August 13, 2017
“In many industries, that would have been the final straw, but London’s financial arena in the 1980s was a wild, reckless place. The City was about to undergo the violent tremors of Margaret Thatcher’s deregulatory revolution, and hungry young traders and brokers were in high demand. Spencer resurfaced at a smaller brokerage firm called Charles Fulton. By now, despite his money-losing ways, he was developing an expertise in a fast-growing corner of the markets called interest-rate derivatives. When Charles Fulton converted into a publicly traded company in 1985, Spencer took his earnings—about $200,000—and with a few colleagues decided to create a new brokerage firm that would specialise in matching up buyers and sellers of interest-rate swaps and other derivatives. They launched Intercapital in May 1986. Its name would later be shortened to ICAP.”
August 13, 2017
“One of the pieces of sage counsel that Brent Davies pounded into his impressionable mentee’s head, over and over again, was the following: “Never trust a broker.” Brokers, he explained to Tom Hayes, were like the hyenas of the investment banking world, wild, clownish figures who feasted on the carcasses left behind by stronger, more cunning predators—namely, traders. These weren’t run-of-the-mill stockbrokers, the types who handled many grandparents’ portfolios of blue-chip stocks. These particular middlemen—known in the industry as “interdealer brokers”—solely interacted with people at big banks and other financial institutions.”
August 13, 2017
“The brokers—few of them university educated, but most of them highly astute—also were infamous for spoon-feeding traders bogus information that had no purpose other than tricking them into doing trades that weren’t really worthwhile to anyone but the brokers themselves. Similarly, if a trader wanted to spread misinformation in the market—for example, nudging the price of a thinly traded instrument higher based on a hazy rumour about pent-up demand for that particular product—a broker could be an ideal conduit. One illustration of the industry’s culture was that brokers used the word broking to mean “tricking” or “misleading”—as in, I was broking him to believe something that wasn’t true.”
August 20, 2017
“ For really high-end clients, the Tradition brokers took things a few steps further via a luxury villa they rented in the Moroccan desert. During the day, they lounged poolside; at night, they went out to clubs in Marrakesh. The brokers and their middle-aged guests often returned to the villa with prostitutes in tow. One guest referred to the occasional Marrakesh jaunts as his “week [of] joy in the NSL zone.” That stood for “no sperm left.” Once, laughing so hard that they nearly cried, the brokers offered to pay a Moroccan prostitute the equivalent of two dollars to be defecated upon. “Yup,” one of those brokers reflected, “we are classy people.”
August 20, 2017
“Hayes had started feeling distinctly unloved at RBS. That summer, a batch of his trades had gone wrong. He had been up about £600,000 for the year. Suddenly, he was down £100,000. The £700,000 swing was a pittance for a bank of RBS’s size, but it meant that managers needed to be informed. That turned out to be a problem: Hayes had started trading a new type of instrument without getting the proper authorisation inside the bank. It hadn’t seemed like a big deal, but now that he had lost money, that decision was going to get someone in trouble. Hayes’s boss didn’t intend for that person to be him. He instructed Hayes to write an e-mail to a manager a couple of rungs higher, acknowledging that he had been trading when he wasn’t supposed to. Within a few months, Hayes was told to fall on his sword and hand in his resignation. With an offer from the Royal Bank of Canada in his pocket, Hayes followed orders. The voluntary resignation didn’t leave any blemish on his records and was undetectable for future employers. Indeed, when the Canadian bank asked the investigative firm Kroll to perform a standard[…]”
August 20, 2017
“In a follow-up phone call a few weeks later with UBS, the RBC compliance executive concluded that Hayes “had not been openly underhand, but was in some respects perhaps young and naïve. RBC would have given him ‘a good bollocking’ and subjected him to enhanced supervision with the aim of making a better human being of him.” The RBC executive added that “they had no proof that this was down to deliberate dishonesty. It may have been that it was simply a poorly constructed model or even the result of inadvertent error.” RBC recommended that UBS subject Hayes to three to six months of enhanced oversight.”
Notes From: David Enrich. “The Spider Network.” iBooks.
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