[Overtonwindow]

This is extremely complex and it's taking me a few reads to understand it, but I just want to plug this particular journalist as extremely good in reporting complex subjects in a way the rest of us can understand. Do check out his previous article on how T. Rowe Price voted for the Dell buyout by mistake.[1] Truly a great job at reporting.

1] http://www.bloomberg.com/view/articles/2016-05-13/t-rowe-pri...

[jackcarter]

And my all-time favorite, for the title:

"Law Firm Accountants Were Bad at Accounting, Law" https://www.bloomberg.com/view/articles/2014-03-06/law-firm-...

[stygiansonic]

I also like:

Blockchain Company's Smart Contracts Were Dumb: http://www.bloomberg.com/view/articles/2016-06-17/blockchain...

Bitcoin Bucket Shop Kicks Bucket: https://www.bloomberg.com/view/articles/2015-06-19/bitcoin-b...

[fnord123]

>Bitcoin Bucket Shop Kicks Bucket

Sounds like it should be on elreg.

[rtpg]

"Merrill Lynch is Fined for Doing Nothing" http://www.bloomberg.com/view/articles/2016-06-23/merrill-ly...

[exhilaration]

The article is definitely worth reading and I agree the journalist did a great job simplifying the topic. I also liked this section near the bottom explaining the mindset of the traders:

Different financial markets have, over long periods of time, evolved standards of behavior that are not, perhaps, entirely honest in the most traditional sense of the word. To outsiders -- and to some less experienced participants in those markets -- those standards can seem shocking, even criminal. To regular participants, they can seem normal, even admirable.

[cm2187]

And in all fairness if you look closer at any other industry you will find similar grey-ish shady practices.

Planned obsolence in consumer electronics? Intel selling you an i7 for 5 times the price of an i3 when really it is pretty much the same piece of silicon, just with a slightly different design (or some features turned off). Some of the stories I hear in the construction industry are pretty appalling, unsuspecting customers are always ripped off. Pharmaceutic industry? Retiring and repurposing the same molecule to a different treatment to ramp up the price,... Should we talk quality controls in clothing?

Commerce is always inherently a conflict of interests between a buyer and a seller, and what keeps people honnest is competition mostly, and laws that require the seller not to lie about the product or service.

I don't think any of this is specific to financial markets.

[princeb]

those are not even the most egregious examples.

think of something like this: you go to a big box store to buy a bunch of home electronics for a new house. you ask the salesperson to throw in some freebies because you're going to be buying a lot. he knocks off the delivery fee, installation fees, and you push further and ask if you can get some other things, say a handheld vacuum cleaner or a stand fan.

he says "Mate this is the best I can give you, I am no longer making commission on this trade". Or if it's the store manager you are speaking to, he says he's not turning a profit with all the discounts already given.

Really pal? You want to repeat that on a recorded line?

Because if this was the credit market, and if your sales guy said you've got a great price because he paid so-and-so for a security he's selling to you and is not getting much in profit, but in reality he actually paid much lower, he can go to jail [1].

But in car sales, home sales, big ticket items like that, you have all these kinds of folks throwing in a white fib here and there, and they don't get locked up.

whatever, I've made my peace with it. there are people who get away with it and people who don't. some people are born rich and some have to work for it.

this hsbc guy is probably going to get into trouble for what he did. the doj is going all out to stamp out this kind of misbehaviour - and not defending it, lying is a scummy move - because the banks themselves could not do it. but while they're at it, maybe start looking at car salesmen and real estate agents too?

[1] http://www.wsj.com/articles/former-jefferies-trader-jesse-li...

[showerst]

If you have an interest in finance from the outside, his daily column Money Stuff is fantastic.

https://www.bloomberg.com/view/topics/money-stuff

[jluxenberg]

You can sign up here to receive it via email every morning: http://www.bloomberg.com/view/?alcmpid=view&subscribe-form=l...

(sharing this here because Bloomberg's website makes it really hard to find)

[Overtonwindow]

WOW. I am really glad you shared this, thank you. I signed up and then my dad was like hey how do I subscribe and I was like uhhhhhhh good question. Glad this was here, thank you.

[vostok]

You can also get on Bloomberg via NI LEVINE <GO>.

[dredmorbius]

Matt Levine's been cranking out some good work, I'd noticed his name in the past few months.

[gaius]

Isn't he the guy that coined the term "vampire squid"?

[Bootvis]

No, that was Matt Taibbi[1].

[1]: http://www.rollingstone.com/contributor/matt-taibbi

[jldugger]

I remember reading that piece, and now with this one, it's hard to tell if the guy is just that sarcastic, or honestly attempting to defend the practices of the accused. "Listen guys, it sounds bad, but actually this is just how trading is. Why heck, if the trading desk isn't out to bend their customers over, they might even take a loss!"

Not sure why I'd expect any better of a trade rag I suppose.

[smallnamespace]

His basic point is that even though the facts of this case look bad, at the end of the day even normal FX execution will like front running just because of the structure of the market.

[chii]

why would any legitimate buyer of currency go with someone who might try to frontrun them?

Why isn't there a way for buyers to pay a set amount in fees for the transaction, in order to guarentee that they don't get boned in the back by their very own agents?

[smallnamespace]

> why would any legitimate buyer of currency go with someone who might try to frontrun them?

Because paradoxically it's often cheaper to do it this way than alternate routes of execution.

For example, you can (for a fee) get set up with a trading terminal and just execute against an FX exchange yourself. However, you might end up paying more for that execution that if you went to a bank, especially if you don't know what you're doing.

In theory, the bank knows the market well and can execute your order at a better price (by 'working' your order, splitting up and not tipping off the market), and then passes off some of those savings to the client.

Whether that actually happens in practice depends on the client being savvy enough about the market to not agree to a bad execution strategy (as we saw here) or not agreeing to a bad price.

[princeb]

i have never been in fx but this is what I heard:

these kind of clients

1. don't want to pay fees

2. don't want any risk

3. just want a single publicly available price (the WMR fix) to simplify accounting (fx, financial, mgmt, risk and all the disparate ERP systems that a company can be hooked up to)

so the whole market is set up this way.

oh... the e-brokerages like hotspot or whatever would drool buckets at the prospect of global corporates going direct to market rather than through the dealers, but all these companies have decided to cede control to the banks because they don't want to deal with any of the difficulty of fx execution. and so you have this.