[smallnamespace]

> I'd have gotten on the GUIs an clicked my way through, with an uncertain outcome, split across various banks and over a few days.

Because you're sophisticated market participant and have sat on a desk. You understand the price impact of showing potential flow to the Street, and how to break up an order in order to hide your intent. Would you expect a random corporate treasurer know how to do that?

Not to mention that there are structural barriers to what you describe -- it costs money to buy Bloomberg terminals and live market feeds, and not every treasury department can afford to do that.

What upsets people is that when traders interact with less sophisticated clients, the latter tend to get fleeced.

It's the same reason people hate car salesmen.

[tptacek]

I'm not sure where we are that we've decided people doing 3.5 billion dollar transactions are "unsophisticated".

[cperciva]

I think it's safe to assume that people who do $3.5B transactions on a regular basis are sophisticated. But people who do this once a decade? They're not going to know nearly as much as the experts.

[smallnamespace]

There's plenty of stupid money in the market. How else do you think trading desks make money?

Nobody who understands the FX market would have chosen to run their execution like that.

[tptacek]

That really seems like a "No True Scotsman" definition of "sophistication". Regardless, it's not the definition the markets use. For the same reason, I qualify to invest in private company stock by dint of my bank account and annual income, not by passing a test.

[smallnamespace]

Sure, there's the legal and regulatory definition that determines who can invest in a hedge fund or open a trading account or sign an ISDA... But! those are just guidelines that ensure that only people who can afford to get fleeced end up at the table.

The more salient definition is that you're sophisticated if you're able to consistently turn a profit (or just avoid getting ripped off).

In a more perfect regulatory world, these folks wouldn't have been able to make the trade until they were properly educated, but we don't live in that world.

As usual, if you can't spot the idiot at the table, it's probably you.

[lordnacho]

Well, the guy in Cairn's finance department may not know it, but I think there's a lot of overselling coming from the banks. They've probably bought into this idea that the market is a predator that will eat you alive if you don't hire someone who knows what they're doing. I'm sure the finance guys need to look like they know what they're doing to their bosses too, so I suppose it's limited what the options are. Even though the naive path would have worked just as fine as paying HSBC.

>>Not to mention that there are structural...

I wandered past the finance department of a major chip manufacturer when I was working there. They already have Bloomberg terminals. It's not much money for a F500 company. They also don't really need it; what they need is a GUI from a broker that they can sit and click on. That's free and very easy to do.

[smallnamespace]

> overselling

Well, not from the perspective of the bank :)

From my interactions with corporate treasurers, they are basically short a bunch of put options and strongly disincentivized from taking any risk.

Transacting at the fix 'feels' like it's easy to justify to your CFO (hey boss, we got the same rate as the rest of the market, and here's how you can verify that I'm telling the truth), whereas if you trade on screens and screw it up, you'll be out of a job.

The fact that the bank's front running P&L gets pushed into the fix rather than being fully transparent is also probably a feature, not a downside, for the treasurer.

[infinite8s]

Of course they are disincentivized from taking risk - their job is capital preservation, not capital growth (that's the job of the rest of the business).

[smallnamespace]

Yes, but my point is that there's an information asymmetry here: treasurers are incentivized to look like they're preserving capital, and that doesn't always align with actually saving the company money (e.g. learning to trade off screens, which might be better than just taking the fix from a bank).

You could look at it two different ways: the cynical one is that treasurers are paying out from the company purse to marginally increase the chances of keeping their jobs.

The more charitable one is that doing the 'safe' and 'boring' thing is the most economically efficient way to let the CFO and the board know that the balance sheet is safe, and that's exactly what the treasurer is doing.

How that shakes out in a company's internal politics becomes interesting when you have a case like this one.

[easytiger]

Credit checking & per institution limits wouldn't let you trade massive volumes anyway... and even if it did automated hedging splits orders up so as to not signal the market.