There were isolated scandals — Mark Stevenson, the Credit Suisse trader who outrigged the Bank of England’s attempt to rig the Gilts market through QE, for example — but no conspiracies or cartels.
But despite their best efforts, the capital markets have not escaped. The US Department of Justice (DoJ) is probing the SSA market, with four London-based traders at four different institutions under the spotlight.
It’s too early to say what the DoJ might find, but it doesn’t look good. The conduct seems recent, for one thing. GlobalCapital understands the probe runs up to 2014 — three long years after the Libor scandal first broke and well after banks should have put their houses in order.
Second, it seems to be focused on alleged unauthorised co-operation between traders. That means antitrust law, and antitrust means big money. Dollar SSA trading desks might not make more than a few million a year, but that’s irrelevant to the punishment that can be meted out.
Banks made pocket change from FX and Libor manipulation but paid billions in fines, which were calibrated to the scale of the market and the stupidity of the chat messages.
Those investigations showed just how bad a clubby, friendly, mutually back-scratching market can seem if it is dragged into the spotlight. Market conventions of helping out, trading favours and sorting out your mates suddenly looked like a conspiracy to enrich traders at the expense of the world.
The bond markets need to make sure there are no more skeletons in the closet. The dollar SSA investigation is narrow in scope but it’s not the only capital market where there is both motive and opportunity for traders to cross lines on co-operation.
2016 marks the first year that the International Capital Market Association has decided to run an “Ethics in the Capital Markets” training session. It’s not a moment too soon.