In the Wall Street Journal, this breaking:
- The U.S. Justice Department is investigating HSBC leaked information to Moore Capital hedge fund, “according to people familiar with the matter”
- The events in question surround HSBC helping Prudential sell billions of pounds and buy billions of dollars to finance the insurer’s planned $35 billion acquisition of the Asian life-insurance unit of American International Group
- HSBC was working on the large currency exchange on March 1
- A senior HSBC trader allegedly alerted a trader at hedge fund Moore Capital Management about the impending transaction
- The HSBC trader also allegedly sold large quantities of pounds ahead of Prudential’s order
- One person familiar with the matter said it wouldn’t be unusual for a big bank to discuss orders with hedge funds and other trading partners as it sought to complete a huge transaction in the open market over the course of a day. In some situations, it can be a useful way to help banks complete large transactions without involving competing banks.
There will be more to this to come I should think. But, take note of that last point … if the trader thought Moore was looking to buy a good amount of GBP then potentially matching the orders off is not suspicious. Beware of applying hindsight to these negotiations.
The Journal article may be gated.
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From a different perspective …. check this from the Journal report …
- That day, the pound plunged nearly 3% against the dollar. There were no obvious triggers for the unusually sharp drop, leaving befuddled traders and analysts searching for an explanation.
Ah, yes.
Well, the explanation for large moves in the absence of news/new data etc. is often large orders going through the market. It does happen, yeah (see above!)? Large orders can move prices (sorry to state the bleedin’ obvious, but sometimes it needs stating … there is sometimes no other ‘story’ surrounding moves).
