Betrayal, corruption and manipulation: 2 traders have been charged with ‘front-running’…(About Time!!!)
Matt Turner
BusinessInsider.com
July 20, 2016
Mark Johnson, the global head of foreign exchange cash trading at HSBC, was arrested at John F. Kennedy International airport late on Tuesday.
He will appear in federal court in New York on Wednesday, and has been charged with conspiring to defraud a client of the bank.
Johnson joined HSBC in 2010 from a fund manager he had helped set up. He previously worked at Deutsche Bank.
He has been charged, along with former colleague Stuart Scott, with “front-running” a client order. Scott had been head of foreign exchange cash trading for Europe, the Middle East and Africa.
Front-running is where market makers trade on client information before the client’s trade is executed. For example, if trader A knows Client B is about to buy Currency C, they might buy Currency C themselves before Client B’s trade is processed. If the currency moves as a result of the client transaction, they cash in.
In this instance, the Department of Justice alleges that Johnson and Scott in November and December 2011 misused information about a client transaction to make trades in HSBC’s proprietary accounts. HSBC allegedly generated profits of $8 million from the FX transactions.
The FDIC’s Office of Inspector General and the FBI’s Washington Field Office are conducting the investigation.
HSBC declined to comment.
Johnson’s arrest follows a multiyear investigation into the rigging of currency benchmarks.
HSBC paid $618 million in November 2014 to resolve allegations that it had manipulated the foreign-exchange market. Five other banks settled civil allegations around currency manipulation at the same time.
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