Skip to main content

UBS Making Foreign Exchange Rate Manipulation Mildly More Inconvenient

  • Author:
  • Updated:

Time was, all a bank employee wanting to manipulate forex rates had to do was sit down at his desk, send a message to a fellow bank employee possessing equally loose morals (and a taste for being called "big boy") and before you could say "let's pop this bottle of Bollinger," the job was done. Which is why UBS has decided to cut its people off at the source. It hasn't figured out a way to eradicate Libor and other types of rate manipulation entirely, but it has figured out a way to make it slightly more difficult for people who don't know how to use a phone. As an added bonus, it'll be giving managing directors the extra responsibility of acting as chat room hall monitors, muttering "this is why we can't have nice things" while handing out passes, hitting AIM-style warn buttons, and occassionally peeking under men's room stalls for rogue chatters while doing actual work.

UBS, Switzerland’s biggest bank, is banning the use of multibank and social chat rooms at its investment-banking division as global regulators probe the alleged manipulation of foreign exchange rates. “All social related chat rooms are prohibited and must be closed immediately,” the investment bank’s executive committee wrote in an internal memo to staff today. Multibank and dealer chat rooms are also banned, and any request for an exception, which can be made “for business critical use only,” will have to be approved by the executive committee member and compliance officer responsible for the specific business, it said. A spokesman for Zurich-based UBS confirmed the memo’s contents. “Recent events within our industry serve as a serious reminder to be mindful at all times to use appropriate language and behavioral standards in all of our communication, no matter the channel,” the UBS memo said. “In order to mitigate the specific risks associated with the use of chat rooms, the investment bank executive committee has decided to implement a number of measures. All staff are expected to comply with these requirements with immediate effect.”

UBS said use of chat rooms with a single client will need specific written approval from a managing director. Such chats, which could have several UBS users communicating with a single client, will have a managing director assigned to them, who would be permanently on the chat, act as a moderator and be responsible for content and behavior in the room, the memo said. All internal one-to-one and multiparty chats should be conducted through UBS internal communication tools only, the bank said. The Swiss bank is setting up a project team to coordinate and assure the implementation of the new policies on chat rooms, the memo said.

UBS Investment Bank Bans Multibank, Social Chat Rooms [Bloomberg]
UBS Memo: ‘Multi-Dealer Chat Rooms Are Banned’ [MoneyBeat]


Banks Were Asked If They Would Prefer To Make More Money Or Less Money, Chose More Money

One kind of obvious thing about financial markets is that you can't just call everyone into a room and tell them, "look, guys, just be honest about the price that you would pay / receive for Thing X." This is because financial industry traders are degenerate lying scumbags. No, wait, that's not right. This is because if everyone just told each other their reserve prices then it would be really hard for them to make any money trading and so we, like, wouldn't have a financial system. So you have things like anonymous execution on stock exchanges and dark pools and, um, lying scumbag traders. And that allows you to have profitable trading. Of course you have to put some limits on the lying scumbaggery: you can't tell people you're investing their money while really blowing it on hookers, and I guess now you can't sell someone synthetic CDOs without telling them who was on the other side. But a little fudging around the edges about the price you're willing to pay or receive - or the price you could pay or receive elsewhere - is kind of at the heart of what trading is. So in a sense the amazing thing about the Libor scandal is that people are amazed by it. A quick recap: