Of course, what happened here is allegations only, allegations by an American prosecutor to boot, on a fashionable item.
In the days and hours leading up to the $3.5 billion transaction, Messrs. Johnson and Scott stockpiled millions of pounds in HSBC accounts, federal prosecutors alleged.
When the client went through with the transaction in December 2011, the two men executed it in a way that drove up the price of the pound, according to the complaint.
This allowed them to sell the currency they had purchased at a higher price while diminishing the client’s proceeds, because the conversion to pounds was done at a higher rate.
In a conference call in November 2011 discussing the coming transaction, an unnamed HSBC supervisor told Mr. Scott they should ramp up the market for British pound in a way that wouldn’t draw suspicion from the client, according to the complaint.
“[W]e don’t want…to push the market too much high[er] and at the same time we want to make money on this,” the supervisor said on the call, the complaint said.
When the client noticed the price of the pound rising the day of the transaction, Messrs. Johnson and Scott falsely blamed it on purchases by a Russian bank, according to the complaint.
The plan netted $3 million in trading profits and $5 million in fees for HSBC, prosecutors said.
$3.5 billion “real” transaction? In one of the most liquid markets in the world?
Spot transactions are $2 trillion a day, Sterling is about 10% of this (for one leg, so that’s not all $/£ but still) so $200 billion a day. Even the index betting people (City Index for example) are on a 1.5 basis point spread for GBP/USD.
And HSBC came back with an 8.5 bps spread and another 14 bps in fees (calculated by looking at total profits and fees as given)?
No idea what they actually did but I think I would complain at that, yes.