Hunt for £100m rogue trader after attack on HBOS share price
speculant!
---------
By Robert Winnett and Philip Aldrick
Last Updated: 11:44pm GMT 19/03/2008
A hunt has been launched for a stock market trader who may have made £100 million in a "modern day bank robbery" after an attack on the share price of the country's biggest mortgage lender.
Shares in Halifax Bank of Scotland fell by 17 per cent as traders attempted to make a fortune by betting on the bank's falling stock.
HBOS share plunge timeline - click to enlarge
Malicious rumours circulated by speculators were blamed for the run, which saw more than £3 billion wiped off the bank's value.
Britain's financial watchdog launched a criminal investigation to hunt down "ruthless" rogue traders, including one speculator thought to have made £100m from buying and selling shares during the day.
A senior HBOS executive said: "This is the modern day version of bank robbery."
The day's developments - which followed several days of turmoil on the world's stock markets - were triggered by the circulation of false information the state of HBOS's finances.
An email circulated in the City by an anonymous banker, seen by The Daily Telegraph, falsely alleged that a newspaper was to run an article today on problems at HBOS which "will raise the spectre of a run on the bank".
It was also falsely alleged that HBOS, Britain's biggest mortgage lender, had sought emergency talks with the Bank of England over the Easter weekend.
advertisement
In the current febrile atmosphere - following the collapse of American investment bank Bear Stearns last week - the malicious rumour quickly spread causing consternation in the City and the share price fell sharply.
The selling of shares also spread to other banks and helped push down the FTSE-100 index, which has seen wild fluctuations in recent days.
In an unprecedented intervention, the Bank of England issued a statement denying that any major high street bank was in difficulty.
HBOS also warned that the rumour was "unfounded and malicious" and the Financial Services Authority (FSA) launched an investigation, likely to be the biggest in its history.
The FSA has criminal powers and is likely to want to set an example if it uncovers wrongdoing.
The day's events took place shortly after trading started at 8am. By 8.50am shares in HBOS had reached a new low of 398p, down 17 per cent.
Half an hour later the bank officially denied the rumour it had applied for emergency funding from the Bank of England. At 10.10am the Bank issued a statement also denying the claims and at 12.30pm the FSA announced the launch of its investigation.
Following these public statements, HBOS's share price recovered to close at 446 1/4p, down around seven per cent.
HBOS is one of Britain's biggest banks and holds the mortgages of one in five people in this country. It is also the country's biggest savings bank with £240 billion of customer deposits.
The regulators were concerned that the events on the stock market may, if left uncorrected, have triggered a run on the bank and the flase rumour would become self-fulfilling.
Danny Gabay, a former Bank of England official now at Fathom Financial Consulting, said: "If this is pure market abuse, they [the traders] should be prosecuted quickly and aggressively.
"This not just threatens investors but real jobs and real people, and given HBOS's central role in the UK mortgage market it could have had wider ramifications. In these febrile times, this is the last thing we need.''
Over the past few days, the FSA has become increasingly wary of hedge funds and bank traders taking large "short" positions to profit from falls in banking shares.
Short sellers sell shares they do not own in the belief they can buy them back cheaper at a later date.
On Wednesday more than £1 billion of HBOS shares are understood to have been shorted. The process is not illegal but any attempt to manipulate the share price - such as by spreading false rumours - is against the law.
There is also concern that financial institutions may have large vested interests in important banks failing which is against the national interest.
In one of the strongest statements issued by a regulator, Sally Dewar, a managing director at the FSA, said: "There have been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling. We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them."
An HBOS spokesman said: "There is not a shred of substance whatsoever in these unfounded and malicious rumours. This is a classic case of a lie being half way round the world before truth has its boots on. It is deeply concerning these rumours are circulating the markets.
"HBOS is one of the strongest financial institutions in the world with a balance sheet of £660bn. The group also has the largest deposit base in the UK. We are one of the most respected names in the wholesale and capital markets. HBOS is a very strong financial institution."
Within the City, the events of Wednesday have shone an unwelcome spotlight on the shadowy world of hedge funds and investment bank trading desks and their aggressive behaviour.
Christopher Miller, chief executive of Allenbridge HedgeInfo, which analyses hedge funds said: "The banks and their traders have started to realise that they have got to pull themselves together as this sort of thing is not acceptable. They may well have a vested interest in shares falling but they don't want to trigger financial Armageddon."
David Buik of the spread betting firm Cantor Index, said: "Every investor in the world knows that the banking sector is under the cosh. But what is unforgiveable is to perpetrate rumours about a pillar of financial society without foundation.
"For market spivs and vagabonds to attempt to capitalise unfairly on the weakness of the sector with vituperative rumours is wholly unacceptable."
However, several hedge funds defended their actions. Firms including Odey Asset Management and Lansdowne Partners, which made £500m from the collapse of Northern Rock, have long-held short positions in banks including HBOS which they believe are over-valued on the stock market and will fall in value.
They are thought to have made millions of pounds on Wednesday and have acted entirely legally. There is no suggestion that either Odey or Lansdowne was involved in the false rumour.
City insiders point out that Bear Stearns also denied any problems last week and blamed the share price fall on unfounded speculation. They were forced to accept a cut-price takeover bid at the weekend after seeking emergency funding.
The Bank of England will today meet with the country's leading banks to discuss ways in which they can help to alleviate the growing credit crisis.
Mervyn King, the Bank's Governor, will come under pressure to extend more credit to British banks who claim they are at a disadvantage to foreign banks who they claim are being given more support by their governments and central banks.
Several smaller building societies, including Bath and Earl Shilton pulled their mortgage deals for new customers. Bank of Scotland also reduced its range.
The news came as analysts Capital Economics warned that the UK economy could follow the United States into a sharp consumer slowdown triggered by falling house prices.
-------
Wot's going on here - sadguru's "free" market arrangement is being undermined - surely that speculant/trader had every right to fk up a bank because it's a "free" market?
Solution to the problem is compulsory notice before shares can be sold - say at least 24 hours. This will allow people to calm down a bit before decision actually happens. Oh, and traders like that should get 20-30 years in jail - get interviews with them every month so that those traders who are jailed yet know what's the conditions inside.
speculant!
---------
By Robert Winnett and Philip Aldrick
Last Updated: 11:44pm GMT 19/03/2008
A hunt has been launched for a stock market trader who may have made £100 million in a "modern day bank robbery" after an attack on the share price of the country's biggest mortgage lender.
Shares in Halifax Bank of Scotland fell by 17 per cent as traders attempted to make a fortune by betting on the bank's falling stock.
HBOS share plunge timeline - click to enlarge
Malicious rumours circulated by speculators were blamed for the run, which saw more than £3 billion wiped off the bank's value.
Britain's financial watchdog launched a criminal investigation to hunt down "ruthless" rogue traders, including one speculator thought to have made £100m from buying and selling shares during the day.
A senior HBOS executive said: "This is the modern day version of bank robbery."
The day's developments - which followed several days of turmoil on the world's stock markets - were triggered by the circulation of false information the state of HBOS's finances.
An email circulated in the City by an anonymous banker, seen by The Daily Telegraph, falsely alleged that a newspaper was to run an article today on problems at HBOS which "will raise the spectre of a run on the bank".
It was also falsely alleged that HBOS, Britain's biggest mortgage lender, had sought emergency talks with the Bank of England over the Easter weekend.
advertisement
In the current febrile atmosphere - following the collapse of American investment bank Bear Stearns last week - the malicious rumour quickly spread causing consternation in the City and the share price fell sharply.
The selling of shares also spread to other banks and helped push down the FTSE-100 index, which has seen wild fluctuations in recent days.
In an unprecedented intervention, the Bank of England issued a statement denying that any major high street bank was in difficulty.
HBOS also warned that the rumour was "unfounded and malicious" and the Financial Services Authority (FSA) launched an investigation, likely to be the biggest in its history.
The FSA has criminal powers and is likely to want to set an example if it uncovers wrongdoing.
The day's events took place shortly after trading started at 8am. By 8.50am shares in HBOS had reached a new low of 398p, down 17 per cent.
Half an hour later the bank officially denied the rumour it had applied for emergency funding from the Bank of England. At 10.10am the Bank issued a statement also denying the claims and at 12.30pm the FSA announced the launch of its investigation.
Following these public statements, HBOS's share price recovered to close at 446 1/4p, down around seven per cent.
HBOS is one of Britain's biggest banks and holds the mortgages of one in five people in this country. It is also the country's biggest savings bank with £240 billion of customer deposits.
The regulators were concerned that the events on the stock market may, if left uncorrected, have triggered a run on the bank and the flase rumour would become self-fulfilling.
Danny Gabay, a former Bank of England official now at Fathom Financial Consulting, said: "If this is pure market abuse, they [the traders] should be prosecuted quickly and aggressively.
"This not just threatens investors but real jobs and real people, and given HBOS's central role in the UK mortgage market it could have had wider ramifications. In these febrile times, this is the last thing we need.''
Over the past few days, the FSA has become increasingly wary of hedge funds and bank traders taking large "short" positions to profit from falls in banking shares.
Short sellers sell shares they do not own in the belief they can buy them back cheaper at a later date.
On Wednesday more than £1 billion of HBOS shares are understood to have been shorted. The process is not illegal but any attempt to manipulate the share price - such as by spreading false rumours - is against the law.
There is also concern that financial institutions may have large vested interests in important banks failing which is against the national interest.
In one of the strongest statements issued by a regulator, Sally Dewar, a managing director at the FSA, said: "There have been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling. We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them."
An HBOS spokesman said: "There is not a shred of substance whatsoever in these unfounded and malicious rumours. This is a classic case of a lie being half way round the world before truth has its boots on. It is deeply concerning these rumours are circulating the markets.
"HBOS is one of the strongest financial institutions in the world with a balance sheet of £660bn. The group also has the largest deposit base in the UK. We are one of the most respected names in the wholesale and capital markets. HBOS is a very strong financial institution."
Within the City, the events of Wednesday have shone an unwelcome spotlight on the shadowy world of hedge funds and investment bank trading desks and their aggressive behaviour.
Christopher Miller, chief executive of Allenbridge HedgeInfo, which analyses hedge funds said: "The banks and their traders have started to realise that they have got to pull themselves together as this sort of thing is not acceptable. They may well have a vested interest in shares falling but they don't want to trigger financial Armageddon."
David Buik of the spread betting firm Cantor Index, said: "Every investor in the world knows that the banking sector is under the cosh. But what is unforgiveable is to perpetrate rumours about a pillar of financial society without foundation.
"For market spivs and vagabonds to attempt to capitalise unfairly on the weakness of the sector with vituperative rumours is wholly unacceptable."
However, several hedge funds defended their actions. Firms including Odey Asset Management and Lansdowne Partners, which made £500m from the collapse of Northern Rock, have long-held short positions in banks including HBOS which they believe are over-valued on the stock market and will fall in value.
They are thought to have made millions of pounds on Wednesday and have acted entirely legally. There is no suggestion that either Odey or Lansdowne was involved in the false rumour.
City insiders point out that Bear Stearns also denied any problems last week and blamed the share price fall on unfounded speculation. They were forced to accept a cut-price takeover bid at the weekend after seeking emergency funding.
The Bank of England will today meet with the country's leading banks to discuss ways in which they can help to alleviate the growing credit crisis.
Mervyn King, the Bank's Governor, will come under pressure to extend more credit to British banks who claim they are at a disadvantage to foreign banks who they claim are being given more support by their governments and central banks.
Several smaller building societies, including Bath and Earl Shilton pulled their mortgage deals for new customers. Bank of Scotland also reduced its range.
The news came as analysts Capital Economics warned that the UK economy could follow the United States into a sharp consumer slowdown triggered by falling house prices.
-------
Wot's going on here - sadguru's "free" market arrangement is being undermined - surely that speculant/trader had every right to fk up a bank because it's a "free" market?
Solution to the problem is compulsory notice before shares can be sold - say at least 24 hours. This will allow people to calm down a bit before decision actually happens. Oh, and traders like that should get 20-30 years in jail - get interviews with them every month so that those traders who are jailed yet know what's the conditions inside.
Comment