Conflict on a Trading Floor

In: Business and Management

Submitted By yohwan
Words 733
Pages 3
CONFLICT ON A TRADING FLOOR (A)

CASE SUMMARY

Brief background and context:

Junior salesperson ("Seth"), an assistant on the non-dollar derivative desk of FirstAmerica (“FA”), finds himself in a difficult situation and has to decide what course of action to take as relates to going along with misrepresenting material facts to a key client, Poseidon, in conjunction with their hedging of French Franks relating to the $700 million equivalent cost of the five year construction of a new cruise ship.

Seth is a relatively new employee at FA and was recruited by one of his key managers, a salesperson named Linda. Linda is asking Seth to “play along” with her questionable sales tactics so as to make the trading desk at FA a huge profit and herself a very large $1 million bonus. Seth would earn a bonus of about 70% of his base salary. Seth is ethically conflicted, as he does not feel that Linda’s tactics are honest and perhaps even legal.

Who are the key players involved:

(i) “Seth” – the junior salesperson at FA
(ii) Linda – a top salesperson on the FX desk at FA and Seth’s boss; recruited Seth in
(iii) Roger – floor trader at FA
(iv) Peter – Sales Manager for Derivatives at FA
(v) CFO of Poseidon

What are the main issues/allegations?

(i) Is fraud being committed by any or all of the following: a. Sending the Telerate page that grosses up for withholding tax, but withholding tax does not apply to cross currency swaps b. Convincing the CFO of Poseidon that the deal needs to remain secret and not shopped to other competitors so as to not “move the market” ahead of the trade. c. Telling the CFO of Poseidon that the profit to FA is $1.25 million when in reality the profit to FA would be $12.5 million. (ii) What is the short-term impact to FA versus the long-term impact? Is FA’s reputation at risk if this information…...

Similar Documents

Trading

...Short Introduction to Trading Theory (S.A.Bartlett) Markets possess both complex dynamic and quantum system qualities. Complex as current dynamics are fully determined by current conditions, with every resulting action or cause producing a reaction or effect, forming the base of subsequent future actions. Quantum as states of equilibrium and disequilibrium occurs between different price bands. With the inherit behaviour of dynamic systems highly sensitive to initial conditions, behaviour of price trends remain a deterministic non-periodic flow, with the perceived construction of trends a by-product of the intra and inter day assorted occurrences exhibiting force upon one another. As the occurrence of these deterministic non-periodic flows exhibit both the reflexivity and factual states of the market; reflexive in its self perpetuating/self defeating distribution, fractural in its display of similar dimensional structure, any qualitative trajectory remains highly dependant on the initial conditions. Given the complex dynamical structure of markets, where the initial conditions remain unstable, bifurcating in accordance with the proceeding reaction or effect, the production of long term (fortnightly, monthly quarterly etc) probability distributions remains highly inaccurate. However, as the use of the mathematical models measuring the structural stability, underlying dynamics and non-linear movement of the basin of attraction, the calculation of the probable......

Words: 593 - Pages: 3

International Trading

...CONTENTS Introduction: 1 Importance of international trade 1 International trade impact on the Syrian economy: 2 Joining International trading organISATION (tRADING bLOCS) 2 Trading blocs with Syria 3 Suggested bloc for Syrian to join 3 Final words 4 INTRODUCTION: The buying and selling of goods and services across national borders is known as international trade. International trade is the backbone of our modern, commercial world, as producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders. There are many reasons that trade across national borders occurs, including lower production costs in one region versus another, specialized industries, lack or surplus of natural resources and consumer tastes. ..{1} IMPORTANCE OF INTERNATIONAL TRADE International trade that occurs among many countries is not a new a concept, as history shows that there were several instances of international trade. Traders used to import and export different raw material of final product like silk, spices, coffee and textiles. {2} International trade is important to the modern, commercial world, by expanding the market limits for traders and producers to the markets out of the domestic boarders. Low production costs in one country versus another, specialized industries, lack or surplus of natural resources and consumer tastes are reasons why international trade occurs. {3} International trade is essential for......

Words: 1329 - Pages: 6

Insider Trading

...2012 Insider Trading In a securities market there are winners and losers, people who get good prices and people who get bad prices. Other things equal, the person with the best information about what is being bought or sold stands in the best position to find bargains and get the best price. Competing against corporate insiders, who possess superior information thus increases the risk that one loses. As a society, we have good moral reason to protect ourselves against this kind of fraud. Definition of “Insider Trading” Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with access to non-public information about the company. In most countries, trading by corporate insiders such as officers, key employees, directors, and large shareholders may be legal, if this trading is done in a way that does not take advantage of non-public information. However, the term is frequently used to refer to a practice in which an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise in breach of a fiduciary or other relationship of trust and confidence or where the non-public information was misappropriated from the company.[1] Unfairness The first and most obvious argument that one may find to describe insider trading as immoral is the one of unfairness. Under their definition insider trading......

Words: 972 - Pages: 4

Insider Trading

...Singapore law states that price sensitive information belongs to the company. However, the arguments made in “Property rights” push for the case that if this information does belong to the organization, then it is the organization’s right to allow its employees to use it for insider trading. Let us examine these arguments. Who does price-sensitive information belong to? The employees who create this price sensitive information are empowered by the finances and reputation of the firm. Without this, they can’t make decisions that create this information. For example, the CEO of a company can’t go on a joint venture with another company to create a new product if he doesn’t have the resources of the firm at his disposal. The employees may disagree and would otherwise disagree may argue that it was their skills and ability that allowed this price sensitive information to be created. Yet, an employment contract means that an employee allows and employer to is already a contract between the employer and the employee to allow the use theof an employee’s skills and abilities for the benefit of the company in exchange for remuneration. The employee is going to be already being rewarded for his work and claiming ownership of the information would otherwise thus be a breach of a contract. Thus, let us take the position that price sensitive information is created by and belongs to the company. The company has the right to do what it wills wants with the information. So it is firm......

Words: 1391 - Pages: 6

Trading

...around 2000 years ago, knew that the first step or rather the first chapter to success is planning. You’d think they’d learn! * * At this stage, a villain would only think of preparing a plan that might lead them to victory but a hero would prepare a plan that can handle multiple possibilities which can turn a potential bad situation in to a moderate acceptable loss. And that is why good always triumphs against evil. Like any well thought out system or machine we require the blue prints and then parts. A car, for instance is a modern day miracle and irreplaceable part of our daily lives, but every car has some key components that are required for it to function, namely: the mechanics, the container, speedometer and rev meter. In the trading industry we also classify essentials into 3 sections: hardware, software and services. * * Hardware: We can start with the organs of every car, the mechanics under the shell, in our case the computer. What makes a Bugatti any different from Maserati, except the price tag? Horsepower, the one thing that puts you ahead of the enemy when racing down Lynnwood road, your ability to push your machine further faster than anyone else. The only way to achieve this would be to build a computer that is capable of running multiple applications at the same time. So what do we look for in such a machine: * Well the brain to any computer would be the CPU (Central processing unit), currently the best CPU on the market you can get......

Words: 2833 - Pages: 12

Trading Floor

...market conditions may actually be advantageous for some investors. For example, volatility is needed to some degree because if prices do not move sufficiently, it will be difficult to make money from trading them. Thus, the recent fluctuations in the share market have highlighted the fact that there are risks involved with investing money and that finding the right investment strategy is a crucial step in investing. Investors today have more investment options than were available to the average investor just a few decades ago. While having multiple options is usually a good thing, too many options can cause confusion and system overload and lead many people to avoid making decisions about their investment strategies. Most strategies used to invest in the share market fall into three general categories including technical analysis, fundamental analysis, or a buy-and-hold strategy. The fundamental analysis approach is primarily concerned with value; it examines factors that determine a company's expected future earnings and dividends as well as the continued dependability of those earnings and dividends (McDonald 2007, 100). The investor who uses technical analysis attempts to predict the future price of a stock or the future direction of the market based on past price and trading volume changes (Subramaniam 2010, 46). The buy-and-hold approach is the benchmark against which any other approaches to market investing should be measured. This strategy provides the returns that......

Words: 21981 - Pages: 88

Financial Trading and Investing

...Chapter 8: Institutions and Procedures in Secondary Markets A. Exchanges and Floor Markets The Securities and Exchange Act of 1934 defined an exchange to be: any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood, and includes the market place and the market facilities maintained by such exchange. An exchange is typically a physical or virtual meeting place drawing together brokers, dealers and traders to facilitate the buying and selling of securities. Thus, exchanges include the floorbased markets as well as many virtual meeting sites and screen-based systems provided by Electronic Communications Networks (ECNs). In the United States and most other countries, exchange transactions are executed through some type of auction process. Exchanges in the United States are intended to provide for orderly, liquid and continuous markets for the securities they trade. A continuous market provides for transactions that can be executed at any time for a price that might be expected to differ little from the prior transaction price for the same security. In addition, exchanges traditionally served as self-regulatory organizations (SROs) for their members, regulating and policing......

Words: 13751 - Pages: 56

Trading

...unbeneficial. The reasons that WTO stated include: technology changes, protectionism, and import competition (Growth and jobs). Protectionism occurs when a country design regulations to protect “domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors” (Protectionism, 2015, para. 1). In reality some countries can adjust better than other countries because of the effectiveness in their policies. In addition, it is clear that the world seemingly operates more effectively via free trade and restricting free trade tends to create more problems. Then again, free trade can stimulate economic long-term growth by providing numerous trading opportunities to gain a comparative advantage, unlimited production possibilities, and improve efficiency (output of products) (McConnell, Brue, & Flynn, 2015). International trade can create jobs through exports; in fact, the Department of Commerce compiled a report showing that exporting goods play a critical role in relation to employment. Exports created jobs and increased the GDP (Gross Domestic Product) because it expanded the global market for businesses by providing opportunities (Massoudi, n. d.). Furthermore, the data shows that U.S. exports increased to nearly $1.7 trillion and created $165,000 jobs per export (Massoudi, n. d., para. 3). Free trade has a positive impact on the economic condition because of the......

Words: 360 - Pages: 2

Trading

...Essay One In the paper The Dark Side of Trading, Dichev, Huang & Zhou (2014) investigate the effect of high trading volume on observed stock volatility controlling for fundamental information. Past literature almost unanimously states that high volumes of trading are always good as they are correlated with lower transactions costs, easier, faster and cheaper creation and adjustment of investment positions, lower cost of capital and higher prices. However one of the implications of the study is that increased trading also bring downsides that impact various market participants (investors, managers and regulators). The literature seems ignore the fact that a high volume of trading can also be destabilizing, as it injects a layer of trading-induced volatility over and above fundamental volatility. Practices like circuit-breakers employed by regulators to halt trading when prices fall dramatically sustain the fact that the market can sometimes go haywire for no particular reason related to fundamentals. Thus such policies are consistent with the view that trading can create its own volatility and it can get so out of hand that the best thing to do is to halt trading so everyone can cool off. The authors did three experiments, they used matched ETF and dual-class stocks as settings with substantial variation in trading but good natural controls for the underlying fundamental, and then they examined the aggregate time-series of U.S. stocks since 1926 and the cross-section of......

Words: 1194 - Pages: 5

Insider Trading

...Insider Trading at the Galleon Group The Galleon Group was one of the largest hedge fund management firms in the world, managing over $7 billion, before closing in October 2009. From greed to more greedy, and finally to destruction, this time the protagonist is Rajaratnam, he was accused of 14 securities fraud. Rajaratnam had a glorious history. He is 52 years old Sri Lanka-American, graduated from the Wharton School, he began his career in the field focusing on technology investment bank Needham & Co., An analyst from the start, 34-year-old became the president of this bank. In 1997, he started a technology stocks investment company, which was called Galleon Group in New York. In 2009, Rajaratnam's net worth to $ 1.3 billion by Forbes global rich list among the first 559. When Galleon was established in NY, Rajaratnam said: "This is Raj Rajaratnam, only the paranoid survived." Unfortunately, this time his "paranoid" gets too far. Rajaratnam's case is the largest in the history of Wall Street hedge fund insider trading case at that time, but also the first use of the Federal Investigation Agency monitor means to obtain evidence relating to insider trading. Rajaratnam's arrest on behalf of the US government efforts to combat financial crime has entered a new phase. In this case, there are two ethic issues that can be discussed. The first is a white-collar crime; insider trading is one of them. The second is the wiretap recording, whether it is legitimate, if it is,......

Words: 1451 - Pages: 6

Trading

...When it comes to FX trading, traders have two sets of currencies that come in a pair. The fluctuations in the exchange rate between these two currencies are where a trader looks to make profit on the Exchange Market. If trader believes that the foreign currency will appreciate against the USD, the trader’s profits will rise with every increase in the exchange price. However if the foreign currency were to fall against the dollar, than the trader would take a loss. Seems simple enough, however traders have option to buy or sell that foreign currency at any time and can go both ways of the currency. So even if the foreign currency were to depreciate against the USD, the trader can still make a profit if they were to sell the dollar on the exchange market. To bring some clarity lets take a look at the Yen. If the Yen were appreciate (rises) against the dollar. A trader would than buy the Yen. By buying the Yen the buyer is also selling the dollar on expectation that the exchange price of the Yen will rise in value. The trader will than decide to close the position, selling the Yen with the exchange price higher than when they first bought it leaving them an increase in value or profit. Now if the Yen were to depreciate against the dollar, the YEN/USD exchange price will fall. That would than leave the trader with a loss as the exchange price falls below their purchase level and leave them a loss. In any trading market, the traders have the option of buying or selling......

Words: 860 - Pages: 4

Trading

...cotton farmers will receive at least $0.70 for every pound of cotton they harvest. If world cotton prices fall below this level, the government makes up the difference, writing a check to the farmers. Some 25,000 United States cotton farmers received some $3.4 billion in annual subsidy checks. Total agricultural subsidies in the United States amount to some $43 billion a year according to OECD figures. Japan is also a large subsidizer, providing some $47.4 billion in subsidies to farmers every year. In relative terms Switzerland, which is not an EU member, spent the most. Subsidies made up a remarkable 68 percent of its farm economy. Iceland was at 67 percent and Norway at 64 percent. European Union subsidies equaled 32 percent of that trading block’s farm economy, while the United States figure was 16 percent. One consequence of such subsidies is to create surplus production. That surplus is sold on world markets, where the extra supply depresses prices, making it much harder for producers in the developing world to sell their output at a profit. For example, EU subsidies to sugar beet producers amount to more than $4,000 an acre. With a minimum price guarantee that exceeds their costs of production, EU farmers plant more sugar beets than the EU market can absorb. The surplus, some 6 million tons per year, is dumped on the world market, where it depresses world prices. Estimates suggest that if the EU stopped dumping its surplus production on world markets, sugar prices......

Words: 1625 - Pages: 7

Trading

...Interest Rate |   | Year 1 | Year2 | Year3 | Low |   | 8% | 14% | Middle | 4% | 10% | 16% | High |   | 12% | 18% | Trading Case B02A The spot interest rate is known with certainty, while in year 2 and year 3, there are three possible interest rates. This creates scenarios of interest rates; 9 scenarios in year 1 and year2, and 3 scenarios in year 3. As a result, there are ranges of possible fair value for the bonds.   | Year 1 | Year 2 | Year 3 | 1 | 4% | 8% | 14% | 2 | 4% | 8% | 16% | 3 | 4% | 8% | 18% | 4 | 4% | 10% | 14% | 5 | 4% | 10% | 16% | 6 | 4% | 10% | 18% | 7 | 4% | 12% | 14% | 8 | 4% | 12% | 16% | 9 | 4% | 12% | 18% |   | Year 1 | Year 2 | Year 3 | 1 |   | 8% | 14% | 2 |   | 8% | 16% | 3 |   | 8% | 18% | 4 |   | 10% | 14% | 5 |   | 10% | 16% | 6 |   | 10% | 18% | 7 |   | 12% | 14% | 8 |   | 12% | 16% | 9 |   | 12% | 18% |   | Year 1 | Year 2 | Year 3 | 1 |   |   | 14% | 2 |   |   | 16% | 3 |   |   | 18% |   | Cp Bond | Zero C1 | Zero C2 | Zero C3 | MIN | 98.232 |   | 85.852 | 72.756 | MAX | 104.426 |   | 89.031 | 78.098 | AVG | 101.285 | 96.154 | 87.432 | 75.387 | At the beginning of year 1 , Zero C1 would matured and no longer tradable. For the other three bonds, we have private information which enables us to cut out an interest rate, lefting with 6 scenarios. TRADE AT BEG YEAR 1 (interest not LOW) |   | Cp Bond | Zero C1 | Zero C2 | Zero C3 | MIN | 92.161 |   | 89.286 | 75.666 | ...

Words: 461 - Pages: 2

Conflict on a Trading Floor

...MAKING TALENT A STRATEGIC PRIORITY Executive Resume:  Today one of the big issues in many organizations is the human management in between the unit’s organizations. Companies in today economic are worried about financial profits and cutting back additional funds to their business run in a profitability environment. Many businesses tend to think that the soul of the business is the sales and profit margins and definitely leaving issues such as human resources, IT departments and marketing in the space. The true is that are many barriers and lack of interaction between the human resources department to accomplished long terms goals in the organization. Are they really understand what Human Resources is all about, probably yes the responsibilities and roles, but many they ignore that the most important department in the entire organization. Why because they Human resources are responsible to bring: * Hiring * Hiring Background * Payrolls * Medical insurances policies * Training and recruiting * Delivery the goals and mission statements of the organization * Recognized Excellent performance to employees All this in the loop of others sound very simple, however involves a lot of training, excellent performance and knowledge of the company vision. Sometimes human resources managers are......

Words: 717 - Pages: 3

Trading

...un mismo exportador o cooperativa. - Interesados en desarrollar relaciones cercanas con productores y exportadores y por exigir alta calidad. - Buscan exclusividad y diferenciación de orígenes. - Importan grandes volúmenes, pero el café certificado rara vez representa más del 10%. - Aquí se encuentran traders como Neumann, Volcafe e Ecom Trading que poseen empresas - Independientes para importar café de alta calidad: Interamercan, Volcafe Specialty y Atlantic Coffee, respectivamente. Figura 20. Características de los Importadores de Café Especial certificado en EE.UU. Fuente: Sociedad Consultora Maximixe. Estudio de Mercado (2005) Bird Friendly 14 Fair Trade 50 Organico 66 Figura 21. EE.UU.: Número de Importadores de Café Certificado Fuente: Centro de Inteligencia sobre Mercados Sostenibles. Estudio de Mercado (2005) 95 Tabla 11. EE.UU.: Principales Importadores Especializados de Café Certificado - 2004. Importador / Trader Alterra Coffee Roasters Atlantic Specialty Coffees Café Imports Coffee Holding Co. Inc. Elan Organic Coffees Holland Coffee Inc. InterAmerican Commodities OPTCO Paragon Coffee Trading Co. Royal Coffee Sustainable Harvest Volcafe Specialty Coffee Orgánico x x x x x x x x x x x x Comercio Justo x x x x x x x x x x x x Bird Friendly x x x x x x x x Fuente: Centro de Inteligencia sobre Mercados Sostenibles. Estudio de Mercado (2005) Existen aproximadamente 1,200 tostadores de café en EE.UU., de los cuales 357 ofrecen......

Words: 62612 - Pages: 251