Jim Armitage: Out-of-the-blue claim of Stock Exchange rigging is meaningless without evidence
Outlook Just when you thought two investment banking scandals in five days was probably enough – Barclays and Goldman Sachs both being rapped over their “dark pools” trading operations – along comes another.
Or is it? The casual manner with which the MP Mark Garnier, a former investment banker and hedge fund manager, tossed into the Treasury Select Committee hearing the “fact” that the Stock Exchange was routinely rigged had something of the molatov cocktail-wielding anarchist about it. But is it true? Does Mr Garnier actually have any evidence at all apart from a dose of hearsay from his mates still on the trading floor?
For the news business, his outburst was fantastic stuff – yet more dramatic City wrongdoing for us all to get worked about.
But for the thousands of investors with shares in the £5.5bn London Stock Exchange, it could have proved to be less thrilling. It could have resulted in a share price rout.
Could it herald a costly new inquiry into the LSE’s systems? Class action lawsuits from the US? Who knows?
As it happened, the LSE’s shares did not budge, although that could have been because the comment came late in the trading day. Today could be different.
Brokers and sources at the LSE speaking to The Independent last night were flummoxed: “We just don’t see how it could be done,” they said – perhaps slightly admiringly. Others pointed out that so much share trading was now done on rival exchanges to the LSE, not to mention those dark pools at other banks, that to rig a price was nigh on impossible. It might have been an issue in decades past, they said, but not now. After all, the LSE’s closing prices are not set by a handful of blokes on a conference call like gold or, in days past, Libor, they said.
Now, I’m not for a minute saying it definitely doesn’t happen. It certainly has in the past: remember the Flaming Ferraris? Three of them were caught rigging Swedish share prices before celebrating their winnings with their favourite Ferrari cocktails. Dubai-based investor Rameshkumar Goenka managed it too, with an obscure stock of Reliance Industries quoted in London. He also got caught and paid the price – a £4m fine in 2011 in his case.
The fact is, we just don’t know if it’s a widespread problem. It didn’t look like Mr Garnier had any actual proof either. And that’s the point: such potentially market sensitive accusations should not just be tossed about by MPs in rooms full of journalists, Hansard transcribers and fellow politicians.
If share price rigging is the major issue he says it is, he should either have presented evidence to the hearing, or raised it with the regulator in private and asked for a proper investigation. Going off half-cocked is of no help to anyone.
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