Barclays is fined £26m for its trader’s ‘mini-puke’ in gold price

 

Barclays, the bank famed for meddling with Libor, was yesterday fined £26m after one of its traders rigged the gold price so as to profit on a trade at a customer’s expense.

The former senior trader at the bank was also fined and banned from working in the City, for bringing about what he termed, in City parlance, a “mini-puke” – a slight fall – in the gold price in order to win his bet.

The news came as Barclays continues to face heavy criticism over huge bonuses paid to its investment bankers, despite falling profits.

The Financial Conduct Authority described Barclays’ failures to prevent such activity as “extremely disappointing”, and pointed out that the gold-rigging occurred the day after Barclays had been fined £59.5m by the FCA for its role in the Libor-fixing scandal. Tracey McDermott, the FCA’s enforcement director, added: “Traders who might be tempted to exploit their clients for a quick buck should be in no doubt – such behaviour will cost you your reputation and your livelihood.”

The watchdog said that the bank’s own investigation into Libor should have highlighted its lack of controls in other price-setting mechanisms, including gold.

The official price, or “fix” of gold is set every day – once in the morning and once in the afternoon – by a small panel of banks, based on the average price of recent trades.

Daniel Plunkett, 38, a senior trader and director on Barclays’ precious metals desk, had entered into a bet with a customer – known as “Client A” in the case – which would have meant Barclays would have to pay Client A nearly $4m (£2m) if the afternoon gold fix was above $1,558.96 an ounce on 28 June 2012.

Initially, it seemed that Barclays could lose the bet, as the price was looking high. So, the FCA said, Mr Plunkett placed an order to sell up to 150 bars of gold – 60,000 ounces – putting downward pressure on the gold price.

The price did fall and Barclays won the bet, meaning it did not have to pay the client. The effect on Mr Plunkett’s personal trading book – which would be used for his bonus – was to make a $1.75m profit.

However, the client was suspicious about how the price had suddenly fallen during the fixing process, and that afternoon complained to Barclays, which then launched an internal investigation into Mr Plunkett’s actions, the FCA said.

During that inquiry, he repeatedly failed to mention that he had placed the gold sale trades, only finally admitting to them after the weekend, on the Monday morning, 2 July. Even then, he gave an “untruthful account” of events to both the bank and the FCA, which subsequently questioned him, the regulator said.

Barclays repaid the client the $3.9m in full.

The Independent was unable to contact Mr Plunkett yesterday. Speaking from Ireland, his father Peter said he knew nothing about the case.

Mr Plunkett, of Bishop’s Stortford, Hertfordshire, was fined £96,500. He currently lists himself as the “finance director” of a London property company, Cor-Dor, and set up a company called LMD Properties in January of this year. He had worked at Barclays since 2006, after stints at Royal Bank of Canada and Dresdner Bank, according to his entry in the Financial Services Register.

Antony Jenkins, Barclays’ chief executive who started a month after Mr Plunkett’s trade, has been talking of how he will change the culture of Barclays after the regime of his predecessor, Bob Diamond.

He said: “We very much regret the situation that led to this settlement. Barclays has undertaken a significant amount of work to enhance our systems and controls, and is committed to the highest standards across all of our operations.”

However, the FCA found that Barclays did not have any systems in place to record what gold-trading orders its traders were making until February 2013.

The FCA said Barclays should have placed more importance on the potential conflicts inherent in its gold operations, particularly as it was reviewing its procedures as a result of the Libor fine.

The overall fine on Barclays was equivalent to 1 per cent of its controversial 2013 bonus pool.

This latest scandal is likely to bring the system behind the gold fix to an end. The setting of Libor has already been changed and plans are afoot to get rid of the silver fixing mechanism, as customers of banks demand more transparent measures.

Barclays joined the gold fixing panel in 2004, but right up until last year, it had failed to recognise how its traders could manipulate the fix as Mr Plunkett did.

The other banks who conduct the fix are Scotiabank, Société Générale and HSBC. Deutsche Bank left the panel this month.

Countdown: How the price of gold is fixed

The names may have changed – ever heard of Mocatta & Goldsmid or Pixley & Abell? – but the principle remains from the first gold fix meeting in 1919. Every day, at 10.30am and 3pm, a panel of banks hold a private conference call. The chairman starts off with a proposed price for an ounce. Each member says how many bars they would buy or sell at that value. The chairman then moves the price up or down until there is an equal weight of buyers and sellers, and the price is fixed. At any time, a member – perhaps after receiving a big order – can call “flag” to start again. In the old days, they would literally raise a flag. The Barclays scandal makes it likely the only flags soon will be white as the banks give up on the whole process.

Trader talk: Glossary

“Mini-puke”: a small price fall

“Fix”: the price the Gold Fixing Members agree is the accurate market value

“Vanilla”: standard bets

“Exotic”: complex bets like the one in this case.

“Barrier”: the figure on which the two sides bet ($1,558.96)

“Digital”: a straight win-or-lose bet, also known as binary

Start your day with The Independent, sign up for daily news emails
Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
PROMOTED VIDEO
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick