Trader fined and banned for trying to rig UK bond market
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Friday 21 March 2014
A top City trader was fined nearly £700,000 and banned for life for manipulating the price of government bonds in an attempt to profit from the taxpayer-backed money printing programme known as QE.
Mark Stevenson, who earned £2.4m-a-year in his job at Credit Suisse, even described the Bank of England’s help that he was abusing as “cake” – trader jargon for a sweet opportunity for a profit.
The 51-year-old had been a trader for nearly 30 years when he came up with a scam to overcharge the Bank for bonds it was offering to buy under its quantitative easing support programme.
After the global financial crisis, the Bank of England launched QE to push money into the economy in the hope of encouraging spending. It did this through the banking system, by offering to pay high prices for banks’ holdings of government bonds.
However, Mr Stevenson tried to use the programme to make a quick profit, by buying huge amounts of one particularly obscure type of bonds, driving up the price before selling them to the Bank of England.
Over the course of five and a half hours on 10 October 2011, he bought £331m-worth, and, as a result, its value shot up.
However, within 40 minutes of him putting his plan into effect, other traders had noticed and tipped off the Bank. When he offered to sell the bonds at the end of the day, the Bank turned him down and they fell back to their normal value.
The Financial Conduct Authority watchdog’s director of enforcement Tracey McDermott said: “Stevenson’s abuse took advantage of a policy designed to boost the economy with no regard for the potential consequences for other market participants and, ultimately, for UK taxpayers. He has paid a heavy price for his actions.”
Just how heavy that price was for a man of Stevenson’s wealth was in some doubt, however.
His fine for manipulating the market was reduced from £948,000 because he agreed to settle at an early stage in the investigation. In the end it was less than a third of the £2.4m he earned in the previous year. Meanwhile, his ban from trading came at a time in his life when he was already way beyond the retirement age of many City traders.
He left Credit Suisse last year.
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