LONDON (Reuters) - Fake news that Napoleon had died is cited in new analysis aimed at helping commodity, bond and forex traders to stop fraud, an industry body said on Friday.
The FICC Markets Standards Board (FMSB), created after banks were fined for trying to rig currency markets, reviewed behavior in 390 cases of market misconduct going back to a U.S. debt securities squeeze in 1792.
The cases were distilled into 25 patterns of misconduct that are consistently repeated over time. The FMSB wants its members to use the findings as a fount of institutional knowledge for new traders and compliance officers.
“Identifying the relevant behaviors underlying misconduct is an essential step to forestalling them,” said Gerry Harvey, chief executive of the FMSB.
The research cited two cases of pumping up prices and squeezing markets to show underlying behaviors are rarely new.
In 1814 Charles de Berenger disguised himself as a Bourbon officer and appeared in Dover to announce that Napoleon had been killed by the Prussians.
He sent a semaphore telegraph to the Admiralty in London, knowing it would find its way into the press. The price of British government bonds rose on the news, prompting De Berenger and co-conspirators to sell gilts they had already bought.
Another case involved the U.S. soybean oil market in 1963 when there was an attempt to corner markets in what became known as the Great Salad Oil Swindle based on creating false warehouse receipts for non-existent inventory.
The research is accompanied by good practice statements such as calling on firms to have a framework for spotting and assessing common conduct risks and the need to draw lessons from new misconduct cases.
Bank of England Governor Mark Carney said such research was fundamental to identifying the root causes of misconduct and to finding ways to reinforce the collective memory of the market.
“I hope that all wholesale market firms will incorporate its lessons in their work to improve standards of conduct in wholesale markets,” Carney said in a foreword to the research.
Andrew Bailey, chief executive of the Financial Conduct Authority, said the analysis provided a very helpful basis for firms to draw out lessons on where supervision and lines of defense should focus their energies.
Reporting by Huw Jones; Editing by Stephen Powell