Wednesday, 4 July 2012
The Libor, Ladbrokes and Law N Order
In May we produced a post comparing the rigging of the LIBOR and the fixing of football matches.
Following the takeover of the England Football Team by bookmakers and the rigging of LIBOR markets by Barclays, Lloyds and RBS, we thought that it deserved repeating.
All financial markets are gamed by insiders seeking cornered structures, collaborative manipulations and inappropriate competitive advantages.
The surprising factor is that human behaviouralism results in exactly the same corrupt edifices being constructed across the market continuum - Goldman Sachs betting against disinformational advice sold to clients, banks working together to manipulate the LIBOR (London Inter-Bank Offered Rate), football agents working to inflate the values of their clients, bookmakers working in unison to achieve the required outcomes in criminalised football matches...
The parallel simplicities of these corruptions are marked - due to minimal external enforcement of the rules and laws in existence, the perpetrators do not have to put much effort into covering their murky tracks.
So they don't.
In this post, we explore these parallels and the issues arising.
The Economist: "It [the LIBOR] is supposed to be constructed using banks' own honest estimates of what it costs for them to borrow money. But regulators around the world suspect that LIBOR... has been subject to manipulation."
Banks' individual borrowing costs prove to be remarkably similar considering their varied levels of risk.
The Economist continues: "The court documents suggest that a group of traders regularly contacted one another to discuss how to influence the Yen LIBOR rate."
And so it is with football betting markets and the player transfer markets.
Primary level betting organisations, taking their cue from the highly liquid underground Dark Pools that are the foundation of postmodern football, co-ordinate match prices between themselves to optimise returns from the event.
This disguises the hyperreality of corruption from the public eye.
Take a fixed match that is regarded by insiders as a certainty but the information leading to this outcome is not open source.
Market makers will price the event based on an array of inputs that maximises their combined returns - if one firm were to suggest that Team A should be priced at 1/100, the market would be destroyed.
This collaboration between the market makers works along competitive pricing in the micro ie the bookmakers want to rip off mugs primarily but their competitor firms secondarily and strategically.
Or take the transfer market.
Agents, club agents and club managers hold a series of private meetings whereby the value of a player is assessed.
But this 'value' is not real - it is an inflation on price to the benefit of the various agents and the club manager(s) involved in the deal.
Once again, football on the whole loses out so that insiders might take a much larger slice of the action via their percentage cuts and the variety of brown envelopes and briefcases changing hands.
The Economist prints the case filing on the LIBOR manipulation where one trader from a whistleblowing bank (Trader A) helps to manipulate the market with a Royal Bank of Scotland (RBS) insider: "Trader A explained to one RBS IRD trader who his collusive contacts were and how he had and was going to manipulate Yen LIBOR. Trader A also communicated his trading positions, his desire for a certain movement in Yen LIBOR and gave instructions for the RBS IRD trader to get RBS to make Yen LIBOR submissions consistent with Trader A's wishes. The RBS IRD trader acknowledged these communications and confirmed that he would follow through. Trader A and the RBS IRD trader also entered into transactions that aligned their trading interests in regards to Yen LIBOR."
Bookmaker A explained to Bookmaker B who his collusive contacts (bookmakers, players, agents, referees) were and how he was going to manipulate the match outcome. Bookmaker A also transmitted his trading positions, his desire for a certain result and gave instructions for Bookmaker B to get his organisation to use its contacts to enhance the match manipulation. Bookmaker B acknowledged these communications and confirmed that he would follow through. Bookmaker A and Bookmaker B also entered into transactions that aligned their trading interests in regards to the match outcome.
Agent A explained to Manager B who his collusive contacts (other agents, club agents, managers) were and how he was going to manipulate the transfer fee. Agent A also transmitted his player valuations, his desire for a certain minimum transfer fee and gave instructions to Manager B to use his contacts to inflate the price. Manager B acknowledged these communications and confirmed that he would follow through. Agent A, Manager B and other interested parties also entered into transactions that aligned their financial interests in regards to the inflated transfer fee.
All of which is illegal, although in football that matters little as there is no regulation and being bent is a core competency.
But this is short-termist and psychopathic.
Civil cases may be brought against the perpetrators.
* Large individual cases might be brought by either other bookmaking organisations or the club owners with respect to betting and transfer corruptions.
* Traders on the wrong side of manipulated bets or club employees suffering the consequences might bring class action suits.
* Traders whose winnings are limited or clubs who lose out on future transfer fees might also have a case if intent can be proved.
* Individual bettors can group together to create class action suits to reclaim losses on events manipulated by insiders.
The similarities in the forms of financial market manipulation is enhanced in a wired world where mass behaviouralisms become global consciousness 'wisdoms' at a pace while the individual manipulators believe that their omnipotence places them ahead of the curve.
When actually there is no robustness whatsoever in such rubbish in/rubbish out corruptions.
Just a symbiotic relationship between market makers and crime.
The criminals who manipulate financial, betting and transfer markets utilising the same tactics...
... some of them are even the same individuals/organisations.
What a weird fluke!