Ex-Goldman Sachs 'Master Of Universe' Under Investigation
Manipulation of U.S. Treasury market.
One of Wall Street's most profitable bond traders is under investigation.
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NYT Dealbook
Morgan Stanley hired former Goldman Sachs trader Edward Glenn Hadden to run its Treasury bond desk last year, even though his former employer had placed the trader on paid leave for about a year following an internal inquiry, said three people familiar with the situation.
On paper, Glenn Hadden seemed to be the ideal person to run a large bond trading operation at Morgan Stanley when he was hired in early 2011. Mr. Hadden, a former Goldman Sachs partner, was one of the most profitable bond traders on Wall Street.
But there was more to his story than just stellar financial results. He had left his previous employer,Goldman Sachs, after questions about his trading activity. And now, Mr. Hadden is under investigation over his trading in Treasury futures while at Goldman, according to a regulatory filing.
Specifically, regulators at the CME Group, which runs commodity and futures exchanges, are investigating whether Mr. Hadden’s purchases or sales of Treasury futures late in the trading day manipulated closing prices in the market and, in turn, made other of his trades more profitable, according to people briefed on the matter who were not authorized to speak publicly.
Mr. Hadden, who is now the head of the global interest rates desk at Morgan Stanley, has been given formal notice by the CME that an inquiry is under way, meaning that it is at an advanced stage.
Through a Morgan Stanley spokesman, Mr. Hadden, 42, declined to comment. Goldman Sachs also declined to comment, and Morgan Stanley would say only that Mr. Hadden continues to work at the firm as head of global rates.
Mr. Hadden is one of the highest paid professionals at Morgan Stanley and has been known throughout his career for aggressive and profitable risk taking. It is unusual for someone of Mr. Hadden’s stature to be the target of a civil complaint like this, and if he is found to have violated exchange rules, he could, in the extreme, face millions in fines and be barred from trading on the CME Group.
He has continued to deliver profits to Morgan Stanley, but his time there has not been without incident. In 2011, Mr. Hadden’s division was burned by a bad wager on United States inflation expectations, resulting in a loss of tens of millions of dollars, according to people briefed on the trade. Since then, Morgan executives have increased their supervision of Mr. Hadden’s activities, according to several people briefed on the matter.
A lot is riding on Mr. Hadden at Morgan, however. Not only does he run the firm’s powerful rates desk, but many of his bosses — including Colm Kelleher, co-president of institutional securities, and Kenneth M. deRegt, global head of fixed income sales and trading — had a role in hiring him.
Morgan Stanley reported the investigation to the Financial Industry Regulatory Authority, Wall Street’s self-regulator, on Nov. 19, according to a person briefed on the matter.
Mr. Hadden got his start in finance in Canada. He was raised in Ontario and attended the University of Western Ontario, where he played football. He worked on Bay Street, which is Toronto’s financial district, and eventually landed a job there with Goldman. He also worked for Goldman in London and New York.
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UPDATE - Response from Hadden's lawyer...
Dec 4, 2012 at 2:38 PM
Reader Comments (4)
"There is no legal or factual basis for any suggestion of market manipulation," said James Benjamin, who defended his client in response to a recent regulatory disclosure by the firm that Hadden is being investigated by CME Group Inc (CME.O) over a four-year-old trade.
http://www.reuters.com/article/2012/12/03/us-xxmorganstanley-hadden-idUSBRE8B20XH20121203
http://www.sfgate.com/business/bloomberg/article/Hadden-s-CME-Inquiry-Focuses-on-1-Minute-4088628.php#ixzz2E6fk6bGR