Morgan Stanley’s headquarters in New York’s Times Square. PHOTO: Bloomberg by Eric Thayer.
(c) 2021, Bloomberg – Donal Griffin, Felipe Marques
A former senior Morgan Stanley foreign currency (Forex) trader, whose unit was the subject of an international investigation for an alleged mispricing of currencies that led to losses of tens of millions of dollars in 2019, has been Withdrew after the investment bank released allegations about his conduct.
According to a statement made by Morgan Stanley to the US Financial Industry Regulatory Authority (FINRA), Thiago Melzer, who supervised investments in foreign currency and its derivatives (FX Options in English) ) was “fired” in June for allegations concerning the mispricing of certain Forex transactions and for using communication channels that are not approved by the firm. The bank launched an international investigation into suspected malpractices at the unit towards the end of 2019, Bloomberg reported at the time.
Melzer was accused by the bank of “advising others to take unsafe positions regarding profit-and-loss goals,” according to the FINRA report. Likewise, he is accused of having communicated transactional information “using communication platforms not approved by the company,” the report says.
Mark Lane, a spokesman for Morgan Stanley in New York, had no comment. Melzer also did not comment. He has denied any relationship to “mismarkings” (“erroneous quotes”), a term used in the industry to describe the inappropriate valuation of financial asset transactions, explained several people with knowledge of the subject.
Melzer is establishing a new fund in Sao Paulo called “Upon Global Capital”, where he will be chief investment officer, according to the new entity’s website. Its strategy will be to profit based on macroeconomic trends, the people commented, taking advantage of the unprecedented influx of Brazilian hedge funds.
“Upon Global Capital” was born based on extensive experience in options and derivatives transactions in developed and emerging markets, ”indicates the firm’s website.
Two former Melzer colleagues have joined him on Upon. Senad Prusac, former head of macroeconomic trends at Morgan Stanley through 2019, will lead the firm’s “international platform,” according to the website. Antonio Moura Andrade, who ran the bank’s business at FX Options for Latin America before retiring in 2020, will be in charge of an investment portfolio, according to the website.
Melzer rose over a decade to become one of the highest ranking traders in Morgan Stanley’s fixed income division, overseeing forex and emerging markets trading oversight. He helped the firm enter the world of foreign currency options, opaque products that are part of a global currency market close to $ 6.6tn (millions of millions) a day.
The strategy came to an end in 2019 when a series of transactions tied to the Turkish lira failed miserably, resulting in millions of dollars in losses and prompting Morgan Stanley authorities to launch an investigation to determine whether traders had been mispricing the assets. transactions, people with knowledge of the matter commented at the time.
Those transactions also helped expose a shadowy hedge fund in Hong Kong that generated a loss of $ 180 million for Citigroup Inc. The status of the investigation – and its conclusions – are unclear.
After all this, Morgan Stanley appointed new heads of currency investment units, including new co-directors for foreign currency options, and the business contributed to a 59 percent increase in fixed income trading earnings in 2020. But the episode highlighted one of the reasons CEO James Gorman has focused on more stable businesses like third-party fund management, investing some $ 20 billion in the purchase of asset manager Eaton Vance Corp. and the operator. retail finance company E * Trade Financial Corp.
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