Richard Drew/Associated PressThe headquarters of Morgan Stanley in Manhattan.A lawyer for a high-profile trader under investigation over his trading in Treasury futures said his client did not engage in any manipulative activity.
Glenn Hadden, the head of global rates at Morgan Stanley, is the subject of an inquiry by regulators at the CME, the big Chicago exchange, according to a recent regulatory filing. The trading — which took place when Mr. Hadden was at Goldman Sachs — was the subject of a front page article in The New York Times on Monday.
“The CME matter concerns technical risk management activity in a one-minute period four years ago during which Mr. Hadden acted properly and followed established market practice. There is no legal or factual basis for any suggestion of market manipulation,” James J. Benjamin Jr., a lawyer at Akin Gump Strauss Hauer & Feld who is representing Mr. Hadden, said in a statement.
Mr. Hadden had declined requests to comment for Monday’s article.
Whether Mr. Hadden followed established market practice will be a topic for discussion with regulators. People briefed on that investigation but not authorized to speak on the record said the inquiry focused on Mr. Hadden’s purchases or sales of Treasury futures right before the markets closed. The effect of this would have been to make other trades more profitable, according to the people briefed on the matter.
Goldman Sachs
Glenn Hadden, a powerful trader in the Treasury market.
Mr. Hadden is one of Wall Street’s most powerful Treasury traders. Morgan Stanley hired him 2011 to run its rates desk, an area of focus for the firm after the financial crisis. When Morgan Stanley hired Mr. Hadden, it was not aware that the CME was looking into his trading of Treasury futures but it was aware of another incident that took place around the same time, according to people briefed on the matter but not authorized to speak on the record.
In that case, Goldman received complaints involving Mr. Hadden from the Federal Reserve Bank of New York. Goldman is one of 21 firms designated to trade United States government securities with the New York Fed. Traders at the Fed, according to people briefed on this matter, felt that Goldman was trying to improperly profit from one of the federal government’s bond-buying programs, which are aimed at stimulating economic growth.
After receiving those complaints, Goldman put Mr. Hadden on paid leave in 2009. Neither Goldman nor Mr. Hadden was accused by regulators of wrongdoing in that case, but Mr. Hadden’s leave stretched out for months, in part because senior managers were divided on whether he should return to work, and whether he should have managerial responsibilities if he did return, according to people involved in the discussions.
In November 2010, Mr. Hadden left Goldman. Soon afterward, he landed at Morgan Stanley. Several senior executives there were aware of the New York Fed’s complaints when Mr. Hadden was hired, but they were satisfied that he had not done anything wrong, according to people involved in the decision to hire him.