Morgan Stanley in the viewfinder of the AMF for manipulation of French debt


A manipulation of prices on sovereign debts. The accusation is serious. The College of the Markets Authority (AMF) is questioning the office of Morgan Stanley in London, which allegedly manipulated the price of the debts of the French state in 2015. According to the investigation, the traders of the bank would have acted to limit their losses. The college demanded a fine of 25 million euros against the bank during a hearing before the Sanctions Committee this Friday morning. Never seen after an investigation.

Futures contracts on French debt

The grievances focus on a particular day: that of June 16, 2015. That day, between 9:29 and 9:44, the "desk" of Morgan Stanley have massively acquired futures on French debt and German debt, via transactions on Eurex, the derivatives market in Germany. Then, at 9:44, the traders would have instantly sold 815 million euros of French loans (OAT) and 340 million euros of Belgian bonds on the trading platforms MTS France, BrokerTec and MTS Belgium.

Fears of "Grexit"

According to the AMF, these transactions were motivated by the "need to quickly exit a deficit position". Morgan Stanley was exposed to French risk. Its desk had taken positions that allowed it to record gains if the French debt price rose and the spread spread between France and Germany was reduced. "It was a chosen strategy," says the prosecution. Problem: the market was in a reverse configuration. The resurgence of fears of Greece leaving the eurozone, after a crucial meeting of the country with its creditors, led to a rush of investors towards the German debt and a widening of the spread.

For the College of the Autorité des marchés, the London traders of the US bank have sought to raise the price of futures on the French debt to "abnormal and artificial levels" in order to raise the price of government bonds themselves, in order to sell them at a higher price.

The prosecution notes that the desk was approaching its $ 20 million risk limit, which played into its decision to intervene "aggressively." "The desk massively dumped its risk on other market participants and took them by surprise," she says. The operative technique would recall, according to a securities specialist treasury heard by the AMF, the
Doctor Evil scandal

    of 2005 involving Citi Bank.

Charter of Securities Professionals of the Treasury

At the hearing on Friday, November 8, the AMF college also recalled that the facts are particularly serious insofar as Morgan Stanley is in its twenties.
partner banks of the French State, the "SVT"

    (specialists in treasury securities). But they sign a charter with Agence France Trésor, which requires them to behave "ethically" in the markets and an effort to maintain the liquidity of government bonds. The college speaks of an attitude "highly prejudicial and incompatible with the rules of a major player in the markets".

Morgan Stanley said it "categorically rejects the allegations of the AMF. The bank will continue to vigorously defend its integrity and the highest standards applied to its professional practices. The bank's defense is surprised by the amount of penalty required in view of the loss savings recorded by its desk and insists that these are not proprietary positions but only in the context of his functions of SVT, in charge of helping the French State to manage its debt well.

Agence France Trésor not auditioned

The bank's lawyer points out that Agence France Trésor – the main interested party in the file – has itself considered, after having received all the explanations from Morgan Stanley on the transactions of 16 June 2015, that "the subject was closed". . Morgan Stanley's defense is also "shocked" by the fact that AFT was not heard in this case.

On the merits, she explains that the operations of June 16 (the acquisition of futures on the French debt) are in fact a simple "débouclage" a cover set up the day before. "The market context on June 16 was very tense, it needed to act quickly," says the lawyer. For him, it is impossible to consider that there is course manipulation. "Imagine that we can vary the French debt market (whose outstanding amount is close to 1.500 billion euros) by buying less than 2% of the average daily volume of futures contracts is an aberration! "


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