Is that the "high jump/radar" paradigm or the "limbo/radar" one?
Employee personal trading guidelines
- Thread starter Matt Houston
- Start date
Is that the "high jump/radar" paradigm or the "limbo/radar" one?
Take this FWIW...
Back in the mid-90's I was working at a large investment bank in NYC.
Had this consultant working for me who had signed the standard personal trading restrictions, fairly similar to what you've posted here.
Anyway, one day I got a visit from compliance. Turns out this idiot placed a daytrade the prior day.
Bottom line was they gave him a choice; either he donate the profits on the trade to a charity or lose his gig and get blackballed from the entire financial district.
When it comes to government or finance, there are no more secrets if you're a worker-bee today...
That puts it in perspective thanks.
OK chances of being caught are higher than at first thought, so if I was to decide I could live with the moral consequences I guess an idea would be to open an account in the wifes name, or go back to gambling.
OK chances of being caught are higher than at first thought, so if I was to decide I could live with the moral consequences I guess an idea would be to open an account in the wifes name, or go back to gambling.
I have never worked in the financial world, but spent significant time in the corporate world at all levels. It basically comes down to if someone likes you or not. If someone likes you, then they will forgive significant infractions of the rules. However, if someone does not like you then they will use ANY EXCUSE to get rid of you. This could be the excuse to get rid of you.
To stay "liked" at work, follow the 4 golden rules:
1) Never speak or write against yourself or others no matter the situation. If someone is giving you a hard time and human resources asks if they are giving you a hard time, then you say they are not giving you a hard time and are of fine character.
2) Dont take anything personally. If the boss comes out and yells out at you saying you are a fool in front of the workplace, then dont take it personally. Let it go. Dont make faces either because sometimes body language is more of a tell then the spoken language.
3) Dont make assumptions and communicate clearly.
4) Always do your best and put your back into it. Everyone knows when you are slacking off.
Follow those golden rules and you will be forgiven for minor infractions in most cases...
To stay "liked" at work, follow the 4 golden rules:
1) Never speak or write against yourself or others no matter the situation. If someone is giving you a hard time and human resources asks if they are giving you a hard time, then you say they are not giving you a hard time and are of fine character.
2) Dont take anything personally. If the boss comes out and yells out at you saying you are a fool in front of the workplace, then dont take it personally. Let it go. Dont make faces either because sometimes body language is more of a tell then the spoken language.
3) Dont make assumptions and communicate clearly.
4) Always do your best and put your back into it. Everyone knows when you are slacking off.
Follow those golden rules and you will be forgiven for minor infractions in most cases...
This is funny because I just moved into compliance and working on a personal dealing system. (Hence my shiz doesn't allow me to trade - period).
But for the rest of ya, here is my take on the rules.
Holding rule - some have 30 days, some have 14 days, etc. Either way, if you can open two accounts (under the same broker - kind of like the concept of omnibus account), you can long in one account and short in another. Legal - yes. Moral - gray. Anyway, most - if not all - compliance system do not roll up positions for you. and most brokers give statements per account. What you want your broker to do is roll up your position risks through multiple accounts, hence if you are day trading, you can long and short all day and still not hold bags at the end of the day. But to your compliance guys, you are holding lots of longs and shorts - which they don't care as long as you have cleared it.
The challenge here is to find a broker that actually can/will open this type of accounts. I called some - they all said ef off - they need about 1m minimum. If you found some, let me know cuz I got friends in the industry who wants to get around this rule.
Clearing of trades - that's easy. just do that as a part of your morning coffee routine. Just had a thought... maybe you can write a script that efn clears the entire S&P! haha.. of course you may want to trade something but your business area is working on a deal - thus, you won't get clearance for it. DO NOT VIOLATE that. You will get disciplined for this. If clearance system says no, that means your chinese wall area has some shiznit going on for that company. It will be considered by compliance as potential insider trading if you violate this rule.
Stop loss - I have NEVER heard of this rule. That is stupid. I would find out more from your compliance about what this means. Is it 20% max? So no 50% stop loss (I wouldn't set it anyway). But if you think about it... if you opened up that omnibus account, this all goes away. You can set a limit order (in the opposite position account) at any level - essentially creating a synthetic stop.
Hope that helps.
But please let me know if you do find a broker that allows sub accounts!!!
But for the rest of ya, here is my take on the rules.
Holding rule - some have 30 days, some have 14 days, etc. Either way, if you can open two accounts (under the same broker - kind of like the concept of omnibus account), you can long in one account and short in another. Legal - yes. Moral - gray. Anyway, most - if not all - compliance system do not roll up positions for you. and most brokers give statements per account. What you want your broker to do is roll up your position risks through multiple accounts, hence if you are day trading, you can long and short all day and still not hold bags at the end of the day. But to your compliance guys, you are holding lots of longs and shorts - which they don't care as long as you have cleared it.
The challenge here is to find a broker that actually can/will open this type of accounts. I called some - they all said ef off - they need about 1m minimum. If you found some, let me know cuz I got friends in the industry who wants to get around this rule.
Clearing of trades - that's easy. just do that as a part of your morning coffee routine. Just had a thought... maybe you can write a script that efn clears the entire S&P! haha.. of course you may want to trade something but your business area is working on a deal - thus, you won't get clearance for it. DO NOT VIOLATE that. You will get disciplined for this. If clearance system says no, that means your chinese wall area has some shiznit going on for that company. It will be considered by compliance as potential insider trading if you violate this rule.
Stop loss - I have NEVER heard of this rule. That is stupid. I would find out more from your compliance about what this means. Is it 20% max? So no 50% stop loss (I wouldn't set it anyway). But if you think about it... if you opened up that omnibus account, this all goes away. You can set a limit order (in the opposite position account) at any level - essentially creating a synthetic stop.
Hope that helps.
But please let me know if you do find a broker that allows sub accounts!!!
Most of these rules are fairly standard for large finamcial institutions.
Trades should be cleared through compliance so that the compliance can check that the employee is not in a possession or likely possession of insider information. For example, if an investment bank works on stock issue for a particular company, this is insider information and all employees will likely be refused the right to trade in this stock till the information about the coming stock issue is public. Interestingly, employees in trading will not be allowed to know why trading in this stock is prohibited due to "Chinese Wall" rules.
All trades to be held for 30 days is a fairly standard rule too. It is again to make sure that the employee is an investor and not trader on personal account. The reason for this is in a number of financial jobs a person is in a position to manipulate stock prices to certain extent, be that by publishing a research report or by choosing how to execute a large customer order. Knowledge of these is also an insider information. However, it is thought that a long required holding period will not allow abusing it.
Forex and futures can only be used as a hedge because they are hughly leveraged products. As you are aware, even though a proker may unwind positions that if the account looses value and teh positions stop satifying margin requirements, this is not guaranteed and the trader is liable for all loss. For highly-leveraged instruments such as futures, such a loss may exceed the value of the trading account. The purpose of this rule is to prevent employees from going personally bankrupt due to recklessly using too much leverage. Becoming personally bankrupt makes it impossible to take certain occupations.
The rule regarding the stop-loss strikes me as unusual... However, take into account that rules regarding minimum holding period and permission to trade obtained in advance apply to closing positions too. So, in effect they mean one cannot have a stoploss as executing stoploss would be an unauthorised trade. In this respect actually having a stop-loss (even if it's 20%) is rules relaxation.
Although tax authorities do have a list of all trading accounts, they don't share this with employers. Moreover, employers (unless they are CIA and the like) are not allowed to spy on employees. So, naturally, they find out about employee trading accounts mainly when employees declare these.
On the other hand, brokers aks where a prospective client works... and if the name of the employer sounds like a name of a financial institution, the broker may request to see permission to open a brokerage account from the employer's compliance department.
A firend who worked for a bank at the time actually observed this happening.
One of the colleagues had a financial spreadbetting account (that's a British way to trade stocks tax-free). Because spread-betting is regulated weaker than brokerages, it is covered by blanket prohibition in large and small financial companies. Once he was away for lunch, a colleague answered his phone. On the line was a spread-betting broker who called to serve a margine call. The same day the owner of the spread-betting account was asked not to bother comiong to work.
You are obligated to disclose any acounts trust/wife where you have power to place or even ADVISE trades.
Anyways, when you opened your brokers a/c, As your employer did you put your current employer i.e. the bank ? If so, you are in a sticky spot.
If you are on Inv. banking side or have access to Non public information, forget get about it. Do not even try or try to act dumb.
If you do get caught, you bank is obligated to report you to authorities and investigate if you did commit insider trading. If you are cleared you will just loose your job. else you will go to the Can.
If you loose your job once due to such circumstances, for get about woring in Financial sector FOREVER.
My point is its not worth it.
And please for GOD SAKE Delete this thread - for your OWN GOOD
If you have two accounts, you can trade long positions in the long account and trade your shorts in the short account.
To your broker, you are flat (if you are indeed flat at the end of the day). For example, you longed 100 shares of GOOG. then flatten out within 10 minutes. If you longed 100xGOOG in account #1 and shorted 100xGOOG in account #2 (as long as you follow the uptick rule), then technically, you are flat on GOOG. You are making money in one account and losing in the other. But as long as risk is checking both accounts, then you are fine.
Compliance systems check by accounts - not by individual names since you may have various types of accounts under the same name such as investment managed accounts which do not follow the trading rules (since you are not in descretion of the trades - that's a different topic). Since systems are checking by accounts AND your broker will provide (ask them) both accounts to compliance seperately, you are "getting around" the holding rule.
Ask your broker how they treat two accounts for the same entity (i.e. you or a LLC/LLP you have established). If they can roll the risk together, then you are home free. If they don't, then keep on looking or stop trading for awhile.
My advice, don't trade for awhile. Use this time to fine tune your system. Use the free market data you get at your job to simulate trading, etc. Leverage the knowledge base at your institution.
Unless your trading replaces your salary, I don't recommend risking it.
To your broker, you are flat (if you are indeed flat at the end of the day). For example, you longed 100 shares of GOOG. then flatten out within 10 minutes. If you longed 100xGOOG in account #1 and shorted 100xGOOG in account #2 (as long as you follow the uptick rule), then technically, you are flat on GOOG. You are making money in one account and losing in the other. But as long as risk is checking both accounts, then you are fine.
Compliance systems check by accounts - not by individual names since you may have various types of accounts under the same name such as investment managed accounts which do not follow the trading rules (since you are not in descretion of the trades - that's a different topic). Since systems are checking by accounts AND your broker will provide (ask them) both accounts to compliance seperately, you are "getting around" the holding rule.
Ask your broker how they treat two accounts for the same entity (i.e. you or a LLC/LLP you have established). If they can roll the risk together, then you are home free. If they don't, then keep on looking or stop trading for awhile.
My advice, don't trade for awhile. Use this time to fine tune your system. Use the free market data you get at your job to simulate trading, etc. Leverage the knowledge base at your institution.
Unless your trading replaces your salary, I don't recommend risking it.