Your big mouth get can you in trouble, even if you think you’re talking in private: Just ask the long line of bankers whose chat transcripts have been used by law enforcement to ding their employers. For instance, this message from an RBS trader—“its just amazing how libor fixing can make you that much money”—was at the heart of an investigation that left the bank with a $612 million fine. Now, benchmark-fixing investigations have grown up around nearly every one that exists.
“if u cud see ur way to a small drop there might be a steak in it for ya”
Banks have been corporate pioneers when it comes to online chatting; even as chat software Slack is taking over the corporate world, traders at financial institutions have been chatting with their colleagues and counter-parties using the Bloomberg terminal network, among other services. But as the Financial Times reports, the terminal’s high price, along with the company’s move into direct competition with the banks as a trade executor, lead some banks to consider bans on traders in chat rooms—not to mention last year’s revelation about Bloomberg news reporters’ practice of surreptitiously keeping tabs on bankers through the service.
“We’re just not, we’re not allowed to have those conversations on [instant messages]“
But chat turns out to be vital, so banks are looking for other options. Goldman Sachs has taken the lead, developing its own internal chat service that it hopes to combine with software developed by a company called Perzo, and then convince other banks to get on board; JPMorgan, BlackRock and Morgan Stanley have all been invited. The most interesting selling point about Perzo’s software is how it encrypts messages: It’s apparently secure enough to prevent even the government from cracking the code if it subpoenas the messages.
“Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”
Of course, banks are required to keep records of their communications, and a court could likely force traders to give up their passwords given sufficient evidence of wrong-doing. But the encryption could prevent others doing business with banks from finding incriminating messages, and Goldman and whatever partners it attracts will be better positioned to supervise their employees if they are using a proprietary service, not an external service. That’s likely to make them more comfortable about allowing traders to keep making deals in chatrooms that were previously sealed in phone conversations or exchange floors. But it will also close a rare window that regulators and the rest of us had into what really goes on in the financial markets.