Wife of Swiss National Bank Chairman: Star Currency Trader
- Posted by DynamicHedge
- on January 10th, 2012
How do you think you could do as a currency trader if you had inside information on currency intervention by a central bank? I guess it depends on which central bank, no?
The chairman of the SNB has resigned in the wake of a scandal involving his wife and her currency trades leading up to open market operations by the SNB in the summer of 2011.
From the WSJ:
Swiss National Bank Chairman Philipp Hildebrand resigned Monday after emails appeared to undercut his assertion that he knew nothing of a currency trade worth more than $500,000 by his wife last summer.
Mr. Hildebrand, who denied any wrongdoing, resigned just days after declaring that he wouldn’t step down in the wake of disclosures that his wife, who once worked at a New York hedge fund, exchanged Swiss francs for dollars Aug. 15, just weeks before the central bank made one of the boldest interventions in foreign-exchange markets in recent years to control the rise of the Swiss currency.
The resignation brought an abrupt end to the two-year tenure of a central-bank chief who generated both controversy and plaudits from the international financial community.
In a news conference, 48-year-old Mr. Hildebrand said he was resigning in part because it was impossible for him to prove that his wife, Kashya, acted alone in making the transaction last August.
“My wife has a strong personality,” Mr. Hildebrand had said last week in discussing the trade. “She worked in the financial business and has her own thoughts.”
Ms. Hildebrand worked at New York hedge fund Moore Capital Management between 1994 and 1999 in various roles, where she met her husband. She has managed an art gallery in Zurich since 2001.
In one of the emails released by SNB Monday, dated Aug. 16, the family’s financial adviser at Bank Sarasin & Cie., Felix Scheuber, raises a question as to whether Mr. Hildebrand had given some assent for the trade a day earlier by Ms. Hildebrand.
“I also remember you saying in our yesterday’s conversation that if Kashya wants to increase the [U.S. dollar] exposure it is fine with you,” Mr. Scheuber wrote.
Two days after the trade, on Aug. 17, the SNB flooded the market with liquidity in an effort to weaken the Swiss currency. The SNB then set a cap on how far it would let the franc rise against the euro.
By exchanging her francs for dollars before these moves, Ms. Hildebrand profited from the subsequent sharp gain in the dollar.
It shouldn’t hamstring you financially if you have a family member in a position of power, but you should not gain such a blatant advantage over others. The real question is, What the hell was Mrs. Hildebrand doing trading currency in the first place? Shouldn’t there be some serious firewalls or controls in place to counteract such an obvious conflict of interest? Besides, if she wanted to cheat there are lots of other non-currency ways to profit from inside information. Maybe she did nothing wrong, but it is a hilarious blunder nonetheless.
What’s even more interesting is that as of the time I read the article about half the readership of the WSJ thought that Hildebrand shouldn’t have to retire over the scandal.
A day later, people seem to be coming to their senses:
Am I old fashioned in thinking the resignation is entirely appropriate? I’d be interested to hear from the other 39.4%?
Source: Wife’s Trades Sink Banker (WSJ)
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DynamicHedge is an equities, futures and derivatives trader based on the West Coast. He runs a long/short opportunistic relative-value strategy within a proprietary trading group. More