Former Barclays trader Daniel Plunkett tried to gain $1.75m (£1m) and cheat a customer out of millions through gold fixing – just one day after the bank was fined £290m for Libor misconduct.
Today the FCA fined Barclays £26m for failings relating to gold fixing and banned and fined Plunkett £95,600.
Plunkett was a director on the precious metals desk and was found to have exploiting weaknesses in Barclays’ systems on 28 June 2012 in order to profit at a customer’s expense.
The FCA found Barclays had inadequate policies and procedures in place to properly manage traders’ participation in gold fixing, and failed to provide adequate training to staff on gold fixing.
The regulator says the failings were particularly serious as its investigation into Libor and Euribor fixing should have caused Barclays to review its systems and controls in relation to other price-setting mechanisms prior to June 2012.
The FCA says: “Indeed, this incident, which occurred the day after the authority published its final notice to Barclays in relation to Libor and Euribor, may have been avoided had Barclays done so.”
Plunkett was responsible for pricing and managing Barclays’ risk on a digital exotic options contract which referenced the price of gold during the 3:00pm gold fixing on 28 June 2012.
The US customer owning the option would receive a $3.9m payment if the gold price fixed above $1,558.96 at that date and time.
In an email sent to colleagues on the evening of 27 June, Plunkett said he was hoping for “a mini puke to 1558 for fixing”. The FCA says the phrase “mini puke” is understood to mean a drop in the price of gold ahead of fixing at 3:00pm.
On the morning of 28 June, he told a colleague: “Hopefully we fix 1558, or 1558.75 ideal”.
Plunkett placed a number of orders that day which meant the price was fixed at $1558.50, just below the required level.
As a result, Plunkett boosted his own trading book by $1.75m.
Shortly afterwards the customer asked Barclays for an explanation of why the price had fixed just below the barrier.
Barclays conducted an international investigation into Plunkett’s actions and repaid the customer the amount that would have been due had the price fixed above the barrier.