Goldman Sachs Flagged Morgan Stanley Block Trading to Regulator: FT

  • Goldman Sachs alerted the Hong Kong securities regulator about Morgan Stanley’s block trades, the FT reported.
  • It flagged Morgan Stanley concerning inventory value drops shortly earlier than its rival put shares available on the market, the FT stated.
  • Both banks had been subpoenaed in US regulators’ probe into whether or not hedge funds acquired advance discover about block trades.

Wall Street large Goldman Sachs flagged banking rival Morgan Stanley’s block buying and selling to Hong Kong’s monetary regulator, the Financial Times reported Thursday, citing folks conversant in the matter.

Goldman Sachs alerted Hong Kong’s Securities and Futures Commission three years in the past throughout an “informal” dialogue about share value drops in a number of Hong Kong-listed firms, the FT stated. These value drops occurred a short time earlier than Morgan Stanley introduced blocks of shares to the market.

Whether the Hong Kong regulator investigated the report by Goldman Sachs’ representatives just isn’t recognized, in keeping with the FT.

Goldman Sachs declined to remark when contacted by Insider. Morgan Stanley and Hong Kong’s SFC didn’t instantly reply to a request for remark.

Block buying and selling refers back to the observe of a financial institution promoting numerous shares in a single go to institutional shoppers, off the open market.

Holders who wish to promote a whole lot of shares could discover promoting in components takes longer and might cut back the worth. Banks are likely to bid for all of them, normally at a reduced value to the market.

The profitable banks then provide these shares to shoppers at a premium to the agreed value, and search to achieve a revenue on this means.

In February, US regulators opened a probe into block buying and selling on Wall Street, taking a look at whether or not banks gave hedge fund shoppers advance discover about huge share gross sales earlier than they had been made public. The Securities and Exchange Commission and the Department of Justice subpoenaed Goldman Sachs and Morgan Stanley, amongst others, as a part of the probe.

Reports of the US investigations prompted Asian regulators to begin asking their very own questions, the FT stated. China’s Securities Regulatory Commission advised Morgan Stanley to offer data regarding the SEC probe in February, whereas the Hong Kong authority began asking banks about their block-trading practices.

Block buying and selling boomed in 2021 and was at a five-year excessive of $70 billion final yr, in keeping with a Wall Street Journal report citing knowledge from Dealogic. Morgan Stanley was the most important participant out there in 2021, whereas Goldman Sachs was additionally an lively participant, primarily based on that knowledge.

Read extra: Stagflation threat is hovering, in keeping with 3 high strategists at a $950 billion asset supervisor. They clarify why some shares are nonetheless engaging — and share 4 methods to arrange a portfolio for the looming mixture of excessive inflation and sluggish progress.

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