Uncategorized

Chatting Up Some Dough

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Written by Matthew McCready
Edited by Sarah Mejia

Has the use of chat rooms by traders come to an end?  It appears so.  The article “Banks Weigh Barring Chats” provided insight that trading chat rooms are being used to manipulate the marketplace. The purpose of the chat room is to connect traders from different banks so they may discuss trading and the market. The use of these chat rooms has come under scrutiny because “the Justice Department has said it is involving banks [that] might have hindered fair competition in the markets” (Strasburg C1-2). This shows us that banks and traders are under a constant microscope.  Complying with regulations is crucial for success and will hurt a company both financially and socially. As a result of the scrutiny the chat rooms have come under, “J.P. Morgan Chase & Co. and Credit Suisse Group AG are discussing internally whether to disable computerized chat rooms that electronically link traders across multiple banks” (Strasburg C1). These are two of the banks facing scrutiny that are attempting to address the issue immediately. This shows us that large banks will do whatever is necessary to avoid having their reputations tarnished.

The idea of consequentialism, or making choices based on possible results, comes to mind when looking at the banks’ decision-making process. How J.P. Morgan and Credit Suisse manage this situation, and the outcomes of their choices, will show us whether or not good business practices were put to use. Are these two companies doing what is necessary to avoid turmoil, or are they ruining an excellent trading strategy? It appears they are planning to try and avoid consequence by cutting the chat rooms out so as to avoid major fines and taking a hit to their reputation, a decision with which I agree wholeheartedly. J.P. Morgan in particular has come under enormous scrutiny and cannot afford to again make a mistake. The fact that both banks are even discussing the option of disabling chat rooms is suspicious in itself, and may lead many to see such action as an admission of guilt. Possible penalties could include major fines or perhaps invoke a deeper investigation into the banks’ practices. However, by choosing to stop the process now, both banks may be able to avoid penalty altogether. Wavering in their decision is unwise; instead, a decision should be made quickly and concisely to end any further investigation.

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**Due to technical difficulties, we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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Strasburg, Jenny.  “Banks Weigh Barring Chats.”  Wall Street Journal 11 Nov. 2013:  C1+.  Print.

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