Goldman Sachs has also traded OTC derivatives with a number of its senior staff. John Wang, a former managing director in New York who ran the bank’s market-making business for products tied to the VIX volatility index, is one such example.
Wang, who now runs a macro fund in San Marino, California, said he was one of a number of staffers to have ISDAs with the bank before he left. He said he used the ISDA, which is still active, for equity-index and interest-rate option trades.
“I got the ISDA because I’m a prop trader at heart and needed to be able to invest and was pretty restricted on the desk in terms of what I was allowed to invest in,” said Wang, who signed a separate agreement with Bank of America Corp.
The set-up whereby a bank trades with its staff can create potential conflicts of interest, such as when junior colleagues are leaned on to give their seniors a good price on personal trades, which can be processed through the same desk as client orders, according to people familiar with the matter.
Former employees can also use their institutional knowledge and relationships to get an ISDA agreement. Simon Morris, who was Goldman Sachs’s head of credit trading for Europe and the Asia-Pacific region until the end of 2016, is one such example.
He set up a company in January last year to trade with his own money. Boltons Place Capital Management Ltd., which shares the name of a street in Kensington, has an ISDA with Goldman Sachs, according to a person familiar with the matter. Morris declined to comment.
“It’s only the very upper echelons of the finance world that get this royal treatment,” said Tze Tung Chong, a former derivatives executive at firms, including Citadel LLC, who now invests in the contracts for his clients at London investment firm Mons Capital Ltd. “You must be very wealthy; you must be financially sophisticated. But perhaps most important of all, you need to know the right people in the banks.”
This article was provided by Bloomberg News.