Lehman Brothers Holdings Inc. has suspended two equities traders in its London offices in the face of an inquiry into how trades were priced in its equities unit, Trading Markets reports.
After identifying the trades through company’s internal risk systems, Lehman suspended the two traders a week ago.
The Financial Services Authority (FSA) has been made aware of the situation and the company is cooperating with its inquiry. The inquiry is focussing on the valuation of securities, probably those tied to equity derivatives, in markets that have felt significant decline in liquidity.
Equity derivatives in plain-vanilla form enable investment-banking clients or a bank’s in-house trading desk to navigate volatile stock markets by locking in prices using either indexes or specific stocks.
Weeks before, in a similar trader related incident, French bank Societe Generale discovered that Jerome Kerviel, a low-level trader on the bank’s equity derivatives desk, handled trades that allegedly led to a $7.2 billion loss. The losses have pushed the Paris-based bank to the verge of potential takeover bid.
Zurich-based rival Credit Suisse, last month, after finding pricing errors on its books, suspended some traders in normal control procedures.