Index-Arbitragers Cited In CSFB Suspension Case

January 01, 1999

Three Credit Suisse First Boston traders were fired after one of them attempted to manipulate the OMX, Sweden's share index.

James Archer, 24, the son of British writer and politician Jeffrey Archer; Adrian Ezra, 26; and David Crisanti, 34, were members of a highly successful index-arbitrage team in London, nicknamed the Flaming Ferraris after their favorite cocktail.

The incident leading to their dismissal occurred during the last week of 1998, when James Archer bought $800,000 dollars worth of stock in Stora AB, a Swedish forestry company traded on the OMX, in an attempt to manipulate the index. The idea was to profit from the differences between the level of Stora shares and futures contracts based on the OMX. The trades were executed with the help of a trader at the Swedish brokerage Nordiska Fondkommission. Discovery came after officials at the Stockholm Stock Exchange spotted the surge in Stora trading and asked Credit Suisse Group's Credit Suisse First Boston for an explanation the same day.

Ezra and Crisanti were dismissed for their failure to supervise Archer properly.

Both Credit Suisse First Boston and Nordiska appear to have violated a number of Swedish stock exchange rules. The incident is being reviewed by the exchange's nine-member disciplinary committee, which could impose fines of up to $1.2 million. In addition, Nordiska and some of the traders involved may face criminal charges, including Archer who, it was discovered, was not authorized to trade on the exchange at all. However, Nordiska says the trader involved in the deal no longer works for the company and has stated that there is no problem with their procedures and rules. In addition, even if criminal charges are leveled against Mr. Archer, his extradition would be unlikely.

Manipulating prices has been prohibited by Stockholm exchange rules for the past two years. CSFB is a remote member of the exchange, though its membership is now in jeopardy because of the incident.


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