Posted on 09/20/2001 10:35:59 PM PDT by Phil V.
THE worldwide investigation into suspicious trading on financial markets leading up to the terrorist attacks on America turned its spotlight on London last night, as Liffe, the futures market, became concerned about trades in options based on British Airways shares.
London is proving crucial to the investigation as, for historical reasons, it manages large amounts of Middle-Eastern money. Next month, the City's Lord Mayor, Sir David Howard, is planning to visit Morocco to drum up business.
There are fears that terrorists - particulary Osama bin Laden, who reportedly has a fortune of $600m - could have used knowledge of the attack to make profits by predicting share prices would fall.
Carol Sergeant, the managing director of regulation at the FSA, is co-ordinating the City's response and the Bank of England has also written to banks to remind them that the United Nations has sanctions in place against Osama bin Laden and the Taliban.
Liffe is understood to be particularly concerned about huge volumes of trading in options on September 7. On that day 2,184 British Airways 'puts' - expecting the share price to fall - were traded. That is four to five times the normal daily volume.
For example, on Friday September 6, just 564 puts were traded and on the following Monday, the day before the terrorist attack, just 203 were traded. Liffe has supplied information to the FSA on the trades, including the names of the parties involved.
The exchange is also looking at options for big insurer stocks, including Munich Re, Allianz, Aegon, CGNU, Legal & General and American International.
A spokesman for Liffe said: "We fully co-operate with the Financial Services Authority. But we do not comment, as a matter of policy, as to whether an individual investigation is going on."
Meanwhile, on Wall Street, top investment banks including Lehman Brothers, Goldman Sachs, Morgan Stanley and Merrill Lynch have been ordered to hand over all paperwork from their broking arms relating to suspicious trades made before the disaster.
In a statement last night, Harvey Pitt, chairman of US financial regulator the Securities & Exchange Commission, said that he was aware that "those associated with the terrorist activities of last week may have sought to exploit our securities markets . . . We are vigorously pursuing all credible leads".
Some banks pointed the finger at hedge funds and said the probe will soon shift to investigate the customers behind these often secretive funds.
One banker said: "It would be chilling if they are able to manipulate markets as well as fly planes into buildings. It is like something out of James Bond."
Before the attack Merrill Lynch and Morgan Stanley did up to 25 times the normal volume of put options in some airline stocks, notably United Airlines and American, the two carriers whose planes were hijacked.
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