A lawyer for Morgan Stanley Managing Director Edward Glenn Hadden said his client, who is being investigated over a trade involving U.S. Treasury futures while working at Goldman Sachs Group Inc, did nothing wrong.
"There is no legal or factual basis for any suggestion of market manipulation," said James Benjamin, who defended his client in response to a recent regulatory disclosure by the firm that Hadden is being investigated by CME Group Inc over a four-year-old trade.
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Hadden, who goes by his middle name "Glenn," left Goldman in late 2010. A few months later, Hadden, who had been a partner at Goldman, joined Morgan Stanley with much fanfare to run the Wall Street firm's Treasury bond and interest rate derivatives trading desk.
Hadden is one of the most powerful traders on Wall Street in the market for Treasury bonds and interest rate derivatives, whose value stands at $531.6 trillion, according to the Securities Industry and Financial Markets Association.
Benjamin, a defense attorney with Akin Gump, said the CME investigation involves a "technical risk management activity" that occurred "in a one-minute period four years ago." While Benjamin declined to discuss the specifics of the allegation against Hadden in his statement, the lawyer said his client had "acted properly and followed established market practice."
CME Group declined to comment.
Morgan Stanley spokesman Mark Lake said Hadden is still employed by the firm, and in good standing.
News of the investigation broke on Sunday evening when The New York Times posted a story on its web site about Hadden with the headline "Morgan Stanley Trader Faces Inquiry on Possible Manipulation."
The paper, citing a regulatory filing and sources familiar with the matter, said the CME was investigating Hadden over whether his Treasury futures trading had manipulated prices.
Hadden's file with the Financial Industry Regulatory Authority cites a pending CME investigation of his Treasury futures orders placed on the expiration date in December 2008.
Goldman had put Hadden on paid leave in late 2009 as it performed an internal investigation, sources familiar with the matter said. Hadden left the bank at the end of 2010 but was not fired, according to those sources, who were not authorized to speak publicly on the matter.
Soon after, in March 2011, Morgan Stanley touted its hiring of Hadden as global head of rates trading. The hiring was seen by some as a coup for Kenneth deRegt, a former chief risk officer who had recently been appointed as global head of bond trading, and was overseeing Morgan Stanley's broader effort to reinvigorate that business.
Trading in Treasuries and interest rate derivatives is an important part of Morgan Stanley's bond trading business, as it focuses on high-volume trading that can be easily automated and cleared under new regulations, rather than riskier and more complex over-the-counter trades.