Morgan Stanley Shakes Up Top Ranks of FX Unit at Center of Probe

(Bloomberg) -- Morgan Stanley overhauled leadership at a troubled currency-trading unit that lost tens of millions of dollars on emerging-market deals last year and is the target of an internal probe.

Alex Silverman and Roland Jeurissen are being promoted to co-heads of the FX options unit at Morgan Stanley, according to people familiar with the matter. The business had been previously overseen by Thiago Melzer, a senior Morgan Stanley trader who has been linked to an internal review of trading practices at the division, Bloomberg has reported.

Morgan Stanley officials are reviewing losses on a batch of trades tied to the Turkish lira, and are also looking into whether traders improperly valued the transactions and concealed losses. Morgan Stanley lost about $100 million in the third quarter on FX options linked to currencies in Central and Eastern Europe, the Middle East and Africa, and then dropped another $70 million in the final period, said one of the people, asking not to be identified because the numbers haven’t been publicly disclosed.

The losses pale in comparison to the gains posted in the fourth quarter by Morgan Stanley, whose fixed-income trading division staged a comeback after revenue more than doubled. Still, problems at the FX options business have blemished a strong end to 2019 and raised questions around risk controls at one of the world’s biggest investment banks. The firm has grown rapidly in the market for the exotic currency derivatives as executives push to compete with larger rivals like Citigroup Inc. and JPMorgan Chase & Co.

FX options are complex derivatives that enable investors to speculate on currencies. Morgan Stanley has more than doubled its presence in this lucrative market since 2016, overtaking rivals such as Goldman Sachs Group Inc., Bloomberg has reported. Morgan Stanley officials fired or placed on leave a group of FX option traders as part of the internal review, Bloomberg reported in December.

Mark Lake, a spokesman for the bank in New York, declined to comment, as did Silverman. Melzer and Jeurissen didn’t respond to requests for comment.

Silverman joined Morgan Stanley in 2017 from hedge fund Citadel LLC after earlier roles with Credit Suisse Group AG and Royal Bank of Scotland Group Plc. Jeurissen joined around the same time after previously working at Citigroup and BNP Paribas SA.

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