A Former Goldman Partner, He Was One of the Most Profitable Traders on the Street.

[ by Melanie Gretchen  and Howard Haykin ]

The head trader of a large bond trading desk at Morgan Stanley is under investigation by the regulators at the CME Group.   Glenn Hadden joined Morgan Stanley in 2011 and currently runs the global interest rates desk.  Yet, the regulators aren't looking at anything Hadden's done at Morgan Stanley - instead, they're probing his trading in Treasury futures while at the Goldman Sachs Group. 

A further twist in the case is the fact that Mr. Hadden left Goldman, his former employer, after being questioned about his trading activity.

Details of the CME Investigation.   The CME Group, which operates commodities and futures exchanges, gave formal notice to Mr. Hadden that an inquiry is underway - meaning that it is at an advanced stage.  The regulators specifically is investigating whether Mr. Hadden effectively "painted the tape" near the close of the market - i.e., whether his purchases or sales of Treasury futures late in the trading day manipulated closing prices in the market.  Such trades would have made other of his trades more profitable, according to people briefed on the matter. 

Who is Glenn Hadden?

• One of the highest paid professionals at Morgan Stanley.
• Known throughout his career for aggressive and profitable risk taking - a "swing for the fences" trader.
• While delivering profits to Morgan Stanley, was burned on a bad wager that resulted in tens of millions in losses - thereafter, firm watched him more closely.
• An individual of high stature who is the the target of a civil complaint - a rare occurence - something quite rare.
• Joined Goldman in 1999, just months before it went public, he rose to become one of the firm's top traders, and was made a partner in 2008.
• During his best years at Goldman, reportedly made over $10 million.

Prior Complaint.   In 2009, the Federal Reserve Bank of New York issued a complaint about Mr. Hadden, at which time Goldman Sachs took the conservative step of putting him on paid leave.   During his extended leave, senior managers at Goldman were divided as to whether he should return to work and, if so, whether to delegate him managerial responsibilities.  Once Goldman made the decision that he would leave, Morgan Stanley hired him, satisfied that he had done nothing wrong.

This change of employment evoked Michael Driscoll, a former senior trader at Bear Stearns who now teaches at Adelphi University, to remark:  "Wall Street is always looking for a proven moneymaker and has been known to look the other way on things in pursuit of that."

For further details, go to [Dealbook, 12/2/12].