Explaining Trades Is More Profitable Than Doing Them

Whistle-blowing.

I have found the best trade. Back in 2016, Bank of America Corp. paid $415 million to settle with the Securities and Exchange Commission over charges that its Merrill Lynch unit "misused customer cash to generate profits for the firm." Merrill did derivatives trades, called "leveraged conversions," that had no real economic substance but that did impact its calculation of "customer cash": The leveraged conversions made it look like customers owed Merrill money, even though there were no real loans or credit risk, and those notional customer debts reduced the amount of cash that Merrill needed to keep untouched for regulatory reasons. So the trades freed up customer cash for Merrill to use, without having any other economic effect. (Also everything worked out fine and the customers were never harmed by this abuse of their cash.)