Rogue trader costs UBS $2 billion

[masterserg]

Did you guys read the story? Do you buy it or is he a scapegoat? I find it hard to believe ... There are some very stringent compliance rules in place ... I am not saying it is impossible, just fishy.

[figbo]

I heard about it and I thought of Chris(Rogue88)!
It's a tough business and once in a while people go nuts,I think that's what happened to him.

[MonBK]

Where's the story?

[STEELINOX]

http://www.theatlantic.com/business/...e-know/245151/

[masterserg]

Originally Posted by MonBK

Where's the story?

http://edition.cnn.com/

http://dealbook.nytimes.com/2011/09/...gue-trader/?hp

http://www.bbc.co.uk/news/business-14927432

and pretty much any other news site.

[capote]

Sure its true. In the 90's one trader singlehandedly wiped out a bank in Singapore or HK completly. Derivatives can be weapons of massdestruction indeed.

[conrail]

Originally Posted by capote

Sure its true. In the 90's one trader singlehandedly wiped out a bank in Singapore or HK completly. Derivatives can be weapons of massdestruction indeed.

Yea, Nick Leeson in the Singapore office of Barings Bank. Brought down the whole bank...

[conrail]

Originally Posted by MonBK

Where's the story?

Everywhere

[masterserg]

Originally Posted by conrail

Yea, Nick Leeson in the Singapore office of Barings Bank. Brought down the whole bank...

Sure, but we are talking how many years ago? A lot of compliance and audit measures have been implemented ever since.

I don't know ... It is just my paranoid mind going about, but I normally trust none of what I read (and less of what I see to quote The Boss).

[capote]

Originally Posted by masterserg

Sure, but we are talking how many years ago? A lot of compliance and audit measures have been implemented ever since.

I don't know ... It is just my paranoid mind going about, but I normally trust none of what I read (and less of what I see to quote The Boss).

But its of course more embarrasing IMO that one guy could by-pass the compliance function etc and swindle UBS than that the whole trading division were making bad bets. So where is the cover-up?

[Lion]

Yikes.....I'm glad it's not me on the chopping block!!!

[jhilly8982]

I find it hard to believe that the risk manager had no idea what position they had on, this guy just might be the fall guy.

However, you report your risk numbers on a daily basis, what gets reported is sometimes only the value of the trades you think they are worth, not their actual value based on settles. So there could be a good chance no one else saw it coming until it was too late.

[toph]

the guy can leverage money and found a way of accessing client(s) money/ a certain account( s) and the market for what he leveraged went the wrong way.
http://www.telegraph.co.uk/finance/n...UBS-1.3bn.html

[toph]

ok the guy is a market maker. this is how it wroks roughly.
He works for clients and UBS
In its simplest form simply. He buy shares 'on loan' at say $1.00 per share as he believe they will go up and has 10 days to sell them and pay for them. They go down and he is stuck with the shares or has to sell at a loss.

[jhilly8982]

Originally Posted by toph

ok the guy is a market maker. this is how it wroks roughly.
He works for clients and UBS
In its simplest form simply. He buy shares 'on loan' at say $1.00 per share as he believe they will go up and has 10 days to sell them and pay for them. They go down and he is stuck with the shares or has to sell at a loss.

Not exactly how being a market maker works. Actually not even close. It is also unclear exactly how this guy lost this much. This morning I heard from inside sources that he was long the swiss franc on its way up with gold then they pegged the currency to the euro, devaluing it and this guys position. Plus his facebook status on Sept. 6th said he needed a miracle, which is the same day the franc was pegged.

[chazha]

«------ the rogue

Sent from my GT-I9100 using Tapatalk

[blackmsport]

I wonder what it feels like going to your boss and say... "sorry Boss, I just wasted 2.bil $ of company money...."

[LostInTime]

Interesting story indeed. $2BB seems a bit more than fat fingering (eg, entering an extra 0) a trade. This guy had to have accessed more capital than he was authorized while concealing bad positions...I am guessing a VP/MD or two are updating their resumes about now.

It surprises me that bulge brackets cannot catch this stuff sooner, especially after Soc Gen/Kerviel and that trainwreck/epic ballsyness. Has UBS already unwound the bad positions? If not, it could be that $2BB is simply a conservative estimate of loss. Oh well, £4BB in UBS market cap gone in a day either way.

[masterserg]

Maybe I am just paranoid after all ... here's an interesting article @ Bloomberg.

http://www.bloomberg.com/news/2011-0...to-arrest.html

And CNN:

http://business.blogs.cnn.com/2011/0...086/?hpt=hp_c2

[Welshwatchman]

Perhaps he can just pay it back £10 a week for two and a half million years.

Just remember that the £1.3b is not lost, it's just in some other investment bank.

The one(s) that won the bets.

[RolexWatcher]

Originally Posted by masterserg

Maybe I am just paranoid after all ... here's an interesting article @ Bloomberg.

http://www.bloomberg.com/news/2011-0...to-arrest.html

And CNN:

http://business.blogs.cnn.com/2011/0...086/?hpt=hp_c2

Yep, I think it was the CHF as well.

[rr-nyc]

He was arrested last night

http://www.ft.com/cms/s/0/258a38d2-d...44feabdc0.html

[jamesbondOO7]

Chicken shit compared to the Société Générale guy who lost 5 billion euros about 4 years ago.

[jamesbondOO7]

Originally Posted by conrail

Yea, Nick Leeson in the Singapore office of Barings Bank. Brought down the whole bank...

Excellent movie.

[Kringkily]

I found it curious how we glorify people like Nick Leeson with books and a film. He lost 1.3 billion dollars and only served 4 years in prison. How ridiculous these people can hide trades, forge documents and seemingly lose that much money. Working a block away from NYSE I talk to people all the time and they are shocked at the freedom some traders get.

[jhilly8982]

Originally Posted by Kringkily

I found it curious how we glorify people like Nick Leeson with books and a film. He lost 1.3 billion dollars and only served 4 years in prison. How ridiculous these people can hide trades, forge documents and seemingly lose that much money. Working a block away from NYSE I talk to people all the time and they are shocked at the freedom some traders get.

How long should they serve? A life sentence? In that business the people employing these people and giving them the power to even trade with that much freedom and exposure are partly to blame as well. What if they were giant winners? They would be financial geniuses in the industry's eyes. Also, it is not like they are squandering government money or running a ponzi scheme like Madoff where he bilked bilions of dollars from ordinary citizens. I think 4 years is adequate.

[masterserg]

Originally Posted by jhilly8982

How long should they serve? A life sentence? In that business the people employing these people and giving them the power to even trade with that much freedom and exposure are partly to blame as well. What if they were giant winners? They would be financial geniuses in the industry's eyes. Also, it is not like they are squandering government money or running a ponzi scheme like Madoff where he bilked bilions of dollars from ordinary citizens. I think 4 years is adequate.

I agree. And I am still not convinced that one guy can circumvent the entire risk management and compliance departments ... with that amount of exposure? I wonder whose a$$ is really being covered ...

[jhilly8982]

Originally Posted by masterserg

I agree. And I am still not convinced that one guy can circumvent the entire risk management and compliance departments ... with that amount of exposure? I wonder whose a$$ is really being covered ...

Yeah, no kidding. I am a trader, everyday my position is reported to my backers as well as my clearing firm. Everyday my risk is typed into a computer program that spits out my risk exposure on the upside and downside of the market. It is my responsibility to trade within our agreed upon parameters but it is also their responsibility to moniter to make sure I am staying within their parameters.

However, if I wanted to lie and fudge my risk slide to hide a position I could only get away with it for maybe a day because everything is electronic and run through an exchange.

Some of these larger institutions trade under call around markets in which exchanges aren't involved therefore the transparancy isn't always there, so it might be easier for large positions with a large risk exposure to go "unoticed" for some time. But still, whoever ran that trading desk had to have known what exposure his traders have on.