Rogue trader caught

[Re6/6]

Another rogue trader has been caught, this time by the Swiss bank UBS. Well fancy that, who'd have thought that it would ever happen again! It would seem that all the new 'rules & regulations' in investment banking haven't worked. Traders make huge profits from tiny margins when they do a trade, or a gamble as we would know it. It would appear that investment banks are riddled with such people who just haven't got caught yet.

 

Now UBS bank may be 'downrated' by one of the credit rating agencies upon who's opinion seems to be important to the whole system. The very credit agencies that who said in 2008 that there was no problem with 'trading' sub-prime mortgage debts in the States.

 

Economics of the madhouse/casino?....Then there's the European Central Bank Euro crisis...........!

 

What's the alternative, bearing in mind that communism failed?

[34theletterbetweenB&D]

Do what the free world system has always done, and adapt, typically by legal institution. The entire structure of finance managment among much else was worked out progressively, as individuals and organisations did things that were not 'useful'. As such behaviour gets recognised for what it is, rule and policing are modified as necessary. It isn't perfect, is often 'messy' and clearly unjust, but has delivered the goods for the majority of the people living under its' influence: and has survived enormous pressure and still preserved more freedom for its' people than all the alternatives so far. Viable competitors? None visible.

[Xerces Fobe2]

Beggars belief - Most of us (when we were employed) have a Line Manager that had to approve big projects or expenditure, however the financial sector appears have lot of lone cowboys who answer to no one and can destroy a business or a country's economy within minutesl

 

One thing's for sure when they are making money these cowboys are on their own but when they lose it - we are then all in it together!

 

The late Gerry Rafferty summed it up well!

 

 

http://www.youtube.com/watch?v=iCFe7rY2x2g

 

XF

Edited September 16, 2011 by Xerces Fobe2

[Mod4]

Just a pre-emptive reminder of the Forum Rules on politics as this has the potential to head off down that alley...

[mezzoman253]

Just an observation. After a matinee at the theatre, we decided to walk along the embankment from Westminster to Blackfriars to let the rush hour subside before getting the train home. In the space of an hour we saw at least a dozen Aston Martins, all heading west from the financial district. A few years ago you'd be hard pressed to spot a couple. The bankers are still doing ok.

 

Rob

[pete_mcfarlane]

I think there should be the word "alleged" in the title of this topic. The UK still has the concept of innocent until proven guilty^1.

 

1. Does not apply to those writing gutter press headlines.

[Pugsley]

I find it quite ironic that one trader can make a massive loss and gets arrested as a rogue trader, however if you make such a massive loss that your bank has to be effectively nationalised you get rewarded with a massive pension pot....

[34theletterbetweenB&D]

To illustrate one of the developments of the free market, which happens to involve a railway theme. The concept of a shareholder owned company derives from the shipping industry, where a ship was very often held in shares, often 64 in number. The profits from its' operation were divided among the shareholders proportional to their holding. When it came to financing railway building among other capital intensive enterprises, shares were issued for sale, and both rights to a share in the profits and control of the company by having an effective majority holding were vested in those shares.

 

Shares were bought with the intention of gaining control of a business, often fiercely contested; and in one particular such transaction Rich Bloke 1, finally succeeded in prising from the grasp of Rich Bloke 2 sufficient shares to give him the majority, and thus control of the railway. But when RB1 went to the stock exchange to lodge his claim as majority owner, he discovered that RB2 had issued a large new tranche of shares to himself, in order to retain majority control. And there was at the time no law against this, so RB1 was well out of pocket, thanks to the dilution of the share capital initiated by RB2. Clearly this was wrong, in the sense of not useful for a stable market, and law was in due course instituted to prevent this wizard wheeze.

[pointstaken]

This begs the question, why are there not effective control systems to alert senior managers to such violations? Is it because people are so busy making money that proper control systems are way, way down the pecking order in terms of expenditure, or because management hope that "it won't happen to us" ? Well it has happened (again), and they are deep in the brown stuff.

 

Dennis

Edited September 16, 2011 by pointstaken

[Horsetan]

As safe as a Swiss bank......

[pointstaken]

As safe as a Swiss bank......

 

 

....or as safe as Greek bonds !

 

Dennis

[jonny777]

I'm afraid that I dont understand all this.

 

He is able to make a massive loss seemingly without any checks on how much he is investing (or spread betting, or short selling) and where. As soon as he makes that loss he is known as a rogue trader and his activities are deemed fraudulent by the media.

 

Presumably, though, he wasn't deliberately trying to lose money, and if he had made £1bn profit would that have been seen as rogue trader fraud as well?

Edited September 16, 2011 by jonny777

[The Stationmaster]

Reported on tv last night that the investment banks have elaborate compliance procedures to stop this sort of thing and they have a large 'back office' staff to operate those systems. Presumably the ones at UBS won't be getting their Christmas bonus this year?

[Kenton]

Some ones loss is some one else's gain - I wonder which individual is in for a big bonus this year after making a lot of money for his bank.

 

Trading small margins very quickly is the name of the game that is seen by those outside the system as "casino" banking.

 

It is simply doing what has always been done in share/forex/bond/futures but now very quickly and with larger sums of money.

 

The only thing that is bad is that the management controls remain in the ark or paper and telephone transactions.

 

i don't know the details of this "rogue" trader's actions but don't expect it was a single deal but more of a series of deals that ultimately ended in a substantial loss.

 

Investing in shares/bonds for the long term yield the way all our pension funds used to be be increased to pay out when required has now been replaced with this type of speculative trading. The trader wins some and loses some - a good trader wins more than loses - a combination of market knowledge, research and insight along with knowing the game. Of course it is a lot easier if you are using someone else's money.

[The Lurker]

Complex systems can apparently always be circumvented by the "computer savvy" which this guy was reported to be. UBS woke up to the fact when he told them what had happened. I suspect he had worked his way around the compliance systems by learning how they worked. In factI've just looked and the BBC are reporting that he worked in ther back office before becoming a trader

[melmerby]

I think there should be the word "alleged" in the title of this topic. The UK still has the concept of innocent until proven guilty^1.

 

1. Does not apply to those writing gutter press headlines.

He did actually own up to it, therefore I think "alleged" is unnecessary.

 

Keith

[Nile_Griffith]

I wonder how many traders, financiers, bankers, whatever will be heading home this weekend and rueing this guys fau paux. The financial sector has long enjoyed the benefits of being recognised by our government and certain others as been "jolly decent chaps" who play with a "straight bat, don't you know". Up until the early 90's those "thoroughly decent chaps" enjoyed the isolation that the rarified atmosphere of their own very special gentleman's club brought. Rogue traders are nothing new, it's just that in our era of media interest in anything that might court public opinion and the speed at which such news can fall upon the publics ear. We as Joe public find out about it so much sooner and generally before the clean up operation can get started.

 

Our Jermyn Street dressed friends do not like the attention that situations and traders such as these bring. They dislike the thought that annoyance from the great unwashed may bring about political pressure and legislative encumbrance on their little Eden. I would hazard a guess that this weekend, as we enjoy our own modest pursuits. the financial institutions big hitters will be out courting the vanities of those from further down the river at Westminster. Making assurances and offering plausible scenario's to sugar coat the pill. Hoping to maintain that after all and on the whole. They are of course "thoroughly decent chaps".

 

Nothing looks after money, better than other money.