"An explanation of my trades": ex-UBS trader's email

LONDON | Fri Sep 14, 2012 2:54pm BST

(Reuters) - The following is the text of an email headlined "An explanation of my trades" which former UBS trader Kweku Adoboli wrote on September 14, 2011 to a company accountant, William Steward.

The email has been presented in evidence at the trial in London of Adoboli, who is accused of fraud and false accounting that cost UBS $2.3 billion (1.4 billion pounds). He has pleaded not guilty.

In the e-mail he refers to his work on the Exchange Traded Funds (ETFs) desk in London. ETFs are financial instruments that allow holders to track indices rather than buying the underlying securities outright. He writes of trading futures linked to the German DAX and U.S. S&P 500 stock indices.

He also refers to his manager John Di Bacco, and events in the crisis surrounding Greece. On June 22, 2011, the Greek government won a confidence vote in parliament following a cabinet reshuffle.

"An explanation of my trades

Dear Will

It is with great stress that I write this mail. First of all the ETF trades that you see on the ledger are not trades that I have done with a counterparty as I have previously described.

I used the bookings as a way to suppress the PnL (profit and loss) losses that I accrued through off book trades that I made. Those trades were previously profit making, became loss making as the market sold off aggressively through the aggressive sell off days of July and early August. Initially, I had been short futures through June and those lost money when the first Greek confidence vote went through in mid June.

In order to try and make the money back I flipped the trade long through the rally. Although I had a couple of opportunities to unwind the long trade for negligible loss, I did not move quickly enough for the market weakness on the back of the first back macro data and then an escalation Euro zone crisis cost me the losses you will see when the ETF bookings are cancelled. The aim had been to try and make the money back before the September expiry date came through but I clearly failed.

These are still live trades on the book that will need to be unwound. Namely a short position in DAX futures and a short position in S and P 500 futures that are due to expire on Friday.

I have now left the office for the sake of discretion. I will need to come back in to discuss the positions and explain face to face, but for reasons that are obvious, I did not think it wise to stay on the desk this afternoon.

I will expect that questions will be asked as to why nobody was aware of these trades. The reality is that I have maintained that these were EFP (exchange for physical) trades to the member of my team, BUC (the accounts department), trade support and John Di Bacco.

I take responsibility for my actions and the stilt storm that will now ensue. I am deeply sorry to have left this mess for everyone and to have put my bank and my colleagues at risk.

Thanks, Kweku."

(Reporting by Michael Holden; editing by David Stamp)