Rogue Trader Lost $2B at UBS

How bad do you guys speculate that this will hurt junior Americas hiring?

(plz say not at all)
 
i still can't believe in this day and age after 2008 that someone got away with this. where the hell is risk management. UBS is a good name. But with this it is gonna be hard. I think we are not getting the full story. UBS say fraud. maybe other banks or traders were involved.
 
Yike Lu said:
The train of thought is this...
The illegality is based on fraud that conceals the position and loss.
Nobody would bother concealing a position that resulted in a win. If a position resulted in a win and the trader wanted to increase the size of the trade, he could yell at risk to resize his limit.
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Not true. That's not the way things work. While most operational losses result in losses, some result in gains. If the underlying activity was done outside of policy, the trader would get fired. It would be too risky to keep such a person on staff.
 
Right, but Ken, the point is that generally there's no reason to go outside of policy if a trade shows a win. The only reason I see to conceal a large winning trade is if the trader has some "once in a lifetime opportunity" (or so he thinks) and he loads up on it past his limits.

But generally, I don't think that's how rogue traders happen. More likely, a person slowly accumulates a large loss through small concealed losses. As I recall, this is what Leeson did - he lost money from the start but concealed it for years.
 
it will be interesting to learn more details of how this happened..
not much useful information in the news
 
I'm writing a "How to be a Rogue Trader" piece for The Register, I believe it is the most cynical thing I've ever written.
 
There are so many useless stories on Mr. Adoboli's $2 Billion loss. Can't UBS just tell us how he lost so much money.
I highly doubt Mr.Adoboli lost that much money by trading ETF. He must be involved in complex derivatives trades which allowed him to take this much risk and hide it for so long.
 
I have a feeling that we will never find out what exactly Mr. Adboli did. Even though Mr. Adboli worked at Delta One trading desk, I remember reading a WSJ article stating that Mr. Adbloi specialized in hedging of risk, which could means OTC complex derivatives.
 
Dcai said:
I have a feeling that we will never find out what exactly Mr. Adboli did. Even though Mr. Adboli worked at Delta One trading desk, I remember reading a WSJ article stating that Mr. Adbloi specialized in hedging of risk, which could means OTC complex derivatives.
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He is going to tell what he did.
http://www.bbc.co.uk/news/business-14950873

Earlier, it emerged that UBS learnt of the unauthorised trades after being informed by Mr Adoboli.
"The disclosure that it was Mr Adoboli's decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren't capable of controlling the huge risks that their traders take," Robert Peston said.
 
Joy Pathak said:
Traders do hide wins too. For rainy days.
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Yes we do, but not 2 yards worth.. the most common way we'd do this is to slightly mismark certain market parameters that only we'd know about (like implied vol) in order to report a smoother daily pnl - management prefers to see +1 mio per day than +11 today and -10 tomorrow. Of course this might mislead people as to the risks of our positions but then again they also have total access to our greeks so there are other ways for competent risk managers to tease out the risk. Now it's easy enough to hide even 1 mio usd losses or gains if you really want to, but 2 bio is another story. I simply don't know how I would even begin to go about getting away with that, which makes me really skeptical of this whole thing - how some ETF trader in a sleepy part of the bank managed to amass and hide truly enormous losing positions...
 
Does anyone know the meaning of the word 'rogue'?
To me, the word 'rogue' = 'money losing'.
Oswald Gruebel said to all his traders "Don't lose any money", ~~> "Don't be a rogue trader"?
 
luso said:
Does anyone know the meaning of the word 'rogue'?
To me, the word 'rogue' = 'money losing'.
Oswald Gruebel said to all his traders "Don't lose any money", ~~> "Don't be a rogue trader"?
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Rogue means a non-conformant, deceitful, loner of questionable character. The word could be used to describe a person in any context, in history it would be to vagrant and beggars, rascals etc.

Rogue Trader as term serves a couple purposes as far as media spin goes. One, it implies the person is of questionable character and is completely responsible for the action. Two, it also implies that they acted alone, so that from a PR persecptive, it makes it seem like the bank had nothing to do with his actions, and are not at fault because he was a 'rogue'.

That's the funny part because it's the bank's job to put policies and safeguards in place to prevent these sorts of things, because there will always be people trying to circumvent the system, and they seem to be making it quite easy to do..Gruebel sounds like a total idiot trying to act like UBS has no culpability in the matter.

Truth is, there are 'Rogue' traders that make a lot of money, you just don't hear about those because the banks take the profits and sweep it under the rug. Maybe the guy gets fired, maybe he gets slap on the wrist and more oversight. But they definitely do not get you arrested and call you a 'rogue trader' in the media.

Rogue is bad! Only when you lose big.
 
This will not be the last of this type of "crime"! Was he the fall guy?

The first time I read about this type of misdemeanor (??) was the case of Juan Pablo Davila. He was CODELCO's copper futures trader.
( CODELCO (Corporación Nacional del Cobre de Chile or, in English, the National Copper Corporation of Chile) is the Chilean state owned copper mining company formed in 1976 from the foreign owned copper companies that were nationalised in 1971 (Wiki))

He took a bet in the wrong direction on the Cu futures market in 1993 - most people thought that the price would drop but it suddenly turned upwards. It was only when Davila's lines of credit were cut that the amount of hos loss (US$ 240 million) was made known. This was well documented in EL MERCURIO (Chile's national daily). Davila thought that he could recoup his losses by continuing to bet but came a cropper when his lines of credit were cut.

This was followed by Nick Leeson and the Barings Bank debacle and so on:(
 
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