UBS rogue trader loses $2 billion

[chasinfla]

Quote from dont:

rogue trader bullshit, they took a punt and like the wankers they are they got smacked plain and simple

you forgot the part about making a scapegoat.

Parenthetically I might add that UBS, like all the other global banks, is infected with corporate stupidity that guarantees such seismic breaches in good judgment.

 

[heech]

Quote from bone:

When was the last time we heard of a US Bank having a "rogue trader" ? Seems it's always a Barings, a Soc Gen, a Metalgeshaftwhatever, a Jap Bank ... that kind of thing.

I recall that China executed a rogue trader in 2009 or thereabouts.

MF Global wheat trader, 2 years ago.

 

[bone]

Quote from heech:

MF Global wheat trader, 2 years ago.

Good find, that one I do not remember. Was that Chicago, NYC, or London; and which office do you suppose oversaw the risk ? I find it strange but consistent that somehow US risk managers have better controls over 'rogue employees'. Notwithstanding idiot hedge funds like LTCM and Amaranth - where the risk is systemic by design and intent.

 

[heech]

Quote from bone:

Good find, that one I do not remember. Was that Chicago, NYC, or London; and which office do you suppose oversaw the risk ? I find it strange but consistent that somehow US risk managers have better controls over 'rogue employees'. Notwithstanding idiot hedge funds like LTCM and Amaranth - where the risk is systemic by design and intent.

I'd have to think Chicago.

http://www.nytimes.com/2008/02/29/business/worldbusiness/29iht-29trader.10564592.html

 

[bone]

Quote from heech:

I'd have to think Chicago.

$142M is modest and I can see that happening. Do you think US banks are lucky, or do US banks have better risk controls in terms of individual rogue traders ? (again, I am not referring to firm-wide sanctioned idiocy like mortgage bets, but individual traders hiding huge stinkers)

 

[the1]

Why is it that every clown on ET is so friggin addicted to that damn stop loss. That's the reason 95% of traders fail. The other 5% are the ones who have learned there are other ways to manage risk besides the damn stop loss. Try a little basic math and see what you can find about managing risk. Stops <b>cause losses.</b>

Newsflash: Traders at banks don't use stop losses. They use quantitative strategies with multiple instruments to manage risk.

Quote from Joman:

This guy revenge traded too much.... you should respect your daily stop loss

 

[AK100]

Quote from the1:


Newsflash: Traders at banks don't use stop losses. They use quantitative strategies with multiple instruments to manage risk.

That probably explains why they make fortunes in bull markets and lose fortunes in bear markets.

The average bank trader = no different from a monkey (who always makes great cash in a bull market)

Always exceptions to the rule but not many. Take away the bid-offer games and order flow and 90% of the bank traders out there wouldn't last 6 months trading his own capital on his own in a single office.

 

[Bob111]

emg at work

 

[Visaria]

Quote from AK100:

Take away the bid-offer games and order flow and 90% of the bank traders out there wouldn't last 6 months trading his own capital on his own in a single office.

90% of bank traders just lose! They just lose!

 

[bone]

Quote from the1:

Newsflash: Traders at banks don't use stop losses. They use quantitative strategies with multiple instruments to manage risk.

Well, it is true that bank desks are almost always hedging their risk through arbitrage, spread trades, and hedged market-making.

Bank traders do, however, have individualized agreements in terms of capital allocations, max drawdowns, and daily losses. At my firm, it was called the "appendix C" - which was actually a specific appendix to my employment contract. Their supervisors will stop them out unilaterally - that is why these 'rogues' go to such great lengths to hide stinkers. Even with the OTC products, each trade is supposed to get promptly logged into the firm's risk tracking system by the trader.

So, like every trader, there is in fact an 'uncle' point that is defined - whether it is the trader taking the loss, or the clearing firm offsetting the position and closing out the trader's account, or the firm locking the trader out of the system, or whatever. There is no endless supply of capital to never take a loss.

And whether you want to color it a 'stop loss' or whatever is really trivial. There is so much naivety and disinformation posted here on ET.