is it just me or does this french rogue trader story smell of BS?

[danny_galaga]

http://news.yahoo.com/s/ap/20080126/ap_on_bi_ge/france_societe_generale

[shmokes]

Isn't there an Australian band called Rogue Trader?  Coincidence . . . ?

[danny_galaga]

Isn't there an Australian band called Rogue Trader?  Coincidence . . . ?

[youtube]http://www.youtube.com/watch?v=7rwUdL9qXjk[/youtube]


                                                   DUH, DUH, DUHNNN!

[patrickl]

What do you mean BS? You think he's being framed?

I agree that it's a bit hard to explain how some low ranked clerk was able to trade these amounts and why he would do so. Still, it's not that different from what Nick Leeson did.

[danny_galaga]

not sure exactly what it is about it. but it has that 'iraqi supergun' or afghan blacksmith built AK47' kinda feel to it. just a little hard to swallow. im not normally into conspiracies but the whole thing just doesn't sound right...

[Singapura]

It's definitely not BS.  I'm working in compliance and this is an excerpt of a report on Complinet, a compliance network site:


The scam was based on the use of hidden, fictitious companies that Kerviel created and used for taking positions that were themselves hidden within other completely hidden positions. The object of the exercise was the creation of a fictitious trade to balance each real trade, thereby making the positions appear to be properly hedged. The real trades were rolled over before they reached maturity. Sociéte Générale's chairman Daniel Bouton has stated that because of Kerviel's "intimate and perverse" knowledge of the bank's procedures and controls he was able to swiftly shift positions to evade detection at each level of control. According to Philippe Collas, the head of asset management at the bank, by the end of December he was massively in the money, but since the beginning of the year his trades became catastrophically unprofitable. According to the Wall Street Journal, Kerviel was prone to working long into the night hacking into the computer system to hide his trades, and to disable credit and trade size controls to keep compliance and risk management off the scent. He used the computer log-in and passwords of colleagues both in the trading unit and the technology section. Some reports indicate that he slipped up and failed to deactivate some controls uncharacteristically as a result of breaking up with his girlfriend.

What are the similarities with the Leeson case?


unauthorised trading;

authorised to hedge not take out proprietary trading positions;

stock index futures and options arbitrage;

young trader with back/middle office experience; and

long "plain vanilla" positions.

Even with all checks and balances in place it's not difficult to do if you know exactly what to do. That's why it's so important to rotate key employees and have them take block leaves. The whole thing came to light when he overstpped a margin and the resident compliance officer took note.