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UBS Rogue Trader Loses $2 Billion In Unauthorized Trades
PolygamousRanchKid writes with this snippet from Reuters that sounds like a ready-made movie script: "Switzerland's UBS said on Thursday it had discovered unauthorized trading by a trader in its investment bank had caused a loss of some $2 billion. 'The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion,' the bank said in a brief statement just before the stock market opened." Asks the RanchKid: "I wonder how this will reopen the debate about the role of computer systems in the trading and the safeguards that are supposed to protect against these risks. But if microseconds mean millions in trading ... who has time for checks?"
Gone at the flip of a switch.
Will he or won't he be ??
Who came out on top on this trade? Or was is spread amongst many?
Just a dude. Stuck in IT.
If he lost $2B, I guess that means someone else made $2B! Seriously, though, the only people at a company who should be even able to lose that kind of money should be senior level executives. What the hell do they do to earn their millions?
But if microseconds mean millions in trading ... who has time for checks?"
At that price, who doesn't have time for checks?
HA! I just wasted some of your bandwidth with a frivolous sig!
i just work harder so i can pay more income tax for the bailout... or.. whatever..
I would just like to say that I have never lost any company I work for 2 billion dollars.
Not even 2 million.
the preceding comment is my own and in no way reflects the opinion of the Joint Chiefs of Staff
Just say it.
Don't blame the computer system. It's poor management. How in the WORLD can someone be trusted with BILLIONS of dollars without checks and balances? This bank deserves to go out of business.
Why do we even allow this real-time trading? It only serves to benefit big investment banks who want to game the system at the expense of other investors.
Exchanges should prohibit these types of games by instituting a random delay of one to two minutes on every trade in the system. Why should a big investment bank with a room full of computers be able to do what the man in the street can't?
You see this guy is black. Which means he won't be treated well by the good old boys network.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
How does a human being engaged in $2B worth of fraud say anything about computer algorithms and millisecond-level trading?
Liberty in your lifetime
Bank lost 2 billion because of a rogue trader. What it should say is they lost 2 billion because of lack of proper management. I love the spin that banks put on these type of events. When did the management of a bank ever take responsibility when they did something stupid?
Sometimes you don't win at gambling. What do they expect? If he had been lucky and instead made a 2 billion profit you would not be reading this.
"Don't belong. Never join. Think for yourself. Peace." V.Stone, Microsoft Corporation
How big a bonus will he get this year?
These "rogue trader" stories come out from time to time, among employees of all the more respectable class of casino, and they leave me deeply skeptical...
Either these outfits are, in fact, handing people the keys to gigantic piles of risk with controls roughly on par with the ones used to keep bored 16-year-old cashiers from skimming the till, or there is a substantial amount of tacit looking-the-other-way as Mr. Golden Boy flouts the rules and makes huge piles of money, and then, if things go south, his actions were "rogue".
Honestly, I find it hard to believe the former. This industry is riddled with perverse incentives toward taking on outsize risk loads(that hopefully won't blow up until you leave, or will blow up in somebody else's face) in exchange for rewards now. Am I supposed to believe that Poor li'l UBS just got plumb slickered by some smooth talker, or that "rogue" is simply the PR response to those who operate particularly close to the risk/reward envelope and happen to stop producing the numbers that HQ wants to see?
So, if you lose money, you're "rogue". But if you win money, you're "managing director"?
High-Frequency Trading is a bet, not much different than counting cards at a Las Vegas blackjack table.
You're betting that:
- You get your trade in milliseconds or less before the opportunity vanishes.
- Your coders are not missing anything that would cause you to fail.
- Your coders are sharper than the other coders our there, or...
- You are taking from the humans, and aren't at risk from other HFT code.
- Nothing goes bad in all of this, from comm links to the market platform.
And of course you can always beg the SEC to unwind the transactions, claiming it was a programming glitch. That's been done before. The SEC is no longer an effective watchdog over the industry. It has in effect been 'captured'. Game Over unless Mary can turn it around. Unlikely.
When you dig into how the NYSE actually works today, with DMMs and 'liquidity providers', that one entity can account for 10-20% of total volume, and all of that is HFT, you may realize that the days of humans trading on news and speculation are over. If you want to hold for a duration and take profits over the span of years, just hope you don;'t need to cash out on the same day as the machines have decided they see opportunity in trashing your holdings. Nothing personal, it was an algorithm you know. Just happens.
It's a genuine miracle that we don't see more flash crashes and >$1B fails than we do. HFT is going ot destroy the market, but only for actual humans. One day, when we realize that 70% of the market volume is HFT, we will then understand that the NYSE in particular is a house of cards. Then what?
deleting the extra space after periods so i can stay relevant, yeah.
I doubt they'd be calling it unauthorized if he'd made them 2 billion.
I hear UBS is going to go to 100% bitcoin. A spokesman said, "basically there aren't enough computers on the planet to handle a billion bitcoin transactions per hour, so it will be days before the money is actually transferred. This gives us time to roll back anything, plus we can get interest on the float while we wait for the transaction to close."
Bitcoin, is there any problem it can't make better?
Some drink at the fountain of knowledge. Others just gargle.
Suppose you put in a trigger to "toss a trade" so your "friend" at another firm, which only you and your partner friend know how to trigger or exploit.
The payday could be small enough to set you up for life and still be chump change and pass by an audit or the other normal wins and losses each month and wouldn't be easily found out as long as everyone kept their mouths shut.
This is the danger of electronic algorithmic trading. No doubt there are safeguards in place, but that doesn't mean they can catch an exploit that may only be two lines of code.
The gigantic piles of risk are shifted onto the taxpayers. They get to keep the keys.
If only the casinos could get the legislature to backstop their customer losses.
"for lack of a better word greed, is good" it makes you make crazy decisions and even more crazy ones (usually under the cover of darkness) to cover the first wave of crazies... end of the day you loose 2B, gets reported all over the world, and after 2 weeks world move on (limping) as it never happens.. until, the next guys thinks "greed is good".
I think it is increasingly clear that the more developed this trading gets, the more risk it offers the world's economy. It is also recognized that "safeguards" need to be in place to prevent certain things from happening. These same safeguards also serve to decrease that highly sought-after and desirable "leverage" power when making trades. These market people have been pushing regulators to remove such safety restrictions which have apparently been connected with all manner of troubles including the most recent market failure.
I wouldn't be against banning the markets entirely. I think Hitler had it right in his analysis of why speculating is such a problem for economic stability. (Just as in the legal system, the only real winners are the lawyers)
Of course the world's bankers would never allow any governments to take their playground away, but that's what I think should be done.
First of all, he'd worked in the back office, so he'd know both people and procedures.
Second of all, anyone who's ever worked in finance can tell you big banks are chaotic. It's not really that strange that he can go about his business undetected for a while, because there's loads of traders with loads of portfolios. And most people on one desk are not going to be experts on the business of another. UBS has had a number of restructurings since the financial crisis. People are moved on, some desks are closed, some are merged, it's gonna be a mess. Makes it easier to hide.
Third, risk officers are not what you think. They are not the internal police, vigilantly keeping an eye out for every possible transgression. They look at the positions, calculate the risk (big can of worms, don't ask), and when someone is over their limit, they show up at the trader's desk and are told to fuck off.
Finally, it is not at all clear that technology played an important role in this fraud. Yes, some HFT market makers trade ETFs, but it's not clear his desk was. That doesn't mean a software error caused it, or that the fraud could not have occurred without whatever system he was using. From efinancial (which you need a subscription to read) the latest rumour is that he messed up a hedge in EURCHF, and his attempt to fix it made it worse.
They're investigating now. Apparently it was this guy:
@
Report anything to the nearest K. Last seen running toward a > .
Don't think of it as a flame---it's more like an argument that does 3d6 fire damage
The guy involved was reported to work with ETFs (exchange traded funds), which are baskets of underlying goods (stocks, commodities, bonds etc). They are like mutual funds, but are gaining popularity, because the values change throughout the day and they tend to have fewer fees than mutual funds. So instead of buying, say, a Fidelity growth stock fund, investors buy a "growth stocks" ETF.
Here's how it works - if people buy the ETF, the administrator of the ETF goes and buys more stocks, commodities or whatever else is in the basket. If investors sell the ETF, the administrator sells the stuff.
ETFs have raised a lot of questions among the skeptical set because you can do a lot of monkey business if the basket involved contains illiquid stuff and derivatives. Essentially, the person administering the basket has a lot of leeway in how they value this stuff because you have to guess what it's worth - there are no up to the minute prices like you get with stocks. There's the temptation to say the stuff is worth you want it to be, the financial institution who administers the ETF to dump risky stuff into it, or the bank to misprice the stuff they dump into it. Moreover, when markets freak out, it can become harder to keep the ETF in line with the value of the stuff in the basket - and you could have a serious problem if investors dump the ETF, and you are forced to sell the illiquid stuff that it holds at firesale prices.
Now we don't really know what happened still. But it's worth noting that London is where the really dodgy ETFs have clustered for regulatory reasons. And UBS, his firm, has a rather poor record in risk control.
Your right but....
ETF & Delta Hedging – the desk he was on - tend to be “commodity” trading. Simply, low risk / low profit stuff. It’s mostly arbitrage in the classic sense. Pounding out pennies as they say – and you make up the profit with large volume.
As for many players – maybe yes – maybe no. For example, the largest ETF out there is Blackrock’s S&P 500 (SPY). Because it is open ended, this means that Blackrock is contentiously creating shares (and thus having to buy the underlying stock) or destroying shares (and thus having to sell the underlying stock). If he was on the ETF desk and was working with Blackrock (I don’t know if it was Blockrock – but if he were on the ETF desk it would have been with whomever the sponsor of the ETF was) he may be only dealing with a few trades.
http://en.wikipedia.org/wiki/Barings_Bank
Despite surviving the Great Depression and both World Wars, Barings was brought down in 1995 due to unauthorized trading by its head derivatives trader in Singapore, Nick Leeson.
Not the 'rogue' part, just the part where anyone expects the public to believe this isn't a calculated skimming off the top by some part of the roguish fortunate few who sit in high places eating someone else's lunch.
Firstly, there is no indication of HFT involvement. In fact the square mile grapevine reports he worked on a Delta 1 desk, which is not usually run as HFT. Maybe some autohedging tools to try and keep Delta ~ 1 (or as close as) , but that's it.
Secondly, the real question - checks and balances. How do 2 yards get lost? Maybe, if the trade(s) had gone the other way, it would be bonuses and reach-arounds, instead of the current situation.
Thirdly, there is a lot of speculation on the specifics of the type of trade(s) that might have caused this. I would be surprised if ETFs were the direct cause, but errant hedges on EURCHF, or USDCHF could be closer to the ballpark. Think - did a certain central bank intervene recently? Did everyone expect it?
This is the same A-hole who requested an iPad with company paid data plan from AT&T from IT! I knew he was up to no good the moment he mentioned AT&T! Think how much money would have been lost paying those data overages!
- UBS anonymous IT personnel (not authorized to make a statement)
I8-D
Wasn't UBS forced a few days ago, after many months of pressure, to reveal information about tax dodging accounts?
Is this a way to cover up $2B of someone's tax dodge who really, really didn't want to be reported to the US government?
Nyahhh. Crazy talk. Just sayin'
Quantitative Investment Software coding is just about the highest paying work a software engineer can get. The jobs typically start at $150,000 per year, and can pay as much as a million if you're really good. It's all written in C++, with Linux being the operating system in recent years.
But you have to work in New York City. I don't want to live there, I think I'd go nuts. I've been looking for West Coast quant work, but none is available. You'd think there would be, as all the investment houses have offices in the West, but I guess they don't do their development there.
Request your free CD of my piano music.
HFT has increased liquidity and lowered transaction costs for the retail investor. And how would a delay help? As soon as trading resumed, it would be speed of light machines v.s my fat fingers.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
""I wonder how this will reopen the debate about the role of computer systems in the trading and the safeguards that are supposed to protect against these risks. But if microseconds mean millions in trading ... who has time for checks?""
This sounds like part of the closing summation from the culprit's defense attorney. Blame the computer? HFT had nothing to do with this. A man caused this withhis deliberate actions, not an algorithm.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
the days of humans trading on news and speculation are over
If you actually follow the market, you will find that nearly every significant rally or selloff can be attributed to news. It is actually quite rare to have a totally unexplained move in price. I think what actually happens is that HFT traders make decisions each day based on news, and then hand it off to the software to handle the actual timing.
Incidentally, it could be argued that ANY form of investing, long-term or short, is anagalous to gambling, and the only meaningful difference is time scale.
So $2 billion vanished and no alarms went off? I am impressed. Almost as good as Solyndra going out of business after getting $500 million loan from govt. Even if you do nothing, how do you go out of business that soon after getting a giant pile of $$$? Those private sector guys crack me up with their zany antics!
Sorry, but gray text on gray background is making my eyes bleed.
Are you all sure this entire story is not a huge lie, that this one trader is not used as a scapegoat, a fall guy for a larger systemic problem at the bank? On one hand knowing how Credit Swiss and UBS handle customers I can sort of believe that there is large level of confusion and things are not, as you would expect them, at least not what engineering types would expect it to be. It's like you are always trying to build a better system, a system that handles transactions properly, a system that does not allow errors, but when you deal with some banks, it's as if they are still ran with pen and paper, it's amazing. (though it's not true, they do have computer systems, but sometimes it feels like their computer systems have routines there, that create chaos, havoc and confusion on purpose). But seriously. 2 billion dollars in this case. There was a guy who lost 6-8 billion a year ago or so in some French bank.
Maybe, maybe. Or maybe the bank is using this guy as a stooge, a sap, somebody to take the fall in case some shady deals go wrong. After all, do you hear about banks catching such cases, where money was made and not lost? I mean if somebody used bank resources to trade and to make money for themselves personally, they would have to draw that money out somehow.
--
In other news the Federal reserve bank and national banks of UK, Switzerland (fuckers) and Japan came out with a strategy to ensure that the paper currencies are destroyed even faster by printing more of it to buy all the outstanding short term securities that USA is issuing or that are maturing. It's all nonsense, it forced a bunch of people to cover a bunch of short positions in a bunch of commodity markets (those who hedge against their dollar and other currency reserves by using commodities), because this news of the national banks is more inflation, the relative prices of commodities must go higher, so people are buying to cover shorts.
The DOW and other markets go up in dollar and other currency terms of-course, because again, this is more inflation.
Interesting times, as always, wrong solutions driven by wrong understanding of economics, as always.
You can't handle the truth.
OF COURSE it results in instability. It takes the irrationality of people's emotions that's already a play in the market, and then it does more emotionally-charged guessing based on that. It's instability squared.
One of the best ways to discourage it would be for the US to just start charging a fee for every chunk of shares traded that's more than, say, 1000. Something like $.50 . That could cut down the profits, AND help pay for some programs to dig us out of the whole Wall St. put us in back in 2008. Maybe even some enforcement for the SEC (imagine that?)
The Invisible Hand of the Free Market is what punches workers in the nuts.
It could have been a dummy account for manipulating the markets. They have to search for another trader(s) somewhere, who bought before it bought and short selled right before it selled a huge amount of some stocks for less than the market value.
I don't believe this has anything to do with 'micro-trading', you won't lose that much money in microtrading, there you make money by sucking it out of the system efficiently :), but you can't fix HFT without fixing the underlying fiscal misconceptions.
You can't handle the truth.
It is an interesting statement. At first i was going to disagree with the parent poster like you did, but consider the broader question, what is money? In the contemporary sense, money is issued by governments base on GNP projections and other factors. Sure, the market is zero sum in the sense that every time a transaction occurs, one person goes up x ducats and one person goes down x ducats, but it is being purchased with money from a central money source that just wills money into and out of existence on whim.
If there were an exact formula that governed the creation of money down to the last cent, I might agree with you, but it is really just a lot of really educated guesswork. Since the money is the medium that defines market values, I don't think that you can divorce the two, and money is very much an non-zero sum game.
So, I back the parent poster. The stock market is not a zero-sum game.
HA! I just wasted some of your bandwidth with a frivolous sig!
I can't remember. Is $2 Billion considered a lot of money to UBS?
Help! I'm a slashdot refugee.
They should revoke his Imperial Warrant!
The UK charges 50 bps on share purchases. This does nothing to stop trading, because it is necessary for market makers to be able to trade without this fee. The MMs then do a CFD contract on the shares, giving the same result.
"the latest rumour is that he messed up a hedge in EURCHF, and his attempt to fix it made it worse."
A similar thing happened in Ausralia during the last decade and a group of three traders bet the wrong way on AUDUSD, costing a bank there at least AUD$600 million in losses, if not more (some rumors put it at AUD$1 billion).
It's really not that hard to do (lose a lot of money) in forex markets...
If the guy had made 2 billion, would they still be "unauthorized trades"?
And the winner for worst advice ever given goes to...you!
Right...nobody ever gets busted for anything on the internet ever. It's a safe haven! You can do what you want here with no chance of repercussions. The RIAA doesn't exist, the Feds don't troll chat rooms looking for pedophiles, cops don't check Facebook pages and bust parties. These are all rumors.
Hey, as much as I'd like to hear what happened at the interview - an NDA is an NDA. They have you sign them for a reason. And it takes only one lawyer to ruin your whole entire life.
Weaselmancer
rediculous.
If this guy was at an equities desk and suddenly needed a "miracle", I am wondering if maybe something like FXF got him. Huge one day loss after the SNB bolted the top of the swiss franc to the euro. Being long the swissie for a million a pip before the last big intervention might have done him in. Not sure what else it could have been. In any case, this guy is only a "rogue trader" because he lost money. I will wait for an earnings restatement from UBS, then I will go long if I get a chance.
The Swiss recently did a jaw droopingly stupid desperation move on their currency. They pegged it to the euro, in the attempt to stem their own currency's appreciation, which was ruining their trade with other countries, being thought of as "safe" in a time of turmoil, when so much cash was out of the other markets due to fear (the rest was going into gold). This resulted in a HISTORIC move of over 8.5% in something that normally moves .1% at most a day, overnight...That's a big enough move to really hurt (or help, depending on which side of a trade you're on) a normal trader. Now, with 100x leverage -- wow - even a tiny bet adds up very quickly, for or against you. With 100x leverage, everything is multiplied 100x -- except the money you have to put down to open the trade. In a gross oversimplification, you can bet $1, but lose $100 in that case. Meaning he might not even had had that huge a bet on. A lot of "safety obcessed" individuals also got hammered on this one. (and soon enough, on T bills when the bond vigilantes come out and treat us like the bankrupt jerks we are -- they'll be around as soon as BenB and TimG stop buying them in debt monetization).
Most people figured that when that happened, the safe trade would switch entirely to gold. The thing is, the Swiss needed tons of instant dough to buy Euros with all of a sudden. So they sold tons of gold (literally) and tried to do it when the western markets weren't open. That was too much for the Asian retail investors to eat, so gold went down too -- they (for reasons that should be obvious) didn't give anyone a heads up on this, except perhaps a few special friends, so the whole deal caught everyone completely off. It will fail, but the Swiss had no choice but to try it or face ruin anyway - their currency was so overvalued that they could sell nothing to anyone else, and no country can live with that very long.
Y'all might want to go look at zerohedge (no link, their servers are chronically overloaded as is - but a few more snarks won't hurt the place, just not all slashdot please) for some more on this. Sometimes they publish microsecond graphs of what the *headline reading* bots are doing too, they don't like HFT either, but it had nothing to do with this one. I used to think with my signal processing experience I could blow those bots off, as some of them seem pretty stupid. But they are a little ahead of most slashdotters in text understanding -- they actually can read the news tickers and adjust based on the headlines and content(!).
The SEC is more or less completely owned by the people they are supposed to regulate. Too small, they don't care about you. Too big, they're already bribing you. Middle size is all they do, and they do little of that. It's like with drugs where the big dealer turns in the smaller competition once in awhile to the bribed cops, so everyone gets a benefit -- cops look good, getting a bust, big dealer gets rid of competition, all go home happy, well...almost all. It's a dirty game, but you can still win at poker even with a cheating dealer, if he's not after you personally.
Why guess when you can know? Measure!
Money is a tool, it's part of the game but it's not the output or payoff of the game. The payoff of the game is the consumption of goods and services.
The payoff of the stock market 'game' is the cash you make when you 'cash out' and sell off stock. I think you are expanding 'the game' to include the separate issue of capturing labor value in the form of hard currency.
The point I was making about currency value being fluid is akin to the issue of measurements when dealing with relativistic physics. One of the analogies that physicists will use is to describe measuring thing with rubber rulers. It seems to be very similar to what is happening in the market, where on a micro transaction level, the game is strictly zero-sum, but on a larger level you are measuring your losses and gains with the 'rubber ruler' of currency value.
HA! I just wasted some of your bandwidth with a frivolous sig!
Until such time as we get the details, this smells to me much like how Nick Leeson's trading in Singapore sunk Barings back in 1995. To rehash: Nick lost big on a trading position, and rather than take his lumps like a man, proceeded to double down with larger and larger trades while attempting to make good his initial loss.
Given the modern day trading culture/technology, this kind of thing is unavoidable.
Luke, help me take this mask off
If you do things that drive the stock price up and down, the only people affected are other owners of that stock, which may or may not include the issuing company. They're pretty much out of the picture at that point. The only reason they want a high price is so they can get a high price should they arbitrarily (and with no recourse by you) decide to dilute your shares by issuing more to get more cash.
Thus, 99.99% of market trading is all you and the other traders - the companies are mostly uninterested other than for ego reasons (and because it's cheap to pay CEOs in stock etc). It isn't necessarily a zero sum game either. Just today, I sold some stocks, in the morning, as they'd hit my targets at last, and I wanted to take risk off the table. Obviously someone else bought them. Those stocks continued to go up all day. So they made money too, assuming they sold at the close. Later, who knows. The thing that makes the markets tick is that we all have different ideas about what something is worth right now, to that particular player. For every buyer there's a seller.
Investing, buy and hold, is for idiots too lazy who feel like there's a set-and-forget way to riches. Nope, TANSTAAFL in this like everything else. If you did that 10 years ago -- you lost money, both in nominal dollars and certainly in purchasing power. If you trade, you surf the waves and it's all skill, sometimes thrilling. The other players know the score, you're not taking candy from babies, but from idiots with more money than brains, and you know the saying about fools and their money (and yeah, a lot of those fools work for the big banks and I'm doing my level best to steal *my* tax dollars back from those jerks). You musta drank the kool-aid sold by some investment manager who doesn't want to have to work for a living paying attention, and who is afraid that if you ever get "out" - no matter how wise that might be in the situation -- you won't get back in -- with HIM and prop up his butt with fees anymore.
Why guess when you can know? Measure!
I wonder how many banks have not published the story that a Rogue Trader has made a $2 Billion profit while making unauthorized trades?
And while we provide the ability to place risk checks in place, it is up to the customers to watch them. Many exchanges have some risk management as well, but that won't stop a firm from clocking up a gradual loss over time.
There is also plenty of exchange software out there that does NOT provide risk management.
This problem has been solved before, for clock distribution on large chips. The way to make it slower, and *fairer* is:
1. All transactions execute at 00 seconds past the minute.
2. Between 10 seconds - 30 seconds past, the results of the transactions are confirmed.
3. Beween 30-50 seconds past, people or algorithms decide on and submit their next bids.
4. Then there is 10 seconds to get the next bid in, and the executions happen simultaneously.
It also means that the speed of light needn't disadvantage more distant traders, and gives the humans a chance against the machines. Also, because the total trades in an hour goes from ~ 100k to just 60, the speed of market-crashing is reduced.
$205 Billion over the next 10 years just so they can brag that their Super Rocket can't achieve low Earth Orbit.
That's $35 billion for the program and 170 billion for NASA budget at FY2011 level over 10 years without cost adjustments.
Congress will be laughing like donkeys over this one ... easier to kill NASA than loose $205 billion then kill the NASA retiree program and NASA health services program for another $510 billion on top of the $205 billion.
USA FED GOV Human Space Flight has ended with these numbers from NASA.
--
http://goo.gl/V9S3B
Why SEC is not regulating the market capitalization of listed companies while FED regulates the reserve ratio of banks?
This move by the Swiss national bank was discussed a lot here in Switzerland... A few corrections:
1. The Swiss franc is not pegged to the euro (meaning a fix exchange rate), they only fix a roof price for the Swiss franc (in euros).
2. They need not sell gold to buy euros. They can just offer Swiss francs at the price of 1/1.2=0.83 euros per franc. Of course they can use several options at the same time.
The bank can sell as many francs as they want, no risk they go beyond their capacity or something. The only risk is creating inflation. This might occur in the long term; for now, we are still worried by a possible deflation, so the politics won't pressure the bank to stop printing money.
Thus the franc will never rise above 0.83 euros, but it might go below.
To jusdge this a "jaw droopingly stupid desperation move" is premature, the future will tell us is they end up making a profit, or facing huge losses, and whether it matters.
There are multiple factors which didn't work here.
First of all this was a human that made a mistake.
Second how that guy had the possibility to make the trades to f*ck it up that big, internal security checks didn't work (riskmanagement and accounting(because he needed quite a huge position to get that loss)). Now the question is how was it possible. Either the checks didn't exist or he bypassed them. (he worked for 3 years in the midoffice). I can see in the industry and you would be surprised how amateur it is there. It's true that there is HFT, but actually these are mostly more secured than the humans.
But the really big problem are the OTCs (over the counter trades ) that are made without any control of an exchange and are typed manually into the system. Which makes it easy to manipulate and also difficult to control. Also OTC give banks a leverage that is close to be absurd.
I'm surprised nobody has mentioned the obvious solution to the high-frequency trading problem, the Tobin tax: http://en.wikipedia.org/wiki/Tobin_tax
By applying a low (0.5% or even smaller) tax to financial transactions, long term transactions will hardly be affected, while millisecond trading will be strongly discouraged. That way you still get the useful part of financial trading (people investing in new projects they think have promise), while the pure speculation part is damped. Hopefully this will get us out of the situation where the finance economy is many times bigger than the real economy.
BBC has just announced the bank did not discover the error or problem. The trader told bank about problem. So no bank checks or audits were in any way involved until after the problem was known to bank.
http://www.bbc.co.uk/news/business-14943084
Regards Eion MacDonald
The US 'lost' $8billion in Iraq - C130s with pallets of $100 bills just shipped in and mislaid. Just careless, I guess.
Guess mom's apple pie ain't what it used to be.
How do bankers create money ? They simply say it exists and print it. To get it into circulation somebody has to take on a debt then perform real work to earn money to pay it back. If they don;t they forfeit real assetts to the banksters.
http://www.youtube.com/watch?v=5BT9E1SRrXU
All UBS have lost in this instance is the equivalent of some numbers off a spreadsheet. They lost absolutely no physical goods.
The worlds banking system is an utterly corrupt, broken, disgrace. it's slavery by any other name.
http://www.californiarealestateinvestor.com/ This website as I said will cater to investors looking to buy residential or commercial properties in California and Vegas for the Vegasrealestateinvestor website. Many people don't know where to start with buying a property in this economy. There are many difficulties they run into such as lending, foreclosures, short sales, pre-qualification, escrow and title.
How come you never hear about successful traders getting arrested?
Not true. In most "micro" trading, the HFT is PROVIDING LIQUIDITY into the markets, in small chucks at high speed.
They are in effect market makers and making money from the rebates / discounts offered by the market places. they're typically NOT taking it from another investors pocket.
None of this is long term investments. Take a long look at the market stats on liquidity and average trades size to see the impact.
The result is lower bid/ask spreads and more liquidity.
And none of that has anything to do with this "Rogue trader" incident here.
Some would take issue with the view that you're paying people to gamble, on the grounds that the odds aren't rigged against you. In the parimutuel betting system, for example, a fixed fraction of all bets (1/6th in my state) is set aside for the profit of the house and government, and the remaining money goes into pools to pay off winners of bets. So in my state, you have to do 20% better than chance (on average) just to break even. In the more common view of gambling, the house and government are said to be running a service, not gambling, because the system rigs the flow of money in their direction. Only the bettors are said to be gambling, because the odds are rigged against them. Under that definition, gambling is always ill-advised, stupid, a crime and/or a sin.
In the case of the stock market, the flow of money seems to go to many of the same traders, over and over again. This seems to be based on good business practices, good analysis of publicly traded companies, etc, not based on policies or procedures meant to guarantee that certain parties always succeed. To the extent to which that's true, the odds aren't rigged against you. But to the extent that some folks violate the rules (stealing, insider trading, just trying not to look bad so as to have a decent chance at success in the marketplace, etc), there is sufficient variability of outcome to cause others to say that the stock market is gambling too. Under that definition, gambling is an unavoidable condition of life itself, and your best bet is to work for those who seem to know how to put food on their own tables.
And now here's my point, which I apologize for taking so long to get to: Regardless of how you view the stock market, there's no doubt that compulsive gamblers view it as a bet that isn't rigged against them, and therefore a better bet than rigged-against-you gambling. So in hiring stock market traders, it would seem prudent to screen out compulsive gamblers, who will be naturally attracted to the job. Unauthorized use of someone else's money to gamble, in false hope of winning and paying back that money, would seem to qualify.