UBS Rouge Trader losses hit $2.3 Billion

 From the UK Telegraph:

The final tally of losses caused by unwinding Kweku Adoboli's trading activities totalled $2.3bn, compared with the $2bn estimated at the end of last week.

In an official statement, the Swiss bank also disclosed that the losses stemmed from "unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures" over the past three months.

Mr Adoboli, who has been charged with false accounting and fraud, is understood to have taken a simple punt on stock markets rising. However, in the three months that the bet was laid, the DAX – the German stock market index – slumped 26pc and the US index S&P 500 slid 7.7pc. He is thought to have built up trading positions totalling about $10bn....read on


From The Hindustan Times:

‘UBS’s rogue trader loses $2 billion’, say the headlines. The rogue trader has been arrested, UBS has made appropriately contrite noises about risk management and internal controls and the world’s financial press is treating the whole thing like an unfortunate accident. Somewhat like an
air crash—it shouldn’t have happened, shows problems in training and safety systems and so on.

It’s interesting, this rogue trader phenomena. What do you think are the chances of seeing this headline. “Rogue trader makes massive profit but sacked for violating risk management guidelines.”

If the big global banks have traders who are prone to going rogue, then the rogue must be coming good and making money. What happens then? Does the bank sack the rogue and donate the profits to charity?

Or does it quietly pocket the moolah and raise the trading limit given to the profitable rogue? One can only guess.

What do you think are the chances of seeing this headline? “Rogue industry continues to endanger global financial system. No end to making leveraged gambles while being underwritten by governments”.

Remember, this UBS was one of the TBTFs (Too Big To Fail) whose failure was threatening the financial system in 2008. It used $75 billion of aid from the US Federal Reserve at the time.

It’s such a convenience. Do all the risky leveraged trading that you’d like to. When things go bad, blame some rogue and wait for a public rescue. Meanwhile, individual investors must feel that it such a pity that they can’t blame their losses on any rogue except themselves.