Rogue trader
Investopedia Financial Dictionary:
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Rogue Trader
A trader who acts independently of others - and, typically, recklessly - usually to the detriment of both the clients and the institution that employs him or her. In most cases this type of trading is high risk and can create huge losses.
Investopedia Says:
One of the most famous rogue traders is Nick Leeson, who was a derivatives trader at the Singapore office of Britain's Barings Bank. Leeson incurred heavy losses through the unauthorized trading of large amounts of Nikkei futures and options. Leeson took large derivative positions on the Nikkei which leveraged the amount of money at stake in the trades.
At one point Leeson had 20,000 futures contracts worth over $3 billion on the Nikkei. A large chunk of the losses came from the downturn in the Nikkei after a major earthquake in Japan caused a broad-based sell-off in the Nikkei within a week. Total loss to the 233-year-old Barings Bank was well over $1 billion and led to its eventual bankruptcy. Leeson was charged with fraud and served several years in a Singapore prison.
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Rogue trader
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Rogue trader
For other uses, see Rogue trader (disambiguation).
A rogue trader is an authorized employee making unauthorized trades on behalf of their employer. It is most often applicable to financial trading, and as such is a term used to describe persons - professional traders - making unapproved financial transactions[1].
This activity is in the grey area between civil and criminal illegality for the reason that the perpetrator is a legitimate employee of a company or institution, yet enters into transactions on behalf of their employer without permission.
One famous rogue trader is Nick Leeson, whose losses were sufficient to bankrupt Barings Bank in 1995 following his ill-advised and unauthorized investments in index futures. Through a combination of poor judgement on his part, lack of oversight by management, a naïve regulatory environment and unfortunate outside events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that bankrupted the centuries-old financial institution.
Table of largest rogue trader losses
| Name | Date(s) | Loss | Institution | Market activity | Sentence |
|---|---|---|---|---|---|
| Nick Leeson [2] | 1995 | £827 million leading to bank failure | Barings Bank | Nikkei index futures | 6.5 years prison |
| Toshihide Iguchi [2] | 1995 | $1.1 billion | Resona Holdings | U.S. Treasury bonds | 4 years prison |
| Yasuo Hamanaka [2] | 1996 | $2.6 billion | Sumitomo Corporation | copper | 8 years prison |
| John Rusnak [2] | 2002 | $691 million | Allied Irish Banks | foreign exchange options | 7.5 years prison |
| Gianni Gray, David Bullen,
Vince Ficarra, Luke Duffy |
2003 Oct - 2004 Jan | AU$360 million | National Australia Bank | foreign exchange options | 16 months prison, 3 years and 8 months prison,
2 years and 4 months prison, 2 years 5 months prison |
| Chen Jiulin | 2005 | $550 million | China Aviation Oil | jet fuel futures | 4 years and 3 months prison |
| Jérôme Kerviel [2] | 2006–2008 | €4.9 billion | Société Générale | European stock index futures | 5 years prison of which 2 years are suspended - may still appeal ruling |
| Boris Picano-Nacci | 2008 Oct | €751 million | Groupe Caisse d'Epargne | Equity Derivatives | investigation in progress |
| Kweku Adoboli [3] | 2011 | $2.3 billion | UBS | S&P 500, DAX, and EuroStoxx index futures | investigation in progress |
References
- ^ MOLLENKAMP, CARRICK (September 16, 2011). "UBS: Rogue Trader Hit Firm". Wall Street Journal. http://online.wsj.com/article/SB10001424053111904060604576571931690088522.html. Retrieved 2011-09-16.
- ^ a b c d e Slater, Steve (September 15, 2011). "Factbox - UBS trader joins rogues' gallery of financial crime". Reuters. http://uk.reuters.com/article/2011/09/15/uk-ubs-factbox-idUKTRE78E1A920110915. Retrieved 2011-09-15.
- ^ "The curse of delta one strikes UBS". Financial Times. September 15, 2011. http://ftalphaville.ft.com/blog/2011/09/15/678306/the-curse-of-delta-one-strikes-ubs/. Retrieved 2011-09-15.
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