One trader wiped out $7.1 billion of capital from Societe Generale over the past two years.
They just noticed it this week, when the turmoil in the markets forced the trader to cover his bets.
You would think that after all of the rogue traders that have brought down firms (Jett, Leeson, etc.) that institutions would have tightened up these risk controls. Ummm, not a chance. This guy was allowed access to systems that allowed him to cover his tracks for years. The firm never questioned anything until it was too late. That's why compliance is so important, but especially to the big firms. It's easier to hide a mistake in a big firm than a small one. The best firms keep insanely tight controls in place, and they just happen to be the same firms that are holding up fairly well in this tumultuous market.
When the wheels are coming off the market, you've got to know that your vehicle is sturdy. The best firms have reviews of individual trading positions frequently, and at the management committee level. You would think that all CEOs of major firms would do this, but only a few actually do it. The rest of them get fired when it all goes down (Merrill, Citi, Bear).
You have got to MICROMANAGE EVERYTHING when it comes to trading positions.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment