UBS rogue trader also lost 123K spread betting

[dealer911]

ZZZZZZZZZZZzzzzzzzzzzzz

The bottom line is that as a trader, he has traded MORE size and made MORE money over a Period of Two years and Of course, Lost More money than anyone on this so called "Traders" Forum.

Following Kwickwools anogly (sp) it like each day carrying an Umbrella (pun included) each and every day while camping in in July feeling that it's going there's going to be a very BIG down pour, only to be mocked by peers due to the appearent sunshine, relenting and then walking about without said Umbrella only for it to be raining cats and dogs for the next two weeks.

The guy was a delta 1 trader - it's an arbitrage desk essentially - yes he has traded more size and made more money than anyone on here - but it is not really trading as such.. no directional view.. just locking in a small profit in HUGE size - Trouble with this guy is that he also started to believe he was a real trader!

 

[Hoggums]

UBS rogue trader Kweku Adoboli's last phone call with bosses - audio | Business | guardian.co.uk

Listen to the recording. "What do you understand an asset to be?" Lol.

 

[ffsear]

Classic. A trader and 2 accounts talking compleatly different languages to each other. Neither understanding what the other is talking about! Thats where the problem stems from in these organisations.

 

[donaldduke]

Classic. A trader and 2 accounts talking compleatly different languages to each other. Neither understanding what the other is talking about! Thats where the problem stems from in these organisations.

Adoboli knew exactly what they were talking about. But they seemed clueless. Which is why he was able to do what he did.

 

[Atilla]

Classic. A trader and 2 accounts talking compleatly different languages to each other. Neither understanding what the other is talking about! Thats where the problem stems from in these organisations.

Separation of duties is precisely what it is about and preached by compliance and security.

Where you have a trader who has knowledge of all three offices; front, middle and back etc for settlements and so forth the opportunity for fraudulent loopholes open up.

 

[PipStar]

The guy was a delta 1 trader - it's an arbitrage desk essentially - yes he has traded more size and made more money than anyone on here - but it is not really trading as such.. no directional view.. just locking in a small profit in HUGE size - Trouble with this guy is that he also started to believe he was a real trader!

Sorry mate, you're wrong. Throw the trading books away as most of them are written by brokers or those who hang off their coats. Real traders who make money do it with arbitrage. The rest who have a directional view just lose.Thats why most traders lose money because very few find an arbitrage play.

 

[dealer911]

Sorry mate, you're wrong. Throw the trading books away as most of them are written by brokers or those who hang off their coats. Real traders who make money do it with arbitrage. The rest who have a directional view just lose.Thats why most traders lose money because very few find an arbitrage play.

Thats all true - This guys problem was that he didnt recognise that fact - He thought just because he could lock in a couple of basis points in an Arb and get paid 300k per year that made him a market Guru.. he started trying to call the market and came undone in a big way - If you want consistant low risk profits it has to arbitrage.. or inside info like SAC!

 

[PipStar]

Thats all true - This guys problem was that he didnt recognise that fact - He thought just because he could lock in a couple of basis points in an Arb and get paid 300k per year that made him a market Guru.. he started trying to call the market and came undone in a big way - If you want consistant low risk profits it has to arbitrage.. or inside info like SAC!

Yes, we are now in agreement

 

[tar]

Sorry mate, you're wrong. Throw the trading books away as most of them are written by brokers or those who hang off their coats. Real traders who make money do it with arbitrage. The rest who have a directional view just lose.Thats why most traders lose money because very few find an arbitrage play.

I don't think this is accurate , long term directional bets can pay-off ...

 

[PipStar]

I don't think this is accurate , long term directional bets can pay-off ...

Not CONSISTENTLY. That's key.

Whereas with an arb, you win each time until the arb no longer exist. They are sure bets where the outcome can only be profits. Been there, done that.

 

[tar]

Not CONSISTENTLY. That's key.
.

Neither do arbitrage , any opportunities out there will be obsolete because of competition if you know what i mean ...

 

[chinabean]

I agree, perfect (pure) arbitrage as opposed to cross arb opportunities generally exist for a very small amount of time (invariably less than a second). I think you'll find funds such as Brevan, Bluecrest, Bridgewater etc whilst employing a huge amount of quant research and running arb strats also make big directional calls based on fundamental factors not just some inequality and that forms the basis of their CONSISTENT returns.

That said, I do think that whilst trading books are useful, it is no substitute for REALLY knowing what is going on in the world, information which can only be gleened by serious research/reading/investigation.

Also, if you are a directional type investor/trader/whatever, whilst you will not win everytime, when you do you win big in a way that arbitrage players can only dream of acheiving.

 

[ffsear]

The suggestion that only arbitrage traders make money is utter ball!

 

[donaldduke]

The suggestion that only arbitrage traders make money is utter ball!

Exactly Soros didnt make a $Billion on black wednesday by doing arbitrage.

Directional trading offers potentially much higher reward than arbitrage, but much higher reward also means much higher risk, something that Leeson and Adoboli learnt the hard way.

 

[Knell]

Exactly Soros didnt make a $Billion on black wednesday by doing arbitrage.

Directional trading offers potentially much higher reward than arbitrage, but much higher reward also means much higher risk, something that Leeson and Adoboli learnt the hard way.

Too true, draw down on directional trading can and will be huge at times. Never read the turtle trader crap properly but seem to remember this was their biggest problem so they were very hot on money management and trade size in order to make money for a split second...

 

[PipStar]

The reason why arbitrage works is because firstly it exists and few find it.
And secondly the crowd does not believe it so they never find it.

 

[rsh01]

I attended the trial for the first two week, and got to speak with the Man in Question.

why did you attend, just bored? or do you know him? and how did you get to speak to him, wasn't he in custody? ie you wld have needed to get permission to talk to him. or did you bump into him at the prison cafe?

All his desk were aware of of his "Umbrella Account" likewise some people in the Back Office and in several echolens of management. NO compliants were made during this massive up trend in profits.

proof this is what happened? or just his word in court? the media reported it as this is what he said, noone else.

Near the end of July he finally gave in to "peer" group pressure and switched his position to Long.

So he trades based on peer pressure. Right then.

After discussing his position with with Desk they decided that he should take the rap for the loss

Proof? his word again?

My own personal views is while he did do some fictitious trades, he did so in an environment that encouraged it, I have yet to hear of a Court case of a "Rogue" Trader that make the Bank $ 1 Billion.

Wasn't his positon down £10bn at one stage, the environment certainly didnt encourage that sort of size, nor that sort of money management. He failed, massively.

The reason why arbitrage works is because firstly it exists and few find it.
And secondly the crowd does not believe it so they never find it.

what type of arbitrage are you talking about? Stat arb?

 

[rsh01]

Classic. A trader and 2 accounts talking compleatly different languages to each other. Neither understanding what the other is talking about! Thats where the problem stems from in these organisations.

disagree, adoboli sounds like he knew exactly what they were talking about ie he had booked the fake trades incorrectly - as 2 assets (not sure if this related to open trades), and realised the game was up. hence why he owned up to it soon after. as someone else mentions - he used to work in back office. he cld have tried to rebook - as debit/credit, this would have made UBS agents in the trade between 2 ctpy's and wld have at least netted one massive loss off against another (on the balance sheet), but then only half (whatver % he split them between the 2 ctpy) his losses wld have been accounted for, so he wld have then had to book another agency trade to clear the remainder balance. Obv rebooking wld cause massive alarm bells, and besides, back up documentation wld then have been requested from trade support for each of these 2 trades due to their size, and the impact it has on collateral required.

front office get charged capital fees on their positions with respect to basel accords, reg liquidity reporting and internal purposes, no longer can you be a trader and not understand the balance sheet of your desk, cos it directly impacts the pnl of your desk - and in turn your bonuses etc etc. a few years ago the balance sheet would be consolidated up to product/business level and noone wld care what it wld look like at desk level, bar the funding aspect.

 

[rsh01]

i would love to have seen the market reports he was providing to his desk during this period, i wonder if he talked his own book.....eg
"i advise go short, cos the market is wrong, its just wrong, the s&p must go down today"
the next day
"oh bugger, it just wont go down, so it must be going up, i suggest go long in as much size as you can fiddle"

 

[peakoil]

Not CONSISTENTLY. That's key.

Whereas with an arb, you win each time until the arb no longer exist. They are sure bets where the outcome can only be profits. Been there, done that.

I'm with tar, ffsear et al on this: directional folk most certainly do make consistent money if they're on the right side of a long term trend. Q.E.D: gold longs in past decade.