Letter to UBS Staff on Unauthorized Trades
Dear colleagues,
We regret to inform you that yesterday we uncovered a case of unauthorized trading by a trader in the Investment Bank.
We have reported it to the markets in line with regulatory disclosure obligations. The matter is still being investigated, but we currently estimate the loss on the trades to be around 2 billion US dollars. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
We understand that you have already had to contend with unfavorable, volatile markets for some time now. While the news is distressing, it will not change the fundamental strength of our firm.
We urge you to stay focused on your clients, who are counting on you to guide them through these uncertain times.
We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank's management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened. We will keep you updated on the progress of our investigation.
Yours,
The Group Executive Board
/
/
Rogue Traders Through History
UBS’s disclosure that a unnamed employee piled up $2 billion in unauthorized trading losses forced Deal Journal to dig into the dusty files of rogue traders through time. Here we go:
Jérme Kerviel: Last year, the former low-level Societe Generale trader was ordered to prison for three years and fined ?4.9bn after being found guilty of unauthorized trades that resulting in $6.5 billion in losses at the French bank.
SocGen had to raise billions of dollars from investors, in part to plug the hole Kerviel left behind. At one point, the thirtysomething Kerviel took ?50 billion in wagers with his employer’s money, without telling his bosses.
Brian Hunter: In 2006, the Amaranth energy trader in Canada sank his firm after $6.6 billion in wrong-way bets on the price of natural gas. The firm lost 70% of its more than $9 billion in assets during Hunter’s September 2006 raid.
Nick Leeson: The apex of rogue traders, Leeson is the standard by which all rogues are judged. The former Barings Bank trader fled from the U.K. in 1995 after bringing Britains’s oldest merchant bank to its knees. Leeson made a string of derivatives bets that resulted in a $1.3 billion trading loss. He tried and failed to cover up his losses, and eventually spent four years in a Singapore prison for his crimes.
Leeson has gone Hollywood, in a fashion. Two books have been published about his life, Ewan McGregor played Leeson in a film, and Leeson sold interviews to the highest bidder in the wake of Kerviel’s rogue trades. Leeson lives in Galway, on the Irish west coast, and rose to become CEO of the local soccer club.
Mr. Copper: Sumitomo Copper trader Yasuo Hamanaka, known as Mr. Copper, tried to corner the global market for the metal and spent billions of dollars buying it to boost its price. In 1996 the scheme went awry, eventually costing the company $2.6 billion as his huge copper stockpiles had to be sold at a loss. Hamanaka was jailed for eight years for his part in the scandal.
/
/
What Do You Call A ‘Rogue’ Trader Who Makes $2 Billion? A Managing Director
UBS AG apparently is the latest bank to suffer at the hands of a “rogue.” British police arrested a man on suspicion of fraud Thursday after UBS’ exchange-traded fund desk said a trader had racked up $2 billion in losses.
Trading on Wall Street, of course, is a thinly controlled game of dice. Traders put their firm’s capital at risk, but must do so with authorization. As this latest scandal shows, authorization is either easy to come by or circumvent. And as nearly every “rogue” has said in their defense, there were winners making unauthorized trades, too. The difference: they were winners.
Consider the story of Nick Leeson, the first trader to bring down a bank. He racked up $1 billion in losses and was sentenced to six years in jail. Barings Bank collapsed under the weight of the exposure. In an interview with MarketWatch in 2004, Leeson said exceptional risk-taking was common. He actually used an account that his team had set up to cover losses of a junior trader. And as many accused rogues have argued, Leeson said the bank tacitly approved.
The number of rogue traders — there have been at least 11 since 1995 who have lost roughly $10 billion combined – suggests that Leeson may be right.
So, why is trading beyond internal limits allowed? Because of the winners. Enter Philipp Meyer, a former UBS derivatives trader who left the business a few years ago and wrote about the excess of the business for The Independent. To be clear, Meyer never said he made unauthorized trades, but he did offer this observation about trading. ” It was pretty clear what The Market didn’t like. It didn’t like being closely watched. It didn’t like rules that governed its behavior.”
Then there is Jerome Kerviel, the ultimate rogue trader who lost $7 billion at Societe Generale in 2008. Kerviel claims he exceeded his credit limits regularly and that when he made money for the bank in 2007, he received a $$416,000 bonus for $60 million in profits for SocGen.
Ultimately, the difference between trading floor rogues and royalty is how their bets pay off, not whether they take extreme risks. As Leeson said, there’s no excuse for not catching rogue trading today or even 18 years ago: “a very simple check would have exposed it.”
(인용: WSJ)