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  #81  
Old 17.09.2011, 16:14
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Re: UBS loses US$2bn in rogue trading

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Bonuses related to performance which appears to be falsified? I guess if it is proven then he will not have to repay such bonuses?
He almost certainly will, but until then it's his money. c.f. Jerome Kerviel!!


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Also bit surprised about the comments about ETFs - my view was they were not that risky. A colleague was in a trading room on Thursday where they were talking about this. Their reaction? "Wow, that guy must be really talented, to lose so much money on ETFs!" (yes they traded ETFs themselves).
The basic idea of an ETF is pretty safe, it's just a cheap way for investors to get exposure to asset classes that might otherwise have high barriers. However, when they get complicated (e.g. in the delta one desks) they can get much riskier, as mentioned by the above poster who quote Warren Buffet.
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  #82  
Old 17.09.2011, 16:21
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Re: Rogue trader in UBS costs it $2 billion

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Warren Buffet described derivatives as weapons of mass destruction.
Very apt phrase. A former trader I used to work with leant me 'Apocalypse Roulette by Richard Thomson' (sub: 'the lethal world of derivatives'), which dates from 1999 and already told quite a few derivative disaster stories.
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  #83  
Old 17.09.2011, 16:26
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Re: Rogue trader in UBS costs it $2 billion

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It was fairly obvious to me what had happened, everybody & their dog were buying into an overvalued CHF because it was a one way bet. When the gold bubble pops there will be another big story.

Clients may well ask for specialist trades, which his desk would provide. Making a small error of judgement could be catastrophic. His bosses probably would not understand the potential risks, until too late.

Warren Buffet described derivatives as weapons of mass destruction.
I do not know much about ETFs except they are based on managing risk by buying derivatives. If you are the one that sold the derivatives in a market that usually moves around in fractions of a percent & it suddenly moves 10% or 20% in seconds then I could imagine you would lose a lot of money. Especially if you could not buy the underlying asset or enough of it.
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  #84  
Old 17.09.2011, 16:29
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Re: Rogue trader in UBS costs it $2 billion

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I do not know much about ETFs except they are based on managing risk by buying derivatives. If you are the one that sold the derivatives in a market that usually moves around in fractions of a percent & it suddenly moves 10% or 20% in seconds then I could imagine you would lose a lot of money. Especially if you could not buy the underlying asset or enough of it.
The thing to bear in mind, his bosses were probably quite happy with his overexposure to the CHF, as it was seen as a one way bet. I suspect they knew & approved in principle until disaster struck. At that point he was braking the rules.....

There will be a huge amount of 'cover my arse' here.
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  #85  
Old 17.09.2011, 17:33
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Re: UBS loses US$2bn in rogue trading

Exchange traded ETFs are vanilla, especially where the "hedge" held by the provider is just the physical stocks in the basket.
Over-the-counter ETFs (or delta one swaps) are also simple - from the client perspective. The client buys a synthetic which promises the performance of a basket of stocksetc. The main risk for the client is the counterparty risk of the bank selling the derivative.
However, how the banks hedge ETFs/swap is not so simple, because the bank may not hedge out the risk 100% or there may be tracking difference between the hedge and the ETF. But if the trader screws up his hedge, that is the bank's loss. Client still gets the performance. That's what UBS meant by client positions would be unaffected by the loss.
The charges say he alleged to have carried out false accounting over a number of years. That suggests to me he was booking fictitious trades to hide hedging losses. The size of the loss suggests this was going on for a long time.
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  #86  
Old 17.09.2011, 17:47
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Re: Rogue trader in UBS costs it $2 billion

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Also bit surprised about the comments about ETFs - my view was they were not that risky. A colleague was in a trading room on Thursday where they were talking about this. Their reaction? "Wow, that guy must be really talented, to lose so much money on ETFs!" (yes they traded ETFs themselves).
Don't be surprised. It should be difficult if they're adequately hedged. The loss isn't due to ETFs per se but, if the charges are true, are down to fraudulent activity.
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  #87  
Old 17.09.2011, 17:58
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Re: UBS loses US$2bn in rogue trading

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Hiding significant losses over 3 years, it's just not possible
You wouldn't think so would you. All genuine trades are confirmed by both counterparties and the bank should reconcile those confirmations, (a) to make sure that the trade being booked is real and (b) that the terms match so their is no dispute later on. If the bank don't get a confirm because a trade is fictitious, it should trigger a failed trade and alarm bells should start ringing. Perhaps somebody wasn't reconciling confirms. But then reconciling of OTC derivative confirms between professional counterparties can take months.
That's assuming of course that the source of the loss really was the booking of fictitious trades and not due to the trader exceeding his risk limits and making one way unauthorized directional bets. But then that should get picked up real time in the risk systems.
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  #88  
Old 17.09.2011, 18:03
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Re: UBS loses US$2bn in rogue trading

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You wouldn't think so would you. All genuine trades are confirmed by both counterparties and the bank should reconcile those confirmations, (a) to make sure that the trade being booked is real and (b) that the terms match so their is no dispute later on. If the bank don't get a confirm because a trade is fictitious, it should trigger a failed trade and alarm bells should start ringing. Perhaps somebody wasn't reconciling confirms. That's assuming of course that the source of the loss really was the booking of fictitious trades and not due to the trader exceeding his risk limits and making one way unauthorized directional bets. But then that should get picked up real time.
Exactly, there is some smoke here.
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Old 18.09.2011, 03:51
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Re: UBS loses US$2bn in rogue trading

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it was clear to see that Swiss people are really angry about the fact that UBS has apparently not changed from its risk taking ways back in 2008
People
A) have the impression now that the banking people have not learnt anything from the previous problems. and in their usual arrogant ways continue as before
B) have the impression that quite some bankers are crooks
C) that any single CHF put into the rescue of UBS from being sold abroad was wasted money



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Another irony that has come out of all this is the fact this trader Kweku Adoboli apparently lost his money whilst betting against the Swiss Franc. During the SF2 debate there were a lot of red faces about that fact. (How could a Swiss bank bet against the decision of the SNB)
-
A) I am not astonished to see that bankers act against the country, and this has been the suspicion of most people all along and now is proven
--- "vaterlandslose Gesellen"
B) I right today read an article about the matter with a precise explanatation about how this business works. I had to re-read it about five times until I more or less understood what was meant. That I quite obviously have not a clue about banking was a rather minor shock as I never had any such aspirations, the realization that I in this most likely am representative for most people however was a major shock, as this means that most likely even people, politically in charge, will not really know what they are talking about
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  #90  
Old 18.09.2011, 12:19
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Re: UBS loses US$2bn in rogue trading

I am surprised about the discrepancy part dating back 3 years too. In order for it to have been a consistent trading error he must have screwed up hedges for 3 years without the middle office or his MD figuring it out. That to me sounds unlikely or improbable. Especially when most of the hedging that goes on in simple swap/ETF trades is all automated at this point.

Another thing that could have gone on is that this guy went out and actively took sides either trying to front run client orders here or there or just simply going out and taking a position and adding it to existing positions with real clients and changing the reporting to make it look real. I always wondered about this with swaps traders. The desk primarily makes money off the spread and margin and not being being actively exposed but I wonder if they go out and take positions sometimes without their superiors knowing.

This is what Kerviel did and it just so happens that Kerviel also worked on the Delta 1 desk and also was Trade Support before moving into a trading role. If this guy came from the middle office he might have known how reporting was done and could have fudged the books so as to avoid detection. The only thing different about Kerviel was that he was caught in a short period of time not so with this guy.
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  #91  
Old 18.09.2011, 13:22
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Re: UBS loses US$2bn in rogue trading

Rogue trader weeps over $2b loss
Jill Treanor, Simon Bowers and Sam Jones
September 18, 2011

Financial focus ... Kweku Adoboli is led from court after hearing claims he falsified records at UBS. Photo: AFP
LONDON: A tearful Kweku Adoboli, the alleged rogue trader at the centre of a $US2 billion ($1.93 billion) loss at Swiss bank UBS, has appeared in a London court facing charges of fraud and false accounting dating back to 2008.

A clerk at the City of London Magistrates' Court handed the 31-year-old Ghanaian a tissue as the 15-minute proceedings began, after which the one-time star trader was led away in handcuffs to remain in custody until a bail hearing on Thursday.

The timescale of the allegations will raise questions about risk-management procedures at the bank, put intense pressure on the chief executive, Oswald Grubel, and support calls from some Swiss politicians for the bank to leave its investment-banking business, putting thousands of London jobs at risk.

Advertisement: Story continues below
Many UBS bankers already fear for their year-end bonuses.

Smiling at times, Mr Adoboli spoke only to confirm his name, address and date of birth in court.

The Swiss bank refused to add to the statement it issued on Thursday, when it revealed it had called City of London Police at 1am to investigate Mr Adoboli after uncovering ''unauthorised trading''.

British-educated Mr Adoboli - whose Ghanaian passport spells his name as Kwaku - joined UBS in 2006 and was a member of the so-called Delta One trading desk where, among other things, he traded exchange-traded funds, known as ETFs.

These complex financial instruments, about which regulators warned earlier this year, are structured to mimic market movements.

Two charges allege Mr Adoboli falsified records of ETFs for personal gain or with intent to cause loss to another between October 2008 and December 2009 and then January 2010 and this month.

A third charge alleges he committed fraud between January this year and this month while he was a senior trader in global synthetic equities.

His lawyers did not issue a statement or enter pleas to the charges.

City of London Police, who arrested Mr Adoboli at his home on the edge of the City at 3.30am on Thursday, said their investigation was continuing, in ''close collaboration'' with the Financial Services Authority, the Serious Fraud Office and the Crown Prosecution Service.

The bank, which employs 6000 staff in London, will have to pay for a detailed investigation being launched by the FSA and the Swiss regulator, Finma, into the control systems at UBS, the failures that permitted the losses to occur and details of the unauthorised trading.

The timing of the discovery of what UBS has described as ''unauthorised trading'' has mesmerised the City, as it coincided with the third anniversary of the collapse of Lehman Brothers.

Swiss politicians are seizing on the scandal to press the case for new banking laws.

''It shows that investment banking is a high-risk field and it's important that we clearly separate systemically important functions from the rest of the banking business,'' Caspar Baader, of the Swiss People's Party, said.

Standard & Poor's placed the bank on its CreditWatch list, citing the ''setback to UBS's efforts to rebuild its reputation … following its weak performance in 2007-09''.

Guardian News & Media



Read more: http://www.smh.com.au/world/rogue-tr...#ixzz1YIY1XRTL
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  #92  
Old 18.09.2011, 17:54
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Re: UBS loses US$2bn in rogue trading

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B) I right today read an article about the matter with a precise explanatation about how this business works.
Is it online somewhere?
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  #93  
Old 18.09.2011, 19:16
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Re: UBS loses US$2bn in rogue trading

Who needs the financial press when you've got commentators of the quality of englishforum? Thanks!
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  #94  
Old 18.09.2011, 23:09
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Re: UBS loses US$2bn in rogue trading

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Bonuses related to performance which appears to be falsified? I guess if it is proven then he will not have to repay such bonuses?

Bwahahahahahahahhahahahahaha!


Bankers repay bonuses that they should never have recieved?


hahahahahahahahahahahahahahahahahahahahahahahahahh ha

<can't ...... breathe ..... must ..... stop laughing ......>
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  #95  
Old 18.09.2011, 23:14
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Re: Rogue trader in UBS costs it $2 billion

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It was fairly obvious to me what had happened, everybody & their dog were buying into an overvalued CHF because it was a one way bet. When the gold bubble pops there will be another big story.
There won't be a big story at such time as gold goes off the boil because the size and impact of the gold market is much less than any of the major currencies and stock markets.

(There's a very strong political motive to keep stock markets high or currencies at a given level - gold is much more of a 'behind the scenes' kind of thing. It is of course manipulated to an extent but more for commercial profit than by political dictat).
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  #96  
Old 18.09.2011, 23:24
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Re: Rogue trader in UBS costs it $2 billion

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There won't be a big story at such time as gold goes off the boil because the size and impact of the gold market is much less than any of the major currencies and stock markets.

(There's a very strong political motive to keep stock markets high or currencies at a given level - gold is much more of a 'behind the scenes' kind of thing. It is of course manipulated to an extent but more for commercial profit than by political dictat).

Seem the value of the loss went up today to nearer CHF 3Bn;who knows, who cares - how many more jobs will be at risk
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  #97  
Old 18.09.2011, 23:48
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Seem the value of the loss went up today to nearer CHF 3Bn;who knows, who cares - how many more jobs will be at risk
Of course it's not the top boss's fault so he won't resign. WTF!
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Old 19.09.2011, 04:05
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Re: UBS loses US$2bn in rogue trading

- The top boss has said he won't resign
- Immediate boss out
- Losses incurred on index future trades in the last 3 months
- Dodgy (but not lossmaking) deals since 2008


http://www.independent.co.uk/news/bu...n-2356840.html
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Old 19.09.2011, 04:17
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Re: UBS loses US$2bn in rogue trading

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Is it online somewhere?
read two German language and two French language newspapers on Saturday, each time waiting to the rain disappearing at the Sion Air Show, and now could relocate the stuff on wiki

http://de.wikipedia.org/wiki/Put-Option
http://de.wikipedia.org/wiki/Call-Option

Quite nice explanations
--
of what kind of business according to Mr Blocher should be separated from the main banking business for security reasons or what should become prohibited according to others
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Old 19.09.2011, 09:24
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Re: UBS loses US$2bn in rogue trading

The trader wept in the dock of City of London magistrates court on Friday as he was charged over offences dating back to 2008. Yet as these did not lose UBS any money, the bank's special committee will not investigate them.

how blatent is that - turn a blind eye to fraud when it's in your favour...
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