October 11, 2011

The new rogue trader: Kweku Adoboli

Nick Leeson is a well know rogue trader - that is - a trader trying to win much, but fails and loses a lot instead. He said:
You expect to be caught in the first 24 hours. Every time the door to your office opens, or the phone rings, you think it will be somebody looking for answers. You live in fear. In that very initial period, the heart is racing. You should have closed the position at the earliest opportunity, and taken no more than a slap on the wrist. 
But when the call, or the knock on the door, doesn't come, you start to grow in confidence. You start to believe that you'll have the time to correct it, that you can push the barriers that little bit further – that you can get back to ground zero and start again.

The latest rogue trader is Kweku Adoboli who managed to lose $2 billion due to bad trading and is now being charged with fraud and false accounting. Kweku Adoboli traded exchange traded funds, which track different types of stocks or commodities. Nick Leeson traded mostly futures contracts which tracked the Japanese stock market: Nikkei.
The reason that no-one managed to discover what Kweku Adoboli was doing is that he had experience from working in the back office of the bank. This is slightly different from Nick Leeson who had co-workers who helped him hide his trading losses. Both of them eventually got caught, and while Nick Leeson is out of prison -Kweku Adoboli is to be expected to live inside the prison walls for some time.

Source: The IndependentBBC News