Rogue trader

A rogue trader is an authorised employee making unauthorised trades on behalf of their employer. It is most often applicable to financial trading, and as such is a term used to describe persons - professional traders - making unapproved financial transactions[1].

This activity is in the grey area between civil and criminal illegality for the reason that the perpetrator is a legitimate employee of a company or institution, yet enters into transactions on behalf of their employer without permission.

One famous rogue trader is Nick Leeson, whose losses were sufficient to bankrupt Barings Bank in 1995 following his ill-advised and unauthorized investments in index futures. Through a combination of poor judgement on his part, lack of oversight by management, a naïve regulatory environment and unfortunate outside events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that bankrupted the centuries-old financial institution.

Table of largest rogue trader losses

Name Date(s) Loss Institution Market activity Sentence
Nick Leeson [2] 1995 5 £827 million leading to bank failure Barings Bank Nikkei index futures 6.5 years prison
Toshihide Iguchi [2] 1995 4 $1.1 billion Resona Holdings U.S. Treasury bonds 4 years prison
Yasuo Hamanaka [2] 1996 6 $2.6 billion Sumitomo Corporation copper 8 years prison
John Rusnak [2] 2002 3 $691 million Allied Irish Banks foreign exchange options 7.5 years prison
Gianni Gray, David Bullen,

Vince Ficarra, Luke Duffy

 2003 Oct - 2004 Jan 1 AU$360 million National Australia Bank foreign exchange options 16 months prison, 3 years and 8 months prison,

2 years and 4 months prison, 2 years 5 months prison
Chen Jiulin 2005 2 $550 million China Aviation Oil jet fuel futures 4 years and 3 months prison
Jérôme Kerviel [2] 2006–2008 7 €4.9 billion Société Générale European stock index futures 5 years prison of which 2 years are suspended - may still appeal ruling
Boris Picano-Nacci 2008 Oct 7 €751 million Groupe Caisse d'Epargne Equity Derivatives investigation in progress
Kweku Adoboli [3] 2011 7 $2.3 billion UBS S&P 500, DAX, and EuroStoxx index futures investigation in progress

References

  1. ^ MOLLENKAMP, CARRICK (September 16, 2011). "UBS: Rogue Trader Hit Firm". Wall Street Journal. http://online.wsj.com/article/SB10001424053111904060604576571931690088522.html. Retrieved 2011-09-16. 
  2. ^ a b c d e Slater, Steve (September 15, 2011). "Factbox - UBS trader joins rogues' gallery of financial crime". Reuters. http://uk.reuters.com/article/2011/09/15/uk-ubs-factbox-idUKTRE78E1A920110915. Retrieved 2011-09-15. 
  3. ^ "The curse of delta one strikes UBS". Financial Times. September 15, 2011. http://ftalphaville.ft.com/blog/2011/09/15/678306/the-curse-of-delta-one-strikes-ubs/. Retrieved 2011-09-15. 

See also