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Feb 03

Rogue Trader

Rogue Trader is the book Nick Leeson wrote when he was in jail in Singapore, after having traded the Barings merchant bank into oblivion. Fascinating read, and quite scary too – quite an insight into the crazy world of derivatives traders. Basically, due to gross incompetence of Barings senior management, breakdown of risk management and compliance, and Leeson’s deceit and foolhardiness, Barings ran up a position hundreds of millions of pounds into the red before anyone even noticed it (except Leeson, of course). Leeson, like a desparate gambler tried to double up each time to recoup his losses – but alas, unlike the casino where the odds are always static, Leeson’s gargantuan position in the market meant that his actions in effect also moved the market. He had bought all these futures in an effort to get the market to rise, and when it didn’t, he kept buying more. It didn’t work. This was compounded by the fact that rapidly unwinding such a long position would cause the market to dip and crash – so he was stuck with a lot of futures in a declining market, and having to make huge margin call payments. A very interesting read.

  10:14pm (GMT +11.00)  •  Books  •   •  Tweet This  •  Comments (2)

This post has 2 comments

1.  Kev

“Derivatives need to be well controlled and understood, but we believe we do that here.”

Peter Baring, Chairman, Barings Brothers, October 1993.

“I’m sorry.”

Note left by Nick Leeson, February 1995.

2.  Stu

“The recovery in profitability has been amazing… leaving Barings to conclude that it was not actually terribly difficult to make money in the securities business…”

– Peter Baring again

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