Rogue Trader's CV

Thanks to The Deal, Rogue Trader Kerviel's CV is available. I'm not sure if he'll be able to achieve the goal he has set himself now.

KERVIEL Jerome
Jeromekerviel@hotmail.com

OBJECTIVE Reach a position as a retail listed derivative products trader, managing a volatility and Delta One book

EDUCATION
MASTERS in Finance (Organisation and Control of financial markets)University of Lyon, September 2000
Bachelor Degree in Finance University of Nantes, 1996 1999

WORK EXPERIENCE
Societe Generale S.A., Paris, France Trader and Market Maker for Delta One Products March 2004 - Today
Trading : Market making of Listed Delta One products
Including open end and closed end Turbos (Single Stocks, Index, Forex and Rate Futures), ETFs and secondary market for Certificates
ETFs structuration - Management of the collateral with Lyxor Asset Management
Development of managing tools (Excel VBA macro)
New Underlyings Study to develop the product range
Participation to the specification for the implementation of turbos to the Clickoptions platform

Societe Generale S.A., Paris, France Trader Assistant - Basket Trading and Delta One Products
August 2002 - February 2004
Valuation and Risk Analysis explanation for Basket Trading (Single Arbitrage book) and Delta One Products
Strategies Backtestings
Short positions hedge
Process automation and managing tools development

Societe Generale S.A., Paris, France
Middle Office - Referential Team August 2000 - July 2002
Products modeling
Process automation
Excel macro Development for the exotic Desk
Participation to the single referential project

ACTIVITIES
Judo - 8 years practice -
Trainer for children's Sailing

SKILLS
English : working language
Microsoft Office Package - Visual Basic
Licensed for EUREX, XETRA, EURONEXT

Which UK bank will reveal a Rogue Trader?

UK Banks, their shareholders and the tri-partied supervisory regime will be bracing for the possibility that a financial institution within the UK has its own Rogue Trader problem.

The ripple effect of SocGen's problem will be for the risk management teams to get together with the auditors, and ensure that each of the trades made have a genuine closeout. That is, for every buy order closed, there is a genuine seller and vice versa. I think the key to Jérôme Kerviel's deception is that he knew exactly how to bypass the existing systems (he'd worked in the back office after all), or that the 'error' account was getting a workout. Nick Leeson, knocked one spot further down on the Rogue Hall of Fame, was famous for using account number 8888 to bundle his mis-trades into.

That same ripple effect will be onto the size of these accounts, and checking that there has been no collusion between institutions and their clients. One of the favourite methods goes as follows.

Share trading at $5
Trader sells shares to client at $4.50
Client sells shares at $5 for 50c profit.
The profit is split between the two parties, the insider getting it paid into an offshore account.

This can easily be written off as mistakes, oversights, or 'fat-button' trading. As banks start to account and assess their books and the risks that accompany it, who will be the first to write off?

With the UK being home to several multinational banking companies, who operated in much the same markets as SocGen. But if this can happen to SocGen, the undisputed market leader in derivatives trading, it can happen to anyone. Who in the UK will put up their hand first?

To prevent such further occurences, you need only look at the Chinese Walls regulations that prevent information from flowing from its advisory divisions to its proprietary trading desks. Ie, in advising a company that is making a takeover, information should not be passed to the traders.

In this case a new Chinese Wall, perhaps call it a Jérôme Wall in honour of the man of the hour, should be applied by market supervisors and legislators to ensure greater independence between the trading and backroom/settlement. This should assuage the minds of those who are afraid of Trading Loss Risk, by reducing it.

Update: Fat Button Trade
Financial News online has a countdown of some very funny "fat finger" trades. Genuine mistakes, but rather costly. My favourite is rugby related:

Heads up at Bank of America, September 2006
Not so much wrong-fingered as wrong-balled.

A Bank of America trader’s keyboard was set up to execute an order when the senior trader gave the signal – he just had to press enter. However, he failed to notice an errant rugby ball thrown in his direction, which landed on his keyboard and executed the $50m trade ahead of schedule. The ball thrower, a graduate trainee, was given a severe reprimand but no further action was taken.

Another trader said: “Rugby balls are a regular danger on any trading floor so the victim trader ought to have hedged against this possibility.”

Société Générale cops the Rogue Trader...to the tune of 4.9 Billion Euros

Société Générale this morning alerted the market that it had lost a significant amount from the actions of a Jérôme Kerviel, rogue trader....the words that send a frisson down the spine of any Hollywood producer, good ones. Less good frissons may be felt of those who worked around and above the as yet unnamed trader; people responsible for his oversight have also been relieved of duty. The trader has, according to a letter from the President of the SG group, been "mis à pied" (stood down).

Before we analyse this latest, let's take a walk down Rogue memory lane, and count the cost of each:

• Brian Hunter; Amaranth Advisors LLC: After studying weather patterns and other data Hunter, Head Energy Trader, made an enormous wrong-way bet that a Katrina-like hurricane would cause the difference between summer and winter natural gas prices to widen dramatically.Instead, a mild hurricane season caused that spread to collapse, wiping out about US$5 billion in value.
  
  Speculation is that Amaranth may have conducted most of its trading away from the Nymex in a bid to "corner" the long contract on natural gas futures. Regulators don't have the same amount of reach in Over the Counter markets as exchanges.
  
  
• Nick Leeson; Barings plc: Probably the most world famous case, inspiring a novel and movie. Leeson placed a short straddle (essentially betting that the Japanese stock market would not move significantly overnight) on Singapore and Nikkei exchanges. However, the Kobe earthquake hit early in the morning on January 17 1995, sending Asian markets, and Leeson's investments, into a tailspin.
  
  Leeson attempted to recoup his losses by making a series of increasingly risky new investments, betting the Nikkei Stock Average would make a rapid recovery. But the recovery failed to materialize, and he succeeded only in digging a deeper hole. Losses eventually reached US$1.4 billion, twice the bank's available trading capital. Barings declared insolvent, and sold to ING for the princely sum of £1.
  
  Sentenced to six and a half years in a Singapore prison, he was released in 1999. In 2005, soccer team Galway United FC named Leeson its General Manager. That same year, Virgin Books published his personal story/self-help book, titled "Back From The Brink, Coping With Stress."
  
  
• Yasuo Hamanaka, Sumitomo: Hamanaka was also known as "Mr. Five Percent," according to the New York Times, because he once bought as much as 5% of all the copper traded in the world each year. He pleaded guilty in 1997 to hiding more than US$2.6 billion in trading losses and served seven years in prison. Copper futures plunged in 1996 after it was discovered that Hamanaka had artificially propped up prices.
  
  
• John Rusnak, Allied Irish Bank: Rusnak lost millions for Allfirst Financial, an Allied subsidiary, by incorrectly gauging the movement of the Japanese yen against the dollar. He forged paperwork to cover further trades and losses he says he incurred in a failed attempt to win the money back for Allfirst, based in Baltimore. He lost US$691 million over five years before his activities were discovered in 2002.
  
  
• Unknown “fat-fingered” trader, Mizuho Securities: Trader sold 610,000 shares in job recruiting company J-Com Co. for 1 yen apiece, instead of an intended sale of 1 share at 610,000 yen. Mizuho said it was unable to cancel the order, causing it to lose about US$340 million. The mistake was attributed to the “fat-finger” syndrome, shorthand for gaffes made when traders hit the wrong button on a keyboard and lose a bundle.
  The Tokyo stock exchange later acknowledged that a glitch in its system made it impossible to cancel the trade. Mizuho and the exchange have discussed sharing some of the losses, but have so far failed to reach an agreement.
  
  
• Nelson Bunker Hunt and William Herbert Hunt bought more than 100 million ounces of silver bullion in 1979 and 1980, causing silver prices to soar to a record of more than $50 an ounce before a sharp plunge. After the crash, the brothers were left with silver obligations of $1.75 billion and a silver hoard of 59 million ounces valued then at $1.2 billion, indicating a loss of US$550 million, according to the Journal. The Hunts, whose fortune was once estimated at $6 billion, filed for bankruptcy protection in 1988.

So if that's a hall of fame of the worst of financial trading losses, then this is a pretty bad one. I would suspect that he had a good working knowledge of the back room operations of the bank, and the exact limits on trading so that he could really make the most of his position. Although the bank has been batted around by the credit crunch, it has plenty of assets against which to increase its working capital, borrowing to "more than cover" its recent losses due to the activities.

Fitch has dropped its long term issuer rating from "AA" à "AA-" estimating that if the the fraud has happened in specific circumstances, it "raises questions on the effectiveness of (risk management) systems and creates a reputations risk for the company. S&P has will be reviewing its rating with a view to downgrade.

Update: His name is Jérôme Kerviel. More from the Wall Street Journal:

The bank identified the trader as Jerome Kerviel. Mr. Kerviel, 31, joined Societe Generale in August 2000 and was working as a trader on the futures desk at the bank's headquarter near Paris. He was in charge of futures hedging on European equity market indices, known as "plain vanilla" futures.

The bank said he was able to dupe the bank's own security system because he had inside knowledge of the control procedures gained from previous jobs with the bank. (Backroom knowledge pays in this case)

Though Societe Generale says it first learned of what it termed "massive fraudulent directional positions" on Jan. 19, it waited until it could close out those trades before going public with the problem. Winding down the trades, the bank said, resulted in a €4.9 billion write-down, making it potentially the largest loss ever from an alleged rogue trader. (Those recent equity market falls would not made the positions any smaller).