UBS: Our Risk Systems Did Detect $2bn Rogue Trader 151
A few weeks ago, UBS employee Kweku Adoboli (universally described as a "rogue trader") ran up a $2 billion loss for his employer; many readers wondered how it is the systems which allow trades to happen at all aren't better tuned to catch such massive cash flows without triggering alerts. Now, reader
DMandPenfold submits a report from Computerworld UK in which the bank claims that such triggers were in place — they were simply not acted on. From the article: "UBS has insisted its IT systems did detect unusual and unauthorised trading activity, Interim chief executive Sergio Ermotti, who is running the company following Oswald Grubel's resignation last month, sent a memo to employees saying the bank is aware that its systems did detect the rogue activity. In the memo, Ermotti wrote: 'Our internal investigation indicates that risk and operational systems did detect unauthorised or unexplained activity but this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced.'"
According to the computer ... (Score:2)
It can only be attributable to human error.
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He lost money so he's a rogue trader.
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Traders who make $2 billion in rogue trades are called Managing Directors.
Called it (Score:2, Interesting)
From my comment on the original article [slashdot.org] :
"Let's face out out on the terrain no-one is holding these guys accountable. IT may set up the system, Risk Management may generate the reports and they'll be either modified to say what management wants to say or just plain ignored because like all gamblers these guys think they have a system which lets them keep on winning even as they are betting their house (or in this case our houses.)"
This "blame IT" crap has gone on long enough. It's time we stood up for ourse
Re:stood up for ourselves (Score:2)
How exactly do you do that?
Either you write a report that is just plain ignored or you get pegged as a HaxorTerrierist.
I swear, this is just that old childhood playground stuff all over again, where the jocks in the board room and Gov are blaming the geeks.
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In my case I pulled out the bug report that showed the VAR reports total field was being overflowed when a customer ran it. Bug had been fixed 6 months prior to customer going into bankruptcy (then being made whole by the ratepayer.)
Of course they weren't trying to blame us. They were claiming it was because they couldn't do long term deals. Which is true, but it's true because they had previously engaged in incestuous, non-arms length, long term deals with their open market corporate cousin.
I shouldn'
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'Blame IT' is a shallow description of what happened. The original discussion was all about: 'didn't they have risk management in place?' Not: blame the IT guy that wrote the VAR report.
Sounds like they are blaming their risk officer (who should be the CFO or at least report to the CFO).
Re:Called it (Score:4, Insightful)
From my comment on the original article [slashdot.org] :
"Let's face out out on the terrain no-one is holding these guys accountable. IT may set up the system, Risk Management may generate the reports and they'll be either modified to say what management wants to say or just plain ignored because like all gamblers these guys think they have a system which lets them keep on winning even as they are betting their house (or in this case our houses.)"
This "blame IT" crap has gone on long enough. It's time we stood up for ourselves instead of allowing ourselves to be used as a convenient scapegoat all the time.
How often have you seen an IT representative in front of the cameras say, "Well, we see this behaviour, the lights are flashing, the klaxons are going like a cat with its tail in a wringer, but the people who collect 7 figure salaries haven't been taking an interest so far."
Should be criminal charges for management negligence -- and I don't mean just giving the the sack. Those protesters on Wall Street have a point, everyone gets hurt when the bank CEOs screw up, but those most responsible. Thanks to their stalwart defenders in the US Congress no stronger regulation get passed. If that's not sign that government is in the bank's pockets, I can't imagine what could be more clear.
Re:Called it (Score:4, Informative)
Those protesters on Wall Street have a point, everyone gets hurt when the bank CEOs screw up, but those most responsible.
Herman Cain says it's the protester's faults if they don't have job. After all, this is 2011 and what the bankers did was in 2008.
Re:Called it (Score:4, Informative)
Actually, what Cain said yesterday [nydailynews.com] was "Don't blame Wall Street, don't blame the big banks, if you don't have a job and you're not rich, blame yourself."
While it's arguable that not having a job is a person's own fault (a losing argument with the economy, but arguable), saying it's the fault of everyone not rich that they're not rich isn't just insane. It's the kind of institutional insanity that is driving the country into nothing but the madhouse, with a corporatocracy of Cains at the wheel.
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After all, this is 2011 and what the bankers did was in 2008.
What bull. The financial crisis is ongoing, the dominoes are still falling.
Re:Called it (Score:5, Insightful)
No, the logic of that post is perfectly clear. Someone says bank CEOs screwing up hurts everyone but those CEOs. Like people who have lost jobs, or can't get one, after bank CEO screwups destroyed the economy's growth, and the jobs with it. Herman Cain says it's the jobless person's own fault for not having a job - and even their own fault they're not rich. The contrast is that Cain says it isn't the bank CEO's fault people don't have jobs, it's their own fault.
But that's obvious. Except perhaps to a Republican, er "Libertarian", like you. Who spent the entire Bush era telling us Chewbacca was on Endor whenever people complained that deregulation was killing us.
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No, the logic of that post is perfectly clear. Someone says bank CEOs screwing up hurts everyone but those CEOs. Like people who have lost jobs, or can't get one, after bank CEO screwups destroyed the economy's growth, and the jobs with it. Herman Cain says it's the jobless person's own fault for not having a job - and even their own fault they're not rich. The contrast is that Cain says it isn't the bank CEO's fault people don't have jobs, it's their own fault.
But that's obvious. Except perhaps to a Republican, er "Libertarian", like you. Who spent the entire Bush era telling us Chewbacca was on Endor whenever people complained that deregulation was killing us.
I hadn't done any research on Cain, as I usually get anyone running for President a few months to flesh out their views and see whether they have a chance or not. The dumb ones usually implode, like Perry is currently doing. I was quite taken aback by the magnitude of profound stupidity of Herman Cain's statement - the man should stick to what he knows, slinging pizza.
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Actually in this case, the CEO resigned, and much of the rest of senior management involved has been also compelled to resign. The losses have been absorbed by the shareholders and employees of UBS, which is exactly as it should be.
The 2008 crisis was a completely different animal, and everybody should be angry the giant banks are relatively unchanged since then. But even then almost all the senior management of those organizations was kicked out.
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While your bitterness toward CEO packages is understandable, you are pathetically underinformed in this case.
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How often have you seen an IT representative in front of the cameras say, "Well, we see this behaviour, the lights are flashing, the klaxons are going like a cat with its tail in a wringer, but the people who collect 7 figure salaries haven't been taking an interest so far."
I'd love to see someone do that, they'd never work in the industry again though.
Should be criminal charges for management negligence -- and I don't mean just giving the the sack. Those protesters on Wall Street have a point, everyone gets hurt when the bank CEOs screw up, but those most responsible. Thanks to their stalwart defenders in the US Congress no stronger regulation get passed. If that's not sign that government is in the bank's pockets, I can't imagine what could be more clear.
Thanks to the revolving door between Goldman Sachs [nytimes.com] and the US government the banks are the government. The barbarians aren't at the gate, they're manning the walls.
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Sarbanes-Oxley is a US regulation. The trader was in London.
Banks in Europe certainly implemented SOX, they couldn't do business with the US if they hadn't, as well as the various Basel accords.
A reminder why computers aren't perfect... (Score:2)
They didn't have adequate risk systems (Score:3)
A risk system that nobody pays attention to is no different from not having a risk system at all, except that you're paying for it. As UBS found out.
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I wonder if this was a case of the boy who cried wolf/car alarm problem; a system that isn't calibrated well and that people learn to tune out due to all of the false alarms.
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Nick Leeson worked in the IT department before he became a trader. He learned all the phrases traders used when a false-positive alarm was triggered; "Oh, I'm just clearing up a wrong transfer", "Just rolling through some accounts", "sorry, the other guy was logged in at my terminal", "Just tidying up an old account".
Then when he became a trader, he knew about the test accounts to store his losses, as well as how to smooth over the tripwire alarm system whenever IT called him up.
Why would IT call him? (Score:2)
Well there's your problem.
Why would IT call him? Wouldn't the alarm go to someone managing the people who manage the trades?
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First level contact was to ask the trader to recheck their transactions, then escalate to supervisors.
Well there's your problem. (Score:4, Insightful)
Sorry for repeating a meme, but in this case it is extremely valid.
IT should NEVER be involved at that level. The alerts should go to the manager (or the manager of managers) who SHOULD have more insight into the situation than IT.
Having IT in the loop means one more failure point (and an additional delay).
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The entire system if fundamentally flawed. The banks are expecting to make more money than is in the system to make. Of course the world economy is still screwed. "Its the bankers, stupid!"
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+1 great car analogy
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Yeah, which is why compliance and middle-office departments exist. Really it is these people that questions should be asked of and ultimately where heads will roll.
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he knew about the test accounts to store his losses
Security by obscurity raises its ugly head again
Re:They didn't have adequate risk systems (Score:4, Informative)
He used an error account, which he realized was unaudited, but that is something you pick up from being a trader or an auditor- not necessarily IT. These things are common in investment banks/brokerages which have a lot of accounts and client trades and errors need to be isolated in an account that does not belong to a client. ie. if a client asked to buy 100 pork belly contracts and you bought him lean hogs instead, you need a place to dump the pork bellies you bought. It does not mean a "test account" in the IT sense.
Operations (Score:2)
Prior to working on the trading desk they worked in operations. While Operations may be the kissing cousin of IT, it is not exactly the same. But in either case, (Leeson or Adoboli) knew what would trigger the compliance office (In those days “Risk Management” tended not a separate department).
In Lesson case, he was head of both trading and operations (which is a no-no - but it was Singapore – a small desk – why can’t one person do both jobs?). So on side he present it as a e
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A risk system that nobody pays attention to is no different from not having a risk system at all, except that you're paying for it. As UBS found out.
Boy are people going to be surprised when they find out the government has all these regulations and very few employees to monitor compliance and initiate enforcement actions.
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Not surprised. Why do you think they pass most of the useless regulation? So the useful regulation is not enforced, just like the limits on feeding cows cornflakes.
Also helps their donors, no better way to preempt competition then put in volumes of regulations and crooked regulators.
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The most important part is where the government stops collecting taxes, guaranteeing that even agencies with oversight orders and staffing budgets are underfunded and so understaffed. It helps even more to block the appointment of top managers in the agencies, so the whole office is crippled, overburdened, and unfocused without a leader.
Guess who is responsible for undertaxing and blocking agency appointments? Don't strain - it's the Republicans, and maybe enough fellow "Conservatives" in the Democratic Par
Underfunded regulators. (Score:2)
Boy are people going to be surprised when they find out the government has all these regulations and very few employees to monitor compliance and initiate enforcement actions.
That will come as a surprise to precisely no one. The SEC has been purposely underfunded for decades. You think that is by accident? The financial firms and their, ahem, elected representatives want it that way so they can't cause too much trouble. Hard to monitor wrongdoing when you don't have enough manpower. Congress can effectively neuter any regulatory agency simply by cutting their budget. Doesn't matter what laws are actually on the books if they can't be enforced.
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Accenture is not an auditing firm (Score:2)
Don't forget, "independent" auditing firms, like Accenture and PWC, actively solicit bribes to certify compliance for those not compliant.
Accenture is not an auditing firm. They are a consulting firm which has nothing directly to do with auditing. They used to be part of an auditing firm but have not been for some time. Furthermore having actually worked with big accounting firms myself, they generally are actually pretty honest, albeit flawed. They serve a very useful purpose which is to verify that the financial statements are a reasonable (not perfect - that is impossible) representation of the financial situation of a company. For th
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Accenture is not an auditing firm.
Arthur Andersen committed a number of felonies while "auditing" Enron. It was so bad that they changed their name immediately after to "hide" from being linked to Enron. Whether they sold off a business unit here or there to be able to deny being the auditing firm that signed off on Enron's cooked books doesn't change the fact that they were. And the feds gave them a free pass for the felonies because the feds didn't want to increase the trouble of the bubble bursting that was going on at the time by und
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"yeah, we knew about it, but we didn't fucking care until he lost a bunch of money. Then we sorta cared, but pushed all the losses off onto our customers, so no, we still don't fucking care.
You must test (Score:4, Insightful)
Whenever you have a monitoring or backup solution, it must be regularly tested to ensure a responsive psychology (as well as proper device operation).
They should have had 1 or 2 fake funny trades per month, and if the people who got the alert messages didn't respond, they should have been punished or fired.
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Whenever you have a monitoring or backup solution, it must be regularly tested to ensure a responsive psychology (as well as proper device operation).
They should have had 1 or 2 fake funny trades per month, and if the people who got the alert messages didn't respond, they should have been punished or fired.
Nah, you don't need to punish or fire them in the traditional sense.
All you need is to have some mandatory meetings that kick off to investigate, document, etc. Just make missing them a pain in the balls for the people who should have caught it, and they will make sure it doesn't happen again. Getting fired sucks.... facing repetitive ball busting hell is much worst and an excellent motivating factor.
But also.... thats not enough, and might not even be the right problem. You have to ask, why did they miss t
Isn't that part of the initial shakedown? (Score:2)
You set up the monitoring system ... and you investigate the events it is reporting.
Then you tune it to get rid of the junk ... and you monitor it again ... and you investigate the events it is reporting.
Then you tune it blah blah blah blah blah.
Once you have it to the point where it isn't reporting junk you start testing it by setting up fake scenarios you want to catch. And investigate the events it is reporting (and the cycle continues).
Not to mention just going through ALL the events on a regular schedu
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The problem is traders see what you did to 'get rid of all the junk' and hide their fun in with the junk. That is exactly what happened here.
The other part is that Traders should not see the risk management system directly. They will still be able to game it (with small test trades to see what gets noticed) but it will be more difficult. Gaming risk management should be fire able.
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Exactly. However, not everyone understands that and a lot of people who don't get this.
Its also nearly impossible to get to this point if management doesn't understand the process that is needed and buys in to making everyone play ball.
I remember seeing presentations by a specific monitoring team of positions past. They presented how the decision was made to "just turn everything on". After several years they had hundreds of alerts a day... way too many to even think of turning on paging... and it was anoth
Exactly.. And even worse. (Score:3)
One place I worked had a problem with an average of 1 alert A WEEK. Because it almost always turned out to be some stupid non-issue ... eventually everyone started ignoring it. Even to the point of ignoring
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This is worse, as a "rogue" trader is, at least to this speaker of english as a second language, someone who deliberately did wrong.
He was not "making mistakes" he was trying to game the system.
As I posted earlier in this thread, at the very least, he should have been sandboxed/honeypotted, with someone replaying any transactions he made that had value(so he'd NOT know he was being audited for being a crook and facing jail time).
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Thats interesting and points out something that I missed...
Monitoring is great for looking for broken systems.... however.... it will never be enough to catch an intelligent adversary, who is actively gaming it (unless he doesn't understand the game he is playing, or makes a mistake).
You are always limited by manpower, because someone has to act on alarms. Humans can and will act according to how the environment dictates. You either have enough people to investigate and log evidence on every single alert, o
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Nothing pains the balls as much as being fined your share of the rulebreaking losses. Which should exceed the annual pay.
Unless it's being fined and fired, which implants the pain instrument in the balls. Better yet, fined, fired, and convicted of a crime. That'll put "balls pain" right at the top of your resume.
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You missed other reasons.
Perhaps said trader got annoyed at all the alerts and simply told them "I'm a hot shit super trader. if there's any odd trades coming from me, it's because I know stuff you idiots don't so screw you and let me do my trades!" This is espeiclaly true if the trader has a reputation of oddball trades but makes tons of money back.
The other possibility is said trader simply causes alarms constantly but they're small ones and they up the threshold for his alarm. Eventually the threshold is
"Rogue Trader" (Score:2)
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No. But you are the only one who still thinks that's funny. So you got that going for you.
I can't say I'm surprised. (Score:2)
I've actually had leadership-types ask me, straight-faced and very upset, "Why did you let me ignore those warnings you've been sending me?"
There is, of course, no answer. (Well, there are answers, but they're pretty dickish: "I tried mind control, but apparently you have no mind." Or "I'm not your mommy, Major." And by "dickish", I mean "likely to get my uniformed ass into correctional custody." To quote Coulton, "Code Monkey not say it out loud; Code Monkey not crazy, just proud")
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"Why did you let me ignore those warnings you've been sending me?"
"for the same reason that you did let me let you ignore those warning's i've been sending you."
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Your NLP is good.
The corporate "Check Engine" light is on again! (Score:2)
Exec: "Eh, it's still running, probably just a glitch or something."
Rogue trader my ass (Score:2)
It's all CYA tactics.
if the loss alone was 2billion imagine how much money was on the table. I don't see how a trader could have access to such obscene amounts of resources without any authorization and oversight.
I am sure that the management knew about everything and was very happy because the bets on rising swiss franc were extremely profitable and pretty much printed money. They had to be smiling at the thought of fat christmas bonuses coming their way. Everything was peachy... until the swiss central b
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That was also the time when European indices, emerging market stocks and to a lesser extent US stocks crashed. But otherwise you are right - apparently Adoboli had done hidden trades starting as far back as 2008 and they were generally profitable. http://www.guardian.co.uk/business/2011/sep/17/kweku-adoboli-ubs-fraud-charges [guardian.co.uk]
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Make it up in volume (Score:2)
He was on a ETF desk, which is supposed to be a low risk, low margin place. The only way to make a profit on those desk is to squeze out every penny and make it up on volume. Such a desk can very easily be dealing with billions and yet only have exposure of less then a million - if it's run the way it supposed to.
Paraphrase (Score:3)
Paraphrase: "We had (have) severe operational problems. Kweku Adoboli is a scapegoat. We can't explicitly say that because of liability issues."
Not a rogue trader (Score:3, Interesting)
My comment from the previous article (Score:2)
This is what I said in the previous article about this situation when commenting about someone who said they couldn't monitor every trade:
Yes, they do. Every trade is supposed to be monitored. Even if it means a few bad trades get through, they can and are supposed to review the accounts, timing, etc that go in to every trade to determine legitimacy and adherence to trading rules.
It's one thing to say you can't check an instantaneous trade. It's quite another to say you can't look at multiple trades your tr
Translation: (Score:2)
We're not idiots, we're incompetent.
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It was a measly 2 billon dollars. (Score:2)
it's all a scam (Score:2)
" they were simply not acted on"
Likely cause UBS was trying to figure out how to make money for themselves from the transaction. So typical of these banks.
Why stop a transaction when you can also skim/make some cash on the side as well. That's the name of the game and why self-regulation failed in the financial industry the last 10yrs.
Unfortunately what applies here, someone once said, don't blame the player, blame the game.
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Blame the player, too. They don't have to play that blameworthy game. In fact, banks as big and influential as UBS are the best positioned to change the game. During the past few years since UBS helped crash the world's economies, UBS has been playing the same game as the other banks in keeping the same reckless risk game running, interfering with efforts to regulate the game. Instead it could have helped regulate the game in a way that let it do legitimate business without overwhelming competition from ban
Computers can't always do the job for you (Score:2)
I'm not sure who to blame here, but I've seen something like this several times in my career: Someone sets up a big elaborate system to detect security threats, monitor their systems, or enforce a workflow. Then the people in charge cheer how this system is going to solve all of their problems, and they cede all responsibility to the computer. They don't check whether the system is working the way it should. They don't pay attention to the alerts the system kicks out.
Having seen it so many times, I've l
They built a better idiot (Score:2)
And again, a basic software axiom has again been proved true:
"When you build a piece of software to be idiot-proof, your user base will find a way to build a better idiot."
They weren't brought down by anything as prosaic as a bug... they lost money because they completely ignored the output from a system specially designed to warn them of activity like this.
Same as It Ever Was (Score:2)
UBS and the rest of its banking industry crippled the global economy by doing exactly this: IT systems and business rules showed unsupportable risks were being executed by their traders, but the execs did nothing to stop or slow it.
Something like 2-10 $TRILLION in losses later, after years of the worst recession possible since the reforms installed after the Great Depression, UBS hasn't changed. There is no reason to believe any of these banks have changed, since they all act the same way to compete with ea
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Well, I think you're right.
This is precisely why there are tens of thousands of Americans on the streets protesting at this very moment.
After the Silverado/S&L crisis of the 1980's, the IPO bubble and Enron scandal of the late 1990's/early-2000's, and then the housing market/derivatives bubble of the late 2000's, each time, we've patiently asked for market reforms, or even an equivalent "justice" so that there would be an obvious moral "penalty" for those charged with this responsibility (and those who
That's almost worse... (Score:2)
But if you have a good risk management system that throws alarms and nobody looks at them, or follows up on them, then it's all on their heads.
They only had to look over one of their borders into France to see what a rogue trader could do. This isn't a novel problem, rogue traders taking positions, then losing money and then taking crazier positions to get back
No Other Way to Put It (Score:2)
Agenda (Score:2)
$2B in losses. There had to be an agenda there. Kill the company? Maybe. Funnel money to someone else is quite likely too. Friends? Terrorist? I think they should look more into where the losses went. Not just how they were lost.
controls are difficult (Score:2)
Blessed with 20/20 hindsight, any failure such as this people react like it's something that was glaringly obvious. Controls can be very difficult to design, implement and monitor effectively. They have to be sensitive enough that they trip when something goes wrong, yet rare enough that they're taken seriously. When they do trip, the response has to be appropriate. They have to be effective yet also not be an endless cycle of bureaucratic red tape.
Generally the best controls are ones that almost prevent an
detection is not sufficient (Score:2)
It's easy to detect anything: you just always say it's there. In order for detection to be useful, it needs to be traded off against error, you need low false alarms. UBS's system must have had too many false alarms, otherwise this alarm would have been acted upon.
Pearl Harbor (Score:2)
There must be something wrong with this new radar thing sir, the screen is full of blips over the Pacific.
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"They must be that flight of B-17s we're expecting in." And the lieutenant in charge didn't bother to tell anyone else. (True! The B-17s in question got a helluva shock, too; they actually showed up in the middle of the attack.)
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What if you were UP $2e9?
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I used to work on a NASDAQ trading floor
A difficult job, considering NASDAQ is an all-electronic exchange.....
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He could be an Android they're electronic.
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I thought it was rather odd that they had nothing in place to detect this. And odder that the CEO was okay with that.
So here's the next question: if UBS lost $2e9, to whom did they lose it? Have the counterparties been identified, and do those identities still exist?
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It's hard to say that the money was "lost to" anyone. They bought a security at a given price, so other people sold them at that price, yes. Later, the value of the security went down. Unless the people who sold them knew that the price was going to fall, those people did nothing wrong. (And if they did know and were acting on insider information, then that's a completely separated, basically unrelated crime.)
In the last year I've sold stock whose value subsequently went down, so as far as I know I took
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I mean, I bought some stocks and the market crashed. Can I go to the prior owner and get my money back? Somehow I think not.
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it depends. If they were insiders of some sort and knew that they were getting a highly leveraged profit from an improper trade, then they would owe UBS every nickel, and the state years of hard time.
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They detected him
They let him run 2 billion in bad trades
They didn't honeypot him
They didn't stop him at a lower amount...
This is supposed to be good how?
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And by up-front you mean since they caught the CEO not being up-front and are now hanging him by his neck over the crowd and being up-front about what really happened that was covered up the first time they stood in front of that crowd.
Re:What was the security protocol? (Score:4, Interesting)
Someone then "looses" a great deal of money. In reality, the "missing" money has already been paid out in commissions to banks for trading - and "bonuses" for traders. (Anyone who understands differential equations can see that vastly more money is paid out to bankers than is actually invested in stocks and bonds, and the banks are sucking the life blood from the world's economic system).
You might ask "Why do people invest in such an obvious Ponzi scheme?" The answer is "Institutional investors do not care about the long term, and are quite happy to feed the system, so long as they get a percentage, and a "plausible deniability" get out clause when it goes wrong. (Why did people give all their money to someone who "Madoff" with it?
Why did the bank not stop him? Because prior to catastophic disaster, he seemed to be "on a roll", and was winning more than he was losing. Banks do not employ people who understand differential equations in a management role, and most bank directors have only a marginal grip on reality. They say "ooh, profit!" like Homer Simpson and doughnuts.
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The entire derivativves trading system is a giant Ponzi scheme
I don't think you quite understand what a Ponzi scheme is, but derivatives certainly aren't one.
the value of fees charged by bankers for trading in derivatives based on on changes in the value of a security exceeds the value of the underlying security over a relatively short time. (it is MINUTES for gold!)
Investing in gold is arguable more like a ponzi scheme than derivatives are. Gold has no intrinsic value, and provides you no income - it only has a value if you can find some other sucker that buys it off you. Hopefully for more than you paid. Or not. Oops.
Someone then "looses" a great deal of money. In reality, the "missing" money has already been paid out in commissions to banks for trading - and "bonuses" for traders. (Anyone who understands differential equations can see that vastly more money is paid out to bankers than is actually invested in stocks and bonds, and the banks are sucking the life blood from the world's economic system).
Differential equations are wonderful, and it's great you understand them, but clearly they're not that useful for calculating percentages.
You might also wan
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You must be new here!
Ok, so I had a little too much brandy, and not enoughy coffee when I wrote that. I can't expect to post a whole book in one /. posting.
However, you might want to look at the system as a whole - sure pension funds like to report good long term results, but they try to do it by the same fashionable "high speed trading" as everyone else does: They don't buy X because its intrinsive value will go up over time (like C
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"You need to understand that everyone is rogue trading these days, and a 2 billion dollar loss hardly even rings a bell around here anymore. I mean if we don't smoke half a trillion, I can't get anybody's attention but the janitor!" -- The Security Manager
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If you're making money, no one cares about security protocols.
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Yes, isn't it odd that we're only hearing about cases where 'rogue traders' lose money? Out of the group capable of bypassing the systems one would expect at least a few to be bright enough to actually make a couple of billions.
Of course, one would assume that those probably get a fat bonus and a promotion, which indicates a culture where acting outside the rules is accepted behaviour as long as money is made.
The day we see the headline 'Rogue trader arrested for making $2bn for employer' we'll know that th
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FTFY. This guy was trading so-called "delta 1" derivatives, meaning he was expected to be leveraged and hedged. The hedge gives you smaller—but more consistent—profits and losses, meaning you live to fight another day.
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Your monitoring system doesn't stop your web site from going down either... It's to give you a whack in the head at 3am so you're fired up to do something about it...
Same here, management didn't do anything, IT didn't do anything, risk management was either hamstrung incompetent or complacent or a mixture of all three...