Bonuses To Be Cut As Another Rogue Trader Surfaces
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MF Global, previously the brokerage unit of hedge fund Man Group, has confirmed that it has sustained losses of some $141.5m after Evan Dooley, a trader fired from the firm this week, made unauthorized trades on wheat futures. According to The New York Times, Dooley, 40, entered into as many as 15,000 wheat futures contracts, the equivalent of around 10% of the market for these kind of contracts in any given month. The trades were carried out through the CME in Chicago, and the losses are understood to have occurred Wednesday morning, after the trader took large a short position on soft wheat futures the night before. MF Global is understood to have fully closed out the position, capping the losses.
Kevin Davis, the firm's CEO, said that 'this is a very disappointing situation for us.....This is an awful event, but we believe it was an aberration'. Davis added that the after-tax loss to the business would be around $80m, and some insurance cover might also kick-in to lessen the blow. He said that his firm would beef up risk controls, and cut bonuses for senior managers to lessen the impact on shareholders.
The Wall Street Journal quotes from a UBS Investment Research note, which said that 'while MF has a history of very strong risk management systems, this is clearly a breach and it will raise questions on its systems and risk management capabilities going forward'.
READER COMMENT:
'A very rich comment coming from UBS - perhaps they'd better beef up their own Risk Management systems before sitting in judgement on other firms'.
