There Are More 'Rogue' Traders Out There Than You Think
Only last week, Here Is The City was tipped off about another rogue trader ( who worked for one of the well known investment banks), who parted company with the firm last year, after it was discovered that he had been mispricing his asset book for around 12 months. He is thought to have racked up losses of up to $30m before he was outed - not in the same league as Leeson or Kerviel, but no small matter nevertheless.
The problem is, of course, that traders are under pressure to perform as never before. And they are eternal optimists - have you ever heard of a trader taking a punt that he thought would lose ? And, despite excellent compliance, audit and risk measures, it will always be difficult to quickly identify a trader determined to hide exactly what he is doing - especially if he has some help from colleagues.
But what happens when a firm uncovers a 'rogue' trader ? Well, that depends. If a material amount has been lost, there is a duty to disclose (as SocGen did). It might be necessary to advise market regulators or the central bank. But it might not. If the loss has been localised, and it is not deemed to be significant, then firms will often take the easy option - deal with the matter in-house, quietly fire the guilty and the responsible and move on (the publicity of a rogue trading scandal - whatever the amount - is not usually good for business!).
So, there are probably a whole lot more rogue traders out there than we know about. Firms will write-off relatively small losses as simply the cost of doing business - some might even unconsciously allow for the odd rogue or two in their annual profit projections!