Won't Somebody Please Think of The Traders??
Source: YouTube · Patrick Boyle · published May 4, 2024 · 18:06
Société Générale is facing scrutiny after uncovering unauthorized options trades on its Delta One desk, echoing the massive losses caused by rogue trader Jerome Kerviel in 2008 0:00-0:14.
Key Takeaways:
• Jerome Kerviel lost $5.2 billion in 2008 through unauthorized Euro Stoxx Futures, prompting a market crash and an emergency Fed rate cut 0:07-0:27.
• Trader Kavish Kataria recently departed SocGen's Hong Kong office after allegedly executing complex options trades that were not registered by the bank's risk systems 3:26-3:32.
• The Delta One desk is meant for linear, non-option products, yet Kataria claims his trades were legitimate, visible to superiors, and generated $50 million in profit 8:46-9:07, 14:52-15:06.
• SocGen asserts that its control frameworks effectively detected the "one-off" incident and that the trader exceeded his mandate, potentially exposing the bank to significant losses 13:50-13:56, 17:34-17:40.
Despite improved risk management claims, the recurring issues on the Delta One desk suggest persistent vulnerabilities in the bank's oversight capabilities.
Sources:
- 0:00-0:14 Intro to SocGen's history with unauthorized trades
- 0:07-0:27 Details on Jerome Kerviel's $5.2 billion loss and Fed reaction
- 3:26-3:32 Discovery of new unauthorized trades on the Delta One desk
- 8:46-9:07 Definition of the Delta One desk and restriction on options
- 14:52-15:06(https://
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First 800 characters of the transcript
The French Bank Société General has struggled with
unauthorized trades occurring on their delta one trading desk in the past. By “struggled” I
mean lost 5.2 billion dollars in 2008 – and caused Ben Bernanke (who we call “The Ben
Bernank” around here) to cut interest rates by 75 basis points - the largest interest rate
cut in more than twenty years at the time. The rogue trader in question was Jerome
Kerviel, who managed to go unnoticed amassing a fifty-billion-dollar position in Euro
Stoxx Futures, and when Soc Gen discovered his unauthorized trades, they notified their regulator
and quickly began selling the position. Markets were quite illiquid at the time as the US market
was closed for the Martin Luther King Day holiday, but U.S. stock-futures were trading in the
overnight mar…