Rogue traders pop up with some regularity, racking up nine- and ten-figure huge losses at well-known firms: Joseph Jett at Kidder, Peabody in the 1980s, Nicholas Leeson at Baring in the 1990s, Jerome Kerviel at Societe General in 2008. Earlier this year, Kweku Abodoli, a 31-year-old trader at UBS's London office, was busted after having notched some $2 billion in losses due to unauthorized trading.
It turns out rogue traders are features of the system, not a bug. That's the argument made by John Gapper, columnist for the Financial Times, in his smart new e-book How to Be a Rogue Trader.
As we discuss in the accompanying video, Gapper chalks up the persistence of rogue traders to the nature of banks, and to human nature. "When it comes down to it, banks are willing to take the risk that these individual exists within the organization," he said. Large investment banks only make money by taking risk. If they fret too much about the prospect of traders losing money, they wouldn'tRead More »from Author Gapper: Rogue Traders a Feature of the System, Not a Bug