Reply to: 'I only tried my best'

[AtW]

it's very difficult to make large sums of money when propertly hedging.

Exactly!

Hedging isn't meant to make profits but to save oneself from big losses, this is like insurance and just like with insurance it should be expected to cost money.

[centurian]

No.

UBS lost so much money because they had tulip for brains to trust some kid making billion dollar "investments".

Further more they lost so much money because they got into gambling in the first place - it was just a matter of time before it happened.

It's amazing that Swiss banks got into this tulip - instead of focusing on their core competency - keep money safe from tax offices around the world.

But if this kid had done as instructed - and properly hedged his trades, like he was told to do, they would would have lost millions instead of billions.

Their mistake was trusting that he had properly hedged - especially during times when he made tulip loads, because it's very difficult to make large sums of money when propertly hedging. When was the last time you heard of a trader being fired for making too much money

[EternalOptimist]

No.

UBS lost so much money because they had tulip for brains to trust some kid making billion dollar "investments".

Further more they lost so much money because they got into gambling in the first place - it was just a matter of time before it happened.

It's amazing that Swiss banks got into this tulip - instead of focusing on their core competency - keep money safe from tax offices around the world.

It's not as if these were public funds AtW, this was a privet hedge

[AtW]

The reason why UBS lost so many zero's was down to being unhedged trades. UBS thought their positions were a lot stronger because the hedge positions that Adoboli said he had taken out

No.

UBS lost so much money because they had tulip for brains to trust some kid making billion dollar "investments".

Further more they lost so much money because they got into gambling in the first place - it was just a matter of time before it happened.

It's amazing that Swiss banks got into this tulip - instead of focusing on their core competency - keep money safe from tax offices around the world.

[centurian]

What annoys me most is that they keep calling this gambling as "hedging", FFS - it's not!

Ah, well that's where we get back to the subject of this thread - Mr Adoboli.

The reason why UBS lost so many zero's was down to being unhedged trades. UBS thought their positions were a lot stronger because the hedge positions that Adoboli said he had taken out, would have covered any losses on the trades - except he didn't hedge - why - because a proper hedge will always significantly reduce your profits..

[AtW]

Someone has to make the decision.

Not anymore - in their quest for quicker trades they delegate it to machnes, sometimes the creators feel the pain too:

This Is What Happens When An HFT Algo Goes Totally Berserk And Serves Knight Capital With The Bill | ZeroHedge



What annoys me most is that they keep calling this gambling as "hedging", FFS - it's not!

[AtW]

Traders may be able to influence the price a bit

They are the ones who'd benefit most from it and they are doing their best for sure.

Recently one unknown trader/company accounted for like 10% of share quotes using HFT software - turns out putting up quotes does not even cost any money on exchanges, yet mere presense of quotes can be used by others to judge what the fair price is.

Bottom line is that there is no economic sense in HFT to anybody other than people who take advantage of it at the expense of other market players.

The price of things on exchange should NOT be decided by SupremeSpod's ability to get his VB 6 code run a bit faster.

[centurian]

Just how much of the £1.50 per liter petrol price is due to those kids playing up the market? Probably a lot because just 10 years ago oil was worth 10 times less than it is now (even though due to high taxes in this country the end sell price was only half current amount).

So given that tax accounts for about 60% of the £1.50 - and that 10 years on, we have much higher demand for oil - for something that has a finite supply - and increasing cost to extract what little supply is remaning.

Traders may be able to influence the price a bit - but to say that "those kids" amount for a "a lot" of the cost of the £1.50

[d000hg]

Why a kid is allowed to bet billions in the first place?

Why any single person can do such things in a big bank in the first place?

Someone has to make the decision.

[AtW]

The snag is if there was Worldwide agreement to impose an artificial delay of say a second

You only need to force big exchanges to implement it - UK, USA and Germany: it should be a requirement of operating an exchange in the interests of all market participants rather than handful who want to exploit the rules to gain unfair advantage.

Other way is to tax transactions - this will make it impractical to do many trades:

"The European Commission has backed plans from 10 countries to launch a financial transactions tax to help raise funds to tackle the debt crisis.

The 10 countries include France, Germany, Italy and Spain."

BBC News - Financial transaction tax for 10 EU states

I would expect them to tax any transactions made from UK or USA to their banks/exchanges. Those who don't like it should not expect to trade with those countries, simples.

[OwlHoot]

The point is that it should not be "high octane" (or explosive in other words) in the first place.

Groan - He's off again, in his own little idealistic world.

The snag is if there was Worldwide agreement to impose an artificial delay of say a second (or some suitable interval) per trade, I guess it would be analogous to increasing the reaction time of motorway drivers and the result would be gridlock like one of those phantom traffic jams with no cause except the traffic density itself.

[AtW]

what's the need for Formula 1

Formula 1 does NOT increase price of oil, gold, wheat etc for all consumers to make some trader rich just because he gambled well.

The problem with current markets is that "banks" have so much leverage to shift the market even when they don't have money to back it up - some kids bet billions as we speak, those of them who win sometimes get in the news, others very rarely go to jail - ultimately everybody else has to pay for it.

Just how much of the £1.50 per liter petrol price is due to those kids playing up the market? Probably a lot because just 10 years ago oil was worth 10 times less than it is now (even though due to high taxes in this country the end sell price was only half current amount).

It's fairly easy to deal with this problem - very high taxes on short term profits and very long jail sentences to everybody up the chain starting from those who hired that kid who gambles billions of shareholder money on tulipe bets.

Kweku Adoboli, if guilty, should spend the rest of his life in supermax jail - right next to everybody who was meant to supervise him. This probably won't stop those ******** gamble other peoples money, but at least it will give some small satisfaction in that justice has been done.

He will probably be out in a few years max...

[dmo]

The point is that it should not be "high octane" (or explosive in other words) in the first place.

Why, because it's unsafe? I'm not saying I condone it, but if it can be done correctly (which I believe is the case), then it's worth the risk.

For example.. what's the need for Formula 1 - why do we need to have drivers race cars around at 190mph; surely there's others ways to run a marketing job than through this unsafe and potentially lethal proxy.

The point I'm making is some risks are worth taking sometimes. If it's not 'high octane' then you're traders aren't trying hard enough.

[AtW]

today's high octane trading floor environment

The point is that it should not be "high octane" (or explosive in other words) in the first place.

[dmo]

Believe it or not these 'kids' are generally good at what they do. Put an old timer in today's high octane trading floor environment and the first thing they'll struggle with will be the sheer pace of biz. Kids can naturally deal with fast changes and voluminous levels are info (no offence - it's true). This is just 1 bad case, for which I'm sure there are countless instances of this going well - nothing gets said or publicised until it goes too horribly wrong to cover.

I suppose there's not much stopping someone from betting billions. Once executed it's done.. it'll take back office to stop it from happening, by which point it'll probably be too late.