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Rogue Trader

by SMD 


I’ve been thinking about doing a story about the movie “Rogue Trader” for a while now. Then a couple days ago my ‘Investing Term of the Day’ email came in from http://www.investopedia.com:

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Term Of The Day: Rogue Trader
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A trader who acts at their own will, usually to the detriment of both the institution and clients that they are employed by. In most cases this type of trading is high risk and can create huge losses.

The movie follows the fascinating true story of Nick Leeson who traded derivatives for Barings Bank in their Singapore office. Due to his distance from the main offices he had almost zero auditing to worry about and was able to freewheel with bank funds.

At one point the young trader held over $3 billion dollars in futures contracts on the Nikkei exchange. When an earthquake hit Japan at about the same time the losses ended up bankrupting the historic Barings Bank.

It is a pretty good movie if you have an interest in stocks etc. For me what was most fascinating was that I could totally relate to what he was going through. On a smaller scale I wonder how many average investors lived through the same emotions during the second half of 2000 when tech stocks were being hit by the earthquake of realistic valuations.

Or even on a more personal level, I know I’ve experienced that feeling, a bit like driving over a bump at high speed, when your stomach is in your mouth and you’re not sure when that stock is going to hit bottom. It’s dangerous as a trader to throw your ego into the mix. The ego does not want to admit a mistake and will try and win back the losses by toying with increased risk. That’s when things can really get out of control.

Leeson ended up serving 3 years in prison. And, I’m sure there are countless others who, to a lessor scale, have ended up in a bad way due to the toxic mix of bravado and the stock market. You can check out the Rogue Trader book [an autobiography by Nick Leeson] or Rogue Trader DVD at Amazon.

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Comments

3 Responses to “Rogue Trader”

  1. K on June 12th, 2007 2:20 pm

    Great article. Nothing’ll cost you money like ego. Goodness knows it’s cost me enough money!

  2. Jon on June 12th, 2007 2:20 pm

    None of the people higher up in the management of the bank did understand how he made money. And he mostly lost money. Did he have any profit at any point? It seemed that he was on the losing end a lot.

  3. Other Jon on June 12th, 2007 2:20 pm

    Hi Jon, it’s been a while since I watched it but as I recall he was in the profit for a while. He became somewhat of a “star” at the bank. That accounts for the slack that he was given from his supers. Their attitude was, “we don’t understand what he’s doing, but if he’s making money, we’re not going to question it.”

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