Switzerland is in a bit of a pinch with the impending collapse of the Euro. UBS, the big bank in Switzerland disclosed today that a “rouge trader” had lost $2 billion in unauthorized trades.
The trader who did this worked out of London. His name is Kweku Adoboli – which if you are thinking “That’ doesn’t sound very much like an English name”, you would be right. He is from Ghana, a country in Subsaharan Africa.
http://www.guardian.co.uk/business/2011/sep/15/ubs-star-trader-arrest-career
Maybe he was moving some more funds from Africa to Jacques Chirac?
Not to worry. Most likely Adoboli merely allowed a recently deposed minister of finance friend from Nigeria to use his UBS account to hold the 17 gazillion Euros his friend spirited out the country. For a nice fee, of course. He prolly just withdrew too much in the excitement of his good at finding a fish, er, friend like UBS to hold the booty. “Subsaharan,” you say. Think about THAT term for a minute.
He is from Ghana. 16% of the people in Ghana are Muslim, but the country is mostly Roman Catholic. I don’t expect to know the answer to that question.
It sounds like the resolution of the European Banking Crisis(tm) will be that the US Federal Reserve System will print yet more dollars and loan them to the ECB to pretend there is no problem. The World is One. Globalism is complete, prosperity will surely follow and war will be but a faint memory.
I guess now we just need Obama to get the EU heads to sign a peace of paper and he can declare “peace in our time”.
From what I read and reading between the lines, he appeared to be involved in what is called arbitrage trading. It’s a somewhat worthwhile profession – what an arbitrage trader does is looks for small differences showing up between things – let’s say you look at the Forex rates for the US Dollar, Japanese Yen and the Swiss Franc. That means there are 3 related exchange rates
USD<->Yen
USD<-> Franc
Franc<->Yen
Very small discrepancies will show up since the 3 rates move independently. The arbitrage trader is looking for those very small short-lived differences to arrange a 3 way currency trade (this is just a simple example of an arbitrage trade). Let’s say the he arranges to buy $100 million in Yen, trade that for Swiss Francs, and then sell the Swiss Francs for Dollars.
Let’s say after doing those 3 trades, he winds up making 0.001% profit…. that’s a $1000 profit. The transaction costs come out of that. The only real risk is if one of the parties you are dealing with suddenly shuts their doors. Even then, you aren’t seriously hurt – you’re just left holding an open position you have to unload quickly. So you do that all day long, and it’s easy money.
Arbitrage keeps the markets honest. If someone tries to sneak in and manipulate the prices, the arbitrage guys will eat their lunch. He was only authorized to do really safe low-risk trades.
Whatever he did with the $2 billion caused the Franc/EU rate to drop from $1.20 to $1.10 in one jump. This was about the time that Switzerland was announcing they would buy “unlimited” amounts of Euros to keep the Franc from going up over $1.20.
I tend to doubt the story. I think he probably was told to enter an order for billions at $1.20, and fat-fingered it as $1.10 and the system didn’t say “Are you sure?” or he ignored the warning. Being an African living in London, he’s an easy scapegoat for UBS – they have had similar management problems in the recent past that they said they had fixed.