Business | Markets
Traders want better explanation
Incredulous equity traders said on Monday they wanted a better explanation from Societe Generale for how a single rogue trader managed to build up a $73 billion position and cause the French bank to lose $7 billion.
- Reuters
- Published: 00:34 January 29, 2008
Hong Kong: Incredulous equity traders said on Monday they wanted a better explanation from Societe Generale for how a single rogue trader managed to build up a $73 billion position and cause the French bank to lose $7 billion.
"I think most people are just astonished that someone could get away with that kind of trade for so long without being noticed," said Matt McKeith, head of equity dealing at First State Investments in Hong Kong.
"I'd always be slightly suspicious of the company line in these circumstances."
Societe Generale said the trader, 31-year-old Jerome Kerviel, created fictitious accounts to make it look as though his positions had been covered, when in fact they remained unhedged, and falsified documents to justify his actions.
Equity traders were foxed by the explanation, especially since the relatively lowly Kerviel appeared to make no personal profit from his gamble, and were flummoxed as to his motives.
McKeith speculated Kerviel could have had a grudge against the bank which made him want to cause losses or perhaps to show off by making a huge profit under his bosses' noses.
"Or he could have been the fall guy for something systematic in the bank. I think more is going to come out. Perhaps he's been hung out to dry. Perhaps they were legitimate positions."
A trader at a foreign bank in Seoul, who was not authorised to speak to the media about the matter, agreed.
"It's just mysterious. It's unbelievable that this could happen and I want to know how. Even a very small deal cannot go undetected for more than two days if it was not reconciled. It's not a matter of one trader's methods," said the trader.
"There must have been some inside help."
The bank said Kerviel set up fictitious trades that cancelled out the risk from his huge bets on European market futures, thereby covering up his true exposure to market movements.
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