What do traders do? They make investments on behalf of their employers, the banks, and the banks’ customers. They watch screens all day, looking for fluctuations in prices, and then try to buy things when they are cheap and sell them when they are expensive. So what they are really trading In Is opinions. They are like booklets once removed; they make bets on how other people will bet. Traders, In other words, are pure capitalists; they understand that something Is worth exactly what people say It’s worth. A rogue trader is not a crook in the normal sense of the word.
He is someone who loses money and, in trying to pretend that he hasn’t lost money, loses more. It’s like a classic farce. For the trader it feels like being carried away by a hot-air balloon; if they don’t Jump off immediately, they can’t Jump off at all. Most people, finding themselves in this position, would jump off immediately. But rogue traders stay where they are; they try to trade their way out of trouble. As the trades get worse, the cover-ups get more complex. And, Ironically, as the losses get bigger, the harder they get to spot, a joss of several hundred million is, In the eyes of a bank executive, much more likely to be a misprint.
One Rogue trader named John Rosins fell into this category. He had started losing large amounts of money in 1 997 by making bad trades on the foreign exchange market. The trades were straightforward; he bought yen in a falling market, and lost money, and then bought more yen, and lost more money. He was the top foreign exchange trader at Lifters or, rather, he was the senior trader of two; it was a small office. In Baltimore, Russian’s Mr.. Wall Street; he’d worked as a trader in two New York banks, but he hadn’t been a star So when he was offered a Job in Baltimore, he saw it as a chance to shine in the provinces.
Things didn’t work out that way. On February 8, 2002, Russian’s trading accounts reportedly showed a deficit of $691. Mm. When Russian arrived at Lifters, he had promoted himself as a trader who could make wildly complicated deals in the foreign exchange and options markets: he claimed to be able to make bets on currency movements and offset those bets with a complex hedging system, so exposing himself to very little risk. But in fact, as a trader, he was en-paced; he bought yen, and yen kept falling. Then he bought more yen. But if the 37-year-old Russian was an uninspired trader, he was a star when it came to covering up his losses.
In the grip of rogue trading fever, he’d burned through millions of dollars over a period of 1,500 working days and nobody had noticed. That’s how good he was. If his trading was suicidal, his ability to cover up his losses was phenomenal. Not only that, but he had even persuaded the bank that he’d been making money; his annual bonuses, which were calculated to give him 30% of his trading profits In excess of his $110,000 salary, had been $102,000 In 1999 and $78,000 In 2000. Russian’s next bonus, based on his system of false accounting, was to be $220,000. It was payable on February 8.
But by now the authorities were closing in: Russian knew What had happened to him? Between late 1997 and early 2002, he was in the grip of the same rogue trader madness. As traders, people who are expected to understand the art of making money, none of them had a normal relationship with money in the first place. And then, a switch flipped inside their heads and their relationship with none entered the realm of the pathological. Driven by a poisonous cocktail of ambition and fear, with fear in the ascendant, the rogue trader becomes more and more devious. But he’s not the only one to blame.
Bank executives do not want to believe that they have allowed hundreds of millions of dollars to slip through the net; if they have, they might lose their Jobs. So the rogue trader’s bosses, like the rogue trader himself, become distanced from reality. A loss of $10,000 is easy to spot; when it grows into a loss of $mom, it almost begins to disappear. It is like the elephant in the middle of a room that nobody wants to talk about because nobody can believe it actually exists. And senior bank executives don’t always understand what’s going on in the trading office.
They are like dads asking their sons to explain the new generation of computer games. Towards the end, John Russian began to make more and more desperate trades. When he failed to turn up for work on February 4, bank executives found an email in his computer, addressed to a trader at another bank. The email read, “l have come to you with a problem, we need to outsource our balance sheet funding. He had done what a trader should never do; he had shown his weakness to another player in the market. He faces up to 30 years in prison and a large fine on each of seven charges of bank fraud and making false entries..
His lawyer, David Irwin, says that he will be pleading not guilty to all charges, and that he has requested a Jury trial. Russian has denied stealing or benefiting personally from his activities, but he may have a difficult task convincing a Jury, several of whose members will be poor and that he was motivated not by greed, but by fear. He’s going to have to explain what it feels like when the witch flips inside your head, and you start to lose, and all you can do is throw away money, hundreds of millions of dollars, until the black hole becomes so big that it can no longer be ignored, and the nightmare is finally over.
Stress in the workplace affects us all; some thrive on it, others fall foul of the constant stresses and are often affected by ill health. A small minority is corrupted by it and engages in illegal activities, blinded by the consequences. The idea that we all have innate needs and it is often when these needs are not met that stress manifests itself The ‘Human Givens’ (HUG) approach to psychology) is constituted through John Russian’s actions. Stress affects us in different ways.