Are cheeky punts bad for your health and wealth?

[tradesmart]

A recent newspaper article that caught my eye was about a £200k pa lady city trader who took a “cheeky punt” on the Italian markets but then decided to go home early. The markets tanked and she dropped £4 million and almost needless to say lost her job; a chain of events, which led her to become suicidal, and was apparently “left screaming in bed needing psychotherapy”

She is now seeking £1 million in damages from her employer, Commerzbank AG for causing psychiatric injury.

Normally she worked up to 15 hours a day, "determined to succeed". She claims that she had too much responsibility “It was ridiculous; it was too much.” She insists that the bank was aware of her condition and should have eased her workload.

Out of this sorry story, several questions occur to me:-

1. Should a highly paid pro trader be taking “cheeky punts” with other peoples millions?

2. Was her stop-loss a bit far out?

3. Shouldn’t she have known that the Italian markets have one forward gear and five reverse?

4. If you want to scream and get noticed, surely bed is not the best place to do it – maybe in the middle of the office or from the top of a high building?

5. Is she taking it all a bit too seriously as it was only money? Should she just forget about it, open a spread bet account and work from home trading her own dosh? (bet she wouldn’t open a large position, and take the afternoon off then…!?!)

6. If you drop a b*ll*ck trading, are you better off forgetting about it, and just going down the pub and getting bladdered? After all, tomorrow is another day and you’ll probably get it back and much more!

Views please dear correspondents…..? (a portrait of the “cheeky punter” below)

 

[BBB]

How odd! I was about to post this as a separate thread, but also fits nicely!

Elbow Risk

By Nina Mehta

Everybody’s heard of rogue traders, but rogue body parts haven’t quite made into the financial literature. Until now.

On the afternoon of July 23, a Salomon Smith Barney trader in London placed an order to sell 100 10-year French government bond contracts at market on Matif’s electronic trading system. Not realizing that his keyboard’s F12 key had an instant sell feature, he later inadvertently repeated that order 145 times when he leaned his elbow on the keyboard.

The price of the 10-year French government bond dropped 1.4 percent in a matter of minutes, surprising traders and Matif’s monitoring staff on an otherwise unremarkable day. The price drop almost reached a “limit down for the day,” says a source at the French exchange. Each contract was worth 500,000 francs ($83,600), and 10,607 of the contracts were matched by counterparties before trading was halted.

Minutes after the sell orders were placed, Matif officials noticed the unusual spike in volatility and traced the orders to Workstation 201 at Salomon Brothers’ London office. When the Matif called to confirm the orders, Salomon initially denied placing them.

A three-month independent audit conducted by CAP Gemini and Kroll Associates determined that the “disputed trades arose as a result of the prolonged, unintentional and inadvertent operation of the ‘Instant Sell’ key by a Salomon trader, and furthermore were not the result of faulty hardware or software.”

So was this an act of extreme carelessness? Not really. The Salomon trader, whose name has not been disclosed, did not know about the F12 key’s instant sell functionality. The company’s electronic trading desks had been installed with GL Trade software less than two weeks earlier, but neither the training manual nor a training session had mentioned the F12 feature. GL Trade is a Paris-based developer of software that links traders to electronic exchanges and enables them to enter orders. The investigators’ summary report notes that the company had released a new version of the soft- ware, “to prevent errors due to the ‘double F12’ functionality”—but had sent the earlier version of the software to the Salomon office.

Salomon asked Matif to cancel the trades but Matif declined, deciding to stick to its market rules. In the first place, an exchange official notes, both parties have to agree to the cancellation of the trades—and in this case, few counterparties did. In addition, the trades were not what the exchange refers to as a “manifest error”—that is, says the official, “a very gross error,” such as keying in an order for 5,000 contracts rather than 50 contracts. In the July case, it couldn’t be established that what had happened was different from a natural “market phenomenon.”

Matif says it was gratified by the independent investigators’ findings for a couple reasons. After the July spike in volatility, traders and others had called into question the exchange’s electronic systems. There was speculation that someone might have infiltrated the computer system and changed an order. There was also fear that the software source code housed a bug, or that a bug had been introduced into the system. “All sorts of things have been said,” notes the official. “That’s why the results of this audit are important to us.”

 

[oatman]

Whatever happened to open outcry? :cheesy:

 

[BBB]

...there's more.....

A keyboard error of another kind caused momentary chaos in the Chicago Mercantile Exchange’s S&P e-mini system on Thursday, October 15, one day before the quarterly contract expiration.

When the Federal Reserve announced it had cut interest rates by one-quarter of a percentage point, the S&P e-mini futures quickly spiked 50 index points, pushing prices from about 1,025 to 1,075 in two minutes. As a result, a number of sell limit orders—a sale order with a maximum sale price limit—were cancelled, creating a momentary dearth of sellers in the system.

A glitch in the Merc’s TOPS order-routing system then played havoc with the market. Many firms that use TOPS to route e-mini orders into Globex2 specify a price limit of 9,999 ticks, a wildly unrealistic number that ensures that their market and stop orders will almost always be matched. When a trader mistakenly keyed in a ridiculously high buy market order, there were no sellers in the system for it to be matched against. A glitch in Globex2 caused the order to became a limit order bid at 9,999.75, the highest price Globex2 accepts.

The result: on seeing the massive limit order bid, a seller hit it, causing the trade to take place. That trade then triggered other buy stop orders, which also became limit orders to buy at 9,999.75, and those orders were also hit by sellers.

The contract settled at 1,062 that day, but at 3:30 p.m., after the close, the president of Globex2 announced that all transactions above 1,085 were null and void.

That decision caused some grumbling in the pit. “There should be some fail-safe mechanism,” says one local. “It makes us doubt whether we can use the e-mini in a busy market.”

The Merc is examining the problem. In the meantime, it recommends that all Globex2 users set realistic limit prices when entering market or stop orders.

 

[BBB]

http://www.derivativesstrategy.com/magazine/comix/0101_1.asp

 

[oatman]

Nice one, sounds about right :cheesy:

 

[tradesmart]

“Cheeky punt” that went wrong pays off in the end…………(despite causing a bit of trouble along the way……!)

A CITY trader who claimed £1 million in damages because her job was so stressful she became suicidal settled her action yesterday on confidential terms.

After days of unwanted headlines for the bank (Commerzbank AG) it agreed to settle with the trader, Ms McNallen yesterday, without any admission of liability, for a six-figure sum.

The trade came good belatedly and a good little earner it was…….! :cheesy:

So when you’re sitting in the living room at home punting at 50p/point for beer money (like me.. ) spare a thought for the professionals battling with suicidal inclinations, dodgy F12 keys, and S&P order bid at 9,999.75 glitches….