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Bruno Iksil Leaving

Tyler Durden's picture




 

Update: not so fast: Bloomberg reports that the whale is still beached: JPMorgan Chase Still Employs Trader Bruno Iksil, Spokesman Says. So... pile into the IG9 trade still?

Yesterday we speculated that the final confirmation that JPM has unwound its disastrous skew trade will only came once Bruno Iksil joins all the other members of the CIO team in being involuntarily retired: "As for the question of how much additional P&L loss JPM has sustained from Friday through today is a different matter entirely, and we are confident the next announcement from JPM will come momentarily, coupled with the announcement that Bruno Iksil, the last remnant of the CIO desk, and now having completed his duty of unwinding the trade that brought so much pain for Jamie Dimon, has been retired." Sure enough, the NYT reports that Iksil is now history.

The $2 billion trading loss at JPMorgan Chase has claimed another victim.

 

Bruno Iksil, the so-called London whale, is leaving the bank, according to current and former traders who worked with him.

 

Mr. Iksil gained notoriety last month after reports that he built up outsizes positions that distorted prices in an obscure corner of the credit markets.

 

His departure follows the resignation Monday of Ina Drew, the 55-year-old banker who oversaw the disastrous trade as head of the chief investment office. Achilles Macris, a top JPMorgan official in London and a senior London trader, Javier Martin-Artajo, are also expected to leave.

This effectively concludes the JPM prop trade debacle. The only loose end is another report from JPM on the final loss tally: our estimate $4-5 billion.

As for the whale's new stomping water? Perhaps Saba capital, headed ironically by yet another person who blew up Deutsche Bank's prop desk several years back, with a trade that was almost identical!

A 38-year-old hotshot trader and chess master named Boaz Weinstein was the driving force behind the harpooning of the “London Whale,” hedge-fund industry sources told The Post.

 

Weinstein, who runs Saba Capital Management, helped shine light on the credit default swap index trade that blew a $2.3 billion hole in JPMorgan Chase’s balance sheet.

 

The JPMorgan position was amassed by a trader in the bank’s London office named Bruno Iksil — called the “London Whale” for the large positions he was accumulating in the Investment Grade Series 9 10-Year Index CDS.

 

Weinstein, a renowned CDS index arbitrageur who launched Saba in 2009, in early February recommended the index, which tracks a basket of US corporate bonds.

 

“They are very attractive” and can be bought at a “very good discount,” said Weinstein, a former Deutsche Bank proprietary trader, speaking at the Harbor Investment Conference on Feb. 2.

 

It appears the index was so cheap because Iksil was buying it to make a big short bet. Weinstein, whose Saba overseas $5.5 billion in assets, decided to go long and said he bought the index a few days before the conference at around 120 basis points.

 

For a while, Weinstein’s genius trade wasn’t working out. The IG9 Index continued to sink under the weight of the Whale’s buys — hitting a low of 105 on March 21.

 

But two weeks later, on April 3, reports surfaced about the Whale’s outsize positions and the tide started to turn.

Take home message: hedge funds will no longer stand idly by as Fed-backed prop desks trade against them: they will complain to the press.

As for verions of the basis trade: it is nothing new - just ask Boaz... He has lots of experience with it.

DEShaw

 

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Wed, 05/16/2012 - 13:28 | 2432112 IMA5U
IMA5U's picture

so when do we see a pic of the whale?

Wed, 05/16/2012 - 13:29 | 2432135 NotApplicable
NotApplicable's picture

I wonder if he got that bottle of bubbly expensed?

Wed, 05/16/2012 - 13:32 | 2432153 resurger
resurger's picture

Ace Midas Bitchez

Wed, 05/16/2012 - 13:43 | 2432196 idea_hamster
idea_hamster's picture

x

Wed, 05/16/2012 - 13:45 | 2432203 derek_vineyard
derek_vineyard's picture

seems i haven't seen steve liesman lately...did he get shit canned (there is a god) , too?  

Wed, 05/16/2012 - 13:58 | 2432275 SHEEPFUKKER
SHEEPFUKKER's picture

Whale harpooned. 

Wed, 05/16/2012 - 14:05 | 2432323 Fox-Scully
Fox-Scully's picture

I believe a "beached whale" is more appropriate.

Wed, 05/16/2012 - 14:14 | 2432379 Ancona
Ancona's picture

I love the graphic!

Wed, 05/16/2012 - 14:35 | 2432468 Convolved Man
Convolved Man's picture

Ok,  load footage of exploding whale and 3, 2, 1 ...

 

http://theexplodingwhale.com/

Wed, 05/16/2012 - 13:51 | 2432238 jdelano
jdelano's picture

the trade is not remotely unwound.  This is a ploy to fool the market into thinking the trade is unwound.  I presume the Tylers know this...which means they've gone over to the darkside.  Hey.  Everybody's got their price.  

Wed, 05/16/2012 - 13:59 | 2432290 BigJim
BigJim's picture

 the trade is not remotely unwound.

Do tell.

Wed, 05/16/2012 - 14:44 | 2432528 fourchan
fourchan's picture

if it was unwound he would be shitcanned. risk is still on and getting worse.

Wed, 05/16/2012 - 14:35 | 2432465 pkea
pkea's picture

the doomsday scenario is still in the chase's cards and on its balance and only bruno knows how to manage it....

 

 it is all actually making sense. dimon coming out to bring the markets down to prevent further losses on the ig9 hedge

 

 they are working on the eu situation meanwhile

Wed, 05/16/2012 - 13:26 | 2432113 Aziz
Aziz's picture

Good decision from JPM, finally. This means they're taking the loss instead of trying to continue gambling their way out (and thus throwing more into the hole).

Maybe Zames really did learn his lesson at LTCM? (I'll withhold judgment for now).

Wed, 05/16/2012 - 13:30 | 2432147 NotApplicable
NotApplicable's picture

Strange, you speak of the facade as if it were substance.

Wed, 05/16/2012 - 13:34 | 2432156 Aziz
Aziz's picture

As far as I can tell Iksil really did lose $xbillion picking up nickels in front of a steamroller.

Wed, 05/16/2012 - 13:33 | 2432160 Ponzified Plebe
Ponzified Plebe's picture

If relenting from repeatedly stepping on your own dick is a good decision, then I guess we could say that JPM made a "good decision". I'd rather call it the function of instinct as opposed to a good decision, as all organisms (even corporations) usually react negatively to pain and avoid it's source. However, inasmuch as JPM's inability to refrain from getting clobbered by it's own huge member it swings on the financial system, to the deteriment of us all, I'm more inclined to see it keep swinging untill it has bludgeoned itself to death.

Wed, 05/16/2012 - 13:39 | 2432178 Aziz
Aziz's picture

I'd rather call it the function of instinct as opposed to a good decision, as all organisms (even corporations) usually react negatively to pain and avoid it's source.

I'd argue that in a lot of cases the function of instinct is to keep chasing losses. 

Wed, 05/16/2012 - 13:47 | 2432222 Ponzified Plebe
Ponzified Plebe's picture

Fair enough Aziz, but that all depends on whether one opts for fight vs. flight. Instinct can lead the bear to charge a hunter weilding a .375 H&H Mag, but if he wants to survive he is better off running away from "the pain". Given the publicity of the losses, it seems to me that chasing the losses was the last thing Dimon was going to have JPM do, unfortunately making him a little more adept at survival than Corzine who chased losses straight into the abyss.

Wed, 05/16/2012 - 13:28 | 2432114 SilverTree
SilverTree's picture

"No risk of that"

Wed, 05/16/2012 - 13:28 | 2432115 fuu
fuu's picture

:(

Wed, 05/16/2012 - 13:29 | 2432124 icanhasbailout
icanhasbailout's picture

Scapegoat: Identified.

 

FBI on the case!

Wed, 05/16/2012 - 13:32 | 2432126 pkea
pkea's picture

nice whale graphics... he looks really happy

and must be going to heaven

Wed, 05/16/2012 - 13:29 | 2432127 RmcAZ
RmcAZ's picture

So he's going to replace Tim Geithner now, right?

Wed, 05/16/2012 - 13:29 | 2432138 yabyum
yabyum's picture

And yet Jamie Dimon stays on with a big boy pants bonus off 22 million...think I am gonna puke.

Wed, 05/16/2012 - 13:29 | 2432142 Joe The Plumber
Joe The Plumber's picture

This is a headfake

Jpm has not fully unwound the trade

Anybody good trader can unwind a position. Iksil is not needed

Wed, 05/16/2012 - 13:42 | 2432197 brooklynlou
brooklynlou's picture

In a way, I agree.

The wahle's leaving signifies nothing because who knows if the trade was actually unwound

The thing started as a hedge against the market imploding. Basically it was a bet that things would tank. The market did not tank but went up, so they lost money and declared the loss.

Thing is, if you feel the market will go down, then why unwind the position? Tweak or redisttibute maybe, but still keep.

Wed, 05/16/2012 - 13:31 | 2432143 lizzy36
lizzy36's picture

Wonder which hedge funds made out like bandits on this trade?

Big boys playing in their sandbox. Fuckee or Fuckor....depending on the day.

Wed, 05/16/2012 - 13:32 | 2432150 mayhem_korner
mayhem_korner's picture

 

 

"Outsized positions"

...I don't know where to start with that.

Wed, 05/16/2012 - 13:34 | 2432155 beechmtnski
beechmtnski's picture

If the market is keying on the whale's exit as the conclusion to unwinding, wouldnt it make sense to freeze, fire him and then conclude quietly unwinding, or adding to the position?

Wed, 05/16/2012 - 13:33 | 2432158 Cognitive Dissonance
Cognitive Dissonance's picture

I'm sure the severance package is spectacular. He was doing exactly what he was supposed to be doing.

Wed, 05/16/2012 - 15:22 | 2432711 barliman
barliman's picture

 

Uhmmmm, CD?

He does work for Jamie "I'll kneecap any of you bastards who tries to short my stock" Dimon.

More importantly, he publicly embarassed Jamie Dimon.

The severance package could still be spectacular - in a severed penis kind of way.

barliman

Wed, 05/16/2012 - 13:37 | 2432168 bsdetector
bsdetector's picture

Is this reporting accurate? Wouldn't he be selling it to make the short bet?

Wed, 05/16/2012 - 13:51 | 2432235 Loukanika the r...
Loukanika the riot dog's picture

Where are Greenpeace when you need them??

Wed, 05/16/2012 - 13:50 | 2432244 Dburn
Dburn's picture

I'm not sure I understand the trade itself. Who was on the other side of the trade or how many and how much was on the other side of the trade. I understand he was shorting by buying a CDS against a index where other traders had bought CDS against individual debt on the index. If this is correct how much did Weinstein have to buy to cause the the trade to move in his direction. More on the mechanics underlying the trade if possible for the more pedestrian people here. I don't think anyone else would understand any part of this trade especially the reporters covering it.

 

One other question, how much cash did Bruno have to use  to buy the CDS ( The premiums) and did he have to put up cash collateral when the trade moved against him? Where did he get the cash?

Wed, 05/16/2012 - 13:54 | 2432252 PhCPhD
PhCPhD's picture

Dimonism-101: The loss at JPMorgan is a management failure pure and simple.  Ina Drew, who headed the CIO unit reported directly to J.Dimon, bypassing thereby all other executives.  With the blessings of J.Dimon, she was allowed to have her own separate VaR system. Her assigned objectives were two folds: (1) to hedge the global risk of the bank; (2) to make it a profit center. Ina Drew should not have been allowed to transform the risk covering center into a profit center because as could be expected the latter function took over the former one.  Cost: $2 billion.  Dimonism-101 should now be taught at Harvard Business School as a case study of what a CEO should not do.  Favoritism is a costly management mistake.

Wed, 05/16/2012 - 13:58 | 2432282 spekulatn
spekulatn's picture

Great post ZH.

Wed, 05/16/2012 - 14:15 | 2432381 williambanzai7
williambanzai7's picture

Perhaps this just means that their other people now have a handle on the whole position.

Wed, 05/16/2012 - 14:19 | 2432416 fuu
fuu's picture

All we need is a bowl of Petunia's and we are set.

Wed, 05/16/2012 - 14:30 | 2432462 giovanni_f
giovanni_f's picture

part of the losses can be paid for with what jp morgue robbed from mfg traders

Wed, 05/16/2012 - 14:48 | 2432540 Convolved Man
Convolved Man's picture

So Weinstein and Iskil started playing a friendly game of chess and it escalated into a game of dodgeball?

 

 

Wed, 05/16/2012 - 15:57 | 2432845 Money 4 Nothing
Money 4 Nothing's picture

Now find Timmy the turtle and we can move on with buissness..

Where is Tim Geithner anyway?

Wed, 05/16/2012 - 16:27 | 2432919 reload
reload's picture

Iskil will no doubt be in extremely gainful employment agin very soon. The relative complexity of the instruments traded should not distract from the fact that this was a classic prop blow up. A seemingly sure fire route to glory and riches which went boooom. JPM know the rules, if it goes wrong scapegoats are sacrificed, but they have no qualms about hiring 'talent' from elsewhere when blow ups have happened. It just proves the trader concerned also knows the rules and will keep quiet if the SHTF. Anybody familiar with the characters from D B London who had a spectacular DAX & EuroStock options blow up will remember that as soon as the SFA 'investigation' was over, they went straight to JPM and carried on as if nothing had happened!

Wed, 05/16/2012 - 16:40 | 2432997 Fanatic
Fanatic's picture

Bloomberg TV is flashing a headline saying that JPM says that Bruno Iksil remains employed at the moment.

Wed, 05/16/2012 - 21:59 | 2433839 General Debility
General Debility's picture

Thar she blows!

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