SocGen Redux - ETF Trader At Center Of UBS Rogue Trade
Yesterday when discussing the blow up of Goldman Global Alpha blow up we predicted, "If 2007 was any indication, and it was, every terminal event for Global Alpha is a harbinger of many, many bad things coming. What is just as ominous is that if Goldman's quant fund has now blown up, then there are tens if not hundreds of other quant funds, and otherwise, that are completely defunct and liquidating, but simply choose to keep quiet. Look for many more such stunner announcements in the days to come" Sure enough not even 6 hours later, we discover that SocGen part two has struck, this time via a UBS' ETF trader (the same as Jerome Kerviel), who has been identified by the FT as 31 year old Kweku Mawuli Adoboli. The trade in question that resulted in the $2 billion loss and forced the arrest of the trader is unknown but very much irrelevant: he was over his risk profile and nobody had stopped him: this reflects very badly on UBS. Look for the bank's Libor rate to surge yet again, as the interbank market struggles to price in the risk of further such trade blow ups in a time of uber volatility. And, as yesterday, we are certain that even more blow ups, at prop desks and otherwise, will now come out of the woodwork.
Here is Adoboli's FSA broker profile:
While unclear if this is his real twitter profile or not, he appears to enjoy watching CNBC's Fast Money. No real suprise there:
Reuters logically expects many firings over this move, and potentially the loss of the entire banking group:
The bank has in the past two years tried to rebuild the investment bank that nearly felled it during the financial crisis. It needed a state bailout after heavy losses on U.S. subprime mortgage-related securities.
Under Gruebel and investment bank boss Carsten Kengeter -- themselves both once traders -- it hired hundreds of traders in a bid to boost its bond business.
Several analysts said the incident made it more likely that Kengeter would be in the firing line, while Gruebel could step down sooner rather than later.
"Gruebel saved the bank from destruction, so his main job is done. It is only a matter of time before he steps down. If it means he leaves a little sooner, it doesn't change a lot. But the investment bank is a bit of a disaster, and the knives will be out for Kengeter," said Peter Thorne, analyst at Helvea.
Another analyst who declined to be named said: "Some important heads are going to have to roll, and some are saying that after a series of missteps with the IB, Kengeter himself will have to go."
Former Bundesbank head Axel Weber is due to join the UBS board next May and take over as chairman in 2013.
The weak performance of the investment bank and tough capital rules in Switzerland had already attracted intense scrutiny over how UBS will cope, with analysts calling for a retrenchment of the investment bank.
UBS had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank.
UBS said last month it was to axe 3,500 jobs to shave 2 billion Swiss francs ($2.3 billion) off annual costs as it joins rivals in reversing a post-crisis hiring binge and preparing for a tough few years.
For those who wish a more indepth stalking of Adoboli's online presence should head to FT Alphaville.