There are a few signs that activity is starting to slow down. As players find themselves with a bit more time on their hands, it’s a near certainty that the talk of who has done well and, more likely, who has done badly will increase.
When I was at Nomura, one of my superiors used to come and put the odd position on. “Where do you want to leave your stop?” I’d immediately ask. “Surely you mean my profit?” he’d reply. Let’s just say the former was always triggered before the latter.
The practice of senior management having a punt raises issues: specifically, what should the banks full-time risk takers do when their boss has stepped up to the plate? Should they go with the big cheese, stay square, or trade against them?
There is plenty of buzz around about a top 10 Euromoney bank that has done its cods as a result of this type of dilemma. Word is that the bank’s global head of FX had a punt in Turkish lira, which his emerging market options desk decided to follow. The boss then promptly dropped a cool $30 million and the desk lost another $37 million. To make matters worse, it took a $30 million bath in Korean won options at the same time.
Chances are that the market has grossly exaggerated the number, but the whispers are getting louder. The bank itself says that the accumulative losses are barely over double figures.