Afternoon trading costs Redmond a job
I’ve long argued that the low volatility environment that characterised FX until the advent of the credit crunch had as much to do with dealers not being allowed to go to lunch as it did with an increase in transparency, distribution and liquidity.
This week, the UK’s FSA banned David Connor Redmond, a former Morgan Stanley commodities trader, from working in the City. Redmond came back from a long lunch, where, according to the FSA, “he drank alcohol over lunch and it appears that this affected his behaviour on his return to the office, although he was not visibly drunk.”
The FSA says: “Between 17.04 and 19.37 on 6 February 2008, Mr Redmond sold 24,868 lots and bought 19,493 lots of WTI Futures on the ICE web-based trading platform... His trading represented over 30% of the total lots of WTI Futures traded on ICE on 6 February 2008. His short position reached 8,900 lots at 18.36. By 19.37, Mr Redmond had a substantial net short position of 5,395 lots.”
So Redmond fancied an afternoon punt that he then parked in his bottom draw – well, technically that’s not true, but he did conceal the trades – before dealing his way out of his positions the next day for a profit. If we are honest, most of us know traders who have done similar things. In the old days, we’d have called it a win-win: a nice long lunch followed by a bit of successful punting.