@Mary of course it would, but where was the manager? If I understand it correctly the account(s?) being used were in a kind of digitial noman's land with no oversight assigned to it
@awilliams, it is all about the amount of risk you're willing to accept. How much is too much? $2b, $5b? I'm sure if you were to ask the former management team at Barings if they wish they'd have checked up on Nick Leeson, I bet they would all say yes.
But FYI, Paul, the SEC does regulate this kind of activity in US markets. It's just that investigating the UBS thing needs to be done where it occurred and where UBS is headquartered, I think.
@Kenton It's an insitutional change. It would require a complete revamping of the finance paradigm and likely cause you to be so inefficent you'd lose in the market.
@jwallace; I think the systems have to be programmed to pick up all kinds of weird activity, not just more obvious stuff. In other words, the risk system has to be brought in line with specific risks.
@awilliams, that doesn't mean it's the right way to do it. We've seen this historically, the problem is that banks are willing accept huge losses. How many $2b losses do you take before you take some action?
@jwallace. I must be missing something because it's surely no rocket science to have trades of a certain size or positions of a certain riskiness automatically trigger a check by whoever is managing the desk. I really thought traders were already subject to those controls.
even if you have coders and traders, the coders are always trying to pick up a good tip on a trade to make their money, and the traders are always looking to code up their personal model to get the big bucks.
I would say if there is a high enough risk that traders who've had access to the back-end system will always take advantage the solution is simple. If you code, you don't trade; separation of duties is a pretty basic risk mitigation technique.
@Paul: Not sure UBS was using any single vendor. A trading floor that big, they're likely using a bit of everything. And you can't lay the blame on the vendors.
The CEO's excuse is palpable nonsense too. Oh, we forgot to lock the door when we left for the weekend, but what can you when there are thieves around?
@Awilliams -- the thing is, shouldn't big business do this sort of thing, especially when it's in their own best interests? It's why I get mad at Microsoft -- it's not so much because theyr'e doing something wrong as much as they can afford to do it right.
UBS is one of the largest financial institutions in the world. If it doesn't have the resources to run its business while monitoring compliance, heads should roll. That's a non-starter.
One thing about traders: the CEO of UBS in Switzerland said last week that he won't resign because "If someone acts with criminal intent, you can’t do anything. That will always exist in our job. If you ask me whether I feel guilty, then I say no.”
@Mary I was refering to smk's comment about allowing traders access to the backend. There could be plenty of cases where you'd want to allow some access (a lot of these guys at UBS are trader/coders)
@Paul, right I understand it's speculation. It just seems to me that's a convenient place to point fingers. But, really, we were "too busy to take care of security because the big bad government gave us too much to do" doesn't fly. Sort of obnoxious, actually.
If you can't trust your traders, it's very easy to assume they will not have the available turn around time to get things done in the microsecond based world markets of today. A bit of a catch-22
@smk unlikely that it is every trader who will use such info for personal gain.....but its all about probabilities. I would always assume a 50 percent probability to begin with. Unless something else is proved
@SMK: Well, some say that a good system could have spotted the deepening crisis. But there was also a management problem. Adoboli apparently had expressed to his bosses that he was in a panic about his situation.
@Paul, actually, some have speculated that UBS was so caught up in trying to get compliant with regulations that it didn't have time or resources to oversee the situation.
While it seems obvious in hindsight, let's look at the flipside of things: Should we assume every trader who's had access to the backend is going to use it for personal gain? What measures are needed regardless?
And @Kim, there is an outcry that if Amex and other financial firms can track our activity, it's possible for IT-based systems to do so for other financial situations.
@jwallace: It has to do with the kind of trading that was involved. These trades should not logically have resulted in big gains, because the funds pertaining to them were losing money.
Banks have no problem automatically preventing me from exceeding my overdraft or suspending my ATM card if fraud is suspected. Why can't they stop a trader from losing billions of dollars?
@Mary: so it does matter how sophitcated the risk management tools are, if there is no shift in corporate culture within the financila sector, then we are doom
@Kenton: " If that is true, then can any system really "protect" a bank from itself? what a question! It just tells me further that technological hellp can' replace institutional cultures
@Paul ok , and probably to minimize exposure as well where deliberate acts of sabotage may be occuring. By intimidating the possible offenders with a checking system.
As has been mentioned, are banks just too high on the profits? Is this a case of a trader who's losses were just too big and so the bank decided to classify it as a "rogue trader" so it didn't have to accept the losses? If that is true, then can any system really "protect" a bank from itself?
@Kicheko: risk management itself is not an exact science. I am sure we are bound to have the occassional breaches here and there. It's just a meter of trying hard to minimize the damage.
So really, UBS didn't need real-time surveillance or analytics to capture that something was amiss. It didn't seem to have the risk built into the system it did have.
@Mary: one accusation that has been levy against financial institutions is that they seems to have move away from focus from risk management in favor of growth and profitability. Is that true in this case
I'm thinking real time surveillance is a good way to go because this could well be a planned "oversight" that happened. For a breach to be big enough to threaten a third quarter loss and nobody noticed
Automated real-time surveillance is indeed available. Should be able to spot unusual activity without having human eyeballs on the network all the time. Don't tell me USB can't afford it.
But there seems to be consensus that in UBS's case, the system should have been set up to flag the enormous returns that went with this kind of trade, even as the exchanges that were being traded against were tanking.
Just reading thru a June 2011 report which statde that: "A report conducted by the Economist Intelligence Unit and released this week by SAS, the big business analytics software firm, warns that financial institutions, particularly in the U.S., are “feeling too comfortable” about their risk management systems and suggests they may be unprepared for the next crisis."
New York's Metropolitan Transit Authority is conducting a pilot test of digital kiosks to guide subway users to where they want to go more efficiently and at lower cost.
The whole Amazon.reader debate is a double-stupid. It's stupid to think that there's any e-book buyer who doesn't know Amazon's URL, and it was stupider to let ICANN launch the whole free-form TLD initiative to start with.
While NFC's original goal was to enhance mobile commerce applications, it is finding its way into a number of other uses, which is creating both opportunity as well as challenges for IT departments.
Enterprises would like to move to cloud computing but are hesitant because they are concerned about providers’ ability to secure company data. Here are some tips that help to ensure that if breaches occur, the business is not left holding the bag.
Edmunds separates customers into segments based on the info it collects on its site and from partners, and uses that to push out custom content, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
The automotive website uses propensity modeling to target ads and customer registration forms, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
Subsidized handsets, rather than locked handsets, should be the focus of regulators. We're not getting good deals, not fostering innovation, and weakening our power as buyers.
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