Same pattern for every rogue trader( Leeson, Kerviel, Dooley ): 1-Let's make a trade with the house money, I will never get caught. 2-Wow. I made X . I am just the king. Let's continue. 3-If I am down, I just have to wait a little to be positive again. See, I made 3X. 4-This time I have to wait longer( down 10 X ). 5-"Hello Ma'am,when is the next flight to ....?"( down 30 X ) I have to say that Dooley has the worst risk/reward ever.
If he was just a broker, why where they backing his trades? Was it just a private trading account and he found some way to hide the loss? In other words if he was not a prop trader how did they ever let the loss get so big?
http://www.elitetrader.com/vb/showthread.php?s=&threadid=119165&highlight=WK08+RIOT He shorted something like 17000 contracts in the overnight session, made a fat finger( not sure about this part ) to buy market and triggered a monumental spike to the upside at the beginning of the regular session( which ended up wheat 2008 high ).
If I recall correctly he had access to the firm's software which had no risk controls on it whatsoever
Correct. Dooley traded his own account (carried by MF) through in-house broker software, for which risk controls were purposefully disabled. Because MF Global was the clearing firm carrying the account, they were responsible for their deficit. I'm honestly not sure what the guy was thinking that night. He was a known alcoholic and perhaps he was foolishly trying to push the market around. Who knows? I DOUBT it was a fat finger. The problem was made worse, I think, when MF began discovered his position around 10:00am and began unwinding it. A professional trader could've probably done a better job offsetting, rather than cause that large upwards spike by hitting offers. So, I accepted a brokerage position at MF Global one week before the Dooley incident occured, and March 3rd was my first day on the job! It's true. Needless to say it was unfortunate timing. More unfortunate is that many of the people in that organization are some REALLY GOOD PEOPLE...honest, professional. And they paid for Dooley's foolishness. MF Global, I understand, is increasingly moving into the investment management space, i.e. CTAs and CPOs, which I think is a strategic decision. You want client funds placed with managers who will keep the equity around. I'm still friendly with MF. It's a good organization for what I do. Hope you guys find this contribution interesting Happy Friday
You are possibly right, but I remember the spike as I had just cancelled a sell order 20 seconds before ( pffew ) and it really happened in almost one single print...A 10000$ per lot spike or so... If that's the way MF unwinded 17000 lots, it is even dumber than what Dooley did.