http://www.businessweek.com/ap/financialnews/D9FCOG7O0.htm I would love to hear the details of how this happened. I guess this is old news, but I don't remember hearing about it.
Wow...I would too. Started with $482 in his account and ended up 141 million in the red? I cant possibly imagine that someone didnt catch that, unless of course his first trades were good ones that netted him a few million in his first week or so. Thats the only way I can conceive that a bank would give him that much money to trade with. But what I would like to read about is the story that you dont hear. For every rogue trader that blows 100 million dollars like this guy, there has got to be another rogue trader somewhere that made 100 million and quit when he was ahead and nobody was the wiser.
"Starting with just $482 in his account, Dooley executed large buy and sell orders in wheat, the indictment said. When MF Global realized what was happening and shut down his account, he was already more than $141 million in the red. Dooley was unable to cover the losses, and MF Global found itself responsible." Makes you wonderabout MF Global's inhouse risk management THIS is why a place like interactiveBrokers is much better than $300 emini margin daytrading brokers with 2 employees.
Hmm. From what I know, MF Global ain't no mom & pop broker. So I wonder how this could have happened. When you get a margin call, your position will be automatically dumped by your broker if you fail to fork over more of your hard earned dineros in time. Isn't that what most brokers have in place as a circuit breaker?
Heh, I was trading the grains while his blowup happened. Crazy moves, like 10% up in 20 minutes, then back to unchanged later. 100 cent moves in an hour. From what I remember, he was a broker at MF, and had a terminal that didn't have position limits built in to the software, or found a way to bypass this. So he just piked on increasing size, following the typical noob martingale strategy to recoup initial losses, unfortunately he did it in the face of a historic bull market of epic proportions, and then put in the top by blowing up. Pretty expensive IT/risk-control oversight. The guy was just some low-wage piker broker who never really produced for them. Amazing that even the big names in this industry are such clueless noobs.
IB is a pissant compared to MF Global in terms of the FCM's customer segregated funds. IB: $500 million MF Global: $7.5 billion http://www.cftc.gov/ucm/groups/public/@financialdataforfcms/documents/file/fcmdata0210.pdf
MF Global created a lot of those losses themselves when they covered the wheat position early that morning after they discovered what Dooley had done. There was speculation that they drove it up to limit by essentially sending a market order to cover the position and the liquidity was not there to handle the volume. Yeah Dooley was to blame for sure but MF Global had poor controls over their system and then hit the panic button when trying to exit the position and shot themselves further in the foot.
They need to build margin limits into their terminals. Trust me, when you hit margin with most future brokers, they will NOT allow you to add anymore contracts.