FINALLY!! A couple days later and after really poor financial reporting globally..
PARIS (Reuters) - Exchange officials warned Societe Generale about Jerome Kerviel's deals late last year, a Paris prosecutor said, piling pressure on the French bank to explain how his rogue trades were not uncovered earlier.
Prosecutor Jean-Claude Marin also said Eurex, a derivatives exchange owned by Deutsche Boerse, questioned Kerviel's trading positions in November, but that the former back office worker had been able to fool his employer.
"Eurex alerted Societe Generale in November 2007 about the positions taken by Jerome Kerviel. Questioned by the bank, he produced a fake document to justify the risk cover," Marin said.
Eurex said its processes and controls "functioned correctly at all levels, also in this case".
My point is that this IS NOT SUPPOSED to happen!
And from the same article This isn't supposed to happen either:
In a new political twist to the scandal, Bank of France chief Christian Noyer revealed that he delayed telling the government about it for several days because he feared a leak.
"I considered that the huge size of the position meant that any risk of an involuntary leak -- involuntary of course -- should be removed because that was the major risk that could happen in the first hours," he told BFM radio in an interview.
Ohhhh... Nice to know, so much for transparency.
and the article continues:
Adding to the bank's woes, a French lawyer acting for about 100 small shareholders said he had sued SocGen over the way it unbundled billions of dollars in share deals.
The lawyer, Frederik-Karel Canoy, said SocGen should have informed its shareholders and the markets about its difficulties before embarking on a massive selling spree that hurt investors.
He alleged insider trading and market manipulation.
He has a good basis for cause considering the facts! My bet is that this settled out of court so that discovery doesn't proceed.
And here you go.... Ken Lay? The smartest guy in the room?
Both Canoy and small shareholder activist group APPAC also said they had filed complaints about the sale of a million shares by a SocGen director, Robert Day, on January 9 and January 10.
SocGen said Day sold the shares well before fraud was found.
Hmmm my question is was that before or after the Market Maker Eurex notified you? I bet that that money is 'returned' before this is all over.
Many analysts and traders believe SocGen's massive unwinding operation, carried out by just one senior trader at the bank, aggravated a market slide on Monday January 21, which was followed by an emergency interest rate cut by the U.S. Federal Reserve.
SocGen has said the trades accounted for not more than 8 percent of turnover on any one of the futures exchanges in which they were, conducted and did not have a serious market impact.
Hmmmm good idea to use just one trader for efficiency and confidentiality and an eight percent drop in futures is oft ignored, your in a plane, the oil pressure drops 8% and you think.. what the hell there is always the option of a crash landing.
But French Economy Minister Christine Lagarde said the bank was under no pressure to merge with another institution.
hmmm Christine hy not deregulate them and see if they can trade their way out of the mess? Or better yet? Put some adults in charge.
Dee Illuminati has no dog in a fight with French banking, but this is categorically one of the most amazing stories I have read as it evolved in years.
This story as first released by the people who have allot of explaining to do never conformed to the law of gravity, there was 'no market maker' and the EUREX said heh.. no margin, no cash, no problem.. and these positions were used to 'offset loss?
Yeah right.. and the flesh colored pickle spurting is fit for internal public consumption news.
You have to love the stories that defy gravity when they are in the tabloids, but when the banking industry starts peddling this crap, somebody ought to demand a better explanation than what was given.
Put some parents in charge, restore credibility, and stop sticking to a story that undermines institutional credibility in an attempt to protect it.
Jeesch I thought that American banking was bad.. but we got SOX and a precedent of Worldcom and Enron, we might get bad news, but certainly not fantasy and lies.
sale of a million shares by a SocGen director, Robert Day, on January 9 and January 10
And Eurex complained in Nov, well if that isn't serendipity
Since the bets greatly exceeded the amount of capital he was allowed to risk,
Kerviel entered fake and offsetting trades in Societe Generale's computer system that appeared to minimize the odds of big losses, the bank said. The trades were purposely chosen to avoid detection because they did not require cash contributions nor were subject to margin calls, which would require putting up more money if the fake bet soured, it said.
"Since the bets greatly exceeded the amount of capital he was allowed to risk"
First Control was breached here, why was the limit control not addressed?
"Kerviel entered fake and offsetting trades in Societe Generale's computer system that appeared to minimize the odds of big losses"
How do fake trades and offsetting trades ("fake straddle positions") minimize anything if they are fake?
the bank said:
The trades were purposely chosen to avoid detection because they did not require cash contributions nor were subject to margin calls, which would require putting up more money if the fake bet soured,
it said. (redundant or incredulous?)
So now, and get a load of this!
We have banks trading without Cash Contributions and not subject to margin calls! Now that sounds like "imaginary banking" to me.
My question is this:
If there is no cash contribution, which would require trader verification for anti-terrorism compliance (know your banker rules in the US), and there is no margin call, then why did the bank act "precipitously" (if there was no margin call) and just not trade their way slowly out of the position?? And if the positions required no cash, why did the bank chose to post this as a loss?
No margin call, no cash, they should have let the kid just double down on the bet knowing that at least twice a day a broken clock is correct!
Let me explain my understanding a full-margin trading, when your loses exceed your capital reserves, or approximate it, the trading institution makes a margin call, and they liquidate the accounts as they see fit, to avoid a loss at settlement with the market maker.
So what I'm led to believe is that this was trading as a 'market maker.'
Or was I missing something here?
I mean sign me up, I bet I can be right twice a year.
I mean using the Stravinsky betting method of simply doubling the ledger bet, I imagine that the odds of winning where no capitalization and no margin call was in effect, sounded like sound investing to 'anyone' who had a system that facilitated that type of trade.
My question is this, if by utilizing this approach, and profits were accrued, where straddle positions were opened, and there was a subsequent closing settlement of the position, and having not funded the account initially, will the bank declare that as a profit or fraud?
To the point, could there be a settlement to an account that had not been cash contribution created?
Is that French banking at it's finest?
Sounds like double journal entry accounting to me, sounds like a system that does not adhere to agreements designed to eliminate terrorists funding.
Sounds like Deja Vue banking 2002 and the circumstance where check fraud was occuring, and any speculation to the contrary should be made with a better explanation of how you trade in the manner that the bank explanation suggests happened?
No margin calls, no cash required?
hey sign me up!