When a famous bank ( Société Générale ) is plunged into the worlds largest financial fraud ever known by a simple junior trader
Summary :
Table of Contents
- Irregular and high risk trading activity.
- Trading beyond acceptable limit.
- Misuse of IT access codes and / or user credentials for privileged access.
- Created fictitious trading operations within financial portfolios.
- Breaking into middle and back office computer systems.
- Trader activity monitoring.
- Management systems.
- Transformation processes for real time system's implementation.
- References.
Abstract
In January 2008, the financial world was disrupted by the world's largest financial fraud case known to date. The famous French bank, société générale, recorded a loss of 5 billion euros due to false positions taken by a junior trader, Jérôme Kerviel. To fully appreciate how he did this, it's important to know a bit about his background. Kerviel spend several years in the bank's middle office in the area of equity trading compliance. In that time, he gained an intimate knowledge of the systems used to log and reconcile trading activity. In 2005, Kerviel moved out of the middle office role to become a junior arbitrage trader. One of his tasks was to leverage derivatives to exploit small price discrepancies in the value of stocks across various markets. During this period, the markets became more and more efficient, this task has become a real challenge, making equity arbitrage a low margin and high volume trading practice .
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