Overview

The history of banking is littered with individuals who jeopardized their institutions through fraudulent activities. But so-called “rogue traders” do not set out to create losses or hide transactions. Instead, an incident occurs that causes them to deviate from the norm. However, despite several high-profile cases, banks continue to experience significant losses due to the activity of these traders.

This tutorial will increase your awareness of the risks associated with rogue trading. It is targeted primarily at the support functions for trading operations, including operations staff and middle office units such as finance, market risk, and credit risk. The tutorial will also be useful for senior executives looking to further their understanding of how rogue traders operate. Drawing on real life cases, you will learn how to identify and manage “out of the ordinary” requests and events that may be indicative of fraudulent behavior.

Objective

On completion of this tutorial, you will be able to recognize the importance of:
- Ensuring that all trades recorded on a bank's key IT applications are legitimate and have been confirmed through a controlled confirmation process
- Performing appropriate reconciliation of all trades to ensure that no fraud is being perpetrated
- Valuing all trades against current market prices to avoid the manipulation of profit or loss by traders or management
- Identifying trades of an abnormal level of profit or loss on the date on which they are first input into the recording system or amended within the system
- Verifying the economic rationale for large value trades
- Monitoring initial margins and the daily payments received from/paid to clearinghouses
- Monitoring changes to collateral margining
- Never disclosing your username and password on any IT application

Content

Topic 1: Tarde Confirmation
Topic 2: Reconciliation
Topic 3: Trade Valuation
Topic 4: Day One Profit and Loss (P&L)
Topic 5: Daily Trade Turnover
Topic 6: Margin & Collateral Calls/Payments
Topic 7: System Access