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A rogue trader is a trader that engages in irresponsible behavior and operates alone, frequently to the cost of the organization that employs them as well as potential clients.
Rogue traders frequently engage in high-risk trading that has the potential to result in significant gains or losses.
Only losing traders are classified as rogue traders, which creates incentives that lead to moral hazard.
If their trades are highly profitable, no one refers to them as “rogue,” and they are more likely to receive a sizable bonus.
However, if their risky bets are unsuccessful, they are considered rogue and can cause the company to lose millions or even billions of dollars.
How Rogue Traders Work?
- To regulate the trading of instruments, including whose desks can trade them, once they can trade them.
- And how much in a particular period, banks have created sophisticated Value-at-Risk (VaR) models over the years.
- The limit of trading in particular is carefully defined and tracked to safeguard the bank and satisfy authorities.
- However, internal controls are not perfect. A diligent trader may be able to find a technique to get around the system to make large profits.
- Regulators frequently order them to be publicly revealed if they are discovered in poor deals, to the bank’s disgrace.
One has to wonder how numerous small-time rogue traders a bank quietly fires because the bank does not want the bad press that comes with learning that internal trading controls were not adequately created or executed.
Examples of Rogue Traders
- Nick Leeson, a previous derivatives trader at the Singapore branch of Britain’s Barings Bank, is one of the most well-known rogue traders in recent memory.
- Leeson suffered significant losses through the unlawful trading of significant volumes of Nikkei futures and options in 1995.
- Leeson took significant derivative holdings on the Nikkei to increase the amount of money at risk in the trades.
- Leeson had held 20,000 futures contracts on the Nikkei, totaling more than $3 billion.
- A significant portion of the losses resulted from the Nikkei’s decline after a big earthquake in Japan triggered a week-long period of widespread selling.
- The 233-year-old Barings Bank suffered a total loss of well over $1 billion, which ultimately caused it to go bankrupt.
- Leeson was accused of fraud and imprisoned in Singapore for several years.
Advantages and Disadvantages
- The permitting Advantages and Disadvantages of Rogue Traders are listing below.
- To use these enhanced rules, you must have a copy of the D6 Space rulebook, which contains the list below.
- A all-out of 5 points can be giving to the advantages or disadvantages.
- Only at the GM’s discretion are any Advantages or Disadvantages permitted.
- Use your character’s assets and disadvantages to “full out” and further develop it. Not to manipulate the system to gain a few more points.
- Both players and game masters should introduce advantages and disadvantages, understanding that they WILL be using in play.
- The Achilles’ Heels (R3, R4) are allergies, cultural allergies, environmental intolerances, metabolic differences, nutritional needs, rot, and vulnerability.
- Examples of the Achilles’ Heel (R3, R4) include allergies, cultural allergies, rot, and symbiosis.
Example of an Advantage Flaw (R1, R2, or R3): Infection, Minor Stigma, or Stench
What is rogue trader risk?
- A rogue trader is a trader that engages in irresponsible behavior and operates alone, frequently to the cost of the organization that employs them as well as potential clients.
- Rogue traders frequently engage in high-risk trading that has the potential to result in significant gains or losses.
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