Rogue Trader

Rogue Trader Introduction: A rogue trader is a market professional who is basically involved in different unauthorized trading activities. Most people are highly familiar with the rogue trading activities, as there have been several instances of huge losses incurred under the rogue trading. Recently these rogue trading activities causing huge losses attracted the media and many films have been based on such rogue trading activities. The rogue trader movie has been highly famous as it portrayed the character of a rogue trader in Baring Bank named Nicholas Leeson. The career path of Leeson followed an upwardly moving curve from his job of back office trading settlement to a highly acclaimed trader earning huge bonuses. Moreover because of the high popularity of Leeson, the Bank allowed him to make his own trade settlement, which is highly unauthorized and risky in terms that the risk limit of loss is violated and the bank, has to pay margin money on a continuous basis to make up for the loss involved. Moreover the negligence of the Barings Bank management and huge dependence on Leeson caused the bank a huge loss of $1.7 billion (Krawiec, 23-26; Rogue Trader). Evaluation of Barings’ internal control mechanism Internal Control mechanism of Barings’ bank and its tone at the top: The internal control mechanism of the Barings bank was completely inefficient. It could be viewed by the fact that the Government body of the organization did not set any fixed limit for the position taking like position in intraday, in overnight position. Moreover the salary of the top management official were linked excessively to the speculated profit which promoted the top management official under the guidance of Leeson to take excessive position in derivative trades even risking the loss limits when led to huge losses incurred. Moreover the absence of any formal internal audit system allowed the bank to take unauthorized path of settling the huge loss in the error account (Rogue

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