<ul><li><strong>Navinder Singh Sarao was arrested in 2015, accused of helping cause a $1 trillion market crash.</strong></li><li><strong>Sarao was accused by the US government of manipulating <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">markets</keyword> by posting then canceling huge volumes of orders to trick other participants about supply and demand — a brand new offence known as 'spoofing.'</strong></li><li><strong>In this extract from hs new book, "<a href="https://www.amazon.com/Flash-Crash-Trading-Manhunt-Mysterious/dp/0385543654">Flash Crash</a>," author Liam Vaughan recounts how Sarao made his first million pounds taking the other side of trades with another notorious financial figure, Jérôme Kerviel.</strong></li><li><strong><a href="https://www.businessinsider.com/?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingestm=ingest">Visit the Business Insider homepage for more stories</a>.</strong></li></ul><p>Navinder Singh Sarao made $70 million buying and selling futures from his suburban London bedroom before the FBI showed up to arrest him for helping cause a $1 trillion market crash.</p><p>A preternaturally gifted trader with a penchant for computer games, Sarao was accused by the US government of manipulating markets by posting then canceling huge volumes of orders to trick other participants about supply and demand — a brand new offence known as 'spoofing.' He believed his actions were justified because the markets were rigged in favor of highly-profitable, computerized entities known as high-frequency traders, or HFT. Many agreed, and in the aftermath of his arrest, Sarao became a kind of folk hero to those on the fringes of the financial ecosystem —the lone trader who took on the billion-dollar behemoths and won.</p><p>Sarao started his trading career at a rough-and-ready prop shop above a supermarket. In an extract from his forthcoming book, <a href="https://www.amazon.com/Flash-Crash-Trading-Manhunt-Mysterious/dp/0385543654">Flash Crash</a>, Liam Vaughan recounts how the man dubbed the Hound of Hounslow made his first million pounds after crossing paths with another notorious financial figure.</p><p>After a few years of patiently building up his account, Nav, pulled off a trade at the start of 2008 that would catapult him into the big time. The global financial crisis was gathering pace and markets lurched around on news of the precarious state of the economy and the measures governments and central banks were taking to shore up the system. Where the S&amp;P 500 might previously have moved forty or fifty ticks in a day, it was now not uncommon for the index to jump around in a range of 5 percent, more than five times as much. The turmoil may have been disastrous for the wider economy, but it was a boon for traders like Nav who thrived on the action. Sentiment had swung firmly from exuberance to panic, and there was easy money to be made.</p><p>Late one afternoon in early January, Nav was at his desk when he noticed something odd in the DAX, an index that tracks Germany's thirty biggest companies. Despite the swirling negativity, there was a glut of buy orders waiting in the order book; and whenever the bids were hit, they quickly replenished. The result was that, over the course of the evening, while most US and European markets remained depressed, the German index actually crept higher. Somebody out there appeared to have an insatiable appetite for DAX futures in the face of strong signals that prices should be going down.</p><p>"It's the Chinese, I know it," suggested one trader when Nav asked him what he made of the mysterious buying. Residing as they did on the fringes of the financial firmament, traders at Futex, the arcade where Nav cut his teeth, were inclined to indulge in conspiracy theories about sinister forces controlling the markets. If it wasn't China, it was the Plunge Protection Team or Goldman Sachs or the Bilderberg Group. Whoever was buying up the DAX had significant firepower. For long periods there were hundreds of millions of dollars' worth of bids sitting in the order book.</p><p>Nav resigned to keep watching the DAX and went home for the night. The following morning he saw that the index had opened 90 points lower, a substantial drop. Whoever was propping up the market had seemingly given up and gone to bed. Over the next few hours, DAX futures continued to tumble in line with markets around the world, but by late afternoon the wall of bids had reappeared and prices started to edge up again. <br /><br />It was surreal. During the regular trading day for stocks, from 9:00 a.m. to 5:30 p.m. Central European Time, German futures followed the global downward trend. Then, when the country's stock market closed and volumes thinned out, DAX futures, which keep trading until 10 p.m., began edging higher, like a salmon swimming against the stream. It wasn't clear who was behind the phenomenon or why. In some ways it didn't really matter. The important thing was that there was a trend that could potentially be exploited.<div type="image" title="9780385543651" height="2775" width="1838" msid="75777844" hostid="261"></div></p><p>That night, before heading home, Nav and one of his colleagues devised an experiment. Both of them would sell a few DAX contracts and see what happened. If the market took a tumble, as it had the previous night, they would buy back the same number of contracts the next morning, closing out their position for a profit. If it didn't, they would take the hit and move on with their lives. Generally speaking, it was frowned upon at Futex to leave a position open overnight because you couldn't react quickly if the market moved against you. They needn't have worried. The following morning the DAX opened 65 points lower, earning them more than $10,000 apiece. By day three, the traders around them had started to take notice. There still hadn't been anything in the press that might explain the move, but the pattern was clear. Half the office followed their suit, hoping to piggyback on the nightly deviation between the German index and markets around the world. Once again, the market rallied before collapsing overnight, this time by 80 points.</p><p>Nav had struck gold. For two weeks, he repeated the overnight trade, placing steadily larger positions before heading home to bed and praying his good fortune would hold. Time and again it did, and by the second week of January, Nav had gone from shorting a handful of contracts to betting two hundred lots a night, a $15 million position that yielded six-figure profits. As he put everything on the line, the strength of his conviction never faltered, and by the middle of January his balance had ballooned to more than a million pounds.</p><p><div type="image" title="Jerome Kerviel" height="1619" width="2300" msid="75777849" hostid="261"></div><br /><br /><strong>ON SATURDAY, </strong>January 19, 2008, a thirty-one-year-old French trader named Jérôme Kerviel stood outside Société Générale's imposing headquarters on the outskirts of Paris and texted his boss: "I don't know if I'm going to come back or throw myself under a train." Waiting for him in a conference room inside were the head of the bank's investment banking division and various other executives who had spent the past twenty-four hours frantically scouring Kerviel's trading records after uncovering evidence of what they suspected to be a massive fraud. Over the next several hours, Kerviel confirmed their fears. Starting in 2005, he confessed, he'd been secretly placing unauthorized trades worth hundreds of billions of dollars. Unlike most of the firm's elite traders, Kerviel, the son of a blacksmith and a hairdresser from Breton, had started his career in an administrative function, and it was there that he'd learned how to cover his tracks using a combination of fictitious transactions and forgery. He'd escaped detection because, for the most part, he'd been successful. In 2007 alone, he said, he'd made a profit of around $2 billion by correctly predicting the impact of the impending financial crisis. Bizarrely, he was never able to claim credit for his success, because nobody else knew about it. The story might have ended there, except Kerviel had recently embarked on his most ambitious foray yet.</p><p>Between January 2 and January 18, the trader had accumulated a long position of $70 billion, double the market capitalization of the entire bank. As his colleagues left the trading floor each evening, Kerviel had stayed behind manically buying futures tied to the DAX and other indices, convinced that the worst of the crisis was over and that the markets would rebound. But his winning streak had come to an end. Kerviel's wave of after-hours buying only ever propped DAX futures up for a few hours each night. Then, like some horrific Wall Street version of <em>Groundhog Day, </em>he awoke each morning to find gravity had kicked in and the market had sunk back in line with the rest of the world. As Kerviel made his confession, Société Générale's management ordered one of his colleagues to close out his positions. By the time the employee was finished, the bank had lost $7.2 billion. News of the incident rocked global markets and helped push the DAX 12 percent lower in two days, wiping hundreds of billions of dollars off the value of Germany's biggest companies.</p><p>Reading about events at Société Générale, the traders at Futex quickly worked out that Kerviel had been the one behind the DAX's strange maneuverings. It wasn't the Chinese after all. One of Europe's biggest banks had been brought to the brink by a lone trader with oversize ambitions and inadequate oversight. Later, Kerviel was sentenced to three years in jail and ordered to pay back the entire $7.2 billion he lost, the biggest fine ever levied on an individual. His desperate buying spree placed him among history's most notorious rogue traders, a name uttered alongside the likes of Nick Leeson of Barings Bank and Kweku Adoboli at UBS. It also gave a young day trader from Hounslow the capital he needed to take his trading to new heights.</p><p><em><a href="https://www.amazon.com/Flash-Crash-Trading-Manhunt-Mysterious/dp/0385543654">Flash Crash: A Trading Savant, A Global Manhunt and the Most Mysterious Market Crash in History</a> (Doubleday and William Collins) by Liam Vaughan is available now.</em></p>Read the original article on <a href="https://www.businessinsider.com/navinder-sarao-convicted-market-manipulator-flash-crash-book-excerpt-liam-vaughan-2020-5">Business Insider</a>

How bedroom trader Navinder Sarao made his first millions and kickstarted an odyssey that ended with historic market manipulation and a $1 trillion crash

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54eae287dd089555138b4595-1200-750/rtrhxpr.jpg" alt="Britain's Nick Leeson stands on the shore of Galway Bay, April 21, 2004" border="0" /><p class="source"><span>Reuters</span></p><p class="caption">Nick Leeson single handedly lost Barings Bank £862 million in 1995.</p></div><p></p></div></div>Nick Leeson, the original rogue trader, can't resist the pull of the markets and is still placing financial bets 20 years after he first became infamous.</p><p>"Trading is one of those things you never totally divorce yourself from, no matter how bad the experience may be in the past," Leeson, who brought down Barings Bank in 1995 with unauthorised trades, told Business Insider.</p><p>Leeson has signed up with CoalFace Capital, a firm that ranks day traders with the aim of tracking the top performers with an investment fund.</p><p>He won't say where he comes in the league table but says his name should inspire others to use caution when trading their own cash.</p><p>"The message that my name brings is caution. You do need to understand what you're doing, otherwise a lot of people blow up, and blow up very quickly," said Leeson, who introduced the world to the phrase "rogue trader" after racking up £827 million ($1.5 billion) in losses.</p><p>While that was enough to bring down Barings Bank, the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>'s oldest merchant bank before its collapse, it pales against the billions lost by the rogue traders that came after.</p><p>In 2008, Jerome Kerviel lost €4.9 billion (£3.7 billion) at Societe Generale, and, in 2011, Kweku Adoboli's trades left UBS on the hook for $2 billion (£1.4 billion).</p><p><div class="KonaFilter image-container display-table float_left"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/569777acdd0895df0a8b46cc-1872-1404/rtr2ic9m.jpg" alt="Nick Leeson (C), the rogue trader who broke Britain's oldest merchant bank, smiles as he is escorted by police at Changi Airport after he was freed from a Singapore prison in this July 3, 1999 file photo." data-mce-source="Reuters" data-mce-caption="Nick Leeson (C), the rogue trader who broke Britain's oldest merchant bank, smiles as he is escorted by police at Changi Airport after he was freed from a Singapore prison in this July 3, 1999 file photo." /><p class="source"><span>Reuters</span></p><p class="caption">Nick Leeson (C), the rogue trader who broke Britain's oldest merchant bank, smiles as he is escorted by police at Changi Airport after he was freed from a Singapore prison in this July 3, 1999 file photo.</p></div><p></p></div></div>According to Leeson, there's one thing they have to do to be able to carry on with their lives: take ultimate responsibility for their actions.</p><p>"You have to accept what you've done and gone through and be accountable for it," he said.</p><p>"I'm not sure Kweku and Kerviel are there yet. It looks like Kerviel still blames the bank and you have to get that accountability to be able to move forward."</p><p>"You need that accountability for your actions and I don't see that evidence yet," said Leeson.</p><p>It took Leeson a spell in a Singapore jail and colon cancer to realise the power of accountability. As the losses spiralled in February 1995, he fled Singapore with his then-wife Lisa and sparked an international manhunt that ended when he handed himself in days later, in Germany.</p><p>CoalFace, based in University College Dublin's tech and innovation wing, is hoping to do to the fund management industry what Uber did to taxis.</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/558a6864dd0895ea748b4643-2439-1832/kweku-adoboli-out-of-prison.jpg" alt="kweku adoboli out of prison" data-mce-source="Getty" data-mce-caption="Kweku Adoboli gestures to photographers as he arrives at Southwark Crown Court on September 18, 2012 in London, England." /><p class="source"><span>Getty</span></p><p class="caption">Kweku Adoboli gestures to photographers as he arrives at Southwark Crown Court on September 18, 2012 in London, England.</p></div><p></p></div></div>CEO and founder Declan McEvoy said: "In the world we live in now, with the amount of data we have, and with all the different gig-economy things going on like Uber for taxi drivers, we could do something similar for traders, connecting traders and investors using technology."</p><p>CoalFace uses data from FXCM, FXPro, ADS Securities, Saxo and CMC on amateur traders to create a league table. Analysing the data, CoalFace can pick out common errors traders make and send them tips on how to avoid them.</p><p>Once enough people have signed up, CoalFace will track the best performers in a managed fund. The firm will pay the top 300-400 performers up to €136,000 a year for the privilege. Just making it into the top half of the table will net traders around €2,000.</p><p>"The project is in two phases. The first phase is Kevin Costner in 'Field of Dreams' - build it and they will come. So we're getting Nick's help to get as many people to sign up as possible. There's zero downside for the traders," McEvoy, a former trader at Citi and UBS, said.</p><p>"Phase two, is, when we get to 5,000-10,000 traders in the system, look at the top 300-400 and see if we can track them. And when we track them, we'll obviously do quite a bit of testing, and that's where our expertise comes in," he said.</p><p>Using the data to spot avoidable mistakes is key. For Leeson, education is power.</p><p>Leeson said: "The two big events in my life have been the collapse of the bank and having to battle cancer. And with both of them, you improve your chances if you educate yourself, if you understand what's going on, empower yourself and take control."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/eighth-grader-invents-braille-printer-2015-1">A 13-Year-Old Made A Revolutionary Invention Out Of Legos And Now Intel Is Investing In His Company</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="5oanB2cjrl7OZQZKJ15oB_-fMpAdPXBF" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '5oanB2cjrl7OZQZKJ15oB_-fMpAdPXBF',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Nick Leeson is still trading - and he has some advice for Kweku Adoboli and Jerome Kerviel

<p><img class="float_right" src="https://static-ssl.businessinsider.com/image/5408bd21eab8ea98778b4567-844-633/jerome-kerviel-2.png" alt="Jerome Kerviel" border="0">SocGen's "rogue trader" Jerome Kerviel is being released from jail early after serving only five months, <a href="http://www.bloomberg.com/news/2014-09-04/jerome-kerviel-to-be-released-from-prison-next-week-lawyer-says.html">Bloomberg News reports</a>. </img></p>
<p><span>He will get out on September 8th and he'll have to wear an electronic bracelet.</span></p>
<p>In 2008, it was revealed that Kerviel lost the French bank approximately 4.9 billion euros ($6.9 billion) through arbitrage of equity derivatives. </p>
<p>He was sentenced in October 2010 to <a href="http://www.reuters.com/article/2010/10/05/us-socgen-kerviel-verdict-idUSTRE69414220101005">three years in prison and slapped with a fine of 4.9 billion euros</a>, but had appealed for a new trial. <span>The appeals court in Paris court </span><a href="the%20appeal%20of%20ex-SocGen's%20" rogue20trader20="">rejected his appeal</a> earlier this year around the time he was finishing a backpacking pilgrimage to visit the pope<span>.</span></p>

'Rogue Trader' Jerome Kerviel Is Getting Out Of Jail After Only 5 Months

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/53299ad76bb3f7907ebe296a-661-495/jerome-kerviel.png" border="0" alt="Jerome Kerviel" /><p class="source"><span>Reuters/ Alessandro Bianchi </span></p></div><p></p></div></div>A French court rejected the appeal of ex-SocGen's "rogue trader" Jerome Kerviel, <a href="https://twitter.com/BloombergNews/status/446273519589269505">Bloomberg News reports.</a></p>
<p><span>Kerviel, 37, is currently on a backpacking trek from Rome to Paris. </span></p>
<p>In 2008, it was revealed that Kerviel lost the French bank approximately 4.9 billion euros ($6.9 billion) through arbitrage of equity derivatives. </p>
<p>He was sentenced in October 2010 to <a href="http://www.reuters.com/article/2010/10/05/us-socgen-kerviel-verdict-idUSTRE69414220101005">three years in prison and slapped with a fine of 4.9 billion euros</a>, but had appealed for a new trial. </p>
<p>Today, the appeals court in Paris gave the final verdict. He now faces prison time and a massive fine. </p>
<p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/53299af0ecad041122df3c07-1190-892/kerviel-1.png" border="0" alt="Kerviel" /><p class="source"><span>AP Images</span></p></div><p></p></div></div></p>

Rogue Trader Jerome Kerviel Loses His Appeal, Faces Prison Time And Huge Fine

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/573dd76552bcd05b008c3e35-2159-1619/rtx22x7i.jpg" alt="Jerome Kerviel" data-mce-source="Philippe Wojazer/Reuters" data-mce-caption="Former trader Jerome Kerviel leaves the courthouse in Paris" /><p class="source"><span>Philippe Wojazer/Reuters</span></p><p class="caption">Former trader Jerome Kerviel leaves the courthouse in Paris</p></div><p></p></div></div>The case between one of Europe's largest banks and a trader that lost them almost $7 billion dollars just took another bizarre turn.</p><p><a href="http://www.businessinsider.com/the-greatest-interview-jerome-kerviel-has-ever-given-2010-11">Litigation has been ongoing for eight years</a> between Jerome Kerviel and his former employer Societe Generale over bad bets that Kerviel made on stock market futures, and now Kerviel is fighting back.</p><p>In French court Thursday, Kerviel sued the bank for 5.7 billion euros, <a href="http://www.bloomberg.com/news/articles/2016-05-19/kerviel-sues-socgen-for-5-7-billion-euros-after-bank-fired-him">according to Gaspard Sebag at Bloomberg</a>.</p><p>That is coincidentally more than the 4.9 billion euros that the bank claims Kerviel lost them prior to his dismissal in 2008.</p><p> </p><p>Kerviel has long maintained that the firing was wrongful termination, saying that the manner in which SocGen fired him did not follow French law and that the firm was well aware of his trades as they were happening.</p><p>So in order to make a statement, according to French news magazine L'Express, Kerviel decided to sue the firm for the exact amount that was lost on his trades, saying that the number was "ironic." In a following tribunal Thursday, that number was increased to 5.7 billion euros, <a href="http://www.bloomberg.com/news/articles/2016-05-19/kerviel-sues-socgen-for-5-7-billion-euros-after-bank-fired-him">according to Bloomberg.</a></p><p>Despite losing multiple times in French courts since the original incident, the trial was reset in February after Kerviel changed his accusations from dismissal with gross misconduct to dismissal without cause.</p><p><strong><a href="http://www.bloomberg.com/news/articles/2016-05-19/kerviel-sues-socgen-for-5-7-billion-euros-after-bank-fired-him">You can read the full Bloomberg story here</a>.</strong></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/waterfall-hidden-in-the-grand-canyon-2016-4">There's a remote waterfall hidden in the Grand Canyon that you can hike to</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="IwcWU3MzE6l1S3YcPGPcFcdeOwt5UcHS" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'IwcWU3MzE6l1S3YcPGPcFcdeOwt5UcHS',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

The rogue trader that lost one of Europe's biggest banks 4.9 billion euros is suing them for 5.7 billion euros

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5666d95cdd08951b1a8b4780-856-642/screen-shot-2014-12-04-at-5.47.46-pm.jpg" alt="daniel craig james bond aston martin" data-mce-source="IMDB / United Artists" data-link="http://www.imdb.com/media/rm2704651264/nm0185819?ref_=nmmi_mi_all_sf_45" /><p class="source"><span><a href="http://www.imdb.com/media/rm2704651264/nm0185819?ref_=nmmi_mi_all_sf_45">IMDB / United Artists</a></span></p></div><p></p></div></div>Some of the world's biggest banks are hiring former spies to try and prevent the rise of any more so-called "rogue traders" and generally ensure that banks are put on the hook for fewer fines.</p><p><a href="http://www.bloomberg.com/news/articles/2016-02-16/spies-who-chased-terrorists-join-banks-to-hunt-for-rogue-traders">According to a report from Bloomberg,</a> banks including HSBC, Deutsche Bank, and JP Morgan have all hired ex-spies from the likes of the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> and US military, the CIA, and GCHQ to watch the activities of bank employees, and try to prevent misconduct.</p><p>Bloomberg cites information provided by recruitment firms, executives, and compliance officers to show that banks are using former spooks to keep tabs on everything from how long employees take for cigarette breaks to how often they text their significant other, and as a result, try and spot the early signs of rule breaking.</p><p>In recent years, bank employees like Jerome Kerviel, Kweku Adoboli, and Tom Hayes have all been jailed for their roles in big banking scandals. In 2008,</p><p>In 2008, <a href="http://www.businessinsider.com/ap-convicted-french-trader-fights-billions-in-civil-damages-2016-1?IR=T">Jerome Kerviel lost €4.9 billion (£3.7 billion) at Societe Generale</a>, and <a href="http://uk.businessinsider.com/ex-ubs-rogue-trader-kweku-adoboli-is-out-of-prison-2015-6">Kweku Adoboli's trades left UBS on the hook for $2 billion (£1.4 billion) in 2011</a>. <a href="http://uk.businessinsider.com/city-trader-tom-hayes-found-guilty-of-rigging-libor-2015-8">Hayes was involved in the fixing of the LIBOR rate, and subsequently jailed for his role</a>, although <a href="http://uk.businessinsider.com/tom-hayes-the-former-ubs-trader-sentenc-2015-12">had his sentence reduced after an appeal.</a></p><p>Not only are these sort of scandals hugely embarrassing for banks, they can also be incredibly costly. The LIBOR scandal, for instance, <a href="http://www.businessinsider.com/libor-rigging-criminal-charges-and-fines-2015-5?IR=T">cost six banks a combined total of around $6 billion (£4.15 billion)</a>, with Barclays alone footing a bill for $2.2 billion (£1.5 billion).</p><p>Increased scrutiny on the banking sector, thanks in large part to stricter stances from regulators like the SEC in the USA and the FCA in Britain, has led many financial institutions to take big steps to prevent such scandals occurring again and costing them billions.</p><p>Bloomberg cites Chris Mathers, a former Canadian police officer, now a consultant, who said: "The biggest threat to banks today, the absolute biggest threat, is the regulator."</p><p>Basically, as a result of increased regulation, banks are putting huge resources into ensuring that they don't get on the wrong side of regulators, as, in an era <a href="http://uk.businessinsider.com/deutsche-bank-q4-earnings-2016-1">where profits are getting more and more squeezed</a>, the ability of banks' balance sheets to absorb big fines, is getting smaller. UBS <a href="http://www.bloomberg.com/news/articles/2015-04-17/ubs-plans-to-add-up-to-350-in-compliance-after-billions-in-fines">announced plans in 2015 to bring in around 350 new compliance staff to the bank</a>, after being hit by a series of big fines, including penalties related to Adoboli's misconduct.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/hillary-clinton-challenges-controversial-drug-pharmaceuticals-valeant-schiller-martin-shkreli-2016-1">Watch Hillary Clinton threaten to 'go after' one of the most controversial drug companies in America</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="M5MWpqMDE6BWUuurkAIDLJxBwpkX9xlv" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'M5MWpqMDE6BWUuurkAIDLJxBwpkX9xlv',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Banks are hiring former CIA agents to spy on their employees

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/573ea690dd0895e0168b45b7-3083-2312/rtsezdm.jpg" alt="India Green paint" data-mce-source="Reuters/Rupak De Chowdhuri" data-mce-caption="Supporters of Trinamool Congress (TMC) celebrate after learning the initial poll results of the West Bengal Assembly elections, in Kolkata, India May 19, 2016." /><p class="source"><span>Reuters/Rupak De Chowdhuri</span></p><p class="caption">Supporters of Trinamool Congress (TMC) celebrate after learning the initial poll results of the West Bengal Assembly elections, in Kolkata, India May 19, 2016.</p></div><p></p></div></div>Good morning! Here's what you need to know in markets on Friday.</p><p><strong>Oil is still fighting to break the $50 mark.</strong> After losses in trading on Thursday, the price of both crude benchmarks is on the rise again. Around 6:45 a.m. BST (1:45 a.m. ET) Brent crude, the international benchmark is trading 0.7% higher at $49.15, while WTI is up a similar margin to trade near parity at $49.12.</p><p><strong><a href="http://www.ft.com/cms/s/0/d1c65e1e-1d95-11e6-a7bc-ee846770ec15.html#axzz49AiteNe8">Deutsche Bank shareholders just rejected a pay deal for the company's executives.</a> </strong>The German bank has become the latest big company to be hit by investor anger about executive pay after shareholders voted down its new salary plan for top managers. In a non-binding vote at Deutsche's annual meeting in Frankfurt, 51.9% of shareholders voted against the scheme, the Financial Times reports.</p><p><strong><a href="http://www.ft.com/cms/s/0/b8063f14-1de8-11e6-b286-cddde55ca122.html#axzz49AiteNe8">Saudi Arabia could be about to issue its first international bonds. </a></strong>According to people familiar with the situation, cited by the Financial Times, the oil rich Gulf state has instructed several international banks to start preparing for the possibility of a sovereign debt issuance, and sounding out buyers.</p><p><a href="http://uk.businessinsider.com/middle-east-egypt-oil-crash-victim-2016-5"><strong>The Egyptian economy is getting crushed by the impact of oil and geopolitics.</strong> </a>"Egypt ... looks vulnerable and a period of weaker remittances and, potentially, less official financing, will add to fears over the country's balance of payments position," argued Capital Economics' Jason Tuvey in a recent research note.</p><p><strong>It is a fairly quiet day of data in Europe.</strong> On Friday morning, the highlight of the economic data calendar is the announcement of the state of the eurozone's current account. We'll also get a reading on German producer prices.</p><p><strong><a href="http://uk.businessinsider.com/jerome-kerviel-suing-societe-generale-2016-5">Rogue trader Jerome Kerviel is suing Societe Generale.</a></strong> In French court on Thursday, Kerviel sued the bank for 5.7 billion euros, according to Gaspard Sebag at Bloomberg. Litigation has been ongoing for eight years between Kerviel and his former employer, over bad bets he made on stock market futures.</p><p><a href="http://uk.businessinsider.com/tesla-raises-nearly-15-billion-in-fresh-capital-2016-5"><strong>Tesla Motors just raised nearly $1.5 billion in new funding.</strong> </a>The carmaker has raised $1.46 billion in fresh capital from the sale of its 6.8 million new common stock offering, according to IFR. Tesla seeks to finance a plan to expand production of its electric vehicles to 500,000 a year by 2018.</p><p><strong><a href="http://uk.businessinsider.com/an-egyptair-flight-from-paris-to-cairo-has-gone-missing-2016-5">The wreckage from EgyptAir </a> <a href="http://uk.businessinsider.com/an-egyptair-flight-from-paris-to-cairo-has-gone-missing-2016-5">Flight MS80, which crashed heading from Paris to Cairo early Thursday morning, has still not been found</a>. </strong>Greek officials initially said they had located pieces of plastic and two life jackets in the Mediterranean Sea, near where a transponder signal from the plane was emitted sometime before it fell off the radar, but that information turned out to be wrong.</p><p><strong><a href="http://uk.businessinsider.com/r-wary-china-watches-as-taiwan-inaugurates-first-woman-president-2016-5">Taiwan has sworn in its first woman president, </a><a href="http://uk.businessinsider.com/r-wary-china-watches-as-taiwan-inaugurates-first-woman-president-2016-5">Tsai Ing-wen</a><a href="http://uk.businessinsider.com/r-wary-china-watches-as-taiwan-inaugurates-first-woman-president-2016-5">. </a></strong>Tsai's Democratic Progressive Party, which has traditionally favored independence from China, takes over after eight years under China-friendly Nationalist Ma Ying-jeou.</p><p><strong><a href="http://uk.businessinsider.com/ncp-research-shows-196-chance-of-a-brexit-2016-5">The probability of Britain voting to leave the European Union on June 23 is currently less than 20%, according to polling analyst Matt Singh</a> </strong> Singh is the only person who correctly predicted a Conservative majority in last year's <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> general election.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/most-interesting-men-world-watches-rolex-breitling-jorg-gray-2015-8">These are the watches worn by the smartest and most powerful men in the world</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="N3NGJ0djpb_DdQzkXVopAvbq5AmmiuOx" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'N3NGJ0djpb_DdQzkXVopAvbq5AmmiuOx',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

10 things you need to know in markets today

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56de8474dd0895644e8b47f0-1556-1167/rtxyuny.jpg" alt="Runners pass another battling fatigue during the London Marathon in central London April 21, 2013. Undaunted by the Boston Marathon bombings, big crowds lined the route of London 's mass road race on Sunday to cheer on around 36,000 runners, many of whom wore black ribbons to remember the dead and wounded." data-mce-source="REUTERS/Eddie Keogh" data-mce-caption="The market had to run out of steam sooner or later." data-link="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0FCIXUHP3DS&amp;SMLS=1&amp;RW=1440&amp;RH=722#/SearchResult&amp;VBID=2C0FCIXUHP3DS&amp;SMLS=1&amp;RW=1440&amp;RH=722&amp;POPUPPN=7&amp;POPUPIID=2C0BF1WLMCFA" /><p class="source"><span><a href="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0FCIXUHP3DS&amp;SMLS=1&amp;RW=1440&amp;RH=722#/SearchResult&amp;VBID=2C0FCIXUHP3DS&amp;SMLS=1&amp;RW=1440&amp;RH=722&amp;POPUPPN=7&amp;POPUPIID=2C0BF1WLMCFA">REUTERS/Eddie Keogh</a></span></p><p class="caption">The market had to run out of steam sooner or later.</p></div><p></p></div></div>British banks are lagging behind their European rivals and may never be as profitable as they were prior to the financial crisis, <a href="http://www.ft.com/cms/s/0/62749460-06f0-11e6-a70d-4e39ac32c284.html#axzz46udhTUwp">according to analysis from the Financial Times.</a></p><p>The FT's research shows that British banks are making nowhere near as much as they did pre-crisis, with profits at the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>'s biggest banks 63% lower in 2015 than in 2007, when banking profits peaked.</p><p>In contrast, European banks, while still making substantially less than in 2007, are just 34% less profitable than back then.</p><p>All of the so-called big five UK banks - HSBC, Barclays, Lloyds, RBS, and Santander - had 2015 profits that were far lower than in 2007. By comparison, pre-tax profits at seven of the 30 biggest banks on the continent were higher last year than they were in 2007.</p><p>Of those banks, UBS, Societe Generale, and Nordea, the Swedish lender, have seen some of the biggest gains. Last year UBS made a profit of 5.5 billion Swiss francs (£3.87 billion; $5.63 billion), nearly 10% higher than in 2007 when the bank took a $10 billion hit on sub-prime mortgages.</p><p>Societe Generale also saw a big gap between 2007 and 2015 earnings, but much of that increase in profitability was down to the near €5 billion hit it took thanks to the <a href="http://www.businessinsider.com/ap-convicted-french-trader-fights-billions-in-civil-damages-2016-1">activities of notorious rogue trader Jerome Kerviel.</a></p><p>A big different between British banks and their continental counterparts is that UK lenders have had to pay huge fines for misselling payment protection insurance, <a href="http://uk.businessinsider.com/payment-protection-insurance-repayments-worth-more-than-23-billion-2016-4">a scandal that has cost almost £25 billion so far with much more set aside for further repayments.</a></p><p>However, once the PPI scandal comes to an end, Britain's banks could see a boost. "An end to PPI provisions, along with conduct fines, would transform the position relative to European banks," the chief executive of Old Mutual Global Investors told the FT.</p><p>While that may be a bright spot, British banks may never recover to pre-crisis levels of profit, according to Andrew Coombs, a banking analyst with Citi. "It's fair to assume, on an absolute basis, that you won't get back to pre-crisis earnings," he said. "Collectively, these are much smaller entities now," Coombs told the FT.</p><p>The UK's banks all report their results for the first quarter of 2016 in the next week or so, with big falls expected across the board. In its round-up of analysts expectations, Bloomberg shows that profits at Barclays are expected to slip 24.5% and HSBC will decline 42%. RBS and Lloyds are both also expected to see profits drop.</p><p>Earlier on Tuesday, Standard Chartered, the emerging market focused, London-listed bank, <a href="http://uk.businessinsider.com/standard-chartered-q1-trading-update-2016-4">reported a 64% fall in profits from the same quarter last year.</a></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/hamilton-makes-over-2-million-month-producer-jeffrey-seller-broadway-musical-theater-2016-4">Broadway's biggest hit 'Hamilton' is making over $2 million a month - here's why the producer thinks it could be making a lot more</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="hqaGdtMjE6TuOLd1QuJ1UzvqOkB9_J_a" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'hqaGdtMjE6TuOLd1QuJ1UzvqOkB9_J_a',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

British banks are lagging behind Europe and may never be as profitable as they were pre-crisis

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/503f4e4aecad044d0a00000a-400-300/anthonyjenkins.jpg" alt="Anthony Jenkins" data-mce-source="Image via Barclays" /><p class="source"><span>Image via Barclays</span></p><p class="caption">Anthony Jenkins</p></div><p></p></div></div>Barclays was the first bank to settle with authorities over LIBOR fixing in 2012. But that was just the start of its troubles.</p><p>In 2013, less than a year after Anthony Jenkins took over from Bob Diamond as CEO, Barclays' US supervisors at the Federal Reserve Bank of New York crucified the US unit of the London-listed bank, according to an internal document from the Fed obtained by Business Insider.</p><p>Barclays declined to comment.</p><p>The New York Fed report, dated June 6, 2013, detailed a series of failures in the bank's US operations, investment banking controls, and risk management protocols. The report was the result of an annual assessment.</p><p>According to the document, Barclays' US operations:</p><ul><li>Didn't implement controls to catch rogue traders.</li><li>Had an outdated and fragmented IT infrastructure.</li><li>Had to review whether it could "effectively manage" its wealth management arm.</li><li>Had "weaknesses" in its capital markets underwriting unit.</li><li>Suffered a supervisory downgrade for compliance risk management, leaving it liable for fines and legal action.</li></ul><p>Jenkins, <a href="http://uk.businessinsider.com/barclays-ceo-antony-jenkins-left-because-of-his-lack-of-investment-banking-understanding-2015-7">who was ousted as CEO in</a> July 2015 by now-Executive Chairman John McFarlane, was supposed to shepherd the bank into a new era of compliance and social responsibility. He replaced Bob Diamond in the aftermath of the LIBOR manipulation scandal in 2012.</p><p>The detailed list of issues noted by the New York Fed, just in the US operations, showed the scale of the challenge left by the previous management, under which Barclays' investment banking activities ballooned.</p><p>The report was addressed to Jenkins, Barclays' then-US CEO Hugh "Skip" McGee III, and Barclays' former corporate and investment banking co-CEOs, Eric Bommensath and Thomas King.</p><p>The first paragraph sets out the tone of the report, saying that Barclays required "more than normal supervisory attention":</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6dfa26e97c660008badc8-1065-385/barc start.png" alt="Barc start" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div></p><p>King is retiring from Barclays on March 4 after spending the past few years at the top of Barclays' investment bank, based in the US. Bommensath left the bank at the start of this year, while McGee, who joined Barclays at the height of the 2008 crisis, left in 2015.</p><p>Barclays was criticized for a lack of controls on rogue trading, which was marked by the regulator as a "Matter Requiring Immediate Attention," and aspects of the bank's use of leverage, or debt, and exposure to hedge funds were identified as concerns. Here's how that looked in the report:</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6dfcd6e97c621048bad12-968-278/barc mria.png" alt="Barc MRIA" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div><br />The New York Fed also said management of the bank's US wealth business "should review its capability to effectively manage the business," in the wake of "control environment weaknesses and infrastructure deficiencies."</p><p>The big bonuses seen in the Bob Diamond era were a sticking point for the New York Fed. Barclays was told to align its pay structure "with control objectives and evolving supervisory expectations."</p><p>The New York Fed said: "Compensation practices should be designed to avoid providing incentives that encourage imprudent risk-taking and processes should be put in place to monitor the effectiveness of incentive compensation arrangements in providing balanced risk-taking incentives."</p><p>The bank's compliance function was downgraded to Marginal from Fair before the review, highlighting how exposed Barclays was to fines and litigation, particularly related to its "deficiencies" in anti-money-laundering controls.</p><p>It was a prescient warning. Barclays was fined £72 million by the UK's Financial Conduct Authority last year for lacking anti-money-laundering controls when handling £1.9 billion from a client.</p><p>Here's the NY Fed:</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6dff46e97c623008bad8f-881-442/barclays compliance.png" alt="Barclays compliance" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div><br />As a whole, the bank's US operations scored a rating of Fair under the review, a rating it first received in 2011 after a downgrade from Satisfactory.</p><p>The Fed acknowledged the size of the task that awaited Jenkins, saying "With such extensive senior level turnover, management must ensure that the team comes together effectively and executes on the firm's strategic and remediation efforts."</p><p>The new tone struck by Jenkins as CEO, focusing on improving culture and risk management, helped placate the regulator:</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6e00e6e97c623048badbd-929-255/barc culture.png" alt="Barc Culture" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div><br />Jenkins was replaced by Jes Staley in October 2015. Staley was a hedge fund manager at the US-based BlueMountain Capital and former CEO of JPMorgan's investment-banking and asset-management unit.</p><p>The US business is going through a period of change. King said in a memo in January that the bank would close its Moscow office, shutter stock trading in Asia, and make changes to the US markets business. The bank is streamlining and simplifying its business in response to regulatory and economic changes.</p><p>But, back to rogue trading, which required the most urgent attention, according to the regulator. Barclays' management had come up with a plan to improve controls on "unauthorized trading" but had failed to implement them:</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6e0256e97c61e048bada6-636-120/barc 1.png" alt="Barc 1" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div></p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6e0356e97c686008bacdb-904-77/barc 2.png" alt="Barc 2" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div></p><p>The issue was classed as a Matter Requiring Immediate Attention, which "tend to be matters of significant importance and urgency" and include "matters that have the potential to pose significant risk to the safety and soundness of the banking organization."</p><p>The New York Fed's pursuit of rogue traders is bearing fruit. <a href="http://www.bloomberg.com/news/articles/2016-02-16/spies-who-chased-terrorists-join-banks-to-hunt-for-rogue-traders">Bloomberg News reported </a>that banks including Barclays, HSBC and Deutsche Bank have hired ex-spies from of the UK and US militaries, the CIA, and GCHQ to watch the activities of bank employees and try to prevent misconduct. In recent years, bank employees including Jerome Kerviel, Kweku Adoboli, and Tom Hayes have been jailed for their roles in big banking scandals. In 2008, <a href="http://www.businessinsider.com/ap-convicted-french-trader-fights-billions-in-civil-damages-2016-1?IR=T">Kerviel lost €4.9 billion (£3.7 billion) at Societe Generale</a>, and <a href="http://uk.businessinsider.com/ex-ubs-rogue-trader-kweku-adoboli-is-out-of-prison-2015-6">Adoboli's trades left UBS on the hook for $2 billion (£1.4 billion) in 2011</a>.</p><p>From a technology point of view, Barclays was a mess in 2013.</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6e0516e97c623008bad92-848-146/barc it.png" alt="Barc IT" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div></p><p>The bank was using spreadsheets updated manually to manage risks and had "fragmented systems."</p><p>The report ends with a list of the challenges facing Barclays and the banking sector as a whole in 2013, most of which remain relevant almost three years later (apart from rising interest rates):</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/56d6df336e97c623048badba-920-354/barc strat.png" alt="Barc strat" data-mce-source="Business Insider" /><p class="source"><span>Business Insider</span></p></div><p></p></div></div></p><p>While the issues raised in the report might be applicable to other banks, it makes for a fascinating insight into the usually secretive world of banking supervision, and the litany of issues that faced management at Barclays as fines for conduct failings began to mount.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/kirsty-bertarelli-billionaire-lifestyle-rich-britain-2016-2">The fabulous life of Kirsty Bertarelli, the richest woman in Britain</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="9tN2MyMTE63Sbb4PVt6oR_kpPl8a3oqU" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '9tN2MyMTE63Sbb4PVt6oR_kpPl8a3oqU',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Leaked document from the New York Fed says Barclays was 'weak' at preventing rogue traders

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/55d45000dd08950a058b458f-1333-1000/nicole el karoui2.jpg" alt="Nicole El Karoui2" data-mce-source="YouTube/Fondation Cartier pour l'art contemporain" data-mce-caption="Famous maths professor Nicole El Karoui." /><p class="source"><span>YouTube/Fondation Cartier pour l'art contemporain</span></p><p class="caption">Famous maths professor Nicole El Karoui.</p></div><p></p></div></div>Mathematical whizkids and former physicists-turned bankers are almost becoming dime a dozen in the financial world.</p><p>But there's a truism that's been rife in the banking sector for decades - France turns out a high number of quantitative analysts.</p><p><a href="http://wilmott.com/messageview.cfm?catid=3&amp;threadid=49364&amp;FTVAR_MSGDBTABLE=">Financiers take to the forums to ask why</a> and associations have been set up to highlight and help France's deluge of quants to network. <a href="http://www.quantvalley.org/home.aspx">This association "Quant Valley" is even subtitled "Paris the City of Quants."</a></p><p>And it can all be traced back to one maths genius -<a href="http://www.cmapx.polytechnique.fr/~elkaroui/">Nicole El Karoui</a>.</p><p>On a basic level, quants - what they're more commonly known as in banking - use <span>computers to tell them what to buy and sell. However, the programmes and analysis require a deep level of pure mathematics and algorithms that only a very neat pool of professionals would understand. </span></p><p><span>French-Tunisian <span>El Karoui is an architect in this field and has been instrumental in shaping France's academic institutions in the way they teach quantitative finance.</span></span></p><p><span>French universities now rank amongst the top in the world for churning out the high-calibre and highest-paid finance graduates. For example, the a<span>verage finance graduate from <a href="http://uk.businessinsider.com/best-paid-finance-graduates-universities-2015-8#ixzz3jAfW8ps5">Ecole Polytechnique in France will earn around £74,000 ($115,000)</a></span></span><span><span>. </span></span><span><span>In fact, there are seven French universities in the top 15 for best paid financial graduates in the world. </span></span></p><p>Famously, some of world's famous quants, and rogue traders, hail from a number of these universities.</p><p><strong>The woman that shaped France's reputation for quants</strong></p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/55d45000dd08950a058b4590-831-388/nicole el karoui.jpg" alt="Nicole El Karoui" data-mce-source="YouTube/Vi?n Nghiên c?u cao c?p v? Toán" data-mce-caption="Introduction to Credit Risk - Prof Nicole El Karoui on YouTube from this year." /><p class="source"><span>YouTube/Vi?n Nghiên c?u cao c?p v? Toán</span></p><p class="caption">Introduction to Credit Risk - Prof. Nicole El Karoui teaching. Documented on YouTube from this year.</p></div><p></p></div></div>Those under the tutelage of professor El Karoui <span style="line-height: 1.5em;">are famously sought after in London's Square Mile and New York's Wall Street. </span></p><p><span style="line-height: 1.5em;">The Paris-based maths professor</span><span style="line-height: 1.5em;">, who teaches the niche art of creating and pricing complex financial instruments linked to stocks, bonds and loans - derivatives, is the </span><span>co-director, with Marc Yor and Gilles Pagès, of the Master of Advanced Studies programme Probability &amp; Finance (more commonly known as <span>"DEA El Karoui")</span>. The programme is</span><span> currently jointly operated by </span><a href="https://en.wikipedia.org/wiki/%C3%89cole_Polytechnique" title="École Polytechnique">École Polytechnique</a><span> and the </span><a href="https://en.wikipedia.org/wiki/Pierre_and_Marie_Curie_University" title="Pierre and Marie Curie University">Pierre and Marie Curie University</a>.<span></span></p><p>It also is now one of the <span>most prestigious programmes in quantitative finance in the world. </span></p><p>In 2006, just before the shine was taken off those trading in complex derivatives by the credit crisis, the media like The Wall Street Journal highlighted what a huge deal it was for finance students to study under the famous French quant expert. </p><p><span>"<a href="http://www.wsj.com/articles/SB114187184703793317">When I talk about El Karoui's master's, everyone knows</a>," said a French student at the time <span>Xavier Charvet to the WSJ.</span></span></p><p><span><span>Rama Cont, a former student and now <span>Professor of Mathematics and Chair in Mathematical Finance at </span><a href="http://imperial.ac.uk/">Imperial College London</a>, said <span>El Karoui's name was "<a href="http://www.wsj.com/articles/SB114187184703793317">the magic word that opened doors for young people.</a>"</span></span></span></p><p>At the time, the WSJ reported that banking headhunters sought after the 75 or so students that were being tutored in <span>El Karoui's "Probability and Finance" course. </span></p><p><span>In the same report, <span>head of BNP Paribas's US equity and derivatives department in New York, </span></span>Amine Belhadj, even said that El Karoui "played a crucial role in finding interns when the bank began handling derivatives for clients in 1989."</p><h2>Rise and fall of French quants</h2><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/55d45000dd08950a058b4591-1978-1484/gettyimages-98698856.jpg" alt="Fabrice tourre" data-mce-source="Getty" data-mce-caption="Fabrice Tourre (L), executive director of the structured products group trading for The Goldman Sachs Group (at the time), is sworn in while testifying before the Senate Homeland Security and Governmental Affairs Investigations Subcommittee on Capitol Hill on April 27, 2010 in Washington, DC." /><p class="source"><span>Getty</span></p><p class="caption">Fabrice Tourre (L), executive director of the structured products group trading for The Goldman Sachs Group (at the time), is sworn in while testifying before the Senate Homeland Security and Governmental Affairs Investigations Subcommittee on Capitol Hill on April 27, 2010 in Washington, DC.</p></div><p></p></div></div>El <span>Karoui shaped the banking world from the outside-in, and with this, a plethora of French quants would flood the shores of the US and the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>.</span></p><p>Immediately following her help in the late 1980s for banks finding the right talent in the derivatives sector, French universities were developing programmes that used her teachings and methods to focus on "<a href="http://www.newsweek.com/quants-derivatives-and-myth-rogue-trader-64883">the very, very complex modeling of derivatives</a>," reported Newsweek. British or other European universities were not on the same page.</p><p>Instead UK and European banks would siphon in French talent.</p><p>But the French talent did come at a price - like Frankenstein's monster, <span>El Karoui's theories and methods, which were taught in all the major French universities, <a href="http://www.businessinsider.com/every-time-a-few-billion-dollars-evaporate-someone-french-seems-to-wind-up-in-the-headlines-2012-5#ixzz3jFYcapNr">were being misused</a>.</span><span><br /><br /></span>The traders that lost a ridiculous amount of money (legally or illegally) and became household names for it were often French and hailed from French university derivatives tutelage.</p><p><span style="line-height: 1.5em;">Goldman Sachs' one time wonder kid, Fabrice "Fabulous" Tourre, came from the elite </span><span style="line-height: 1.5em;">École Centrale Paris. Unfortunately, he was dubbed the "face of Wall Street greed" by US regulator Securities and Exchange Commission (SEC) and was fined £391,000 ($650,000) and told to hand back a £112,000 ($175,000) bonus for defrauding investors in the run up to the credit crisis.</span></p><p>Former trader Bruno Iksil - dubbed "The London Whale" for his massive legal market bets - was also a derivatives wizard that reportedly went to <span>École Centrale. While he was at the centre of the $6.2 billion (£4 billion) JP Morgan legal trading loss of 2012, when massive derivatives bets went sour, he was a massive profit generator for the bank previously.</span></p><p>Critics say that traders that don't come from the same calibre of university, such as Jerome Kerviel, also make huge mistakes like financial wizards, such as Iksil and Tourre, to prove their worth. </p><p><span>Kerviel, a former trader at Societe Generale's </span><a href="http://www.businessinsider.com/jerome-kerviel-gets-out-of-jail-early-2014-9?IR=T">lost $5.8 billion (£3.7 billion) in rogue trades</a> and graduated from the <a href="http://www.newsweek.com/quants-derivatives-and-myth-rogue-trader-64883">less prestigious and "provincial" university</a> (<span>University of Lyon). </span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/50-cent-files-bankruptcy-lawsuit-rise-fall-2015-7">This is how rapper 50 Cent made millions and then lost it</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="VlbnI2djrZXIh9tIkLc68cC984sL8GSb" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'VlbnI2djrZXIh9tIkLc68cC984sL8GSb',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

France is famous for its quants because of this one woman

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54eae287dd089555138b4595-1200-750/rtrhxpr.jpg" border="0" alt="Britain's Nick Leeson stands on the shore of Galway Bay, April 21, 2004"><p class="source"><span>Reuters</span></p><p class="caption">Nick Leeson single handedly lost Barings Bank £862 million in 1995.</p></img></div><p></p></div></div>What do you do when you lose a bank £862 million through illegal and fraudulent trading? Well, you become a debt counsellor, of course.</p><p>That is what Nick Leeson, arguably <a href="http://www.businessinsider.com/rogue-traders-2011-9?op=1&amp;IR=T">one of the most famous rogue traders in recent history</a>, does now.</p><p>"The world of banking is always good to me, because it throws out a bone from time to time by shooting itself in the foot," said <a href="http://www.theguardian.com/business/2015/feb/23/nick-leeson-banking-industry-extremely-competitive-improperly-policed">Leeson to the Guardian newspaper</a>.</p><p>Leeson's interview marks the 20th anniversary since he caused the collapse of Barings Bank. He fled Singapore with his then-wife Lisa and after he disastrously "lost a lot of money" across a flood of rogue trades. After causing an international manhunt, the bank eventually collapsed three days later as it struggled to recapitalise at such short notice, after Leeson concealed the losses from 1992 to 1995.</p><p>However, judging by his interview in the newspaper, he seems more <a href="http://www.theguardian.com/business/2015/feb/23/nick-leeson-banking-industry-extremely-competitive-improperly-policed">embarrassed than contrite for his hand in the felling of one of the world's most old and prestigious lenders in the world</a>. </p><p>At the time, the <a href="http://www.businessinsider.com/13-awesome-wall-street-movies-2013-1?op=1">Queen was rumoured to have invested £40 million into Barings</a>.</p><p>"You go through them all. But the lasting one for me is embarrassment," said Leeson. "Because it's the complete opposite of what I wanted. I'd want to be remembered for my successes rather than my failures, but nothing that I do is probably ever going to change that."</p><p><span style="line-height: 1.5em;">He even downplayed his notoriety from other, now, <a href="http://www.businessinsider.com/rogue-traders-2011-9?op=1&amp;IR=T">infamous rogue traders</a>.</span></p><p><span style="line-height: 1.5em;">"[Even among the ranks of rogue traders], I'm way down there now," he added, while referring to <a href="http://www.businessinsider.com/kweku-adoboli-profile-2011-9?IR=T">UBS' Kweku Adoboli who lost UBS £1.5 billion</a> in 2011 and Societe Generale's <a href="http://www.businessinsider.com/jerome-kerviel-gets-out-of-jail-early-2014-9?IR=T">Jerome Kerviel who lost £3.7 billion in total</a>.</span></p><p><span style="line-height: 1.5em;">So what is he up to now?</span></p><p><span style="line-height: 1.5em;"><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54eae287dd089555138b4596-1200-858/rtr2ic9m.jpg" border="0" alt="Nick Leeson (C), the rogue trader who broke Britain's oldest merchant bank, smiles as he is escorted by police at Changi Airport after he was freed from a Singapore prison in this July 3, 1999 file photo."><p class="source"><span>Reuters</span></p><p class="caption">Nick Leeson (C), the rogue trader who broke Britain's oldest merchant bank, smiles as he is escorted by police at Changi Airport after he was freed from a Singapore prison in this July 3, 1999 file photo.</p></img></div><p></p></div></div>He now l<a href="http://www.theguardian.com/business/2015/feb/23/nick-leeson-banking-industry-extremely-competitive-improperly-policed">ives with his second wife Leona, in her home town of Galway, Ireland</a>, after his first wife divorced him while he was in jail.</span></p><p><span style="line-height: 1.5em;">He served four and a half years in a Singapore prison for</span><span style="line-height: 1.5em;"> his rogue trading activities. However, he was released early when he contracted bowel cancer.</span></p><p><span style="line-height: 1.5em;">While the court made him personally liable for £100 million after he was convicted, liquidators stopped chasing him in 2005.</span></p><p><span style="line-height: 1.5em;">He now earns around <a href="http://www.telegraph.co.uk/finance/personalfinance/fameandfortune/9483379/Barings-rogue-trader-Nick-Leeson-Money-is-not-my-motivation.html">£80,000 per year as a debt counsellor and through raking in around thousands of pounds a time</a> for after dinner speeches and conference talks.</span></p><p><span style="line-height: 1.5em;">"Look, I live comfortably, I don't try to hide from that. I'm very well paid for the talks that I do." When pressed, however, he admits that for someone who had "a huge need for success", it's not quite fulfilling, "because I still feel that I have more to offer".</span></p><p><span style="line-height: 1.5em;"><a href="http://www.theguardian.com/business/2015/feb/23/nick-leeson-banking-industry-extremely-competitive-improperly-policed">For the full interview click here.</a></span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/eighth-grader-invents-braille-printer-2015-1">A 13-Year-Old Made A Revolutionary Invention Out Of Legos And Now Intel Is Investing In His Company</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="5oanB2cjrl7OZQZKJ15oB_-fMpAdPXBF" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '5oanB2cjrl7OZQZKJ15oB_-fMpAdPXBF',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

You Searched For "Jerome Kerviel" and got 11 results

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