From the August 01, 2009 issue of Futures Magazine • Subscribe!

Rogue trader strikes

London’s Financial Services Authority (FSA) is keeping mum on reports that it is investigating whether rogue trader Steve Perkins was drunk or stoned when he logged onto his home computer at 2 a.m. London time on June 30 and began building a long position in front-month Brent crude oil futures on the Intercontinental Exchange (ICE) on the ICE Futures Europe electronic platform. Neither the FSA nor ICE nor Perkins’s employer, PVM Oil, one of the UK’s largest oil traders, would confirm the size of his trades, but volume on the platform topped 15,000 contracts that night during a period that usually sees less than 1,000 traded.

“As a result of a series of unauthorized trades, substantial volumes of futures contracts were held by PVM,” wrote PVM boss Robin Bieber in a written statement provided to media. “When this was discovered the positions were closed in an orderly fashion. PVM suffered a loss totaling a little under $10 million.

PVM discovered the position shortly after 10 a.m. that morning, at which point Brent crude had surged to $73.50 per barrel, the highest point this year.

Perkins had been with the company for seven years and was listed as a “senior trader” before being suspended. A company spokesman would not comment on whether he had circumvented risk management controls when placing the trades, and the nature of those controls is sure to play a part in the FSA’s investigation into the matter.

The spree came just a month after a Morgan Stanley trader was fired for trading drunk after an afternoon in the pub, and the timing of Perkins’s trades sparked similar speculation in the media. Security specialists, however, say such conclusions aren’t necessarily warranted.

“It’s not uncommon for senior traders, especially a trusted seven-year vet, to have market access from home, and it’s increasingly common for traders to place trades at odd hours,” said a spokesman for risk management provider FFastFill. “It’s also not that difficult to establish protocols that prevent something like this from happening, and the question will come down to whether such protocols existed and, if so, how they were violated.”

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