Morgan Stanley has suspended a trader in London after the individual allegedly cost the Wall Street bank $120m (£60m) by wrongly pricing investments.
The actual offence he’s accused of is that when he marked to market (on items which are difficult to do this with) his prices were too high.
So he didn’t in fact "cost" the company money. He certainly concealed that it had made the losses, but didn’t cause those loses by doing so.
3 responses so far ↓
1 Infoholic UK // Jun 19, 2008 at 9:37 am
That’s a bit simplistic Tim – assuming he didn’t make all the trades at the same time, if he’d priced the earlier trades correctly, the losses would have shown up on the daily P&L and he’d have been shut down, or at least under increased scrutiny.
2 jonathan // Jun 19, 2008 at 11:11 am
” assuming he didn’t make all the trades at the same time, if he’d priced the earlier trades correctly, the losses would have shown up on the daily P&L and he’d have been shut down, or at least under increased scrutiny”
Surely this can only be about marking historic investments? Are they not , by definition, actually market priced (rather than marked) when a trade is made? And if subsequent market trades are made at the marked price would that not validate the mark?
3 Infoholic UK // Jun 19, 2008 at 12:02 pm
Normally yes, for your bog-standard OTCs, but it’s a bit more tricky if you’re talking about an illiquid market in exotics.
Leave a Comment