FSA bans second Morgan Stanley trader

The UK Financial Services Authority (FSA) has banned David Redmond after he put on a large unauthorised oil futures trade while on Morgan Stanley's freight desk in London in February last year.

"On February 6, 2008, in breach of Morgan Stanley policies and procedures, Redmond built up a substantial short position in WTI Futures on the ICE Futures (Europe) web-based trading platform. He then concealed the position overnight, exposing Morgan Stanley to the risk of incurring a significant loss. The next day, rather than informing the firm of his actions, he traded out of the position," the FSA said in a statement yesterday.

The FSA added that, as Redmond was trading on the prop account and had not endangered the bank's customers, it would be likely to lift the ban in two years' time.

Redmond built up a large net short position of West Texas Intermediate oil futures equivalent to 5.4 million barrels on the WebICE trading platform on the evening of February 6, 2008. He attempted to conceal the position by transferring it to one of his colleagues, and failed to report it on his daily profit and loss report.

By leaving the position open, he exposed the bank to a possible $10 million loss. He closed out the position the next morning, making a small profit, but was detected by management. "It appears Redmond was, to some extent, under the influence of alcohol when he commenced trading at 17.04 on February 6, 2008", the FSA added.

The news follows the FSA's decision last week to fine the bank £1.4 million over the actions of a prop credit trader, Matthew Piper, who failed to mark his portfolio of credit derivatives correctly, forcing the bank to take a $120 million markdown.

See also: Morgan Stanley fined over $120m mismark
OpRisk Europe: FSA condemns operational risk weaknesses
Morgan Stanley trader mis-marking for months
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