After losing $141.5 million to a single rogue trader, New York commodities broker MF Global has revealed the new internal controls intended to stop it happening again.
In a few hours, the trader, Evan Dooley, was able to put a massive short position in Chicago Board of Trade wheat futures on his personal account. Normally, electronic trades would have been monitored to keep them within client trading limits, but MF Global had deliberately disabled the safeguards on its internal trading terminals to speed up order processing, and was left liable for the losses Dooley incurred.
The company employed two consultancies to repair the damage. Technology specialist FTI Consulting has restored and tested the trading controls on the broker's Order Express entry system. Promontory was given the task of assessing the firm's risk management in general.
As a result, MF Global says it has now improved its risk monitoring systems, and recruited more risk specialists, especially those on duty outside normal working hours - Dooley put his trades on early in the morning of February 27. The company has also restructured its risk management department and will recruit a chief risk officer, who will now report directly to chief executive Kevin Davis.
MF Global says it expects to report a net loss before tax of $55-65 million for the fourth quarter of the financial year, mainly due to the provision for Dooley's losses.
Topics: Mf Global
More on People
Job changes in the derivatives, regulation and risk industry throughout Asia
Hoodless and Madaras among those suspended
Head of retail predicts appeal to conservative Canadian investors
UBS promotes Shane Edwards to head of global equity derivatives
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
Nominated for two technology awards
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.