'He didn't want to tell the truth immediately': Mianne on Kerviel

The unauthorised trades in European equity index futures had been going on for "a few months" in 2007, Mianné said, but "the losses were just in 2008".

"Why didn’t we see that? Because he was working before at the middle and back office and knew perfectly how to hide the positions with some fictitious transactions on, let’s say, forwards on indexes, and in terms of the VAR spread test, delta every night on the position was zero." One of the techniques he used, Mianné said, involved rolling 30-day forward positions, which were unwound just before confirmation and replaced by forwards with different counterparties. "He was very clever," he adds, "but that's not an excuse, because we have to be more clever."

The trades only came to light late last week, when SG's management noticed a forward deal timed for Sunday night. When SG called the supposed counterparty last weekend to confirm the deal, it denied all knowledge. "Then we spent hours, all night, evaluating the rogue trade, because [the trader] didn't want to tell the truth immediately, and discovered at the end of Sunday night what the futures position was."

SG's management decided to unwind the positions immediately, starting on Monday - but Mianné is confident that the unwinding did not cause this week's equity slump, as the maximum volume equated to only 8% of total equity futures volume.

He says: "We estimate that the impact we had on the market was approximately half a per cent. We had nothing on the Asian markets, and when we arrived on Monday morning as you saw the Asian and emerging markets were already falling. So the impact was minimal – we had no choice, and the secrecy was well managed, I think, till the start of yesterday afternoon, when rumours started to circulate."

Mianné, however, is still puzzled by the trader's actions. "We are almost 100% sure he didn't benefit at all," he says.

See also: Questions remain over SG rogue trader
€4.9 billion fraud at Société Générale

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