What do you do with the drunken trader? Post: 302433829

Sponsored Content

Special Forums News, Links, Events and Announcements Complex Event Processing RSS News What do you do with the drunken trader? Post 302433829 by Linux Bot on Wednesday 30th of June 2010 04:00:01 PM

06-30-2010

Registered User

What do you do with the drunken trader?

John Bates
06-30-2010 03:59 PM
The news that Steven Perkins, (former) oil futures broker in the London office of PVM Oil Futures, has been fined 72,000 pounds ($108,400) by the FSA and banned from working in the industry is no surprise, see article here:

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7862246/How-a-broker-spent-520m-in-a-drunken-stupor-and-moved-the-global-oil-price.html.

It could have been worse given that the broker, after a few days of heavy drinking, took on a 7.0 million barrel long position on crude oil in the middle of the night. The fine seems miniscule since it cost PVM somewhere in the vicinity of $10 million - after unwinding the $500+ million position.

The surprising thing about this incident is that it happened at all. Perkins was a broker, not a trader. He acted on behalf of traders, placing orders on the Intercontinental Exchange among other places. That he could go into the trading system and sneak through 7.0 million barrels without a customer on the other side is unbelievable.

Heavy drinking is practically a job requirement in the oil industry, my sources tell me, so this kind of thing could be a real issue going forward. As algorithmic trading takes hold in the energy markets, trading may approach the ultra high speeds seen in equities markets. This is a recipe for super high speed disaster, unless there are proper controls in place - especially if there were a way for the broker or trader in question to enrich himself in the process.

One powerful way to prevent this kind of accident or fraud is through the use of stringent pre-trade risk controls. The benefits of being able to pro-actively monitor trades include catching "fat fingered" errors, preventing trading limits from being breached, and even warning brokers and regulators of potential fraud - all of which cost brokers, traders and regulators money. PVM is a good example of this.

Ultra-low-latency pre-trade risk management can be achieved by brokers without compromising speed of access. One solution is a low latency "risk firewall" utilizing complex event processing as its core, which can be benchmarked in the low microseconds. Errors can be caught in real-time, before they can reach the exchange. Heaving that drunken trader right overboard, and his trades into the bin.

Source...

Linux Bot

View Public Profile for Linux Bot

Find all posts by Linux Bot

LEARN ABOUT DEBIAN

blockdiag

BLOCKDIAG(1)						      General Commands Manual						      BLOCKDIAG(1)

NAME

       blockdiag - generate block-diagram image file from spec-text file.

SYNOPSIS

       blockdiag [options] file

DESCRIPTION

       This manual page documents briefly the blockdiag commands.

       blockdiag is a program that generate block-diagram image file from spec-text file.

OPTIONS

       These  programs	follow	the  usual  GNU  command  line	syntax, with long options starting with two dashes (`-').  A summary of options is
       included below.	For a complete description, see the SEE ALSO.

       --version
	      show program's version number and exit

       -h, --help
	      Show summary of options

       -a, --antialias
	      Pass diagram image to anti-alias filter

       -c FILE, --config=FILE
	      read configurations from FILE

       -o FILE
	      write diagram to FILE

       -f FONT, --font=FONT
	      use FONT to draw diagram

       --fontmap=FONT
	      use FONTMAP file to draw diagram

       -s, --separate
	      Separate diagram images for each group

       -T TYPE
	      Output diagram as TYPE format

       --nodoctype
	      Do not output doctype definition tags (SVG only)

       --no-transparency
	      do not make transparent background of diagram (PNG only)

SEE ALSO

       The programs are documented fully by
       http://tk0miya.bitbucket.org/blockdiag/build/html/index.html

AUTHOR

       blockdiag was written by Takeshi Komiya <i.tkomiya@gmail.com>

       This manual page was written by Kouhei Maeda <mkouhei@palmtb.net>, for the Debian project (and may be used by others).

								   May	9, 2011 						      BLOCKDIAG(1)