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Rogue Trader Hits Alleged Irish Bank

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Before starting this article, I phoned my legal adviser for some...well...for some legal advice. His response can be summed up as follows: (1) when in doubt, put the word 'alleged' in front of anything of a dubious or questionable nature, (2) better still, don't write the article, and (3) never, ever, ever...and I mean NEVER, EVER, EVER...phone me again when I'm lining up a vital putt on the eighteenth green.

And so, bearing in mind the advice of my alleged legal adviser, here goes...

In the first place, let me just say that I know next to nothing about high finance, currency trading, options, derivatives, etc. Where I'm concerned, hedging is something I do when I've finished mowing the lawn.

All of which, it now appears, makes me more than qualified to oversee the alleged currency trading department of Allfirst Bank of Baltimore, the US subsidiary of an Irish bank that will, for legal reasons, hereinafter be referred to as an Alleged Irish Bank, or AIB for short.

From what I can gather, currency traders earn their daily crust by carefully analyzing all the data available before making informed decisions as to which currencies are going to rise and which are going to fall in the near future. Or else they toss a coin.

The strange thing is, they also take out options to cover themselves should the currencies move in the wrong direction. Now, I'm not a gambler, but it seems to me that this defeats the whole purpose of the exercise. I mean, what's the point of having a punt on both horses in a two-horse race?

And it appears I'm not alone in thinking this way, because an alleged currency trader in Allfirst Bank, (for convenience sake, let's call him John), seems to have come to exactly the same conclusion. Over the past year or so, John gambled that the Japanese yen would rise against the US dollar, but he neglected to take out the necessary options to cover his losses in the unlikely event that the alleged Japanese currency should actually sink against the US dollar.

As a result, when the yen did a more-than-passable imitation of a dot com stock, John-boy was left with no alternative but to resort to a currency trader's ultimate fall-back strategy: he crossed his fingers and faked his covering options.

Unfortunately for John, the yen continued on its inevitable, downward way. Eventually, John's alleged managers at Allfirst noticed that he was requesting excessively large amounts of cash and initiated a thorough investigation.

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