How to be a Rogue Trader (2011) by John Gapper is an account of how and why Rogue Traders are now appearing with greater frequency and what could be done to reduce their impact. Gapper is an editor and chief business commentator at The Financial Times so he is well placed to understand the problems that allow Rogue Traders to wreak havoc.
The book looks at various Rogue Traders including Nick Leeson, Jérôme Kerviel, Kweku Adoboli, the NAB rogue traders and various others. Gapper points out that they tended to have things in common. All were outsiders to some degree, most had worked in the back office or could oversee how their trades were booked and so they could hide losses. They tended to appear to do well for a period before getting into serious trouble which they hid before the losses became so enormous that leaked out.
Gapper thinks that the rogue trading can also be reduced if proper controls are used. He points out that the really big successful Wall Street trading banks have not suffered from rogue traders. This could be because they have, as yet, been lucky, but it could also be because they have better controls in place and make sure someone always oversees other people’s trades.
Gapper also makes the point that rogue traders are quite similar to the way in which the whole financial crisis, with the use of credit default swaps and other financial instruments set up something that worked well for a long time before conditions turned and huge losses became apparent.
The book is a fine use of the short ebook format. Gapper has written a very readable, very interesting account of Rogue Traders that is a well worth getting.