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Recklessness and rogue traders

The UBS rogue-trading fiasco (Banks under new pressure as ‘rogue trader’ loses bn, 16 September) does, as you point out, emphasise the need to implement the Vickers recommendations in full much more quickly than the government’s complacent 2019 timetable. Yet insulating retail banking from high-risk speculative trading activities only addresses part of the problem.

One is bound to ask who benefits from the maelstrom of speculative trading. Answer: only the grossly overpaid traders themselves and their employers and shareholders. No products are manufactured, no jobs are secured, no food is placed in hungry mouths, no diseases are cured, no social benefits are shared. I would like to see regulation going much further, stifling this frenzy of valueless speculation, starting with an international legal requirement that all transactions can be implemented no sooner than 24 hours after they are initiated. This will deny traders the opportunity to jump on and off every speculative wave as it develops.
Robin Gill

• So Kweku Adoboli, the so-called UBS “rogue trader”, may be charged with “fraud by abuse of position” – assuming it still counts as fraud, if the perpetrator doesn’t gain materially himself. I think we all know that had Adoboli earned bn for UBS, rather than lost it, his trading behaviours would never have been called an “abuse of position”, and he would now be anticipating the kind of bonus that would enable most of us to consider early retirement, rather than the lengthy spell of imprisonment he will almost certainly get. His case is timely: it highlights the continuing and licensed recklessness of the banking sector that puts the financial well-being of the rest of us in such peril. The banks’ cavalier practices need reining in sooner rather than later. A trader is not a “rogue” only when he loses money.
David Clifford

• Quite simply, the internal risk managers in these banks are one of two things: incompetent, because they do not understand the data their systems give them; or complicit, because they have turned a blind eye while profits racked up over the years and paid everybody’s bonus. Now it’s all gone wrong, as the law of averages dictates. Analytical programs are only as good as the analysts.

So UBS will wring its hands, pay a fine and promise to clean itself up,, as have others over market-related issues, and carry on as before. The regulatory bodies are the only ones who can drive the necessary changes.
Phil Thomas
Director, financial trading systems, Sinus Iridum

• Your headline focuses again on the problems of risk-taking behaviour. If the banks are serious about wanting to tackle unacceptable risk then they need to take cocaine abuse extremely seriously (Meltdown in the City: drug problems among traders reach record high, 10 September). Cocaine is a major psychoactive drug that heightens the brain’s own reward systems. Drug abuse is becoming increasingly unacceptable in many jobs. A zero-tolerance policy by the finance houses backed up with random testing is long overdue.
Dr Fred Schon
Consultant neurologist, St George’s hospital

• Sometimes naive questions should be asked. What is the social value of the frenetic buying and selling of shares in the world’s markets? Do we need to be told, in every news bulletin, of the rise and fall of the FTSE? We hear of the winnings and losings of the big-time gamblers, but what is the justification for these games with money? One person’s profit is another’s loss.

The slave trade was once seen as a legitimate way to make fortunes, so was child labour. Both were abuses of other humans. Perhaps one day stock market trading will be seen in the same light. Last week’s evidence of another “rogue trader” suggests that these questions should be answered.
Michael Bassey
Newark, Nottinghamshire

• If one trader has lost the UBS investment bank £1.2bn, then presumably other traders have gained £1.2bn for their investment banks. Bonuses all round!
Philip Errington
Staincross, South Yorkshire

• Currently, the amount of value being “traded” on the world’s stock markets represents about 6.73 times the total value of actual company assets and commodities in the “real world” valuation. This therefore should truthfully be referred to as “fantasy money”, which is why when you get a credit crunch, as in 2007-08, the money appears to “disappear” when the real value of the mortgages is being covered by synthetic credit default swaps (CDSs) and collateralized debt obligations (CDOs) rather than actual mortgage bonds.

These, therefore, should either be banned as fraudulent trading or taxed as in gambling. It should be illegal to sell shares/commodities or options that the seller does not actually own.

Actual mortgage bonds should only be available from the holder of the actual mortgage loan. Similarly, exchange-traded funds (ETFs) should be illegal, unless the seller actually owns the stocks. An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks.

If ETFs are banned then the value of the investment market will equal the real value of the assets owned and the fantasy money will be stripped out.

However, that may well mean a huge tranche of investment money will be owned without any assets behind them. These then should properly be invested in the real market to stimulate real growth and manufacturing. Thus rogue traders should be banned or removed from their fantasy world.
Robert White
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