Nick Leeson had to serve 4 years in prison in Singapore on fraud charges. Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World is a book by Nick Leeson, who served four years in prison for fraud after bankrupting the London-based Barings Bank in 1995 by hiding $1.4 billion in debt he accumulated as a derivatives trader in Singapore.
Derivatives trading does indeed pose systemic risk. You should watch this 1 hour 30 minute movie Rogue Trader that has been based on the book written by Nick Leeson. In his autobiography Rogue Trader, Nick Leeson said the ethos at Barings was simple: ‘We were all driven to make profits, profits, and more profits … I was the rising star.’
Leeson did make Barings vast sums. In 1993, he made £10m – 10% of the bank’s profits for that year. But in 1995, the discovery of a secret file – Error Account 88888 – showed that Leeson had gambled away £827m in Barings’s name.
The City’s oldest merchant bank was finished.
Watching this movie will help you get a glimpse of how bank traders think and trade. As retail trader we are always pitted against these bank traders who have huge funds at their disposal that they can use to trip our stop losses. But when trading becomes gambling this is what happens. Always keep in mind, never ever take your risk management rules easy. The catastrophe happens when you relax risk management in your exuberance thinking that you will keep on winning. Statistically speaking this is not possible.