Shit happens on the trading floor :
The $6bn trade was processed by a junior member of the bank’s forex sales team in June while his boss was on holiday, said two people familiar with the matter. Instead of processing a net value, the person processed a gross figure. That meant the trade had “too many zeroes”, said one of the people.
The most sweeping way to describe this undertaking is as a demonstration of a new version of capitalism, one that will shift the incentives of financial and business operations to reduce the environmental, social, political, and long-term economic damage being caused by unsustainable commercial excesses. What this means in practical terms is that Gore and his Generation colleagues have done the theoretically impossible: Over the past decade, they have made more money, in the Darwinian competition of international finance, by applying an environmentally conscious model of “sustainable” investing than have most fund managers who were guided by a straight-ahead pursuit of profit at any environmental or social price.
Note : title edited
Many different themes run through Deaton’s work – one of which is an emphasis on the importance of measurement. In his view, data collection and economic theory have become too separated, to the advantage of neither the data collector nor the economic theorist. Collectors need the guidance of theory and analysts need to understand the data they work with. Too often, Deaton says, “what we think we know about the world is dependent on data that may not mean what we think they mean”.
Of course, honest traders change their minds all the time and cancel orders as economic conditions change. That’s not illegal. To demonstrate spoofing, prosecutors or regulators must show the trader entered orders he never intended to execute. That’s a high burden of proof in any market. One helpful fact is if most of a trader’s (canceled) orders were on one side (say to buy) when he was mostly actually trading on the other (selling). For instance Sarao allegedly put in huge orders to sell, so that he could buy a few contracts: All his trading was on one side, but most of his orders were on the other. Then he’d switch a little while later. That seems like a bad sign.
Martin Wolf on liquidity :
If relaxed regulatory requirements encourage banks to provide liquidity in good times, only to run away when unable to fund themselves, we end up in the worst of all worlds. Overconfidence in fair-weather liquidity should be discouraged. Investors ought to worry, instead, since the risk that nobody will be on the other side of their trades is a real one.
Abnormal Capitalist 