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100 million dollar "mistake"

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Anonymous Coward
User ID: 458592
7/6/2008 10:54 AM
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100 million dollar "mistake"

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TD Securities taking $96M hit on mispricing blamed on individual in London
Fri Jul 4, 6:05 PM
Gary Norris And David Friend, The Canadian Press

TORONTO - Toronto-Dominion Bank (TSX: TD.TO) disclosed Friday a $96-million loss caused by "incorrectly priced" financial investments at its operations in London.

Canada's second-biggest bank by assets said the employee involved at its TD Securities arm "is no longer with the company" and the Toronto bank is co-operating with Canadian and British regulators investigating the matter.

TD did not say if the losses were linked to trading mistakes or if any wrongdoing or criminal activity was involved.

TD spokeswoman Simone Philogene said she could provide little information about the former employee due to privacy considerations.

"What I can tell you is we had a senior trader in our London office leave our employ on Monday, June 23 and upon transitioning his accountabilities we identified incorrectly priced financial instruments," Philogene said.

The financial instruments were credit index swaps - complex futures or derivative contracts used by traders to spread credit risks.

In this instance, the trader most likely priced the instruments higher than their value, which means that TD was recognizing a profit when there wasn't any money being made.

"It's an account we trade for the bank, so there's no client money involved," Philogene said.

A source familiar with credit index trading suggested there are two frequent motivations for a rogue trader to incorrectly price financial investments above their actual worth.

The first is ego, or the trader wanting to be seen by their employee as a success, even if they lost money on the trade. The second is ensuring that money isn't lost on the trade so that the trader receives higher payouts, or monetary rewards, from their employer.

Neither potential motivation has been specifically linked to the TD Bank case, which one banking analyst said was more an embarrassment than a hit to the bank's bottom line.

"It's got to be disappointing for management at TD because they have prided themselves on having not had these issues, where many of their peers have had absolutely devastating related issues," said Brad Smith of Blackmont Capital.

TD Bank has spent the last year gliding relatively unscathed through a period where its Canadian peers have been slammed with massive writedowns related to credit losses tied to the U.S. subprime mortgage market.

The bank also managed to exit the asset-backed commercial paper market just before it crumbled last summer in Canada.

"We are very disappointed that this has occurred," TD Bank Financial Group chief executive officer Ed Clark said in a brief statement.

"Our company has a strong risk culture and we deeply regret this incident. We take this very seriously and will make every effort to ensure that this doesn't happen again."

The news had no discernible impact on the share price of the bank, which has $503.6 billion in assets and ranks behind Royal Bank among Canada's largest lenders.

TD shares were down 25 cents at $63.09 on the TSX, with a 52-week range between $77.10 and $58.57.

The bank's announcement echoed similar risk management troubles faced by the Bank of Montreal (TSX: BMO.TO) early last year when it reported $680 million of commodities-trading losses, mostly from natural gas trading.

The TD Bank charge is not a large one, amounting to only about 11 per cent of the bank's C$852 million net profit in the second quarter ended April 30.

TD will report its third-quarter results Aug. 28 and may include the latest charge in its finances at that time.

Ooopsie Doopsie
User ID: 429261
7/6/2008 11:21 AM

Re: 100 million dollar "mistake"	Quote

Anonymous Coward
User ID: 401342
7/6/2008 11:31 AM

Re: 100 million dollar "mistake"	Quote

Omega

Total Unequivocal Bad Fuckin' News
User ID: 340280
7/6/2008 11:38 AM

Re: 100 million dollar "mistake"

Quote

Ahhh...the quintessential *rogue trader* defense.

I don't buy it for a second.

epcfl

Never underestimate the power of idiots in large groups.
___Omega
_____________________________________________
America is at that awkward stage. It's too late to change the system from within, yet too early to shoot the bastards.
__Claire Wolfe

_____________________________________

"During times of universal deceit, telling the truth becomes a
revolutionary act." - George Orwell
_____________________________________

“War is an ugly thing, but not the ugliest of things. The decayed and degraded state of moral and patriotic feeling which thinks that nothing is worth war is much worse. The person who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself.” John Stuart Mill

Anonymous Coward
User ID: 463869
7/6/2008 11:39 AM

Re: 100 million dollar "mistake"	Quote
OOOOPS!!

Anonymous Coward
User ID: 223380
7/6/2008 11:45 AM

Re: 100 million dollar "mistake"	Quote
hahaha

Anonymous Coward
User ID: 463879
7/6/2008 1:57 PM

Re: 100 million dollar "mistake"	Quote
dumb canucks

paladin Subscriber

Forum Moderator
User ID: 463944
7/6/2008 2:16 PM

Re: 100 million dollar "mistake"	Quote
:dow-cliff:

Aaron

just another frequency domain
User ID: 420547
7/6/2008 3:06 PM

Re: 100 million dollar "mistake"	Quote
Ahhh...the quintessential rogue trader defense. I don't buy it for a second. Quoting: Omega awesome pic. All matter originates and exists only by virtue of a force... We must assume behind this force the existence of a conscious and intelligent Mind. This Mind is the matrix of all matter. Max Planck [link to www.myspace.com]

agento
User ID: 364476
7/6/2008 3:18 PM

Re: 100 million dollar "mistake"	Quote
dumb canucks Quoting: Anonymous Coward 463879 Not as dumb as you moron the article clearly stated the man at fault was british!!!

Anonymous Coward
User ID: 281483
7/6/2008 3:29 PM

Re: 100 million dollar "mistake"	Quote
Its so bizarre.... 100 million looks like PEANUTS... Compared to $20 BILLION of US TAXPAYER MONEY headed to Iraq EVERY MONTH. Who needs tax and spend radical liberals when you have "run up your childrens credit card debt" neocons?

Anonymous Coward
User ID: 357422
7/6/2008 4:03 PM

Re: 100 million dollar "mistake"	Quote
dumb canucks Not as dumb as you moron the article clearly stated the man at fault was british!!! Quoting: agento 364476 Canadians are British subjects, unfortunately for them.

GraftedPromise U$ofA
User ID: 464014
7/6/2008 5:20 PM

Re: 100 million dollar "mistake"	Quote
Quoting: Ooopsie Doopsie 429261 WoW!!!! That's a BIG OOPS!!!!

Anonymous Coward
User ID: 463136
7/6/2008 7:40 PM

Re: 100 million dollar "mistake"	Quote
THe rub here is that there are all sorts of back up procedures to make sure stuff like this does not happen. This being said it still can

Anonymous Coward
User ID: 463361
7/6/2008 7:52 PM

Re: 100 million dollar "mistake"	Quote
rogue trader my ass every bank and investment house out there has these and they're all way overvalued they're all in deep sh*t

Mi'Kmaq
User ID: 400157
7/6/2008 8:24 PM

Re: 100 million dollar "mistake"	Quote
Ya gotta have a scape-goat,don't cha know!

ego
User ID: 437387
7/6/2008 9:32 PM

Re: 100 million dollar "mistake"	Quote
dumb canucks Not as dumb as you moron the article clearly stated the man at fault was british!!! Canadians are British subjects, unfortunately for them. Quoting: Anonymous Coward 357422 Not since Trudeau signed an independent constitution. Now the colony is all 96 million dollar window dressing.

Anonymous Coward
User ID: 400833
7/6/2008 9:59 PM

Re: 100 million dollar "mistake"	Quote
And we wonder why the brokerage firms always seem to survive - up or down markets. They always seem to have enough to keep the doors open and some hot shot traders making money for them. Stealing 100million is nice work if you can get it. Wonder what the interest alone is worth on 100mil? Per day? Per hour? Bet they don't give that back! Wanna bet?

Anonymous Coward
User ID: 322321
7/6/2008 10:09 PM

Re: 100 million dollar "mistake"	Quote

whowho
User ID: 465007
7/8/2008 6:09 PM

Re: 100 million dollar "mistake"	Quote
uhhh...it was London Ontario

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