Last week, John Carney asked why rogue traders always seem to lose money rather than making it. Today we find out exactly why, at least in the case of MF Global (MF): their rogue trader, Brent Dooley, was trading his own account.
Mr. Dooley, who has spent more than 15 years in the rough-and-tumble business of commodities trading, had just one customer, and that person hadn't done any trading business with Mr. Dooley in "some time," Mr. Davis said. But the trader was allowed to process trades for his own account through MF Global, which collected commissions on those transactions. Such arrangements are common in futures trading, even though the brokerage firms essentially must use their own capital if traders can't afford outsize bets that go wrong.
Does this mean that if his bet had gone well, he would have made $141 million in one day?