How The Original Rogue Trader Rebuilt His Life

Joe Weisenthal (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

Tracy, I think we might have our most famous guest ever on the episode today.

Tracy Alloway (0:25)

We've had some pretty well-known people before.

Joe Weisenthal (0:29)

Yes, but the person we are speaking to today was for at least for a brief period, one of the most well-known people in finance in the entire world, if not actually one of the most well-known people period, like in any news.

Tracy Alloway (0:46)

Yeah, yeah, you're probably right. Do you wanna go ahead and introduce who it is or say who it is?

Joe Weisenthal (0:53)

Yes, I will. And I think one also might characterize, I said that he's going to be our most famous guest ever. Others would probably say he's our most infamous guest ever, but our guest this week is Nick Leeson.

He is famous for being probably the biggest quote unquote rogue trader of all time. In the early 90s, it was his trades and the attempt to hide them that brought down the UK's Barings Bank, which was a bank that had been around for over 200 years.

He then discovered and went to Singapore where he spent years in a Singaporean prison there's books about him, there's a movie made about him. And then I think like after all that ended, probably most people never really thought about him again and probably have no idea what he's been up to since.

Tracy Alloway (1:54)

Right. But Nick Leeson is almost the original rogue trader of modern times, right? You mentioned there was a movie famously with Ewan McGregor called Rogue Trader and it was, I'm sure it was the first time that a lot of the stuff entered the public consciousness.

And as you mentioned, he was in Singapore at Barings Bank when he did his rogue trades and then he ended up in jail. And then he sort of mounted a comeback career, right?

Joe Weisenthal (2:24)

Yeah, absolutely. And I do think that point you made is really key that from time to time, and I'm sure we'll have them again in the future, a rogue trader emerges. Someone who went way beyond their risk limits at a financial institution, tried to cover them up, failed to cover them up, and then their behavior or their trades resulted in staggering losses. But as you say, I do think that term probably originated with Nick. Though I guess I'm not 100% sure, but that's something we can bring up.

So without further ado, Nick Leeson, thank you very much for joining Odd Lots.

Nick Leeson (3:04)

You're very welcome. We're looking forward to it.

Joe Weisenthal (3:06)

I guess I'll start. Were you the first rogue trader?

Nick Leeson (3:10)

I look, I think there were many before me. There probably weren't as many that hit the headlines as dramatically as I did. I think, you know, rogue trader is one of those things that, well, rogue trading is one of those things that goes hand in hand with the market. People would often mismark their position, the market, or they would trade outside of their position.

I was certainly not the first person to do something like that at Barings. I was definitely the last one. And I probably took it a little bit further than anybody had had prior to that. And I think obviously one of the reasons that I am so well known for that rogue trading activity is the catastrophic effect that my actions had in the majority of cases. Most rogue trading episodes are caught fairly early. And whilst they do financial damage to the institution, they don't usually result in the collapse of the bank.

Tracy Alloway (4:11)

So I don't think we want to dwell too much on your actual trading at Barings, because at this point it's been really, really well covered.

But for the purposes of this podcast and the conversation that we're about to have, what would you say about what you actually did at Barings? Was it a rogue trade? Was it authorized? Was it as insidious as some people made it out to be?

Nick Leeson (4:40)

I got myself into, I had an awful lot of autonomy in Singapore. I could pretty much do what I wanted. It was a remote subsidiary of the bank. There wasn't a great deal of control or expertise that surrounded me in terms of making sure that I was doing what I was supposed to be doing. So when things started to go wrong and I found myself in a difficult situation, it was a lot easier than you would expect it to be to hide those losses for a period of time. Now, I used to wake up every day thinking that today would be the day that somebody would expose what was going on, that it was only ever supposed to be a short-term thing. Like I said at the beginning, putting things into error or putting trades into error accounts overnight was a regular occurrence at Barings at the time.