How to go from the IT dept to being a rogue trader

Remember, the successful ones are still out there

Moving to the desk

Please don’t ask your IT boss for that move. You are making him look good, and if you join another group he won’t just lose some of his visible productivity, he may not get headcount to replace you. Expect him to fight this, so make sure the traders are on board first and be aware this is not a risk-free option. Recently one of my candidates was explicitly told that because he was looking to move to another part of the bank he’d get zero bonus this year. He’s not at that bank anymore and that is the way it works.

Friends in low places

Coming up through the ranks means you build contacts at all levels, and you gain yet more access rights because, in spite of the 237-page security procedure manuals, access and passwords are usually controlled by a mix of BOFHs and old hands who dish them out if they think you ought to have it.

Get in the habit of buying the first beer when you go to the pub with these people. It costs now but pays back very well. If you can help them dodge the bullet for a screwup, then all the better.

Also, your visible productivity is enhanced by knowing who to call when things need to get done quickly and directly. Make sure you give credit to your backup team; the most poisonous thing that may be thought of you is that you are a credit leech. The traders don’t care how it gets sorted - if you get it done, you’re the man.

Since you fix spreadsheets no one thinks it's unusual to see you at other people’s desks. In fact you won’t succeed on your illicit quest until senior people insist that they hand you their password.

Sounding like a trader, but not yet a rogue

Any aspiring rogue has to read everything by respected author Nassim Taleb: you don’t have to agree with him but a trader who hasn’t read The Black Swan is like a BBC executive who doesn’t read the Guardian; he just won’t fit in. Paul Wilmott’s lecture on risk management using blackjack is a must and you must read Beat the Dealer by Ed Thorp, the genuine top-tier mathematician who beat Las Vegas harshly enough that they changed the rules and the law to stop him.

You also need an unhealthy interest in brainteasers, coin tossing ones especially. Yes, traders are partly chosen on how well they understand the probability of combinations of coins being tossed. You can understand everything about the problems of financial markets from that one statement alone.

Hidden at the end of the digital TV news channels is Bloomberg. Make it your habit to have this as your background noise from the first day that the path to Rogue Trading calls you.

Exotic methods

You don’t need to use exotic financial instruments: Greece crashed with bonds, and previous rogues have used methods that sound like rocket science but are far from exotic.

In a sense, all are equally complex simply because all the money has long been squeezed out of the easy parts, so you need to go deep wherever you trade. Let’s also be realistic: you’ve got a mediocre education, not much integrity and you’re on the make, take what you can get. An ideal gig is a high-volume desk because trades go wrong all the time and you will want to hide your strategy in among a good noisy crowd.

Of course your direct bosses should spot what you’re up to, but to do this properly you need to have taken a useful number of small excursions outside the official boundaries and come back OK. Part of the protocol is that your boss will mention casually in a noisy bar a tiny limit excess that he’s running. Your options are to report him - terminating your career, not his - or to make light of it. Your choice, of course, but you are on your own from day one, and you should make sure you join enthusiastically in the social scene of the other traders, but don’t believe that is an iron wall around you.

Survivorship bias

There is a bias in the sample you see on the news because a snared rogue is someone who bets big and loses. You’ve worked out for yourself that occasionally a rogue must luck out, so have I. Do you imagine they were automatically taken away in handcuffs? I don’t either.

Once you start, you must assume from that moment an invisible clock is ticking. Banks have some very good security people and they don’t expect their monitoring of your activity to be easily spotted.

Covering your tracks

Another reason for going rogue is that you’ve made a career-changing loss through quite conventional behaviour. That needs to be made good else your career will change from trading to the standard dumping ground for failed traders: being a business analyst.

Bear in mind that you can borrow some limit from another group by parking a trade with them, a handy trick in a time when market conditions cause some desks to not use their full limit.

Of course this will show up, but if you’re doing your job properly it will look like a data input error, or yet another issue with the system. You may even choose to be the person who discovers the "error", muttering obscenities just loud enough for the right people to hear. They have confidence that you’ll sort it out - after all, you can only be screwed over by people you trust. Everything else is just business. ®