There is no doubt that electronic trading should lead to a far more secure dealing environment. The days have long gone when a dealer based in Oslo could ring you up from a phone box and ask you to sell half a yard of USD/JPY, only for you to find out 15 minutes later that he’s been sacked – which happened to us at Midland in the 1980s. Limits can be set on a totally discrete basis, and positions can be monitored and P&L calculated in virtual real time.
And yet, over the past decade I have reported on countless incidents where something has gone wrong in an electronic trading environment, from rogue traders to fat fingers on keyboards and the supposed initiation of trades by a cleaner dusting an EBS keyboard that had not been turned off. Almost inevitably, when unexpected losses occur, there is a tendency for everyone involved to blame someone else. No trader, broker, platform, or prime broker is likely to admit: “Yep, we lost a load of dosh because we didn’t put in place the proper systems.”
The electronic trading deal chain is only as secure the weakest links in it.