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UBS reveals further rogue trader details

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Swiss bank UBS has revealed further details of the unauthorised trading loss announced last week, with the total loss rising to £1.5 billion.

The bank confirmed that the unauthorised trading had been conducted by a trader in its global synthetic equity business, for which rogue trader Kweku Adoboli was charged last week.

The loss came from positions held in various S&P 500, Dax and EuroStoxx index futures in the past three months.

The Swiss bank says the positions had been taken in the “normal business flow of a large global equity trading house”.

However, it revealed the magnitude of the risk exposure had been “distorted” as the positions had been offset in its own system with “fictitious, forward-settling, cash exchange traded fund positions”.

According to the bank, the fictitious trades had concealed the fact that the trades “violated” its risk limits.

The bank’s board has set up a special committee, to be chaired by senior independent director David Sidwell, to conduct an independent investigation. Sidwell will be joined by Ann Godbehere and Joseph Yam.

It confirmed Adoboli had revealed the unauthorised trading to the bank on September 14.

In a statement, the bank explained it had “to be certain” that it understood the positions taken and the amount of the loss before disclosing further details. It added that the equities business was now operating “within its previously defined risk limits”.

Separately, the Financial Services Authority and the Swiss Financial Market Supervisory Authority are to launch their own investigation.

The regulatory investigation will be conducted by a third party firm independent of UBS, and focus on the details and control failures of the trades. It will also assess the strength of controls to prevent unauthorised trading within its investment bank operations.

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