Whale Watching on the Trading Floor: Unravelling Collusive Rogue Trading in Banks
51 Pages Posted: 19 Jul 2017 Last revised: 25 Jul 2018
Date Written: July 13, 2018
Recent history reveals a series of rogue traders, jeopardizing their employer’s assets and reputation. There have been instances of unauthorized acting in concert between traders, their supervisors, and/or firm’s decision makers and executives, resulting in collusive rogue trading. We explore organizational misbehaviour theory and explain three major collusive rogue trading events at National Australia Bank, JPMorgan with its London Whale, and the interest reference rate manipulation/LIBOR scandal through a descriptive model of organizational/structural, individual, and group forces. Our model draws conclusions on how banks can set up behavioural risk management and internal control frame-works to mitigate potential collusive rogue trading.
Keywords: behavioural risk, collusion, corporate culture, misconduct, organizational misbehaviour theory, rogue trading
JEL Classification: K42, M14, P37
Suggested Citation: Suggested Citation