CHAPTER 3 CASE STUDY

QUESTIONS TO CONSIDER

1. Peter Gumble, European editor for Fortune magazine, comments, "Kerviel is a stunning example of a trader breaking the rules, but he's by no means alone. One of the dirty little secrets of trading floors around the world is that every so often, somebody is caught concealing a position and is quickly - and quietly - dismissed... [This] might be shocking for people unfamiliar with the macho, high-risk, high-reward culture of most trading floors, but consider this: the only way banks can tell who will turn into a good trader and who even the most junior traders to take aggressive positions. This leeway is supposed to be matched by careful controls, but clearly they aren't foolproof." What is your reaction to this statement by Mr. Gumble?

 - Trading in different fields is full of opinions about the right way to trade. Trading should abound. If trading is as much about self-development as it is about having a proper profit and loss statement, then as a trader you need to rely more on your individual perspective than on collective opinion. "The rules of conduct are just an outer show of devotion and loyalty - quite confusing to the heart." To be impeccably loyal to a trading system like the issue being said by Peter Gumble, it tells confusing to your heart and your individuality. And when men rely on these rules for guidance, there comes a time of ignorance abounds.

link: http://tradereducatoronline.com/2011/09/20/the-taoist-trader-breaking-the-rules/

2. What explanation can there be for the failure of SocGen's internal control system to detect Kerviel's transactions while Eurex detected many suspicious transactions?

 - As I searched over the net...., When the heads of SocGen discovered this, they could not believe this one man had managed to do so much, so surreptitiously. A person familiar with SocGen's board says: " Everyone is stupefied to this affair. SocGen had an image as the best French banking. What is striking here is the contrast between the mediocrity of the trader and the scale of the catastrophe." Jean-Pierre Mustier, the head of SocGen's investment banking division, spent hours interrupting Mr. Kerviel in the aftermath of his Icarus-like plunge that ended up costing the bank €4.9bn.

link: http://www.ft.com/cms/s/0/927fe998-d5b2-11dc-8b56-0000779fd2ac.html#axzz1tgZ0NaYx

Discussion Questions

1. Do you think that Mike Lynn acted in a responsible manner? Why or why not?

    Yes, it is because Mike Lynn wants a pair and square in their jobs.

2. Do you think that Cisco and ISS were right to pull the plug on Lynn's presentation at the Black Hat conference? Why or why not?

    I guess what Cisco and ISS did to Mike Lynn is an unprofessionalism work. Cisco and ISS have to face the issues and problems and be true to the others.

3. Outline a more reasonable approach toward communicating the flaw in the Cisco routers that would have a led to the problem being promptly addressed without stiring up animosity among the parties involved.

    When Mike Lynn discovered that is was possible to create a network worm that could propagate itself as it attacked and took control of routers across the internet.