We have to be more clever

Marc Andreesen:

Risk Magazine -- the finance industry magazine focused on risk management -- presented, this very month, its Equity Derivatives House of the Year award for 2008 to... ta daa... Societe Generale.

Whoof. They sure did:

With one of the largest exotics books on the Street, one would imagine that Société Générale Corporate and Investment Banking (SG CIB) would be licking its wounds and coping with hundreds of millions of euros in losses. There was some impact, but the losses have been relatively minor and entirely manageable, says Christophe Mianne, SG CIB's head of market activities, covering equity, derivatives, fixed income, currency and commodities in Paris.

Risk Magazine - Equity Derivatives House of the Year - Société Générale

Of course, Risk has a new story at the top of its website right now... and it's an interview with M. Mianne:

24 January - The Société Générale rogue trader knew "perfectly" how to conceal his trades with a combination of fictitious trades and rolling forward positions, according to Christophe Mianné, the new head of global equities and derivatives, who spoke exclusively to Risk today.

The unauthorised trades in European equity index futures had been going on for "a few months" in 2007, Mianné said, but "the losses were just in 2008".

"Why didn’t we see that? Because he was working before at the middle and back office and knew perfectly how to hide the positions with some fictitious transactions on, let’s say, forwards on indexes, and in terms of the VAR spread test, delta every night on the position was zero." One of the techniques he used, Mianné said, involved rolling 30-day forward positions, which were unwound just before confirmation and replaced by forwards with different counterparties. "He was very clever," he adds, "but that's not an excuse, because we have to be more clever."