

How a broker spent $520m in a drunken stupor and moved the global oil price - Davertron
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7862246/How-a-broker-spent-520m-in-a-drunken-stupor-and-moved-the-global-oil-price.html

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anigbrowl
_Having admitted to an alcohol problem and received treatment, Mr Perkins was
banned from trading for five years and hit with a £72,000 fine, reduced from
£150,000 because of potential financial hardship. Mr Perkins was not available
for comment last night at his £340,000 home in Brentwood, Essex, and it is not
known whether he has found alternative employment. The FSA will consider re-
approving him as a broker after the ban, if he has recovered from his alcohol
problem, but noted "Mr Perkins poses an extreme risk to the market when
drunk". It added that there appeared to have been "no motive" for buying up
the oil._

Homelessness is a major social problem, especially during periods of economic
austerity. The first step in mitigating it is to understand how people respond
to such sudden reversals of fortune: Mr Perkins is uniquely well qualified to
study the subject, and should be allowed to begin his investigations
immediately, if not sooner.

On a more serious note, I did a pile of research into global oil markets and
exchanges for a documentary proposal a couple of years back. My intention was
to trace the contours of the 'invisible hand' and demonstrate the importance
of price signals as an input to policymaking as a counterpoint to the rampant
conspiracy mongering. Instead I discovered the markets in question were being
run like a large-scale shell game. The majority of oil futures gradually moved
onto the ICE exchange mentioned in this story, largely because regulators in
the UK and US each believed the other country's agency was supervising trades,
when in fact nobody was.

This guy's irresponsibility is much easier to explain in a newspaper story
than a pattern of regulatory shopping in high-volume commodity trades, but the
real scandal is the way regulators kept citing economic fundamentals while
assuming somebody else was maintaining an audit trail and would have mentioned
if there were anything amiss. Perkins blew about $15 million of capital in an
alcoholic stupor; how much evaporated during frenzied trading in 2008 is hard
to say. Much depends on whether one sees the price spike as a trigger of the
wider economic crisis, or a frantic attempt to stave it off by traders in
search of a fast return.

