Mitsui trading losses: Naptha

Its happening again!!! How much ever we have risk analysts and exposure strategists working overtime this happens again. And this time its mitsui who lost 81mln USD in Naptha futures trading.... Reason: The trader reported false pricing and traded on this own price to cover up the already mounting loses... To add to it no one in Mitsui had access to the data, when the fact remains that traders should never be let alone to trade as we are naturally a crooked lot...

For those who have sat in a trader's seat might realize that once you are in, you have this irresistable attitude to trade up or wind positions. U might be wrong but at that point of time u think u can turn the market in ur favour and make the biggest mistake of building bad positions over an existing loss....From then on your are doomed. Very few get out of the position and most take the hit.

In Mitsui, the trader was left alone and no one found out his games till a naptha broker blew the whistle. A third party!!! Nick Leesons, Bearing, COA etc can never teach these companies the values of risk management.

Given below are the biggest trading losses in the last decade. Specially note Amaranth in Sept 2006. A whopping 6 Bln .....!!!!!!!

1)Jan 1988 - Major international oil trader Transworld cornered the Brent market but was later forced to sell cargoes back into the market as prices fall, losing an estimated $200 million

2)Oct 1988 - West German trading group Klockner accumulates losses of 600-700 million German marks in paper positions on the Brent oil market

3)Dec 1993 - Germany's Metallgesellschaft AG suffers huge losses on energy-products linked derivatives, forcing creditors to mount a $2.2 billion rescue.

4)Jan 1994 - Chile Copper Corp., the world's largest copper producer, known as Codelco, says it lost $175 million through derivatives trading.

5)June 1996 - Sumitomo Corp., which had lost $1.8 billion in unauthorised off-balance sheet copper trades, later revises the losses to $2.6 billion. It fires star copper trader Yasuo Hamanaka, who subsequently pleaded guilty to fraud and forgery

6)Nov 2004 - Singapore-listed China Aviation Oil (Singapore) Corp. Ltd. says it lost $550 million on speculative oil derivatives trading during an oil price surge to over $55 a barrel in October

7)March 2005 - Japanese trading house Sojitz Holdings Corp says it lost 17.987 billion yen ($172.8 million) from commodities trading that may have violated internal rules, widening its preliminary estimate.

8)July 2005 - Hong Kong trading arm of Samsung Corp. declares losses of $93.8 million from metals futures transactions.

9)Jan 2006 - South Korean Samsung Corp says it is scaling back trading operations in the oil market. Oil traders say the move is the result of trading losses on naphtha swaps

10)Aug 2006 - U.S.-based hedge fund MotherRock LP tells investors it is shutting down after heavy losses on the U.S. natural gas market. Traders say the losses are between $85 million and $235 million.

11)Sept 2006 - U.S. hedge fund Amaranth Advisors suffered a $6 billion loss in wrong-way bets in the energy market, particularly U.S. natural gas prices, forcing it to lay off staff and cut positions

12)Nov 2006 - Japan's second-biggest trading company Mitsui & Co said its Singapore unit lost $81 million from naphtha trading as of Nov. 17 and that a trader had falsified data to cover the losses.