How a French solo trader made a US$6.6 billion unauthorised bet

LONDON/PARIS: A selfemployed trader in France accumulated stock futures worth US$6.6 billion in a single day, trading records show, raising questions among investors about how he could build up such a large position despite having only 20,000 euros in his account.

Financial industry safeguards have been tightened in the 10 years since rogue trader Jerome Kerviel lost 4.9 billion euros at French bank Societe Generale and internal controls at financial firms are meant to prevent individual traders taking such large positions.

But Harouna Traore was able to buy 43,941 S&P500 futures contracts worth US$5.3 billion and 34,388 Eurostoxx 50 futures contracts worth 1.2 billion euros on June 29 last year through London broker Valbury Capital, trading records reviewed by Reuters show.

When contacted, Traore, 41, referred to a court document reviewed by Reuters in which he confirmed the trades and said they had resulted from a mistake because he had initially thought he was trading on a practice platform where trading limits did not apply, rather than, as it turned out, a live one.

He is now suing Valbury Capital in a French court, alleging the broker has kept the US$11 million of gains from his trades.

Valbury Capital referred questions to Robert Falkner, a partner at law firm Reed Smith which is representing the broker. Falkner said there was a contractual limit on Traore’s account, but declined further comment.

A June 16, 2017, email from Valbury Capital to Traore, seen by Reuters, shows the French trader’s 20,000 euro account had a trading limit of just 10 futures contracts per day.

“There was a mistake on his account,” said Tarek Elmarhri, head of the Krechendo French trading arcade in Paris whose trading facilities are used by Traore and other day traders.

This meant Traore “could buy unlimited contracts” on the system he had only just spent eight weeks being trained to use, Elmarhri said. Traore asked Elmarhri to review with him the June 29 trading when he came back the following Monday to the Krechendo trading arcade.

In the risk parameters for Traore’s account with Valbury Capital, according to a screenshot of the account seen by Reuters, the user credit is indicated as “unlimited” by the broker. — Reuters