Who Is JPMorgan’s White Whale?

by Beth Connolly on May 11, 2012

JPMorgan chase london whaleAlternately known as the “London Whale,” and “Voldemort,” mysterious French trader Bruno Iksil was in the news in April. It was reported that the trader, working from JPMorgan’s London office, had created a huge position in the derivatives market, creating a massive risk for the bank.

At the time, JPMorgan CEO Jamie Dimon scoffed at the stories, calling the media coverage “a tempest in a teapot.” Now he wishes he hadn’t.

His bank’s enormous $2 billion trading loss, announced Thursday, may be a result of the whale’s risky bets on credit default swaps. Dimon admitted that he ought to have paid more attention to newspapers.

Iksil works in JPMorgan’s Chief Investment Office in London.

Bloomberg reports on how the whale’s trading strategy led to the massive loss:

Iksil may have amassed a $100 billion position in contracts on Series 9 of the Markit CDX North America Investment Grade Index, counterparts at hedge funds and rival banks said in April. They based their estimates on the trades and price movements they witnessed as well as their understanding of the size and structure of the markets. The positions amounted to tens of billions of dollars, under the firm’s own math, a person familiar with its view said at the time.

The trade on the index probably wasn’t a one-way bet, the market participants said. Iksil may have offset it by buying protection on the same index with contracts that expire about seven months from now, the people said. That strategy would pay JPMorgan the difference between the long-dated contracts and the short-dated ones, and the trade would gain when the gap narrows. The hedge would end in December unless another trade is made to replace it.

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Beth Connolly is Editor-in-Chief of the Wall Street Job Report and the Compliance Exchange. She blogs creatively at When Nutmeg Met Basil. Connect with her on LinkedIn , Twitter, and About.Me.

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One comment

[...] $5.8 billion f*ck-up last May blamed by JP Morgan on a UK near-rogue trader, call-sign, the “white whale” –  but regrettably, nothing will come of these ‘investigations‘ of Wall [...]

by Life Defaulted - Compatible Creatures on September 9, 2012 at 4:10 pm. Reply #

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