Nick Leeson, the
20-something futures trader who single-handedly brought down
Barings Bank in 1995, began writing an account of his
exploits soon after he arrived in Singapore’s Changi prison.
Rogue Trader, the book, is a vivid but maddeningly
self-serving cautionary tale of the dangers of a derivatives
operation run amok.
Films based on the financial
world are usually painted in broad strokes. Even the best of
the recent contributions to the genre such as Wall Street
and Barbarians at the Gate focus on
the shopworn themes of avarice, lust and machismo, without
much consideration of the more complex workings of the human
psyche. Rogue Trader is subtler: Nick possesses neither
insatiable greed nor unquenchable lust for power. His
motivation is merely to make his deceased mother, his wife
and his father, a plasterer, proud. This desire to please
others ultimately leads to his downfall.
Rogue Trader begins
with young Baring's Bank back-office clerk
Nick Leeson being sent
to Jakarta to straighten out a mess involving bearer bonds.
After solving the problem--and meeting Lisa, who soon becomes
Lisa Leeson--Nick is transferred to Singapore to become
general manager of Baring's Simex trading operation,
focusing on derivatives of the
Nikkei Index, particularly futures and options. Nick is
tapped to run both the trading side of the business and the
back-office settlement operation—a decision that would prove
disastrous.
Shortly after setting up
shop, Nick creates an error account--choosing the number
88888 because a clerk says the Chinese consider eight a
lucky number--to sort out the inevitable mistakes of an
inexperienced trading operation. On one Friday afternoon,
Nick is confronted with just such a gaffe. One of his young
traders mistakenly sells 20 Nikkei futures rather than
buying 20, creating a $30,000 hole in the balance
sheet. Nick tells his immediate boss, Simon Jones, regional
manager of the Southeast Asia division, about the problem,
but Jones brushes it off, telling Nick to deal with it
himself. Nick does, but not in a way Jones would have liked.
On Monday, rather than immediately trading out of the
position and taking the loss from Friday's price, Nick keeps
the position in the hope that the market will improve. The
reverse happens, and Nick is forced to sell at a
$90,000 loss to get out.
Putting his
back-office knowledge to work, Nick places the loss in the
88888 account. His plan: to trade out of the hole using
Baring's
client accounts, diverting the profits to cover the error
account. As long as the balance is zero by the end of the
month, he reasons, no one will know the difference.
Before long, he has run the
88888 account into a $15-millio hole. Nick, pounding a heavy bag at a gym,
hatches his ultimate strategy to circumvent the balance
sheet: he realizes that he can solve the problem of funding
his growing initial margin payments by selling options.
“That will generate commission in-gain,” he enthuses, “and
will return the balance on the five-eights account to zero.”
There's one catch to the
plan, however: Nick must generate huge business to keep up
with the margin calls. Enter Pierre Beaumarchais, a Swedish investment banker
and big-ticket player who falls into Nick's lap at the
perfect time. Soon Nick is doing big business, and by the
end of 1993 he makes up the entire $15 million loss in
the 88888 account. Nick, now the biggest player at the Simex,
resolves to kick his addiction to the 88888 account once and
for all.
But soon thereafter,
Beaumarchais requests a big trade that Nick doesn't fully
understand. Without being sure he can pull it off, Nick
guarantees Beaumarchais' price and tries to “leg it” in
order to keep the business from going to the Societe Generale
Bank of Switzerland.
The plan backfires, and Nick is forced to reopen the 88888
account. The downward spiral has begun.
Later on, a back-office
clerk notices a 7.78-billion-yen loss in the 88888
account--roughly $78 million--and Nick scrambles to cover his
tracks. He tells the clerk to print a report showing that Simex owes Barings the sum, then requests more cash funding
from London to cover his margin payments, which are becoming
massive. Meanwhile, he begins lying to Simon Jones and the
London office about the deal and the extent of the bank's
positions. By the end of 1994, Leeson is in deep trouble.
McGregor succeeds in
conveying, in bile-swallowing candor, what it’s like to be
constantly on the wrong side of the market. In Nick's case,
the market is also a metaphor for the class system he has
tried to leave behind. Nick's working-class background is
established in the film’s deft opening scene: When Nick's
drunken friend Steve is rude to a young
woman in a London nightclub, the woman's friend hurls a
chair that accidentally hits Nick in the face. Nick is thus
introduced as a victim of circumstance--a theme that the
film, like the book, revisits often.
While Nick's losses grow,
Lisa has a miscarriage. The event becomes a turning point:
Nick decides that he will take an even more aggressive
approach to get out of his mess. When a Coopers & Lybrand
accountant preparing the 1994 year-end audit confronts Nick
about the 7.78-billion-yen receivable from Simex, he
concocts a wild story about an over-the-counter trade
between Spear, Leeds & Kellogg and
Barings. The accountant demands documentation, and Nick,
adding forgery to his crimes, provides it, even arranging
for a bogus bank transfer.
Meanwhile, the positions in
the 88888 account begin taking on a life of their own. The
Kobe earthquake sends the Nikkei plummeting, causing Nick to
lose more than $75 million in a single day. Nick tries
to hold on until February 24--bonus day. He’s been promised
at least $500,000, and plans to get out of Singapore
upon receiving the check. But the clock is working against
him as his losses mount. On February 23, one day before he’s
to receive his bonus, the Nikkei falls to 17,665 despite
Nick’s frantic efforts to prop up the market. Nick realizes
it’s over, having lost more than $500 million all
told. He and Lisa flee Singapore, only to be captured by
German authorities after landing in Frankfurt the following
Monday.
The result of Nick's rogue
trading: Barings loses more than $1 billion as its
positions crash, and the bank is bought by ING for $1.
Rogue Trader is not
without its flaws. Its depiction of Nick's trading losses is
thin: the 88888 account balloons with little explanation,
and Nick's efforts to reduce the position get short shrift
as well. The dialogue is occasionally stilted, as characters
delve into unnaturally expository language for the benefit
of the audience. Some of the expressly educational material
is uneven--there are detailed definitions of futures
contracts and margin payments, for instance, but not
options, leading one to believe that Nick's claim of
collecting “commission in-gain” from his options trades,
rather than premium, is more than a misnomer. In one
questionable sequence, Nick, in a voice-over, says he stands
to make a killing if the Nikkei moves to 19,000 as a result
of all the options he had been selling. But the book version
notes that Leeson had been selling straddles around 19,000,
meaning he needed the index to stay near 19,000 or he stood
to lose vast sums.
And while the characters of
Nick and Lisa, his wife, are well realized, others are less
thoughtfully developed, particularly when the film strays
from the book's account of events. Ron Baker, introduced in
the film as head of derivatives trading in London, is an
adrenaline-charged buffoon, especially in a fictionalized
motivational speech at the annual meeting in London. Peter
Norris, the CEO of Baring's, is an
aloof opportunist who bawls when the bank finally goes bust. Peter Baring, the
Baring's Chairman of the Board, is a pompous blueblood. The book notes that his
famous statement: “"...it was not actually terribly difficult
to make money in the securities business",” was uttered in a
meeting with Brian Quinn of the Bank of England. In the
film, the comment is made by a smug Baring before a rapt
audience at a dinner party, to thunderous applause.
In a film so dominated by
dialogue, Nick's description of the continent of Asia says
it all: “
"What's good about this place is it's not still full
of pompous ex-colonials who think they were born to rule the
world... anyone can make it here.”"
