CHAPTER 3 Genius Traders: Who They Are and How to Catch Them

Whereas the Rogue Trader operates behind the scenes and needs must remain hidden, the Genius Trader upends things while operating in plain view. When the Genius Trader strikes, it is not, strictly speaking, a case of trader malfeasance but of trader overreach spurred on by ego, enthusiastic management support, and, as a result, a lack of tight controls.

Characteristics of the Genius Trader

The Genius Trader is not as well known to the general public as his cousin the Rogue Trader, but the threat he poses to investment banks, their employees, and their shareholders is just as real. Who exactly is he? Well, he is a genius, of course. Furthermore, he is head over heels in love with his own genius, and so is everyone around him. He does not need to work behind the scenes like the Rogue Trader to gain access to large amounts of capital to trade with. Instead he works in the open with the full support of management.

Aside from being unusually smart and intellectually confident, what else distinguishes a Genius Trader? After all, being super smart and intellectually confident describes many traders at investment banks or hedge funds. In addition, then, Genius Traders have acquired during their tenure, or come to the bank with, an almost unimpeachable reputation for trading success. That success more often than not has resulted from exotic and obscure trades that netted significant profits for the firm. Even better ...

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