The deadly derivative game

Justice Pillay had made a major ruling against Deutsche Bank of the lost of $59m for recommending derivative trading to a client few days back. In 3 months, the client, Dr Chang Tse Wen, lost $59m! This must be a kind of a record for the speed and the sum to be lost by an individual client.

The client was recommended to put money in discounted share purchase programme commonly known as accumulator. Whatever names they called it, derivatives, in whatever combinations or clever arrangements, are nothing more than betting slips. They are not investments but high risk betting or gambling.

How could such gambling slips be approved and be sold so widely across the world is troubling. The amount of derivatives bought and sold is mind blogging and could be the very instrument that could collapse the world financial system. But many high net worth clients would have to go first, losing their millions and their pants.

Investors who do not know how the derivative games are played are best to stay clear from such instruments.


Anonymous said...

"But many high net worth clients would have to go first, losing their millions and their pants."

Does not seem like brains and financial acumen that made these high net worth individuals rich in the first place.
Makes you wonder how they got rich in the first place?

Did they marry the right people?
Did they join the correct political party?
Were they cronies?

Anonymous said...

Accumulator is better known as Kill You Later

Anonymous said...

Rich people who lost through derivatives deserve every penny that they lost. Did they find out what is derivatives in the first place?

They delegate trading to their so called relationship managers, then act blur, make money they take, lost money they claim ignorance.

Anonymous said...

These are the easy come, easy go money. Most are self made millionaires. Doctors, businessman. Doctors who charge their patients by the millions. Buesinessmen who earn millions for every 10 cent increase in their crop price.

Anonymous said...

Well said amf questions asked are most relevant.
If they have so much and still gamble for, it showed insatiable greed and the money they have must have been gotten easilly and probably also Sinfully.

Veritas said...

DBS Bank (Hong Kong) has demanded a mainland investor pay more than HK$90 million she allegedly owes the bank due to her investments in accumulators.
It is the first accumulator- related case to be heard by the High Court here.

The bank had considered the defendant, Hao Ting, to be an experienced and successful business person, said lawyer Jat Sew- tong, representing DBS.

In July 2007, after signing eight accumulator contracts, Hao put HK$80 million in DBS.

A few months later, not only had Hao lost everything in her account due to the contracts but also incurred additional losses of HK$90 million, Jat claimed, and this was owed to DBS.


He said bank staff had consistently warned Hao - a director of a mainland oil company - of the potential risk of her investments, and that included the caution their value could fall to zero.

Seeking repayment from Hao, DBS Bank filed a lawsuit in Beijing in 2008.

And in 2009 Hao was arrested by police in Hong Kong on suspicion she sent a threatening message to bank staff.

Our criminal DBS bank was embroiled in selling the most toxic accumulator as well.
In addition, she sold the most odious financial faeces Lehman notes to Singaporeans. Instead of arresting the bosses of DBS banks, Kuan Yew blames the victims.

DBS was run on the style of Kuan Yew-ism. Full of FT, Singaporeans are being despised. Today the best run bank, in SG, the UOB are mostly run by Singaporeans.

I do not really like Wee Chow Yaw, father and sons, for their cross holdings of companies, abusing share holders. Compared to Kuan-Yew's GLC or those criminal MNC banks, UOB is like a virgin comparing to a bunch of whores. Wee Chow Yaw, despite of his short comings, really are patriotic in the sense that Singaporeans young man are given chance to excel there.

The daft Singaporeans has once proven again that we can make it. Despite the fact, Kuan Yew is hell bent on his neo-hinduism. Singaporeans must be Dalit and we must lick the ass of foreigners. No matter how much we prove we are capable, Kuan Yew will use foreigners to put us down, deprive us of jobs. Singaporeans will never be given any chance. If Singaporeans are good, then use racism against Singaporeans.

We must take down PAP.

Anonymous said...

Mr Chua, good afternoon. A Blessed Christmas to you & family.

My personal opinion as an investment professional with derivatives trading experience for almost 30 years is that a number of toxic derivatives sold by banks to retail investors are highly misleading and extremely complex beyond them, prior to the Great Financial Crisis in 2009.

It is almost impossible for anyone other than derivatives experts to understand the manifold risks involved in some of these products.

I applaud High Court Judge, Mr Pillai's ruling in this particular case.

Nevertheless buyers do bear partial responsibilities if the yields offered (say above 9% if 3-yr deposit rates are 3%) are absolutely and relatively high, especially to sophisticated investors.

It is unwise to greedily go for high yields, into areas of ignorance. Contentment is a blessing. Financial markets is an expensive place to find out who you are.

Chua Chin Leng aka redbean said...

Hi anon 3:22. Agree that the derivatives can be very complex and very difficult to understand and monitor. Most investors are fully dependent on the sellers of these products and hardly any clue of what is happening. They only see the final number of what they could gain but forgot about what they could lose.

Very dicey stuff.

Anonymous said...

Mr Chua,
What surprised me was that Asian regulators allowed banks to sell some of these toxic complex products like "mini-bonds" to retail when they were not allowed in the US and UK to retail investors, prior to Great Financial Crisis.

I feel sorry for the retail investors. Mr Tan Kian Lian was right but powerless.

Anonymous said...

This type of things existed because those behind them know very well that many people are motivated by greed just like the pussy action party who also lost many deals. If they are not greedy, they would have not amassed so much monies for themselves in the first place. They would use the monies to help the poor, old and sick people in their society. I do not side with Dr Chang or DB and will throw the case out of court.

Anonymous said...

Veritas 1040am - UOB also has many malaysians there and their preference seems to be malaysians. You keep singing their praises, are you working there too?

Veritas said...
This comment has been removed by the author.
Veritas said...

Veritas 1040am - UOB also has many malaysians there and their preference seems to be malaysians. You keep singing their praises, are you working there too?

Anyone from SE Asia, I treated them as one of my kind. I do not like UOB and the Wee family. The are corrupt business man from Sarawak. Not surprise they hired lots of Malaysian. Malaysian do discriminate Singaporeans if they are the manager.

Of course I do not like hiring Malaysians but compared to hiring PRC or worse FT Indian, UOB HR policy looks like angels.

But compared to DBS, UOB is like a virgin vs whore. The Wee family as far as I know, run their bank conservatively. I have not heard UOB pushing toxic financial faeces aggressively. I am not in financial line. I don think UOB screw up like DBS Lehman notes or accumulator. At least up to this point UOB seems to be a virgin compared to DBS.

If you look at UOB management, they give lots of chance to locals. UOB fill its foot soldiers with locals.

DBS uses FT extensively. Locals are not welcome in DBS. Locals can at best be a lackey there. And DBS ROI is the worst among our major banks.

The worst sort of bank is Citibank. Go CBP, everyone is FT Indian. Singaporeans no matter how good we are, are not cut for the job. FT Indian never mind how stupid, got the offer.

Citibank CBP is the epitome of racism, all fxxking Indian management style, of rotten caste-ism origin from India.

Indians has screwed their country big time. They export racsim and screwed Pakistan, Nepal, Bangla, Ceylone. Everyone of these country is shit big time. Next target, Singapore.

Today excluding UOB, all back office of major banks are filled by FT Indians. Their only weapon is racism. Even I do not like UOB and I hate usury, I dislike UOB run their banks in towkay style, I would rather see UOB survive.