Questions About Rochdale

In the news, Rochdale Said to Be in Rescue Talks After Apple Trades Sour.

Rochdale claimed than due to unauthorized trades made by a rogue trader has caused major stress on the company’s financial position and that it is looking for investors to rescue the firm.

Regarding the situation, we know that

a. Apple earning was reported back on Oct 25th

b. Apple swinged down to right above 590 and back up to 610 on Oct 26th

c. Apple then gapped down to below 590 on Oct 31st and bounced back up to above 600 briefly before another wave dropping Apple straight down to 575 on Nov 1st

My questions,

1. Why is there no firm-wide real-time warning on sudden increase in margin usage? Their trading portfolio is supposed to be quite small so it makes no sense that such margin usage increase is not detected immediately.

2. Why is there no authority limitation on the trader? A mid-sized hedge fund or even a small prop firm has authority limits on traders.

3. When did the people at the top find out about the trade? It is total nonsense that the firm is still holding the position if the people at the top found out about the situation before the bounce in Apple happened on Oct 26th.

Logical conclusion is that the firm chose to hold onto the Apple position as of Oct 26th close even if the trade is really as claimed that it was unauthorized, if its people in charge already found out about the trade that day.

I guess we will never be able to find out what happened exactly, just like all the other famous Wall Street trades that went bad.

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