Friday, December 23, 2011

Barclays, No Sumitomo here, Copper Traders Whupped by Red Kite (BARC.L)

Via a sharp eyed reader.
From Reuters:
It was a summer shoot-out between two of the biggest copper traders in the business -- investment bank Barclays Capital (BARC.L) betting prices would rise and London hedge fund Red Kite expecting them to fall. Red Kite won, hands down.

The head of metals trade at Barclays Capital and a colleague were leaving the company on Thursday after losing tens of millions of dollars on London Metal Exchange (LME) copper, compounded by losses on aluminum futures, trading sources said.

They were named by dealers as Iain Macrae, head of the metals desk at Barclays, and Christian Saunders. Barclays would not confirm the identity of those departing. Neither could be reached for comment.

Barclays would not specify the scale of the losses but said they were not "big" and that there was no "abnormal" trade, a reference to rogue trading.

Traders said Macrae, said to be responsible for the biggest book on the LME, went long in copper in the summer betting that warehouse stocks would fall. He ordered long positions on outright copper prices, spreads and options.

Barclays in August had bought a stake in Erus Metals, a small metals warehouse in Europe, to help manage its trading position and to secure a foothold in the profitable storage business.

One large bet was on a widening spread of December 2012 copper over December 2013.

Macrae was up against the most renowned trading team in metals, Red Kite's Michael Farmer and David Lilley....MORE
So, just a straight up wrong-headed bet, no Mr. Copper, Sumitomo's Yasuo Hamanaka, trying to corner the entire world's copper supply, and losing $2.6 Billion in the process.
I'm sure that's a relief for BarCap senior management.

UPDATED--Barclays Hit With "Immense" Copper Trading Loss; 50 Sigma Move In Cancelled Aluminum Warrants (50-Sigma events don't happen)

Barclays Capital to Wall Street Journal on Copper Losses: "Nonsense"