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GeneralRe: Announcing .NET 6 — The fastest .NET yet Pin
Kent Sharkey8-Nov-21 15:26
staffKent Sharkey8-Nov-21 15:26 
News10 eureka moments of coding in the community Pin
Kent Sharkey7-Nov-21 7:16
staffKent Sharkey7-Nov-21 7:16 
GeneralRe: 10 eureka moments of coding in the community PinPopular
Marc Clifton7-Nov-21 9:03
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GeneralRe: 10 eureka moments of coding in the community Pin
Gjeltema7-Nov-21 10:19
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GeneralRe: 10 eureka moments of coding in the community Pin
Marc Clifton9-Nov-21 6:05
mvaMarc Clifton9-Nov-21 6:05 
GeneralRe: 10 eureka moments of coding in the community PinPopular
Vivi Chellappa7-Nov-21 22:46
professionalVivi Chellappa7-Nov-21 22:46 
GeneralRe: 10 eureka moments of coding in the community Pin
Marc Clifton9-Nov-21 6:09
mvaMarc Clifton9-Nov-21 6:09 
GeneralRe: 10 eureka moments of coding in the community Pin
Vivi Chellappa9-Nov-21 6:40
professionalVivi Chellappa9-Nov-21 6:40 
Singapore in 1980 had a hundred plus banks trading in foreign currencies. Some banks didn’t have regular retail or commercial banking operations but had a trading floor for trading US dollars against British pounds, Japanese yen, Italian lira, Deutsche Mark, French franc, etc.

The profits were really minuscule as exchange rates normally varied within a very short band. One could trade a million dollars against the British pound and show just a few thousand dollars in profit when lucky.

This particular bank had a young man from London who was their trader. About 9 months into the job, he started drinking heavily during lunch and showed other erratic behavior. The alarmed manager called the audit firm where I was employed to look into the books. They discovered that the trader had been booking false profits by putting into the computer system incorrect (and favorable to his trades) exchange rates. The profits he had booked were about $6 million. The trader was fired and a very experienced and much older trader brought in to fix the mess.

The new trader closed out all the trades and said that this should stop the losses. The next day, the books showed a new loss of $450,000. The trader said the computer software was screwed up and there was no way there could be additional losses.

The auditors refused to certify the books unless and until the trades were re-run on the computer for every single day with the correct exchange rates for that day for each currency. Presumably, one could get this from the daily newspapers but where does one go for six-month old newspapers? Each day’s run would take five hours or so and six months of daily processing would be in excess of 1000 hours.

This was around December 1 and the books have to be closed on December 31 and shortly thereafter the audited results have to be submitted to the relevant authorities. There were hardly 700 hours in the rest of December if we ran the system 24 hours a day so this was an impossible task.

I came to know of the situation when an auditor ran up to me in the office and asked if I had heard about the major disaster and related the story to me.

I went to the audit partner and offered to look into the computer system to determine what can be done. She said the decision was to re-run all the processing with the correct exchange rates and that I could do nothing to alter the situation. I told her politely that perhaps the client should make the decision about involving an IT consultant. She called the bank manager who, happy to grasp at straws, accepted my offer.

The new trader met me and told me I was wasting my time as he has done what one was supposed to do in these situations to limit the loss and the system continued to report losses in hundreds of thousands of dollars every day. As far as he was concerned, the software was erroneous.

I got the pile of documentation on the software and started reading through it. I also got the reports generated by the computer and was looking to see if the reports could be correct.

After two days of these, I came to the conclusion that the system in fact was correct.

When you book a trade , let us say with Citibank, to trade USD $5 million against Japanese Yen at an exchange rate 98.34 yen to a dollar, that contract may be due in a week.

You could book a false exchange rate 101 yen to dollar in your computer and show more yens and thus a bigger profit.

But when time came to settle a week later, Citibank is not going to pay you 101 yen to a dollar! They would pay only 98.34 yen! On the day the settlement was due, the trader would have to use the mutually agreed exchange rate.

This meant that the system in fact was self-correcting. The previous trader was merely postponing the inevitable, not averting it.

The elderly trader refused to accept my reasoning. He said there was no was for the bank to sustain more losses as it was doing when he had closed out all the trades.

I went back to the daily numbers and looked at the reports.

The losses were accumulating because of a simple reason: the total amount of money traded was closed out but not in each pair of currencies! This meant that if you had bought yen against US$10 million and sold French franc to get back US$10 million, those two currencies could move against you and you could sustain losses. To truly close out all trades, There should be no outstanding balance in any currency!

The trader was shocked when I told him this. I had discovered something that he, in his years of experience in trading, did not!

He went back to the trading floor and closed out trading in each pair of currencies.

For the next few days, I showed him that there was no further losses and the total loss had stabilized.

I continued to monitor the books for a few more days.

Then I saw a discrepancy of about Sing$20.

I broke my head for an hour on this problem and reluctantly left the building at 6 pm, to tackle the problem the next day.

As I stepped on the sidewalk, with the locked building doors closing behind me, I knew the answer.

The USD-Sing$ exchange rate had held steady for three days but the rate change that day resulted in the small difference I had observed.

I was elated when my calculations the next morning confirmed my hunch.

Around December 25, I wrote up my findings and told the audit partner that we had no reason to refuse to certify the books.

PS. A decade or more later, Barings Bank in Singapore suffered more than a billion dollars in trading losses in a manner identical to what this bank had experienced.

I just couldn’t believe that bankers haven’t understood separation of responsibilities and that traders should not be allowed to input wildly inflated exchange rates but a second person should be responsible for verifying the reasonableness of the exchange rate in every trade.
GeneralRe: 10 eureka moments of coding in the community Pin
Nelek9-Nov-21 11:29
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NewsPlease ask stupid questions as a new software developer Pin
Kent Sharkey7-Nov-21 7:01
staffKent Sharkey7-Nov-21 7:01 
GeneralRe: Please ask stupid questions as a new software developer Pin
Marc Clifton7-Nov-21 9:12
mvaMarc Clifton7-Nov-21 9:12 
GeneralRe: Please ask stupid questions as a new software developer Pin
Kevin McFarlane8-Nov-21 1:47
Kevin McFarlane8-Nov-21 1:47 
GeneralRe: Please ask stupid questions as a new software developer Pin
Nelek7-Nov-21 9:38
protectorNelek7-Nov-21 9:38 
NewsTo learn a new language, read its standard library Pin
Kent Sharkey7-Nov-21 7:01
staffKent Sharkey7-Nov-21 7:01 
GeneralRe: To learn a new language, read its standard library Pin
Richard Andrew x647-Nov-21 7:27
professionalRichard Andrew x647-Nov-21 7:27 
GeneralRe: To learn a new language, read its standard library Pin
Kent Sharkey7-Nov-21 8:04
staffKent Sharkey7-Nov-21 8:04 
GeneralRe: To learn a new language, read its standard library Pin
Richard Andrew x647-Nov-21 8:07
professionalRichard Andrew x647-Nov-21 8:07 
GeneralRe: To learn a new language, read its standard library Pin
Rob Grainger8-Nov-21 23:22
Rob Grainger8-Nov-21 23:22 
GeneralRe: To learn a new language, read its standard library Pin
Greg Utas7-Nov-21 10:38
professionalGreg Utas7-Nov-21 10:38 
GeneralRe: To learn a new language, read its standard library Pin
Kevin McFarlane8-Nov-21 1:35
Kevin McFarlane8-Nov-21 1:35 
GeneralRe: To learn a new language, read its standard library Pin
Rob Grainger8-Nov-21 23:25
Rob Grainger8-Nov-21 23:25 
NewsMicrosoft to Kill OneDrive for Windows 7, 8, 8.1 in Early 2022 Pin
Kent Sharkey7-Nov-21 7:01
staffKent Sharkey7-Nov-21 7:01 
GeneralRe: Microsoft to Kill OneDrive for Windows 7, 8, 8.1 in Early 2022 Pin
Nelek7-Nov-21 9:36
protectorNelek7-Nov-21 9:36 
GeneralRe: Microsoft to Kill OneDrive for Windows 7, 8, 8.1 in Early 2022 Pin
den2k887-Nov-21 21:25
professionalden2k887-Nov-21 21:25 
GeneralRe: Microsoft to Kill OneDrive for Windows 7, 8, 8.1 in Early 2022 Pin
#realJSOP8-Nov-21 1:13
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