Armin S.

Armin S. (complete name unknown) is a German independent securities trader.

Life

Armin S. started his career as a trader at the German WestLB Investment boutique. Afterwards he worked 8 years at Citigroup on the trading floor.[1] 

Subsequently, he traded for his own account. Armin S. compared his job with the work of a used car dealer, selling and buying securities constantly and making his margin on the Bid-Ask Spread, the difference between the selling price and buying price.[1]

€163 million lawsuit

Armin S. achieved international recognition when he sued BNP Paribas for over €160m, one of the largest civil cases brought by a private investor in Germany.

The German newspaper FOCUS was the first to publish an article regarding a €163m erroneous trade allegedly involving BNP Paribas Arbitrage. The bank had sold securities for €326,400 to an investor but the value of the securities was €163 million, according to the bank.[1] According to the article, the error remained unnoticed for several days, and BNP had even reconfirmed the original price. However, a trade-cancellation was only possible until the next day according to prevailing mistrade rules. The lawyer of Armin S., Mario Bögelein, stated in the article that a bank not recognizing an error of this magnitude should not be protected by law.

Next, Armin S. commented on his case in the German magazine AnlegerPlus, questioning the breaches on the risk-management side of BNP.[2]

On 11 March 2017 the French newspaper Les Echos published an article with the headline “trader requests 161m EUR from BNP Paribas”.[3] A member of the European Banking Authority retweeted the article as an example of operational risks within the banking sector.[4]

On 23 May 2017 Bloomberg News dedicated a spotlight article on the case. The 152m EUR case will be one of the largest civil cases of one individual in Germany. The author highlighted the prevailing erroneous trade rules, that erroneous trades could only be canceled until the next day. Hans-Peter Burghof, a renowned university professor, was cited with the words "a bank is obliged to execute their trading activities correctly, this may not have happened".[5]

On 5 July 2017, Armin S. commented on the case with the words "If (the loss) is about 163m EUR, this should have caught the immediate attention of a major bank." Further "The arrogance of the bankers makes me sick. They think of themselves they are the best and brightest – which they sometimes are – but once something goes against them they ignore it"[6]

On 6 July, an article on the front page of the FAZ appeared by Christian Siedenbiedel.[7] A speaker of the Frankfurt Stock Exchange said that they would have spotted a 163m EUR mistrade (erroneous trade), however the transaction was executed over-the-counter (OTC), without the involvement of a stock exchange.

The lawyer Michael Lusk published an article with the title "Do banks' internal control system work?"[8] Why BNP did not spot the mistake in their risk management and thereby violated supervisory rules by the European Central Bank remains unknown.

Armin S also filed the 152m EUR claim in France, because the relevant jurisdiction is still unknown.[9]

BNP's Risk-management affair

The Financial Times published an article in March 2018 about the case with the title "BNP Paribas failed to book trades in Germany for a week". They cite internal documents that show why the error has not been detected: as it turns out, BNP forgot to book all trades that happened in structured products in Germany from 2 December 2015 to 9 December 2015. The Financial Times estimates that 8500 trades might have been affected. It also questions if the bank has hedged their positions if the trades have not been booked. Armin S. is cited with the words “I don’t think it’s fair if on the one hand, BNP wants to rely on statutory safeguard clauses but on the other hand they ignored all control-tasks imposed by the regulators — ECB, BaFin and AMF — for a whole week".[10][11]

See also

References
  1. Niesmann, Andreas (2016-06-05). "Bank-Irrtum zu seinen Gunsten". FOCUS.
  2. S., Armin (2016-09-01). "Erfahrungsbericht des Sdk Mitglieds Armin S." (pdf) (in German). Retrieved 2017-03-21.
  3. Lacour, Jean-Philippe (2017-03-11). "Un trader réclame 161 millions d'euros à BNP Paribas" (in French). Retrieved 2017-03-21.
  4. Nijdam, Christophe (2017-03-11). "Voilà un exemple concret de ce qu'on appelle le risque "opérationnel" dans le secteur bancaire [This is a concrete example of what is called "operational" risk in the banking sector]" (in French). Retrieved 2017-03-21.
  5. "Daytrader verlangt von BNP Paribas wegen Preisirrtum 152 Mio € - WELT". DIE WELT (in German). Retrieved 2017-05-27.
  6. Sackmann, Christoph (5 July 2017). "Dieser Mann verdiente über Nacht 163 Millionen Euro - aber seine Bank zahlt nicht". Focus Online (in German). Retrieved 2017-07-11.
  7. Siedenbiedel, Christian (2017-07-05). "Plötzlich Multimillionär durch einen Bankirrtum". Frankfurter Allgemeine Zeitung (FAZ) (in German). Retrieved 2017-07-19.
  8. "Do banks' internal control systems work?". 2017-07-31. Retrieved 2017-08-20.
  9. Matussek, Karin (2019-01-11). "BNP Faces New Front in $188 Million 'Fat-Finger' Suit by Trader". Bloomberg. Retrieved 2019-01-11.
  10. Binham, Caroline (2018-03-09). "BNP Paribas failed to book trades in Germany for a week". ft.com. Retrieved 2018-03-17.
  11. "ArminS vs BNP Paribas". 2018-09-26.
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