in WWW Security List Archive
Re: Barring Bros Was:Re: SLL protocol implementation ?
daemon@ATHENA.MIT.EDU (Chuck McManis)
Thu Mar 2 03:10:16 1995
Date: Wed, 1 Mar 1995 11:07:07 -0800
From: cmcmanis@scndprsn.Eng.Sun.COM (Chuck McManis)
>It is not clear that the suggested technical measures would have prevented the
>Baring Bros collapse, for a variety of reasons.
After having read several articles on different aspects of this I have to agree
with this point. In fact it looks as if any system that would have prevented
these particular deals would have a devastating effect on the ability of the
company to deal in any derivatives. I suspect the underlying cause for this
first disaster (and I predict there will be several more nearly just like it)
is that as the financial markets have increasingly been converted to digital
processes, the "friction" associated with the process has been reduced.
This has made practices that were previously "relatively safe" given the
rate or rapidity with with the markets changed, to now being quite "unsafe"
as the potential downside has increased dramatically. As early as 5 years
ago month to month changes of 3 or 4% on the major indexes was news, now
its taken in stride. Anyway, the bottom line is that unbalanced derivatives
of this sort will no doubt kill a few more financial institutions before
traders stop trying them.
Of course, there is the alternate possibility that this trader is somehow
affiliated financially with the firms from which the contracts were bought...
(Remember that the "other" party here is _making_ money, not losing it)
I guess we'll know when they find him. Now back to Web security :-)