There is an underreported flavour to the much-debated middle and back office experience of Jerome Kiervel, the Soc Gen trader responsible for last week's high drama. According to a copy of
his CV circulated online (thank you Chris Skinner), he was involved in reference data between 2000 and 2002, working in the middle office Referential (sic) team. His resume mentions product modelling, building Excel macros to support exotic products, and
involvement in a Single Referential project.
Referential/referentiel is common anglo-franco jargon for reference data (things like security masterfiles, counterparty hierarchies, etc).
This suggests that an intimate knowledge of financial products, counterparties and position management is very useful in making the very dificult and increasingly rare transition from back- and middle office jobs to the sharp end. Reference data rules!
I am not sure if the Soc Gen story is a tragedy or a farce, but like the sub-prime saga the plot does involve a very potent reminder of the basics of this game we call capital markets. When you lose sight of what it is you are trading, how much it is worth,
and who you are doing business with, something will happen to reduce a pyramid of esoteric and arcane financial engineering to a straightforward and harsh final bill.
On a related note - did you also notice the relief in mainstream press reports that the Societe Generale episode did not involve any particularly complex products? Thank goodness - no requirement for yet another Guide to Collateralised Debt Obligations