Professional managers in any financial industry have an urge to use the resources at hand to make money for themselves. There is only the difference between daring and willingness. Whether it is a fund, brokerage, insurance investment or trust, the money in hand is not their own, is their own customers', in principle the professional manager's duty is to create value for the customer, and then through the creation of value for the customer, he or she receives a salary and bonuses. The problem comes when you look at the accounts you manage, and everyone naturally thinks: how nice it would be if this money were my own.

Especially when you earn money, you can't help but think: how nice it would be if all the money you earn was mine. To keep this idea from becoming illegal, you need to use the "carrot + stick" form. Some financial institutions give enough incentives, for example, to the company earned 10 million, divided into 2 million employees. If the behavior of using customer funds for their own profit, directly sent in.

But in the field of public funds, many people feel that the carrot is not enough to give, bonus allocation company said, rather than completely in accordance with their own performance to give. Some people can not tolerate, do their own private equity to go, some people can not tolerate, we must use the wrong brain. This is a lot of people have heard of the rat warehouse. Previously, the rat warehouse is relatively crude, such as you are a fund manager, know which stocks you want to buy, in advance to let their friends or relatives to buy in, so that their own fund is equivalent to their own advance ambush stocks "sedan chair".

But there are 2 problems here.

The first is that the means of detecting mouse positions has been very advanced, there are many technical masters and industry veterans have been incorporated into the regulatory agencies, many of the latest big data technology has been applied to the regulatory system, which is able to sensitively capture the traces of mouse positions.

Secondly, rat trading is done by buying stocks, which is not very efficient in earning money and can even lose money. The latter is followed by this play of over-the-counter options.

Over-the-counter options this tool has so many features:

1, can be on the leverage

Interested friends can look at the calculation of the leverage of options, in short, the conclusion is that the price of the underlying stock rose by a factor of 1, the option according to the time, the strike price, the risk-free interest rate and so on, you can go up by many times. This is obviously more efficient than using the underlying stock as a rat trap.

2, relatively bad tracking

Unlike options, which can be traded on software by ordinary people, OTC options are financial derivatives made by brokerage firms according to the special requirements of buyers and sellers. While such commodities are also under regulation, they are relatively hard to find cracks in because the terms vary so much.

How exactly do you make money?

For example, a client walks up to a brokerage firm one day and says we need a special option that corresponds to a portfolio of 5 stocks. Now the average stock price of these 5 stocks is $40, and I need you to make me an option with a $50 strike in 2 years, so quote me a price. For this client, if the average price of the 5 stocks stays under $50 for 2 years, there is no value in buying this option, after all, if you want to buy it, you can just buy it in the market. If the average price of the 5 stocks reaches $60 in 2 years, then there is value in exercising this Call option. What many people don't actually know is that brokerage firms have all sorts of personalized services on a day-to-day basis, such as creating products like this that don't exist in the market.

As long as the demand is there, the money is given, and no crime is committed, this can be done. What the brokerage firm has to do is take the order and then find someone who is willing to sell this option. One way to do this is to find people who are willing to bet against this kind of client, for example, some people just don't think that the average price of 5 stocks will be more than 50 bucks, and the brokerage firms can be an intermediary. Or the brokerage firm could assemble an option of its own, dynamically hedged with the underlying stock, and sell it to the client. Then, somewhere else far away, a fund manager starts pulling up those 5 stocks.

On the surface you can't find out if anyone swooped in ahead of time, but the huge return on investment after pulling up goes somewhere. As for the punishment, no matter how well designed this mouse position is, it is always still the use of customer funds in their own illegal profits, I think there will be 2 effects. In the short term, if the evidence is confirmed, then the fund manager should not be, this is certainly a severe and heavy punishment, referring to the previous times. And this time, if you really want to rumors said involved in a wide range, it is even more unlikely to peace of mind, is certainly to be even the pot to end.

Of course the case of collateral is call options related to the positive stock, if it is the kind of rise too much, valuation can not be explained, but also have to click. Investors will realize that the rise so high turned out not to be fundamental, but because of rat trading. In the long run, this is another upgraded version of the cat and mouse game, and the loophole will certainly be closed. Only in the huge interests of the drive, there will be people to figure out a whole new way to play. Fund managers buy call options - build a position in the stock to pull up the stock price - call options surge - brokerage firms in order to hedge the passive purchase of shares to help pull up the stock price - call options continue to surge.

Then there is a large concentration of stocks in the hands of the fund and brokerage firms, the stock market rose, of course, nothing wrong with each other, and if it fell, a huge amount of equity concentrated in the institutions and brokerage firms, is bound to bring stampede. By the time the net value of the fund fell, the fund manager, as usual, to collect management fees, losses borne by the fundamentalists and the stockholders who took over. To be honest, the current punishment for financial crimes is too childish. Not only is the fine too low (should be raised at least 10,000 times the current top amount), criminal liability is almost completely absent. For serious financial crimes, the sentence should be life imprisonment. Financial crimes are far more detrimental to society, both in breadth and depth, than isolated cases of murder.

I have always had a bias that the so-called "asset managers" are the ones with the greatest moral hazard. On the one hand, this group of people received the best education, and have the most information, can be said to have a great information advantage compared with ordinary people; on the other hand, these people are the closest to the money, and is so close to a huge amount of money, can be said to experience the greatest temptation of the crowd; Finally, this group of people in the world of the elite, although they have a high amount of income, but also is the closest to the field of fame and fortune, all kinds of "up" and "down". The desire for "upward mobility" is easily aroused, but they are too far away from the sufferings of ordinary people. To the ordinary people are very important tens of thousands, hundreds of thousands, far less than their transactions, laughing and joking in the digital zero zero these factors are prone to cause moral hazard events.

The above doesn't even mention the so-called "asset managers" who are trying to deceive the public and make a name for themselves. These people are pure crooks who set out to cheat you out of your money. As such, the role of "asset manager" should be chosen with great care. After all, they will be "managing" your assets. If you're not careful, they can give you a serious blow to your property or even your life.