NATWEST MARKETS, the largest clearing bank in the United Kingdom in the mid-1990s and a financial trading unit of National Westminster Bank of London, specialized in corporate, treasury, and investment banking. In 1997, it discovered mispricing errors in interest rate options trades that dated back to 1994. The errors were subsequently traced to a rogue trader who had elevated his paycheck through fraud and a manager who had neglected his duty to supervise.

Kyriacos Papouis was a relatively low-profile, and low-paid, London-based trader in the rate risk management division of NatWest Markets. He earned an annual salary of about £80,000. In 1996, he left NatWest Markets just before the end of the year for a similar position at Bear, Stearns, a worldwide investment banking and ...

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