SocGen Computer Glitch Rippled Through Bond Derivatives

Societe Generale suffered a systems failure that rippled through several futures contracts last month, according to Bloomberg. This event is raising questions about the derivatives powerhouse’s risk oversight and the reliability of its technology.

Bank’s back-office systems malfunctioned, causing errors in figures that showed up on Intercontinental Exchange , said the people, who declined to be identified because the conversations were confidential. Bank staff had to sort through client trades manually, one of the people said, while ICE later restated data on seven contracts.

“A technical fault on one component of our clearing platform, and compounded by extreme market conditions following the U.S. elections, meant the trade-load system was impacted briefly in November,“ a SocGen spokesman said in an e-mail. “This was an exceptional event, which has been resolved. Our platform has been further strengthened and continues to run as normal. Risk management, for the bank and its clients, continues to be an absolute priority.“

The glitch took place as trading volumes in many assets soared in November. Global markets were roiled after Donald Trump’s election as U.S. president and as OPEC debated a deal to cap oil production. Brent futures volumes at ICE were the highest since January.

ICE said on Nov. 17 that contracts including Gilt and oil futures on its derivatives exchange had been “materially overstated“ due to member-system error. ICE was referring to SocGen, which overstated some positions, the people said. The flawed data signals SocGen may have misunderstood how much risk its clients were taking. A spokesman for ICE declined to comment.

ICE had to restate open interest, which is a measure of outstanding futures positions. That data helps calculate how much collateral must be held. ICE’s clearinghouse operations, which collect bonds and cash from members to prevent a counterparty collapse from spiraling out of control, are the third biggest in the world.