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Quantitative Finance · Glossary

What is Segregation of duties, block leave?

Also known as: segregation of duties · block leave

Definition 28.5 Rates, Credit, XVA and Risk · Chapter 28 — Operational Risk and Rogue Trading

Segregation of duties separates the people who trade from those who book, confirm, settle, value and report the trades. Block leave requires each trader to be away from the desk, with no access to its systems, for a consecutive period each year, so that positions that need daily attention to stay hidden are exposed.

The chain of controls a trade passes through, and where the documented cases broke it. Each link is independent evidence that the position exists and is what it claims to be. Schematic; cases from the Chancellor’s statement on Barings (1995) and the FSA’s 2012 notice to UBS.
Figure 28.1. The chain of controls a trade passes through, and where the documented cases broke it. Each link is independent evidence that the position exists and is what it claims to be. Schematic; cases from the Chancellor’s statement on Barings (1995) and the FSA’s 2012 notice to UBS.
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