Nick Leeson traded simultaneously on two exchanges in two different time zones. Does the fact that he was trading on two exchanges simultaneously automatically mean he was speculating, or is it what he was doing that makes the trades speculative?
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It was what Leeson was doing that made his trades so speculative. If Leeson had been arbitraging, the only real exposure Barings would have borne was the exposure from not having offsetting margin requirements on the same exchange. Arbitrage trades should have earned gains on one exchange approximately equal to the losses suffered on the other. Because the exchanges were Barings' counterparties, credit risk was very low.
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