The London Whale Trade That Cost JPMorgan $6.2 Billion

Bruno Iksil worked in JPMorgan's Chief Investment Office in London. In early 2012, he was running an enormous position in a corporate credit index called CDX.NA.IG.9 — a basket of 125 investment-grade North American companies. The bet had the bank long credit risk, effectively wagering that no big chunk of those companies would default.

The position grew to roughly $157 billion in notional exposure. It was large enough that the market noticed. Hedge funds traded against it and tagged Iksil 'the London Whale' in a Bloomberg piece in April. Once a counterparty knows your size and your direction, they can grind you.

The price moved against the CIO. JPMorgan initially disclosed a $2 billion loss in May 2012. By the time the book was closed out, losses totaled about $6.2 billion.

The Senate's Permanent Subcommittee on Investigations spent months picking through the trade. Its 2013 report concluded the CIO had shifted from a hedging function to something more like a proprietary trading desk, that risk limits had been breached repeatedly, and that model changes had masked the scale of the position.

The fallout reshaped bank supervision. The Volcker Rule's proprietary-trading ban, already drafted, was tightened. JPMorgan clawed back executive pay, paid about $1 billion in regulatory fines, and the CIO's London office stopped running the kind of book that had hidden the trade.