There have been a few more developments reported in the press, in this situation, surrounding the expected loss of $450 million at BMO, as a result of allegedly excessive risky positions in natural gas options. For context that loss represents about 80% of one quarters net income.

Executives at Optionable Inc., the New York commodities broker linked to Bank of Montreal’s natural-gas trading fiasco, cashed in stock worth US$27-million days before the Canadian bank received a strongly worded auditor’s report into the activities of its options trading desk.

Source: Canadian Banks & Insurance

Executives at Optionable potentially make Martha Stewart’s $40K +/- trade look inconsequential, with their purported $27 million transaction three days before the Auditors at BMO brought this out.

For the up to date story, excellent coverage of the reporting here.

The situation has painted the Bank and their new CEO, Bill Downe into an unhappy corner, that no Bank would want to see happen to themselves.

“It will be very difficult for him to pursue a higher-risk strategy,” Hall said. “He’s having his knuckles rapped, and there isn’t anything he can do other than be a very low-risk operation for the next little while.”

Source: Canadian Banks & Insurance

This will call for renewed innovation, with low risk, and high, visible returns to counter the situation. Should be a fascinating time.