I'm late to the UBS rogue trader story (I was away from the blog yesterday), but the WSJ's Marketbeat blog points out a fact worth repeating: You only hear about "rogue traders" when they lose money.
In fact, the rogues often say they were rewarded for breaking the rules before their trades went bad. From Marketbeat:
Then there is Jerome Kerviel, the ultimate rogue trader who lost $7 billion at Societe Generale in 2008. Kerviel claims he exceeded his credit limits regularly and that when he made money for the bank in 2007, he received a $416,000 bonus for $60 million in profits for SocGen.
Ultimately, the difference between trading floor rogues and royalty is how their bets pay off, not whether they take extreme risks. As [a rogue trader who was busted in the 1990s] said, there's no excuse for not catching rogue trading today or even 18 years ago: "a very simple check would have exposed it."
On a related note, Kid Dynamite writes:
I, as someone with extensive trading experience in varying roles on both sides of the Street, cannot comprehend how a trader can lose billions of dollars without anyone else knowing about it.
The rest of Kid Dynamite's post has lots of technical details about why this is so.
For a broad overview of what just happened at UBS, see this Bloomberg story.