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Boi in the line: the curious case of the day trader who only got it right | Market

A day trader who (almost) never fails is pretty rare. Operating with off-curve hit patterns in the intricate live cattle futures market, Leandro Attie Testa left the brokerage intrigued and his statistics ended up on the CVM. The result: there were ox in the line.

The executive used the information he had as director of cattle purchases at JBS, the largest player in the meatpacking industry, to speculate and earn profits in the live cattle futures market, according to the CVM. In 2020 alone, it earned BRL 990,000 (on average, individuals represent 40% of positions in live cattle futures contracts on B3, with a volume of less than BRL 100 million per day). The absolute number is not what drew the most attention, but the hit rate.

After the denunciations of Testa’s atypical operations — the executive left JBS last year — the CVM opened an investigation. Initially, the ex-director argued that the knowledge he had accumulated in two decades of livestock farming qualified him to know the particularities of the market, but he ended up proposing a term of commitment of R$ 1.6 million. The capital markets sheriff refused.

A statistical analysis conducted by the municipality showed that, in 2020, the executive was able to close 86.36% of the trading sessions with positive adjustments in the positions of live cattle. The loss/profit ratio in day trade operations was only 1.21% (R$1.1 million against a loss of R$14,200).

Day trader: ex-director of JBS made almost R$ 1 million in the live cattle market — Photo: Unsplash

On the other hand, JBS — “a professional player with a trading desk dedicated to this market”, emphasizes the CVM — had a much lower result than Testa. In 2020, it closed 51.7% of the trading sessions with a positive adjustment. The loss/profit ratio was 105% (R$5.3 million against R$5 million).

As head of cattle purchase origination, Testa handled the planning of cattle purchases and risk mitigation in cattle purchases, which may include hedging transactions in the futures market. Panel members, however, were free to decide whether to hedge on the stock exchange or otherwise.

“By operating with the knowledge of which volumes, in which contracts and in which direction the Company would conduct business in a relatively little liquid market such as BGI (in relation to JBS’ needs), Leandro Testa committed an infraction known as front running, prohibited for offering an undue advantage to an investor who knows that a certain operation will be carried out in a certain active market and anticipates it”, said the technical area of ​​the CVM.

In the investigations, the technical area removed the suspicion that Testa’s counterparty in the operations was deliberately JBS (eventually, this only occurred due to the company’s relevance in this market).

Sought, JBS reported that “the matter is being handled by the individual, and JBS has no relationship or part in the investigation. Since last year, the executive is not part of the company’s staff”.

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