A trader has been banned from the City for taking out a huge $10 million bet and concealing it from his superiors after a three and a half hour alcoholic lunch.

David Redmond, who worked in the commodities trading department of Morgan Stanley in London, returned from lunch on February 6, 2008 and while under the influence of alcohol made a barrage of bets on the future cost of freight.

He then compounded the offence by concealing his positions - which could have cost the bank $10 million - and next day traded his way out of them to book a small profit.

The Financial Services Authority (FSA), the City watchdog, yesterdayy banned him for "a lack of honesty and integrity" falling short of the standards it expects from approved persons.

In an unusual detail, the regulator suggested that drink played a part in Mr Redmond's behaviour. In its report, it said on the day of the offence, "Mr Redmond took an extended lunch break between 13.14 and 16.41 and it appears that this affected his behaviour on his return to the office, although he was not visibly drunk."

Although some traders have a reputation for hard drinking and drug-taking, this is thought to be the first time the FSA has suggested alcohol might have led to serious misjudgment on a trading floor. The FSA said the behaviour of Mr Redmond was out of character and unpremeditated. It appeared that he had "panicked when he realised at some point after 17.04 that he had a short position."

At that point, he appeared to engage in a frenzy of trading, making electronic trades on average every 7.5 seconds for an hour and a half into the early evening. He went home with the positions still outstanding. Later he was unable to give any satisfactory explanation for his trading. The following day he traded out of his position for a small profit.

The FSA said it would look favourably on dropping the ban after two years. Mr Redmond, who is now 28, was suspended by Morgan Stanley immediately after the offence on February 7, 2008 and fired for gross misconduct a month later. He was subsequently hired by another firm until its application to the FSA for his approval was withdrawn in November.

Morgan Stanley allows moderate drinking at social events and for client entertainment, but casual lunchtime drinking is strongly discouraged and can lead to disciplinary action.

Yesterday's ban is the second of a Morgan Stanley trader this month. Last week, Matthew Sebastian Piper was fined £105,000 and banned after deliberately concealing up to $120 million of derivative losses. The bank was also fined £1.4 million for failures of control. The bank said today, "As the FSA states in its announcement, Morgan Stanley promptly identified and investigated the issue and took swift action against Mr. Redmond. He was suspended by the firm and subsequently dismissed."

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