[GJM] TRICKS OF THE TRADERS from [www dot ecotort.gn.apc.org]

[Mary Fee]

Anonymously printed in the colour supplement.
Just the sort of thing I suspected - and then some
- truly shocking. Thanks for posting it Nick
..M



>TRICKS OF THE TRADERS
>
>What's the rarest commodity on the stockmarket? 
>Honesty. A former broker exposes the corruption, 
>greed and insider dealing endemic in the City 
>The Guardian, Saturday May 3 2008
>
>
>
>It was a typical day of coke hangovers and 
>questionable ethics. Half past 10 in the morning 
>and I was slumped at my desk, grey Hermès tie 
>hanging despondently from my neck like a 
>hangman's noose. I was struggling to breathe. 
>Steve on the other side of the room overruled my 
>pleas for the air conditioning to be switched on 
>- another reason to hate him and his crew on the 
>old-boy side of the desk.
>
>         We sat in long, straight rows in the 
>trading room, like slaves chained in the hold of 
>a Roman galley. Our chains were gilded ones, 
>granted, but they shackled us all the same: from 
>7 till 4.30, five days a week, we barely left 
>our desks. There were eight screens shared 
>between each pair of traders, the monitors 
>stacked on top of one another in a tight 
>semicircle. Hundreds of stocks flashed their 
>rise and fall across the screens, with the 
>Reuters newsbar spewing out company 
>announcements like a Gatling gun all day. Our 
>eyes were trained to follow every flicker. Banks 
>of phone lines were available at the push of a 
>button, two handsets per man - one for the right 
>hand, one for the left - thoughtfully built of 
>toughened plastic to withstand the phone-to-wall 
>smashing that took place whenever a deal fell 
>through. This was our world - and the flashing 
>numbers scrolling past on the liquid crystal 
>screens could make or break us, turning us from 
>heroes to villains and back again in the blink 
>of an eye. My boss Tony's rasping voice bored 
>its way relentlessly into my ear from the minute 
>I sat down to the minute I bolted at the closing 
>bell. Today was no exception, try as I might to 
>ignore him.
>
>         "Everyone's saying there's a bid for 
>Company A," he babbled. Yeah, Tone, but you're 
>like the boy who cried wolf - every five minutes 
>he'd get a text, or a call, or even just a 
>vision, about this or that company being the 
>subject of a takeover bid. Nine times out of 10 
>it was complete nonsense - but in this game 
>nonsense wins prizes. Because if you buy early, 
>and the story reaches enough people, the stock's 
>going to fly - truth or no truth - and you've 
>sold yours well before the company issues a 
>denial announcement.
>
>         Hard facts meant little in a world ruled 
>by paranoia and fear - paranoia that everyone's 
>trying to do you out of your profit, fear that 
>you're going to miss out on even bigger winnings 
>if you don't follow the herd. People like Tony 
>acted as both instigator and reactor in this 
>game - some days he set the ball rolling when he 
>felt like ramping a stock; on others he'd be 
>just one more adding to the circle of Chinese 
>whispers that blew round the City like wind 
>through rushes.
>
>         So, for all I doubted this latest 
>rumour, I agreed to keep my eye on the screens, 
>in case anything did happen. We worked well like 
>that - he had all the sources, I did the grunt 
>work. He'd large it up at Fabric, Hakkasan or 
>wherever the denizens of the trading scene hung 
>out, while I, faithful lapdog, got to be his 
>Sets boy by day. (Sets is the computerised 
>trading floor used by the London Stock 
>Exchange.) If you're quicker than the other 
>10,000 traders out there, you can read an 
>announcement, make up your mind in a flash, and 
>buy or sell before the others have even clocked 
>something's going on.
>
>         That's the way it would go. I'd seen it 
>happen. Bang - Company B announces, it's 
>received an approach. Your fingers know what 
>they're doing before your eyes have caught up. 
>Buy ... 100,000 ... limit, say, £7.65. Got them 
>- now you're off and running.
>
>         Ten seconds later and the little 
>beauties are changing hands at 835, no ... 840, 
>850 ... 860 now ... you're yelping like a puppy 
>and, ignoring everyone around you, selling back 
>the 100,000 you've just bought for maybe 862. 
>The brokers erupt like Vesuvius. Right there 
>they're sitting on nearly a hundred grand profit.
>
>         Their hearts are racing. They get the 
>lift down, then run out on to the street for a 
>smoke.
>
>         "Keep it down, keep it down, someone'll 
>hear..." And this is the beauty of the 
>operation. With the team leader on board level 
>at the firm, yet still a dodgy little bastard at 
>heart, a three-man team has the means to pull 
>this type of heist all day, every day. The rules 
>say you must specify which client you're dealing 
>for before you trade - so, in theory, the 
>Company B winnings would already have a home. 
>But for many a broker, the rules are slightly 
>different. You trade first, ask questions later. 
>If it all goes pear-shaped, if the stock falls 
>instead of rises, there's always a pension fund 
>or discretionary account that can take the hit 
>for 50 grand or so. But if, with Company B, say, 
>you hit the jackpot, then screw the clients, 
>this one's for the boys.
>
>         Everyone had dummy punters, friends or 
>relatives who let you wash any winners through 
>their account. So in the case of Company B and a 
>three-man team, this would mean just shy of 100 
>grand split three ways: more than £30,000 - less 
>40% capital gains tax - and that would be nearly 
>20 grand per man.
>
>         I had a setup with my mate M that we'd 
>go 40-60 on each deal - but I had to see it in 
>cash the same day. And, of course, I took the 
>60. His account was entirely governed by me. I 
>had tacit approval to move as much stock through 
>it as I liked, so long as he was always up at 
>the end of the week. And that's what I did. The 
>compliance department (company employees who 
>were answerable to the Financial Services 
>Authority [FSA] which was supposed to check that 
>all the deals were above board) barely batted an 
>eyelid at his account's stellar performance, 
>assuming he was a proper punter who knew the 
>ropes - plus I tossed in a few losing trades 
>every now and then to throw them off the scent. 
>We needed to maintain only around 20 grand in 
>the account to keep it operational. I traded off 
>margin (that is, we had only a small percentage 
>of what we were spending in the account); so 
>long as the trade was bought and sold during the 
>same three-day period, no cash would ever need 
>to be laid out on the deal. In this way, I could 
>take six-figure positions in his name with ease. 
>Whatever smash and grab I'd pulled off would 
>soon be marked down on a dealing ticket with M's 
>name and number at the top; I passed it to the 
>boys in the back office who put the trade into 
>the system, thus ensuring the cash made its way 
>to its (not so) rightful home. That meant, in a 
>few hours' time, I could be picking up several 
>grand in folding bills somewhere near Bond 
>Street.
>
>         Behind the headline-grabbing stories of 
>rogue traders losing billions, the more mundane, 
>day-to-day world of high finance is as wild and 
>unregulated today as it ever has been. Brown 
>envelopes stuffed with £50 notes change hands 
>every lunchtime in bars across the City; drugs 
>wreak havoc with traders' judgments as they 
>stake fortunes of their firms' money on the 
>markets; and greed trumps all else in the 
>stampede to get rich or die trying.
>
>         "When in Rome, build a fucking 
>aqueduct." Those words, bellowed at me by my 
>biggest client as he lay sprawled in the bar, 
>proved to be the most telling advice I ever got 
>in the City. Everybody's doing it, why shouldn't 
>we? There's no point pretending - no one is in 
>this game to make the world a better place. It's 
>all about the money. >From the bottom up, the 
>only thing that matters is feathering your own 
>nest, regardless of who gets shafted along the 
>way or how compromised your morals become in the 
>process.
>
>         I played the game for the best part of a 
>decade and saw first-hand what lies beneath the 
>veneer of London's financial district. For all 
>the stock exchange is presented as a 
>transparent, trustworthy great British 
>institution, the truth is that everywhere 
>corruption drips like honey. For all the talk of 
>FSA controls, those working there know they can 
>get away with abuses with barely a slap on the 
>wrist - and so they do, day after day, year 
>after year.
>
>         The way things worked in our firm, the 
>well-dressed, well-connected north London boys 
>were groomed to become the next generation of 
>brokers, skilled at flattering the clients. At 
>the same time, the Essex boys who joined the 
>profession ended up as dealers, equally 
>obsequious, penetrating the inner circle of the 
>market to get the best prices buying or selling 
>shares. The relationship between brokers and 
>dealers was a symbiotic one, though below the 
>surface there was little love lost between the 
>two sides. The brokers looked down on the 
>uncouth mannerisms of the barrow-boy dealers, 
>who in turn mocked the slickness of their 
>cufflink-sporting counterparts. For my part, I 
>yearned to be a rough and ready dealer, out 
>getting hammered with the other market-makers 
>every lunchtime, but - in the caste system that 
>was the stockmarket - I was doomed to remain on 
>the broking side of the divide.
>
>         It was 1997 - I was 19, suited and 
>booted and fresh out of school. The dotcom boom 
>was in full flow and the firm's corporate 
>finance department was inundated with new 
>companies wanting to ride the internet wave and 
>list on the market. All this extra work meant 
>many more hands were needed on deck in the 
>junior department. A few new faces were brought 
>in and I - by virtue of being the only one who 
>had even the slightest clue how the dealing room 
>operated - was put in charge of our little team. 
>All of us were urged to take the relevant exams 
>as soon as possible, so we could start trading 
>for clients in our own right. I made it my 
>mission to be the first to make the leap from 
>junior to broker and suddenly I was propelled 
>from dogsbody doing menial tasks to the lofty 
>position of partners' assistant.
>
>         Paul was my overall boss and tormentor 
>for the entire time I spent working for the 
>partners. He ran the Middle Eastern side of the 
>business and took his role incredibly seriously. 
>I spent all day hunched over my Reuters 
>terminal, watching minutely every move of the 
>FTSE stocks for him.
>
>         Back then, not a day went by without yet 
>another minnow doubling in price as the punters 
>piled in. According to one of the partners, the 
>next big thing was going to be Company C. This 
>was a cash shell - a listed company with some 
>funds on its balance sheet, but otherwise no 
>operational business - and our firm's finance 
>department was negotiating a deal to reverse a 
>new internet company into it, which meant the 
>sky was the limit in terms of its future share 
>price. Officially, there were Chinese walls 
>between the finance department and the trading 
>room, which meant the brokers shouldn't have 
>been privy to any of the impending deals being 
>thrashed out upstairs. In practice there was no 
>such thing - and no one batted an eyelid in the 
>compliance department.
>
>         None of the brokers would be so brazen 
>as to trade any "house" stocks in their own 
>account, as their personal trades were far more 
>likely than their clients' to be scrutinised, so 
>most people just bought Company C for their 
>favourite clients and took their cut through the 
>commission they charged. Other brokers displayed 
>even more chutzpah, setting up accounts in the 
>names of trusted friends, then washing trades 
>through their accounts and taking their cut of 
>the profits in cash.
>
>         As I had no clients of my own, I told a 
>friend's older brother what was going on with 
>the stock - which had risen stratospherically by 
>now from 15p to more than £1. He loaded up, 
>strapped himself in for the ride, and within a 
>couple of weeks was selling them back to the 
>market at more than £4 apiece. He sorted me out 
>in the currency I favoured most - vacuum-packed 
>bags of skunk - and we all did nicely out of the 
>experience. Thus began my education in the 
>low-level insider trading endemic in every City 
>firm - whatever the authorities would have you 
>believe.
>
>         As one partner explained it to me, "If 
>you've got a son who's a doctor, then he'll give 
>you a free check-up when you need one. If your 
>dad's a lawyer, he'll do your conveyancing for 
>nothing, won't he? So if your best friend's a 
>broker, you'd expect him to toss you free money 
>when it's on offer - that's what we do." That 
>all sounded sweet as far as I was concerned: I 
>was yet to find anything that turned me on more 
>than fast cash and the chance to flash it about.
>
>         Our firm was a self-styled boutique 
>brokerage, with a small and exclusive customer 
>base - captains of industry, property tycoons, 
>pop stars and minor celebrities. Many sat on the 
>boards of public companies and were more than 
>happy to brief us about their own shares. No 
>matter to them that they were under obligation 
>not to divulge financial information when their 
>firms were in "closed periods" (the two months 
>before they made public their annual results and 
>trading statements); they used coded signals and 
>texts to get the message out that the time was 
>right to buy or sell their stock, before the 
>public got hold of the information.
>
>         The brokers greedily devoured the 
>morsels they were thrown - after all, being in 
>the know is everything in stockmarket circles. 
>If a takeover bid was coming for a certain 
>company, you could guarantee those close to the 
>board would have a quiet 50 grand punt on the 
>stock in the run-up to the event. And when the 
>right people bought, it sent a signal to the 
>partners to fill their own personal accounts 
>with the shares, too, before they passed on the 
>tip to their friends in the market and really 
>got the ball rolling.
>
>         The brokers could also rely on their 
>friends at other trading houses to pass on any 
>nuggets that came their way. Our brokerage 
>wasn't considered competition by the market 
>colossuses - if anything, we were akin to the 
>birds that feed themselves cleaning hippos' 
>teeth, and the relationship suited both parties. 
>Many of the top traders and market makers at the 
>major firms had their personal accounts with us. 
>Technically they were obliged to report their 
>dealings to their own compliance officers, but 
>if another brokerage carried out the trades, 
>there was much less scrutiny of whether they'd 
>put their own interests before those of their 
>clients.
>
>         They'd call and tell us what to buy in 
>their names, then say, "You should have some of 
>those yourselves; we're about to run the price 
>up." Once everyone was on board, that's exactly 
>what happened. The market is run on a "for us, 
>by us" mentality.
>
>         There were financial journalists who 
>were just as deeply in the pockets of the 
>industry and broking figures. If the morning 
>papers carried reports of bid rumours for a 
>stock, you knew that whoever was the source of 
>the whisper had already loaded up on stock for 
>themselves. For the journalists it was a 
>self-fulfilling prophecy - once they'd reported 
>the story, their readers would witness the 
>meteoric rise of the shares during the course of 
>the day. Any trader who tipped off the the city 
>pages' gossip columnists could count on maximum 
>exposure, thus giving their stocks a welcome 
>fillip when the market opened next day.
>
>         If the story had legs, the company 
>involved would put out a "response to press 
>speculation" announcement and confirm that they 
>were indeed in bid talks - so the shares would 
>rocket and those already in would be laughing. 
>If the story was false, chances were the price 
>would spike initially as the so-called "mug 
>punters" piled in, giving those who'd bought the 
>day before the chance to offload their stock; 
>and by the time the company denied any bid, the 
>only people left holding the baby were those 
>sucked in by the paper's eager reporting of the 
>rumours.
>
>         Either way, journalists played as 
>important a part as anyone in the ramping of 
>share prices, which is why they were treated 
>with such deference by brokers and company 
>executives alike. "Buy on rumour, sell on fact" 
>was an adage to which we all stuck - the real 
>moves in price came long before companies issued 
>official guidance about their activities. And, 
>for all its bluster, the FSA - set up to 
>regulate the industry - never did anything to 
>address the suspicious moves in hundreds of 
>share prices every week.
>
>         While insider trading - dealing stocks 
>with the benefit of knowledge not available to 
>the public - is strictly illegal, it is also so 
>rife among City firms as to have become all but 
>institutionalised. Knowledge is power and since, 
>in the world of finance, power is money, it's 
>little wonder that however hard the FSA tries to 
>stamp out the abuse, those who call the shots in 
>the City try even harder to get away with it. As 
>Jonathon Crook of the law firm Eversheds said 
>recently, in the wake of the HBOS scandal (when 
>the bank's share price fell by 20% following 
>carefully planted rumours that it was in 
>trouble), "The effectiveness of the FSA as a 
>prosecutor remains questionable. While it has 
>had some success on relatively straightforward 
>cases, it has yet to prove its mettle on a major 
>matter."
>
>         Calls that came through to the dealing 
>room were taped, but mobile phone calls were 
>not; nor were text messages monitored. Chats in 
>local bars and pubs provided equally secure ways 
>to circumvent compliance procedures. These were 
>people who wouldn't steal from the supermarket 
>but thought nothing of the way they robbed the 
>rich to make themselves even richer. Every 
>illegally gotten piece of information was 
>depriving outsiders of the chance to trade the 
>markets on a level playing field. For every 
>penny made illicitly, by definition someone had 
>to lose in return. Spoofing the public into 
>buying shares via newspapers or by spreading 
>rumours was highly questionable, but in a world 
>in which morals are defined by the standards of 
>those around you, who would point the finger?
>
>         It was a similar story with drugs and 
>alcohol. When the FSA periodically announced it 
>was mulling plans to perform random drugs tests 
>on traders, many in the industry were privately 
>up in arms, questioning why they should be 
>subject to such draconian measures when doctors 
>and nurses - "who are playing with people's 
>lives" - were not. It didn't occur to them that 
>being in charge of millions of pounds of 
>clients' money was a similarly enormous 
>responsibility.
>
>         Part of my unofficial role as assistant 
>to the partners was to pick up their drugs, for 
>which I was tipped in cash as though I were a 
>shoeshine boy outside Moorgate station. Coke was 
>just another way to flash one's wealth, as well 
>as get the same buzz after the market shut that 
>trading provided during the day. For all that 
>everyone loved the moment they closed out a 
>winning position, there was a postcoital 
>depression that is the curse of gamblers of 
>every persuasion. Drugs and drink filled the 
>void. Though doing coke during office hours was 
>generally frowned upon, a hard drinking session 
>over lunch was laughed off by the other brokers, 
>even when it caused people to fall asleep at 
>their desks or be so addled that they hit "buy" 
>instead of "sell" when dealing on the screens. 
>In the City, excess was to be admired and blind 
>eyes were turned to any indiscretions - so long 
>as the guilty party was a financial asset to the 
>firm in the wider scheme of things.
>
>         Certain clients even expected such 
>behaviour from their brokers, viewing their 
>antics as proof that they were so good at their 
>job, they were given free rein to behave as they 
>pleased. I routinely had to entertain clients 
>for marathon 12-hour sessions which involved 
>supplying them with whatever drugs they desired 
>on top of £1,000 lunches. Broker-client 
>relationships existed through a prism of false 
>mutual adoration - the broker lavishing praise 
>on the client to curry favour and keep his 
>account, the client doing likewise to ensure the 
>best service, best advice and, most importantly, 
>best off-the-record tips.
>
>         The ecosystem worked very nicely for all 
>those on the inside of the Square Mile-sized 
>gentlemen's club that was the City. It wasn't 
>what the FSA had in mind when it periodically 
>promised to clean up the world of finance, but 
>by monitoring the situation from afar, it was 
>never likely to penetrate the opaque sheen that 
>allowed duplicity and double standards to 
>flourish unchecked within broking houses. 
>Occasional censures were handed out, but no one 
>I knew was ever caught for their crimes, and 
>with neither peer pressure to play fair nor 
>intervention from on high, it was no wonder the 
>City continued to adhere only to the law of the 
>jungle.
>
>         The basest instincts come to the fore 
>when the name of the game is money and your 
>standing in society is based purely on how much 
>you've made and how fast you've made it. I was 
>as guilty as the next man of adopting this 
>skewed outlook - but it wasn't until I left it 
>all behind me that I realised how deeply I'd 
>been bitten by the lust for lucre. When I was 
>trading millions on behalf of my bosses and 
>clients, I saw nothing amiss about spending £300 
>on a McQueen sweater or half a grand on a 
>drug-fuelled night out. Cash that could be made 
>in an instant could be spent the same way, and 
>there was always more where the last wad came 
>from - no matter how ill-gotten the gains or how 
>unscrupulous the process of acquiring the next 
>haul.
>
>         In the end, I got out because it was 
>clear to me that it was a case of now or never. 
>Spending all day with men in their late 30s who 
>couldn't see past the next deal, the next line 
>of coke or Porsche Carrera set alarm bells 
>ringing in my head - if I didn't want to turn 
>out like them, I had to hang up my trading 
>boots. Much as the casino atmosphere was 
>limitless fast-paced excitement for a boy in his 
>mid-20s, as a long-term lifestyle choice it was 
>too shallow and superficial - it wasn't worth 
>selling my soul.
>
>         Trading is as addictive a pastime as any 
>other form of gambling, and as any drug. It 
>becomes a way of life - a way to define 
>yourself, to convince yourself you are the 
>centre of the world and believe that you are 
>abundantly powerful in the grander scheme of 
>things. Hitting a button and effecting a 
>seven-figure transaction is the stuff of fantasy 
>for most people in the real world, but when 
>you've been doing it every day since you were 
>19, you soon lose your sense of reality and get 
>swept away in the carnival atmosphere.
>
>         Sipping a quiet pint in the pub after an 
>adrenaline-packed day riding the market 
>rollercoaster doesn't quite sate the appetite, 
>so heavy drinking, hard drugs and all the other 
>trappings of overindulgence soon become standard 
>fare. But the plight of the trading addicts is 
>masked by their clothes, jewels, cash and 
>"success" - few question their happiness, since 
>they seem to have it all. These aren't junkies 
>huddled under railway arches begging for loose 
>change, but their entrapment is no less acute - 
>quitting is as hard for a trader as it is for a 
>heroin fiend.
>
>         I don't say this in an attempt to 
>solicit sympathy for the devil - I've got none 
>myself, and wouldn't expect anyone else to be 
>brimming with compassion for the City traders, 
>either. Instead, thought should be spared for 
>those members of the public whose chances of 
>investing successfully are greatly impaired by 
>the innate corruption of the Square Mile, and 
>the inaction of the authorities who are meant to 
>police the City. Until a crackdown occurs, 
>there'll never be a change in how business is 
>done in the stockexchange - there wasn't 
>throughout my 10 years on the inside and, 
>judging from the tales of friends who are still 
>trading, there hasn't been since I left. The 
>public might feel justice has been done when the 
>likes of Nick Leeson and Jerome Kerviel are 
>caught red-handed - but the truth is that they 
>are just the tip of the iceberg.
>
>
>
>· The names of individuals and companies, and 
>some other details have been changed.
>
>
>
>[U:Evidence:Tricks of the Traders]
>
>
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