The Devil's Deal

Welcome to the jungle50

‘A quick question. Answer this and you get the job. Give me three

reasons why I always choose risky investments.’

‘You can make big gains. Your gains can come quickly. It’s more

exciting.’

‘Good. Start now. Five hundred a week OK?’

There wasn’t time for an answer. The previous year I had spent

the summer teaching English to foreign students for £50 per

week. That was a great job. Now I was getting ten times the

money, but I had no idea what I was going to do. Perhaps Jerry

Witts wanted someone young and strong to carry his phone.

I found out – much later – that the woman with the clipboard

was meant to send me to the post room. And it was to be some

time before I learned whose CV Jerry had on his desk.

The trading floor

Jerry took me under his wing that summer as I lled out spread-

sheets on the bank’s creaking computers. I was so green that I’d

never been through a door which opened electronically. One

morning Jerry slid his pass over the control. There was a beep of

recognition and he beckoned me in.

‘Welcome,’ he said, ‘to the jungle.’

It was the noise that hit me rst. Then the sheer size of the open-

plan oor, as big as a football pitch. Then the minions, shuttling

from desk to desk carrying printouts and bacon sandwiches.

Finally, the traders. Some were standing up, shouting into

two phones. Others were splayed across their desks, staring at

terminals and TV screens. At least two appeared to be ghting.

‘I won’t introduce you,’ Jerry said. ‘They’ve got no time, and

they’d only be rude to you.’

‘That’s very kind of you to protect me, Jerry.’

Jerry laughed. ‘It’s not you I’m protecting. I’m facing huge

reputational risk bringing a squirt like you into the lions’ den.

51Damn clients

Make sure you keep two steps behind me and don’t be tempted

to answer any phones.’

Conference rooms were spread around the outskirts of the

trading oor. The three managing directors had ofces in the

corners. I stood open-mouthed as I read the signs above each

row of desks – Japanese Equities, UK Bonds, Credit Risk, Foreign

Exchange, Derivatives. Four nearly-identical men, wearing black

wire spectacles and red ties, stared in silence at a graph on their

Reuters screen. They smiled simultaneously when a red line

crossed a green one.

‘Quants,’ hissed Jerry. ‘Pointy-headed rocket scientists who

invent whizzy trading ideas. They speak a language of their own

that I don’t understand.’

Quants and their mysterious black boxes

What if fundamental analysis – using research and ratios to pick

underpriced shares – was total bunkum? What if computers and

algorithms were smarter than people?

Quant analysts believe that superior returns come from analysis of

rapidly changing price information. Computers can crunch huge

amounts of data in a millisecond. They are free from bias and

human emotion. And they can implement thousands of trades in

the time it takes you to read this sentence.

Black boxes are automatic trading systems which humans have

designed but do not manage. They lead to high-frequency trading

which, in turn, creates market volatility.

fast facts

A ball of scrunched-up paper smacked into my right ear. A

group of European equity traders took ve seconds off from

their careers as Masters of the Universe to laugh in unison at my

pain and shock. The ball of paper was a brief research note I had

written about a Spanish bank. A single Anglo-Saxon word had

been written in thick black marker pen over my name.