We are meeting for drinks at the Anthologist, a dimly lit City bar popular with people working in the financial markets.
Joris Luyendijk talks to a broker about the punishing hours, entertaining clients, making money and how to cut a deal
He is a tall man in his mid-30s, cheerful yet intense. While we talk he can't help following conversations at neighbouring tables. This is his "broker's ear", he explains; working in brokerage you develop an ability to hear everything around you that is hard to switch off. He orders a beer.
"The sad reality in finance is that perhaps 5% really make a lot. The rest make more than those with similar levels of education but also put in longer hours. How it works, I suppose, is that I am at my desk looking at my boss. He has millions in the bank, his own jet, a few cars, houses in several countries … My boss is not smarter than I am. He has put in a lot of hours over many years, sure. He's also been lucky, being in the right place during the last boom.
"And I wonder: why him and not me? So I sign on for another year, waiting for the big one. That's the thing with the City. The 95% know that only a few make the huge sums. But you are exposed to that category of people, every day and up close. It plants the idea in your head: this could be me.
"I get in at around 7am and call major clients, find out how they're doing, what's happening, how they think the market will go. At 8am the orders begin to come in, say, 'I want to buy options for December at 4.5'. This goes on till the markets close.
"After finishing the paperwork I may go for a drink with the boys or do client entertainment. We take out clients and spoil them, and they give us their business. It can be excruciating. One client from continental Europe, his answers never exceed two words. I find myself checking my watch, thinking, my God, we have only just finished our starter and we've covered his wife, children and hobbies already.
"Most clients are interesting. We talk about the markets, at least the first hour. It isn't just wining and dining. Some brokers are known to just party away, and some clients go for that. These are sometimes called "entertainment brokers" or "broker whores".
"You need to realise that some of our clients are 22-year-old traders at investment banks. They expect to be pampered. They're kids. They want to be taken to the Playboy mansion. I am too old for this. These youngsters go till 4am and are back at the desk by 7am.
"I have taken clients to the grand prix in Monaco, driven a Ferrari at Silverstone, gone skiing with them. You suggest, they decide. I would have a list of restaurants to choose from, they pick one. They call me: can you get me tickets for Wimbledon? With the Olympics it will be very important for us to have good tickets to give away.
"Some clients bring in over £10,000 a week in business. That is worth some investment. They can go anywhere. You have 70 brokers operating in the same market. Brown envelopes are known to change hands, brokers paying traders for business. That's now illegal and regulators are coming down on that pretty hard.
"I am what is called an interdealer broker, one of those shouting and wildly gesticulating guys on a trading floor with two phones pressed to his head.
"If you simplify a little, the job is not difficult to understand. Banks get a call from a hedge fund or from asset managers – people investing money in the markets on behalf of their clients [pension funds, wealthy individuals etc]. This hedge fund or asset manager tells the trader at their bank 'Buy me product X for 4'. The trader calls me and I go into the market, asking 'who wants to sell product X for 4'? If I find someone in the market, I say 'mine'! The deal is done and I get a commission. The other way around is when I am the one selling on behalf of a client. If I find a counterpart at 4, I shout 'yours'.
"That's the simplified version. In reality the banks' traders do not interact directly with their clients in hedge funds etc. They have salespeople for that. The chain is: Pension/hedge fund calls salesperson calls trader calls interbank broker. On the other side there's a similar chain. Finally you have the 'back office' settling the trade – the whole paper trail.
"A second simplification is that I would find someone wanting to sell for 4. It's more likely he wants to sell for 6. Here my job gets interesting. I go back between buyer and seller, trying to get them to agree to a price.
"Which brings us to the third simplification: I may have a dozen deals like this in progress. The initiators of the deals, called 'the interest'; then about 10 potential customers who came forward when I first announced in the market that I have this product X for 4; and finally at least 30 parties who may decide to jump in. Each time any of these makes a move all the others need to be told.
"I have a lot of lines open and it requires enormous concentration and powers of memory to know which is which.
"Brokers are screaming because speed is of the essence. As I said, I have all these market players on an open line. They are interested in whatever I am asking for or have to offer – but not at the price my client is suggesting. They're waiting. I may go to them and say 'look, if you move a little I think my client will, too'. This is how you can help a deal come about.
"But now the market moves. Something happens in the wider world that affects prices. The equilibrium shifts and what looked like a bad price suddenly becomes a good price. When a client has said he will buy for 5, he is legally held to that offer until he withdraws it. Now if the market moves lots of people may want to withdraw, all at the same time. Others want to buy or sell, all at the same time. This is when you get the panicky shouting. Clients tell you to do something and you have to process that, while keeping everyone else on the line informed, make sure colleagues trading in the same market know…
"I am in the derivatives market where there are roughly a handful of factors determining prices. Hence all these screens; they update you on those factors. It's mostly macro economic figures. Unexpected unemployment numbers can 'move the market', a big terrorist attack, a surprising election result. As a broker you don't need an awful lot of background on the products you are working with. I might as well have been in commodities [oil, grain etc], FX [currencies], equity [stocks] or fixed income [bonds].
"Another thing is you must not try to think ahead too many steps. The complexity outstrips your ability to understand all the possibilities so it's best to think only one or two steps ahead. I have had to learn that. Your job is primarily to make sure everyone on the phones has all relevant information. Sometimes things move so fast you cannot call everyone. A good broker knows who to include.
"In spite of new technology we don't get cut out as middlemen. Clients want anonymity, they don't want the market to know until they have completed the transaction. Brokers offer a shield.
"A good broker will also know what each major client is specifically interested in – some prefer to trade in particular months of the year, given particular needs. Another thing are large quantities. If a client were to buy or sell a huge number of derivatives in one go, this itself would affect prices. If there are 100 Mercedes cars in the UK and you set out to buy 10 of them, these will shoot up in price and you end up paying much more. Hence the anonymity, where we buy or sell smaller quantities over a period of hours.
"Anonymity creates room for mischief, obviously. I don't do funny things myself, it's not in my character. I know this guy who got an order from Banque Paribas or BNP London. At the same time he got an order from BNP Paris, and lo and behold, the two were matching. He could do a trade where BNP bought something from itself. Now, I would tell both clients, look, sort it out among yourselves. It's the smart thing to do, as they will remember me as this utterly ethical guy. But brokers know that two sides of a deal don't normally find out who was on the other side.
"In the BNP case it came out. If you are caught cheating, clients 'pull your line' as it's called. You are no longer allowed to call them and they stop directing business your way. The BNP case lost this guy business worth 3 billion, or 15 to 20 million in commission.
"It works the other way too. French players are known to pretend to be buyers, drive up the price and suddenly turn out to be sellers; since they drove up the price they get a better one.
"Mine is not a standard paper-pushing office job. The trading floor is like a playground and it's addictive. The news comes streaming in from monitors everywhere, you have 25 men screaming at the top of their lungs, and you do too, to get heard. It's full-on action, we talk about 'going in'. Often I can't just go out for a fag, I may not even go to the loo for a long time. Lunch is brought in by the junior.
"Part of the culture is hazing, absolutely. When juniors come in, they are like 16 or 17 years old, and we may bet one £500 that he can't eat 300 chicken nuggets within 25 minutes. Of course the kid thinks he can. Of course he cannot. Or we bet someone he can ingest 15 effervescent vitamin tablets, the ones you dissolve into water. Only he has to take them without the water.
"I have had my CEO fart in my ear when I was dozing off. Another classic is when somebody has a phone pressed to his ear, you push away their arm, then release it again. That way they slam the phone against their head – even when they are aware of what somebody is trying to do.
"No one ever calls in sick, no matter how heavy the drinking the night before. It helps when you do sports. I can tell from my turnover if I am really fit and go the extra mile to bring in business. Coke use … that's a taboo topic. Let's say some colleagues find it hard to say no when a client orders some. You're seen as a spoilsport. The police are known to send totally hot undercover women into bars like this one. They chat you up, try to get you to find some coke for the two of you, and you're busted.
"I don't really suffer withdrawal symptoms when I am not working. Well, there's not a whole lot of time when I'm not working but I know I can tune out. Sort of. On holidays I miss the speed, the atmosphere, the camaraderie. You are hungover from a long night of client entertainment, but so are your client and colleagues. You order in McDonald's bacon rolls. When the markets close at 4.30pm you go for "a cleansing pint".
"A simple mistake is so easy to make and can cost £10,000, just like that. It might be £100,000. I know of some that cost £250,000. 'Fat finger syndrome', when you press the wrong key and buy rather than sell, or some other nightmarish fuck-up. You promised a client the product at 4 but failed to make the trade when something else demanded your attention and now the market has moved and the product trades at 8. What are you gonna do? The client is entitled to buy at 4. Most derivatives come in packages of a thousand, so go figure what your loss is having to buy at 4. Firms go tits-up because of one mistake by one guy.
"My kind of 'volume' brokerage is 100% transparent. You don't make enough, you get a warning. Three months later and not enough improvement, you're out. If clients haven't done business for a while, I have to call and chat them up, get them to send a few trades our way.
"In the past years our bonus would be partly discretionary; a pool we'd divide up. That was so unfair, you get into office politics. Now I have a contract where I earn solely on volume of trade. I get an advance I have to earn back. Then it's 50-50 for me and the firm. I also have to pay for costs, my desk, computers. Client entertainment gets split between the firm and me. Juniors start at 30k a year. I am now at 80k plus bonus.
"You have two types of brokers. Those who came in very young and learned it on the spot. And people like me, university educated and more brainy. The first category is the classic market vendor. They talk and talk. I have seen the best of them take home £300,000 or £400,000 a year. At 19.
"Yesterday we made 25k with the team. A bad day. The best day so far this year brought in 90k.
"I have learned to keep a watertight administration. In the past I worked for some real motherfuckers. At some point I was entitled to a £20,000 payout. Instead, they claimed I owed them £2,000. They cooked the books. How was I going to prove them wrong? Go to court, pay lawyers, spend years in litigation? They knew the amount was too small for that. They screwed me over. That's the City for you, too.
"One time my then employer poached a whole team away from a competitor. We were told not to worry. The economy turned and three of us were out; they were not going to fire the team they just hired at great cost. Promises mean little. This is something you need to learn.
"There are not lot of brokers at, say, 55, that's right. Most change careers in their late 30s, early 40s. I know people who died at 28, collapsed at their desks. Others have a heart attack, recover and come back, only to collapse again. I know brokers who are made for life but come into the office every morning. They love the job.
"I plan to do this for another three years or so. In the office we tell each other, hang in there, next year everyone of use will make a pile. This is what we said after the sub-prime crisis of 2008. We stuck that one out and before you know it, the euro crisis hits. Another terrible year. When I'm finished I want to move on to something a bit more useful. Teaching, business consultancy … I hope to take up my hobbies again. I haven't had time for those at all."
When sent the draft of the interview, he responded: "It's funny how I agreed to do this with the aim of presenting a calmer, more realistic picture of the industry, countering its overly glamorous image. Going over the piece now I worry it may give younger readers the same romanticised idea of the profession that I got many years back, when reading similar 'city boy' stories and thinking: wow, that must be the coolest job in the world. It's not, and then it is."
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image: © Lubritpetition
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