First impressions of Broking

I Leave  being a dealer to be a broker – I now arrange deals, not originate them. This is a bigger step than I imagined. In fact, I hated my first few weeks as I was stuck on the “Forward Cable ” desk. This was the area that quoted prices in GBP/USD for all maturities beyond two days. In those days, dealing directly between banks in London was banned and every trade had to pass through a broker. The trouble was that Woellwarth weren’t in the first tier for this particular market. Their expertise was in three areas – French Franc, Italian Lire and Canadian Dollars.  However, none of these was where I expected to be. I was a bit premature but in June the trading of Deutsche Marks would be freed up and the company would be able to create a desk for that.  This was my area of expertise and it was a bit of a shock that it wasn’t planned for me to join that section. However, I expressed myself fairly strongly and, when the time came, joined the new section.

My new boss was an imposing man called Tony le-Ray Cook – very city gent in his dress and always wore a monocle. Roy Jarvis and Graham Winterbourne were the other main players – Graham being the nephew of Reg Winterbourne, the company managing director. Graham was a lively and funny guy who took the mickey out of Tony mercilessly, even buying a plain glass monocle which he often placed in his eye when Tony’s back was turned.

In spite of my dislike of this new job, my Salary had jumped again – from £2,000p.a. to £3,000p.a. , which was a lot of money in those far off days – but there was a catch. The salary is £440 p.a. paid weekly and the rest is commission – 1.1% of the company turnover. The  2016 equivalents are £29,500 up-to £44,000 – nice big jump! The problem was that I joined on Payday so I, in theory, had to wait three months before I got any more than the weekly sum. Fortunately, the company had, what they called, an advance whereby, after about 6 – weeks into the quarter,  Ron Strudwick, a director and one of the guys I used to have lunch with back in District Bank days, would walk around and ask how much of your expected bonus did you want. . I disliked the idea of working on a bonus but it was based on company performance and not individually. Plus, 1.1% was a good portion, as it turned out.

Eventually David Raison, who got me into this in the first place,  joined from the Canadian $ desk and my best man, Roger Whittle came into the company along with another new comer – Linton Viney.

I got the job of managing a new venture with Roger, David and Linton. This was to quote DEM forward but this wasn’t a success as we couldn’t seem to get any of the market makers to give us support. I even tried Peter Johnson at Nat West. I thought that he might come across as it was me that got him into the dealing room as a trader in the first place but his boss, Paul Winchester (Will), whilst not anti-us, was commited to others so that was it. Eventually, we all went back onto the Spot Mark as we were making a success of that.  I was quite good at getting business from the “unusual” sources, in other words the banks that trade spot mark when they have to rather than as a continuous service. Tony, Roy and Graham were handling the big boys and my efforts got us some good trades.  I made good friends with the DM trader at one of the larger merchant banks. His regular trades for 5 million DM were worth having.  As commission was £75 per side per DEM1,000,000 we get £150 brokerage for every one million!

We also instituted a new idea – quote the D-Mark against the US$. Now, this wasn’t actually allowed so we had to do a bit of a fudge.  In 1974, the DEM/USD was around 2.53 and the USD/GBP was around 2.39 so one could trade DEM/GBP at around 6.0720 (2.53 * 2.39 approx). We would quote and trade at 2.53 and then send out two brokers notes, one for the DEM amount aganst Sterling and one for the US dollar amount against sterling – the latter one being nett of brokerage. Even the Bank of England participated in this fashion!

Whilst looking for other new customers, I decided to quote prices to the Bank of England. I suffered some ridicule from the rest of the team as “the BofE doesn’t trade in the markets” was the received opinion. It turned out that they did, so long as it wasn’t in their role of support for the pound! Mind you, it wasn’t going to be easy. First, I had to pass muster with the Chief Dealer – they only dealt with people that they could trust.

I got called out to lunch to meet the dealer I had been speaking to – Richard Diggory – plus the chief dealer – Ted Bradshaw. It seemed that, as I could talk serious banking and had operated for the BofE in the past, then it was OK for me to quote them. Surprise, surprise, they did trade and quite large as well. It seems that the UK had to pay the Germans for the bills of the “British Army Over The Rhine” – BAOR –  (i.e. our soldiers over there). This resulted in DEM20 – DEM25,000,000  every month – and I got it all. See my note about brokerage above. I went up in the company’s estimation.

We also found out that the BofE traded in short dated Sterling/USD swaps. Something that we found out when Nigel Staughton joined us from Astleys. His expertise was in stringing one day swaps into one week or one month swaps and the BofE was one of his customers. Nigel and I knew each other from my Julius Baer days when, on one notable occasion after an Astley & Pearce evening party, he found me sound asleep on a park bench in Bow Churchyard. He never let me forget this. I remember that Nigel had one of the first BMW 2002 Tii Touring, for  which I really envied him. Up until his arrival, we were King of the Hill but he eventually brought the USD/GBP section up to match our performance, which was just as well, considering what happened later.


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