1 00:00:08,440 --> 00:00:11,879 Speaker 1: Hello, and welcome to another edition of the Odd Thoughts podcast. 2 00:00:12,000 --> 00:00:15,520 Speaker 1: I'm Tracy Alloway and I'm Joe Wisenthal. So, Joe, we 3 00:00:15,600 --> 00:00:18,600 Speaker 1: had a pretty big development happened in the world of 4 00:00:18,680 --> 00:00:22,799 Speaker 1: finance and markets earlier this month. Yes, we did. Arguably, 5 00:00:23,520 --> 00:00:27,000 Speaker 1: I mean arguably the biggest job in finance. There is 6 00:00:27,040 --> 00:00:30,480 Speaker 1: a right when you say that, yeah, concerned the probably 7 00:00:30,480 --> 00:00:33,479 Speaker 1: the premier job in all of banking and finance, I 8 00:00:33,560 --> 00:00:36,519 Speaker 1: absolutely would. So what we're talking about, of course, is 9 00:00:36,600 --> 00:00:41,800 Speaker 1: Goldman Sachs apparently putting David Solomon in line to become 10 00:00:41,920 --> 00:00:47,040 Speaker 1: the CEO once Lloyd blank Find finally, finally resigns. This 11 00:00:47,120 --> 00:00:49,159 Speaker 1: is something that people have been talking about for a 12 00:00:49,200 --> 00:00:51,479 Speaker 1: while now, but now they're talking about it in the 13 00:00:51,520 --> 00:00:54,280 Speaker 1: context of what it means for Goldman and what it 14 00:00:54,320 --> 00:00:57,360 Speaker 1: says about the changing nature of the bank before we 15 00:00:57,400 --> 00:00:59,080 Speaker 1: go out. I guess you could also say that the 16 00:00:59,200 --> 00:01:02,040 Speaker 1: succession I shouldn't for Berkshire Hathaway is right up there 17 00:01:02,120 --> 00:01:05,720 Speaker 1: in terms of huge finance jobs. But there's something, as 18 00:01:05,720 --> 00:01:09,160 Speaker 1: you say, very special and relevant about Goldman because a 19 00:01:09,840 --> 00:01:11,840 Speaker 1: it is uh, you know, it's right here on Wall Street. 20 00:01:11,959 --> 00:01:15,240 Speaker 1: And also because as you as you put it, it 21 00:01:15,280 --> 00:01:18,320 Speaker 1: does have these sort of multiple business lines that seemed 22 00:01:18,360 --> 00:01:21,880 Speaker 1: to rise and fall over time, causing the fortunes of 23 00:01:21,880 --> 00:01:23,880 Speaker 1: the people who are involved with them to sort of 24 00:01:24,200 --> 00:01:28,120 Speaker 1: rise and fall in sympathy exactly. So the trope is 25 00:01:28,160 --> 00:01:32,640 Speaker 1: basically that Lloyd blank find came from this trading background, uh, 26 00:01:32,640 --> 00:01:35,000 Speaker 1: and the new guy that's coming in, David Solomon, he 27 00:01:35,040 --> 00:01:38,120 Speaker 1: comes from more of an investment banking background, and that 28 00:01:38,240 --> 00:01:41,840 Speaker 1: signals where Goldman kind of wants to go. The thinking 29 00:01:41,959 --> 00:01:44,720 Speaker 1: is that trading, at least in the old style is 30 00:01:44,840 --> 00:01:48,200 Speaker 1: dead and it's time for the new Goldman sax. So, 31 00:01:48,720 --> 00:01:51,080 Speaker 1: you know, as a former banking reporter, all of this 32 00:01:51,240 --> 00:01:55,520 Speaker 1: news this transition made me a little bit nostalgic, Joe, 33 00:01:55,640 --> 00:01:59,280 Speaker 1: So I thought for this episode, we could talk about 34 00:01:59,600 --> 00:02:02,800 Speaker 1: some old tiny trading. We could talk about, you know, 35 00:02:02,840 --> 00:02:05,520 Speaker 1: when men were men and traders were traders and most 36 00:02:05,520 --> 00:02:10,040 Speaker 1: traders were men, uh, and and really dig into some 37 00:02:10,160 --> 00:02:12,760 Speaker 1: of the trading world as it used to be. Yeah. 38 00:02:12,800 --> 00:02:15,240 Speaker 1: I mean, it's always fun to talk about trading, and 39 00:02:15,280 --> 00:02:18,400 Speaker 1: I think people have some image in their mind of 40 00:02:18,440 --> 00:02:21,639 Speaker 1: what traders do and maybe yell on the phone and 41 00:02:21,840 --> 00:02:24,720 Speaker 1: yell in an open pit and take huge risks and 42 00:02:24,720 --> 00:02:28,480 Speaker 1: stuff like that probably looks pretty different today if you're 43 00:02:28,480 --> 00:02:31,079 Speaker 1: on a trading floor, but people always love those old 44 00:02:31,120 --> 00:02:34,640 Speaker 1: timey stories. So we have the perfect person to discuss this. 45 00:02:34,800 --> 00:02:38,320 Speaker 1: It's Cameron christ He's a macro strategist at Bloomberg now, 46 00:02:38,400 --> 00:02:42,360 Speaker 1: but he was a longtime options trader and he's going 47 00:02:42,400 --> 00:02:45,760 Speaker 1: to tell us some of his war stories from trading. 48 00:02:49,480 --> 00:02:52,760 Speaker 1: How's it going, camera, Yeah, very well. It's snowing outside. 49 00:02:52,880 --> 00:02:55,720 Speaker 1: I'm not ready for the warm weather, but other than that, 50 00:02:55,800 --> 00:02:59,440 Speaker 1: everything's going fantastic. So Cameron, I gotta say. This whole 51 00:02:59,480 --> 00:03:02,919 Speaker 1: discussion and was partly kicked off by a tweet that 52 00:03:02,960 --> 00:03:07,720 Speaker 1: you put out about a particular character who was trading. 53 00:03:07,800 --> 00:03:10,160 Speaker 1: But before we get to him, can you sort of 54 00:03:10,200 --> 00:03:12,960 Speaker 1: set the scene for us? What exactly were you doing 55 00:03:13,200 --> 00:03:16,239 Speaker 1: when it comes to trading? What was your role exactly? 56 00:03:16,960 --> 00:03:19,240 Speaker 1: So I'm kind of one of the last of a 57 00:03:19,320 --> 00:03:24,800 Speaker 1: generation of foreign exchange option traders that essentially served an 58 00:03:24,840 --> 00:03:31,880 Speaker 1: apprenticeship on a physical exchange. Nowadays, nine point nine of 59 00:03:32,000 --> 00:03:35,960 Speaker 1: all effect spot and option traders are done over the counter. 60 00:03:36,640 --> 00:03:39,320 Speaker 1: But back in the early nineties, which is the period 61 00:03:39,320 --> 00:03:44,160 Speaker 1: we're talking about here, uh, I worked for Swiss Bank Corporation, 62 00:03:44,280 --> 00:03:47,520 Speaker 1: which had just purchased O'Connor and Associates, which was one 63 00:03:47,560 --> 00:03:51,320 Speaker 1: of the biggest and most respected option market making houses 64 00:03:51,760 --> 00:03:55,880 Speaker 1: in Chicago, and our modus operandi was essentially to have 65 00:03:56,120 --> 00:04:01,280 Speaker 1: the new crop of future traders of an apprenticeship on 66 00:04:01,520 --> 00:04:04,920 Speaker 1: the exchange, on the Chicago Mercantile Exchange. Now there was 67 00:04:05,120 --> 00:04:08,200 Speaker 1: still quite a bit of activity here, both in Chicago 68 00:04:08,320 --> 00:04:11,800 Speaker 1: and on the Philadelphia Stock Exchange, which also listed currency 69 00:04:11,880 --> 00:04:15,840 Speaker 1: options contracts. A lot of the flow, I think came 70 00:04:16,000 --> 00:04:20,839 Speaker 1: from European corporations who were looking to hedge some exposure 71 00:04:20,920 --> 00:04:24,200 Speaker 1: and say dollar mark or dollar Swiss or dollar Yen 72 00:04:24,880 --> 00:04:29,880 Speaker 1: or whatever. So we were hired essentially by this firm 73 00:04:30,080 --> 00:04:34,279 Speaker 1: stuffed full of M. I. T. Engineers and sort of 74 00:04:34,360 --> 00:04:39,680 Speaker 1: pen Wharton finance wuiz kids, and then thrown on to 75 00:04:39,920 --> 00:04:44,159 Speaker 1: the floor of the Chicago Mercantile Exchange, which shall we 76 00:04:44,200 --> 00:04:47,200 Speaker 1: say it was not full of these sorts of people. 77 00:04:47,480 --> 00:04:50,240 Speaker 1: So you know, when I started work, I didn't have 78 00:04:50,320 --> 00:04:53,080 Speaker 1: a sort of a finance the background. I studied public 79 00:04:53,120 --> 00:04:57,720 Speaker 1: policy in college, had actually been studying abroad when Sterling 80 00:04:57,760 --> 00:05:02,080 Speaker 1: was ejected from the European change rank mechanism, which sort 81 00:05:02,080 --> 00:05:06,120 Speaker 1: of fostered my interest in foreign exchange. So when I 82 00:05:06,160 --> 00:05:08,200 Speaker 1: was hired six months later, I said, yeah, I want 83 00:05:08,240 --> 00:05:12,200 Speaker 1: to go into ffacts and had his interviews with these 84 00:05:12,200 --> 00:05:16,400 Speaker 1: really smart guys and they were all guys UH, And 85 00:05:16,400 --> 00:05:19,239 Speaker 1: then started on the floor of the mark, not really 86 00:05:19,240 --> 00:05:21,440 Speaker 1: knowing what to expect, but sort of thinking that it 87 00:05:21,440 --> 00:05:24,560 Speaker 1: would be just full of people similar to the ones 88 00:05:24,600 --> 00:05:27,279 Speaker 1: with whom I'd interviewed. You hear stories about this, about 89 00:05:27,320 --> 00:05:31,000 Speaker 1: people who don't have a traditional finance background just sort 90 00:05:31,040 --> 00:05:34,680 Speaker 1: of willing their self into the space. What made you 91 00:05:34,680 --> 00:05:36,960 Speaker 1: think you could do it? And what do you think 92 00:05:37,160 --> 00:05:41,240 Speaker 1: your interviewers saw in you that you know, this opportunity 93 00:05:41,400 --> 00:05:43,760 Speaker 1: to learn and to be an apprentice and to sort 94 00:05:43,800 --> 00:05:45,960 Speaker 1: of get involved in this very exciting area. What do 95 00:05:45,960 --> 00:05:48,400 Speaker 1: you think they saw on you that you had made 96 00:05:48,400 --> 00:05:50,240 Speaker 1: them willing to take a chance. Well, there were a 97 00:05:50,279 --> 00:05:54,719 Speaker 1: couple of things. One was a sort of familiar familiarity 98 00:05:55,040 --> 00:05:59,919 Speaker 1: or an intuition for probability theory understanding essentially expected value 99 00:06:00,360 --> 00:06:04,560 Speaker 1: expected value type payouts UH. And a second was mental 100 00:06:04,600 --> 00:06:07,279 Speaker 1: math because when you're on UH, certainly when you're on 101 00:06:07,279 --> 00:06:10,240 Speaker 1: an exchange floor trading options, you have to be very, 102 00:06:10,360 --> 00:06:13,560 Speaker 1: very sharp and very very quick at mental math, being 103 00:06:13,600 --> 00:06:16,559 Speaker 1: able to add and subtract relatively quick. And I'll explain 104 00:06:16,600 --> 00:06:19,640 Speaker 1: sort of the mechanism in a second. And while I 105 00:06:19,640 --> 00:06:23,640 Speaker 1: I'm no sort of quant or higher mathematics genius, my 106 00:06:23,720 --> 00:06:26,280 Speaker 1: mental math was very good. So they asked me a few, 107 00:06:26,480 --> 00:06:30,240 Speaker 1: you know, a few questions, what's eight fifty four or 108 00:06:30,320 --> 00:06:32,479 Speaker 1: something like that, and I could figure it out back then, 109 00:06:33,160 --> 00:06:35,599 Speaker 1: very very quickly. Uh. And so that was sort of 110 00:06:35,600 --> 00:06:37,640 Speaker 1: a prerequisite that they were looking for to be able 111 00:06:37,680 --> 00:06:40,479 Speaker 1: to trade options on an exchange floor. And so the 112 00:06:40,520 --> 00:06:45,120 Speaker 1: mechanism for trading options is you would have a sort 113 00:06:45,120 --> 00:06:48,479 Speaker 1: of a set of of sheets we call them paper sheets, 114 00:06:48,520 --> 00:06:50,839 Speaker 1: that were filled with theoretical values, where they would sort 115 00:06:50,839 --> 00:06:53,120 Speaker 1: of be the price of the underlying, a range of 116 00:06:53,160 --> 00:06:56,200 Speaker 1: prices the underlying on the sort of the top on 117 00:06:56,240 --> 00:06:59,120 Speaker 1: the x axis, and then a list of strike prices 118 00:06:59,560 --> 00:07:02,880 Speaker 1: on the access and a list of theoretical values. So 119 00:07:02,880 --> 00:07:05,440 Speaker 1: it's essentially a grid. So as spot moved, as the 120 00:07:05,440 --> 00:07:08,080 Speaker 1: strike price moved, you'd have a theoretical value for a 121 00:07:08,120 --> 00:07:11,920 Speaker 1: given level of implied volatility for for an option. Um Now, 122 00:07:11,960 --> 00:07:16,800 Speaker 1: this was based on a flat volatility curve. Obviously in reality, 123 00:07:17,280 --> 00:07:21,280 Speaker 1: market option values are cartotic, i e. How the moneys 124 00:07:21,280 --> 00:07:23,360 Speaker 1: are different from the at the money and their skew 125 00:07:23,640 --> 00:07:27,000 Speaker 1: sometimes puts our different value from calls. And so you 126 00:07:27,040 --> 00:07:31,520 Speaker 1: had to be cognizant of these dynamics. And you know, 127 00:07:31,560 --> 00:07:33,840 Speaker 1: we were all we were always very dismissive of people 128 00:07:33,960 --> 00:07:37,400 Speaker 1: and a firms. Some firms actually built this in to 129 00:07:37,520 --> 00:07:39,720 Speaker 1: their theoretical value sheets and we just called them sheet 130 00:07:39,760 --> 00:07:42,200 Speaker 1: monkeys because all they could do was pair it off 131 00:07:42,560 --> 00:07:44,920 Speaker 1: what was on the sheets and if and as volatilities 132 00:07:44,960 --> 00:07:47,520 Speaker 1: moved and as markets moved, you had to be able 133 00:07:47,960 --> 00:07:51,480 Speaker 1: to essentially adjust on the fly. Now, if you were 134 00:07:51,560 --> 00:07:54,720 Speaker 1: used to doing that for everything, it became much easier 135 00:07:54,960 --> 00:07:56,680 Speaker 1: than it was if you were just used to saying, 136 00:07:56,680 --> 00:08:00,200 Speaker 1: all right, it's worth forty on the sheets. So one 137 00:08:00,760 --> 00:08:03,040 Speaker 1: for us, maybe it was worth thirty seven on the 138 00:08:03,040 --> 00:08:05,640 Speaker 1: sheets and you were forty two or something like that. 139 00:08:06,120 --> 00:08:11,960 Speaker 1: So Cameron, armed with your mathematical abilities, what were your 140 00:08:12,120 --> 00:08:16,040 Speaker 1: first days or weeks actually like? Because I imagine, no 141 00:08:16,080 --> 00:08:19,080 Speaker 1: matter how well adapted you were to this work, it 142 00:08:19,160 --> 00:08:21,320 Speaker 1: must have been something of a culture shock. It was 143 00:08:21,360 --> 00:08:24,720 Speaker 1: a total culture shock because based on the interview process 144 00:08:24,880 --> 00:08:28,760 Speaker 1: I assumed that sort of mental acuity was the primary 145 00:08:28,880 --> 00:08:32,520 Speaker 1: distinguishing feature of all the participants in the market, and 146 00:08:32,559 --> 00:08:37,040 Speaker 1: I quickly realized that the primary asset that most people 147 00:08:37,040 --> 00:08:40,640 Speaker 1: on the exchange floor had was size and volume. If 148 00:08:40,679 --> 00:08:43,360 Speaker 1: you essentially it was full of x big ten football players, 149 00:08:43,800 --> 00:08:47,200 Speaker 1: um seriously in the in in in the pit, and 150 00:08:47,559 --> 00:08:50,120 Speaker 1: I mean it was really it was an amazing site 151 00:08:50,160 --> 00:08:53,160 Speaker 1: because you have the pit which was full of market makers, 152 00:08:53,840 --> 00:08:57,640 Speaker 1: and that would be ringed with brokers, and then the 153 00:08:57,679 --> 00:09:01,439 Speaker 1: brokers each would have somebody a clerk standing next to them, 154 00:09:01,480 --> 00:09:05,120 Speaker 1: so there was it was a very complex chain of communications. 155 00:09:05,160 --> 00:09:07,960 Speaker 1: There would be say um, say e D and f Man, 156 00:09:08,000 --> 00:09:10,880 Speaker 1: which was a big broker. They would have an office 157 00:09:10,920 --> 00:09:13,480 Speaker 1: somewhere and in there there would be a broker talking 158 00:09:13,520 --> 00:09:16,319 Speaker 1: to a customer. So the customer wants to do a trade. 159 00:09:16,840 --> 00:09:20,560 Speaker 1: The broker would then ring the exchange and there would 160 00:09:20,559 --> 00:09:22,599 Speaker 1: be a box, you know, sort of like and it 161 00:09:22,640 --> 00:09:25,400 Speaker 1: was almost like an amphitheater, so there'd be rose and rose, 162 00:09:25,679 --> 00:09:29,000 Speaker 1: and there'd be boxes with phone clerks who would be 163 00:09:29,040 --> 00:09:31,040 Speaker 1: then on the phone with the guy in the office 164 00:09:31,120 --> 00:09:33,240 Speaker 1: or the person in the office. They would then get 165 00:09:33,240 --> 00:09:36,400 Speaker 1: the order. They would signal down to the pit where 166 00:09:36,440 --> 00:09:39,320 Speaker 1: the clerk whose job was just a hand signal. Yeah, 167 00:09:39,360 --> 00:09:41,480 Speaker 1: just hand signals, and I'll talk about those in a second. 168 00:09:41,679 --> 00:09:44,480 Speaker 1: So the clerk, the pit clerk, whose only job was 169 00:09:44,559 --> 00:09:47,240 Speaker 1: essentially to watch the guy on the phone, would then 170 00:09:47,280 --> 00:09:52,000 Speaker 1: see what the order was whisper to his broker, his 171 00:09:52,040 --> 00:09:55,280 Speaker 1: pit broker. Then the broker would start screaming, you know, 172 00:09:55,320 --> 00:09:59,480 Speaker 1: I need a price in in mark two thousand U, 173 00:10:00,000 --> 00:10:03,440 Speaker 1: which would mean you know, this mark would be obviously 174 00:10:03,520 --> 00:10:07,160 Speaker 1: the contract. The deutsch Mark uh six would be the 175 00:10:07,200 --> 00:10:10,000 Speaker 1: strike price, and two thousand would be two thousand, two 176 00:10:10,040 --> 00:10:13,600 Speaker 1: thousand contracts, and then it would be a scramble. Everyone 177 00:10:13,640 --> 00:10:16,200 Speaker 1: would look at their sheets, figure out what the theoretical 178 00:10:16,240 --> 00:10:18,880 Speaker 1: value was, then figure out what their price was, you 179 00:10:18,920 --> 00:10:23,280 Speaker 1: know two four. So what was your role in this ecosystem? 180 00:10:23,360 --> 00:10:25,760 Speaker 1: So I was a trading assistant. We all started as 181 00:10:25,960 --> 00:10:29,200 Speaker 1: as trading a well, the theoretical name was trading assistant, 182 00:10:29,200 --> 00:10:32,320 Speaker 1: the reality was clerk uh and it was basically dog's 183 00:10:32,360 --> 00:10:35,480 Speaker 1: body do all the grunt work for the trader in 184 00:10:35,520 --> 00:10:39,880 Speaker 1: the pit. So the relationship between our pit trader and 185 00:10:39,920 --> 00:10:44,040 Speaker 1: the overall bank was that they would be an over 186 00:10:44,040 --> 00:10:46,320 Speaker 1: the counter trader who would run the over the counter 187 00:10:46,400 --> 00:10:48,560 Speaker 1: book in an office at the Chicago Board of Trade 188 00:10:48,600 --> 00:10:52,520 Speaker 1: in Chicago, and we would be a liaison between that 189 00:10:53,520 --> 00:10:56,800 Speaker 1: overall book trader UH and portfolio manager, if you will, 190 00:10:57,080 --> 00:11:00,200 Speaker 1: and our guy in the pit. And so we would 191 00:11:00,240 --> 00:11:03,439 Speaker 1: be a channel of communication both upwards and downwards. So 192 00:11:03,600 --> 00:11:05,880 Speaker 1: something happens over the counter market, we would then have 193 00:11:05,920 --> 00:11:08,320 Speaker 1: to tell our guy in the pit, A vauls are 194 00:11:08,320 --> 00:11:12,200 Speaker 1: getting paid up, valls are getting getting given and and 195 00:11:12,280 --> 00:11:14,560 Speaker 1: the other way we do a big trade, we tell 196 00:11:15,000 --> 00:11:18,760 Speaker 1: the guy upstairs what we've done. Now. The the the 197 00:11:18,840 --> 00:11:22,080 Speaker 1: unfortunate aspect of this is whenever there was a miscommunication 198 00:11:22,760 --> 00:11:25,080 Speaker 1: UH and the trader did something the guy upstairs didn't like, 199 00:11:25,800 --> 00:11:30,600 Speaker 1: we would essentially bear the brunt of the of the anger. 200 00:11:30,800 --> 00:11:34,800 Speaker 1: So I was told at different times the world thinks 201 00:11:34,840 --> 00:11:38,480 Speaker 1: we're stupid and it's your fault. And between you three guys, 202 00:11:38,720 --> 00:11:42,520 Speaker 1: I e. Me a junior trader and the senior trader, 203 00:11:43,040 --> 00:11:45,240 Speaker 1: you know you don't have a brain, which you know 204 00:11:45,280 --> 00:11:48,199 Speaker 1: when you're three months into your job, is pretty uh, 205 00:11:48,400 --> 00:11:50,520 Speaker 1: pretty sobering show. We I'm not sure if you can 206 00:11:50,559 --> 00:11:52,679 Speaker 1: get away with that these days with all the sensitivity 207 00:11:53,200 --> 00:11:58,400 Speaker 1: sensitivity trade depends. Yeah, so you know, it basically, you know, 208 00:11:58,760 --> 00:12:02,920 Speaker 1: working at a pit is very unusual because these days 209 00:12:03,720 --> 00:12:07,040 Speaker 1: in financial markets, you're you're you're essentially you spend your 210 00:12:07,040 --> 00:12:09,560 Speaker 1: time working with people who were on your side, i e. 211 00:12:09,760 --> 00:12:13,000 Speaker 1: Working for the same company. When you're on an exchange, 212 00:12:13,200 --> 00:12:16,120 Speaker 1: you're spending most of your time working with people for 213 00:12:16,200 --> 00:12:19,360 Speaker 1: other companies who in many ways are your adversaries. Uh. 214 00:12:19,400 --> 00:12:20,880 Speaker 1: And that, you know, that requires a bit of a 215 00:12:20,880 --> 00:12:25,440 Speaker 1: different mentality. And I mean, I've been working there a 216 00:12:25,559 --> 00:12:29,120 Speaker 1: month and our guy in the deutsch market pit was 217 00:12:29,200 --> 00:12:31,640 Speaker 1: like the biggest guy. He was the hammer. He was 218 00:12:31,679 --> 00:12:35,760 Speaker 1: the most important, biggest market maker there. And I remember 219 00:12:35,800 --> 00:12:37,840 Speaker 1: I'm going to give him some cards or picking up 220 00:12:38,080 --> 00:12:40,160 Speaker 1: you know, you literally they do a trade, they would 221 00:12:40,160 --> 00:12:41,839 Speaker 1: scribble it on a card and we'd have to pick 222 00:12:41,840 --> 00:12:43,800 Speaker 1: it up and then enter it. There was a guy 223 00:12:43,840 --> 00:12:45,520 Speaker 1: we hired that you know that it just entered. His 224 00:12:45,600 --> 00:12:47,319 Speaker 1: job it was to enter it, enter the trades into 225 00:12:47,360 --> 00:12:49,680 Speaker 1: the system. So every every so often we have to 226 00:12:49,679 --> 00:12:51,040 Speaker 1: go and pick up his cards. So they would go 227 00:12:51,040 --> 00:12:52,880 Speaker 1: into the system. Because there was a cut off point, 228 00:12:53,360 --> 00:12:55,199 Speaker 1: you know, something like half an hour after a trade 229 00:12:55,200 --> 00:12:56,480 Speaker 1: was done, it had to be entered into the into 230 00:12:56,520 --> 00:12:59,520 Speaker 1: the Marke system. So I'm standing at the edge of 231 00:12:59,559 --> 00:13:01,760 Speaker 1: the pit trying to pick up cards from my guy, 232 00:13:02,720 --> 00:13:04,560 Speaker 1: and next thing I know, we're strolling a punch at 233 00:13:04,559 --> 00:13:10,480 Speaker 1: another trader. So so, you know, I'm fresh out of college. 234 00:13:10,480 --> 00:13:11,880 Speaker 1: What's the first thing you do when you see one 235 00:13:11,880 --> 00:13:14,160 Speaker 1: of your buddies, you know, getting to a scrap. Well, 236 00:13:14,200 --> 00:13:17,520 Speaker 1: you grabbed the other guy from behind, and I'm the guy. 237 00:13:17,920 --> 00:13:20,400 Speaker 1: The guy looks at me, He's like, let him go, 238 00:13:20,760 --> 00:13:24,520 Speaker 1: get out of here, and then throws another punch. So, uh, 239 00:13:24,640 --> 00:13:28,880 Speaker 1: he ended up getting essentially banned from from trading on 240 00:13:29,000 --> 00:13:33,040 Speaker 1: on the merk for sort of violent conduct or whatever, 241 00:13:33,679 --> 00:13:35,679 Speaker 1: or fortune or unfortunately, depending on your perspective. I was 242 00:13:35,720 --> 00:13:38,400 Speaker 1: not banned, so it's stuck around. But it was sort 243 00:13:38,440 --> 00:13:40,800 Speaker 1: of a you know, it was sort of a real 244 00:13:41,160 --> 00:13:44,960 Speaker 1: um introduction, uh, sort of cold water ice bucket challenge, 245 00:13:44,960 --> 00:13:48,680 Speaker 1: if you will, to the combative nature of of the business. 246 00:13:48,720 --> 00:13:51,280 Speaker 1: And like I said, it was full of really loud, 247 00:13:51,400 --> 00:13:55,400 Speaker 1: really big guys and physical size was a real asset 248 00:13:55,440 --> 00:13:58,760 Speaker 1: because in a crowded pit, if there's a broker across 249 00:13:58,840 --> 00:14:00,959 Speaker 1: the pit that has a big order that you want 250 00:14:00,960 --> 00:14:04,000 Speaker 1: to trade on, listen, the broker's gonna allocate the trades 251 00:14:04,040 --> 00:14:06,080 Speaker 1: based on who's right in front of his face. So 252 00:14:06,120 --> 00:14:08,800 Speaker 1: obviously the bigger you are, the more bodies you can 253 00:14:08,800 --> 00:14:11,120 Speaker 1: sort of shove out of the way to get into 254 00:14:11,160 --> 00:14:14,160 Speaker 1: the broker's face and make sure you get your your 255 00:14:14,200 --> 00:14:16,400 Speaker 1: share of the order. Uh. Now, I'm not sure if 256 00:14:16,400 --> 00:14:18,520 Speaker 1: I can say this on a Bloomberg podcast. And so 257 00:14:18,600 --> 00:14:22,160 Speaker 1: the guy that replaced are are sort of would be 258 00:14:22,240 --> 00:14:25,560 Speaker 1: Mike Tyson was like an umpa loompa. He was about 259 00:14:25,600 --> 00:14:29,640 Speaker 1: five ft nothing. It's sort of a skinny guy and 260 00:14:30,640 --> 00:14:33,760 Speaker 1: he he managed to carve out his space not through 261 00:14:34,280 --> 00:14:39,720 Speaker 1: physical prominence but through flatulence. So I wish I were 262 00:14:39,720 --> 00:14:44,000 Speaker 1: a kidding but I'm not. So. It just took so 263 00:14:44,080 --> 00:14:48,040 Speaker 1: many different Each descripted here was like another twist that 264 00:14:48,120 --> 00:14:52,120 Speaker 1: I didn't see. So I think you know you can 265 00:14:52,160 --> 00:14:54,400 Speaker 1: delete this better, you need to, But it's you know 266 00:14:54,520 --> 00:14:56,720 Speaker 1: it was it was you know, that was what it 267 00:14:56,800 --> 00:14:59,360 Speaker 1: was like. You had you used every edge you can, 268 00:15:00,000 --> 00:15:03,360 Speaker 1: even if it was last night's dinner. Um, so I 269 00:15:03,400 --> 00:15:08,120 Speaker 1: get I get the Okay, So Cameron, can I ask 270 00:15:08,280 --> 00:15:12,280 Speaker 1: you know, more broadly, what rituals did you observe on 271 00:15:12,320 --> 00:15:15,760 Speaker 1: the trading for while you were there? Well, rituals I 272 00:15:15,800 --> 00:15:18,520 Speaker 1: mean we we had to be in the office every 273 00:15:18,600 --> 00:15:20,400 Speaker 1: day at five dury in the morning to sort of 274 00:15:20,480 --> 00:15:22,520 Speaker 1: run the sheets and and do all the prep work. 275 00:15:22,560 --> 00:15:24,640 Speaker 1: And then we had to walk from the board of 276 00:15:24,680 --> 00:15:27,960 Speaker 1: Trade to the murk. And we we had these big 277 00:15:28,000 --> 00:15:30,480 Speaker 1: brown sort of satchels that we called the football's because 278 00:15:30,480 --> 00:15:32,440 Speaker 1: we had to com you carry him under the big 279 00:15:32,480 --> 00:15:35,000 Speaker 1: as brown you carried underr arms football, you know, get there, 280 00:15:35,080 --> 00:15:38,400 Speaker 1: do the preparatory work. There was always one of us 281 00:15:38,440 --> 00:15:41,760 Speaker 1: that had to go over even earlier to deal with 282 00:15:41,800 --> 00:15:46,440 Speaker 1: the previous day's out trades. Um, so any mistakes between 283 00:15:46,440 --> 00:15:48,160 Speaker 1: what you put in the system and what the murk 284 00:15:48,600 --> 00:15:51,960 Speaker 1: had in the system had to be resolved before the 285 00:15:51,960 --> 00:15:54,920 Speaker 1: next day's trading. And so you'd show up it's sort 286 00:15:54,920 --> 00:15:57,280 Speaker 1: of sixth or in the morning and the guy you 287 00:15:57,320 --> 00:16:01,320 Speaker 1: were dealing with inevitably smelled of last night's rum and coke. 288 00:16:01,800 --> 00:16:04,920 Speaker 1: I mean, I mean it was this was real Chicago 289 00:16:05,280 --> 00:16:08,760 Speaker 1: through a South side Chicago working class guys you were 290 00:16:08,800 --> 00:16:12,520 Speaker 1: dealing with. Other than that, really the primary thing was 291 00:16:12,600 --> 00:16:16,800 Speaker 1: you would you learn to bet and make prices on anything? 292 00:16:17,280 --> 00:16:20,760 Speaker 1: You know, how high is the ceiling? Oh um, I've 293 00:16:20,840 --> 00:16:23,480 Speaker 1: fet for you, you know, And then you'd someone would 294 00:16:23,520 --> 00:16:25,640 Speaker 1: deal on, deal on your price and you you look 295 00:16:25,680 --> 00:16:28,120 Speaker 1: it up. So that's something that just became part of 296 00:16:28,160 --> 00:16:32,720 Speaker 1: the culture. Yeah, it's outside of the actual exchange of options. 297 00:16:32,880 --> 00:16:35,640 Speaker 1: People just got that inclination. Yeah, you would bet on anything. 298 00:16:35,680 --> 00:16:39,400 Speaker 1: So obviously this is quite timely. March Madness was a 299 00:16:39,440 --> 00:16:41,880 Speaker 1: big thing, so there would be all over the floor 300 00:16:42,320 --> 00:16:47,000 Speaker 1: that was this essentially floor wide betting system where the 301 00:16:47,040 --> 00:16:49,320 Speaker 1: team that would win the tournament would go out with 302 00:16:49,360 --> 00:16:52,040 Speaker 1: a hundred bucks and everyone else is worth zero. So 303 00:16:52,160 --> 00:16:55,040 Speaker 1: you would make prices and deal on and run a 304 00:16:55,080 --> 00:16:58,000 Speaker 1: book of n C double a team. So this year, um, 305 00:16:58,080 --> 00:17:02,920 Speaker 1: you know, maybe Virginia be I know, eighteen twenty would 306 00:17:02,920 --> 00:17:05,160 Speaker 1: be the price, so you need to pay twenty bucks 307 00:17:05,200 --> 00:17:07,399 Speaker 1: to buy Virginia and if they want, they would go 308 00:17:07,440 --> 00:17:09,520 Speaker 1: out with a hundred and if they didn't win, they 309 00:17:09,560 --> 00:17:12,640 Speaker 1: would go over zero. Is this I'm actually very curious 310 00:17:12,640 --> 00:17:15,480 Speaker 1: about this because I've heard there are people out there 311 00:17:15,520 --> 00:17:18,680 Speaker 1: who just have this inclination to bet on everything. Like 312 00:17:18,880 --> 00:17:21,160 Speaker 1: I've read a story once about some poker player who 313 00:17:21,280 --> 00:17:23,320 Speaker 1: saw a fly on a window and he's like, I'll 314 00:17:23,359 --> 00:17:25,720 Speaker 1: bet that fly takes off. For the next thirty seconds, 315 00:17:25,800 --> 00:17:28,760 Speaker 1: he made a price. Do you think that is the 316 00:17:28,920 --> 00:17:32,720 Speaker 1: type of thing and that people hone over time, or 317 00:17:32,800 --> 00:17:36,080 Speaker 1: they're simply people who just see the world with sort 318 00:17:36,080 --> 00:17:38,800 Speaker 1: of numbers and odds floating over everything they look at. 319 00:17:38,880 --> 00:17:41,480 Speaker 1: I think it's a combination of nature and nurture. To 320 00:17:41,560 --> 00:17:44,399 Speaker 1: be honest with you, The sort of person that's interested 321 00:17:44,440 --> 00:17:48,000 Speaker 1: in financial markets will naturally tend, I think, to view 322 00:17:48,040 --> 00:17:50,960 Speaker 1: the world through that prism. So in that sense, as 323 00:17:51,000 --> 00:17:54,080 Speaker 1: a there's a natural affinity between wanting to work in 324 00:17:54,119 --> 00:17:57,200 Speaker 1: financial markets and wanting to sort of assess the probability 325 00:17:57,240 --> 00:18:00,719 Speaker 1: of various things, whether it's the stop market going up 326 00:18:00,760 --> 00:18:04,760 Speaker 1: or a fly flying off the wall. But certainly the 327 00:18:05,200 --> 00:18:09,040 Speaker 1: pattern of behavior of making a price on anything sort 328 00:18:09,040 --> 00:18:13,760 Speaker 1: of aggressively. It was was, at least from my perspective, learned. Um. 329 00:18:13,800 --> 00:18:17,200 Speaker 1: You know, I didn't walk around in college saying well, um, uh, 330 00:18:17,760 --> 00:18:19,920 Speaker 1: you know might six eighty eight on how I did 331 00:18:19,920 --> 00:18:23,439 Speaker 1: on that test, right, whereas you know, maybe when I 332 00:18:23,480 --> 00:18:27,000 Speaker 1: was taking an exam six months into my professional career, 333 00:18:27,119 --> 00:18:29,439 Speaker 1: that's the sort of thing I would have said. So 334 00:18:29,520 --> 00:18:33,680 Speaker 1: there were a few things that sort of outrageous things 335 00:18:33,680 --> 00:18:35,919 Speaker 1: that happened in terms of in terms of bets, so 336 00:18:36,160 --> 00:18:38,640 Speaker 1: referencing the n C double a sort of the the 337 00:18:38,640 --> 00:18:42,080 Speaker 1: the year before I started, apparently a clerk for one 338 00:18:42,080 --> 00:18:45,760 Speaker 1: of the big banks had run this enormous book having 339 00:18:46,080 --> 00:18:50,240 Speaker 1: um sort of liabilities with all sorts of people all 340 00:18:50,240 --> 00:18:55,520 Speaker 1: over the floor, and basically he lost a lot of money, 341 00:18:55,760 --> 00:18:58,560 Speaker 1: couldn't make good, and so essentially the bank that he 342 00:18:58,600 --> 00:19:01,280 Speaker 1: was working for had to make good to maintain a 343 00:19:01,359 --> 00:19:04,400 Speaker 1: sort of professional you know, a professional standing with this 344 00:19:04,440 --> 00:19:07,080 Speaker 1: was an n double a pool. Yeah, yeah, the bank 345 00:19:07,480 --> 00:19:10,840 Speaker 1: he wasn't he wasn't running you know, he was part yeah, yeah, 346 00:19:11,400 --> 00:19:13,400 Speaker 1: but he like got into a bet there just yeah, 347 00:19:13,440 --> 00:19:17,280 Speaker 1: basically basically yeah, basically they were the they were the 348 00:19:17,280 --> 00:19:21,119 Speaker 1: New York fed to this guy's leman. Right. There was 349 00:19:21,359 --> 00:19:24,240 Speaker 1: there was a broker that ate a foot of cockroaches. 350 00:19:24,840 --> 00:19:29,480 Speaker 1: So cockroaches lined up lined up in the foot, people 351 00:19:29,520 --> 00:19:31,320 Speaker 1: that will he do it? Will he not do it? 352 00:19:31,359 --> 00:19:34,359 Speaker 1: He did it? There was a guy where did he 353 00:19:34,400 --> 00:19:37,840 Speaker 1: get the cockroaches from? Yeah? That I wasn't privy to. 354 00:19:38,080 --> 00:19:42,720 Speaker 1: The Chicago is it? That's like the Chicago The Chicago 355 00:19:42,960 --> 00:19:46,080 Speaker 1: unofficial national anthem is like called like cockroaches on the 356 00:19:46,080 --> 00:19:49,120 Speaker 1: March or something. So I don't think. Yeah, they rarely 357 00:19:49,160 --> 00:19:52,159 Speaker 1: are right. So there was a particularly memorable one, that is, 358 00:19:52,200 --> 00:19:56,120 Speaker 1: there was a rather portly clerk training, not even a training, 359 00:19:56,240 --> 00:20:00,520 Speaker 1: he was a broker's clerk, and the somehow it got 360 00:20:00,560 --> 00:20:04,359 Speaker 1: the the instance came up, you know, how many Reese's 361 00:20:04,400 --> 00:20:07,639 Speaker 1: Cups could this guy eat? And so somehow fifty fifty 362 00:20:07,680 --> 00:20:09,919 Speaker 1: packs of Reese's Cups, you know, at one sitting. So 363 00:20:09,960 --> 00:20:12,320 Speaker 1: it's sort of like the Chicago version of Paul Newman 364 00:20:12,720 --> 00:20:15,040 Speaker 1: in Cool Hand, Luke, how many resist cups can this 365 00:20:15,080 --> 00:20:18,040 Speaker 1: guy eat? And there must have been you know, can 366 00:20:18,240 --> 00:20:19,920 Speaker 1: and then it just evolved you can he or can 367 00:20:19,960 --> 00:20:23,160 Speaker 1: he not? Eat fifty packs of Resa's cups in one sitting? 368 00:20:23,200 --> 00:20:25,680 Speaker 1: And there must have been thirty or forty grand amongst 369 00:20:25,720 --> 00:20:28,480 Speaker 1: all the brokers on this, and like, you know, the 370 00:20:28,560 --> 00:20:30,960 Speaker 1: day before the big day, it was gonna happen, after 371 00:20:31,000 --> 00:20:34,119 Speaker 1: the close, everyone was gonna go. The guy comes up 372 00:20:34,200 --> 00:20:36,119 Speaker 1: sort of looking bashful, and I was like, well, I 373 00:20:36,160 --> 00:20:37,879 Speaker 1: went to the doctor and he said I could go 374 00:20:37,920 --> 00:20:41,040 Speaker 1: into sort of glycemics. He didn't, he said sugar shock. 375 00:20:41,080 --> 00:20:43,480 Speaker 1: But I'm assuming some sort of glycemic shock if I 376 00:20:43,520 --> 00:20:46,080 Speaker 1: eat fifty Reese's cups and you know, everyone was really 377 00:20:46,080 --> 00:20:47,840 Speaker 1: just I was long. I was really disappointed because someone 378 00:20:47,880 --> 00:20:49,760 Speaker 1: had asked him like the day before, well how much 379 00:20:49,760 --> 00:20:52,159 Speaker 1: do you actually like Reese's cups? And the guy like 380 00:20:52,240 --> 00:20:54,760 Speaker 1: looks at us and says, oh, they're my favorite, right, 381 00:20:54,880 --> 00:20:57,840 Speaker 1: So that's what I've tilts the odds in your favor. 382 00:20:58,200 --> 00:21:00,359 Speaker 1: I remember once I had to ring the Ship Cargo 383 00:21:00,400 --> 00:21:04,400 Speaker 1: Aquarium because there was a big debate on who would win, 384 00:21:05,160 --> 00:21:07,480 Speaker 1: great white shark or a killer whale. I think the 385 00:21:07,520 --> 00:21:10,240 Speaker 1: Discovery Channel made a documentary about this about ten years ago. 386 00:21:10,240 --> 00:21:13,439 Speaker 1: But we knew well in advance because I had to 387 00:21:13,840 --> 00:21:17,240 Speaker 1: ring some marine biologists the Chicago aquariums are all yes, 388 00:21:17,280 --> 00:21:21,359 Speaker 1: this is Cameron christ from Swiss Bank Corporation, you know 389 00:21:21,480 --> 00:21:24,320 Speaker 1: who would win? And he's like, well, I think the 390 00:21:24,440 --> 00:21:26,639 Speaker 1: killer whales smarter, So I think the killer whale would win. 391 00:21:26,720 --> 00:21:29,480 Speaker 1: Which was the deduction of the National Geograph or Discovery 392 00:21:29,560 --> 00:21:32,679 Speaker 1: Channel whatever it was, docum documentary, so we knew, we 393 00:21:32,720 --> 00:21:35,720 Speaker 1: knew well in advance. So so yes, so they're all 394 00:21:35,760 --> 00:21:38,040 Speaker 1: sorts of little high jinks that that that went on 395 00:21:38,080 --> 00:21:41,520 Speaker 1: for sure. So Cameron, you have um some characters, to 396 00:21:41,600 --> 00:21:43,960 Speaker 1: say the least on the training floor, but you also 397 00:21:44,000 --> 00:21:46,879 Speaker 1: have some characters in terms of your clients, right like 398 00:21:47,000 --> 00:21:50,680 Speaker 1: who stands out to you now well as a market 399 00:21:50,720 --> 00:21:54,080 Speaker 1: maker on the floor, certainly all all your really your 400 00:21:54,080 --> 00:21:57,600 Speaker 1: only point of reference is the is the brokers, and 401 00:21:58,280 --> 00:22:00,960 Speaker 1: that those were just personalities. You didn't know the end 402 00:22:01,000 --> 00:22:04,400 Speaker 1: client behind that, you won't. You only sort of learned 403 00:22:04,440 --> 00:22:07,600 Speaker 1: that once you sort of moved, if you will, upstairs. 404 00:22:07,600 --> 00:22:11,040 Speaker 1: But even there there, I mean sort of they say 405 00:22:11,040 --> 00:22:13,840 Speaker 1: they passed his prologue, right there was there was one 406 00:22:13,880 --> 00:22:15,960 Speaker 1: broker in particular in the deutsch Mark pit now I 407 00:22:16,000 --> 00:22:19,560 Speaker 1: won't name, but had the sort of orange fake tan 408 00:22:19,840 --> 00:22:23,760 Speaker 1: was sort of loud and obnoxious. It's sort of, uh, 409 00:22:24,000 --> 00:22:26,800 Speaker 1: I'll just leave I'll leave it there. But it was 410 00:22:26,840 --> 00:22:30,359 Speaker 1: funny the sort of them. The hand signals that that 411 00:22:30,440 --> 00:22:34,320 Speaker 1: the that people would use to indicate, say, which broker 412 00:22:34,440 --> 00:22:36,720 Speaker 1: was doing which trade. We're you know, we're kind of funny. 413 00:22:37,080 --> 00:22:39,720 Speaker 1: So if it were Goldman, the pit broke would point 414 00:22:39,720 --> 00:22:42,080 Speaker 1: to their hand like a gold ring. If it was 415 00:22:42,119 --> 00:22:44,560 Speaker 1: pain Weber, they'd point to the neck, so pain in 416 00:22:44,600 --> 00:22:49,000 Speaker 1: the neck, Shearson scissors share. And if it were Deutsche 417 00:22:49,000 --> 00:22:52,439 Speaker 1: Bank they would point yeah, yeah, they would point to 418 00:22:52,440 --> 00:22:55,120 Speaker 1: the spot. You know, basically point to the septum. Yeah, 419 00:22:55,119 --> 00:22:58,879 Speaker 1: the Hitler mustache. You know, again perhaps not politically correct, 420 00:22:58,920 --> 00:23:02,199 Speaker 1: but you know, you have to communication, yeah exactly. You know, 421 00:23:02,200 --> 00:23:05,240 Speaker 1: you knew what they meant um. So once I eventually 422 00:23:05,280 --> 00:23:09,880 Speaker 1: moved upstairs and in fairness away from trading more towards 423 00:23:10,600 --> 00:23:12,920 Speaker 1: I spent some time in sort of sales and sometimes 424 00:23:12,920 --> 00:23:15,720 Speaker 1: in strategy. You know, you got to see the big 425 00:23:15,720 --> 00:23:19,280 Speaker 1: ticket clients over the counter, both in terms of spot 426 00:23:19,800 --> 00:23:21,879 Speaker 1: and in terms of in terms of options, and that 427 00:23:22,000 --> 00:23:26,640 Speaker 1: was you know, that was interesting because for example, during 428 00:23:26,680 --> 00:23:29,119 Speaker 1: the Asian crisis, I was actually working in Singapore, so 429 00:23:29,160 --> 00:23:33,399 Speaker 1: that was incredibly useful to see how various hedge funds 430 00:23:33,440 --> 00:23:36,840 Speaker 1: were behaving. You know, around that time, people who were 431 00:23:37,359 --> 00:23:40,840 Speaker 1: long dollar tie bought, seeing it explode higher but then 432 00:23:40,920 --> 00:23:44,760 Speaker 1: having to pay sort of on an overnight basis to 433 00:23:44,840 --> 00:23:48,400 Speaker 1: fund the position. You know, just interesting to see how 434 00:23:48,480 --> 00:23:51,040 Speaker 1: how you know, how they reacted. And you I mean, 435 00:23:51,040 --> 00:23:55,320 Speaker 1: you could certainly see that some clients, some hedge funds 436 00:23:55,320 --> 00:23:58,480 Speaker 1: in particular, would take advantage of illiquidity, which I guess 437 00:23:58,520 --> 00:24:00,679 Speaker 1: isn't you know that's not a great surpris eyes to 438 00:24:00,720 --> 00:24:04,159 Speaker 1: anybody unless you're naive. But they would trade to not 439 00:24:04,200 --> 00:24:06,200 Speaker 1: to get best execution in the sense to get worst 440 00:24:06,240 --> 00:24:10,600 Speaker 1: execution to push the price, which I'm curious. So you 441 00:24:10,680 --> 00:24:15,879 Speaker 1: mentioned interesting personal days like the days the day the 442 00:24:15,880 --> 00:24:18,399 Speaker 1: trader got into the fist fight, but you sort of 443 00:24:18,400 --> 00:24:20,480 Speaker 1: anticipated where I was gonna go when you mentioned the 444 00:24:20,520 --> 00:24:25,600 Speaker 1: Asian crisis. Are there any specific days in market history 445 00:24:25,640 --> 00:24:29,160 Speaker 1: that people would remember that strike you as having been 446 00:24:29,200 --> 00:24:33,240 Speaker 1: particularly interesting or intense from the floor perspective. From the 447 00:24:33,280 --> 00:24:36,760 Speaker 1: floor perspective, I mean a few that come to mind, 448 00:24:37,359 --> 00:24:39,840 Speaker 1: Uh was I mean? And this is nothing special in 449 00:24:39,880 --> 00:24:43,880 Speaker 1: the annuals of history. I remember on Valentine's Day, which 450 00:24:43,960 --> 00:24:46,080 Speaker 1: was like a week or two after the FED first 451 00:24:46,119 --> 00:24:49,720 Speaker 1: put rates up in that tightening cycle, Dolly Yen fell 452 00:24:50,760 --> 00:24:53,720 Speaker 1: like six or seven percent in a day, which was 453 00:24:53,760 --> 00:24:57,920 Speaker 1: sort of mayhem. A year later, I was actually working 454 00:24:57,920 --> 00:25:01,199 Speaker 1: in Paris at this time because the motif, which was 455 00:25:01,200 --> 00:25:04,240 Speaker 1: the futures exchange in Paris, saw that all these French 456 00:25:04,280 --> 00:25:06,840 Speaker 1: corporates were trading on the floor in Chicago and in 457 00:25:06,920 --> 00:25:10,520 Speaker 1: Philadelphia and decided, well, we want, you know, we want 458 00:25:10,560 --> 00:25:13,240 Speaker 1: some of that action. So I spoke a bit of French, 459 00:25:13,280 --> 00:25:15,720 Speaker 1: so I got sent out there sort of the senior clerk, 460 00:25:15,840 --> 00:25:19,879 Speaker 1: junior trader type guy. So when the dollar collapsed in 461 00:25:20,240 --> 00:25:26,040 Speaker 1: sort of early spring of nineteen, I mean we rarely 462 00:25:26,040 --> 00:25:28,640 Speaker 1: saw volume on that on that floor, but even us, 463 00:25:28,840 --> 00:25:31,040 Speaker 1: we were super super busy because there was all sorts 464 00:25:31,080 --> 00:25:33,880 Speaker 1: of demand to sort of take advantage of or hedge 465 00:25:34,119 --> 00:25:37,399 Speaker 1: of following dollar. And this was right after the Kobe 466 00:25:37,480 --> 00:25:41,440 Speaker 1: earthquake in Japan that also saw Nick Leason blow up, 467 00:25:41,600 --> 00:25:47,000 Speaker 1: So that just injected general level of volatility across all 468 00:25:47,080 --> 00:25:51,159 Speaker 1: fidancial markets. But you know, going back to clients or 469 00:25:51,160 --> 00:25:54,760 Speaker 1: individual trading, I mean one and sort of if you will, 470 00:25:54,800 --> 00:25:58,400 Speaker 1: taking advantage of market discrepancies. I was working in Philadelphia 471 00:25:58,520 --> 00:26:01,120 Speaker 1: for a summer have D I left. After I left 472 00:26:01,160 --> 00:26:03,840 Speaker 1: Paris again, trading FX opened on the exchange of Philadelphia 473 00:26:03,920 --> 00:26:06,359 Speaker 1: and there was a big client there who it was 474 00:26:06,400 --> 00:26:09,240 Speaker 1: some sort of French corporate and lord knows what they 475 00:26:09,240 --> 00:26:11,359 Speaker 1: were doing, but they used to do these really complicated 476 00:26:11,400 --> 00:26:14,520 Speaker 1: spreads in dollar mark and dollar Paris Don't, which was 477 00:26:14,560 --> 00:26:17,560 Speaker 1: dollar French franc where they would do these option butterflies 478 00:26:17,600 --> 00:26:19,720 Speaker 1: and they would swap one for the other, and they 479 00:26:19,760 --> 00:26:22,440 Speaker 1: really had no economic value. So I think the guy 480 00:26:22,560 --> 00:26:24,639 Speaker 1: was just trying to pay his broker for some some 481 00:26:24,720 --> 00:26:27,920 Speaker 1: other service or something, um. But you always knew which 482 00:26:27,960 --> 00:26:30,639 Speaker 1: way he was going to go, so it might be 483 00:26:30,720 --> 00:26:34,520 Speaker 1: worth say theoretical value of zero, but you know he's 484 00:26:34,560 --> 00:26:37,280 Speaker 1: buying it, so you would make it, say ten basis 485 00:26:37,280 --> 00:26:40,959 Speaker 1: points at twenty basis points um. And then it just 486 00:26:41,000 --> 00:26:45,000 Speaker 1: became a game of not even canton mouse. It was 487 00:26:45,080 --> 00:26:48,359 Speaker 1: just hit and hope kind of because you knew this again, 488 00:26:48,440 --> 00:26:51,040 Speaker 1: this thing is worth zero with theoretical value zero, market 489 00:26:51,080 --> 00:26:53,920 Speaker 1: value zero. You're ten bid because you know the guy's 490 00:26:53,960 --> 00:26:55,760 Speaker 1: gonna pay twenty for it, or at least pay sort 491 00:26:55,760 --> 00:26:58,040 Speaker 1: of sixteen or eighteen for it, so you're giving him 492 00:26:58,040 --> 00:27:01,160 Speaker 1: the massive read. But you're you're out there. Your price 493 00:27:01,240 --> 00:27:03,280 Speaker 1: is out there, and if someone wants to sell it 494 00:27:03,320 --> 00:27:05,440 Speaker 1: to you, you've got to essentially you've got to honor 495 00:27:05,480 --> 00:27:08,000 Speaker 1: the price. And if you get hit, if your big 496 00:27:08,000 --> 00:27:12,520 Speaker 1: gets hit, then the guy in Chicago who's running the 497 00:27:12,560 --> 00:27:15,520 Speaker 1: overall book says, what kind of morn are you to 498 00:27:15,600 --> 00:27:18,520 Speaker 1: pay this much over the theoretical value price. If you 499 00:27:18,560 --> 00:27:21,000 Speaker 1: sell it, then you're you know, then you're a genius. 500 00:27:21,320 --> 00:27:23,919 Speaker 1: But if you get given, you know, you're a moron. 501 00:27:24,080 --> 00:27:26,840 Speaker 1: So just that waiting game of who you know, who's 502 00:27:26,840 --> 00:27:29,639 Speaker 1: going to respond to the phone first, the client or 503 00:27:29,720 --> 00:27:32,480 Speaker 1: someone else, you know, Goldman Sacks or JP Morgan or 504 00:27:32,520 --> 00:27:35,560 Speaker 1: someone else who's not on the exchange floor. I did. 505 00:27:35,720 --> 00:27:38,640 Speaker 1: I personally didn't enjoy that because you know, it's sort 506 00:27:38,640 --> 00:27:41,159 Speaker 1: of a coin flip after whether you're a genius or 507 00:27:41,200 --> 00:27:43,119 Speaker 1: an idiot, and you know, I'd like to have a 508 00:27:43,119 --> 00:27:46,080 Speaker 1: little control, more control over my destiny than you know 509 00:27:46,160 --> 00:27:49,800 Speaker 1: who answers the phone first. Okay, so speaking of destiny, 510 00:27:49,880 --> 00:27:52,320 Speaker 1: we alluded to this a little bit at the beginning 511 00:27:52,320 --> 00:27:55,439 Speaker 1: of our conversation, but there's been this ongoing discussion of 512 00:27:55,520 --> 00:27:59,240 Speaker 1: whether the decline of trading is a cyclical or a 513 00:27:59,400 --> 00:28:03,120 Speaker 1: secular phenomenon, i e. Whether it's temporary or something that's 514 00:28:03,160 --> 00:28:05,760 Speaker 1: going to be around for a very very long time. 515 00:28:05,920 --> 00:28:08,600 Speaker 1: I mean, listening to some of your stories from the nineties, 516 00:28:09,200 --> 00:28:14,119 Speaker 1: I cannot imagine that that kind of trading ecosystem is 517 00:28:14,359 --> 00:28:17,760 Speaker 1: ever ever going to come back. How do you view 518 00:28:18,119 --> 00:28:20,600 Speaker 1: that debate and how do you think the markets are 519 00:28:20,600 --> 00:28:23,680 Speaker 1: going to proceed going forward in terms of trading? Yeah, 520 00:28:23,720 --> 00:28:25,880 Speaker 1: I mean I couldn't agree more. I mean, even going 521 00:28:25,920 --> 00:28:28,040 Speaker 1: back to where we were in sort of two thousand nine. 522 00:28:28,640 --> 00:28:31,200 Speaker 1: And I remember even like five or six years ago, 523 00:28:31,240 --> 00:28:34,400 Speaker 1: when I was macro hedge fund portfolio manager, we would 524 00:28:34,400 --> 00:28:36,479 Speaker 1: sort of sit there and look at each other as 525 00:28:36,600 --> 00:28:39,520 Speaker 1: volatility declined to something close to zero and many of 526 00:28:39,520 --> 00:28:41,600 Speaker 1: the stuff, many of the assets we were trading and 527 00:28:41,680 --> 00:28:44,560 Speaker 1: sort of saying, hey, the game is over. Everyone held 528 00:28:44,600 --> 00:28:46,880 Speaker 1: the pool. And you've sort of seen that to a 529 00:28:46,920 --> 00:28:50,640 Speaker 1: degree in terms of the return stream over the last 530 00:28:50,680 --> 00:28:52,840 Speaker 1: five or six years, not only of sort of macro 531 00:28:53,000 --> 00:28:57,520 Speaker 1: hedge funds, but active management across other asset classes. There's 532 00:28:57,560 --> 00:29:01,320 Speaker 1: certainly equities generally, and I there's a few things here 533 00:29:01,400 --> 00:29:03,920 Speaker 1: that are driving, if you will, a permanent change in 534 00:29:04,000 --> 00:29:09,600 Speaker 1: market conditions. Obviously the regulatory environment being number one, both 535 00:29:09,640 --> 00:29:13,440 Speaker 1: in terms of market abuse, although I think that was 536 00:29:13,520 --> 00:29:17,360 Speaker 1: generally speaking overstated in macro products. But number two, it 537 00:29:17,440 --> 00:29:18,800 Speaker 1: just in terms of the amount of risk you can 538 00:29:18,840 --> 00:29:22,600 Speaker 1: take the fact that banks can't prop trade in most assets. 539 00:29:23,000 --> 00:29:27,000 Speaker 1: That's a change. The fact that the edge that many 540 00:29:27,520 --> 00:29:29,400 Speaker 1: hedge funds may have had in the past in terms 541 00:29:29,440 --> 00:29:34,080 Speaker 1: of information uh being seeing that regulators can now expost 542 00:29:34,440 --> 00:29:36,720 Speaker 1: say well, you shouldn't have done that, and you know 543 00:29:36,760 --> 00:29:39,520 Speaker 1: we're gonna find you or close you or in very 544 00:29:39,560 --> 00:29:43,160 Speaker 1: rare occasions, send you to jail. That also changes um, 545 00:29:43,320 --> 00:29:46,640 Speaker 1: changes the you know, the calculus. And and let's face it, 546 00:29:46,760 --> 00:29:51,720 Speaker 1: the advent of more quantitative trading, arbitrage, trading, uh, the 547 00:29:51,800 --> 00:29:54,640 Speaker 1: al goes, whatever you want to call it, as well 548 00:29:54,680 --> 00:29:57,400 Speaker 1: as sort of the more passive strategies have taken a 549 00:29:57,400 --> 00:29:59,440 Speaker 1: lot of the edge out of the market. And that's 550 00:29:59,480 --> 00:30:01,240 Speaker 1: when the reasons are think all this whole crypto thing 551 00:30:01,360 --> 00:30:05,320 Speaker 1: is has received so much attention is that this is 552 00:30:05,600 --> 00:30:09,360 Speaker 1: that is clearly an inefficient market, and less efficient the market, 553 00:30:09,600 --> 00:30:12,040 Speaker 1: the more the risk premium there is to be harvested. Well, 554 00:30:12,040 --> 00:30:16,560 Speaker 1: I have to imagine that any trading environment which was 555 00:30:16,680 --> 00:30:20,800 Speaker 1: characterized by someone up in a booth sending hands signals 556 00:30:21,240 --> 00:30:25,400 Speaker 1: to a guy whose main advantage in life is that 557 00:30:25,440 --> 00:30:28,760 Speaker 1: he's you know, over six ft tall, must be riven 558 00:30:29,000 --> 00:30:34,440 Speaker 1: with inefficiencies that a computer very quickly can ring out. Yeah, 559 00:30:34,480 --> 00:30:36,640 Speaker 1: I mean, yeah, I think that's fair. I mean, let's 560 00:30:36,760 --> 00:30:40,120 Speaker 1: let's put this in in crazy perspective. I mean, I 561 00:30:40,160 --> 00:30:43,959 Speaker 1: started my career a year after worldwide Web was invented. Alright, 562 00:30:44,080 --> 00:30:47,640 Speaker 1: so the whole internet thing was basically a nonstarter in 563 00:30:47,720 --> 00:30:51,360 Speaker 1: terms of financial markets and the speed with which information 564 00:30:51,760 --> 00:30:55,600 Speaker 1: could flow. In terms of that floor culture that you described, 565 00:30:56,240 --> 00:30:59,479 Speaker 1: was there like a moment that you felt like, Okay, 566 00:30:59,480 --> 00:31:01,400 Speaker 1: this has come to an end, like where you saw 567 00:31:01,600 --> 00:31:04,240 Speaker 1: that it was still active and there was money to 568 00:31:04,240 --> 00:31:07,080 Speaker 1: be made, but that it felt like the writing was 569 00:31:07,120 --> 00:31:09,080 Speaker 1: on the wall. Well, I think when I when I 570 00:31:09,120 --> 00:31:12,800 Speaker 1: went to Paris, which was literally only nine months into 571 00:31:12,800 --> 00:31:17,880 Speaker 1: my career, the fact that the French corporations wouldn't trade 572 00:31:17,920 --> 00:31:21,280 Speaker 1: on the French exchange, that kind of didn't smell right, 573 00:31:21,720 --> 00:31:23,760 Speaker 1: And so, you know, for better or for worse, I 574 00:31:23,800 --> 00:31:27,200 Speaker 1: spent a little over a year kind of just cooling 575 00:31:27,240 --> 00:31:31,920 Speaker 1: my heels, which stunted my professional development almost certainly. But 576 00:31:32,120 --> 00:31:34,040 Speaker 1: by the same token, I was sort of twenty three 577 00:31:34,040 --> 00:31:36,320 Speaker 1: and getting paid to live in Paris, so you know, 578 00:31:36,360 --> 00:31:40,840 Speaker 1: the complaints were weren't two to vociferous, but yeah, I 579 00:31:40,840 --> 00:31:43,360 Speaker 1: mean then when I went to Philly, and there was 580 00:31:43,400 --> 00:31:46,280 Speaker 1: the occasional big ticket trade that I described earlier, but 581 00:31:46,280 --> 00:31:48,320 Speaker 1: other than that, again, we spent a lot of our 582 00:31:48,360 --> 00:31:51,760 Speaker 1: time kicking our heels. Versus even two years previously, when 583 00:31:51,800 --> 00:31:55,080 Speaker 1: I was in Chicago, it was generally a steady flow 584 00:31:55,480 --> 00:31:59,200 Speaker 1: of of activity. You could see even then even over 585 00:31:59,240 --> 00:32:01,680 Speaker 1: that two years, the business is migrating away from that 586 00:32:01,760 --> 00:32:06,600 Speaker 1: exchange environment much more towards towards and over the counter. Yeah, 587 00:32:06,640 --> 00:32:09,480 Speaker 1: so you know, I wouldn't describe it as unlucky. It's 588 00:32:09,520 --> 00:32:12,560 Speaker 1: just you know, a circumstance of circumstance of history really 589 00:32:12,680 --> 00:32:15,760 Speaker 1: and Mark. You know, as we've seen markets evolve, and 590 00:32:15,800 --> 00:32:20,200 Speaker 1: that was a classic evolution from a less efficient you know, 591 00:32:20,240 --> 00:32:24,480 Speaker 1: in a sense there's a financial market, uh law of thermodynamics, 592 00:32:24,600 --> 00:32:28,120 Speaker 1: you know, and the thermodynamics entropy always increases. And generally 593 00:32:28,120 --> 00:32:31,920 Speaker 1: speaking in markets, efficiency doesn't always increase, but it generally increases. 594 00:32:31,960 --> 00:32:34,440 Speaker 1: But certainly when you talk about a chain of a 595 00:32:34,520 --> 00:32:37,640 Speaker 1: chain of communication that's maybe five lengths long versus a 596 00:32:37,680 --> 00:32:39,880 Speaker 1: click of a mouse button, I mean that's only going 597 00:32:39,960 --> 00:32:43,040 Speaker 1: one way, isn't it? All right? Joe? Are you okay 598 00:32:43,120 --> 00:32:46,000 Speaker 1: leaving it there? I mean I could actually listen to 599 00:32:46,680 --> 00:32:49,440 Speaker 1: Trader floral hydrinks for like five hours, but I think 600 00:32:49,440 --> 00:32:52,400 Speaker 1: maybe it's time to leave it there alright. Cameron Christ 601 00:32:52,680 --> 00:32:56,120 Speaker 1: that was an amazing conversation. Thank you for bringing um 602 00:32:56,160 --> 00:32:58,920 Speaker 1: the nineties world of trading to life with the flatulent 603 00:32:59,040 --> 00:33:03,040 Speaker 1: Umpa Loompa's and various other things. Thank you my pleasure. 604 00:33:14,400 --> 00:33:17,280 Speaker 1: So cho, I don't know where to begin. Um. I 605 00:33:17,400 --> 00:33:21,440 Speaker 1: really enjoyed that conversation, but it is basically talking about 606 00:33:21,440 --> 00:33:25,040 Speaker 1: a lost world, isn't it. I wasn't big facetious when 607 00:33:25,040 --> 00:33:28,000 Speaker 1: I said we could do that for five hours. Now 608 00:33:28,040 --> 00:33:30,640 Speaker 1: I'm wondering whether we should do like a little spinoff 609 00:33:30,720 --> 00:33:34,120 Speaker 1: odd Lots where we do like a ten part series 610 00:33:34,560 --> 00:33:37,680 Speaker 1: really recounting the glory days, because I have definitely not 611 00:33:37,800 --> 00:33:42,000 Speaker 1: laughed that hard on any of our previous episode. I 612 00:33:42,040 --> 00:33:45,440 Speaker 1: did not see the flash ONMPA is coming up. I 613 00:33:45,600 --> 00:33:48,320 Speaker 1: know that was a curveball. I did not. I hope 614 00:33:48,360 --> 00:33:50,480 Speaker 1: you're glaring at our producer right now and making sure 615 00:33:50,480 --> 00:33:52,880 Speaker 1: that he's going to keep that into the podcast. But 616 00:33:52,920 --> 00:33:55,240 Speaker 1: I would definitely be on board um for more on 617 00:33:55,280 --> 00:33:59,640 Speaker 1: this discussion. But there is there's a serious theme underlying 618 00:34:00,000 --> 00:34:02,680 Speaker 1: all of these funny stories, which is the degree to 619 00:34:02,760 --> 00:34:06,840 Speaker 1: which markets really have changed. And a lot of people 620 00:34:06,840 --> 00:34:09,759 Speaker 1: would say they become more efficient, they've become safer in 621 00:34:09,880 --> 00:34:13,800 Speaker 1: various ways, but there are some criticisms around the edges 622 00:34:13,960 --> 00:34:16,319 Speaker 1: of what markets have turned into. So, for instance, there's 623 00:34:16,360 --> 00:34:20,279 Speaker 1: this pervasive argument about lower liquidity because banks aren't doing 624 00:34:20,280 --> 00:34:23,880 Speaker 1: proprietary training anymore. So there is a serious discussion here. 625 00:34:23,920 --> 00:34:26,600 Speaker 1: I doubt anyone has realistically lost out from the fact 626 00:34:26,600 --> 00:34:29,800 Speaker 1: that we don't do hand signals on an actual floor anymore, 627 00:34:29,840 --> 00:34:31,680 Speaker 1: but you know what I mean. But yeah, and there 628 00:34:31,680 --> 00:34:34,520 Speaker 1: are certainly people who I probably wouldn't make that argument 629 00:34:35,160 --> 00:34:40,800 Speaker 1: that although volatility has been incredibly low for a while now, 630 00:34:41,440 --> 00:34:46,160 Speaker 1: that if we did have more sort of natural handbrakes 631 00:34:46,239 --> 00:34:48,880 Speaker 1: and more people involved in the process, that we wouldn't 632 00:34:48,920 --> 00:34:52,680 Speaker 1: have these extraordinary volatility spikes that come out of nowhere 633 00:34:52,719 --> 00:34:54,439 Speaker 1: that are supposed to only happen one out of every 634 00:34:54,480 --> 00:34:57,680 Speaker 1: five thousand years, but it seemed to happen one every 635 00:34:57,680 --> 00:35:01,080 Speaker 1: two years. So you do lose something. I mean on net, 636 00:35:01,600 --> 00:35:06,040 Speaker 1: I do think it's probably good for markets overall that 637 00:35:06,600 --> 00:35:12,319 Speaker 1: being a big ten football player is not uh an advantage, 638 00:35:12,360 --> 00:35:15,440 Speaker 1: although I'm biased because I'm you know, five ft nine 639 00:35:15,480 --> 00:35:19,680 Speaker 1: and basically so I'm I'm pro this change. So I'm 640 00:35:19,680 --> 00:35:23,080 Speaker 1: biased as well because I think, as Cameron mentioned, there 641 00:35:23,120 --> 00:35:26,200 Speaker 1: were virtually no women on the floor at that period 642 00:35:26,200 --> 00:35:30,160 Speaker 1: of time. Um, but anyway, shall we call it a day. 643 00:35:30,400 --> 00:35:32,839 Speaker 1: Let's call it a day, all right? This has been 644 00:35:32,880 --> 00:35:36,240 Speaker 1: another episode of the odd Thoughts Podcast. I'm Tracy Alloway. 645 00:35:36,320 --> 00:35:39,120 Speaker 1: You can follow me on Twitter at Tracy Alloway. And 646 00:35:39,160 --> 00:35:42,399 Speaker 1: I'm Joe Wisenthal. You can follow me on Twitter at 647 00:35:42,440 --> 00:35:45,640 Speaker 1: the Stalwarts. And you should follow Cameron christ or Bloomberg 648 00:35:45,719 --> 00:35:49,800 Speaker 1: macro strategist on Twitter. He's great at Fifth Rule, and 649 00:35:50,239 --> 00:35:54,080 Speaker 1: you should follow our producer on Twitter to for four Heads. 650 00:35:54,080 --> 00:35:56,640 Speaker 1: He's on Twitter at four head t, as well as 651 00:35:56,640 --> 00:36:00,719 Speaker 1: our Bloomberg head of podcast, Francesco Levy at francesco It Today. 652 00:36:00,719 --> 00:36:01,520 Speaker 1: Thanks for listening.