A Day in the Life of a FX Spot Desk Trader

06:00 Alarm goes and I'm out of bed. Hopefully I have managed to sleep all
through the night, although on odd occasions I will get a phone call or a text
message if anything particularly important is up. Not so often these days though.
The people I work with know how much I value my beauty sleep. Quick shower
and shave and I'm usually out the door some time before 0630
06.30 On the way to the tube station I will have a quick scan through the news
headlines on my phone, check my e-mails, check the spot market levels in Asia
etc. By the time I get to the tube station my phone has downloaded all the early
morning research pieces that I've been sent so I have something more
stimulating than the free papers to read on the train. It's a pretty short hop down
to Bank (usually around twenty minutes), but by the time I'm there I usually have
a better idea of what has happened of note overnight. Over the years I've found I
have improved immensely at 'skimming' the morning reading, and can fit a
surprising amount into the time available.
07:00 Usually around this time I arrive at the office. The junior on the desk is
more often than not already there a few minutes ahead of me, and he has some
early morning stuff to do for us, which, these days needs minimal supervision
from either myself or any of the other more senior traders on the desk. Nothing
earth shattering - a quick check of highs and lows in Asia, a look to see if any
barrier options should have been triggered, and he also writes a few quick notes
to put on our internal chatroom system here for the whole of the trading floor. It's
a good exercise for him to be able to get up to speed quickly and to be able to
precis and disseminate before the information becomes stale. To give him his
due he's gotten pretty good at it since he started with us around 18 months ago.
While he's doing this, I'll be logging into all the trading systems we have on the
desk, and talking to a few market contacts either electronically via individual or
group chats on Bloomberg, Reuters etc, or down a sqwawkbox line.
The conversations vary wildly depending on who I am speaking to. Some
conversations will be with contacts in Asia, getting a bit more colour on what was
going on overnight, some will be with London contacts at assorted banks, hedge
funds, prop trading houses etc, while other conversations will be with
counterparts in the U.S. who may have woken up in the night to see what's going
on. Some of them are habitual overnight traders, some merely take a look at
their screens if they happen to wake and some will have been woken as a result
of 'call levels' left with friends and colleagues stating specific trading levels at
which they wish to be disturbed. A friend at a New York based hedge fund calls
me up and we chat for a few minutes about the markets, what's happening at
home, baseball scores (he's a long suffering NY Mets fan) and anything else. His
wife is out of town this week visiting family and I've known him long enough to
know that he usually gets restless when that happens and more often than not
ends up trading a bit more overnight than would usually be the case.
07:09 As we're speaking euro/yen is plummeting through some short term
stoplosses, gathering pace on a thin and illiquid day in London. My friend has a
core 'long risk' position that he's very comfortable with, but he will job in and out
around that to keep the scoreboard ticking over so to speak. He actually sold
some eur/jpy and nzd/jpy via my Singapore guys in Asian time, and as we're
sitting chatting he asks me to work a bid to buy half of that eur/jpy amount back,

just below where the market's sitting. My Yen trader has just stepped off to grab
a coffee, and so coincidentally I am actually covering the yen seat myself for a
few minutes. So I'll watch my mate's order here. He leaves me with a little
discretion as to how and where to execute (as he trusts me not to abuse him). All
taken care of, he hangs up and goes back to sleep, knowing I'll call him if there's
anything he needs to know.
07:18 Price request comes in from a sales guy on the floor, asking for a
predatory corporate customer of his. - "gbp/jpy in 50 please". I make him a price
- "48/60". "YOURS - you get 50 at 48" replies the sales guy, a little too quickly for
my liking. This smells a bit. The customer in question has a bit of a reputation for
'drive-bys', a practice frowned upon in interbank FX circles, whereby a client will
call several banks within a few seconds and execute multiple large clips of the
same currency pair in the same direction. So that the end result is that the client
ends up paying away a spread appropriate for, say, only 50 million sterling when
they might have had ten times that amount to execute in total. And then you
have several banks tripping over each other in order to try and get out of those
positions. Sure enough, it's a mess. gbp/jpy looks heavy immediately, and I can
hear the dollar / yen voice broker over my speakers getting hit repeatedly. I am
definitely going to have my work cut out here, but I am looking to sell some yen
in any case, around these levels, for my buddy in New York. Another salesperson,
this time from the desk that services the world's central banks, is asking us a
price "Georgie" (our sterling trader). "Bid in the cross please mate - just 25, usual
guy, full amount, in competition".
By 'The Cross' George knows he means eur/gbp. eur/gbp is trading around 81/83
at the time, having ticked down from 85 right as the guy started asking for the
bid.. "I'll take that one George" I shout. "Mike - show 81.5, maybe 82 if you have
to. Make sure we get these please". I notice the newest of the summer interns
looking over from the end of the desk, a bit puzzled. I beckon to him. "Meat" (his
nickname - fresh meat), come here, watch and learn. Meat plonks himself down
in the empty seat next to me. "81.5 you got em Rich" Mike shouts out. I just got
my 25 Euros. I immediately hit the Reuters Matching system, offering out 10
million of the Euros at 82. I get paid for (i.e. manage to sell) two million only, and
then the price starts moving lower. 80 given, then 80 offered, 79 trading, 78
trading. I shout across to George "pick me up another 27 somewhere down here
please George. George starts working his keypad furiously, pausing a couple of
times to lean into the microphone on his dealerboard and talk to his sterling
voice broker. Not much later his price comes back "79.5 or thereabouts". "Into
me at 80" I shout back. I'll buy the Euros from George at 80 and anything better
than that he can keep in his P+L account for his efforts. As an exercise I get Meat
to start jotting down a few numbers on my paper pad, as the deals from the
other salespeople and traders will take a little while to be booked to me.
What have I done so far? Bought 50m gbp/jpy at 143.48 Bought 25m eur/gbp at
0.90815 Sold 2m eur/gbp at 0.9082 Bought 27m eur/gbp at 0.9080 07:25 Netting
the 3 eur/gbp deals out shows me having bought 50m Euros at 0.908067. "so
what do we do now?" I ask Meat, he looks at me a touch blankly. I point at the
order manager system on my monitor, showing me all the orders that we are
working for clients. One of them, my friends order to buy eur/jpy is blinking pink
and red, indicating that it is very close to being triggered. The notes column
reads 'Rich, Smalls Discretion, partial ok', which means I am watching it
personally, I have a little bit of latitude on the level to fill the guy at, and if we
get some but not all of his order done that's ok as long as we call him. I see
realization dawning on Meat's face. "Err - we need to buy more eur/gbp".
"Correctamundo" I reply, doing a poor impression of Samuel L Jackson in Pulp

Fiction. "Check out the big brain on Meat!!. So how much more? Quickly now".
Meat taps a few numbers through on the calculator. After a couple of goes at it
he gets the right answer. Just over 5 million more. 5 million is a standard amount
quoted by the voice brokers all the time. Price at the moment is a touch higher
again. "82/84, two four, two four in a fiver, two four" he repeats. I thumb the talk
button on the speaker for the guy at Icap and say "Take five Parrot" (Parrot is the
broker). "Five at 84 George" He replies. "It's Rich actually. Thanks mate". Meat
recalculates the eur/gbp average immediately. I bought 55 million Euros at
0.908097 average. And now it's easier to see what I've done.
I bought 55m Euros at 0.908097, meaning I sold 49.993 million gbp (55 x
0.90897). But I had previously bought exactly 50m sterling against yen at
143.48. So the sterling amounts from all those trades almost exactly netted out,
leaving me long 55 million Euros against yen, at a price of 130.29375. I look up
at the screens again. eur/gbp is going nuts. 85 paid, 90 paid, 98 paid, 0.9100 bid,
0.9110 bid. It's dragging everything else with it. And gbp/jpy is falling through
the floor. Some uk news must be out. One of the bond traders is pasting
something into our internal chat session for all, the traders here. Rumours hitting
the market of the chancellor being called to a meeting with Moody's, one of the
ratings agencies. The market knee-jerk assumption is that the UK's perfect AAA
sovereign rating may be about to be cut and sterling is selling off on the back of
it. With dollar/yen sidelined on this news and hardly moving, but euro higher as a
result of all the eur/gbp buying, euro/yen is of course climbing steadily. I quickly
phone my guy in New York back. "Hi mate - you've done 55 at twenty nine and a
half so far. Real low's been around 32 but I got a break and legged into some.
Now Darling (the UK Chancellor), is allegedly meeting Moody's and euro
sterling's off to the races. Want me to scoop the other ten in for you?" (his
original order with me was for anything up to 65 million). "Nah" comes the reply.
"Just work it back down there again that's cool. Thanks man. Book em at 31 dude
and thanks for hooking me up". His drawl so laid back he couldn't possibly hail
from anywhere else than California. "Pleasure mate. I'll call you if it all boots off.
Go back to sleep". "Later he says". He hangs up.
I look at gbp/jpy. It's getting destroyed. Half the banks on the street were sitting
long and wrong when the news started to filter down, as a result of that little
drive-by. So they were all falling over themselves to get out. But there must have
been some sort of a bid in usd/jpy lurking around somewhere, as that side of the
equation has hardly budged, and cable (sterling against the US Dollar) has taken
the full brunt of both the panic selling in sterling yen and also the knee-jerk
sterling selling on the back of the Moody's story. So we definitely dodged a bullet
there.
07:35 "So what's the moral of that little story then Meat?" I ask him. His reply,
about the need to be aware of all the risks you are running on the desk, and of
where and when you can offset one against the other is of course both correct,
and at the same time exactly what a young intern, keen to impress is going to
say. But there's a simpler moral, and it's a market phrase it's time he learned. So
I stand up, and so does George, and so does Mike. And we all shout it out to him
in Unison "I'D RATHER BE LUCKY THAN GOOD". At that point Lucky (Luke, the yen
trader) re-appears. And he's brought me a coffee. Happy days. I let him settle
back in and then I instruct the junior to square any of the tiny balances in my
book and make sure the euro/yen trade is booked ok. Profit on that few minutes
of work - 6,800 Euros. And my guy in New York still walked away very happy. Job
done. I stand up and head off the desk, and over to my office. I have a couple of
meetings that will take a bit of time.

08:05 The first of my two meetings this morning (I have another later in the
afternoon). In this case it's a conference call with the two senior spot traders in
our Singapore office. It's a regular monthly catch-up that we have, just to make
sure we're all singing from the same hymn sheet so that clients are going to get
consistent prices and service from us regardless of what time they want to
transact. Foreign exchange is a twenty four hour market, five days a week and
we're busy around the clock. Asian time is a touch quieter, and liquidity
concomitantly poorer, but we've always been one of those banks that has prided
ourselves both on the quality of liquidity and relationships that we can maintain
out there, and also on the fact that we work very hard to pass that competitive
advantage on to our clients. The three of us have a good general chat. I fill them
in on the gbp/jpy trade (as they had got half the story from the internal chat
system). Apparently at least two other banks, less fortunate in the stuff they had
in their order books as a backstop, had already had their chief dealers calling the
client up stating in no uncertain terms that this kind of thing is not acceptable
any more.
Everyone in the market, both in London and in Asia had seen the trade going
through, and it was indeed a total mess. They ask me if I am going to say
anything. I decide against it on this occasion, but also decide against using it as
some sort of a marketing ploy to say how happy we were to see the flow from
the client. I take a less is more approach in this case. Complain too much and the
client will just stop doing business altogether. Smile too much and you're tacitly
condoning their actions. We move on.
Next up for discussion is a slightly thorny topic of Stop-loss orders. Specifically
those left by clients towards the end of the Asia trading day, which then get
passed to the London desk around 8am GMT. We had been having a few issues of
late where the Asia guys had decent sized stoploss orders on the books and
passed them to London, at which point, while the dealers in London were sifting
through the orders to see what was there of any size, the market started moving,
and flew through the level almost before anyone had had a chance to react, let
alone cover the resulting position. The first time it had happened everyone
(including myself) had simply put this down to bad luck, but after it happened a
second time, and after I heard a rumor of the same thing happening to a mate at
another shop, I had started to reach the conclusion that there was possibly more
to it than that. I left the guys in Sing under no illusions as to what I wanted done
about this. The desk were not to 'run' the stop, but were equally asked not to
wait until the last minute to try and start executing the stop. Procrastination, in
this case, seems almost uniformly fatal so I make sure the traders know they
have my full permission to position themselves 'defensively' when this client left
stops. Maybe he's leaving some of the order with us and some away, or maybe
he's just really really good with his technical levels. Doesn't really matter, the
main thing is that until it becomes apparent that its just bad luck, I am assuming
that the stops will be tricky to execute, and taking steps accordingly. To be
honest it's in the client's interests too as he'll get far less slippage that way. The
risk is that if he leaves a sell stop the relevant trader gets short just ahead of the
level and then the level doesn't get triggered and he has to cover the short in a
hurry. But given the way the price action on these things has gone lately, that's a
risk I'm prepared to take.
That just about wraps up the meeting, other than a two minute discussion on
whether I am happy to sanction a (potentially expensive) desk dinner next
month. They had in fact only just had one, (last time I was down there, three
weeks ago) but we have a new joiner starting in two weeks time, and we usually
make sure there's some sort of opportunity to meet the rest of the team outside
of work. I agree to the dinner, but ask the guys not to go too nuts on the wine.

That's where the bills always get out of hand. Meeting over, we adjourn for
another month and I step out to grab a coffee before the next meeting.
08:45 I grab a coffee from the Starbucks concession in the ground floor of our
building. God only knows how much money I go through in that place. I bump
into the head of facilities management there, who, it turns out, I am drawn to
play against in the next round of the bank's open squash knockout competition in
a week's time. Much banter ensues when he clocks me buying a full fat
cappuccino and promptly changes his order to a skinny, at which point I do too,
at which point he changes his to a peppermint tea, at which I change mine back
to the original fatboy order. At which point the barista, getting a bit bored of our
antics, hands him the peppermint tea (which he doesn't really want anyway) and
me my coffee. As Sun Tzu says, every battle is won before it is ever fought. I
head back to the floor chuckling.
09:07 Second meeting and this time an external one. Our representative from
EBS comes in to see us to go over the latest enhancements to the system and
how they can benefit us. As we don't have standalone EBS terminals any more
these days, but instead route all our spot liquidity through a price aggregator
that consolidates all the prices, some of the new functionality changes aren't
100% relevant to us. But some still are, and in any case keeping abreast of
market developments is part of the job. Luke (who is the nearest we have to an
uber geek on the desk) and our head of e-commerce and electronic trading,
Sarah are sitting in with me (or, more realistically, I am sitting in with them).
Some of the enhancements are pretty obvious (new currency pairs that they are
allowing to be traded on the system, which, to be a success will need the buy in
of banks prepared to make markets and commit pricing in the early days) whilst
others are slightly more subtle (changes to the quote lifetime rules aimed at
further inhibiting the activities of snipers from high frequency trading houses
often accused of 'flashing', i.e. posting quotes and removing them milliseconds
later to artificially move the market and profit from it). Not a problem for us but
something Sarah needs to be aware of as she monitors our 'hit ratios' for each
ecn to which we are connected (including EBS) to make sure that when we
attempt to trade on one of these venues we have a decent chance of being
successful. If, when these changes are implemented by EBS, we find that they
are dropping off our radar in terms of the ratio of successful trades to attempted
trades we will tweak our aggregator's smart order routing algorithms accordingly.
I get sent a detailed statistical analysis of these ratios and the overall
performance of the system once a month by Sarah's team, and I sit down with
Luke (and anyone else on the desk if needs be) and go over any oddities. All of
the enhancements seem straightforward enough. I duck out, leaving Lucky,
Sarah and the EBS rep to discuss a few more of the finer points of the electronic
trading world.
10:45 - everything's quietened down a bit now. Everyone's back on the desk and
so I am back to my usual job (aside from all this management malarky of
course), which is to quote what are known as 'commonwealth' currencies, i.e. the
Australian, Kiwi and Canadian dollars. All of them with their own little subtleties,
and all of them at times pretty tough to trade. "Rich - thirteen kiwi yours please".
It's one of the options traders, Ben. Obviously hedging some of his delta
exposure. But as it's not something we had on the order book already, I'm
guessing that he's just in the process of dealing now. "34 worst" I shout. I give
myself a touch of breathing room, saying that I'll try to improve but the worst I'll
fill him at is 34. On the basis that he's usually very smart with his levels, (scarily

so sometimes), I decide to go short with him, and start to sell and hit the voice
broker for five million at 35, offer out another five there on Reuters matching and
get paid for only four of those. Then it starts to dry up a touch. Here we go I
think. Voice broker is 32/34 now, and Reuters is 31/34 in small amounts only (less
than five). I tweak the settings on my price aggregator a touch and offer a couple
of kiwi out cautiously on the aggregator, to two of the other ecns, at 33. Manage
to lose those, so I've done 11 all day. I don't fancy this at all. Aussie is also
getting given now. Voice broker is 31/33 so I hit him in another five. Then it really
starts to run away. I go straight to market on the ecns for the remainder (another
four) at 28, and within a minute it's getting given at 20, 15, 10. Just nothing
there. After five minutes the price starts to stabilise around 05. I buy back five
and hold off on the other two. Alas it never quite cracks the figure and settles
back up at around 20/25 ish. I buy them back there. I'd ended up improving
Ben's rate to 34.5, but all in all, given the circumstances I'm pretty happy with
the morning's work so far. I've had no real firm convictions today, having been
stopped out of a couple of positions over the past 24 hours, I have spent half the
morning so far in meetings, made three prices of any real size, and by my
reckoning I'm up around 11.5k in kiwi p&l, plus the 6,800 Euros from earlier. A
solid morning all in all, considering the relatively small amount of risk I've had on
board.
11:40 I'm flat again now, and the market has dried up. It's lunchtime, with lots of
numbers, including employment data, due up out of the states in the afternoon.
So most people have less than zero interest in getting involved at the moment.
Having squared the book I leave lucky watching my book as well as his and step
outside for some fresh air and to grab a sandwich. They have a decent enough
cafeteria at work, but I need the fresh air as I find it all a bit stuffy sitting at the
desk all day. Plus I hate the fact that in winter months you can go all day without
tasting daylight. So I make sure I get out when I can from time to time. Ten years
ago it wouldn't really have occurred to me, but these days I am much better at
handling the burnout. I take a brisk walk around Bishopsgate and London Wall.
Oddly enough, as I'm grabbing a sandwich I bump into Parrot (his office isn't far
from ours). He tries to tempt me to the pub for a swift pint but I want to get back.
I need to be out of the door on time today and I have to write a couple of 360
degree appraisals by the close of business (for the uninitiated, those are
appraisals you write about equivalent level peers within a company, rather than
me writing them for the members of my own team). To be honest they're a bit of
a minefield and I can't stand them, but hey ho. It's mandatory so I might as well
at least make a decent fist of them.
12:05 Appraisal time. I'm back in my office, munching my sandwich and typing
with one finger. The first one is Mike, which is actually pretty easy. He's
experienced, thoroughly competent, and as far as his interactions with spot
trading are concerned he's a model citizen. Done. Next! This one's tougher. It's a
girl called Carla, who heads up the middle office functions here. I can't say we've
always seen eye to eye if I'm honest. We've had a few run ins over the delivery
of P&L and risk reports (both in terms of timeliness and also with accuracy).
She's not producing them herself, but my personal thought is that she's had long
enough now to whip that team into shape, having come over from our rivals, I
heard, at no small expense to do just that, but I don't give it both barrels. There's
almost zero upside to doing that, on any level. For a start, I'm sure she's both
well intentioned, and, knowing the approach to headcount that all banks take
these days, almost certainly under staffed. Plus I know they migrated onto all
new systems six months ago, which was a big part of the problem, and

something she inherited too late to do much about it. The other reason why
sticking my oar in isn't worth the hassle is that it counts for something like 5% of
her overall appraisal mark. So I would achieve nothing by doing this really
(except to royally tick her off). Plus I am deeply uncomfortable about being
negative towards co-workers around this time. Everyone has families to provide
for, mortgages to pay etc, so as long as people are doing what they can I will
always try to play nice. I settle for some comments that, whilst highlighting the
years issues, also very vocally underscore just where some of her challenges
have come from. Hope I've hit the right mark. She is entitled to read the
comments, so I'm sure I'll find out soon enough. Right. Phew - done for another
year. Haven't even started looking at my own yet, so I don't actually know who's
doing my 360. Oh well, that can wait. I have a touch longer to do my own, it's
just the 360's they need today.
12:45 Back on the desk. George is delegating the monthly non-farm payrolls
prediction competition. Fivers in, winner take all, forfeits for whoever is furthest
away. So Meat has two jobs. Firstly to collect the money and secondly to take
note of the predictions from the room. there are usually about 35-50 people
playing so he walks round doing it on his iphone and getting stick for it and by
ten past one he's finished. 38 people today so someone will do nicely out of it.
We haven't decided on a forfeit for the loser yet. Suggestions come thick and fast
on the internal chat system. Some REALLY aren't suitable for reading at work. A
fair few involve Meat, usually but not always in a sexual context. You have to be
a bit careful with this kind of thing, especially when stuff's in writing. Fortunately
Meat is pretty thick skinned but you do get the odd intern who simply can't hack
it. This is usually when they take it all a bit personally, which it truly isn't. Luke
and George also cop a bit of flack, (the worst of all actually involves Lucky, and is
frankly so appalling that I am amazed that the person who typed it isn't sacked
on the spot). There are little gasps as people read it and suffice to say the
winning forfeit is a little, ahem, tamer than that. The loser will have to don an
outfit similar to Mrs. Doyle from 'Father Ted', and, using a trolley from the
canteen, distribute tea to anyone on the floor that wants it, on the next NFP day.
Meat suggests that we add a charitable angle and this is quickly agreed. Cups of
tea will be a fiver for that trolley run only, and we'll give the winnings to the
charity of the loser's choice.
Market consensus is for the US to have shed around 55k jobs in the past month,
although all the rumours we're hearing this morning in the market, (and there
are always rumours on payrolls day), are for a somewhat more benign number
(one US based house even going for a positive print, which although definitely an
outlier, has nevertheless got a few tongues wagging in the market). We'll all find
out soon enough.
13:15 Everything's gone eerily quiet. Prices are starting to widen out on all the
electronic dealing venues and the bookies aren't quoting much at all down the
squawk boxes. Our e-trading team have widened the prices we are showing to
our customers accordingly. They are pretty much a self contained unit most of
the time. The early versions of bank e-commerce platforms were unsophisticated
pricing engines, very much tied to the rates that were visible in EBS and Reuters
matching (regardless of how much actual hard liquidity was available at those
prices). Once a customer had dealt on the platform, more often than not, the
trade would plop into a dealers position on a bank's spot desk, and the dealer
would manage the risk from there in precisely the same way as if he'd shouted a
price to a salesperson and been hit.

Fast forward five or so years and the landscape has utterly changed. The engines
used to derive a price at which a bank is happy to transact business are, for the
most part, both extremely sophisticated, and blindingly fast. Frankly, 90% of the
time, too much human interaction just slows the whole thing down. So the ecommerce team operate as a separate entity (we on the spot desk are even able
to trade on the platform ourselves, to clear smaller amounts if we wish), and only
when things go awry do they need to enlist the help of the spot desk to offset
any risk they incur. The rest of the time they are either skewing their price
according to what positions they are running (if they are long, for example,
they'll be a naturally low offer to persuade other clients to buy from them thus
reducing their long position). If this isn't having the desired effect the machine
will go out into the market on it's own and 'auto-hedge', reducing positions in a
carefully specified manner, and again, at lightning speed. But once in a while it
will still come unstuck, so each trading centre has a couple of traders who's job is
to monitor any positions that fall through the cracks. Tim is the main guy in
London, and NFP day is the day he hates the most every month. They usually
make very good money on these types of days, but equally, it's pretty easy for
Tim to drop a cartload of money if he isn't quick and decisive when trouble
strikes. It's a bit of a poison chalice but he's pretty sharp at it and is considered a
safe pair of hands here. I wander over to him. "All strapped in?" I ask. "Yep" he
replies. "Seat is back in it's upright position and my table is stowed away. Should
hit turbulence in about 14 minutes." Hopefully it'll clear without anyone needing
to reach for the sick bags and oxygen masks I think.
13:27 We're in trouble! We just got asked a price in eur/usd in one hundred and
fifty million and got paid for them, so my euro trader is short more Euros than
he's easily going to be able to cover. He had made what he thought was a wide,
defensive price that frankly was supposed to discourage the client from trading.
But it didn't and it gets worse. Tim stands up. "RICH - I need Euros. Been paid
three times here now. Not getting anything back". Crap. Anything even remotely
dollar negative and we're dead. I sprint over and appraise him of the fact that
we're in the same position ourselves. He's short a total of a hundred and thirty
five million himself. A tad suspicious as he's been hit three times, all equal
amounts, all 45 million. The threshold for what we are happy for the machine to
quote without manual dealer intervention is usually a hundred million in normal
market conditions. But prior to major data releases this changes. With 15
minutes to go this changes to seventy-five million. Then with five minutes to go
it's fifty million. Then, in the final 90 seconds it's something like twenty million
these days (and of course spreads are also widening out at the same time). It's
not hard and fast - again, complex algorithms, even incorporating recognition of
what the data release came out as, govern both when and how we withdraw
liquidity, and also how quickly we're able to add it back in again once the initial
chaos calms down. But in any case manual intervention was fifty million and
we've been hit three times in just under that amount. But no time for post
mortems now. I shout over to Ben "BEN - Any short dated euro in the bookies?
Ship some in - we're caught here, badly". "On it" he shouts. Thirty seconds to go.
He stands up. "Done 80 of the overnight ats" (at the money options) and there's
another 50 of 30 delta calls out there. Those are 3 days though, not the
Mondays. "Do Em!!" I scream back. He leans over to the microphone and speaks
to his broker. "YOU Got Em Rich - but that's gonna be it for a bit - nothing else
decent out there till after the numbers". "Thanks - let meat know the spot refs
and any delta stuff asap - I need this booked asap".
In buying some short dated options I am hoping I have staved off at least some
of the effects of a shocking payrolls number. Unfortunately, I will have had to pay

away some premium to buy these options, so one way or another we're taking a
hit today, but at least we have offloaded some of the risk we were wearing. A six
figure down day isn't a huge deal - these things do happen. But a seven or even
eight figure down day is definitely not what we were put here to achieve. I have a
great team of traders on the desk and for the most part I just try and leave them
to it, but insofar as I have a role to play in trading terms, it is on exactly this sort
of occasion that I need to justify the title on the business cards by making a
quick decision in the interests of the bank as a whole. I look down at the live
price and trade feed from Tim's pricing engine that I have open on my desktop.
He's showing a tighter price than usual, and it's definitely skewed higher. The
only problem is, no-one's taking the bait. He can't tip his hand too much (and
neither can the guy on our desk) as the whole of the market will be watching for
some sign of movement immediately prior to the numbers, and will jump all over
it.
13:28 My phone flashes - it's my friend at the New York hedge fund. "Hey, Rich.
Sorry man, need a quick favour. All my systems just went down here. Can you
work a 65 offer for 90 eur/aud?". I look at where it's trading now. 58/62. Very
close. "Sure mate - leave it with me. I thumb the mute button and shout over to
the commonwealth trader 'Hey - we need to buy 140 Aussie, got an offer here in
the cross - gonna lean on it with the short Euros. I leave him to work, watching as
he bids for the Aussie Dollars on the Machine. Tim's also able to help out,
skewing his own Aussie bid a touch higher and getting given a quick 37 million
worth from a variety of high frequency algorithmic model accounts. My friend in
New York is trying to sell eur/aud. If you break that trade down into it's
component parts. he's trying to sell Euros/ buy US dollars, and buy Aussie / Sell
US Dollars. The US Dollars then net out. But effectively, by way of the driveby
that we just endured, the desk has already done the first 'leg' of my friend's
order, getting itself short eur/usd. Now all we need to do is get long aud/usd. And
that should hopefully be a touch easier as there hasn't, to the best of my
knowledge, just been a drive-by in the Aussie. Sure enough, we manage to get
all bar maybe twenty million Aussie before the clock ticks down to the deadline.
The price went away a bit at the end so eur/aud has tracked lower as a result.
13:30 The number comes out and the room goes nuts. Headline number is for
-125k jobs and the dollar immediately starts selling off against pretty much
everything. The Euro, Yen, Sterling, Aussie and Kiwi are all appreciating in
roughly equal amounts. Suddenly Lucky screams... "This is topping out here Rich.
Revisions and the U-Rate. Watch". Lucky has a good eye for price action at times
like this. And he has correctly noted that while the headline payrolls number was
a shocker, the revisions (i.e. the change to the previous month's number once all
the statistics have been properly verified) are actually very positive. Plus there's
been a pretty healthy decline in the unemployment rate, well ahead of what
people were expecting. "Turn that Aussie if you can" I shout, asking my
commonwealth guy to sell the Aussie dollars out that he bought. "Already on it
Rich - done fifty right here. Eighty now. Ninety five. Not getting paid any more comes offered now". Sure enough, Aussie has topped out and turned as people
digest the story behind the numbers. So we're no longer short Euros and long
Aussie (against my mate's order). We're back to being naked short Euros again
but the market's going our way.
Euro retreats, taking Aussie with it. Once it's dipped back to around where we
started off the Aussie trader goes back in and bids to get the Aussie back again.
Back to being short eur/aud, but now, we've got short at a much better average
rate (if you tot up the P&L from all the 'jobbing' in and out in the aud. I look at

the chart of eur/aud and it never went any higher than 58 after the numbers,
even in all the confusion. I phone my friend and he picks up straight away. "You
get any done? I kinda blew that I guess". He's assuming we didn't fill his order as
it never really traded up to 65 (and certainly not in his amount, 90 seconds prior
to the data coming out). "Done them at 61. Hope that's ok mate". He whoops.
He's very happy with that as the market is now trading around 41/44. "Thanks
Rich - definitely owe you dinner now man. Book at 59 as well. Great fill. Gotta
hop". Totting up the rate in eur/usd and the all in rate for the Aussie, by our
reckoning we managed to actually end up selling the eur/aud at 72 or
thereabouts. We wouldn't pass on all that improvement to my friend, no matter
how good a mate he was, as we had to take on extra risk in order to achieve that
price. But in doing so we managed to sell the cross for him at the highs, just as it
dumped. He certainly couldn't have done that for himself with the tools he has
available at his desk.
So everyone's happy. Looking over the various blotters I see that most of the
short euro/dollar position is now covered. Largely at a loss (as the guys couldn't
really push the market much in advance of the payrolls number for fear of
tipping their hand). But the options trades we did had given us some positive
P&L and also some long gamma exposure, meaning the options desk had also
been trading spot eur/usd on our behalf, selling near the highs and buying back
lower to keep the portfolio broadly delta neutral. I shout over to Ben to see where
he could sell the options back out again, (as the spot position it was hedging was
pretty much covered now). He comes back with some half decent bids for both,
(as would be expected given the fact that the market had gotten itself caught a
little short on the bad payrolls number), and we exit that position too.
14:15 Things are nearly back to normal now. We've had a few more price
requests, in an assortment of currencies, as the market digests the days
economic data. Some requests went well, some less so, but they've broadly
evened out. The actual proprietary positions the guys have had on today have
been fairly light, which is not unknown on payrolls day, as the price action can be
a bit of a lottery and plenty of perfectly good trading ideas get blown out of the
water in the mad half hour we just had. So discretion is often the better part of
valour on this particular day of the month. Having a quick look at the desk's P&L
numbers so far it looks like we're down around $270k, with the e-commerce desk
down another $165k. Could have been a whole lot worse. E-comms were down
over $250k at the peak but a combination of the euro's retracement of some of
its gains and the fact that after things calmed down a bit the day was, as is so
often the case, a good source of revenue for the e-commerce side of things has
meant that their numbers are still slowly but surely ticking in the right direction
this afternoon. I can see Tim standing up, blue shirt betraying him with a couple
of large sweat patches under his armpits. He's talking to Lucky, who, not
surprisingly is a lot calmer, having seemed, in line with his nickname, to have
swerved and neatly side-stepped most of the days shenanigans today. 'In an ever
changing world...' I think.
15:35 CNBC is on all the monitors on the floor- our chief economist is being
interviewed. Side bets are being taken on the floor on all manner of things
related to his appearance. Number of times he says certain words, how often he
wrings his hands, whether or not he gets any facts and figures wrong etc. Some
wag already tried ringing him up (he was caught out that way once before having
not turned his mobile off for the interview, but he's reverted to being the
consummate professional today, so no joy). At the mention of one slightly odd
phrase there's a massive cheer from the interest rates desk, followed by some

booing from the sales guys behind me. Turns out his challenge today had been to
work a farmyard animal into his interview responses (I had been off the desk
when this all transpired and no-one had mentioned it to me in the chaos).
Sweepstakes were taken on which animal would be first to be mentioned and it
looks like the rates desk came out winners. George informs me that they had
gone for pigs, and in formulating a response to a question about the ability of the
US to respond more rapidly to economic and structural events than the
somewhat cumbersome coalition that is the Eurozone he had used as an
example of less able economies, those of Portugal, Ireland, Greece and Spain,
otherwise known as the P.I.G.S.. Once again money is changing hands rapidly.
15:45 Lucky strikes again. Handed an order at 15:35 for a pension fund, to sell
220m usd/jpy at the 4pm WMR fixing rate. This should see him do pretty well on
the day. He needs to sell the dollars and is agreeing to execute with the client at
4pm at whatever the official rate is that is published shortly after the hour by
WMR (A subsidiary of Reuters that offers data related services like this). But
nothing says that Lucky has to wait until 4pm to try and sell all the dollars. He is
perfectly at will to do so earlier and so he does. Starting at a price around 94/96,
he steadily sells them from around 15:45 onwards, seeing the price gradually fall
as he does so. At 16:00 he is effectively going to be given all the dollars back by
the client he has agreed to do the fix trade for, and will find out, shortly
afterwards, what rate he's dealt at. So the trick is to make the market end up
lower than where you started selling, booking a profit on the trade. From the
client's point of view they get a transparent rate (as the fix rate is published on
WMR's website, Reuters pages etc, but the cost for that is that it is in Lucky's
direct best interests to push usd/jpy as low as he can before it fixes. So the client
usually doesn't get a great rate on a larger trade. But there are a few structural
reasons why sometimes they still wish to transact this way (although it seems a
poor tradeoff to me). In any case Lucky does a solid job of judging just when he
can start to push usd/jpy lower without running out of 'ammo' too fast and he
does the desks day no harm at all, banking around $75k on the trade.
16:20 We're pretty much done for the day. The Group treasurer of the bank
wanders over from his office, possibly as he saw the running P&L numbers for
the day. We have a quick chat about the days events and he seems relaxed. Not
because he expects Tim and myself to do nothing about the problem with the
trades in the run-up to the numbers, but because he trusts us to sort it out. It's a
short conversation and given how much money it cost us, it's not too bad. Post
mortems will be had, just not today.
16:45 I power down my PC having checked all my positions and said goodnight
to a few people on assorted chats and down a collection of speakerboxes. The
others are mostly doing the same, with the exception of Lucky, who is busy
sorting out a lot of bookings related to the fixing trade. Turns out the Asset
Manager who did the trade wanted it split across all sorts of different pension
funds and all sorts of different dates. So he may still be there while we grab the
first beer in the pub downstairs. Oh well. Can't live up to his nickname all the
time. Where's the fun in that?
17:20 Downstairs and most of us are there. On payrolls day we always have a
tradition of everyone making a bit of an effort to at least have one or two drinks
together before they head home. Some, (younger ones usually), will stay longer.
Some with families stay an hour then head home. But when everyone has a drink
in hand we gather in one corner of the pub and George ushers Meat into the

middle of all of us. "So, Meat" he says, "Did you learn anything from your first
proper full on hairy payrolls day on the desk?" Meat predictably can't quite shake
off the eager to please college boy spiel and starts launching into a little diatribe
on liquidity, not trusting dodgy corporates etc etc before crumbling under the
sheer weight of catcalls and taunts from the others "All right, all right, I Get it!!!"
He wails "All together now....." and as one, the sales desk, traders, head of
research, Meat and all the others shout out the time honoured six little words
that, at least this time, have defined our day..
"I'D RATHER BE LUCKY THAN GOOD". For today, I think, happily we were probably
both.