Trading Reality

by Michael Ridpath

  She stirred. ‘What is it, Mark?’

  ‘Nothing.’

  3

  I was at my desk by seven fifteen the next morning clasping a cup of coffee and a croissant. I wasn’t surprised to see quite a few others in so early. We all had a lot to do.

  With trepidation I switched on the computer in front of me. It had a large light grey screen on which I could display a whole range of prices from Reuters and Telerate, and then manipulate them however I liked. Next to it was the smaller, squat Bloomberg box, which provided graphics of the relationship of everything against everything else. As the screens warmed up, I glanced at what the market had done to me overnight.

  Well, it had held in New York’s afternoon, but come off again in Tokyo. The Renaults I had bought yesterday had opened lower, giving me a small loss on my trade. Still, it was early days. Greg’s eights of twenty-one were also down a touch.

  I looked across towards him. He had just put down his phone, and was already writing a ticket to record a trade. ‘Greg, sorry about those bonds you bought yesterday!’ I called over to him.

  He turned and grinned. ‘Hey, it’s the spring sales! They’re a quarter of a point cheaper, so I bought another fifty!’

  I had to admit, Greg had more balls than me. We both ended up making the same amount in the long run, but my profits tended to come in equal monthly instalments. Greg’s came in large dollops, and went in spectacular blow-ups.

  Ed came in, surprised to see me in so early. He had dark rings around his eyes, magnified by his thick glasses.

  ‘No sleep?’ I asked.

  He looked embarrassed. ‘Not much. I was on the phone to Tokyo.’

  Modern technology means that you can keep in touch with the market twenty-four hours a day. But human frailty means that anyone who tries to deal in the middle of the night often makes mistakes. So I usually sleep, and let the market go its own sweet way.

  Bob Forrester came over. ‘Well, how did that machine do?’ he asked, nodding at the Bondscape computer by my desk.

  It was an unfair question, and he knew it. ‘It’s too early to tell yet,’ I said. ‘But our positions have real potential. We’ll get our money back, I’m sure of it.’

  ‘We’d better. You’re a good trader, son. I don’t want you wasting all your time on expensive gizmos. You can keep it here till the end of next week, but if you don’t have any results by then, I want it off my trading floor. Understand?’

  I understood. As he walked away, I turned to Ed. ‘OK, let’s get this thing powered up. We’ve two million dollars to make back from somewhere. All we have to do is work out where.’

  We donned the little headsets, one pair each, both plugged into the computer. The familiar landscape stretched in front of us. The day before, we had looked for bonds that had temporarily shifted out of line. Now, I wanted to focus on new trends that had been set in motion by the hike in interest rates.

  My attention was drawn to the flattening of the slope of the hillside more or less everywhere. It was particularly true in the American section. The difference in yield between US two-year and ten-year government bonds had narrowed from 1.6 per cent to 1.4 per cent. Far from expecting this relationship to return to previous levels, I expected it to narrow further. Before Greenspan’s announcement, US interest rates had been too low and there had been a real risk of inflation rearing its head again. Now, the Federal Reserve’s chairman seemed determined to raise short-term rates despite political opposition from the Treasury Department. If he stuck with that view, and I thought he would, then short-term rates would rise further, and expectations of inflation in the long run would diminish. Sell two-year government bonds, and buy ten-years.

  So, we sold four hundred million dollars of two-year treasuries and bought one hundred million dollars of ten-years.

  Now all we had to do was wait.

  Later that morning, my brother called.

  ‘I tried Bondscape for real today,’ I said.

  ‘Oh yes? How did it go?’ I could feel the anticipation in his voice.

  ‘It was terrific! Truly brilliant. It was as though I was actually inside the market, feeling it move.’

  ‘How was the landscape metaphor? Did it work? Or did it just get in the way?’

  ‘No, it worked very well.’ I, and the financial software company that was working with Richard, had thought that Bondscape should show graphs of bond yields. Richard had felt that a moving landscape would provide the information more effectively, since it would be in a form that humans could intuitively understand. As usual, he was right.

  I described in detail how Bondscape had performed. Richard listened closely for a couple of minutes, but then he interrupted me. ‘I’m just leaving to catch a plane to London. I’ve got a meeting this afternoon. Do you mind if I drop by later on? There’s something I want to ask you and Karen.’

  I was intrigued. ‘Of course, Richard. What is it?’

  ‘It’s a bit awkward,’ said Richard. ‘I’ll tell you then, if you don’t mind. Where shall we meet?’

  ‘Let’s have a drink at the Windsor Castle at seven, and then you can have supper with us. Stay the night if you like.’

  ‘Thanks. I will. See you at seven.’

  I was glad I would see him in the evening. I had enjoyed working with him on Bondscape, and I missed the frequent contact. His company, FairSystems, was based in Glenrothes, a New Town in Fife. But despite the physical distance between us, we were close. We always saw each other every month or two, usually in London, although I would occasionally travel up to Scotland to stay the weekend.

  I smiled to myself. Bondscape’s success under fire had pleased Richard, and I liked to please my big brother.

  On the way out, I told Greg I wanted a drink of water. He chuckled, and we loitered by the water-cooler. All was not well on the equity desk.

  A wiry man in his forties was standing at his desk, shouting at a much younger woman a couple of spaces along. ‘Jesus, Sally! I know those Scottish assholes own Caremark. They’d be crazy not to sell at this price. All you gotta do is get them to sell to me!’

  It was Jack Tenko, a burned-out, grizzled old equity trader, who had been sent to London from New York because they didn’t want him there any more. His mouth was working furiously on some gum as he stared at the woman.

  She was in her early twenties. She had short dark hair in a bob, and glasses. She looked scared. Karen was sitting next to her, talking on the phone, but keeping an eye on what was happening.

  ‘But Jack, they won’t tell me what they have in their portfolio. They say they don’t give that information away,’ the woman protested. She looked close to tears.

  ‘Well, how the fuck do you think I know then?’ the older man demanded. ‘Get on the phone, and get that stock!’

  Sally looked at her phone in misery. She knew if she called the client again, he would be angry. If she didn’t, Jack would be. She reached for the phone.

  Karen hung up, and held out her hand. ‘Wait a minute, Sally!’

  Tenko glared at her.

  ‘Jack, you think you know what Sally’s client owns because someone told you in a pub at lunchtime. Right?’

  ‘I have my sources,’ said Tenko, gruffly.

  ‘Well, you know these guys are difficult at the best of times. They only deal with a small list of brokers, and we’re not on that list. You can shout at Sally all you like, but it won’t change that.’

  ’Well, she should get us on the fucking list.’

  ‘Maybe she will, maybe she won’t,’ said Karen. ‘But you’ve got to give her time. And encouragement.’

  Tenko glared at Sally and Karen, and turned back to his desk. ‘Yeah, well one of you get me some Caremark,’ he muttered. ‘I’ve got a big order to fill, and the market’s bouncing.’

  Greg and I exchanged glances, and left.

  We propped up the bar of the Windsor Castle, and tucked into our second pint of IPA. It was a small, old pub in Kensington with three c
ramped bars and enough genuine drinkers to prevent its warm atmosphere deteriorating into olde worlde charm. Greg had said that he wanted to be introduced to Richard, and so I had brought him along. We had arrived slightly early. We were thirsty.

  I saw the tall figure of my brother push into the crowded bar, and waved to him. ‘Pint?’

  ‘Yes please,’ he said. ‘I need it. I’ve just spent two hours with one of our Japanese customers. God, it was tough. The guy I‘m talking to is fine, in fact I quite like him. But his bosses in Japan . . . They just won’t negotiate.’

  I swiftly procured a pint and handed it to him. He took a long gulp. Looking at us side by side, you could tell we were brothers. We had the same shape of nose and chin. But Richard was five years older than me and three inches taller, at a little over six feet four. He had my father’s blond hair and blue eyes, while I had the dark curly hair and almost black eyes of my Italian mother. I was often mistaken for an Italian, and Richard for a Norwegian. He was very good looking, and issued a charm that attracted men as well as women. Certainly a big brother to look up to.

  I introduced Greg.

  ‘So you have the misfortune to work with my brother?’ said Richard.

  ‘That’s me,’ Greg answered. ‘It’s tough, believe me. But for a tight-assed Brit, he isn’t so bad. And he gets me out of a hole now and then.’ He grinned at me.

  ‘Oh yes?’

  ‘Sure. My second week in London, I almost blew myself up. I was long a billion dollars of a government issue that the US Treasury suddenly decided to reopen during an auction. That means instead of creating a new bond issue to raise money, the government decided to sell eight billion dollars more of an old one,’ Greg explained for Richard’s benefit. ‘The issue I owned. Not surprisingly, my bonds tanked. Red ink everywhere.

  ‘Then this guy pops up, and offers to take up half my position. We sweated it out together over the next few weeks but in the end, we came out whole. So I’m still here, whipping and driving those bonds.’

  I was pleased that I had helped Greg out then, even though it had been a big risk to do so. In many places, Harrison Brothers among them, traders compete with each other for glory and bonuses. I suppose my theory is that the markets are difficult enough; you need every friend you can get. And Greg had certainly got me out of trouble a couple of times, too.

  ‘Greg is the second person to use Bondscape in anger,’ I said.

  ‘Really? What do you think of it?’ asked Richard with interest.

  ‘Oh, it’s great,’ said Greg. ‘All those cute little buildings, and everything. I could play on it all day. I have just one request.’

  ‘Oh yes?’

  ‘Yeah. Couldn’t you change it so that there is a nice white beach, some palm trees, maybe a babe or two? I’m sure it would be much more meaningful. You know, blonde means buy, brunette means sell. That kind of thing.’

  Richard laughed. ‘That would take quite a lot more research.’

  ‘I’d be happy to oblige.’ He stood back to let an old man order his half-pint of Guinness from the bar. ‘No, seriously, it worked well. I hope you’re not going to make this system generally available?’

  ‘I think it will be six months at least before we can put a real system on the market.’

  ‘Good.’

  Richard grinned. ‘Oh, it’s that good, is it?’

  Greg smiled and took a gulp of his beer. ‘What the hell is virtual reality anyway? I mean, Bondscape is virtual reality, right? What else can it do?’

  ‘You can use virtual reality for all sorts of things. Most of them are more lifelike than the bond markets.’

  ‘Like what?’

  ‘Like medicine. Surgeons can perform virtual operations, and patients recovering from injuries can try out a virtual world before facing the real one. Architects can design virtual buildings, or virtual kitchens and move around them to see what they’re really like to live and work in. Engineers can create virtual prototype engines, or cars, and then try to maintain them. And then there are all the military applications.’

  ‘What, guys wandering around a battlefield with those weird helmets on?’

  ‘No,’ Richard grinned. ‘That’s the whole point. You don’t need to go near a battlefield. You can create a virtual battlefield for soldiers to drive tanks around, and pilots to fly planes. It’s a lot easier. And, what’s more, it’s cheaper.’

  ‘And what about these arcade games I’ve seen on TV?’

  ‘Those are virtual reality, too. In fact, entertainment has probably been the most successful application of VR so far.’

  ‘Huh,’ said Greg. ‘And how does it all work? Do you need some great big machine?’

  Richard could see that Greg was genuinely interested, and was happy to tell him more. ‘No, not at all. Most systems are similar to the Bondscape one you’ve used. You need a computer with special software to run the virtual world. Then a head-mounted display with two little screens, one for each eye, earphones to give sound in stereo, and a sensor that tracks where you’re looking. So, when you turn to the left, the image you see changes to the view to your left in the virtual world. Special gloves can recreate a sense of touch. With the senses of sight, sound and touch all totally immersed in the computer-generated virtual world, you really are in virtual reality.’

  ‘Cool,’ said Greg. He sipped his beer, and a thought struck him. ‘So can you make any nice new friends with this equipment?’

  ‘Pervert,’ I said.

  ‘No, I think it has lots of possibilities for all those lonely American guys in a strange country shunned by the local talent.’

  ‘You’re right,’ agreed Richard. ‘Virtual sex has plenty of possibilities, most of them truly disgusting. It’s called teledildonics, by the way.’

  ‘Gee,’ said Greg in his fake innocent-American-in-London voice. ‘And what peripheral equipment does that need?’

  I glanced at my watch. ‘We’ve got to go,’ I said to Richard. ‘Karen’s cooking supper. Come on.’

  We left the pub, Greg heading south, and Richard and I north. It was only a fifteen-minute walk back to my house.

  ‘Nice guy,’ said Richard.

  ‘Yes, he is.’

  We walked on in silence for a bit. ‘I saw Dad,’ Richard said.

  ‘When?’

  ‘A week ago. In Oxford.’

  ‘How is he?’ Much to my surprise, I found I really wanted to know.

  ‘He’s fine. He’d like to see you.’

  ‘Oh.’

  Richard didn’t push it. He could tell I wasn’t going to bend. I had only seen my father once in the last ten years, and that had been at my mother’s funeral. I still had no desire to see him again.

  Until I was seventeen, we were a typical university family. My father was a fellow at an Oxford college, where he taught mathematics. He was an expert in an obscure branch of topology. He had met my mother when he was twenty-five. She had been a beautiful twenty-year-old student from Milan doing a summer course at Oxford. Apart from a few years at Stanford University in California in the sixties, we had been brought up in Oxford. My parents argued occasionally, great squalls that soon subsided. When provoked, my mother had quite a temper. But she managed to create an atmosphere of love and warmth in our house, a cocoon of security for two adolescents uncertain of their place in the world.

  And then one day my father had walked out.

  Richard and I had no warning, and neither had my mother. He had fallen for one of his post-graduate students. She was only twenty-four, just a couple of years older than Richard. They moved into a small house together in Jericho, less than a mile away. It devastated my mother. She refused to talk to my father, and so did I.

  Six months later she was diagnosed with breast cancer. Two years later she was dead.

  I was still angry with my father. I couldn’t forgive him, though Richard could. I had inherited my mother’s temper; Richard was more tolerant.

  We walked on in silence for a few min
utes. Richard broke it. ‘How’s work?’

  ‘Fine,’ I said. ‘We all made lots of money last year when the market rallied. This year, the market’s going to fall and we‘ll all lose lots of money. Simple really. They should just give us the rest of the year off and keep us out of harm’s way.’

  Richard laughed. ‘So, no mega-bonus this time?’

  ‘I’ll get by,’ I said. ‘They tend to look after their proprietary traders.’

  ‘Well, thanks for your help last year.’

  ‘That’s OK. I was glad to do something useful with the money.’ Frankly, the bonuses embarrassed me. But if I earned Harrison fifteen million dollars a year, it was hardly surprising they gave me some of it. I just didn’t want to get used to it.

  ‘And your boss is keeping off your back?’

  ‘Bob? He’s OK. Growls a bit sometimes, but you get used to it. As a matter of fact, he doesn’t like Bondscape much.’

  ‘Oh?’ Richard sounded concerned. He didn’t want his system to pick up a bad reputation.

  ‘Don’t worry, Greg and I will prove him wrong. No, I enjoy Harrison Brothers. There are some nice people there: Greg, a guy called Ed who works for me now, several others.’

  ‘Including Karen?’

  ‘Including Karen.’ I smiled.

  ‘How’s that going?’

  ‘Pretty well. Things are much better now. I think she’s finally got over him.’

  ‘Who? The bloke she was seeing before you?’

  ‘Yeah.’

  ‘What was his name?’

  ‘I don’t know. She won’t tell me. In fact, she won’t tell me very much about him at all.’

  ‘Strange.’

  ‘It’s not so strange. It’s too painful, I think.’

  ‘Hm. Do you know what he did to her?’

  I paused. I had asked myself that question many times over the last year. ‘I’m not sure he did anything. I think she was just very fond of him.’