Trading Reality (2 page)

‘The yield on the new Renault has shot up. See if you can get some of that,’ I said.

‘How much?’ asked Ed.

‘A hundred million francs should do if you can get them.’

‘OK.’ I heard Ed on the squawk box with the traders in Paris, asking them to buy the bonds for us. Within a minute our order was filled. I watched, entranced, as the building shuddered, and collapsed a couple of storeys. Our purchase had already affected the price of the Renault bonds, and Bondscape had picked it up.

‘Done,’ said Ed. ‘What do we sell?’

My next task was to scour the hillside for bonds that were too expensive. I had to be quick. I didn’t want the market to fall further before we had sold something.

‘I’ll try the eagle,’ I said. The eagle was what is known as an intelligent software agent, which can be programmed to search data according to certain criteria. With a couple of clicks, I asked the eagle to find me bonds that had become significantly more expensive in the last two hours.

The eagle flew swiftly a short way up the hillside to circle the Dutch flag. I followed it. It was hovering over a five-year Dutch government bond, which had created a hole in the ground because it had such a low yield.

‘OK, Ed, I’ve found one. Sell the Dutch Treasury seven-and-a-halfs of ninety-nine!’

‘Right,’ said Ed. Within thirty seconds he had completed the trade.

Encouraged, I continued my search of the landscape. The whole time I was doing this, I was talking to Ed, making sure that the real world tallied with the virtual one.

‘Earth to space cadet. Earth to space cadet. Come in please!’

I flipped up the virtual glasses, to see the tall figure of Greg strolling towards me, carrying a cup of coffee. The cuffs of his sleeves were rolled up once to reveal his wrists, and his yellow tie had dropped half an inch to show an undone top button. But he still looked calm and relaxed.

‘What are you doing, Mark? Checking out the futures market on Alpha Centauri? I’m a seller, by the way.’

I grinned at him. Originally from New Jersey, Greg had been in London for two years now. We had become good friends.

‘Do you want to take a look at Bonds?’ I asked him. By that, I meant the US government bond market, where Greg plied his trade.

‘Hey, that’s a horror movie. Blood and guts everywhere. Haven’t you got something with a bit more class?’

‘Shut up and put these on. You need all the help you can get.’

Greg sighed. ‘You’re right there.’ He picked up the second set of virtual glasses.

I took him to the part of the mountain that showed the long-term US government bonds. On normal days, this would be a smooth, gentle slope, scattered with similar one-storey bungalows. Today it looked more like a Tuscan hill town, a jumble of buildings of different sizes and shapes, perched on a jagged hillside.

‘What a mess!’ Greg said. I showed him how Bondscape worked. He picked it up quickly. He was able to explain away many of the anomalies with such comments as ‘No wonder the nine-and-a-halfs look so expensive. They all got stripped years ago!’

Greg knew the relationships of all the bonds he traded intimately. It was by placing himself actually on one of the buildings representing a bond, and fast forwarding through time, that he was able to see a change in these familiar relationships. ‘The eights of Novie twenty-one!’ he said at last. He meant the US Treasury eight per cents of November 2021. ‘Those suckers just shouldn’t be that cheap. I gotta go.’ He gave me the headset, and rushed off to buy some bonds. Knowing Greg, it would be quite a lot of bonds.

I was just about to flip back the glasses when I saw Bob Forrester striding towards me.

‘What are you doing fucking around with toys at a time like this?’

I had expected this. I swivelled my chair round, lifted the headset on to my brow, and looked Bob straight in the eye. He liked to be looked straight in the eye.

‘Our positions are a mess,’ I said evenly, ‘and they’re getting worse.’ Etienne, standing next to Bob, bridled.

Bob frowned, but he was listening. ‘Of course they’re a mess! The market’s shot to hell.’

I pointed to the computer. ‘With this system, I can see what the firm’s long and short positions are. And they make no sense.’

‘What do you mean?’ growled Bob.

‘For example, one trader is busy buying German government bonds, while another is happily selling German eurobonds. It’s crazy. Sure the government bonds are cheap, but the eurobonds are cheaper.’ I had overlaid a colour scheme that shaded the buildings blue if Harrison was long, and red if we were short. This had highlighted some ridiculous trading in the hour and a half following Greenspan’s announcement.

Bob looked to Etienne. ‘Well?’

Etienne looked confused and angry. He knew I was right, but he wasn’t going to admit it. He recovered swiftly. ‘This thing is dangerous, Bob. In a market like this the best thing to do is to sell anything you can as quickly as you can. You can’t afford to spend time mucking around with fancy machines. If the market falls again tomorrow, those positions Greg and Mark have put on will be a problem. A big problem.’ Bob was watching him thoughtfully. ‘Nothing can beat a good trader’s gut-feel, Bob. You know that.’

I was about to open my mouth to protest. With the trades we had constructed we should have been all right if the market moved either way. Then I saw Bob’s face, and kept quiet.

‘I sure hope you’re not just pissing away more money, kid,’ growled Bob, and he stalked off.

I re-entered Bondscape’s world. Over the next hour or so, I picked out a couple more trades to put on. Eventually, the landscape stopped shifting, indicating that the market had calmed down, and I took off the headset and stretched. ‘How much are we down now?’ I asked Ed.

It took him a few minutes to do the calculations. ‘Still two point one million,’ he said, glumly.

I rubbed my face with my hands. Shit! It took a long time to earn two million dollars, and it had only taken an afternoon to lose it. Why oh why hadn’t I hedged my positions that morning?

Greg came over and leaned against the desk. ‘How much did you drop?’

I winced. ‘Over two mill. And you?’

‘A touch more. But I’ll get it back. I’m long two hundred twenty of the Novie twenty-ones.’

‘Jesus! I hope you know what you’re doing.’

‘I do,’ said Greg with a relaxed smile. ‘Thanks to that machine of yours. Was Bob impressed?’

‘Not really,’ I said. ‘I think he prefers gut-feel to rational thought. I hope to God those trades we put on work.’

‘Don’t worry,’ said Greg, ‘they will.’ With that he went back to his desk to tidy up.

‘Are you OK, Ed?’ I asked.

Ed nodded. He still had a scared look in his eye, but he had coped well.

‘That was a tough day,’ I said. ‘You did well.’

He smiled, and returned to the paper trail of our afternoon’s trading.

I stood up, and looked around the huge trading room. There were nearly two hundred trading desks in eight long rows. Bonds, foreign exchange and equities were all traded from the same room. There were no windows, although the walls were lined with a series of glass meeting rooms. At the end of a turbulent day, the floor looked as though a hurricane had hit it. Desks were cluttered with screens, computers, phones and intercoms, and there were bits of paper everywhere. Chairs were pushed haphazardly between the rows of desks, and traders were milling about, stretching, looking for a cup of coffee, chatting.

I headed over to the exit on the far side of the room. I walked past the equity group. Harrison Brothers was mostly known for its expertise in the bond markets, but it felt it had to have a presence in equities. The small group sat underneath a giant ticker-board, like an electronic frieze, giving constant updates on the prices of the thousands of stocks quoted on the New York Stock Exchange. It was irrelevant to nearly all of us, but Bob Forrester thought it gave the place a true American investment-bank look, and besides, it allowed him to keep up with his personal portfolio. It was of no use to the only people for whom it might have had any professional interest, since they couldn’t see it; they were sitting directly underneath.

Another Forrester touch was the brown HB logo on every column and wall, there to be picked out by any visiting TV cameras providing those background shots for market reports on the news. The room had to look good.

I stopped at the water-cooler just by the exit and poured myself a cup. The equity group, too, were all winding down after a hard day’s work. All of them except one. Karen. She was sitting on her desk, a phone jammed between her cheek and her shoulder, her long legs resting on her chair. Despite the day’s excitement, her yellow skirt and white silk blouse had not a wrinkle in them, and she looked as cool as she had at seven thirty that morning.

‘Oh, come on, Martin, really? You didn’t!’ She chuckled down the line. I sipped my water and listened. ‘Now, how many of those Wal-Marts do you want?’

She brushed the fine blonde hair out of her eyes, and winked discreetly at me. She turned to a trader who was packing up to leave. ‘Jack! Before you go, what’s the offer on Wal-Mart?’

I looked over the clusters of dark suits gathered around the huge atrium. She wasn’t here yet.

The atrium was ridiculous. Waterfalls, smooth sculptures, and whole trees seemed to take up most of the space in the middle of the building, leaving a narrow shell around the outside for people to work in. We had both been invited to a party by Banque de Genève et Lausanne, who were opening new London offices. I usually avoided these things if I could, but Barry, their head trader in London, had been insistent that I should come. I didn’t know anyone there, and was happy supporting a black marble column that shot fifty feet up into the air above me, sipping a glass of champagne.

What a day! I had managed to lose over two million dollars. Whichever way you looked at it, that was a lot of money. My year’s profit and loss should be able to stand it. In fact, Ed and I were, or rather had been, three million dollars up on the year. But dropping that much money had hurt my pride badly, especially since I had foreseen Greenspan’s move and done nothing about it.

Still, in a funny kind of way, I had enjoyed the day. I was facing quite a challenge – to make back two million dollars in a treacherous market. And I was determined to make it all back. I had my reputation to think of, my track record. For a trader, the annual profit and loss is all.

And I had a pretty good track record. I had started trading the proprietary book for Harrison Brothers two years ago. In my first year, I had made eight million dollars for the firm, and that had grown to fifteen million dollars in my second year. Not bad for a twenty-eight-year-old trader. And my salary, and especially my bonus, were beginning to reflect my trading success.

So, how was I going to make back that two million dollars? Bondscape would certainly help. It had given me a tremendous feeling of power. I had been able to visualise the whole bond market, to get right inside it, to see and feel it moving. And I was the only one in the market with that capability. Richard and I had been working on Bondscape for a few months. I had been through several practice sessions, and suggested a number of changes. I had known it would work, but never dreamed it would work that well.

It was a strange sensation. I had indeed experienced an alternative reality. I had always been sceptical that virtual reality provided an experience that was any different from a fancy computer game. But today I had felt as though I were living and moving inside another world, an abstract world of bonds, yields and currencies. What would other virtual worlds be like, I wondered.

A flash of blonde hair weaving its way through the suits caught my eye. ‘Hi. Sorry I’m late. God, I need a drink.’ She looked round, a waiter was instantly by her side, and she was soon swallowing her own champagne.

‘I got here as quickly as I could,’ she said. ‘It’s impossible to get Martin off the phone. I don’t know when he gets any work done.’

‘He just likes to chat you up, that’s all.’

Her eyes twinkled over her glass. ‘As long as he does the trades, I don’t care. Anyway, I hear you had a good day.’

‘That’s one way of looking at it. Another is that I dropped two million dollars.’

‘Well, Greg was impressed. He says you’ll make it back. He told me you were using that virtual reality machine.’

‘That’s right. Bondscape. It worked brilliantly.’

Karen laughed. ‘I bet you looked pretty funny in those little glasses.’

‘Oh, I don’t know. I think they suit me. In a couple of years everyone will be wearing them.’

‘Nerd.’

‘Hey! As long as it helps me make that two million back, you can call me what you like.’

‘I’m sure you’ll make it back. You always do.’

‘I hope you’re right.’ I sipped my champagne thoughtfully. ‘How did you cope today?’

‘Not too bad. The panicky clients panicked. The sensible ones sat on their hands. Nothing I couldn’t handle.’ And she did indeed look as if the day’s turmoil had had no effect on her at all. ‘The atmosphere on the desk is pretty bad though.’

‘Why’s that?’

‘The rumours are they’re going to reorganise Equities worldwide. That probably won’t be good for London. Everybody’s getting pretty defensive. Watching their own backs, looking for exposed areas in other people’s.’

‘What a team!’

Karen snorted. ‘We’re just one big happy family.’

‘You’ll be all right, though, won’t you?’

‘I should be,’ she said. ‘My commission is up fifty per cent on last year. But you can never tell.’

She was right. You couldn’t tell. Somehow, though, I expected Karen would be a survivor.

‘Do you want to play tennis on Saturday morning?’ she asked. ‘I’ve booked a court for nine.’