These days traders try to keep their excesses under wraps
Banks seek to project a nobler image following 2008 crisis -- but the opulence is still there
TOWARDS the end of the 20th century, traders took over from bankers as the new, vibrant and incredibly extravagant kids on the block.
Trading, epitomised by the likes of stockbroker Jordan Belfort, the Wolf of Wall Street, became synonymous with fast cars, strippers and blow.
But now, in the decade after the financial crisis, traders are a whole lot less conspicuous.
Petri Redelinghuys, an independent trader, sits on a trading floor where all his colleagues are under 30.
Given the way traders were portrayed in Martin Scorsese’s 2013 film, one might expect Redelinghuys and his peers to be wearing tailored suits and spending their free time comparing the exclusivity of the paper on which their business cards are printed.
In fact, says Redelinghuys, they “wear shorts and are all about trading. There’s no extravagance, the parking lot isn’t packed with supercars. They might go out on the weekend, but during the week they’re incredibly disciplined.”
He says most independent traders understand the importance of maintaining their focus because one mistake is all it takes to rack up a gigantic loss.
“Unlike the guys in the banks, they can’t afford to lose money, so being alert is very important.”
Although no bank was prepared to comment, Redelinghuys says the culture gap between the trader working for a big bank and one who trades in his own capacity is enormous.
“Your corporate trader is kind of Wolf of Wall Street-ish. Not as much today as 10 years ago. A lot of that has been around the regulation and compliance issues. They’re a little more restrained in some ways.”
In the corporate space, it’s all about the money and power. Not only do traders in big banks handle much bigger amounts, the risk to their own wealth is significantly reduced.
Any bad bets are cushioned by the fact that they will still get their salaries at the end of the month.
Traders who earn commission are likely to be more cautious. For them, a bad decision costs them their client’s money — and they earn nothing.
“The private traders who sit at home are usually not flashy with their money and most people don’t notice. They’re much more circumspect,” says Redelinghuys.
Most corporates also have a blanket bonus offer. How much varies across organisations.
When Simon Brown, who now owns an investment education platform, worked at a bank, he knew he was guaranteed half of his annual salary as a bonus at the end of the year, even if his performance wasn’t all that great.
Brown says the consequence of making a mistake at a bank might mean a cut in a trader’s bonus.
“They have room to mess up because there’s always going to be more money, more capital and there will be more time to target another bonus.”
Brown says the early 2000s were also the days when traders in banks had no problem showing off the fruits of their labour.
“I remember when the day after bonus day there would be eight new Ferraris in the parking lot. That doesn’t really happen any more.”
Barclays Africa CEO Maria Ramos says she has never seen a Maserati in her bank’s parking lot. “If I saw a Maserati in the basement, I’d be having a very tough conversation with the owner.”
The lavish lifestyle of traders has gone off the boil as banks seek to project a nobler image following the global financial crisis.
Redelinghuys says that for most independent traders, the excitement comes from months of studying the market and eventually spotting an opportunity that others haven’t. A lot of satisfaction comes from being able to see what others can’t and taking advantage.
“If you look at JP Verster [a portfolio manager], he spent months reading, analysing and thinking. He finally found an opportunity that nobody else saw, which was African Bank. He shorted that stock and made a ton of money in the process.”
In 2014, African Bank collapsed because of bad debt.
This is also what drives many of the traders who trade in their own capacity. For them, the life of constant partying, chopping up lines of blow and falling into their chairs hung over the next day is scarcely attractive, let alone worth their while.
Both Redelinghuys and Brown say traders outside large banks get their edge from being able to react quickly to a changing environment and fast information.
“You can’t do that with a hangover. In my experience, these traders go to the gym, they eat well. They’re incredibly strict about their work and respect their craft,” says Redelinghuys.
But that’s not to say traders aren’t living the high life.
Says Brown: “It’s certainly there, but I can’t say it’s more prevalent than what you’d find in a firm of lawyers.
“The JSE used to have close-out parties every quarter for futures close outs. Those parties don’t even happen any more. The opulence is still there. The drugs are probably also there, but not the levels we saw back then.”