Paris Traders

From Le Monde 03.02.08.
by Raphaëlle Bacqué and Calire Gatinois

THOSE PURE-BRED MARKET TRADERS

It is 19:45 h, London time. Alexander Capez, 34, City trader, the business district of the British capital, goes home. A bit stressed-out. 'This evening, the Fed lowered its rates, and the Market went up 1,2%', he explains. For a trader, 1,2% at Wall Street, the New York Exchange, represents thousands, perhaps millions of dollars. In gains or losses. 'In one day', he points out, ' one can end up or down 100 000 dollars, perhaps 10 or 20 million in a volatile market.'

Alexander Capez has been working for ten years as a trader. Ten years of buying and selling shares, index derivatives, options, "swaps", "strikes", futures. Ten years of arriving every morning at 6:30 h at the desk of the multinational investment bank where he works. At 7, in the markets room, will be the "morning meeting", where each outlines the market situation and his own investments. Ten years of working till 21 h, on a good day. Ten years of not going out for lunch. Ten years of his adrenaline fluctuatuing as a function of Market indices.

Ten years is pretty much a limit. 'More than that, a trader is burnt out' believes Vincent Riotte, from Demos, a finance teaching institute,'the majority only sleep four hours a day'. How can it be other when, somewhere in the world, an Exchange is still open? By day in Europe, by night in the U.S., Asia in the early dawn. In this wakeful universe, a screen is always running with the number-filled tables proferred by Bloomberg or Reuters.

In an illusory window on the world, on sees the prices of primary materials, and the encrypted signs of the great upheavals of the world economy. 'Why not pretend to predict the future', joke the financiers among themselves. Finally at home for the evening, one still has the Blackberry which no one would do without. 'It is a day and night obsession', says a smiling Philippe P., a Paris trader who wishes to remain anonymous 'because bonuses can plunge and this is no time to make a bad move'.

Drunk with success, or anihilated. At that game, family life can hardly compete. One answers the phone hurriedly, with a 'make it short!' Week-ends at Méribel may well be luxurious, but are often cut short. Youth is wasted at work. There are no old traders in market rooms: the average age is 28. There are few women. A measly 10%. They generally prefer working in the "back office", giving administrative and logistical support to the operations of the "front office". 'Among the underlings', maintain the more arrogant traders.

'Week-ends, in the evening, during vacations, these financiers are cogitating all the time', adds Vincent Riotte. A change in orientation from the Fed is greatly more important than a cabinet shuffle. An interview given by Claude Trichet, president of the European Central Bank, is commented on more ardently than a presidential election in France. Because an economic decision, monetary, a grain of sand, are sometimes enough to provoque a krach. And for the trader, a 'major bad one', an operation that means a heavy lost for the portfolio he is managing in figures that would horrify the average man.

A pattern of two or three heavy losses and one knows it is the end of working on the floor. A masterly move and there is a bonus, negotiated in February, that can attain many millions of Euros. 'Those at the top of the profession earn in general 3 to 4 million Euros per year', informs us Vincent Riotte. Monetary gain is not the only incitement. 'Being a trader is a state of mind, one has to love money, certainly, but also enjoy the competition, wanting to be the best, leave the others behind', confides an ex-trader.

'Even if we all try to assert intelligence in the face of randomness, we are above all gamblers', insists Julien, a trader for a large French business bank. Uncertainty is at the heart of the profession. An analysis of quotes, betting on what is to come, a drug which forms the personality. Finishing the evening off with a game of poker is not uncommon, once having quit the market floor. Yet today's traders are very different from those of twenty-five years ago, when commercial paper dominated the profession. The golden boys of the 80s, washed out by market krach, have been replaced by mathematicians and their algorithms. These are the true lords of finance. Someone like Jérôme Kerviel, today accused by the Société Générale, coming from the "middle office", that is the control and supervision positions for floor operations, can rarely hope to attain such heights.

'Traders from small schools or from a university represent only 20% of overall forces and do not have the contacts in the network which, through cooptation, open the doors to the desks of the better banking establishments', according to Olivier Godeshot, a sociologist from the Ecole des Hautes Études en Sciences Sociales. The surprise, and sometimes contempt, created by the CV of the trader accused of having lost 4,9 billion Euros for the French bank, are testimony to the new face of today's traders.

Because being a trader, is also being a member of a caste. A world unto itself, dominated, in France, by the specialized schools (which recruit through rigorous exams), Polytechnique (engineers), Centale (engineers Lyon), Ensae (statistics), perhaps Hec or Essec(commerce). And, the best of the brightest, those who hold a master's in probability and finance under the direction of Nadine El-Karoui. The alumni of "El-Karoui", as they refer to each other in this enclave of excellence, are the most sought-after. The most expensive to recruit. The lady mathematician, professor at Polytechnique and Paris-VI, has formed generations of 'quants', quantitative analysts, specialists in those sophisticated products which are the derived products of shares or bonds. Those will join the ranks of Paris traders or better yet those of Wall Street or London, where salaries are highest but where one can easily spot them because at their desks, in spite of the obligatory anglosaxon jargon, the jokes are still in French.

Young and rich, it is sometimes difficult for them to keep a cool head. Of course, they can afford what they want,with luxury cars and wine cellars bought more often for the value than out of true taste or the product. But the true danger they have to face is on the floor itself. 'The traders who stay the course are those who know how to be reasonable', tells us Alexander Capez,'and go through fire without getting their wings burnt.' Taking a profit when it is time to do so. 'And keeping in mind', adds Philippe P.,'that the pleasure of winning is often less strong than the suffering of loosing.' In short, being able to resist a too promising transaction which can bring about disaster.

One hears legends, in trading rooms, of suicide traders who had their positions "cut off" by their bosses. 'At heart, to be a good trader one has to have gone through a krach and know one doesn't want to live through that again', jokes Bruno Petit, an ex-trader who has turned screen-writer for the television series "Scalp", which describes the Stock Market during the first Gulf War. It is not uncommon for traders to refer to each other as "survivors".

All the major banks know, the true danger is the excitement in front of these gigantic operations by the numbers involved and dematerialized by a wholly computerized system. They have psychologists on hiring boards as well as controllers meant to oversee transactions. But a room manager, whose own bonus depends on the performance of his team, can always ignore the advice of the Human Ressources Department if he wants to hire the best. And controllers are often despised.

In highly hierarchical operations rooms, where teams of Poly graduates might snob the centralists on the next desk, the "back office" meant to ask for explanations to traders and "front" vendors is easily mocked. Less well payed, considered underlings, controllers often have trouble understanding the complexity of transactions engaged in by the mathematically-gifted denizens of the "front office" who even refer to them as 'the broken arms'.

Thus the lords of finance pursue their lives on their own. Far, even, from bankers themselves, who tend to ignore the trading room. Later, when, having past 30, they will have survived the various crisis, they will invest their gains in wineries, or, more often in hedge funds. Just to keep the adrenaline going, although they could just as easily retire.