Interview with a Trader 
Interview with a Trader: Ghost in the Machine

Trading and ethics - not often seen as the most comfortable pairing. The Globalist delves deeper

President Jacob Zuma addresses Lonmin miners, 22 Aug 2012. Photo by GovernmentZA via Flickr. Used under Creative Commons License Attribution-NoDerivs 2.0 Generic (CC BY-ND 2.0

President Jacob Zuma addresses Lonmin miners, 22 Aug 2012. Photo by GovernmentZA via Flickr.

In September 2011, city trader Alessio Rastani sparked a familiar outpouring of vitriol and bile on the financial industry. He claimed in a BBC interview that he and his fellow traders simply don’t care about the ramifications of economic collapse: “We don’t really care that much how they’re going to fix the economy. Our job is to make money from it.” He followed this up with a smug confession: “I got to bed every night and I dream of another recession.”

One common response was sheer denial. Indignant splutterings from besuited “real” city traders were particularly prevalent, dismissively highlighting that Rastani wasn’t on the payroll of any of the big-name city firms.

While Rastani’s modest personal income and unglamorous lifestyle don’t fit well with the stereotype of the mercenary trader, are his comments indicative of a deeper, unpleasant truth? In a profession in which there is money to be made from cataclysm, is it all that surprising to hear such blithe acknowledgement of the unsavoury side of the financial markets?

In this final portion of a series of articles on the insider world of the stock markets, The Globalist poses these difficult questions to professional trader, Mark.

Rather than focus on the more nebulous “ethics” of the market place, Mark is quick to note that standing on the sidelines cheering for a crash is, at best, rather short sighted. When the markets fall, it’s bad news for most. Most individuals, he says, have exposure to stock of some kind, whether its a personal portfolio or, as in many cases, through company pension funds. There is also the looming spectre of the leveraging of private banking capital by the investment side of major public banks – even as Lehman Brothers collapsed, supposedly ring-fenced private capital was sucked into the vortex of market panic. This led to the ignominious tax-payer funded series of bank bailouts.

In short, market crashes aren’t the most appetising prospect for the sane and currently solvent.

Mark takes this point wider, noting that there is something to be learned from statements as vulgar as Rastani’s: “How they’re saying it is ugly, but what they’re saying is ‘This is going to happen at some point’”. Crashes, dramatic and temporarily disastrous as they are, are a fact of the system. Comparing crashes and rallies to a cycle of entropy and growth, Mark argues that when falls happen, traders don’t necessarily have to be participating with driving prices down. That, he says, can be left to a sub-culture of “fairly angsty” professionals. The truth is, if you’re happy to weather the storm, bottomed out markets offer truly rare buying opportunities.

While the lucrative potential of crashed markets are indeed attractive to those on the right side of the trading screen, the market perspective does tend to neglect a crucial fact: market crises have very real, very tangible effects. From ruined pension funds to company wide redundancies, the tidal wave effect of market panic results in huge real-world cost. A study by the lobby group for financial reform, Better Markets, estimated the total loss to household wealth in the US in the financial crash at a staggering $11 trillion.

When it comes to the social impact of the treacherous and destructive whims of the market, Mark is more taciturn. While bearing in mind the ethical implications of speculating on the market, Mark offers a pragmatic perspective:

“If you speculate, especially on the downside, it is actually part of the healthy nature of things. It’s a force of gravity in its own right, perfectly legal and rightly so.”

As a necessary part of the system, degradations in value can be sudden, brutal and dramatic – a crucial, but often unpleasant, fact of the global economy.

However, a serious issue with the pragmatist approach arises when speculation is implicated in all-too-real human cost. In September 2012 striking miners at Lonmin PLCs Marikana site in South Africa clashed with South African police forces, resulting in the deaths of 36 miners. Recalling the incident, Mark elaborates a scenario which really pitted the “trader mindset” against personal scruples:

“A very particular pattern was forming on the chart when the riots were at their height. Meanwhile, miners were very tragically being killed outside the mines. Everything indicated that the price was going to fall. I remember saying to an assistant at the time that we should have £100,000 short Lonmin – it’s going to fall. Sure enough, it fell 6% the following day.”

Unable to get the image of miners lying dead in a South African paddock out of his mind, Mark couldn’t bring himself to take the position: “I really don’t know what I would’ve done with the profits from that trade without a clean conscience – there’s no point in dirty money, you just can’t enjoy it.”

As much as the hyper-technologisation of the marketplace has abstracted trading, it seems that the physical world of asset production occasionally bubbles to the surface a little too uncomfortably, even for the most pragmatic of market players. However, Mark acknowledges himself as a smaller fish in a pond dominated by sharks – a marine sub-species of a more scrupulous breed than the average.

If (as has been demonstrated by limp-wristed policy-maker moves towards greater regulation of the financial sector) ethical trading via regulation is a pipe-dream, should we be worried that the only thing standing between the grotesque commodification of human life are the scruples of unaccountable, invisible corporate bodies?

In a word: yes.

Leaving little more than the ghostly fingerprint in the form of an entry on a vast balance sheet, the corporate trader sits alienated by screen and City, tugging back and forth on the innumerable strands of commodities, equities, assets and futures, sublimating invisible, costless capital from the very physical origins of production. How can s/he feel accountable – particularly when there are a thousand others sitting at the other end tugging back?