THE JOBBING SYSTEM OF THE LONDON STOCK EXCHANGE: AN ORAL HISTORY

Interview No. 24:  Stephen Raven

Interviewer: Bernard Attard

Garban Holdings Ltd.,: 16th May 1990.

Tape 1, side 1

BA:  Could you first tell me, Mr. Stephen Raven, where and when you were born?

SR:  1938, 19th January, just before the Second World War, in Bromley, Kent.

BA:  And who were your parents?

SR: My father was Ernest Frank Raven, who was a member of the Stock Exchange and my mother was Violet Lilian Raven who, herself, at some stage had worked for the Exchange in my father's firm - that's how they met.

BA:  Did any of your grandparents have connections in the City?

SR:  No, as far as I can recall, and sadly, they died before I was born, they had no City involvement at all. 

BA:  Was your father a stock broker or a stock jobber?

SR:  He was a stock jobber, he started with the firm which I went into in 1955.  He started just before the First World War, I think it was something like 1914 or 1916, around that period, simply by answering an advertisement to go as the office boy.  He had been working, I think, in a shop as an assistant and his father persuaded him to answer this advertisement, because he rather felt it would be useful to go to the City, which he did; and he was literally the office boy, running around, delivering stock, and he liked the business, clearly he stayed and that was his whole career path.  He retired in 1973, having, I think, enjoyed jolly nearly 60 years in the City.

BA:  Did his Stock Exchange career impinge much upon the family life?  For example did you as a boy have much idea of what he went off and did during the day?

SR:  Yes, in my teens I became more aware of that.  Unfortunately during the War he was away all of the time, stationed in Malta, and it wasn't until I was six or seven that I realised that I even had a father, let alone what he did.  So I think in my early teens I became more aware that he was involved, as they used to say, as 'something in the City'.  And we used to come up during school holidays to visit his office.  I remember those days quite well.  I'm sitting here talking to you looking at London Bridge and I can well remember walking over London Bridge, from London Bridge station to my father's office which was in Old Broad Street - Gresham House, Old Broad Street - which sadly no longer exists;  that's where the Natwest tower is.  I remember walking over that bridge and seeing all the big liners tied up near Adelaide House, which I'm looking at now, a very thriving, busy community, the river as a working river.  I remember looking at those ships and thinking how exiting it would be one day to go abroad on one of them.  So yes, I became aware of the City and what it meant from a point of view of commerce, as a schoolboy would understand it.  Our visits during school holidays to my father's office with my mother were regular and I got to know the staff over the years and began to have a little bit of a feel for the business.

BA:  Did the firm provide your father with a reasonably good living?

SR:  Yes, nothing fantastic.  I don't think there was a great fantastic amount of money to be made in those days, and we're now talking of, when I was coming up, the late forties, early fifties, still a very gloomy time after the War.  My father's firm specialised in foreign securities, particularly Americans and Canadians, and because of foreign exchange which had been imposed at the time of the War, there was not an enormous amount of interest from the investor's point of view in dealing in those securities.  So I think it was tough for him in those days.  We lived in a very modest house, a rented house.  Father never felt that it was right to put his own capital into a house after the War.  He felt it was much better to use the capital in the firm.  He was by this time a partner and was made a partner actually very soon after coming to the firm.  Although he started as an office boy he had this ability to cope as a jobber and make prices and understand the business as a trader, and they made him a partner when he was 21, which was quite something in those days because he didn't have the old school tie or any backing which was still important in the early twentieth century.  He literally worked his way up to a partnership very well, but never had a great deal of money to use as a capital base.  Whatever he managed to make he kept in as his partnership stake, so that he could have an increased percentage etc.  There was never a great deal of money as I recall as a boy for living in a very smart home and having all the trappings that go with it.  We had a modest home, we didn't have a motor car.  We didn't have things like fridges or central heating, which everyone takes for granted these days.  We did go to private school.  I had one sister who is seven years older than me, and we did go to private school which clearly they thought was important at the time, and I still believe in that myself.  But apart from that we had a very modest life.  Holidays in English seaside resorts, going down by train - very modest.

BA:  Would you say your parents had influenced you?

SR:  Oh enormously.  We were a very close family and a very loving family.  My sister and myself had enormous respect for my parents and they devoted their life to their two children.  Father had very little outside interest, outside his firm and the City, and neither did Mother, so there was this family unit that developed around, I suppose Father's business - not that we were necessarily conscious of it as youngsters, and yes, they did influence both my sister and myself.  My sister came up and worked for a stockbroking firm, and as I told you earlier my mother also worked for the firm that my father was with and that's how they met. So you could say that the Stock Exchange was well and truly - I was born into it, if you like.  So yes, there was that influence.  I had an aunt, my mother's sister, who worked for a stockbroking firm, so we were all involved in one way and another.  And this was very much the pattern.  Families were involved in City firms.  It was very much the trend that you would introduce your son or your daughter or your relations into your own small firms, because there were many many firms and they were all small family businesses of one sort or another.  So yes, there was that general influence and I was very grateful for it.

BA:  What kind of jobs did the women do in the firms?  Because obviously they weren't going onto the floor of the House.

SR:  No, secretarial of course.  My mother and my sister became comptometer operators, if that's something familiar to you, which of course was the early calculating machine.  Very tough things to work.  My mother worked on them before they became electronic comptometers and one had to have a certain amount of force just to push the keys down.  My mother was the first female employed by the firm that my father was a partner in, a firm called Stocken & Concanon which was formed if my memory serves me right in 1896, in the last century, and my mother was the first female that they had employed.  Maybe they didn't get on too well with females and my father was given the job to marry her, I don't know.  But anyway they obviously struck up a relationship and married, and soon after marriage she left the firm. But other girls at that time I believe were doing very much the secretarial, telephonist, keyboard work, but I was not aware of too many girls, even when I joined in 1955, even involved in the clerical side.  I don't think I knew of anyone that was a stockbroker - certainly there wasn't anyone as a jobber, because as you rightly say, they would not have been permitted to go on the floor, and the activity of a jobber was obviously based on the floor.

BA:  Where had you gone to school?

SR:  I went to a prep school.  I went to several schools during the War and I won't bore you with where they were; it was wherever Mother felt safe away from the bombs.  I probably went to more than I could remember.  But I settled down after the War to a prep school in Bickley in Kent, called Bickley Park School which was a very fine school. I enjoyed that enormously.  I then went on to a grammar school.  The market was probably pretty thin in the late forties or early fifties, so I don't think there was enough money to send me to public school.  I didn't know it at the time.  I went to St. Joseph's College, Beulah Hill, which is South East London, which is a Roman Catholic college, run by the St. John Baptist de la Salle Brothers, which was the full title of the French order which had come over here, I think, prior to the War.  It was a very fine grammar school.  I was very happy there as I was at my prep school and we got a very good sound general education.  

BA: Had you begun to make any plans about what you'd like to do as a career?

SR:  Not until I was really taking my O' levels which was 1955, so during 54/55.  I had developed a liking for artistic work.  I was quite good at art and I thought I would probably like to think about architecture and I would like to have trained as an architect.   That was my thinking at the time.  And I was moderately successful at school in the exams, I got 8 O levels, the important ones, the Maths, English, History, Geography and those sort of things.  One must remember that at that time, and I'm thinking now of the summer of 1955, one had to make a few choices.  In the back of one's mind you had National Service to do, which was going to be two years out of your life somewhere along the line.  If one wanted to pursue a career which required some sort of formal training, architecture, accountancy, law, whatever, it was going to be 5-7 years out of your life.  One could, of course, choose to go to University, stay on after O  levels and do A levels, and then go on to University.  But certainly as I recall in my grammar school, going on from the O level time to take A level, very few of the boys stayed. Only those that really wanted to pursue an academic career and go into something which they had very deep thoughts about stayed.  I remember our sixth form was made up of four or five boys only, whereas the fifth form where we were taking O levels there were 16-18 people in the class.  So it was not an automatic trend, having taken your O levels to stay on for A levels, at least where I was at school.  So there were these choices.  And I made the choice that I would not stay on to do A levels, probably because I didn't think I would pass them if I did stay.  I would not want to pursue a University career, I guess again, influenced by my father.  My father went to an East End school and literally did the 3 Rs; there was nothing as grand as even a grammar school.  So there was never the influence from Father, or indeed Mother, to pursue an academic career.  It was very much, when you get to a certain age, you go out and work.  So having passed and got my 8 important O levels I thought I wanted to do architecture and I went to various firms, more firms that were involved in the building business.  Hillier Parker May & Rowden I remember was a firm that I got a job as an apprentice to, and at the same time as doing that I applied for an early call-up.  I particularly wanted to go in the RAF, and you could apply for an early call-up.  Having spent two or three months with pursuing the architecture thought, I became a little disenchanted.  I wasn't sure that it was quite what I wanted to do, maybe I wasn't in the right sort of place to pursue it.  I was going to night school at a polytechnic, and I had the feeling that this wasn't going to work.  I wanted to get the two years National Service out of the way anyway and then maybe I would come back to architecture or whatever.  So I remember in the autumn of 1955, my father, I think somewhat persuaded by my mother, said, come up to the office and we'll give you a bit of pocket money and you'll probably be in the services by the end of the year or early next year and see how you like that.  So I did.  I joined Stocken & Concanon in the autumn of 1955 as the sort of oddjob boy, office boy, doing whatever people wanted me to do, running stock round the City etc.  And my existence there was much longer than I had anticipated because my early call-up, as I had hoped I was going for, didn't actually come through until January 1957.  So there I was for a year and a bit, working in my father's firm, where he was the fifth partner out of five.  And I liked what I found.  I got very much involved in our dividend department with a nice old boy whose name I can't remember, who took me under his wing and he taught me how to actually handle the payment of dividends on Canadian bearer stock, which was literally taking all the certificates which clients were not allowed to hold in those days.  They had to be held either in a bank or another authorised depository of which a member firm in the Stock Exchange was.  And we used to have this stock, we used to collect the dividends from the Companies concerned to us in bulk and we split it down to the individual shareholders, who claimed that dividend from us.  It was a fairly simple procedure and we were what was called a marking name in those days in the City as Stocken & Concanon. As a marking name we paid out these dividends.  I quite enjoyed that after spending a few months in the earlier days delivering stock around the City, answering the telephone and doing other odd jobs. It was something I found interesting.  It was interesting discovering the names of the Canadian companies, which had meant little to me in those days - Canadian Pacific Railway, Brazil Traction which operated more down in Brazil than it did in Canada, but it was a Canadian company, International Nickel and all those sort of companies - and seeing these very attractive bearer script coming through, and putting our rubber stamp on the back and working out all the numbers and paying the dividend.  There was a certain interest in owning securities and receiving dividends and the benefit of this money was going either to the investor - and of course they were people that had bought the shares in the first place - which was going to the companies.  I liked it.  

Anyway, an opportunity came my way in the autumn of 1956, to go onto the floor of the  Stock Exchange as a blue button.  And I hasten to add that Stocken & Concanon were a very small firm.  There were only twelve people in the firm: five partners, two blue buttons on the floor and the rest of them were running the back office - so there were only five or six running the back office.  It was a tiny little firm.  But most of the firms - I think there were about 147 jobbing firms when I joined in '55 - most of the firms were that sort of size.  There weren't any huge jobbing firms as we saw in later years.  The firms were very much run as small back offices and floor staff and I liken it somewhat to the services themselves, where the floor staff are very much the commissioned officers, and your non-commissioned officers may be there as well as blue-button clerks, and the office staff were very much the ranks.  There was this great divide.  And that actually continued for many years after that and the great ambition if you were working in the back office and you had any desire to go further, was to get onto the floor of the Exchange.  You didn't only have access as what was called a blue-button clerk, there were two other means of having access to the floor environment, not the floor itself. There was something called a red button clerk, which was the clerk that checked manually the bargains that the firm had done the day before (and there was a big meeting room under the Stock Exchange floor where you used to go down daily as a red button) and I was a red button for a little while, to check those bargains.  And in some way that checking floor duplicated in its environment the work of the Stock Exchange floor.  Because each jobbing firm had its own particular place in that room in the basement and each broker knew where to go to meet that jobber to check the bargains, so there was the same atmosphere under there, and they were a like-minded bunch of youngsters and very smart. You had to go down there wearing a suit and white collar, and look very smart; you couldn't just go down as people walk round the City these days.  This was your first rung on the ladder to getting involved in the commissioned side of the business, the floor community.  The waiters - the Stock Exchange employees who were then called waiters and up to a point there are still one or two around - were very strict.  They were the sergeant majors and if you did anything on that checking floor which they thought was inappropriate, they would be down on you like a ton of bricks.  So there was a discipline and a community spirit through those red buttons, checking the bargains, that was exciting, interesting, and one felt proud to have that position as a red button.  And there was also another category of person - I forget what we were called - but you had to wear a badge which was triangular in shape, it had a green rim with a yellow or orange interior.  It was a fairly distinctive badge, which again you wore in your buttonhole.  And this was somebody who was allowed to go down to this checking floor on account day.  You were only allowed down there once a fortnight to assist your red button in passing the cheques for settlement on that one day at the end of the account.  And, before I was a red button, I had my triangle or whatever it was called, of which I was equally as proud - that must have been some time during mid-1956 when I was doing this other work in the office as well.  So having gone through those particular two areas of the business, and having had the opportunity to meet people on that checking floor, who subsequently one went through one's whole Stock Exchange life with, because they became the blue buttons, either with the brokers or the jobbers and subsequently became the dealers and the partners of the future ...  I still know several people in the City that I met down on those checking floors and the companionship and spirit of working through the City all those years ago together, has remained.  And that was terrific.

BA:  Was there any competitiveness down in the checking room?

SR: No, I don't think there was. There was the need to be efficient.  It was somewhat historical because you were checking bargains that had been done, so there was no need to be competitive. I suppose if anything, one would want to be able to prove one's efficiency in those days.  So if you were a pretty sloppy checking clerk, it was unlikely that your seniors would ever promote you to a blue button.  Bear in mind there was no mechanical way of checking the bargains, which had been struck on the floor the previous day, had simply been written into a book by the jobbers and their clerks, and in the evenings the blue buttons had written those bargains into a book which was then used for checking that following day.  So there were many mistaken bargains written in by the Clerks, or the jobbers themselves had made mistakes, and people who had been investing in round amounts on a particular price subsequently changed those for checking the following day.  Quite often as a checking clerk, as a jobber's checking clerk, you would get a particular broker coming up to you and saying, 'we buy 250 shares of Canadian Pacific Railway at $32', and you'd say, 'Oh no, we've got selling you 200 Canadian Pacific Railways at $30'.  Now you had to have a little bit of flexibility in thinking, 'well, no-one else has come to buy that 200, it must be the right firm, they wanted 250'.  So you would get to the situation, 'okay I will check with you, "unless",' and the "unless" was if you came on when you got back to your office and said, 'no, my dealers don't agree'.  So you had an element of flexibility to round up the figures or perhaps change the price slightly.  If I had that bargain booked in my book at $30 for Canadian Pacific, shall we say, and yet my other bargains for Canadian Pacific or the bargain price that day for Canadian Pacific was $50, clearly my dealer had made a mistake.  So you did this checking 'unless'.  And if you went back to your office and you then wrote down the unchecked bargains which you gave to the blue button, who no doubt talked it through with the dealer, you'd say, 'well the 200 shares at $30, in fact with Messrs Bloggs and Co, I believe should have been 250 shares at $50, so I have checked "unless" is that alright?'  Then the dealer would come back and say, 'absolutely I made a mistake there, that is correct' - or he'd come back and say, 'no, no way, you go back to him and say it is 200 shares at $30.'  So in developing that part of the business where you had to show efficiency in checking the bargain, your seniors managed to get some kind of feel as to whether you were an idiot or whether you had some possibility of developing into a blue button and maybe a dealer.  So not quite competitiveness as such, but in the ability to have a dialogue with the brokers' red buttons, you managed to demonstrate your abilities.

BA:  You said that the next stage was the promotion to becoming a blue button.  How did you feel about that?

SR:  Well, it was always one's ambition; when you'd gone into this red button area, if you liked the business, you had an ambition to go onto the floor of the Exchange.  We had two blue buttons, fairly young men, and we were not the size of firm that warranted any more blue buttons.  It was not 'dead man's shoes' but that sort of approach to it.  Unless those blue buttons either were promoted or left for some reason or other there was a block, and you could be a red button for years.  And there were some pretty old red buttons down in that checking room.  I was fortunate because one of the blue buttons that we had at Stocken at the time got a bit miffed at some of the responsibility he was given.  I'll just go as an aside here.  Our senior partner, Col. Concanon, lovely old boy, member of the Stock Exchange Council, was reputed to be the best-dressed man in the City of London in his time, but was getting on.  He looked about 120 to me, he may only have been in his seventies, I don't know, but he was shuffling around the City, he was half blind but absolutely immaculate.  And he wore white spats.  Now one of the jobs the junior blue button had was to ensure that the Colonel's white spats were changed at lunch time.  There were a whole lot of white spats in the office. I suppose there was some kind of cleaning arrangement that they used to go to - when I was a runner I don't think I ever got involved in that, but anyway there was this great box of white spats in the Colonel's roll-top desk (and I remember that lovely roll-top desk in the senior partner's room) and the blue button had to ensure there was a clean pair of white spats down for the Colonel at lunch time.  The Colonel always lunched at the Gresham Club.  There were several clubs in the City at that time.  There was the City Club and the Gresham Club, and the Colonel chose to be a member of that club.  And because the poor old chap was half blind and shuffled a bit with a stick, he really needed someone to help bring him back from the club, and then change his spats. And strangely enough the senior blue button we had at the time, who'd been doing that for some years, didn't mind doing that; that was his job.  Anyway the senior blue button couldn't do it or was on holiday or something, and this junior blue button - can't remember his name - he either was being ribbed by some of his fellow blue buttons on the floor for doing this job, but he didn't like it, and he said if he had to continue picking up the senior partner, this lovely old man, from the club and change his spats, he would leave.

Tape 1, Side 2

BA: Was Colonel Concanon still jobbing on the floor of the Stock Exchange?

SR:  Oh, yes, very much, and of course all the senior partners of the jobbing firms were actively involved in the day to day business.  I'm not sure how 'active' active was in those days. I think probably we only did about 20 or 30 bargains a day.  It seemed a lot at the time.  And of course not all enquiries, or price making, developed into an actual trade.  Many times one quoted prices or talked about a particular company, which never actually led to a bargain taking place.  But yes, he was active in his own way, and as were the other four partners and ...

BA:  Were they of a similar age, or were they a little bit younger?

SR: Stocken I never knew, he died before I came on the scene, so Colonel Concanon was the senior partner and as I say, he was probably in his seventies but looked older.  And then we had a second partner who was a Major Love who was certainly in his sixties when I arrived.  Then we had somebody called Harold Moore, who was an eccentric old bugger but everyone loved him, hopeless jobber but attracted people because he was such a nice person; he would have been at that time probably in his fifties.  And then there was my father who would have been in his late forties, and then Harold Moore's son, Pat Moore, who was very much younger.  I guess he was in his mid-thirties.  So that sort of 40-70 range would seem to have covered it. A fair spread.  We used to have Colonel Concanon's son in the firm but he drank himself to death just about the time I joined, around the mid-fifties.  Wasn't suited to the business - a brilliant engineer apparently and the poor chap hated being in the firm.  His father should never have brought him in.  The one place you'd be guaranteed to find him at half past eleven was the bar across the road with a very large gin and tonic on the counter waiting for him.  He literally drank himself to death.  Very sad.

BA:  When you say Harold Moore was eccentric, do you mean as a character or was he eccentric as a jobber also?

SR:  Probably both.  Certainly as a character.  He would deal with people and shout out, "Boy did you get that bargain?"  One couldn't hear all bargains.  The senior partners very seldom put pen to paper themselves; there were always the slaves, the blue buttons hanging around that were supposed to do all the paperwork.  So you'd say, 'I'm very sorry sir, I didn't get that bargain'.  And he'd say "I've just dealt with that chap there, God knows who he's with, I'm not sure whether I bought or sold them and what the hell was the name of the Stock I dealt in and what was the price? I don't know". So you finished up with absolutely no details of a bargain which he thought he'd done.  And so he was eccentric in that way.  Those sort of bargains came up the following day in the checking room.  There was a bargain alleged to you that you hadn't got on your book, but then dear old Harold would remember it the following day "Yes, that's the one".  He was eccentric as a jobber, but he attracted the people, and in those days it was very much relationships.  With 140-odd jobbing firms, and I think in the markets we were involved in we had about 12 competing jobbers in American and Canadian securities,  why did a broker go to one rather than another?   It could only have been relationships because by and large everyone negotiated the prices and as a broker you had to feel comfortable that you were dealing with somebody who was above any doubt of being totally honest and high integrity and all those sort of values which one expected of members of the Exchange.  It was personality that attracted people to deal with you.  And Harold Moore had a lot of personality.  Lovely man.  Very kind to all the young staff as I recall.

BA:  Do you remember your early impressions of going on to the floor of the House.

SR:  Oh, absolutely; frightened to death!  As I was saying earlier, I was fortunate enough to take on this chap who'd left us, because he didn't want to put the spats on the colonel. I took on his job and I didn't mind picking up the Colonel and taking his spats down.  Poor old chap died soon after that anyway.  So I went down to the floor late in 1956, and in those days you had to be presented to the senior waiter - the senior Stock Exchange staff member on the floor, in uniform - to be shown around and shown the various stands.  The waiters used to actually be positioned on stands which were two or three steps higher than the rest of the floor community and they were strategically located in various parts of the floor. And they were the point of communication.  There was no other means of communication, other than very large electronic numbered boards, again strategically placed around the House.  Each broker would have a number, and that number would be triggered from a particular waiter's stand; so if you wanted broker no. 88, you would go to that stand where you knew the broker's number was triggered and you'd ask the waiter to put up so and so broker's number, 88.  So it was very important in those days to have a relationship with the waiters as a blue button.  Because they were your telephone, they were your source of communication with the brokers that you desperately needed to be in contact with. So one's initiation was to meet the senior waiter, who would then take you as a blue button around the various stands to introduce you to the other waiters, and generally tell you what was expected from a code of behaviour, from the Stock Exchange, let alone your own firm.  I remember being taken round and being presented very early one morning in 1956, being absolutely scared to death of this procedure, being terribly smart in new suit and polished shoes and white stiff collar which we all used to wear in those days.  And then I remember after the introductions, standing on my pitch, totally confused by the amount of noise which one was aware of on the floor, because as I said the only means of communication was a waiter putting a broker's light up or shouting for the broker.  It was not dissimilar to an auctioneer at a cattle market, because the waiters had their own means of attracting particular brokers.  It wouldn't be Messrs. Bloggs and Co; it would come out "Bobobobob" and that would actually be his means of communicating with Bloggs & Co.  And when the waiters did that only the people from Bloggs & Co would respond to that, so he had his own, if you like, vocal shorthand.  And this noise was going on all the time.  And when you're first down there as a blue button, you couldn't differentiate between the noise when he was trying to attract your firm (my firm Stocken & Concanon), if we were wanted, either because there was a message for us at the door or that we were wanted on the telephone - and bear in mind there were no telephones on the pitches, all the telephones were in telephone rooms around the perimeter of the Exchange.  So if somebody was trying to communicate with us, this waiter would shout out in his vocal shorthand, Stocken & Concanon - God knows what it was in those days - and you had to tune in to that particular mating call of the waiter to your firm and ignore the rest.  But in the early days down there, no way could I differentiate, and I'd suddenly get kicked by one of the dealers, probably my father, 'answer the bloody door, boy', or something like this.  And it was frightening, because it took time; and then of course you developed this relationship with the waiter, who was a bit kind to you to start with and probably not shout out out in his shorthand 'Stocken Stocken Door', or something like that.  So the general hubbub and the noise of the building confused me and distracted me enormously in those early days.  I remember literally not sleeping, worried about this noise and how I was ever going to cope with when it was us that was wanted or what I should do.  

And then the other confusing thing that I found right at the beginning was that there was no way of identifying the broker that was doing business with you.  Nobody wore the name of their firm on a badge or had any identifying marks at all as to who they were representing.  So you were standing there as a blue button and it was your responsibility to record any bargain that you did.  Your dealer, your partner, would be in conversation with a broker who'd be standing in front of him, talking about a particular company and the merits of the company etc. and ultimately the broker may say 'I'll buy 500 shares' at an agreed price and then walk off the pitch. Now your dealer would never say to you 'Right book that, we've sold 500 shares to Cazenove & Co at £1.25p' - £1/12/6 whatever it was in those days.  He would never say that to you.  You had to pick all this up yourself, so how on earth did you know this chap was Cazenove?  The only way you did it was through even blue-buttons, either your colleague blue-button or fellow blue buttons from other firms that would be standing close to you.  You made it your business to develop a relationship with the blue buttons that were standing with other firms close by you. You'd nudge them and say 'Who's that?'  'Cazenove, old boy' or whatever. So it was only in time that you identified a face to a name of a firm.  It didn't matter whether he was Mr. Jones or Mr. Smith.  That was unimportant; you knew him as one of Cazenove's partners or one of Cazenove's dealers.  So you knew him as Cazenove.  And that took quite a bit of time to learn, I can tell you.  And if you didn't manage to get the co-operation of your fellow blue-buttons or your competing blue buttons to tell you, because they literally hadn't seen the chap, you had to slam the book on the bench and literally follow this chap.  Then the custom was to actually point to a waiter on any of the stands, and you'd point to him and you'd be pointing down at the chap you were trying to follow; and the waiters understood that you as a blue button clearly had done a bargain, you didn't know who he was with and so the waiter, if he knew - and the waiters were marvellous, they seemed to know everybody who was on the floor; three or four thousand names they knew - and he would attract you to him and say 'Yes, that's Cazenove'.  If the waiter didn't know or wasn't clear who you were pointing to, he'd shrug his shoulders and you had to follow him to a place in the Exchange near another waiter's stand, and so on until you managed to attract somebody's attention who could identify that particular person.  Then you'd go back to your pitch; you'd probably get an earful from your dealer as to where the hell you'd been, but at least you'd found out who that bargain was actually carried out with.

So that was something which was hard slog in those days, trying to remember who people were with, trying to get all the details of a bargain that had taken place, and that was the sort of after-bargain type of activity that you had to do.  There was another side of it, where you had to be far more pro-active; because if your dealer had done a deal which was say selling 500 shares to somebody, bear in mind that the basic job of a jobber was to try to balance his book all the time; he would want to buy those 500 shares from somebody else who had indicated earlier in the day or earlier in the week, that should they reach such a price they would be a seller.  So the jobbers maintained what they used to call a limit book and either the dealer himself would remember that having sold 500 to Cazenove, Laurence Prust wanted to be bid [for] 500 shares.  The dealer would say 'Boy, go and bid Laurence Prust' - marginally lower than the price you'd sold them at - '£1/10/- for 500 shares of Can Pacs'.  And you had to rush off either to the stand where the waiter would put his number up and you'd wait for him to come along; or probably more importantly to what was called the broker's box; around the perimeter of the Exchange the brokers did have their own little boxes, not just on the ground floor, they would be on several of the upper floors in the building where the Stock Exchange was located.  It was a warren of various rooms and corridors, and very few lifts; you had to run up and down stairs, etc.  So it was important for the blue button to understand where all the brokers that were likely to deal with you (and you didn't deal with every broker, there were several hundred) where they were located from the box point of view.  And in some cases brokers operated out of their offices which might be in that building.  I remember there was a trade from retiring blue buttons, or blue buttons that were experienced, in buying maps, that they'd drawn out, of the location of the various brokers.  When you were a young raw blue button down there, for probably five or ten shillings you thought it was appropriate to go and buy from one of the seasoned blue buttons a map showing where the brokers' offices or boxes were.  The Stock Exchange was singularly unhelpful.  There was no official Stock Exchange map or plan which showed these various boxes.  So one used to take those and go home at night and try to learn it, rather like trying to learn a part in a play, as to where all these places were.   And again it took time.  The importance of knowing where they were was from a competing point of view.  If Cazenove had bought 500 shares from you, he may have bought a similar amount of shares from one of your competing jobbing firms and they [i.e. the jobbing firm], knowing who the sellers were, because the brokers would leave limits to be bid or offered stock with all [ie. some of] the competing jobbers ...  And the importance was as a jobber's blue button, to get to that broker who might have stock to sell or buy whichever it was, before your competing blue button.  So not only did you have to know where the chap was likely to be found, you had to know the quickest route to get there.  And it might not have been going dashing straight across the floor, because the floor was a terribly busy place, especially near opening times and closing times, you ran into pockets of activity on the floor where it was very difficult to get through.  It might be better to go out in the street and run round the building and get to this broker's box.  So you had to find your own way of getting to a particular position, to get to that broker before the opposition.  And again, you developed a knowledge of where that broker would be going for lunch, where he might having a drink or a cup of coffee, and that helped enormously.  And the more efficient you were at discovering this sort of thing, the better a blue button you were, the more opportunity there would be of you being promoted to a young dealer.  So these were the tricks of the trade, and there was a good community between the blue buttons.  We all used to meet up for a lunch, and a long lunch in those days was twenty minutes.  You were lucky if you got twenty minutes for lunch across the road in one of the cheaper restaurants.  Otherwise, you were stationed on that floor from opening to close.  And you never sat down.  If you ever sat down as a blue button, you'd be thrown out of the building;  you could never sit down as a blue button.  Even authorised dealers, which was the next rank up, very seldom sat down.  The benches or seats attached to the jobbers' pitches were very much for the partners and senior people and - "bloody boys, you keep out of the way".  As a blue button, if you were inactive, you didn't hang around your pitch; you stood about ten yards outside, because the partners sat down and the partners may be wanting to talk to various brokers about ... well blue buttons probably thought it was about business; it was probably about their social lives or some sporting activity, but you had to stand ten yards or so away from the pitch and keep out of the way.

BA:  Can you describe what the pitch was like, the Stocken & Concanon pitch?

SR:  Yes, all the pitches were either based around a pillar, one of the structures of the building itself, or one of the walls of the Exchange, or one of the waiter's stands, or little kind of beer barrel rotunda-type thing of wood on the floor of the Exchange itself.  And under the dome - there were two domes on the floor of the Exchange where clearly there were no supporting pillars - there was a great floor expanse; there had been positioned these sort of circular wooden seats and stands where the jobber would have his board up and sit from time to time.  But there was nothing else to put there, no communications.  It was quite in many ways a free standing type of stand that would be there, probably bolted down for safety reasons, but it could be moved instantly, and all in beautifully polished oak, lovely wooden well-carved stands; as indeed were the stands around the permanent structures, beautifully polished.

BA:  Were you very close to other firms?  You occasionally referred to a blue button from another firm.

SR:  Yes, very close.  Literally a matter of a few feet away, nudging elbows a lot of the time.  You wouldn't necessarily be close to a competing jobber in the same securities that you'd be dealing in, because that would not necessarily retain the amount of secrecy that was required during a trade.  You might be standing next to a competing jobber, but he'd be dealing in a different sector of the market on that particular pitch.  The jobbers in a particular type of security, whether it was electricals or chemicals or South African mines or as we were, Canadians, Americans, would be fairly close to each other and you all kept an eye on each others' price boards; and these price boards were [nothing like] you would see today in an electronic market place, or even before 1986 on the new floor of the Exchange.  They were literally boards of white paper; this was long before Chinagraph boards were invented; and the more successful jobbing firms had the names of their stocks printed on these sheets of white paper.  You literally wrote up the price of the security - not necessarily up or down in blues and reds, but just in pencil - next to the security itself.  And when that page had been worn out you tore it off, threw it away and started another page, as simple as that; not dissimilar to what you would actually see today at a race course, with the bookies where they'd have the horses and the odds against it; not dissimilar to that at all.  During my time I never saw them as blackboards with chalk, although I do believe at some stage that was used.  But in my time it was white paper with pencil prices on them.  They were the feature of the pitch and of course that was your advertising; you were advertising the companies in which you were prepared to make markets to the brokerage community.

BA:  It was important to keep those up to date?

SR:  Oh no, it was important to keep them not up to date.  They were a very good tool for confusing the broker.   And you'd only ever have a mid-price up there, you'd never have a bid and an asked.  You'd have your mid price up.  Let's say we start with a stock trading that day at  £1/10/-.  If you'd bought stock from a broker at £1/9/-, clearly less than the price on the board, your opposition would be looking at you, because it's quite likely that the broker had been to him first and had a quote, and quite clearly that quote hadn't suited him; or it was the same as the quote you were making, and you could see the broker putting pencil to paper in his book and the jobber's clerk putting pencil to paper in his book; so a deal had been done.  Then you'd watch that jobber's clerk, as a competitor, to see if they were going to alter the price on their board.  If you had bought stock at £1/9/- and it was your intention to lower the price because you didn't want to buy any more at that level, the last thing you would do is to put on your board, marking them down from £1/10/- to £1/9/- because you'd altered your quote downwards; you might mark the price up, you might put it up from £1/10/- to £1/11/- to give the impression to your competitors that you'd sold them.  Then he'd get into a bit of a flat spin and think there's a buyer going round here, I'd better close my short position, or I'll go and bid somebody, which is precisely what you wanted him to do.  

Of course it wasn't as simple as that, because everyone knew everyone did that, so there was a double spoof; sometimes you would mark them down when you'd bought them thinking that he would think the opposite.  So there were lovely games you could play with the prices on the board, and there was no best execution or publication of trade, so it didn't matter a damn to the investing public what the jobber had on his board.  It was used as a tool for misleading your opposition.

BA:  So did the brokers find these lists any use?

SR:  Only as a very rough guide.  The price was somewhere in the region of £1/8/- to £1/11/-, a very rough guide. When I became a dealer, the broker would say, 'what are they?'  You'd make £1/8/- £1/9/-, and he'd say, 'hang on, you've got them £1/5/- on your board'.  You'd say, 'well you can't deal with a bloody board.  Do you want the price or not?  They're £1/8/-, bid'.  'Okay, I'm a buyer, I'll pay you £1/9/-'  He'd obviously checked elsewhere and you were still the cheapest, even though you had  £1/5/- on your board.  You could use the board to attract the broker.  Because if he was a buyer and you were £1/5/-, that would clearly indicate to him that you were a cheap seller, even though you weren't.  But once you'd got him on your pitch, then you can play with him.  And the most important thing, it's like getting somebody into your shop, you've got to get the customer into your shop to start negotiating and hold him there.  Once he'd seen the price on the board, once he'd come to you and started to ask, then you'd try your damndest not to let him off your pitch.  And you'd shout at him as he was going away, a quote of £1/8/- to £1/9/-; you'd say '£1/8/6 offered' or '£1/8/3 bid'; and you'd say 'Oh, £1/8/6 choice, do what you like.  Do you want to buy or sell them at £1/8/6?'  And with that it was very difficult for them to resist dealing because if they did deal outside that quote they would be dealing on what was called a backwardation, and they would have to declare that to the other jobber.  So there was very much a way of attracting business from the brokers to you, and you could use the skill of altering your board or the dialogue you had with him.  It was the tricks of the trade that you had learned only by experience; you couldn't put this in a book anywhere, it was just the tricks.  And many an occasion as a dealer you would make a price to one particular broker which was totally different to the price you'd make to another particular broker.  One broker who you'd know was interested in the stock and traditionally had been buying them, you might make him £1/2/6 to £1/3/- because you didn't want to sell at [under] £1/3/- to him.  And another broker whom you'd know traditionally had been selling the stock, you might make him £1/1/6 to £1/2/-, so leaving yourself a huge gap in the middle and hope to God he wouldn't buy them from you; because he could buy them at 2/- where you'd offered them at 3/- to the other guy.  You built up this feel for the brokers and the style of client business that they had whether they were buyers or sellers.  In today's life this would probably be frowned upon as being grossly unfair and cheating even, but this was the skill. You were there as a jobber to make money and you had to make it by your wits, and seat of the pants reaction to a particular situation.  So having, if you read that right, that guy on your pitch, you managed to get stock from him at £1/2/-, great; you'd then go to the chap who'd just asked you, and rush off, send your blue button to him and say, 'I can actually offer them at £1/2/6'.  And he might come back and say, 'yes I was a buyer.  Your £1/3/- was too high, but I will pay you £1/2/6'.  You'd made a 6d turn. That was unlikely, you'd be lucky if you made a penny ha'penny turn, but anyway for the purposes of demonstrating what one did.  And that was the skill that you developed over the years and this was the excitement of it, because no two brokers were ever the same, your prices were never the same to two brokers.  If there was a particular broker that you didn't like or you may even question his financial situation, you didn't want to have too much exposure to one particular broker because he might be questionable and might one day be hammered or something.  So you might make a price to him in 500 shares where you'd make it to the Cazenove's of this world in 5,000 shares.  That was another skill.  You had to have a feel for the type of broker that you were dealing with; you had to have a feel for his credit rating; you had to have a feel whether he might be a buyer or a seller.  You had to have a feel for the type of client that he had, because if he had some pretty sharp information coming from clients who maybe knew more of the story of the company than anyone else knew - which today would probably be totally illegal and be classed as insider trading; in those days it was all part of the game - if he knew somebody might be taken over in the next hour or two, he'd come and try and buy as many shares as he could. Well, once bitten twice shy.  You might deal with this guy a couple of times and the third time he'd come up to you and say, 'what are XYZ stock?', and you [might] say, '[there], bid only - [or, nominal] - I'm not going to make you a price.  Last week you picked me up twice on takeover stocks, cost me a fortune to get the stock back - I'm here to make money as well, old boy,' so you might tell him in the politest possible terms, which would probably ....

Tape 2, Side 1

BA:  So some brokers were occasionally not welcome on the pitch?

SR:  That's right, and you could make either wide prices or negotiable prices, or prices one way which obviously weren't going to suit their style of business and they got the message in the end, they just didn't bother to come to you.  There was always somewhere else they could go.  [But] the amount of jobbers they could go to was narrowing all the time, so they either had to change their style of dealing or say to their client, 'Look, if you keep on like this, there'll be no way I can deal eventually, so it's up to you.  Don't rip the jobbers off'.

BA:  Now, all this still lay in the future while you were a blue button, which you became autumn 1956.  Was the next step National Service?

SR:  That's right, bear in mind, going right back now, I thought I'd be an architect, but I was losing enthusiasm whilst learning a bit about jobbing; and having had this fortunate break to go down as a blue button, I really enjoyed it after my initial fears and worries of how I was going to cope with it, but I really began to enjoy it.  And unfortunately in January of 1957 I was called up and I did my two years National Service, in the RAF, and the firm were extraordinarily kind to me.  I'm sure that my father influenced their kindness but nevertheless they were, and I was paid full wage all the time I was in the RAF. Full wage, I hasten to add, was £5 a week, but it was useful.  I was only getting 10/- a week in the RAF.  So I thought that was extraordinarily kind.  In point of fact, it wasn't just my father, I think the other partners had seen perhaps the son of a father that might develop to be a reasonable trader of the future.  My father was exceptional.  He was a marvellous trader and he always had the respect of the brokers; he was 150% honest and of the highest integrity; and he was very well thought of by the brokerage community and was very successful for our firm. Having come up from humble beginnings, he was probably the most astute and sharpest dealer we'd ever had.  I'm not saying that just because he was my father.  So I think in fairness to me at the time, they weren't just paying me because I was my father's son, they saw the possibility that I might mature into a dealer.  Probably desperately disappointed as the years went by.

BA:  What did your father feel about you starting a Stock Exchange career?  Had there been any expectation, for example when you were at school that you would ultimately pursue a Stock Exchange career or had it been really left for you to decide?

SR:  I think the opposite.  I don't think Father wanted me to go in.  I think he felt that it would be difficult having a son there and that he might be seen to be influencing my career path too much etc.  And it is a difficult thing - fathers and sons working together.  Remember he'd lived through the situation of his senior partner Colonel Concanon bringing his son in which had been a disaster, and I guess the Colonel's son, Pat Concanon and my father were about a similar age, so he'd seen that disaster, and the poor chap drink himself to death.  And I think that must have influenced his thinking, so I would think it was very much the opposite.  Father tried to persuade me not to come in and certainly pushed me in the way of thinking about architecture as he felt I had an artistic bent anyway.  If anything it was probably Mother who persuaded him to get me out of the house and do something useful as I was waiting to be called up and didn't like this architecture job; so I think she influenced his thinking, and he accepted it, and probably got the other partners to accept it, very much on the basis it was short-term.  Nobody knew it was going to be this eighteen month/two year period.  I think life was awkward for him in the early stages, having me around.  But towards the end when I was a blue button, I got more and more support from him, as I did from the other partners.  So there was no expectancy of me following in his footsteps. 

So when I was in the RAF there was this inducement to at least consider going back to them because they were extraordinarily kind in paying me all the way through.  I did take some sort of correspondence course for architecture when I was in the RAF, because they allowed you to do all these things, and they were very helpful actually, but again I couldn't get into it. And I think after about a year I stopped that.  My thoughts were very much of returning to the City.  I kept in touch as the two years went by and it was quite clear in my mind in the January of 1959 that I would want to go back.  So I did, and they made me very welcome.  The firm had grown a little bit during the time I was there.  We'd taken on a couple of dealers, and the climate in the late fifties early sixties for dealing in American and Canadian shares had improved.  There'd been one or two reasonable oil finds in parts of Canada and people were buying Canadian oil shares etc.  In spite of the exchange control concerns, we had expanded our business slightly.  So I came back, started seriously thinking of this as a career path, and I was still a blue button.  I became a dealer, which was the next rung up the ladder in 1960, so about a year after I'd come back.  And I was put on this junior Canadian oil book, working with Pat Mooreee, who was then the junior partner.  Colonel Concanon, as I said earlier, had sadly died, so Major Love was the senior partner.  And I just got to grips with dealing.  I found it difficult in the early stages to make the transition from blue button to dealing where you had that responsibility of a trade, and one of the things I found extraordinarily difficult was how all my fellow dealers, my partners and dealers, managed to remember prices of securities.  I used to take home - we had a list of the securities which we dealt in available for all the brokers daily with the prices, opening prices of the shares; which was literally on a Roneo machine, a Gestetner, whatever they were called, literally rolled off every morning - and I used to take this damn' thing home every night and try to learn the prices, parrot fashion, which was useless, because it meant nothing at all. And it slowly sank in to me out of doing the job, that the only way you really understood prices was making a price, doing a deal, either making one hell of a mess of it or making a profit out of it, and then the next deal - and they all started to inter-relate to each other.  And within a fairly short period of time the dozen or so stocks that I was responsible for with the partner I was assisting, I got to know the prices of those stocks, everything about those stocks, which one had to do.  Because brokers very much wanted the advice of the jobbers in those days.  The broker had an idea that he wanted to look at a particular Canadian oil company shall we say, but he didn't know much about it.  And it wasn't easy to find out about stocks.  We had correspondents in Canada that we could contact, because in those days a jobber was allowed one correspondent member of a foreign exchange, and that was the only non-member of our British Exchange that we could actually do business with; this was by the rules.  So we had the ability to find out more about these companies from the Canadian broker that we used as a correspondent, and pass that information on to the brokers. So you got a fairly good feel for the dozen or so companies that you were specialising in, and you knew roughy when those movements were going to take place in price, there would be peaks and troughs.  It was right sometimes to go long of stock, it was right sometimes to go short of stock.  And you developed, and I think I jobbed fairly successfully in some of these junior oil stocks, and we started to make a bit of money.  It was curious to me, that as a firm, we used to stop trading when the partners wanted to go home at 4.30.  The Stock Exchange house, or the floor, closed at 3.30, we used to go back to our office and it was very difficult to find anybody that would take any responsibility in our office after 4.30.  Certainly Father used to go home, and as a young man I thought it was probably right to go with Father; I was living at home, so we both went together.  And it was my young colleagues with the broking firms who used to say to me, 'Stephen, why do you go home so early?'  So I said, 'well, everyone goes', and they said, 'we tried to get hold of you at 5 o'clock and we wanted to deal in such and such a share'.  So I said, 'oh, we think it's dangerous to deal in Canadian and American shares when Canada and America are open, we're onto a hiding to nothing'.  And that was very much my father's view.  You won't do any good, because clearly the Americans and Canadians know more about what's going on than you'll ever find out in London, so leave it to them.

Anyway my young colleagues used to say, 'well you're missing business, your opposition are doing it'.  So I bravely stayed a little later, probably up till 5 - 5.30, and of course got into severe trouble, because I was doing the bad bargains, and I used to get a hell of a bollocking the following morning if I'd bought or sold something which overnight had gone wrong, which created a loss for the firm.  But I was persuaded to see it through, and slowly I was fortunate enough to persuade the brokers, 'look, don't always do the bad bargains with me, give me a few goodies from time to time, otherwise this isn't going to work'.  And I developed contacts of my own, which were the younger people that I'd met as red button clerks, as blue button clerks; that we all do; we develop relationships, and that's how yhe business continued from firm to firm from generation to generation.  And to cut a long story short, I became a member in 1961, an individual member of the Stock Exchange.  I became a partner in 1963, and I had developed, very fortunately, a following of some of the younger brokers who had been a little bit frightened to go to our senior dealers and indeed my father perhaps, because that was the older generation.  They wanted someone of my age they could relate to and it was the senior people that were still going to my father and his partners.  So I developed a following of my own of these younger brokers, more of an understanding, more of the ability to judge whether it was right to buy or sell, that jobber's gut feeling which clearly my father had developed over the years, and I'd watched and learned.  But it wasn't really until 1965/66 that I felt confident in taking big positions, so I'd been in there ten years, taking out the two years' National Service, I'd been involved with the business for a good eight years, getting the fundamentals right before I felt anywhere near confident to do anything on my own.  And I believe this was very much the pattern with the other jobbing firms.  Whereas now people seem to get in the business and within six months they're running a book and doing all sorts of funny things.  Well, good luck to them, they must be far more intelligent than I was, because it took me all that time. But this grounding was so important, I believe, and the relationships and understandings that you were building with your brokers and your competitors.  I thought that stood me very well as I developed in the business.

BA:  Would you say any particular jobber with your firm had influenced you in learning the jobbing skills?

SR:  Only my father.  I don't think the others were particularly good; and this one I was supposed to be working with which was Harold Moore's son, Pat Moore, again a lovely man, but too rigid, didn't quite have a flair or flexibility to take on positions and see them through, for maybe two or three days; very short-termism.  They wanted to just trade and try and make a quick penny or two on that trade. I used to take more of a view and build up positions which I think my father used to do as well.  So clearly, yes, my father influenced me 100%.  I didn't find the others particularly good.

Now at the same time there was a youngster that joined soon after me as a clerk, and then a red button, then a blue button, called John Purcell, and he'd come from the East End and was a really good trader.  And we developed a rapport and relationship during the sixties where we became, I believe, a first class team.  Had he not been there, I don't think I would have been able to develop the confidence to be the only young dealer.  Because after this Pat Moore fellow, there was a big age gap between him and me, and there was nobody else.  So this chap John Purcell was a tremendous support to me.  We were similar age (I think he's about two years younger than me) and we developed the business, there's no doubt about it.  And the whole attitude of the firm changed around us, and by the late 60s we were quite a force in that Americans/Canadian market.  There'd been a great deal of activity in the middle to late sixties in Canadian companies that had discovered minerals in Ireland, or around Ireland, and we developed a speciality in jobbing those particular stocks.  There was only one other competitor that we had and we scooped the pool during the European time zone in making markets and dealing in those securities.  At the same time, North Sea oil had been found and there were quite a few Canadian/American oil companies that were involved in the early discovery of natural gas and oil in the North Sea. We made markets in those companies.  And I saw the opportunity, it sound rather as if one's getting too cocky about this, but I did see the opportunity more than anyone else in our firm, to specialise in those particular areas, Canadian/Irish mining companies and North Sea Oil Canadian companies, as well as doing our other mainstream thing in American [ie. Canadian] shares as well.  And we became one of the acknowledged market makers - jobbers - in those two areas.  We attracted not only the smaller brokers who were doing small business but some of the big institutional business as well. And I developed very close relationships with the Canadian brokers that were established in London.  Wood Gundy was a firm that were enormously helpful to me as a developing jobber, and to my firm, because they clearly were doing far more business in those particular shares than we as a jobber on the floor were; because they didn't have the restrictions of single capacity, they knew all about Canadian shares and they were dealing with a lot of the brokers direct who by rights should have been coming to the jobbers, but weren't.  So I thought if the brokers are going to these outside houses, then I'm jolly well going to go and do business with them as well.  I developed a business which had to be booked through an English broker, so we had to take his commission into account, and developed a relationship there.  That was enormously helpful, and I saw more and more the need to have an awareness of what the non-member firms of the Exchange were doing, in this international arena.  It was a very small international arena, just the Americans and Canadians, in those days, but we became successful, and we started making useful money in these stocks.  I was gathering confidence more and more, and this young chap, John Purcell with me was gathering confidence, and I think we were a damn' good team.

This took us through into the seventies.  In 1969 I made my first trip abroad. I went to the New York Stock Exchange with a view to developing a close relationship with a New York stockbroker to try and get us into the big American business.  We were playing around with it.  We were good in Canadians, but we were playing in American shares and we were probably less than useless actually.

BA:  Was this broker your existing correspondent in New York?

SR:  No.  We used to go to a firm in fact that was doing more business with Akroyd & Smithers as a correspondent than we were doing, so I thought that that wasn't going to be any good, and I went to look for my own correspondent [whom] I could develop a rapport with.

BA:  How did the relationship between a jobber in London and a correspondent in New York or Canada work?  What was the role of the correspondent? 

SR:  Purely to either execute the positions which the jobber had created in a particular security, so either sell stock into the market or buy stock on demand from the jobber from the market.  We were allowed to deal with those brokers free of commission, so we could buy or sell nett with one correspondent on one exchange.  And it was very necessary to have that, otherwise you couldn't rely on getting a complete balance of orders in London through the London brokerage fraternity.  If London were big buyers of a particular type of American or Canadian security for whatever reason, you weren't going to attract any selling in London.  You had to get the selling which was coming into the American market direct.  So our correspondent performed that function, and we worked it out on what we called a joint account basis.  We actually brought our correspondent in [a way into] partnership with us, not physical partnership, but on all the business we did we shared the profit or the loss; so that if I wanted to take a position during the day in, say IBM, and I felt [nervous]; we would be in touch with our correspondent; we'd wake them up in the middle of their night sometimes, or we'd speak to them when their market was closing late in our evening, sort of 9 or 10 o'clock at night to us.  We'd say 'how's IBM closing, what's the feel for it tomorrow?'  And he would say, 'it looks right to be long'.  So if we attracted a position in IBM where we might be long of 4 or 5 thousand shares, we would send that over to our correspondent at the end of the day: 'we are long of 5,000 shares IBM, average price,' (whatever it was in those days) $70, and he would work that position for us into the New York market.  He would then take his own view and we wouldn't restrict him.  He'd either sell them all at the beginning; he might get 70 1/2; might play it during the day and get more; might get it totally wrong and make a less; or throw the position back to us in the evening and say 'unable to sell at profit, leave it to you in London, see what you can do tomorrow morning.'

The upshot of that was that whatever the profit or loss was on that transaction taking all expenses into account, we halved.  So it was attractive for us because we knew we had a partner there who was keen to deal because the P and L made a difference to him; and I think it was attractive to them because they knew that we wouldn't necessarily take unhealthy positions because we would suffer.  I did this in Canada and in America and it worked very well.

BA:  Would you describe that basically as arbitrage?

SR:  Yes, not quite the same way as the brokers would arbitrage.  Because the brokers would have their clients that would be dealing with them direct.  A broker would have an American arbitrage client, or an American institution that would want to buy stock out of London, because it was perceived to be slightly cheaper than the offering in America.  So they had the opportunity, the brokers, in arbitraging, of dealing with the ultimate clients, which as a jobber I never had.  So the only arbitrage that I could do was very very short term price differentials between the two markets.  So yes, arbitrage in a way, but not the complete arbitrage that the brokers could do.  We didn't have that advantage.  But it was price differential and was arbitrage I suppose.  And that worked very successfully for us.  Not that the trip I had in 1969 in America was very successful.  Because I went over there when America had just come away from its all-time trading levels; they were so busy, settlement was in a ghastly mess and they closed every Wednesday in America at that time, this was the autumn of 1969; and because they were so busy and trying to sort out their own settlement mess the last person they wanted to spend any time with was a small London jobber that wanted to open up a joint account with them.

So I got the cold shoulder everywhere I went; it was a miserable bloody trip; successful in Canada, I went there as well, but miserable in New York.  So I somewhat shelved that idea until 1970, when a good friend in London of a broking house said that he had a chum coming over to visit him who ran a small New York firm of brokers.  So I said I'd quite like to meet him and I met this chap who was called Morris Coh n, who had his own firm called Cohn, Delaire & Kaufman, members of the New York Stock Exchange and American Stock Exchange, and we struck up a very good [working] relationship.  We seemed to have mutual respect for the businesses we were running.  Anyway the upshot of it was that later that year I opened up a joint account with him, and I employed another person from a broking firm called Tony Marshall, who I taught how to deal in American shares, and we put him in charge of making the market in American shares.  This fellow John Purcell and myself were still making a market in Canadian shares, and so we had three youngsters then, all about the same age, although those two were a bit younger than me, and it worked very well.  And that firm of Cohn Delaire & Kaufman, I bought control of in 1975.   I'll come to the story later, but it ultimately became Akroyd & Smithers in New York, and it is what Warburg Securities in New York is today; so that very humble beginning, that little seed is Warburg's New York office, and I'll perhaps explain a bit more about how that came about later.  So, in the early seventies we were becoming more and more successful as a jobber, the system of jobbing was still very alive and successful.  We'd moved into a temporary Floor whilst they were building the new Floor, and we all moved into the new Floor, I think it was 1973. But very little had changed in the jobbing system.  The personalities hadn't changed.  The older ones had clearly retired or moved on, but people didn't retire very early. People would still be active in their seventies and eighties if health permitted them to do so.  So you still had this huge wealth of experience there and the youngsters coming on.  It was a marvellous place to work though and a marvellous place where you had this ability to exchange ideas and talk about securities, talk about economics and what was influencing markets generally.

BA:  Were the brokers still relying on you as a source of information or were they beginning to become a lot more independent?

SR:  They were becoming more independent.  Communication was far better. Reuters had developed their information systems to a very high technical degree in those days.  You could establish price formation on other exchanges through Reuters.  That was probably in the mid-sixties that they came up with something that was called Stockmaster, which was a funny little machine with three eyes looking at you, and as you dialled in, tapped in your codes, the price of a security would light up in these three eyes looking at you.  But it was instantaneous and you could get the actual price that was trading in New York or Canada of a particular stock when their market was open, as it happened.  So it ruined arbitrage.  There was no way when this became successful.  And we were the first jobber, my firm, to have Stockmaster in our offices.  I'd seen it in Wood Gundy's, this Canadian broker's offices and I thought this is going to change the world as far as making markets in foreign securities is concerned.  I ordered one, frightfully expensive, and got one in my office as soon as I could.  And then we had to get telex.  That was another machine which no-one had thought of, because up until mid-sixties everything we did was by cable.  And part of my job as a young blue-button and young dealer was actually coding up all our messages which went either by Western Union or Commercial Cable - no, that's an insurance company - there was another cable company which we used to use; the Western Union most of the time.  And we used to literally phone up and give these coded messages over to the cable company to our joint account correspondents in America and Canada, asking for a quote of a company; and a quote would come back on a cable within a minute.  It was so efficient.  And we then had the benefit of that information, which brokers by and large never actually got hold of.  So if someone after the New York opening wanted a price of IBM, I would flash a cable over, 'quote quick IBM', get the reply, deal with the person here, flash it back, 'bought 500 shares or sold 200' or whatever it was and the whole business was completed on cable very very efficiently, within a matter of a few minutes.  But nevertheless it wasn't as quick as Stockmaster when it came into being through Reuters, and there the prices were instantaneous.  And because we were the only jobber - and this must have been 67, 68 I suppose - that had this machine, which gave the second by second movement of the Dow Jones Index, we used to display that on our pitch - Dow Jones up 1.2, up 1.3 - and that attracted a whole crowd of people onto our pitch in the afternoons after 3 o'clock, or after 2 o'clock, whenever the time changes were.  And again that helped my business enormously, because I was now the source of information, not just on stocks, but on an index.

Tape 2 Side 2

SR:  About 90% of those people were just idly wanting to know what Wall Street was doing and very few of them wanted to actually deal with me in American and Canadian stocks.  But the odd one or two did, and our business grew because we were an information provider on the floor of the Exchange.

BA:  What did the other jobbers in your market feel about it?

SR:  Hated it, tried to complain to the Stock Exchange; they said it was unfair, that a crowd gathered, it was blocking the various walkways through the Exchange, and it should be banned; and the Stock Exchange came along and frowned and I said, 'you can't; this is information. What are you going to ban it for?  This is what the market's all about'.   I was a bit of a rebel in those days because this was not thought to be the done thing by the establishment.  But I kept to it.  And of course my father, who was probably by then the senior partner actually (Major Love had died in the late sixties; my father took over as senior partner) ... and there was this son whom he thought was probably a pain in the neck, but was - he had to admit - doing quite well, and so [thought] we'd better go along with these new modern ideas.  So we were the first to do it and that helped.  But during the earlier part of the seventies, we certainly had established ourselves as the jobber in Americans, Canadians, from information point of view, of disseminating that information, and then we moved towards going onto the new floor.  But before we did that in 1972/3, I can't be too sure which year, the Government extended Exchange Control to the old overseas sterling area countries.  To deal in other foreign securities at that time, prior to 1972/3, you had to go through this thing called the dollar premium.  You had to buy your foreign currency to pay for transactions by literally going to a dealer in foreign exchange and paying a premium to get hold of that currency.  The Bank of England monitored it all; there were other places where you could deal in the premium, but at the end of the day all the records went back to the Bank of England, so they monitored the amount of demand for foreign currency.  This went right the way through to 1979, and according to the supply and demand for foreign currency, a premium developed on the quote for this currency which was known as the dollar premium.  And we used to make markets in this dollar premium thing.  We understood how to deal and convert the prices in sterling to make it simple for the brokers, and we would take on the responsibility on their behalf of working it back into dollars and putting all the records back to the Bank of England, because I thought that would attract them to deal with us rather than anybody else.  The opposition caught up and did it as well.

BA:  This all happened in the back office?

SR:  The actual deal in dollars we would do from the floor, but the brokers weren't necessarily aware of that, so it was somewhat irrelevant.  Just to backtrack a little bit.  I think it was 1965 the Labour Government brought in a clause that said that on buying a foreign security you paid this premium, on selling a foreign security, you surrender 25% of the premium to the Government.  So if you bought a dollar for arguments sake at 100% premium, if it cost you a pound to buy a dollar, 100% premium, it was costing you £2 to buy a dollar.  That was fine when you were buying it, and up to 1965 if you sold it and the premium had remained unchanged, you'd get your £2 back.  But the Government saw this as a source of revenue and a tax, so that if you did sell and still got your 100% premium, instead of getting £2 back, you got £1.75, so 25p of each transaction went straight to the Government.  Now directly this happened I saw a further opportunity for us to actually handle those transactions, the surrender of 25% of the premium for the brokers, because it was going to be hugely confusing for them to a) have a quote which was in sterling based on a dollar quote which included whatever the ruling premium was and that changed minute by minute according to supply and demand, to then turn round to be a seller, to sell at the ruling premium, to then have to do a transaction with a bank somewhere, to surrender 25% of that value of the premium and tell the client what they'd done.  So after that budget, we as a firm, and John Purcell and myself thought this one through, we would do that for the brokers; so if they dealt with us, we would give them the opportunity to handle that 25% surrender of the premium and give them: sale proceeds £2,000, give up 25% of the premium, £250, and we would book that out as a separate contract to them and they had to do no more work at all. So that gave us a nice position in dollars and premium dollars, which we took a turn on, which was an additional turn to us making a turn on securities.  That helped enormously.  Again we'd got the reputation of being able to handle this.  No other jobber was doing it at the time.  They all followed suit in the end.  But it helped us.  And that went right the way through, this 25% give up until, I think, that finished in the mid-seventies. Something happened, the Government said, 'ok no more give-up but there's still the premium'.  But I can't be certain of that.  

So come the early seventies and we're still in the temporary Exchange.  We're standing back to back with a firm of jobbers that is specialising in South African securities, called Lazarus Brothers; nice firm, nice old boys, very few youngsters there, but George Lazarus who was the senior partner, and his father before him, were the pre-eminent jobbers in South African gold shares in terms of experience and relationships; although Smith Brothers who were involved in gold shares were probably the better jobbers, because they had a younger, more aggressive attitude - this old boy was getting a little bit past it.  Anyway, in 1972/3 when the Government extended this 25% give-up to the old sterling area securities which brought in Australian and South Africans, this firm, Lazarus Brothers, hadn't a clue, they just didn't know what to do; and they used to come round the corner to us and say, 'we've done a deal.  We've got to do a dollar surrender.  We've got to put a premium into it.  Can you show us how to do it?'  Of course we showed them; there was this tremendous spirit of co-operation, helping your competitors etc.  Anyway, we did so much business with them stripping out their dollar premium etc. that to cut a long story short in the early part of 1973, I thought 'why don't we get together as two firms, and merge the business?  We don't deal in South Africans, you're not doing a lot, and I see potential'.  Because [19]69, 70, we'd come off the gold standard, where the gold was fixed at $32 or $38 an ounce, and was allowed to [trade fully], and it pretty quickly doubled into the [late] sixties and [early] seventies and there was clearly more activity going to develop in gold and gold shares as a result, so I saw this as a window of opportunity.  My fellow partners agreed as did the Lazarus partners, so we merged in the spring, early summer of 1973,and we changed the name of the firm to Stocken & Lazarus.  I became senior partner in 1971. My father thought probably it was easier to give in to me, to my demands and excesses at that time, so he decided to stand down as senior partner.  The other partners thought they'd better let me continue to have my head and I brought John Purcell and Tony Marshall into partnership with me at that time and I took over as senior partner.  Father stayed on for another few years as did Pat Moore, the other partner.  So I was keen to expand it even further, and when I saw this firm in 1973 I thought 'we'll have a go at this'.  And we did merge, changed the name of the firm to Stocken & Lazarus, and hit that just right, because 73/4, gold started moving up dramatically and the Americans got involved and they were buying gold coins and gold shares - it was super.  And we did very well during 74 and early 75. In 1974/5 I took over another firm called Bradford Brothers which were a very small firm in the British industrial market, so for the first time I branched out into British shares.  We were not part of the jobbing fraternity that would at that time work towards agreeing fixed spreads etc.  I wasn't going to have any of this, I was going to go in there and compete with them for the smaller business - I had no ambition to do the huge deals...

BA:  Was that what inspired you to take over Bradford, to widen the number of markets you were dealing in?

SR: Yes, we were then dealing in Americans, Canadians, South Africans, three very active markets still in the area. I had no ambition to go into Australians because settlement was so ghastly in the late sixties early seventies, and I didn't think I could cope with that, so I pulled back from going into Australians.  But I saw that there was an opportunity to expand into British stocks.  By now we were down to probably 20 or so jobbers only throughout the country. I still had great faith in the jobbing system, I thought it was going to go places and I thought let's have a go at the English market.

BA:  What was the attraction to Bradford?

SR:  Small firm, old senior partner, no youngsters in the firm and if I hadn't taken them over, or somebody else taken them over, they'd have gone out altogether.  And they had this pitch, especially in electricals and some of the store shares where they had a following, they were good.  So I thought this would be a nice little niche jobber to get into as a vehicle to expand into the equity market.  The big jobbers weren't too happy, because I think they would have rather liked to see another jobber in that sector go altogether, and I didn't find it too easy in the early days.  I managed to attract a young trader from Wedd to join me and I gave him that book, Micky Gibbs, and he was very good and he looked after that section.  So I was building up my younger lieutenants, if you like, and made them partners to run these various pitches.

Later that year there was a big jobbing firm called Berger, and you may have interviewed one or two people from Berger ...?

BA:  That's coming up.

SR:  Right, the interview's coming up?

BA:  Yes, Ken Pitcher.

SR: Oh great, well Berger had had overtures to merge with Bisgood, Akroyd all sorts of jobbers I think.  Anyway things weren't going quite as well as they thought.   At the end of the day Akroyd decided they wanted to take the bulk of Berger, but they didn't want to take any of the foreign business.  Berger were good in mining finance shares, some Rhodesians and I negotiated with their partners at the time to take on what Akroyd didn't want really, but which would have complemented the type of shares I was dealing in because although I did South African gold shares, I didn't do what was called the mining financials, Consolidated Gold, Rio Tinto Zinc and those sort of stocks; so I took them over.  Now one wasn't going to be successful all one's life and not make any mistakes.  The mistake I made was buying their computer system.  They had a very elaborate computer hardware which was based in Throgmorton Street, opposite the Exchange.  I bought all that; I bought their computer operators, managers and it was expensive.  And I never got it working properly.  It was the first slip I'd made, we were expanding well, we were making money in various areas, and that was an unnecessary back office expense.  I was on a bureau at the time, a computer bureau and I thought it would be rather attractive, and I was advised by my financial partner that it would be quite a sensible thing to do, but it turned out to be poor advice.

So come the end of 1985, I finished up with having bought two firms - 1975, I beg your pardon - two firms and expanded into other areas.  We'd moved offices in 1974, so bigger suite of offices, so the old expense side of it was going up.

BA:  How were you comparing at that stage with other firms in the Stock Exchange?

SR:  We were the sixth largest jobber and there were the obvious six, Wedd, Akroyd, Smith, Pinchin, Bisgood and ourselves.  Some other things were happening in 1975.  Firstly I was invited to stand for the Council.  The then Chairman George Loveday was standing down and we were going to have a Chairman, Michael Marriott, from Williams Debroe.  He was to be elected as Chairman, and there was no doubt that he was going to be Chairman.  Michael had a very good understanding for the international market and was one of the few people on the Council that did understand the international market.  It was dominated by domestic people, both jobbers and brokers.  And I'd been frustrated over the years of 73, 4, and 5 over some of the rule changes which were going about, which was pushing the international market away from the jobbing system.  And a particular rule in 1973, rule 88b, I shall probably have it written on my grave, which allowed without any form of reference to the jobber... all brokers could do their business either directly in overseas markets or with the big houses like the Wood Gundys and the Merrill Lynches etc. without any reference to the jobbers at all in that market.  Whereas prior to that they had to get a form signed - a white form as we used to call it - which, if they could deal on better terms outside, the jobber had to sign the form and let it go outside, otherwise it wouldn't have been fair to the client.  That was totally reasonable and I didn't mind that at all.  But they did away with the white form concept and just allowed the brokers to do all their foreign business away from the jobbing system, which totally negated the concept of single capacity, on the basis that the jobber would stand there and make prices providing the brokers brought their business to the broker [i.e jobber] and; vice versa, the broker wouldn't take principle positions.  That all went in 1973 with this wretched rule change called rule 88b.

So I had mounted some sort of campaign to try to ease the effect that that would have, not with a great deal of success.  I'd started going up in front of committees and moaning and groaning and trying to say, 'you're ruining the system for the international community', and had the support of the fellow jobbers in the international community, for taking this somewhat high moral stance.  And Michael Marriott, I think, became aware of that in 1975 and particularly asked me to stand for the Council and [said] that I would get the support of the Council members and there would be an international voice. I needed this like a hole in the head, because I was really hands-on senior partner, not only running a book, but trying to control the expansion of the firm and it was going well.  But very difficult to turn down such an approach from the new Chairman, and on the basis that, if I could influence rule changes which would be more appropriate to the international community, then my firm would benefit, other firms would benefit.  And it would be good for the Stock Exchange, because we were losing the international business.  So I stood for the Council and I got on; there was little doubt that I would because I had the support of other people.  And I became a regulator.  I became involved in committees etc. and I loved it.  The cut and thrust of the committee debates and looking at the various things in rule changes for the Exchange, and the ability that I had as being a hands-on, day-to-day practitioner, I found fascinating, and did find I could influence the thinking of the various committees.  Within a year I was deputy Chairman of the then markets committee, under Anthony Steel, who sadly died some years later.  The worst thing from my point of view was, even more so for the Marriott family, Michael Marriott died in the December, I think it was of that year, 75, and I think we lost as an Exchange what would have been a great Chairman, who had a very broad idea of where the Exchange should be going in an international way, in a global way.  And Nicholas Goodison was appointed in 1976.  Nicholas was fine.  He had a wonderful brain.  I think Nicholas was a good Chairman, but he didn't have that international flavour that Michael had had and after six months of moving towards internationalising the Exchange, we went right back to square one under Nicholas' chairmanship and the old guard got back into control and we did nothing to improve the international approach.

BA:  What had you been working towards during the previous six months?

SR:  We were working towards something which was known as the Marriott proposal, which would be to allow jobbers and brokers to both open up offices abroad, and be members of the various Exchanges, but more particularly to allow the jobbing firms to deal freely with members of overseas exchanges; so that this would balance it- the brokers would be dealing overseas from the rule change earlier, and the jobbers would have this freedom to do so as well.  And we would attract that business more back to the Stock Exchange, because the jobbers would be the funnel for bringing it back, if you like, the conduit; because they'd have more access to international business, which I thought was a very good proposal.

BA:  What service did you feel the jobbers could provide to a broker on the floor of the House that he wouldn't necessarily get by going to a firm like Merrill Lynch?

SR:  No better a service, but as good a service.  Because the Merrill Lynches and the Wood Gundys, very fine firms, not members of the Exchanges, therefore didn't have the same ability to deal during account periods free of commissions and all that sort of thing.  The broker coming to the jobber was just simply dealing nett; he was having to pay a commission to deal with the outside houses, so there could have been a price advantage.  But in fairness we couldn't say that we could give a better service, but certainly as good as, and [as] part of the membership of the Exchange, which in those days was still very much single capacity, and it was all done on unlimited liability.  There were no limited liability companies in the Exchange.  So we could have retained the system at no disadvantage to either the international investor or the broker who had international ambitions.

BA:  What was the attraction to the brokers, then, to go to the outside houses?  Did they feel they could get a closer price?

SR:  Reciprocity - the outside brokers would attract them to give them their business in foreign shares on the return for giving them English orders. And it was a very compelling, very tempting thing to do.  If you wanted to go and buy a few thousand shares of IBM, give that to Merrill Lynch, or Wood Gundy, if it was a Canadian share, more particularly, you would virtually get back in commission dollar for dollar an order to buy some ICI or BP.  

BA:  So there was nothing per se in the actual Stock Exchange mechanism that was causing the brokers to go to the outside houses rather than you as the jobbers?

SR:  No, reciprocity and I suppose, to be fair, research.  The big American and Canadian houses in their respective companies, the national membership, did have better research.  But not something that the jobbers couldn't have access to.  I had access to all the research in America and if somebody particularly wanted the research on a company, I'd have got it for them with no charge.  But it was an angle which they did feel was more natural;  that if you wanted research on an American share you'd go to Merrill Lynch, if it was a Canadian share you'd go to Wood Gundy.  You don't want to go to Stocken & Lazarus as a jobber on the floor of the Stock Exchange - what on earth do they know about American and Canadian shares?

BA:  What proportion of the business did you feel was now being done outside the House in the markets in which you were dealing?

SR:  80, 90%.  It had virtually all gone.  From the really good investment business, the sort of business we were doing was the speculative, account type dealing in some of these North Sea oil shares and these Irish Canadian shares, which were far more English in make-up really than they were Canadian or American.  We had a handle on everything that was going on there and we made very keen close prices, so we attracted the business there by the keenness of our price and size.  But we couldn't do that in IBM.

BA:  So what were the consequences for the firm itself?  Was turnover suddenly drying up, or were you simply doing less business?

SR:  No, it wasn't drying up; not that we were doing very much less, but it would have been very difficult to expand. We went into it in the knowledge that we were going to be a very poor secondary market to the major domestic markets in America and Canada.  We had total realisation of that situation.  But we did feel that if we were efficient, we would be able to attract business from the brokers under single capacity because there was an obligation to come and deal with us.  But we had to be efficient in price formation and dealing and expenses etc. which we felt we could offer.  But when the rules changed and there was no compunction to come and even ask us a price, we weren't going to expand in any meaningful way into those markets.  The small regional stockbrokers whom we developed a very good rapport with from 1973 when we had the Federal Exchange approach, they were very loyal to the jobbing system, so we got a lot of business from the country brokers and the small London based brokers; because they didn't have the wherewithal to contact the big Merrill Lynches of this world, and they certainly didn't want to get involved with all the  expenses of communicating with a firm directly in America or Canada, or anywhere else in the world, come to that.  So we attracted their business and I think we provided a very easy and good alternative to the domestic markets.  But if you're in a business and you want to expand all the time, you've got to be able to see an opportunity out there.  If it's blocked to you by some regulation, then it makes it tough.  And so during 1975, because the rules did permit a jobber to, for the first time (and this was a rule change at the same time in 1973, the change of this rule 88b) did permit any member of the Exchange, brokers and jobbers to open up overseas offices, I thought that if I wasn't going to beat them here on their home ground, that I would actually open up an office in New York.  So having dealt with my friendly correspondent, Cohn Delaire & Kaufman, we decided to buy control of that firm, and become members through them of the New York Stock Exchange.  So at least we'd be able to say to our brokers in London, 'well, why are you going to New York?  You're dealing with the equivalent in London of a New York member firm'.  So it did help.

BA:  And in effect your New York office was serving the same function previously filled by your correspondent?

SR:  Yes, it was just ownership which changed.  But it did give us the ability, from a marketing point of view in London, to be able to say, 'it's not just a joint account, this is a sister company.  And we didn't change the name; it wouldn't have been right to do so from the New York point of view.  So we were expanding into that and that was good.  It probably was not an ideal time to do it, because in America in 1975 May Day, negotiated commissions etc, it was getting tough for the small American brokers to survive, let alone us going over there.  So fortunately we developed that firm as a trading firm. We did think at one stage it might be useful to actually become a specialist on the New York floor and link up in that way;  we toyed with the idea of doing that but we never quite went down that route.  As a trading firm Cohn Delaire & Kaufman didn't suffer too much under negotiated commissions, and it was a very good vehicle for undoing our book and creating positions that we wanted to undo in London.  That was quite an active year for me, 75, we took over these two firms, opened up in New York, I went on the Council and there was quite a lot of business around anyway.

In 1976, the early part of 76, the gold share market went into a nose dive, everything turned around and there was very little activity going on in gold shares.  The economy here, if you recall, was pretty tricky during 75/76, it wasn't easy for anybody to survive and the Stock Exchange had been referred to the Office of Fair Trading, Restrictive Practices - which I don't think any of us realised in 1976 how important...

Tape 3 side 1

BA:  What were your feelings about the rule book being referred to the Restrictive Practices?

SR:  Well, I obviously became more aware of this wearing my Council hat than I did my own firm's hat.  I don't think we'd even have known what the Restrictive Practice court was in 1976. It didn't mean anything to us.  But up in the Council we did become aware of it, and again I don't think we thought it was frightfully important.  But as we became more and more aware of what it meant and that ultimately we would have to defend our practices in front of a court, which may or may not determine whether they're fair or not.  When that became apparent in probably 77, 78, as late as that, I think the jobbing system began to realise that this could be pretty serious.  During the period 75 through to 77, the jobbing system came under a great deal of strain anyway.  There wasn't a great deal of business around, the older fraternity were wanting to move on and retire, take their capital out of the firms, and very much bearing in mind that every company was still unlimited liability companies, and we'd all gone through a very long period of extremely high taxation, for youngsters to be able to create any wealth to keep in the jobbing firm was damn' near impossible.  You were effectively, as you know, paying 98p in the £1, if you were successful.  There wasn't much fat left over to increase the capital of the jobbing partnerships.  So we were under great strain as jobbers without a continuing growth of business and activity during that period.  And more importantly than that, I think that because we had been referred to the courts, the Council, as the regulatory body, the decision-making body, felt that it was more and more being restrained and hamstrung - it couldn't make any decisions which would allow for change in the market, would allow the market to evolve.  75, New York, negotiated commissions, what was that going to mean in London?  Something was going to change.  You were going to have all these American firms over here, that were no longer charging fixed commissions; they could negotiate, not just for American shares, they could negotiate for our British stocks in ADR form.  There became more and more of an awareness that we were actually losing a bit of business to the Americans.  We'd seen the creation, in 73/4 of the options markets. What was that going to mean to London?  This was a new animal, traded options market. How was that going to affect London?  What should we do to combat it?  And in 1975/6 in the Council, we felt we should actually have a traded options market in London, and there was very much a view that we should do this with Amsterdam and create a big successful, or potentially successful, traded options market in Europe.  So, good idea, what were we going to do with the international community in dealing in foreign shares, something very close to my heart?  Should we move more towards negotiated commissions for deals in foreign securities here in London?  Should we have more of a dual capacity approach to it for the brokers and the jobbers?  So these were all ideas which were being bandied around the Exchange and being pushed through from the practitioners themselves, but the Stock Exchange, who set up little committees to look at all these things, felt totally unable to make any positive decisions to move forward because it might so alter the rule book at a time when you were trying to defend what was good about your system: single capacity, fixed commissions, closed membership and all that sort of thing.  So quite a few of the fairly progressive proposals which were coming through the various committees at that time to create change to allow this market to evolve, were blocked.  And this went right the way through to '79, 80.  We got a Conservative Government, 'Whoopee, it's all going to change now, we won't be referred to this stupid court any more, it's all going to be systems go, boys'.  But we all know that from the history point of view that didn't happen. We were still referred to this damn' silly court.  And so more actively we got the lawyers in, said, 'let's look at the rules'.  More actively, the Council said,' you can't change any damn' thing at all, even putting up commission rates, better not do that, or doing away with them altogether.' So it became a very frustrating period for the members of the Exchange and the Stock Exchange Council, right up until that momentous decision in 1983 between Parkinson and Goodison.  We've taken a huge leap here, from 76 to 83, but virtually nothing happened in that period. 

We did start up a traded options market.  We didn't go in with the Dutch, because the Dutch were going into it very much on a dual capacity approach. Their so-called market-makers could be brokers as well; they didn't have any restrictions, they could do what they liked.  We felt it very dangerous to go down that route, and so we set up a market making system-based, traded options market, where only the jobbers could be market makers.  There was one exception to that, a firm called Vickers, which set up a subsidiary which was seen to be more like a jobber than a broker.  So the traded options market - lots of thought and planning as to how it should work - was restricted by a very small community of market makers, i.e. the jobbers, who probably had a terrible conflict of interest because they were making markets in the underlying stock, and it was their fellow members of the same firm, that were making markets in the traded option.  And of course the taxation rules at the time were not at all conducive to developing a healthy traded options market which was out of the Stock Exchange control, and we pushed for change all the time, but it was not easy to get that change.  So we had this other animal which was restricted by our membership rules, which wouldn't allow any new members to come in unless they were full members of the Stock Exchange, and then they had to be unlimited liability firms, so nobody new came in, and very much restricted to it being fixed commissions and single capacity.

BA:  Had your access to, the jobbers' access to, overseas markets improved in any way?

SR:  No, I was still the only jobber that had an overseas office, no-one else took up the running at this stage.  In the early eighties Smith opened up and Wedd opened up and soon closed down again, so we were the only ones that had a continuing, and might I say, successful operation over there.  It always made money, thank God.  So that was good, but no, other jobbers had taken that direction.

So I well remember in the late seventies - whether it was 78 or when we had a Conservative Government, 79 - crisis meetings of jobbers because we couldn't afford to see one more go. There were effectively only five.  I had merged into Akroyd & Smithers in late 76, effectively Jan 77, so I was the sixth one and had gone.  We were aware that Smith Brothers and Bisgood were in talks to merge, and of course they referred that to the Monopolies Commission, so that was another unfortunate thing that happened to the Stock Exchange; and when the Monopolies Commission said it would be perfectly alright, of course Smith Brothers and Bisgood were not too sure they wanted to do it anyway, and they didn't.  So we didn't have a merger there.  I think it was very fortunate for Bisgood that the unlisted securities market started up at about that time and it gave them a new lease of life.  The other jobbers quite deliberately stood away from that market so that Bisgood could have a free run at it, because they were under a certain amount of strain in their more traditional types of shares which they were jobbing in.  That was a tremendous boost to them, and it was quite a success, and that was probably one of the good things that the Stock Exchange did do at that time - the Council - in creating this unlisted securities market.  It was again useful in 1979 when there was the abolition of exchange control, because that made foreign shares again more attractive to the investor and there was no worry about going through the premium market, so that did give a little bit of a push to that type of business.  But, it was a double-edged sword, because the foreign community, the  non-members of the Stock Exchanges, these big international houses which were present here, had been present by and large, to deal in and promote shares of their own country. But when exchange control had disappeared they were getting far more interest in dealing in their own American or Canadian shares from the big British Institutions, direct, not going to the broking or jobbing system unfortunately; and as a return for that these big foreign firms, because there was no exchange control and no problems and they were dealing in a negotiated commission way, they felt it was appropriate to expand into British stocks; and the big British stocks in the early 80s, BPs and the ICIs and the Glaxos, there were many times when more than 50% of the daily trade was taking place in New York.  More business going away from the jobbing system at a time when we could ill afford to lose business and something had to be done about it.  So we were in a great state of flux in the late 70s and early 80s, in trying to defend a system, which, in our heart of hearts we believed was right to defend.  There was a lot of good in single capacity and there was a lot of good in fixed commissions, but we were fully aware that we were losing out to different systems. So what on earth could we do about this?  And there were those that said we should abandon the case and not try to defend it and go down the dual capacity route, before the deal with Parkinson.  But the majority of people on the Council felt that would not be appropriate and that we'd spend a lot of money defending the case and it would probably hurt the smaller jobbers and the smaller brokers if we did go straight into dual capacity. So we did go full speed ahead to try to defend it.  And then the deal came with Parkinson in the early summer of 1983.  And that of course led to Big Bang. It seemed a relief to us at the time that we would not have to defend ourselves in the Courts, and in fairness, the deal which Nicholas Goodison came to was very much only on two fronts: to have negotiated commissions and to open our membership doors to allow virtually anyone that wanted to and had the right sort of resources, to come into the Exchange.  There was no suggestion that we should do away with single capacity.  And it was only in some very in-depth discussions in the Stock Exchange Council during the summer and autumn of 1983 that we developed the link argument.  The link argument, which was going to be one of the arguments we were going to use to defend our case - that you couldn't just go down and negotiate commissions because it would destroy the jobbing system - it had been fairly well thought through, and now that we'd come to this agreement, we revisited that and said, well hang on, this was going to be the major point of our defence - it still exists.  So how do you go down and negotiate commissions, how do you allow all these non-members to join our club if you like, without going into dual capacity?  And we were stuck with that one I'm afraid.  It was felt that in a negotiated commission world, it was quite likely that the big brokers, if we had single capacity, would more and more be forced down the route of nett dealing, not charging a commission, to be competitive; and if they're going to be nett dealing, they're going to be running positions.  So if they're running positions, and they had access to all the clients out there in the world, there's not much point in having a jobber.  That was the link.  So the jobbers, I think, probably forced the pace more than the brokers and said, 'we'd better go at this head on and do away with single capacity by 1986 as well'.  There was a view that we should do it step by step, we should do it in certain securities or we should reduce commissions.  But at the end of the day it was thought that you'd have such distortions in the markets if you had negotiated commissions in the gilt market or the chemical market or whatever you wanted to call it.  What that negotiated commission would be is nil, because everyone would say 'well we're giving you all the commission in the ones which still have fixed commission'.  There was a lot of logic in that argument and so it was thought we'd do it all in one day, have a Big Bang approach to this - hence the name Big Bang.  And we all agreed on that, so that's the way we went and we agreed it would all be in place by 1986.  And it did, it happened, and the single capacity system went out with the bath water.

BA:  Shall we break there for the moment?

Tape 3 side 2

Interview resumed on 24 May.  The first minutes of the interview were not recorded.  Mr. Raven is describing the circumstances in which, after experiencing difficult trading conditions in the mid-1970s and his own attention being diverted to the Stock Exchange Council, he decided to merge Stocken & Lazarus with Akroyd & Smithers.

******

SR: .... was a company or Bisgood perhaps, Pinchin, but the most attractive one, the one that appeared to have the best organisation and fairly decent capital base was Akroyd & Smithers. One didn't know what the capital base of Wedd Durlacher was, it was a partnership and they did have a small interest in foreign securities, where the injection of our business would not have been as attractive to them as it clearly would have been to Akroyd.  Fortunately David Le Roy-Lewis, who was the Chairman of Akroyd & Smithers at that time, was on the Stock Exchange Council with me and we talked about this in the concept of us doing something together.  He took it to his fellow directors and they thought it would be attractive to pursue and we agreed to merge the business of Stocken & Lazarus into that of Akroyd & Smithers, which took effect really 1st January 1977, although all  agreements were made in December 1976.  So sadly the name Stocken & Lazarus was lost.  We'd been in existence for about ninety years, and it was yet another jobber that was going out of existence.  It was a trend which had started many years ago and I'm afraid we became a statistic and disappeared.  Akroyd & Smithers as a public company, quoted in that name clearly, didn't feel it appropriate to include the name of either Stocken or Lazarus and I had to agree with that. It didn't make commercial sense to do so.  So I was responsible for the foreign side of what became Akroyd & Smithers' jobbing business in that area, and it was a marvellous deal to have done.  It worked out extremely successfully for my partners, and I think it was very helpful to the continuing development of Akroyd & Smithers.  It gave them a perspective in the foreign markets which they'd not seen before.  I had, as I think I said earlier, opened up a New York office, where I'd taken a controlling interest in this American firm Cohn Delaire & Kaufmann.  That of course was injected into Akroyd & Smithers as well.  So Akroyd & Smithers became the first large jobber to have a New York office, and ultimately the name was changed also to Akroyd & Smithers Inc.  That was in the early 80s.  So it was, as I say, sad to have lost Stocken but it was encouraging the welcome that we had at Akroyd & Smithers and the opportunity we had to continue to develop our business.  I personally continued on the Stock Exchange Council and I've been there all the way through, as you know, up to now.  And it gave me an opportunity to spend a little more time up there, because the day to day management of the overseas business which continued with my existing partners for a time, but there was an injection of the Akroyd management style as well, which was very efficient, and of course we had the large capital base to see us through into a period of expansion. 

Because we were there and had the expertise in dealing with the foreign currencies and dollar premiums etc, it did encourage Akroyd & Smithers to open up in the Eurobond market, which they had toyed with the idea of doing, but didn't feel that they had the right expertise both in dealing and settlement, to break into it.  Our presence enabled them to break into that market and they became a very very strong jobber/dealer in the Eurobond market which was by and large more of a market which had developed in the mid sixties away from the Stock Exchange.  And although some of the big brokers were heavily involved, the Cazenoves and the Strauss Turnbulls of this world, the jobbers that had taken an involvement were really the smaller jobbers; Medwin & Lowy and White & Cheeseman were the two that come to mind that took a presence in the Eurobond market, but again they didn't have a strong capital base and I don't think they could put the resources to it that Akroyd & Smithers could. So Akroyd went in and developed that market for themselves very successfully.

BA:  What do you think the attitude of the jobbers had been to the creation of new financial instruments like Eurobonds?

SR:  I think that jobbers and brokers and the Stock Exchange in general, took a very jaundiced approach to the development of that market.  They didn't feel it was part of the Stock Exchange.  And I know in the early days, especially firms like Strauss Turnbull which were very instrumental in the development of that Eurobond market, tried to encourage the Stock Exchange to participate, but I think it was pure apathy in the mid-sixties.  We were involved with a Labour Government, foreign exchange was an inhibiting factor and I don't think there was sufficient excess capital in either the jobbing system or the broking fraternity to really get involved in a structured way through the Exchange.  Now, I must say, even as a member of the Stock Exchange Council, that in many ways it was probably better for the development of the Eurobond market, that they were not controlled by the bureaucracy of the Stock Exchange, which would have insisted on a single capacity approach to it, and on membership, and it may have just stifled the growth in London, of that particular market.  The market would have grown; I rather fear it might have gone to another continental centre, or offshore somewhere, had London tried to have been involved with too much regulation.  It's a market which grew amazingly well during especially the seventies, with very little regulation.  And eventually the AIBD was formed to become a structured, lightly structured, body to look after the activities of that market, which became huge, as we all know in the seventies and eighties.  It still is a big market.

BA:  Were any of these securities actually traded in the House?

SR:  Yes, there was the odd sort of issue which seeked a London listing and if it had a London listing, then it went through the normal procedures of the jobbers having a tranche and being offered through the brokers to the professional market - the retail market never got involved in Eurobonds. So there was a little bit of activity in those which were listed, but the bulk of them were listed in Luxembourg, very light regulation, and then the secondary market that developed after that was in a very much freer state.

BA:  And does that also mean that the jobbers who were dealing in Eurobonds were seeing a whole different range of brokers in trading those securities?

SR:  No, the jobbers were still restricted, certainly in the mid-sixties, right up until 1976, to deal with the member brokers of the London Stock Exchange, who, with the exception of four or five, were not large in that market.  The big players were the big American brokers and others, the big Swiss organisations, outside the Stock Exchange.  So the jobbers were restricted to dealing with those members of the Stock Exchange or one correspondent in an overseas centre, which didn't give them very much of a window onto the professional world where this activity was taking place.  What happened in reality, and it would be better for the jobbers to answer this question than me, but my understanding of it was that there was a tranche offered to the jobbers where there was a London listing, those jobbers placed them again with those four or five professional brokers that were interested in that market, and there was a little flurry on the first day of trading, maybe for the first hour or so, where that tranche got absorbed, the jobbers took their turn, and there was very little secondary market after that first day. The activity was taking place away from the Stock Exchange.  So it never really developed to a secondary jobbing market, if you like, until we changed the rules in 1976, whereby the one correspondent rule was widened to allow a jobber to deal with a market maker, a non-member firm market maker, who was registered through the AIBD as a primary trader. And then we allowed those jobbers to deal with those people. So it gave them a window onto the professional market, those players that were not members of the Exchange.  That was very helpful to Akroyd & Smithers, when we developed; and I think we went into it in 1978, because the rules had changed in 76 which allowed Akroyd to deal not only with members of the Stock Exchange, but those primary dealers, those registered market makers of the AIBD, who were very active in the secondary market for the new issues of Eurobonds.  And of course the Eurobond market, unlike the equity market, even the gilt market, was such that all issues had a limited period of activity in the secondary market.  They were issued, they were traded around the system for two or three days, and then they all went into very firm hands, so there's never been very much trading in the secondary market of Eurobonds except in the most recent issue.  And I believe, not that I'm an expert, that is the case even today.  So the Stock Exchange did lose a potential huge market by not getting involved in the mid-sixties but I think under our single capacity rules, it would have been difficult to have been involved.

And as we move on in the story of the development of the Exchange and its activities and jobbing into the eighties, I think that the equity market, not so much the gilts, but the big UK equity market, was going in the same direction as the Eurobond market, whereby the big international intermediaries that were not members of the Exchange, were taking a very much larger slice of the transactions that were taking place in those securities, and dealing those on market into New York and other Exchanges, thus taking the business away from our jobbing system and quite a lot of our UK brokers.

BA:  And this involved the actual client dealing direct with the international firms you were describing as primary dealers?

SR:  Yes, and very much the professional client, not the Aunt Agathas of this world; but the big professional fund managers, insurance companies, were being actively wooed by the non-member firms of the Exchange, the Salomons, the Goldmans, the Merrill Lynches, the Wood Gundys, those firms that had had a presence in London for some time, had developed a following from those big institutions in their own domestic securities - Merrill Lynch, obviously, American shares, they were researching and offering in London - having built up the following from the institutions, felt that they could widen their scope of interest and offer business in UK stocks.  A healthy market had developed in the New York Stock Exchange and the NASDAQ market in ADRs, American Depository Receipts, on some of our UK stocks, which took it out of the UK settlement system and registration, which was time-consuming and expensive, so the development of ADRs themselves was a very important factor in the restructuring of the market place.  Because once you've created this bearer bit of paper, if you like, this depository receipt, then that itself became a tradeable instrument without ever having to go through registration, and of course the Americans that were dealing in this instrument with some of our big UK institutions were able to offer this very speedy settlement system at a negotiated commission rate as well, whereas our chaps, our members of our Exchange, right up to Big Bang in 1986, were forced to charge a fixed commission, which was quite high.

BA:  Did you feel there was any way of counteracting this from within the existing single capacity system?

SR:  We should have changed our systems in the mid- to late seventies, to take account of the evolution of the market in America and the continent.  We were quite able to change as the Stock Exchange had done in its very long history.  We were very flexible in the development of the market place, on a global basis all through, between the wars, after the war.  But where I think we came unstuck was, when we were referred to the Restrictive Practices Court, and I think it was 1976, it was like pulling down a shutter on the activities of the Exchange and any possible evolution or change of regulation which might have encouraged our members to go out and seek this business which non-member firms were actively pursuing.  I think in 76 we none of us appreciated the importance of this reference to the Restrictive Practices court, but as the 70s went on we realised that the ball game had changed and from May Day 1975 in the United States, when the American brokers were allowed to deal in a negotiated commission way, they were exporting this new found freedom to other parts of the world, not only content to do it in their own domestic stocks, they were looking for opportunities to do it in other securities. So in the late seventies certainly they were very keen, these big American groups, to deal in UK stocks which were truly international stocks, the BPs and the ICIs and the Glaxos, and the Fisons and many many other stocks which were active at that time.  And of course the business which was taking place through the American brokers into the American Exchange, was business which was being taken away from the jobbing system.  Up to a point, the London brokers managed to find a niche for themselves, originally taking business from the London jobbing system not onto the brokers' books, but the brokers acting as agents, into these American houses.  So there was, from time to time, a flow of business away from jobbers into the ADR system, and then when investment changed, the strategies changed and the climate changed, that business would sometimes flow back into the London market.  So we saw the outward flow and the inward flow, but what we didn't see was the day to day activity in between those flows.  It was like any market place, unless you are seeing the totality or jolly nearly the totality of business coming into your market, you cease to be the most important market and people will look elsewhere; and that's the same whether it's the fish market, the meat market or whatever market you're talking about.  So where we had been very much the primary market for our UK equities, we were losing it, and this became far more apparent in the late seventies and early eighties, and still we felt we couldn't do anything from a regulatory point of view to ease our commission rules, ease our single capacity rules, because we had made this decision, through the Council, and this was accepted by the membership, to defend ourselves in the courts.  I don't know how history's going to react to this and what it will say, but maybe we should have taken the bit between the teeth in the seventies and said, we're going to abandon what is seen to be a restrictive practice, and we'll go out and have dual capacity and negotiated commissions in an evolutionary way, rather than Big Bang which was a revolution in the change of the markets.  But it's probably still too early to say whether we got it all wrong or whether we had no alternative than to go down the route which we went down in 1983 in the deal with Parkinson.  I'm still uncertain in my own mind whether one can come out categorically to say that we made mistakes or not.

BA:  Would the jobbers themselves dealing more exclusively in the domestic equities in the seventies, be as conscious of the problems that they were up against as perhaps you may have been from the perspective of the Council chamber or as a jobber who'd also jobbed in international stocks and was much more conscious of the structure of the market outside of London?

SR:  I think having that international flavour to my business was of great help to me.  I used to travel abroad quite a lot and therefore I became conscious of what was going on in the overseas markets.  That isn't to say that the big powerful jobbers didn't make themselves aware, I simply don't know.  But having said that, the domestic jobbers tended to keep themselves very much to themselves and didn't seek too much to adopt the ways of the big international firms; so I don't know, that's a tough one to answer.  I personally kept pushing for change at the Council level to our approach to business.  I wanted to open it up a bit more, I would love to have seen the jobbers having an opportunity to deal directly with member brokers of other Exchanges.  The world was becoming a smaller place, communications were excellent, Reuters was making prices available in all manner of securities to the international investing community.  The world had changed apace since the sixties, and I don't think the Council in its governance really took enough notice of that change, and indeed, the big operating firms themselves.  The brokerage community were aware of change and had adapted their business very much to take advantage of communications and the development of the overseas activity, both in overseas stocks and overseas activity in our British stocks.  But I think the jobbers were a little bit slow.  I guess it's like all things, you become a little bit complacent.  The single capacity rules were fine when there was lack of communications and lack of outside involvement, because the broker was honour bound, by regulation, not just honour, to bring all his business to the jobber.  So the jobber was content that he was going to see this business, albeit in competition with his fellow jobbers, that was fair game.  But directly the brokers started to take their business away from the jobbing system, then I think the writing was on the wall.  It was certainly apparent in the early seventies in the foreign markets, where brokers were not bringing their business in overseas securities to the jobbers.  They managed to get the rules changed in the Council before I was up there.  The rules were changed in 1973, to allow these brokers to deal away from the jobbing system.  And because there were no really big powerful jobbers involved in the foreign markets at that time, I don't think there was the outcry there would have been if the same rules had been made for the domestic stocks.  But it was the thin end of the wedge.  And the brokers who enjoyed doing that in foreign securities, I think, saw the opportunities developing in domestic securities.  We saw quite a move towards what in our jargon was called the put-through in the late seventies and early eighties, which was unheard of except in very isolated incidences before that, where a broker would come up to a jobber, the broker having found a client who was a seller of a particular line of stock, and the broker had managed to find a matching buyer for that line of stock; so the broker, quite rightly, wanted to do both sides of the business, would come to a jobber and clear the price with the jobber at which this transaction could take place, and there was a very small turn in it for the jobber.  It had to go through the jobbing system to comply with the rules.  So the broker, having been approached by a seller or a buyer, having actively found the other side of that market, dealt through the jobber;  and the jobber no doubt in the early days was happy to take a small turn on that because there was [little] risk.  But the broker dealt with the commission both sides, very attractive business to pursue.  And as the brokers developed their research capability more and more, then the institutions would push their business towards the broker that was researching the particular area that the institution was interested in, and if there were buy recommendations coming out from a broker, then a buying institution would clearly go to that broker to give him orders.  But of course, a buy recommendation can also attract a great deal of selling orders from institutions that had been holders of that particular line of stock for some time, and see that there's going to be now an opportunity to capitalise on their investment.  So they take a view that yes, there probably is more to go [for] on this buy recommendation but let's sell into this new buying demand that's being created by this broker.  So an institution would often approach a broker that put out a buy recommendation to give him sell orders, because clearly if he was going to have success with his buy recommendation, he would get the buy orders.  Then what happened was that the broker would see greater opportunity for put-throughs, to match buyer and seller because of this research product, and he would go down to the jobber; and very rarely would a jobber spoil a put-through, that means interfere with it and stop it; he would want to ensure that it was going through at the correct market price which would be fair to both buyer and seller, and also not to upset the rest of the business that the jobber was doing with the other brokers in that particular security.

But this was getting up to the level where sometimes 8, 10, 12 per cent of the business was being done in put-throughs. Well, that was no good to the jobbing system, because although the jobber was getting his very tiny turn, and it was tiny, the jobber could not survive on that turn alone. The jobber needed to have the opportunity to take on lines of stock, or to sell lines of stock and do as the name implied, job that position back, and make a decent turn. Because he'd taken the principal risk and he deserved to make whatever turn he could out of it.  It could be huge sometimes.  And bearing in mind quite often, he jobbed that position back at a loss, he had to on balance get it right.  No-one ever made a profit on every deal, and no-one made a loss on every deal.  On balance, so long as you got it right six times out of ten, you could make a good living.  But if you were restricted purely to this tiny put-through turn, then your living was in question.  So in the early eighties because the brokers had developed this following with the institutions, because their research had improved, because the big international firms, who were not members of the Exchange, were attracting business from institutions, less and less business was actually coming in to the jobbing system.

BA:  What would a broker's response have been to a jobber putting the situation to him in precisely those terms?  That in effect what he is doing is killing the jobbing system?

SR:  It was put to them in those terms.  There were various meetings of jobbers.  The jobbers' committee itself was formed in 1975, in Chicago, at a meeting where we were all discussing the options market.  I think it was in the Sears Tower, I wouldn't swear to that, the six jobbers that were there, myself included, because I had Stocken in those days, formed the jobbers committee, out of the six largest jobbers, which I was privileged to be the sixth, I just scraped in.  Then there were five when I went out of business.  But anyway, the jobbers' committee; and the jobbers frequently met and tried to get it through to these big brokers that you're killing the goose, in a way.  Not that there was a great deal of golden eggs around for anyone.  It was still a struggle in those days, for brokers and jobbers to make a profit, and then you were so heavily taxed on it.  But none of us were enjoying a particularly high lifestyle, it was okay.  But how do you say to a UK member broker firm, don't do this or you're going to rock the boat so much you won't have a system, when he is in competition with a non-member Canadian, American, Swiss Bank, whatever, firm, who were equally able to secure that business from the wholesale institutional client.  So if there was ever a willingness for the brokers to try to cooperate with the jobbing system, I think the commercial logic of it was that they were in competition themselves with non-member firms.  Maybe that's how the world goes round, and I can't fault the competition and the commercial approach which had to be adopted by all sides.  

So there was I think still a little unfair balance towards the broking fraternity in those days, because they were allowed to do put-throughs, they were allowed to deal outside the Exchange with institutions, they were allowed go into the American market and deal, they were allowed to pursue that business as agents, not restricted by single capacity to only doing their business with a jobber, whereas the jobber was still, in domestic securities, and up to a point foreign securities, very much restricted to only dealing with his broker member.  So there was a bias in favour of the brokerage fraternity, certainly in those days.

BA:  Did that reflect the bias in terms of the far fewer numbers of jobbing firms in the Exchange now and the far greater number of broking firms?

SR:  I think it was more the bias at the Council level.  I think in terms of numbers the jobbers, in terms of people they employed...

Tape 4 side 1

SR: ... the jobbers could hold their own from the point of view of any negotiations that were taking place on the floor directly with the brokers.  But in the Council, which in those days was made up of I think it was 36 members in the Council, there were only eight jobbing firms represented, eight individuals. Not that they were supposed to be up their representing jobbers anyway, and the brokers weren't supposed to be representing brokers, but the harsh reality of it is that you're actually going to talk on the experience that you're taking to the Council.  The great thing about the Council was that we were all elected by the membership en masse, to govern the Exchange in the best way for all members, and you never spoke about anything which would advantage your own particular firm. But at the end of the day if you've got a bias towards jobbing because you're a jobber, or you're a broker, then you're biased that way - that's human nature.

And so any debate which in any way threatened the existence of the brokers, proposals being put up by the jobbers, never really stood much chance of getting through.  Although strangely enough, perception outside the Council itself was that the jobbers, because they were so powerful, were dictating all the rules up there. I can assure you that was not the case. There were many rules that I'd like to have got changed if I was wearing purely a jobber hat, which would have been of great benefit to the jobbers, but which never got through because the brokers had the vote.  Anyway, that was a detail.  I think that the jobbers certainly tried to make the brokers see the dangers of the developments which were taking place and might jeopardise the continuance of the market, but sadly it had little effect that I'm aware of, unless things were going on behind closed doors that I never became aware of.  Certainly during my whole life as a jobber since the mid-fifties, there was never a new jobbing firm that ever started. The system was under strain and probably had been since its creation. There was also either firms going out of business altogether, or mergers and takeovers, which brought it down to this very small number that we had in the eighties.

BA: You mentioned the formation of the jobbers committee in '75.  What were the circumstances of that?  Was it arising out of the kind of problems you've been referring to?

SR:  Yes, I think that we'd seen one or two mergers and firms go out in the 73, 74, 75 period and, bearing in mind the bear market of '74, there were a lot of casualties around at that time in the brokerage fraternity as well as the jobbing fraternity.  And I think we felt that divided we might well fall, that margins were under pressure, the spread which the jobber would make on a quote, was under pressure.  The brokers were pushing more and more to reduce that spread to an unrealistic level, where it would be hard to make a profit on a transaction.  The jobbers, because they were under pressure without the ability of price agreements, were taking up stocks which their competitors had traditionally been jobbing in, and the other jobbers had left it alone.  And so the market was being over-jobbed.  I think that when we all met in Chicago, away from the United Kingdom, and managed to talk of different subjects. (Traded options was a subject we were all really considering.)  We managed to sit round a table.  It was at coffee time, not at dinner time, when we'd had too much to drink.  We were all just drinking coffee, I remember it well.  And we thought, would it not be wise if we repeated that meeting and discussed the concerns that we all had as jobbers, because they all seemed to be remarkably similar.  We were all trying to strive to improve our market share, to improve the system, to stay in business to survive, during what had been a terrible period in 74 and early 75.  So we agreed that when we got back to London, that the six of us would meet again.  And we then agreed to meet on a regular basis.  Quite carefully we never called ourselves a jobbers' committee, and we were very careful that we shouldn't.  We never wanted the Stock Exchange Council or the proper committees to ever think that there was a jobbers' committee.  We were simply a collection of people that wanted to meet regularly to discuss some of the problems.  Now the outside world always did call us the jobbers committee, but we never were formally a committee.  We never had a chairman, we never had minutes or things like that.  We met over lunch at different jobber's office each time.  So it was an informal gathering of the six leading jobber firms.  It was always the same person from that firm that turned up; we didn't delegate it round to another jobber who would send somebody else along because he was on holiday or something.  That in itself strengthened any decisions that came out of that informal group, and I've got to be careful what I say there, because we probably never should have made decisions.  We agreed to do things between ourselves.  And I think that that did help.  It stabilised the system.  There were never any fewer jobbers than there were in 1975, apart from my firm which merged into Akroyds, and we did that the following year.  So there was one casualty.  And I was very pleased, because they allowed me to stay involved with the committee as its Council representative then, so I became a sort of honorary member of the jobbers' group.  

The sort of things that we did discuss were price agreements - was it right that there should be a 2p spread in ICI or a 5p spread in BP or whatever it might have been?  And it was thought appropriate that if we stuck to that as an opening gambit, it might be more beneficial for all of us, rather than to feel that we had to undercut each other all the time.  But there was total freedom to break away from that.  It was just your opening gambit would be an agreed 3p spread.  And we would discuss if a jobber wanted to go into a particular market to expand, there would be a discussion between the other jobbers, who would either be violently opposed to it because it would ruin the market or they would say, fair enough, and somewhat cautiously welcome it - that sort of debate.  If a particular broker was going around in such a way that his dealings were unhelpful to the market ...: because there were conventions, there was a code of dealing which the jobbers looked at and helped to form that code.  If a broker had a large order and he went to a particular jobber and he persuaded that jobber to deal with him in larger amounts than perhaps the jobber wanted to deal in to start with; if a broker said, 'what's the size?' and it happened to be 50,000, and the broker wanted to deal in, say, 250,000, he might have said to the jobber, 'if you deal with me in 100,000 to start me off, I'll leave the balance with you'.  Now that was perfectly in order, well within the code.  But if that broker or his own firm got another order and they went to another jobber and negotiated the same sort of deal in that same stock with another jobber,then that was out of order, because clearly the first jobber who had stuck his neck out to try, if it was a buying order, to find the stock for the broker, was now in competition with another jobber, who was trying to do the same, for the same broker.  So between ourselves we used to chat and if we became aware of this practice developing in one particular broking house, we used to get hold of the partner in charge of dealing in that firm and make him fully aware that we knew what was going on and don't do it again.

And similarly we became aware that the institutions were becoming more and more aggressive in their style of dealing.  They wouldn't just send in one broker to do a big order, they would send in one broker to maybe do half the order and another broker to go in and do half the order.  They would instruct Broker A to go to Jobber A and Broker B to go to Jobber B.  The brokers, in fairness, probably didn't know there was another side of the order going on.  Now because the jobbers had this rapport through this so-called informal committee, at the end of the day, if they really felt something was going on, they'd phone up and say, 'did you do a large order in XYZ security?'  'Yes we did'.  'Who did you deal with?'  And then they'd all get together and say, 'well that's funny, we did half a million', 'we did half a million', 'we did half a million'.  So you then went back to the broker and you complained and said, 'this isn't on, this is against the code, you go back to your clients and tell them that if this is the way they want to play, they will ruin the market for themselves, the clients'.  So it was very useful as a group, as a forum for discussing that sort of activity.  And constitutionally there was nothing we could do about it, we realised that. The clients would deal in the way they felt was appropriate and all we wanted to draw to their attention, through their broker, was that they would upset that fine balance in the market.

BA:  Were you able to put a stop to some of those things, or basically did the problems keep on recurring?

SR:  I don't think we ever stopped it.  I think we stopped it getting out of hand, because the institutions, they were quite bright; they would choose big brokers, sometimes small brokers; it was very difficult to get a handle on who they were using.  And I think the brokers themselves didn't know that they were being used in such a way.  And, you know, it's a free market and competition is there.  It was not desirable, but there was nothing untoward or illegal going on, so one just had to accept it.  It's a market place.

BA:  Did anyone accuse you as jobbers of getting too close together?

SR:  I think the brokers felt it was unhealthy from time to time, that there was this sort of cartel if you like, this group that was trying to dictate spreads, dictate sizes and dictate to the brokerage fraternity.  Yes, they didn't like it.

BA: And how would you respond to that?

SR:  I think we just had to say, there are so few of us left now, we're a dying breed, and if we don't get together to try and protect the system, it will disappear.  And by and large the dealing partners of the broking firms, who were very responsible people, understood the need for it.  It was the broker who was down the line in some of the smaller firms, who I think got a little upset.  You can't please all the people all the time.  So it survived as an informal group right up until Big Bang.  It's totally disappeared now, there's nothing like it.  I think it helped the standing committees of the Exchange when they were trying to formulate rules and regulations in the early 80s and late 70s.  It helped them to feel that they could approach this group of people in such a way that they would then be able to get a true feeling of what the jobbers wanted, or what they thought about a particular development.

BA:  And did you continue jobbing on the floor of the Stock Exchange right up to Big Bang?

SR.  Me personally?  No, after I went on the Council, I spent less and less time on my pitch, which was a shame in many ways because I enjoyed jobbing and I think - other people you'd have to ask really - I don't think I was too bad a jobber.  The thing about jobbing is though, you can't be a part-time jobber.  You are working with a team of people and whether you're the senior jobber on the pitch or the number two jobber, you have to be there pretty well all of the time to give confidence to your colleagues and to the brokers that are coming to you.  And if you are only there part of the day because you're going off to a committee meeting or a Council meeting or something, it is very unfair to your own colleagues to come back and question what they might have done - either buying or selling a position which you thought was unwise.  And of course in hindsight you could say, 'Christ, you've sold them and they've gone up a pound, that was a bloody awful deal'. Very easy to say that after the event, but [in] the circumstances when that deal was done, if you weren't there, you may well have done the deal yourself.  So that was an unhelpful dialogue which might take place from a part-time jobber.  And also the brokers like to feel they can enter into a dialogue with a person that they have trust and faith in, and if they want to do big business, or talk about a small deal, if they want to go up and talk to Stephen Raven about that deal, and he's not there, they're more likely to go and speak to a competitor, quite honestly, than speak to my number two.  They don't like it if the people that they've developed a business relationship with isn't there.  Obviously if people are on holiday or sick, or that sort of thing and they can't be there, everyone understands that.  This is a long-winded answer to your question: no, I didn't stay on the floor for too long after I went on the Council.  Probably for about a year or so, but I realised I was becoming more and more part-time, more and more of a pain in the neck to my partners, and probably to our clients as well.  So I tended to take more of a managerial role and looked more towards strategic planning than active jobbing.   It was a big change for me.  I'd been jobbing down there for twenty years, and I missed the floor very much.  But in the early days I was absorbed by the committee and Council work and enjoyed that as well.  And I think you would find that the other jobbers that went on to the Council more or less had the same sort of change in their business style.  They ceased to be active jobbers and were more involved in managing their firms off-floor, and of course that is totally the case now.  And I think also it is difficult for a broker, either a broker maybe involved in corporate finance or private client business, it's difficult for them to participate in active committee work and be heavily involved in their own businesses, a little easier [than] for the jobber, because maybe their decisions, their involvement with their clients etc are not quite as time-critical as a jobber's activity.  

And this probably puts into question the whole role of the Council and the type of person that would move onto the Council, even in the seventies and certainly through into the eighties.  Would it be somebody that had time to spare and thus wouldn't be missed too much by their firm?  In which case he ceases to have that sort of important role to play on the Council, because he's no longer involved in day to day decisions in his own firm, and has no longer got his finger on the pulse of what is going on in the market - both market-making and agency business.  So it does bring into question the role of the individuals that now serve on the Council.  I don't know the answer to that.  I think probably what has developed is that the Council members over the last five years particularly, have tended to play less of a role in developing strategy and day to day management of the Exchange than they used to have, and that role has now been taken over more by the executive staff of the Exchange, and the Council is used far more for a general advisory role, which I think is a pity. I regret that move away from the Council members who are the true practitioners, or have been in the past, and certainly have access through their own member firms [to] the needs of a practitioner.  I think they should be used more in the governance of the Exchange than they are currently being used, because no matter how good our permanent staff are (and we have some excellent people on the staff of the Exchange) it isn't the same in the way they formulate their business decisions, as arriving at those decisions, as somebody who's had to really dirty their hands in the business of the Exchange, when certainly in the times of unlimited liability, your whole life was on the line.  If you made bad decisions, you suffered from those decisions.  The permanent staff, many of whom we had bought in from outside Stock Exchange business from Government bodies, from other organisations around the City, have not had that day to day experience in a member firm and I find that regrettable. Not to say that they're not all first-class individuals in their own field, and extremely intelligent, but I just - maybe I'm old-fashioned - I just feel people are more able to arrive at good decisions, if they've been involved in the business themselves.

BA:  Can I ask you some more specific questions about the actual markets that you'd previously jobbed in?  At the time that you did join with Akroyd & Smithers in 77, were there many other jobbers jobbing in the stocks, the international securities, that you'd been jobbing in previously?

SR:  No, sadly not many.  There were not many jobbers full stop.  Wedd Durlacher were dealing actively in the Australian market and they had taken over another smallish jobber in Australians, whose name completely escapes me - it may come back to me - or you can certainly find out.  Smith New Court were very active in South African golds and mining finance houses, and had been for some years, so they were probably the market leader in that area.  Pinchin had developed a European jobbing section to their business, and I don't think a great deal was actually happening in European shares at that time but that they had the wherewithal to do it.  Bisgood didn't deal in foreign shares at all.  And so that's really the biggies.  Akroyd didn't deal before we went there.  They did have a small book in Hong Kong shares.  I'm not quite sure what the history of that was.  I think they were quite good in those shares.  The smaller jobbers - there was a firm called White & Cheeseman, who were very active in Australians, in Eurobonds, which we said earlier - they had a presence in Eurobonds; I don't think there was a great deal of secondary market going on in those sort of shares - and all manner of foreign bonds and convertibles and things.  They were really a specialist firm in that area and they developed a good business in those sort of securities.  And there was a firm called Medwin & Lowy, who also dealt in foreign bonds.  They were competing with White & Cheeseman, and they had an active market in American shares and Canadians and Australians.  Who else? Rattle, there was a small firm called Rattle, who were active in Australians, and some South Africans - they had quite a good book in South Africans.

BA:  Did all these markets have different characteristics to the markets in say UK domestic equities?

SR:  Oh yes, totally.  The basic difference was that we were providing a secondary market to the domestic market.  I mean we were never as big in any of those sectors as the markets in the home countries.  Perhaps with the exception of South African golds.  I think that on many occasions there was more activity in London than there was on the Jo'burg Exchange.  But in Australians and European shares and Americans, Canadians, we were providing a secondary market to the huge activity that obviously took place in the domestic markets themselves.  So that was a characteristic which made us more like arbitrageurs.  We were trying to take advantage of price differentials which might develop during the European time zone, after the close of the big home markets in these countries.  And we tried to satisfy either the supply or the demand that developed in the United Kingdom for those particular shares.  But even there I think we were only doing a fraction of the business.  There was still a great amount of business which either brokers themselves or institutions left to the opening of the domestic market itself, which is understandable.  If you have a huge deal to do in an American security, chances are you'd wait until 3 o'clock in those days for the New York market to open, rather than come to a firm like mine.  We made a market in American securities, but we made a market around the close the day before.  And because we were only seeing a very small amount of business in those particular securities, we may not have been in a position to make a price in the size that the big institution would want to deal in.  So I can understand them wanting to wait for the New York opening. 

And another thing which inhibited the activity in foreign securities, was the lack of visibility of what we were doing.  There was no visibility in what happened in the domestic stocks except a price in the Financial Times the following day, or the daily Official List.  And bearing in mind there was no requirement to mark your bargains as we used to say, even what you saw in the FT, even what you saw on the Official List, was probably only a fraction, maybe a large fraction, of the amount of business which actually was taking place.  So no visibility, mystery in our domestic stocks.  But in our foreign stocks, total and utter mystery as to what was going on.  So an institution needed to be sure that if it was dealing in a foreign security at the right price, it could never be criticised for waiting to deal in a large lump of IBM on the American market at the opening; whereas if it had dealt with a firm like mine, and it turned out it paid too much because the opening was lower in New York, it could be criticised, and the investment managers would come along and say, 'that was not a very wise thing to have done'.  So we understood that, in all of these markets, with the exception perhaps of South African gold, that we would only be providing a secondary market to those investors that just wanted to deal because of the immediacy of the price transaction which we could give them.  If somebody particularly wanted to invest in a British stock and sell a foreign stock to do it, they could come to a firm like ours and they knew there and then what they were getting for their sale.  And that was of some benefit to these firms, or vice versa.  If somebody had told them it was right to buy an American or Canadian share before the opening in New York because they were going to open up very much higher in New York, they would come and deal and take advantage of the price in London.  And sometimes that was very painful for a firm like mine, because we'd have sold stock without knowing the story that perhaps the buyer became aware of.  And the stock would open a dollar or so higher in New York and we made an instant loss.  Or we'd try to run the position and job it back.  So it was a totally different style of business. It was a style of business where people were trying in the main to take advantage of price differences between the home country and the prices we were making in London.

BA: Did you ever feel that the market knew more about the stock or the company, than you ever did as a jobber?

SR:  All the time.  We tried to appraise ourselves of all the information that we could get hold of on a particular security, but there was always the suspicion that the broker's client knew more than we did, especially if it was a large order.  But we didn't mind that too much.  Because once you dealt with somebody who you felt might know something - and you might have sold him not too many shares, not too much capital involved, and try and [get him to] leave some business with us to do when the New York market opened - once you'd done that, it gave you the opportunity then to go out and start bidding for stock, either through the London market or through people who had access to the continental markets.  So if we'd sold short of American Telephone, whatever stock, we might know that we'd done a pretty rotten deal, but go out and bid to cover that position and then buy more to take advantage of what was possibly going to be a higher opening in New York.  So although we'd lost on the first bargain, on that swing, we hoped to gain on the roundabout later, of a higher market in New York.  So we were all aware of the problems of the particular foreign markets we were dealing in and we hoped to get it right on balance.  But there were particular situations where it really did hurt.  But it was very much scratching the surface of the real activity which was going on through the big foreign houses which had established themselves in London over this period, in the fifties and sixties and seventies.  And we had to try as much as possible to develop a dialogue with those houses so that we could cross-reference any thoughts we had on a particular security.  And they were pretty open, they would keep us in touch.  And they themselves might want to deal in prices which we were making.  They had to deal through a broker in those days, pay a commission to get into us as a jobber, and vice versa.  We would have to deal with a broker, and he would have to charge commission on the price we were ultimately...

Tape 4 side 2

SR:  Jobbers dealing in the foreign market were dealing in a totally different market to the domestic market and we all realised that from day one.

BA:  Were you seeing a different range of brokers to the ones that would have dealt in domestic equities?

SR:  Yes, by and large I would say yes. There were firms of brokers that specialised in foreign securities, either themselves arbitraging out of the domestic market into our market, because they'd developed particular contact with an overseas institution or an overseas broker... There were a handful of firms that we knew had those sort of contacts, and you treated those differently.  You would make a different price in a particular security to those firms than you would make to maybe a small regional stockbroker who might be dealing for somebody in the Midlands who wanted to buy or sell a particular foreign security.  This was a feature of the old jobbing system, both in foreign and domestic securities, that there was not one price for everybody.  It was very much horses for courses, and you would make a price to one broker which would be in some instances totally different to a price you'd make to another broker.  You'd make your own backwardation, if you understand what I mean by that.  You might be making in today's jargon 3-6 to one broker and you might make to another broker 7-10.  So that you'd actually be prepared to sell them at six to one broker, but it appears as if you'd be bidding seven to another broker.  Now the only reason you did that is, you'd have a pretty good idea in your mind that the first broker that was coming up to you was a seller, therefore you only want to make him 3-6 and buy them at 3.  But the next chap who was coming up to you, you have a pretty good idea he was a buyer, so you make him 7-10, with a view of selling them at 10, not at 6.  This was I guess gut feeling for the market, your own knowledge of a particular security, your own knowledge of that particular broker's possible client base.  It was a skill.  You played around.

BA:  And did the brokers accept that this was part of the rules of the game?

SR:  Oh sure.  There was no commitment for them to deal with you.  They would go and check with another jobber, or check with the outside market. So we didn't have a monopoly situation, otherwise that would have been grossly unreasonable and unfair for us to have done that.  But we were looking after our own money.  As jobbers, we weren't there to provide a service to anybody.  We were there to make a living.  It was our own money on the line all the time.  And nobody came along and bailed us out if we got it wrong.  So any profits we did manage to make we felt quite justified in taking.  Because we were competing.  As I say, if it had been a monopoly, then that would have been unreasonable, but at no time did you ever deal in the certainty that you were going to be able to make a profit on that particular transaction. There was always competition.  So as the foreign market developed over the years, it certainly went more and more away from the jobbers to the outside houses, and at the time of Big Bang, fortunately a year or two before that,  we had developed the opportunity as jobbers to deal with a lot of these outside houses direct.  The rule was actually changed in 1979/80, which allowed us to deal with members of overseas exchanges direct in these foreign securities, much to the annoyance of many of the brokers.  But it did give us the opportunity to see more foreign business coming in, which for those genuine brokers that wanted to deal in those securities and not just arbitraging, it gave them a wider window of opportunity and more realistic prices to deal in.  Then in 1985 we started this screen-based system called SEAQ International, which the jobbers participated in displaying their prices on the screen, together with non-member firms, these big American and continental firms that had established in London.  They put their prices on the screen as well in these foreign securities, and then we had the makings of course of what has become an extremely successful market now, SEAQ International, whereby there are 54 separate firms putting their prices on the screen, some the old jobbing style firms, but more importantly, the big international players, taking advantage of displaying their prices away from their domestic markets.

BA:  So when the rules were changed in 79 were you entitled to deal with any number of member firms of overseas exchanges?

SR:  Yes, the restriction which had been in for many years, whereby you'd only been allowed to deal with one correspondent in one centre, which had been under pressure for some time as totally inappropriate, did change in 79.  It was called the designated dealer concept and we had to submit a list to the Exchange of those overseas brokers that we wished to deal with.  We didn't as a firm want to deal with everybody in America, or everybody in Canada or everybody in South Africa.  We had our favourite firms we wanted to deal with regularly, so we submitted those lists.  But I must say those lists did get longer and longer between 1979 and 1984/5 when the rules changed again, and to all intents and purposes, in the latter years, we were dealing with anybody.  And there was nothing in the rules that said you couldn't deal with everybody except they had to be on the list.  So you simply put somebody else on the list. It was as easy as that.  But the brokers who I believe had had the advantage for some many many years, certainly since 1973, didn't like it.  They were inclined not to bring their business to the jobbers. They would deal deliberately away from the jobbers in those days, because they felt that we were trespassing on their territory.  Because a lot of these overseas brokers that we were now able to deal with direct were the brokers' clients.  And I can understand their concern.  The world was going towards dual capacity and it was all going to break down in 1986 anyway.  So that was the first move if you like in foreign securities.

BA:  Let me just start asking a few questions as a way of winding up.  You've mentioned at various points some of the strengths and weaknesses of single capacity and of the jobbing system in particular.  How would you characterise those strengths to start with in brief terms?

SR: I think it was a marvellous concept when it came in in the early part of this century and there was this separation of capacity.  The regulation surrounding that I believe was absolutely marvellous, whereby the jobber agreed to always make markets to the broker and never attempt to go to brokers' clients, and as a quid pro quo the brokers agreed to bring all their business in any security which they had offered to them from their clients, agreed to bring that into the jobbing system.  To me that was a superb division of activity which I only wish was there today, because it worked.  There was tremendous trust built up between the brokers and the jobbers.  Nobody dared to trespass on the other person's territory and so the jobbers were always very very willing to make prices in as commercial amount of size as they could to the broker, because they knew that, although they were in competition with other jobbers, that that business was coming into the Exchange, into that membership and so they had a very good chance of seeing a good slug of the business.  And the brokers had no fear in opening to the jobber what he wanted to do, and in asking for a better price in a huge amount of stock; in leaving the jobber business to do over long periods of time, many many weeks or months in some cases, to undo very large stock; no fear in doing that because the jobber wasn't going to dream of going to find a client to do that with.  So it was a superb system and the advantage of that was, as I said right at the beginning, that there was this trust and faith between the two parties that the jobber would always make a price to the broker and the broker would bring all his business to the jobber.  And that was the secret. It would be the central market working at its best.

BA: Before any of these pressures built up that you have described during the seventies, did you feel there were any weaknesses in single capacity under the system that you'd known?

SR:  No, it's very difficult to see any weaknesses, as long as both parties were sticking to the absolute letter and spirit of the regulation.  No, I didn't see any weaknesses at all.  I obviously came into it very much later in the mid-fifties, and it had been going for some time and it had been very successful.  The reason there were fewer jobbers all the time was not because single capacity in itself was wrong.  It was I believe because the style of the business was getting changed.  There were bigger and bigger orders coming into the market which a one-man jobbing firm found difficult to be able to make a price in the size which was acceptable to the broker.  And so one man-firms started merging with another one-man firm, then two-man firms and four-man firms, eight-man firms and so on.  So you saw mergers taking place, which was purely ... economies of scale came into play and it was more appropriate to design your business that way.  It wasn't for any other reason in my opinion other than business was getting bigger.  The institutions were playing far more of a role in dealing in securities than the private clients.  The balance had changed and certainly very much changed since the War, so you had to stand up and make prices in a pretty fair number of securities after the War.  And the individual jobbers - they were all partners;  all unlimited liability - decided they'd had enough.  They'd either made their money or lost too much and decided just to get out of the business and there was nothing wrong in that.  So I find it difficult to find anything wrong with the single capacity approach to business providing all the players are going to be involved.  It came under strain after the War, first of all in the international markets because of exchange control etc where there were other factors coming into play, and because we didn't have a monopoly as the Stock Exchange and other organisations set up to do business in the City of London.  The game changed.  Before the War it was pretty well 90% plus of the business did come into the Stock Exchange, not necessarily the London Exchange, some of the regional exchanges.  But it was the same situation up there where it would all slosh around the system and eventually finish up perhaps in London as the largest Exchange.  

But as firms slowly set up in business away from the membership of the Exchange and managed to get a very easy licence to trade in London through the Government agencies of the time, and could demonstrate that they had membership of overseas exchanges, which gave them the respectability which the clients needed - because that developed, then the market became fragmented; and there was never the assurance from both the jobbers, I suppose, that all business was coming into them through the brokers; and indeed from the brokers, there was not the assurance that there wasn't somebody out there who was dealing as a principal - not a jobber, not a member firm - but was taking business away from the brokers.  So the brokers would then look for more business there.  

And again the development of research; not so long ago did research become a tool of the broker in order to get orders from the clients.  One can look back of course and see it as a natural development.  Clients were not going to deal in securities where they did not have some sort of information about it.  That is fair enough.  That information usually came from the central market place and the jobbers probably knew more about stocks than the brokers themselves; and the brokers used to get that information from the jobbers and pass it on to the clients.  And that seemed to satisfy the desire of the clients. But as more and more became available and more brokers specialised on research, then quite clearly those brokers were receiving orders as a result of that research and then as we said earlier about put-throughs, they were seeing both sides of the orders, and that business developed which put single capacity under strain.  No doubt about it. Because it ceased to be the brokers bringing all their business truly to the jobbers.  Yes, they were bringing it to the jobbers, but they weren't giving the jobbers the opportunity to make a decent turn on that.  It was just a tiny tiny little turn and the brokers were delighted to be getting full commission on both sides of the business.  That put it under strain.  I can't say it was wrong.  The clients wanted research.  The brokers were the right ones to supply that research. It was a natural development of the business.  But then little jealousies started to develop, little concerns that the brokers were not necessarily playing the game according to the rules and bringing their business to the jobbers.  The jobbers started developing a rapport with some of the institutions. The jobbers knew when orders were coming into the market, which upset the brokers.  Not that the jobbers ever dealt directly with institutions, but communication was such that you would meet people over lunch or have a telephone conversation with an institution, and they would tell you that they're getting involved in a big buy program of XYZ.  So that started to annoy the brokers.  And then of course more and more these non-member organisations were dealing directly with institutions.

Had you had some sort of Royal Charter or monopoly; or some requirement that a client could only deal and have a member firm's contract note, or that any organisation over here had to be a member of the Exchange to solicit business and not just a Board of Trade licence to deal, which you get as easily as getting a dog licence;  had that at all not have taken place then we may well have seen a single capacity system still operating in the Exchange today, which to a degree you've still got in the two largest markets in the world.  You've got it in America, the specialist system; you've got it in Tokyo with the Saitori system.  They operate and they do more volume than all the other European exchanges put together.  So who knows.

BA:  Just to conclude, what would you say had been the qualities required either in you to be a successful jobber, or the jobbers that you'd known?

SR:  I think the basic quality was commonsense; a sharp mind; you had to be very flexible; and you had to develop relationships with what were going to be your clients, the brokers.  So I think they were the qualities.  You didn't have to be a rocket scientist; you didn't have to have a lot of degrees and qualifications from an education point of view to be a good jobber. You lived by your wits and you had to be acutely aware of everything that was going on in your market that you were concentrating on; make yourself aware of all the news items, which I put down to basic commonsense.  And that was about it.  It was hard work.  You had to be totally dedicated to it, and if it demanded your complete attention on the pitch all day you gave that your attention.  You were there all day, late hours into the evening, if it was required of you.  I can't say any more than that I don't think.  Many many of my jobbing colleagues over the years have come up from very humble backgrounds and humble education, very few qualities at all, and they've turned out to be extremely successful jobbers over the years.  That's not to say that you haven't had extremely well educated ones as well, degrees and whatnot; they've also been good jobbers. It was open to anybody.  But you had to have that ability to get on with people, and to have your wits about you at all times.

BA: I think we can finish there, thank you.