There were lots of things that astonished me when I lived and worked in Tokyo as an FX trader for a time in the early 1990s. It was a glorious, yet totally alien world. One detail in particular used to amuse me no end. At midday, the bustle and excitement of trading in the Tokyo market would stop abruptly. No matter how berserkly the markets had been trading, brokers would announce that it was lunchtime and the lines and boxes would go silent for an hour.
In many ways this was always a relief – nights out in Tokyo were often brutal. Ducking out at midnight was considered the mark of a lightweight. Three a.m. finishes were commonplace and all-nighters all too regular. The lunchtime hour was always good for a quick snooze.
Today, sad to say, trading carries on through the lunchtime hour. The quaint Japanese habit was simply overtaken by developments in the rest of the market. If Tokyo was closed, then FX could be transacted in Singapore or in Sydney. The first brokerage house in Tokyo to keep lines open during the hour probably thought they’d get all the deals – I can only imagine that when the dam broke, however, the rest of the market followed quickly.
These days it just seems inevitable that ‘inefficiencies’ like the Tokyo lunch break will be ruthlessly eradicated from business life. Another example is that the gradual encroachment of business duties into the hours that used to be free time seems to be unrelenting. Mobile phones and emails are the culprits. I think that if I were to map out all the times at which I’ve read or written emails, every available slot on a 24-hour clock would be filled – and that’s before counting the ones I used to read or write while awake, jet-lagged, in the early hours of the morning in some foreign hotel room. I’m sure most business people could say the same.
This doesn’t surprise me. The twin forces of technological development and commercial competition together create supremely powerful pressures in only one direction. You can try to be the banker who doesn’t answer emails after 6pm, but you’ll be overtaken by one who will. You can try to be the bank that doesn’t automate FX, but you’ll be eaten alive by the ones that do. So powerful are these twin forces that I managed to get an entire 300-page book out of talking about them.
But one aspect of the world of trading has not changed and doesn’t seem as if it will. No one trades at the weekend. In many ways this seems curious. Events often happen at weekends that require some kind of market response (anyone who has had to trade the spasmodically gyrating markets in early Asian time on the Monday after a weekend G7 meeting would no doubt agree with me).
Commercial pressures in other fields (take, for instance, shopping) have very markedly softened the distinction between weekdays and weekends. Given that a lot of flows in markets like equities and FX are carried out by retail customers, wouldn’t weekends be more convenient for them to punt on – just like weekends are best for them to shop? It seems – for the moment – this argument is not being taken up when it comes to trading – at least in the wholesale markets.
Years ago, though, when I worked at Deutsche Bank, we came pretty close to breaking this particular taboo. It was in around 2005 or so, when we were in the first flushes of our success in the automated trading of spot FX. Why not, it was suggested, leave ARM (the spot pricing and risk system) running over the weekend? We would have no external liquidity to call on but if customer flows were more or less balanced and if spreads were wide enough – it was envisioned that the weekend spread would be a multiple of the weekday – we would be fine. We could create a whole new market and mop up 100% market share of anyone wanting to deal when every other bank was shut. Knowing the temper of the times I am sure that the dreaded words ‘Euromoney Poll’ might have been mentioned – weekend volumes would add to our score in this annual trial of strength, which was then considered vitally important.
The proponents of the scheme also pointed to the fact that it would not be enormously costly (a couple of hapless overseers from trading during London and NY hours and a few from IT) and would be a tremendous marketing tool for the bank’s capabilities. I suspect that there was a keen sense of mischief at play as well. Why not lob a brick through the window of the cozy FX club and see what happens? I have to admit that part of me was attracted to the idea for this very reason. Who doesn’t have a secret urge to stomp on sandcastles?
Eventually we did not do it. The counter arguments were partly rational – all about costs and IT budgets that could be spent elsewhere – but also partly just because of a primitive, almost atavistic horror we felt about what the move would mean. Dimly, we all realised that, although we would be the first to trade at weekends, we would not be the last. Just like the first broker to break the Tokyo lunchtime curfew, we would be joined by others. In time, if this happened, the weekend would be just another working day in FX land. Inside Deutsche we’d be on the hook to oversee it – a pain. Worse still we would have pissed off the FX market as a whole; everyone would know we had been responsible. We would have been shunned by polite society (or as polite a society as you could find in FX). Back in 2005, before all bankers were pariahs, that meant something.
Looking back, I’m glad we made the decision we did. I also hope that, if weekend trading ever does come to any market, no one points to this article as the initial impetus for their thinking.
If they do, you’ll know where to find me: like Homer Simpson, I will be living under the sea.