There is nothing new about fake news. Rumour, fact and revisions.

If you want to know ’bout the bishop and the actress
If you want to know how to be a star
If you want to know ’bout the stains on the mattress
You can read it in the Sunday papers
Sunday papers

Joe Jackson

It occurred to me that many of you , my dear readers , will have no idea of how news was gathered and disseminated in previous eras and as information played such an important role in the day that I last described I would like  to share a few more memories revolving around its gathering , use and importance .

News has been the lifeblood of the financial markets since time immemorial. Despite appearances my experiences only go back to the mid-1970s. Even in that, to me, short period of time the way news has been gathered, presented and disseminated has radically changed. Late last year I attended the funeral of my first City boss. William Romney Cooper Dyson. Even the name now seems reminiscent of a bygone era. After the funeral I was sharing a glass or two with some old colleagues from what seemed another life. I will not embarrass myself with describing some of their memories of the shy and callow youth that I was, but I will share a memory of one of William (Bill) Dyson’s great pontifications –which I will always remember him saying , as he looked at a newly installed monitor ‘This is the day the market died’.

What was Bill referring to? None other than the introduction of the first Reuters screens displaying prices from other brokers and banks  .This innovation occurred in the mid 1970’s and up to that point Reuters had been purely a news service and the pricing of financial instruments from overnight funds through to bonds and gilts had been the preserve of each individual broker . To clarify this, which may seem shocking these days, we kept a book in front of us and made the prices from the buying and selling orders that our colleagues gleaned. We were in fact blind and our equivalent to the now ubiquitous price screens was an old blackboard which the juniors kept up to date with price movements. I was one of these “board boys “and I can assure you it was amongst the worst jobs that I have had. When the market was slow you were the buck of all jokes as well as being the general errand boy. That was bad enough, but when the market was busy you were constantly chalking up changing prices and remember this was a “held “market. A held market was where the broker had to justify and deal on the price he made …or pay the difference between the prices quoted and those dealt at  .I can still hear the shout of “ difference “ or “cheque book “ when things went wrong . The reason Bill was so anti the screens was the all of a sudden our knowledge was shared outside of the environs of the dealing room and the other market participants had price transparency .Knowledge was then, and still is, power.

News and pricing, as I have described, started to make quantum leaps forward with the innovation of small fast hand held computers and radically changed the financial markets. However some institutions were reluctant to change and even in the late eighties and early nineties The Bank of England relied heavily on the nods and whispers of the top hatted discount house brokers (The Discount Houses acted as the Bank of England’s money market intermediaries, until 1996, and their dealers wore Top Hats whilst out of the office on business). The days of the Minimum Lending Rate (precursor to Base rate, the UK’s headline interest rate) for the following week being displayed in a window in the bank of England every Thursday, having had curtains dramatically drawn back, lasted till the late seventies. In those days the city was awash with runners and messengers who would dash back from the bank of England to their offices with the news .Obviously those situated closest to the bank had the edge and it is no coincidence that all the Discount Houses and The Stock Exchange floor were located within about 100 yards of the Bank of England.

Gradually as the internet became more reliable and powerful computers shrank in cost and size not only the markets changed but also its participants. But let us stay back in time for a while and loiter in the late 1980s. The worldwide futures markets were in their ascendency and the colourful chaos was in full voice .Then, as now, there were two distinct types of news which I call the predicted, such as Non-Farm payrolls which the market geared itself up for and the random walk events such as a resignation or unexpected government change of policy. The atmosphere on the floor pre the release of an important economic figure was part fear, part humour and part excitement. All your buy and sell orders were ready in ascending and descending price order, hand signals agreed , throats cleared and sightlines readied and then , from nowhere the murmuring of the tune to “ The Twilight Zone “ would start to be heard until it seemed the whole floor was humming and then , suddenly an eruption of noise as the figures broke . I genuinely don’t think anyone ever got information on the markets really early but you would occasionally see the big houses buying or selling a split second early but was that because they had better latency ? I like to think so.

The random walk of a sudden and unexpected news event is harder to describe, partly as they always seem to happen whilst I was either having breakfast or, believe it or not, afternoon tea. The look on the poor runners face as they found me sipping a cup was often of sheer panic, tea mugs and sandwiches were left as we sprinted back to the trading pits where the action was .Hard to believe now but mobile phones were in their early stages, as well as being the size of bricks, so we relied on the juniors literally to run. As a floor broker the interpretation of the flow of orders and the implication of the event needed to be immediate .Only the briefest of overviews was possible and again the feelings of exhilaration and fear overwhelmed everything.

Now the markets are automated and pricing movements are analysed instantaneously. Floor traders are no more and the last vestige of voice brokers just about hang on in the money markets with the sale and merger of the last two to become TP ICAP and as some observers have said this was a smart way of Michael Spencer ( CEO of ICAP)avoiding the redundancy claims of his brokers. Despite all this innovation there is one truism that overrides. From the days of the Rothschilds knowing that Wellington had won the Battle of Waterloo a full two days before the rest of England to thinking that you have an edge because you have non-farm payrolls first remember one thing. Wait.

There is a wide spread assumption that the Rothschild’s greatly increased their fortune by acting on the key political news that Wellington had triumphed in 1815. They had got the news days before the rest of the world first they told King George III and then waited a full two days before they acted, and then a further 18 months before realising their 40% profit. So what relevance does an act over 200 years ago have? The lesson to remember is that even in these days of 24 hour rolling news, instant analysis and rapid execution always wait for the news to sink in and be wary of the revision of the revision of the headline number .Indeed I remember on the day Great Britain left the ERM a rumour hit the market the signal went into the pit for my trader, aptly named as Nuts (he was the mutts nuts not mad!), to buy everything. In the furore that followed Nuts had his glasses knocked off and being blind as a bat had to scrabble around on the floor to retrieve them and in doing so missed the market …by the time he was back bespectacled the rumour had been denied and our buy order had changed to a sell and as such his semi blindness had saved the client a fortune!

Just remember there is no such thing as fake news just fake reactions.

2 Replies to “There is nothing new about fake news. Rumour, fact and revisions.”

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