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

Interview No. 42: George Birks

Interviewer: Bernard Attard 

Institute of Historical Research: 18 October 1990

Tape 1, side 1

BA: Could you first tell me, Mr George Birks, where and when you were born?

GB: I was born in 1932 at Walton on Thames in Surrey.  My father was a solicitor in London.  And I lived at Walton on Thames until he died in 1949, just as I was about to start articles with his firm - I was due to become a solicitor - but I, at that stage, decided to do my National Service instead.  

BA: What date in 1932 was that?

GB: 13th of September.

BA: And where did your parents send you to school?

GB: I went to a school called Kimbolton in Huntingdonshire until I was about 11 and then I was ill for a year and, because of the distance involved, I then went to Cranleigh in Surrey.

BA: Had your family had any background in the City?  Had your grandparents been involved?

GB: No.  The answer is no, although when I joined the Stock Exchange in 1952, there was a firm called Henry Birks and Sons - my father was a Henry Birks, which was a bit of a coincidence - although I think there is a family connection there it is very distant.

BA: Now how was it that you came to be working in the City?

GB: When I came out of the army, my father having died, there was no prospect of my existing as an articled clerk for five years without pay as the situation was in those days.  I needed to get a job and I got a job in the City with De Zoete & Gordon as they then were called.

BA: How did you get the job?

GB: I can't remember.  It may have been through the Public Schools' Appointments Bureau; I think that's what it was.

BA: How did your career with De Zoete progress?

GB: I started in the General Office in De Zoete & Gordon.  I spent a year there keeping a gilt-edged jobbers' ledger; then I went into their private client department, answering the phone to banks and private clients; then I spent about a year in De Zoete's private client department doing valuations and reports; then I went and spent another year to 18 months in their gilt-edged back room as they called it, which was a room up in the main office.  De Zoete's gilt-edged partners all operated from a box in the Stock Exchange and I spent my day in this room working out redemption yields and preparing lists of yields which went out to clients.  Then I went into the House as a blue button with De Zoete & Gordon and I suppose I was in the House about a year with them and a job was advertised in the Financial Times for a blue button which in those days was a rather princely salary of £600.  I applied and in fact got the job.

BA: And who was that with?

GB: With Phillips & Drew.

BA: When was that?

GB: I joined Phillips & Drew in September 1957.

BA: Before we leave De Zoete, what kind of broking firm were they?  How did they fit in the hierarchy of firms at that time?

GB: They were a very long-established firm of Stockbrokers.  They were, I would say, large to middle size or middle to large size with a speciality in tea and rubber, which Sir Martin Wilkinson who subsequently became Chairman of the Stock Exchange, his father before him had operated in the tea and rubber market and in much earlier years of course they had been quite large areas of the market.  But they covered the waterfront and they had a very good business.  They were rather old-fashioned in those days by comparison to Phillips & Drew.  When I joined Phillips & Drew it was a completely different atmosphere and set up: in De Zoete's, unless you were a partner you weren't normally expected to speak to clients to any great extent in those days; whereas in Phillips & Drew responsibility was heaped on you at a very early age.  When I joined Phillips & Drew there were probably only a hundred people in the firm altogether: there were only about ten partners.  And we had quite small offices in Pinners' Hall.  By the time I retired there were 72 partners and very nearly a thousand staff.

BA: Were they already at that stage specialising in gilts?

GB: Yes.  Each department in Phillips & Drew was relatively small. I suppose that there were three partners on the gilt-edged desk, with perhaps three assistants; and a similar number operating in the equity market.  But already Phillips & Drew were building up a reputation for research both in the gilt edged market and in the equity market, and their whole reputation had been founded on professional people: either actuaries, chartered accountants or people of that calibre. I had no qualifications, I might say, in that line for the role I carried out, but I had had I have to say, a good training and a good groundwork in De Zoete because I'd had training in so many different aspects of their business which stood me in very good stead.

BA: Do you have any early memories of going on to the floor of the House as a blue button with De Zoete?  Which markets were you associated with?

GB: I was a general blue button with De Zoete in the equity market.  It was in the old Stock Exchange.  I don't think I had any specialist role as a blue button in those days.  

BA: What was your job then?  Were you collecting prices?

GB: Yes, yes.  I would say that also in De Zoete in my early days, as well as keeping this gilt edged jobbers' ledger, I did the checking which in those days involved going down underneath the Stock Exchange and checking the bargains that had been done the day before - one was a red button then - and then one became a blue button on the floor of the House.  I was a general blue button for De Zoete.  When I joined Phillips & Drew I joined as a blue button.  Phillips & Drew had a very small House staff: they had one partner and two dealers and I think two blue buttons when I joined.  And the partner dealt in the gilt-edged market and the two dealers dealt in the equity market and they were very understaffed.  Coincidently with my being taken on as a blue button, a man called Paul Bazalgette joined Phillips & Drew as a senior dealer in the equity market because Phillips & Drew realised with the expansion of their business they didn't really have sufficient skill or numbers of people in the House on the dealing side.  Paul Bazalgette joined Phillips & Drew on the equity side as I joined them, on the equity side in September 1957.  Within two or three years he became a partner, and he was taken on with the prospect of becoming a partner.  He was a very well-known and very respected dealer on the floor of the Stock Exchange, in the equity market.  I spent I would think it would be two years on the equity side of Phillips & Drew and then I was asked if I would go onto the fixed interest side and join a man called Arthur Beard, who was the partner in the House, as his assistant.  So I did that, and in the early days he dealt in gilt-edged stocks as well as debentures and preference shares and for no particular reason also dealt in banks, hire purchase and insurance shares. Those three categories were not dealt in by the equity dealers.  And so I became his assistant, and I think in a short time I was authorised as a dealer.  His wife was seriously ill for many years and he wished to retire early, and in fact retired I think in 1962, and I then became, rather luckily perhaps, the senior gilt-edged dealer for Phillips & Drew in 1963, and was made a partner in Phillips & Drew in 1963 at, I suppose I would have been, 31.

BA: Was that relatively young for becoming a partner?

GB: I think, let's say, I was lucky to be a partner at that age in that role.  So, although I held the senior position in the gilt-edged market in terms that I was the senior gilt-edged dealer for Phillips & Drew and we were a firm with an expanding business in the gilt-edged market, I was very much younger than the other comparable dealers in other firms: for instance, Mullens, Pembers, Grievsons, De Zoetes; they were all men in their 50s.  I think the hierarchy in the Stock Exchange then was older than it is today.  You didn't aspire to seniority or the partners tended to go to an older age anyway and all those senior dealers, as I say, were in their 50s and I was barely 30, so I was very much the boy in a older man's world.  

BA: Did you feel that placed you at a disadvantage in any way?

GB: I think in some ways it worked to my advantage because I was in a sense a bit different because of my age.  It may have allowed me to get away with a bit more than I might otherwise have been able to.  I formed, over the years, a very close friendship in business terms with the partners of Wedd and Akroyd particularly, and a firm called Wilson & Watford.  Phillips & Drew always had a very close relationship with Wilson & Watford.  Arthur Beard had been a great friend of Herbert Wilson who was a very good small jobber; and I think Wilson & Watford ran almost equal third to Francis & Praed after Wedd and Akroyd.  Wedd were amazed when they discovered the extent of our business with Wilson & Watford as they did; they never realised that Phillips & Drew had the size of business until I started dealing with them. They had been unaware that we this size of business because a lot of it had been done with Wilson & Watford, in fact. 

BA: Why were they amazed that you were doing a lot of business with Wilson & Watford?

GB: Arthur Beard who I had great respect [for] and who was a marvellous mentor of mine, at one stage had a bit of a row with Dick Wilkins and I don't think they ever quite got on so that we didn't do as much business as we might have done with Wedd.  Akroyd, the senior partner there was Hugh Merriman, and I was a contemporary of Brian Peppiatt and Tim Nixon who were the same age as myself; the partners on Wedd's book were all of the Wilkins' era in that Wilkins, Priestley, Dick Russell, were all of a similar age, and then in those days John Robertson was on the book and he was my age - he was a bit younger than me - but he didn't remain on the long book for many years after I became the dealing partner for Phillips & Drew.  So most of my dealing was with Wilkins, Priestly, Merriman, Peppiatt, Nixon, with Wilson & Watford - Herbert Wilson and his son Nigel Wilson.  We had quite considerably less dealings with Francis & Praed.  We did a certain amount of business with Bruce & Hinton, and then most of the other firms were smaller and we didn't have institutional business of a size that we could transact with them.  We did a certain amount with Campion & Pawle but that didn't amount to a great deal.

BA: Would you say you learnt most of your dealing skills from Arthur Beard?

GB: Yes, he was a very respected man.  He could be very fearsome, but he was very shrewd and yes, I certainly learned a lot from him.

BA: Is it possible to identify certain qualities that one needed to be a good dealer?

GB: I always felt that the first and most important thing is not to be hypnotised by a price: a price is only a figment of anybody's imagination at any particular time; because they were calling a stock a certain price, didn't mean to say that in the end you needed to deal within that price.  A lot of people felt that that was the price and that was all they were going to get.  And in many ways, by asking a jobber what the price was, you gave him the initiative because he said what his price was.  I think a broker's role was to know the price, or to know what to expect the price to be.  If the market was falling the right price might have been quite a bit below what they were actually calling them and therefore if you were a buyer there was no reason to feel that you had to deal within the price they were quoting, you might well finish up getting it cheaper than that.  So I always felt that if you asked a jobber a price you might well hear something you didn't want to hear and it was far more important, in my book, to know what the situation of jobbers' books were in the market, both as a whole and in individual stocks.  And you gleaned this by experience and being trusted by them.  If you got an order, very often the way to do it was to say, 'I'll give you so much for such and such a stock', and forget what they were calling them. Because if you were a buyer and they wanted to sell stock, okay they couldn't put the price up against you because they were your way; if on the other hand you were a buyer and they were short of stock well then that is a different situation entirely and you have to be careful and you have to obviously ask the price and pin them down on what they were calling the stock.  But if you were doing what they wanted to do - that is buying stock when they wanted to sell it - then there was much more scope for stating what your price was.

BA: So you would in effect go and bid them.

GB: Yes.  But again there were ways of doing it.  I can't say that you would necessarily often do it but there was a great advantage to having a shrewd idea what the situation was in the market, and a lot of brokers I don't think applied themselves to knowing that as much as they might have done.  

BA: Can you recall any particular examples?  Were there jobbers who didn't like being dealt with in that way?

GB: Well there were some jobbers that you wouldn't naturally be able to do that with because you didn't necessarily have the relationship with them or... It was because of the aspect of a lot of Phillips & Drew's business that we obtained quite a lot of business with a view to undoing jobbers' positions and they were, therefore, very often prepared to tell us which way they were in certain stocks because they could rely on us, to some extent, being able to undo their positions.  There were obviously times when we obtained business which was against the way the market was and they accepted that.  There were a few occasions when they led me to believe that they had a position in perhaps less stock than they did have and that could lead to a few ructions on occasions.  I well remember a case when Dick Wilkins said they'd got 5 million funding fours and after a lot of trouble we found a buyer for 5 million funding fours and then I discovered that they'd actually got 15 million of them, which didn't please me very much.

BA: Can you elaborate a bit on that side of Phillips & Drew's business you mentioned earlier, being able to undo the jobbers' positions?

GB: Well, we had a number of insurance companies.  Some of them adopted quite an active switching policy, and therefore they would exchange stocks one for another with the prospect of making quite a small profit, reversing the switch for quite a small profit.  Now most gilt-edged switches, the client would not open the switch unless he could be reasonably sure of getting at least a half a per cent net of expenses: so after having paid our commission reversing the switch, he would want to get back into his original position having made half a per cent.  If one of the larger jobbers had, say, bought a large line of a certain stock; now he would have already have obtained that stock at a price below the market price, because one of the large jobbers would have naturally made a price in any gilt-edged stock in, say, half a million, but if the broker said, 'Right I want a price in two and a half million', then he would have widened his price so the jobber would have obtained the stock on some occasions quite considerably cheaper.  Now if we bought that stock at something near that margin cheaper, already there was the prospect of a profit in a switch transaction.  So we did these switches for a number of clients with the prospect of that client making quite a small profit.  But because the clients were prepared to be active we did a vast amount of business on this basis.  Because, from when I joined the Stock Exchange in 1952, when I can remember around that time war loan was about 95 - and at one stage, I think, during my lifetime in the Stock Exchange, War Loan got down to about 17 - so over all that period the gilt-edged market had gradually fallen - it had little blips about twice a year it would go up - but by and large we were in a falling market throughout most of that time.  It was quite a factor that this was happening.

BA: Would you say switching was one of the most important parts of a broker's business in the gilt-edged market?

GB: It was very important in Phillips & Drew.  There were other firms, for instance.  Mullens and Pembers. Pembers had a large clearing bank business, but Mullens and Pembers and a number of others tended to get large straight orders on occasions. And very often these were sales of gilt-edged stock because over the years the insurance companies and pension funds built up their equity portfolios and ran down their gilt-edged portfolios so there was a steady stream of stock coming on to the market. And we, as I say, did this switching business, because the jobber perhaps rather than having all his eggs in [one basket], if he'd bought 5 million of a particular stock, he would have rather had a number of stocks than having all his eggs in one basket.  So we would sell him three other stocks and buy part of the five million of the one.

BA: By and large were different institutions, different clients and different jobbers wanting to switch different stocks or was it ever the case that they all wanted to do the same switch because there was the same basic advantage?

GB: There were times when for one reason or another in those days some gilt-edged stocks had factors that affected them as individual stocks - they couldn't be regarded as just part of the gilt-edged market as a whole that moved up and down.  But there is always a price for everything and you would always find a buyer of any stock or a seller of any stock if the price is attractive in a market, as it was in those days, as big as the gilt-edged market, because there was plenty of stock in issue.  Whereas people over the years have tried to create shortages in some gilt-edged stock they very nearly always came undone because there was always somebody with some stock which would resolve the situation.  There were people who thought that they could drive up the price of a stock like conversion three and a half irredeemable because of the sinking fund and old consols - it was a subject of a strong buying at one stage because the gentleman concerned thought he could create a shortage.  But in the end they tended to fail because somebody would sell the stock and resolve the situation.

BA: What was the object of creating a shortage, was it to corner the market?

GB: Yes, to drive the price up.

BA: Now, you had originally had your blue button experience in the equity market.  Was the gilt market a very different kind of place?

GB: Yes, it's a much smaller market, you're dealing with the same people, or a limited number of people.  In my case most of the business was done with two firms and a certain amount with Wilson & Watford, so one had to retain the trust and the confidence of those two major firms of jobbers.  It would have obviously been unacceptable for Phillips & Drew for me to have made myself so unpopular with one or either or both of those firms so that we couldn't transact our business.  Happily, I've never got anywhere near that situation, so I didn't have that problem. 

BA: Did you still find it a competitive market, even though ...?

GB: Highly competitive, yes.  

BA: How did that manifest itself?

GB: You only need to have two people in any game for it to be competitive.  When I started in the gilt-edged market I think there were 26 firms of jobbers.  How there was enough business for them all, I don't know. But in the end it came down to really just two jobbers; and provided you have got two, you have got competition and that is all that's necessary really.

BA: What was your impression of the relationship between the two jobbing firms; I mean towards the end the jobbers in a sense became very close because there were so few of them?

GB: I think the two major firms always had a fairly good working relationship.  There was always competition between them but I think that they were respectful friends.  They were very competitive with one another but I think that they could be sociable after hours and there wasn't a problem, as a whole.

BA: Did you ever find yourself wishing for a third firm to go and deal with?

GB: Well, we always, I felt, had a third firm in the shape of Wilson & Watford and because of a close relationship with them they did really quite a large amount of our business at times.  And then there were other firms - there was Francis & Praed and one or two others who, on occasions, would have a fling and do us a certain amount.

BA: How would you decide to go to these other firms - would it be on the price that they were quoting, or the particular size you wanted to deal?

GB: It was a feature of the gilt-edged market that, unlike the equity market, you couldn't, or it was unwise to go round the market and check the price and then go back to one of the jobbers.  If you went back and the jobber knew you had been elsewhere and checked the market, in the gilt-edged market more than the equity market they knew that you'd checked the market.  The only reason you were going back to them was that they were making the best price in relation to you. If you did this on a regular basis, you had less likelihood of doing your business than if you just approached them direct.  And this goes back to what I regarded as the role of the broker was for him to know the price without asking it. If you know what the price is, then you don't need to go and ask anybody else, and you were far more likely to do a good deal...

Tape 1, side 2

GB: How do you know what the right price is?  There's no answer to that.  There are obviously many stocks at any time where one wouldn't know what the price should be, only it's relationship with stocks that you might know the price of.  The gilt-edged market tended to move in price broadly together, but having said that there were differentials within those various stocks; and if you knew the price of about three or four stocks in fact you could calculate very easily in your mind what the prices of the others should be.  But also it would only be over a continuing dealing in the market that you would know the jobbers' likely positions in stocks.  There would be many, many occasions when you had no idea what their position was in a stock and where they might well wish to make sure you didn't know what it was; but merely by slight comments that they might make, one would be able to form a picture of whether they were short or long of a stock and it was part of what I regarded as a broker's role to know.  That's not to say one took advantage of it but it was helpful in doing one's business.  

BA: I was very struck by the fact that it was regarded as not the right thing to do to be seen to be checking your price with the various jobbers, because in some ways that contradicts the conventual view of what a broker did in the Stock Exchange: the way that the system worked was one did go and check with all the jobbers and you found the best price and then you dealt with who was most suited to you.

GB: Well, the gilt-edged market is very different from the equity market.  In the equity market you have - I don't know how many stocks there were - but we're talking thousands; in the gilt-edged market at any one time the government market was broken down between shorts and longs, and all my experience basically was in the long market. I didn't deal to any great extent in the shorts; only if we had a switch between longs and shorts would I deal.  So I was only concerned with knowing the price of about thirty stocks.  An equity dealer couldn't hope to know the price of all the stocks and there is no relationship between one equity stock and another equity stock. There's no relationship between a textile company and an oil company for instance. The oils may be going up and the textiles may be going down or vice versa; whereas in the gilt-edged market they're all the same only different, and if interest rates are falling the gilt-edged prices are going up and vice-versa.  So, as I say, if you knew the price of one or two stocks then by definition you had a shrewd idea of what the price of the other stocks was.  And if, therefore, you had an order and you knew the situation in the market, you knew or should have known which jobber was going to be most likely to do your business and you put your shirt on that.  There were many occasions when the chap who I was dealing for in the office or even the client would say, 'What is the other jobber calling them?' and I would be forced to say, 'I don't actually know what he's calling them.'  But it wouldn't have been in my interests to have found out because by going and asking the other prices, I might well have prejudiced the ability to do the business with the jobber I'd chosen.

BA: How would you react to someone saying that that doesn't sound like a very competitive market?  

GB: Well it may sound like that, but if it is your business and you spend all day and every day doing it, it is part of the job to have the confidence and knowledge that you've got it right.  If you don't believe in it, then you will go and ask the other jobber.  

BA: Was this the way other broker dealers were operating or were there different styles?

GB: Not many, no.  I think there were other very good people in the gilt-edged market who I would respect, certainly, but maybe not all would have done it in the way that I saw it.

BA: So how would they have done it?  Would they have gone and chatted with most of the jobbers?

GB: Oh, yes, but there were not many other firms, if any other firms, who the jobbers would have gone to see to undo the positions.  I don't think there were any other firms, to any extent, apart from Mullens, of course, in their role as Government Broker.  And of course Mullens, in their role as Government Broker used to do switches for the market and undo positions for the market, and when the market was falling Mullens or the Government Broker was the jobber of last resort in that he would buy stock from the market and frequently had to.  He would make a bid for that stock below the level of the market and then immediately the market would fall to that new level.  And that happened over the years on many occasions.  

BA: Now, how did the dealing side of Phillips & Drew develop?  I know looking at old lists of members that the partnership of Phillips & Drew was constantly growing. I think by the early '80s there were about 50 or so partners.  Did the dealing staff become a lot larger?

GB: Yes.  I think in the latter days in the '80s we had around 25 people in the House and we would have had two people on the long dated gilt-edged stocks, two on the short dated gilt-edged stocks; we would have had two on debentures and fixed interest stocks, and the rest would have been in the equity market.  In the equity market we would have had two or three partner dealers and one of those dealt exclusively for Phillips & Drew's pension fund department because we were one of the largest managers of pension funds' money.

BA: Were you in overall charge of the dealers in the House?

GB: For some years I was, yes.  First of all Arthur Beard was the dealing partner, then Paul Bazalgette who joined at the same time as myself was for some years, and then he subsequently became senior partner of Phillips & Drew; and when he became senior partner of Phillips & Drew, I became the partner in charge of the dealing side and then remained that until about '85, and at that time I went onto the Stock Exchange Council.  From the late '70s I also managed gilt-edged portfolios for the pension fund department and so I played a lesser role in the dealing side although I was still in charge of the dealing side of Phillips & Drew.  And then '86 I think, no, 1980 I went onto the Stock Exchange Council.

BA: What did being in charge of the dealing side mean in practise?  Did you keep a close eye on what the dealers were doing?

GB: Well, one was responsible for the behaviour of the dealing staff as a whole, for their salary structure and for the discipline in the House, and if something went wrong, or there was a contretemp or row between one of the dealers and a firm one had to try and sort that out.  On the whole that wasn't a problem.  Dealers tend to sort out their own problems; don't often get to the stage where the partners are brought into it.  

BA: How would you describe a typical day for you at the stage of your career when you were the dealer partner in charge as it were; well, when would you be leaving for the office right through the different stages of the day?

GB: Well, I seemed to get into the City latest when I started in the City and it got ever earlier, but a normal day I would get into - I can't say I was ever very good in the morning, people tended to leave me alone until about half past ten - I used to get into the office about twenty minutes, or half an hour before the market opened.  I'd go into the Phillips & Drews office and there would be a short discussion about the prospects for the day's business and then five minutes before the market opened, I'd go down onto the floor of the House.  And of course there were many days when for one reason or other some traumatic bit of news or good news had come out, and the first half hour or so would be very hectic. At those times it was obviously very important to be able to attract the attention of one of the partners of the firm with whom you wished to deal, that is the jobber, which was another good reason for being on good terms with them, in order that you attracted their attention and they dealt with you rather than with one of your competitors.  There was no queue on the pitch as such, you just had to insinuate yourself in the right position at the right moment.  Then the day would be spent... Many gilt-edged firms operated from a box in the shell of the Stock Exchange.  Phillips & Drew had a box, but it was used by the equity side of the firm and I always stayed in the Stock Exchange itself.  We had a telephone very near to the gilt-edged market, or within the gilt-edged market, and we did all our communications from this phone, but I had no refuge.  I could go out to a box, the equity box, but I always regarded it as a factor.  If you're in a box outside the floor of the Stock Exchange and there's something happened - and when I say something happened, one deal - if you're on the floor of the Stock Exchange you'd see that deal taking place.  You wouldn't know what it was, but if one of my competitors was one the pitch for more than two minutes talking to the same jobber, and they were obviously doing business, it was quite clear that there was something happening and it's important to know that.  So I was always on the floor of the Stock Exchange.

BA: What would happen at lunches?

GB: I'd go out for to lunch, but hopefully that was a quiet time of day.  The bulk of the business took place in the early morning and then very often it tended to perk up a bit towards the close.  The middle of the day was often quiet unless... In the old days the bank rate was changed on the Thursday at quarter to twelve and that could make Thursday a very busy day.

BA: Can you remember the impact of any of the bank rate changes?  Or even in '67 when there was the devaluation and I think the bank rate went up seven or eight per cent?

GB: There were many situations along those lines. I think it was after the 1967 devaluation, on the following day I did 45 different switches.  That doesn't sound a great deal but believe me, I think it was the busiest day I ever had.  And that wold be in addition to a whole lot of straight orders.  There were days like that when it was very hectic and very difficult.

BA: How would the jobbers react to a bank rate change?  I mean would they simply adjust their prices or would there be sudden frantic activity?

GB: There were occasions.  There was one occasion when the government adjusted the way the capital gains tax was levied on stocks according to the price at which they were issued.  And this was known as 'the neutral zone' situation.  And there were some stocks which hitherto had been entirely the same: there was a British Electric Threes 1968-73 and British Transport Threes 1968-73s and those two stocks had always been regarded as totally the same, but because of this quirk of the price at which they were issued they became subject to a different tax situation.  And immediately the prices of the two stocks became 5 points different.  Now this was announced overnight and it took the jobbers, and everybody, completely by surprise and it took them some time to work out what the new price of these stocks should be.  And in fact they had to stop dealing for a couple of hours to adjust that.  There were one or two other occasions when dealings were stopped in order that the jobbers could readjust their prices onto a new basis.  I think there was one day - it may have been after the 1967 devaluation - when we actually closed for a whole day but otherwise there may on occasions have been a slight pause and the jobbers would have said, 'Right, just hang on; we'll start dealing again in five or ten minutes'; otherwise the market to my knowledge on the whole never stopped or was always open.

BA: Just reverting to your typical day.  Did you do a lot of dealing over the phone after the house had closed?

GB: There was a certain amount of dealing after hours.  It wasn't necessarily popular with jobbers because, in the same way as I've explained one could feel what the market was doing and knew what the prices were, the jobbers were the same and they could judge whether the market was going down.  When you're in your office as we're sitting in this room, all hell could be breaking out down the corridor and we don't know about it.  So the jobbers were less likely or willing to deal after hours, particularly in large amounts of stock because they didn't know what was happening elsewhere.  

BA: And about what time of day would you be packing up, as it were?

GB: Well I suppose I might have tried to go home at 5 o'clock but not before that.  And there were many evenings of course when one stayed later, particularly if something was happening or something was in prospect the next day.

BA: Did you find it a stressful life, or did you enjoy it?

GB: No, I enjoyed it immensely.  There were times when one got tired because I was in the market all the time. Some people went and sat in their box. I tended to stand in the market and that on occasions was tiring.  But I was always reasonably fit, so it wasn't a great problem.

BA: Does the move from the old House to the new House in the early '70s via what's been called the half-way house figure in your memory in any way?

GB: The temporary market, as it was known; yes, it was not a very good time. There was a bit of boomlet in the gilt-edged market in 1972 and we had these rather cramped conditions with a low ceiling to the market and the gilt-edged market was in a sort of horse-shoe so in fact Akroyd & Smithers pitch was out of sight as far as I was concerned from our telephone and I know I didn't like that.  And it also coincided with Smith Brothers coming into the gilt-edged market and starting up at that time and that created a destabilising effect in that we had a factor which we hadn't experienced before [and] took a bit of getting used to.

BA: Could you elaborate on that a little bit, because I've heard a lot even from Smiths' partners about the attempt to get into the gilts market?

GB: Well Smith Brothers were a very successful and good firm of jobbers in the equity market, and I think that the government broker had wished that there was another largish firm of jobbers in the gilt-edged market and Smith Brothers therefore announced that they were coming into the gilt-edged market. They quite rightly and sensibly sought the advice of a number of people before they came in and started up.  Certainly my advice, for what it was worth, was that they should take it slowly and gain experience over a period of time before getting too adventurous.  For reasons best known to themselves they decided to be very aggressive when they started and because of this and because of the fact that they didn't realise that some stocks reacted independently of other gilt-edged stocks, they were doing deals in stocks which had they had the experience they wouldn't have done.  And I think this made it difficult for them and it also made it difficult for the brokers because it was an unknown factor all of a sudden.  We had this situation where prices were moving erratically in relation to one another because the Smiths felt that they would move the prices of stocks individually to some extent.  It was a very new factor and difficult to come to terms with.

BA: What was the feeling when they decided not to continue?

GB: Well, we reverted to what we'd before. As I say, we knew what we had before. I'm sorry that it didn't succeed because I think they did try very hard in their own way.  It was just that the gilt-edged market was something different to what they had been used to and didn't behave in the way that they expected. 

BA: It was more or less at the same time that Francis & Praed decided to cease trading and also, I believe, a smaller firm called Pike & Bryant?

GB: Pike & Bryant, yes.  I was in Brittany on holiday and I read in the Telegraph one morning that Francis & Praed and Pike & Bryant had packed up.  I quickly phoned up to find out what the hell was happening.  But they were unrelated in cause.  I think Pike & Bryant decided that the business was not sufficiently good to warrant continuing and they just ceased; Francis & Praed I think was a bit more surprising in one way and not surprising in another - they'd had unfortunate circumstances at times and I think hadn't brought on young people sufficiently to takeover from the older generation.  

BA: Did it make a difference to the gilt market that Smiths withdrew and the other two firms disappeared more or less at the same time, or had most of your business already been so oriented towards Wedd and Akroyd?

GB: I don't think it made a great deal of difference to us.  It was sad always to see anybody cease trading, but I don't think, as far as the competitiveness or the depth of the market [were concerned] it made much difference, no.

BA: Did the recession in '74 have an impact on the gilt market?

GB: Yes, 1974 was when the equity market index went down to 146 and the gilt-edged market was in a pretty sorry state itself, and I think some wag said, 'Well if old consols go down as much as they have today, we've only got 18 days to go', because the price of old consols was then 18 and they'd just fallen a point that day.  And things were pretty gloomy. Firms were losing money and it did look as though the end of the world was at hand.  But I think the saying 'If you're going to go down, go down fully invested' because after the New Year collapse of Burmah - it's a bit of a mystery but I've always felt myself that the institutions perhaps at the instigation of the Bank of England decided to put money into the market and that's all it needed because from about January the 2nd or 3rd the gilt-edged market and the equity market rose almost vertically, and all those who'd scambled to get out in the later months of 1974 were quite unable to get their money back in again and it was a very interesting time.  

BA: Were they particularly difficult dealing conditions?  Was there still a lot of turnover in the gilt market?  

GB: Oh, yes there was very heavy turnover in the gilt edged market and I can remember one situation at that time.  We had a client who (he was an overseas based insurance company) for tax reasons had done a switch and at the New Year he'd sold a particular stock and bought another; and we had, just before the market began to recover, bought quite a large sum of stock - 15 million I think it was of this particular stock - and then the market started to rise. I particularly remember this because I went and asked the same jobber the price in 15 million of this particular stock and he was quite convinced that we were ... No, I've got it wrong, the market had continued to fall and he was convinced that we were going to sell this stock back and in fact we bought another 15 million and it was just as the market was turning.  But it became very difficult to deal particularly on the buying tack because there was an acute shortage of stock.  

BA: Was this a time, in general terms, that broking firms found difficult to make money during the '70s?  The reason I ask is that a lot more matching business seemed to be done by broking firms during the '70s and it's sometimes been said to me because the broking firms needed the double commission.

GB: You're talking about the gilt-edged market, or overall?

BA: Overall.

GB: Well in 1974 it was a bad time for commissions because the low level of prices generated a low level of commission and I think all firms found commissions difficult in 1974.  In both areas of the market - I think in the equity market and in the gilt-edged market - if the broking firm got a large order, there was the tendency and temptation to try and find matching business to undo that.  And of course if you carried it to extremes that was very bad news for the jobbing fraternity because it destroyed their jobbing function.  It did become very difficult and a source of great aggravation in the equity market and also to some extent in the gilt-edged market because of this matching of business.  In the gilt-edged market there were what were called net bargains: by netting a stock, the broker only took one commission and so it was possible for him to undo business, and by netting the stock and take this one, it enabled the client to get better terms.  But it took away the jobbing function because the stock didn't pass through the jobber's book; it effectively was done outside the market, so the jobber just didn't get a turn on that and the jobbers didn't like that but it was quite a big factor and was a source of considerable aggravation at times.  

BA: About what proportion would have been matching business in the gilt market?  

GB: If you're talking about net business I think not a large proportion - I would think something of the order of 5 per cent to ten per cent, possibly.  But very often the business was only transacted because the jobber bought a stock and sold a stock.  There may have been net bargains in the middle but at the end of the day the jobber bought a stock and sold a stock.  And the business depended on what the jobber would buy and sell at even though there were transactions in the middle.  So the jobber in the last resort did have the say so as to whether that business took place.  

BA: The later seventies were a period in which what have been called 'gilt strikes' took place, particularly in 1976.

GB: Yes.

BA: What kind of time was that in terms of dealing?  Was it a judgement that brokers and jobbers made that yields were not sufficient to justify taking on stock, or was it a judgement that the clients were making?

GB: I think it was a collective judgement.  The people, the professionals who dealt in the gilt-edged market, felt that because of the government's borrowing requirement they knew at some stage the government had got to issue stock.  And so it was a question at what price or what level of yields the broad spectrum of insurance companies and pensions funds would be prepared to start to buy stock.

Tape 2, side 1

GB: It was a question of finding a level at which the institutional's clients would buy stock again and at some stage, usually coinciding with the new issue of a tranche of stock or a new stock entirely, the level of yields would rise.  I suppose, more often than not, it would be a tap stock which had been on tap or available for the public to buy through the market and the government broker would cut the price of the tap stock. And at that stage more often than not, the whole of the stock would be taken, usually by the market very often, and they would then pass it on to jobbers.  You had to keep quite a close eye on the situation as to when it was likely that the government broker was going to cut the price of the tap stock and have orders for your clients ready so that they could deal, because it very often signalled a rise in prices at least for a short time.

BA: Do you recall what dealing conditions were like during these so-called gilt strikes?  Were they ones of poor turnover or were jobbers constantly depressing prices to find a level at which buyers would come in?

GB: Yes, I think there was an understanding between the authorities and the jobbers that the prices had to come down in order to sell stock, it was just a question of getting the right psychological moment.  Because it was no good the Bank of England and the Government Broker cutting the price of the tap if having cut it they didn't achieve their object - that is to sell stock.  So there had to be almost certain demand there, but that was achieved by the jobbers on occasions building up a bear position. It didn't necessarily have to be in the stock that the government were trying to sell: the jobbers could have been overall bears and then through the switching mechanism they would resolve the cross positions.  

BA: How much influence did the jobbers have on prices? Did they simply reflect supply and demand, so if demand was poor you could guarantee that the prices would be depressed, or could the jobbers actually influence the price?

GB: Oh, the jobbers very often, and there were certain jobbers who didn't like the market standing still - well that's understandable - but on occasions would mark prices up when really there wasn't much justification for it or mark them down because there wasn't much justification for it.  But unless somebody had the fire power in the form of orders to stop them doing it there wasn't much anybody could do.

BA: Do you recall any particular occasions or any particular jobbers who'd like to do that?

GB: Yes, Mr Jimmy Priestley I think was much happier when the market was going up than down; whereas other jobbers, I think, were more natural bears and were happier when it was going down.  But I always felt that he was happier when he was putting prices up, which of course over the years wasn't the way that the market was going, but he was nonetheless a very successful jobber.

BA: In the later '70s Pinchin Denny opened up a pitch in gilts.

GB: That's true, yes.

BA: Did they impinge on the market?  Was it something that was welcomed?

GB: Yes.  Again, I think that they were encouraged to come into the market by the Bank of England and the Government Broker.  At times they did fulfil a useful role.  I don't think they ever got anywhere near approaching the size of business that Wedd and Akroyd had; in fact, I think in the short market they did quite a reasonable turnover, but not a great deal in the long.

BA: Was it difficult by that stage for another jobber to come in, in the sense that...?  

GB: It was always a difficult job for any jobber to come into the market.  One of the most remarkable things, in the gilt-edged market, was the stability in the relative size of firms.  The pecking order didn't change a great deal either in the jobbers or the brokers.  Various firms of brokers tried at various stages to get into the gilt-edged market and one or two achieved some success but by and large the firms that had always been there continued to be there.

BA: Why was that?

GB: I don't know.  I think the client relationships obviously were a part, the fact that the clients knew that you were an established broker in the gilt-edged market.  I don't think there were many people who wanted to be a gilt-edged jobber from scratch.  Pinchin and Smith came in, I think, more because they were asked to rather than perhaps they felt that there was any great reward to be achieved by it. It was a small market in terms of numbers operating in it but it was very difficult to achieve business from scratch.

BA: Does the Battle of Watling Street mean anything in your recollection?  It's something that people have mentioned to me at various times.  

GB: Yes, it was, I think, related to an issue of 0307s, another tranche, and one or two firms failed to get their applications for stock in as I recollect it.  And because of this it was very expensive for one or two firms because their clients didn't receive the stock that they should have done.  I think that the broking houses involved had to compensate their clients to some extent.  It wasn't a factor that affected us.

BA: Can you remember roughly when it was, sometime in the late seventies?

GB: I guess it would be late seventies, early eighties - my memory for dates is not the greatest.  

BA: Well, let me ask you now about some of the dealers that you may have had experience of.  Was Norman Smithers still in the market?

GB: Yes. Uncle Norman.  Yes, but he was an elderly gentleman at the stage that I knew him and wasn't taking an active part in the day to day business.  

BA: So was this a point at which Hugh Merriman and Brian Peppiatt were the main dealers?

GB: Yes.

BA: How would you describe them as dealers?

GB: Hugh Merriman was a very quiet, aloof, rather withdrawn gentleman who was very shrewd, always as I say a little withdrawn but nevertheless a very good and true jobber.  And he recruited or had on the pitch two younger - Peppiatt and Tim Nixon  who shall we say did the day-to-day business for many years, and Brian Peppiatt became one of the best and shrewdest jobbers that there was in the market.

BA: Could you define what those qualities were or is it very difficult to define?  

GB: Nerve, I suppose, is in the end what describes a good jobber. Never panicking out of a situation.  As I've said all the gilt-edged stocks tended to be the same or different and because you were short of one and long of another didn't really matter because in the end you could resolve that situation.  And the fact that he was prepared to hold a position until it resolved itself naturally.  And I always thought of Akroyd, their motto might have been 'Never knowingly overbought' because the gilt-edged market over the years continued to go down it obviously always paid to be a bear of the gilt-edged market. And if you consistently ran a bear book, over the years you'd make money.  So I always thought of them as being short of stock.  The market paid you to be short; you got paid as a jobber if you were short of stock; if you were carrying stock, if you were a bull of stock, it cost you money.  So it was a natural position to be a bear.

BA: Now did Wedd have a different character to Akroyd?  

GB: Yes, Wedd naturally liked to square the book up.  They were less inclined to run big positions for any great length of time and if they got a large position in a stock they would rather have got it down to more manageable proportions, and this on occasions worked to the advantage of my own firm because we would assist them to find that stock or...

BA: You've already described Jimmy Priestley.  Was Dick Wilkins a different jobber?

GB: Dick Wilkins liked to do the big deal.  He didn't like getting involved in the intricacies of switching to any extent.  He liked to do the big straight deal and that was his forte.  In a sense he was a very extrovert character and I think was thought of as the King of the Gilt-edged Market for many years.  He knew everybody who operated in the market well and they used to go and chat to him.  But I think he used to just like to do the big deal.  He could be extraordinarily harsh with senior people in the market and senior partners of firms and yet was the kindest and most respectful to the juniors.  Remarkable character.  

BA: Now is there anyone I haven't mentioned who comes to mind out of the gilt jobbers, perhaps during the '70s?

GB:  Well, I think that a person who may not have been mentioned to any great extent was Herbert Wilson of Wilson & Watford.  Wilson & Watford was formed after the Second World War by Herbert Wilson and Vivian Watford and became really number three I think in many ways.  They certainly did more bargains than any other firm in the gilt-edged market, or any jobbing firm in the gilt-edged market, and I think many times people would have been surprised at the amount of business that they did.  They tended to contract in the later years after the retirement of Herbert Wilson and in the period before Big Bang had contracted to some extent, but in the '70s they were quite a force in the market.

BA: As we get towards the end of the '70s, the Stock Exchange Rule Book was taken up by the Restrictive Practices Court.  On the floor of the House, did you feel there was any strain on the way the Stock Exchange was set up as a market?  Did you feel any strain on the single capacity system?

GB: Yes, I think that although brokers probably didn't acknowledge the fact, those that had a substantial gilt-edged business undoubtedly, it was a very rewarding business.  In short-dated stocks the commission was at discretion therefore you could do bargains for nothing and if a client dealt with us in the long-dated stocks we would never charge him commission on shorts, for instance.  But because the level of commissions was laid down by the Council we were bound to charge those commissions and it was a very good position to be in.  They were reduced in the period leading up to Big Bang and there was quite a feeling that perhaps, by some brokers, that they shouldn't have been reduced, but compared with the profitability that has ensued since ... the level of profitability in the gilt-edged market by the larger firms was usually quite good.

BA: Did broking firms ever feel they wanted to job stocks themselves?  Did they ever resent the fact that things had to be put through the market?

GB:  Yes.  I'm sure that there were occasions when... And this is where the net bargains came into effect: it was an effort to bypass the market and to avoid having to pay the jobbers' turn that net bargains were done.  And I know my own firm could happily have run a jobbing book in a sense which would have expedited our business.

BA: Conversely, did you ever suspect the jobbers of having contact with the clients?

GB: Not to any great extent, no.  I know that there were some clients who did speak to jobbers direct on occasions but they were few in number and I don't think they were a major factor. 

BA: Did the discount houses ever provide much of a competition?

GB: Yes.  The discount houses would have at times liked to have been the market in short-dated gilt-edged stocks, but when it came down to it, they didn't have the source of outlets, or they didn't have the range of outlets that the larger brokers had and so they weren't able ever to achieve what they might have liked to have done in that area.  But they were big operators some of them at times and did carry large inventories of short-dated stocks - and longs on occasions - but not always with happy results.

BA: Just a couple of concluding questions: what would you have said were the strengths of the single capacity system, if for example someone from the New York Stock Exchange or the Paris Bourse asked you why you had this strange system of jobbers and brokers?

GB: Well, the New York Stock Exchange is a single capacity system, they have specialists.  Not in their bond market - they have a different system there.  The greatest single thing to be said for the single capacity market was that you employed the broker as your agent and if you knew your broker you could rely on him for impartial advice.  And I think this was the greatest single thing in favour of single capacity.  You paid a commission, you knew what the commission was and for that commission you got impartial advice and, if you didn't like your broker, you could go to another broker and pay him the same commission.  In a dual capacity situation which you have now, the advice you're getting from your financial adviser, be he an integrated house, may be less than impartial if he is a seller of that stock or if he is a buyer of a stock; he may be inviting you to buy a stock that he has got on his book and which the chap who's talking to you has been told to sell for all he's worth, and that is not impartial advice.  I'm not saying that that happens to a great extent but it is a risk.  There was a lot to be said for the stability of the market in a single capacity situation; there was in many ways less scope for manipulation. I think in many ways it was difficult to justify.  I regret its going in many ways. I don't know that we have a better system now.

BA: Would you say it had any weaknesses?

GB: It had weaknesses in that its cost structure was too high: you had two people to reward in the sense that you had the broker and the jobber both to obtain a living out of dealing in it. But in the gilt-edged market, because of the level of turnover that reward as a percentage of the turnover was very small; so in fact the government got a very good service cheaply.  The brokers and the jobbers got rewarded well, but in many ways they worked quite hard for it and it achieved for the government quite cheaply what they sought to achieve.  

BA: As a final question, how would you contrast the Stock Exchange as a trading floor towards the end of the single capacity system with the trading floor that you had known as a young dealer in the early 1960s?

GB: It was not as good: it was more clinical, it lacked atmosphere; I think the character of the old market was never achieved by the new Stock Exchange floor.  There were people who had character but it lacked some indefinable something.

BA: Had the way people dealt changed in any way?

GB: I don't think it got any better.  I think that with the passing of some of the older generation the discipline in some ways became less.  It didn't hold the attraction for me after about 1980 and that is when I in fact stopped dealing on the floor.  It became a young man's business and I was at that stage getting a bit long in the tooth.

BA: I think we'll finish there.  Thank you very much.