Trader Interview: Nick Leeson (Part 1). Photo:

Pod Chats: Nick Leeson on Trading Infamy (Part 1)

Two Blokes Trading

Two Blokes Trading Episode 107: Breaking the Bank with Nick Leeson. Click above to listen to the full episode

Nick Leeson is the infamous trader that broke Barings Bank by losing over £800 million, over twice the available trading capital of the bank.

Following early release from a Singaporean prison, Leeson has written a number of books on his experience, while Ewan McGregor played him in the 1999 film Rogue Trader. Today, he consults on risk management to investment and financial companies around the world, while still speaking on the after-dinner circuit. He also acts as the Head Trade Consultant at Bizintra Financial Academy.

In Part 1 of his interview with the Two Blokes Trading podcast, Leeson opens up about his early experiences in trading, including his memories of pre-Internet trading and his time at the prestigious Coutts bank.

The trading environment is you pitted yourself against other people and seeing who comes out on top. It’s like a modern day amphitheatre where a couple of gladiators are going at it and one of them is going to come off bloodied and bruisedNick Leeson

On his beginnings...

I started in Coutts when I was 18 year of age. I was fresh out of Watford, I arrived at Bank station, which was the heart of banking in London. And I started working in Lombard Street which was the epicentre of finance. I mean it’s not like that anymore, you walk down there now and there’s a Pret, some serviced offices… and a few trendy bars, you never used to have those. When I first worked there, there were a few pubs around the little alleyways, so it’s definitely a changed place, a lot of banking moved down to Canary Wharf, I think a lot of it is moving back at the moment, there are certain banks in the West End. But this was 30 years ago, so you’re talking when everyone thought they needed to be in the city and now it really doesn’t matter where you are as long as you’ve got that connection to the market place.

On pre-Internet banking...

It was an age where we used things like Telex’s, a lot of the orders would come through in the morning. A Telex is an early form of telegraphic information that was passed from one office to another, it’s sort of like a typewriter… there would be codes that you could access it, there would be a degree of security around this, but definitely pre-internet. But you could send messages across the world, it was quite fancy at the time. We used to get one in the morning and then maybe one the following morning. What we would normally use it was for orders, so if obviously people were in South East Asia, in the morning you would get the Telex orders come through, they would be coming in from different locations where the bank is located and you would be executing those orders. It was more equity trades than anything else. There was a degree of discretion in terms of executing those orders.

On working at Coutts...

I started off in the back office in Coutts, Coutts is more of a traditional high street bank, the same functions as Barclays and HSBC really, but obviously the client base are very very wealthy. The minimum amount to have an account with Coutts is always quite speculative, this has changed over the years, but at the time I think you needed to have a million pound in your account, or access to a million pounds worth of liquid assets. So we used to get some strange things occurring at Coutts. It’s a very old institution, so we used to have to wear tails…with a waistcoat on as well, posh penguins if you like. And sometimes you would be going down the pub at lunchtime and you forget to take it off and you look like an even bigger *&%^. At least if you got into a fight you could identify who works for the same bank. You weren’t allowed to go in un-shaven, you always had to be freshly shaved…girls as well!

On Coutts culture...

Coutts was a real sociable bank, we used to do a lot of stuff together after hours. The senior managers would often take us out. It was a little bit out there in that regard, but it was a really good firm to work for. It was a very small boutique bank at the time, the branches would primarily be in London, in very wealthy areas as you can imagine because of the clientele they had. The queen has a branch in the Strand, which is called Buckingham branch, all the royal family hold their accounts there. All of the accounts are numbered so you don’t know who they are…there’s usually some years involved in it so you can start to guess who the people are.

On life after Coutts...

Back in that era, there was lots of opportunity in the city, new banks entering the city, a period of de-regulation, lots of demand for people and not much supply so people were changing jobs fairly regularly. And Morgan Stanley was one of the accounts I used to look after at Coutts and they asked me to go and work for them, which I did. The first area I worked in at Morgan Stanley was the bond trading side, we were working on Euro clearing there, which was one of the settlement systems that they used to use for Euro bond trading and then from there I moved to Liability Management and we were working out how much money the bank had left at the end of the day to invest, and you would place that money into bank. So if Morgan Stanley had £100m that they wanted to use at the end of the day, they would put it overnight, so we were just looking for the best rates and best ways to apply that money. And then I moved into futures and options. This was in the late 80’s when I was in my early 20’s.

Rogue Traders: Nick Leeson

On lasting city friendships...

For me the city was always a vehicle for working, for widening my horizons and achieving what I wanted to do from a business perspective. In all of the time I worked in the city, the guys I counted as friends really came from Coutts. It was a different type of organisation and you could gel with those people. Working in the city and working in large investment banks it’s quite transient. I still communicate with people I knew from Coutts 30 years ago. Do I communicate with people I know from Morgan Stanley or from Barings? Very very rarely, if at all.

On deciding on being a trader...

I think that’s always where you’re aiming, not only is the bigger money paid there, but its where the important decisions are made. I’m somebody who has the courage and belief in my own ability, the trading environment is you pitted yourself against other people and seeing who comes out on top. It’s almost like a modern day amphitheatre where a couple of gladiators are going at it and one of them is going to come off bloodied and bruised. Trading is like that you know, I’ve been bloodied and bruised a few times. I would have always been trading throughout on my own account and specifically trading equities during that time, but the move onto the real trading floors in terms of just placing money on deposit overnight would really come when I was working at Barings. The thing at the time was people picking the next big stock, it was always trying to identify those and that’s really where the market was focussed.

Want to listen to Nick Leeson's full interview with Two Blokes Trading? Listen here to Episode 107