Dr Michele Blagg

By Dr Michele Blagg
Research Associate at the Institute of Contemporary British History (ICBH)

How do you become the Global Head of a commodities trading company? During his interview for the Voices of the London Bullion Market project, Jeremy East provided insight into how his own career path led the way to him taking on such a role.

Philipp Bros offices in Bolivia circa 1930s.Photo reproduced by kind permission of Lee Baeck Institute. Centre for Jewish History Digital Collections, AR25131, Lee Baeck Institute, LBI Archive, 15West 16th St, NY 10011. Record no, 43,072. Box 1, Folder 1.

Early career

On leaving university armed with a degree in Economics and Economic History, Jeremy took a short three-month break in the South of France, returning to his parent’s home penniless and in need of work. Having worked his way through university doing a number of temporary jobs that paid quite good money but had no career prospects, his initial thought was that milkmen work short hours. He applied to the local dairy, but when they saw that he had a degree, they thought it was a practical joke and he was rebuffed. A local job agency then set the wheels in motion for an exciting career in finance, enabling him to live and work around the world.

His first proper job

The first step in his career path was taken in 1980 following an interview for a telex operator post in a commodity trading team at Derby, part of Philipp Brothers, one of the largest commodity companies in the world. As part of the interview process, he was invited to tour the dealing room, and as he stood mesmerised by the sight of the trading floor with its atmosphere, noise and fast- paced environment, he instantly knew this was where he wanted to be. However, he was jolted back to earth when told he wasn’t right for the advertised position. Instead, he was offered the role as the company’s first graduate trainee, which he immediately accepted. Strangely, as fate would have it, his first intern role was telex operator in the gold department. The telex was similar to the Reuters desk of today. There was a bank of screens and operators sat on wheeled stools, rolling themselves back and forth making and changing prices and trading.

Running not reading a book

Over the next few years, Jeremy rotated through the various departments within the company before ending back in the gold department. His on-the-job training saw him go into the back office, providing him with an understanding of settlement procedures, payments and transfers, so that when he moved to the front office, he understood what was going on behind the scenes. As he progressed through the company, he sat alongside the commodity traders, helping them with their positions. Showing promise, he was trained to run a book, the first being silver.

The Derby (Phibro) dealing room in Moor House in 1983. Pictured left to right are Trevor Clein, Martin Turner,Vincent Thompson, George Pajak (sadly deceased) and, last but not least, on the far east, it’s Jeremy East

Unlike today, all trades were made over the phone. People phoned Derby, a primary market maker, for prices. There were no such things as credit lines. Trust and integrity were at the core of how business was done. London was very much a spot trading market– you bought if the price of metal went up and you sold when it went down. The greatest challenge was in knowing, when someone called for a price, whether the market was going up or down. Most traders had a natural instinct, a feeling for what was happening. Jeremy worked alongside Robert Stein, who he classes as one of the great traders. Robert was very disciplined with his trading but also had a great feeling for the market. If he felt the price might be going up, he would start the day by selling. If he sold and the price didn’t go down, this gave him an indication that he was right, and he would start buying. He had a track record as a profitable trader for many years.

“As fate would have it, his first intern role was telex operator in the gold department.”

The telephone was the trader’s greatest asset. Jeremy recalled how Robert would call Andrew Stoppani over at Drexel Burnham and ask him to make a gold price for Derby, and at the other end, he might say ‘I could do more’, then you got a good idea that there was going to be some serious buying around and that we might turn our entire position” – although, it could have been that he was playing a game of ‘cat and mouse’ and didn’t really have an order to fill but was just trying to see if Derby had an order to sell. As a 21-year-old, it was an exciting world for Jeremy to work in. The average age of the team was 24. Unlike today, where people need to have university degrees and impressive CVs, in the 1980s, anyone who fancied themselves as a bit of a trader could call up any of the trading companies, which might take a chance on them becoming brilliant.

Buying and selling on the fix

Breaking the gold trading monopoly of the traditional five bullion firms which ran the gold fix was the greatest challenge Derby faced in order to increase the company’s market position. The Derby team was headed up by Guy Field, who in order to break down some of the barriers, decided that Derby would adjust its fixing commission. Traditionally, if you were a seller on the fixing, you paid a premium of 5 cents and if you were a seller, you received a premium of 25 cents. Derby introduced rates of 10 cents and 20 cents respectively. This move diverted business to the firm, increasing volumes through its books. It also encouraged other financial institutions to trade precious metals as they became more aware of the financial gains. Generally, the standard trade between the fixing companies was 4,000oz (10 bars).However, once the market expanded, it wasn’t unusual for Derby or Drexel to quote each other larger volume trades of 10,000oz or more.

“It evolved from a purely intuitive ‘seat of the pants’ spot market to now include amore mathematical formulaic forward market.”