This morning I was interviewed on the BBC Radio 4 Today Programme. Twenty five years ago today, the Big Bang completely changed the face of British finance. Here is what I had to say on the matter (click here to listen to the full clip):
EVAN DAVIS: Well, we go straight to the City now, Simon Jack is there. He’s not in a tent or outside St Paul’s but he’s down there to gauge the market’s reaction.
SIMON JACK: Morning, Evan. Yes…
EVAN DAVIS: Morning Simon.
SIMON JACK: Good morning. I’m on the trading floor of RBC Capital Markets in the City. Initial indications are that the deal has been received positively. Shares in Asia – the Nikkei, for example – up nearly 2% and all indications are that we’ll get a strong opening on financial markets here in Europe when they open at eight o’clock, so a big day for the market.
It’s a big day for another reason as well. Twenty-five years ago today was the ‘Big Bang’, that’s when rules and regulations were stripped away, open outcry was replaced by the banks of screens I can see in front of me now. The Square Mile since then has been a hotbed of financial innovation. I met Terry Smith, the Chief Executive of Tullett Prebon in the City, he’s a veteran of the City and I asked him how life and work here has changed since that day.
TERRY SMITH: It’s become more professional, in most senses at least. People used to get in late, go home early and have a long, often liquid, lunch, now it’s quite an intense working environment. Secondly, the ownership has changed. The City was dominated by partnerships owned by individuals who took unlimited liability often for their actions; and of course, the really big change was that people either acted for clients or they traded on their own account as a principal and they didn’t do both. And that’s the big thing that changed because I think it introduced some quite big conflicts of interest.
SIMON JACK: Do you miss the pre-Big Bang days?
TERRY SMITH: Yes, I think anybody who was there before is bound to have a touch of nostalgia for it. I mean, it was much more of a club and people knew each other and it was a jolly environment. I mean, everybody had a nickname in those days. There was a member of the Stock Exchange who had a Victoria Cross and his brother who had the Military Cross, and his brother’s nickname was ‘The Coward’, and it was just a bit of… a bit of fun, that kind of thing really.
SIMON JACK: What was your nickname?
TERRY SMITH: I think it was Top Cat actually, if I think back to it.
SIMON JACK: That’s not a bad nickname.
TERRY SMITH: Well, my initials are TC, that’s why. The Coward’, I like that.
SIMON JACK: Now, we’ve now come inside to one of the City’s well-known restaurants, we’re now heading towards lunchtime. This would have been quite a big part of the day, wouldn’t it?
TERRY SMITH: Yes, it would. Lunch was a very important part of doing business prior to Big Bang. Cheers.
SIMON JACK: Cheers.
TERRY SMITH: And it would have been quite normal for people to be lunching with clients and it would have been quite normal for them to be drinking.
SIMON JACK: Has the fun gone out of it, and how did that happen? Was it the arrival of American, more professional organisations, in the ‘80s?
TERRY SMITH: Yes, it was really. The working day expanded; people started earlier. The lunch went out of the window, so to speak, and the trading day just continued to go on. Once people were no longer subject to going on to a floor to trade with each other, they could do it electronically, you’ve got to the point now where people will quite regularly trade on their BlackBerry from home.
SIMON JACK: And 25 years on have things changed for the better?
TERRY SMITH: No, I would say they probably haven’t. There were certainly some things that needed reform - Big Bang - but it basically took away the regulation based upon principles where people knew what was right and wrong and didn’t need a rule book and it took away people acting in the interest of customers, people started to act for their organisation trading against the customers.
SIMON JACK: And ‘twill ever be thus?
TERRY SMITH: Yes, I think it will ever be thus unless you go back to a world in which you just had a set of very loose principles and you have a wise man or woman at the top. The thing that used to exist before Big Bang was the Governor’s eyebrow. If the Bank of England Governor in a meeting with you raised his eyebrow when discussing what you were doing that was enough to make you stop.
SIMON JACK: Both eyebrows raised at the moment I think.
TERRY SMITH: I would think the Bank of England Governor is in danger of getting into the position of the boy with the chemistry set who blows both eyebrows off in the lie of events.
SIMON JACK: Terry Smith, thank you very much.
TERRY SMITH: Thank you.