Gary Stevenson entered the London trading floor of Citibank as a 21-year-old boy in the summer of 2008, weeks before the implosion of the global economy. He left it in 2012 as Citibank’s most profitable foreign-exchange trader, having made millions from betting billions on the long aftershock of the Great Recession. He went from living with his parents in Ilford, “in the shadows of east London’s skyscrapers”, to living as a millionaire in a marina. As a boy he would watch the train his father took to work as a postman pass by his bedroom window, catching a glimpse of a man on his way to earn £20,000 a year for a family of five. In his second year at Citibank, Stevenson was paid a bonus equal to 20 times his father’s salary. In his fourth year his bonus was £2.4m.
Stevenson made his fortune by betting that austerity would be far more damaging that most people expected. Developed economies, he realised in early 2011, were not going to recover. Interest rates were not going to rise, as economists predicted. The poor were going to stay poor and the wealthy would thrive. “JB, you don’t get it do you?” he said in 2012 to a fellow trader who had mentored him in his early days at the bank. “The asset holders never lose. The rich never lose.”
How do you end up on a trading floor? Few jobs are more competitive, and much of the competition isn’t played in the open. Stevenson didn’t understand that when he first arrived at the London School of Economics as a tracksuit-wearing undergraduate who had delivered papers and fluffed pillows at DFS for spare cash in his youth. It soon dawned on him that he had no hope of securing a summer internship at a bank despite sitting at the front of every lecture and getting a first. Fortunately for Stevenson, one day he was approached in the library by an older “gangly northern kid from Grimsby”. The boy told him of an upcoming competition at which an internship could be won – and then explained its rules to him.
Here at last, Stevenson writes, surrounded by children of wealth, was “a path into the City that didn’t require me to have played the f***ing oboe. Here, finally, was a level playing field.” Stevenson walked into the competition two weeks later having studied the maths behind the trading game he was about to play. He made it to the final round and kept betting big on an outcome justified by the probabilities – only to watch as a set of specially numbered cards came up with impossible odds (one in 11,440). He had failed at the last. He was sure he had been cheated.
He had. Stevenson had outperformed the field so convincingly in the early rounds that Citibank had rigged the final round to see if he stuck to the maths even as the game turned against him. “I’m Caleb Zucman,” the man who had fixed the game told him. “I’ll see you on the desk.”
You don’t get given a job as an intern – you have to carve one out. The Trading Game is at its best when Stevenson brings alive the unease of trying to survive in the purgatorial space between being an employee and an outsider. That tension is particularly acute on the trading floor, where Stevenson is thrust – at the end of a row, with a filing cabinet for a desk – among the characters (all men) who populate his book. There is Caleb, the gleaming, precocious 28-year-old in charge of the team, whose confidence rose off him “like smoke from a candle”; Rupert, whose imperious manner and muscular-yet-fat physique fits his boarding-school class; JB, the Australian former rugby player whom younger, smarter, and hungrier men such as Stevenson will eventually eclipse; and Bill, the small, withdrawn, white-haired Liverpudlian who just happens to be the best trader in the building.
“I would sit with Rupert or JB, whoever seemed happier to acknowledge my presence,” he writes. “I soon learned that there was nothing Rupert liked more than me being wrong. In fact, what Rupert liked was… me being wrong and then fully and thoroughly accepting the blame for it, apologising unreservedly and devotedly, and then gathering my reserve and staring stoically into the mid-distance, absolutely committed to becoming a better man.”
If he was going to learn anything, Stevenson realised, he would need to talk to Bill. He beats him to the office to ensure an unsolicited coffee is waiting on Bill’s desk. They soon strike up a bond, united in their contempt for the class around them. Bill is underperforming because he has a belief no one else on the floor has: he thinks the global economy is about to blow.
Fortunately for Bill, he’s able to stay solvent longer than the market is able to stay upright. After Lehman Brothers collapses and Citibank is bailed out – which its own traders had banked on – Citi’s foreign-exchange floor becomes one of the few sources of credit in the market. The “ramshackle mob” surrounding Stevenson has dollars, and everybody wants them. “Billy was the only guy in the whole City, it seemed, who realised that was going to happen. He made tens of millions of dollars in a single week.” (For Citibank, that is. The traders eventually earn around 7 pence on each pound they make in an opaque system of bonuses.)
Bill’s insight is born of a disdain for those working on the credit structuring desk across the floor who, in Stevenson’s words, “had sold the world a lot of apparently worthless bullshit for billions”. Bill never believed that they had packaged away risk as they claimed. (Sub-prime housing mortgages could only be hidden away in bundles of loans, or “collateralised debt obligations”, for so long.) The trading floor is a status game like any other, and scorn served Bill well.
It served Stevenson too. In the end it was he, not Bill, who spotted the great flaw in the way markets were priced post-crash. But it was Bill who delivered the lecture that would open his eyes. After a bungled trade, Stevenson turned to his LSE textbooks, trying to understand why the Swiss central bank had started offering debt at a negative interest rate (paying customers to borrow, rather than charging them). There was no wisdom to be found in books, Bill told him. He had to look around. “Walk down the high street. See all the f***ing shops closed down. See the f***ing homeless people under the f***ing bridge. Go look at the ads on the Tube. Debt relief, home equity release… Go home and ask your mum about her financial situation. Ask your friends.”
By 2011, however, even Bill expected the flood of cash printed by central banks after the crash to wash through the system. Stevenson looked around – at the friend sleeping on a sofa because his parents had had to sell the family home, at the lavish parties his bank was throwing – and realised why the economy wasn’t rallying. “It was us, wasn’t it? We were the balance… we were the ones receiving the interest on Aidan’s mum’s mortgage.” Inequality was choking off the recovery. Economists were bewildered by this because they paid no attention to the distribution of wealth in their models. “The problem would not solve itself. In fact, it would accelerate.”
Stevenson was right. He made himself a millionaire – his childhood dream – by betting on the gulf between the interest rates others expected and the rock-bottom interest rates he was certain would last. But there was a fury in his discovery – and as his bet paid off, year after year, he was hit by depression and realised he wanted out, with all of the money he was due. (“The economy had become an obsession,” he writes, “it spread like an oil spill through the acid of my heart.”)
Citibank had no interest in letting their most profitable trader leave. Stevenson was sent to Japan, where he could barely function, in a denouement that the inevitable screen adaptation of this arresting story is bound to condense. Caleb, the man who brought him in, threatened him with years of trumped-up lawsuits. The company had nothing on him, but Citibank could afford to pore over Stevenson’s chat logs and the thousands of trades he had made, looking for any error or indiscretion.
In the end the bank gave in and Stevenson was freed, with the bonus he was owed. He has since sought to sound the alarm online, building up a YouTube following as a “people’s economist”, with the message that the game is rigged. In Britain the economic dice have been loaded against the boys and girls who aren’t fortunate enough to trade their way out of Ilford.
The Trading Game: A Confession
Gary Stevenson
Allen Lane, 432pp, £25
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[See also: The QE theory of everything]
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This article appears in the 28 Feb 2024 issue of the New Statesman, The QE Theory of Everything