Everyone in this industry knows that not all clients are created equal. Some CEOs or treasurers and people on the buy-side are well liked and have a reputation for fair dealing and respectful behaviour with their bankers and brokers. Others ... well, it’s a customer service job, and because the sell-side are generally capable of acting like professionals, bad clients don’t necessarily ever find out what people actually think of them. Bankers may differ in their precise rankings of hated clients, but in any given segment of the industry, there’s usually a pretty strong consensus about who the top five horrors are. And then occasionally you get the Great White Whale of bad buysiders, the people about whom the sell side is prepared to believe absolutely anything unfavourable.
Jeffrey Epstein appears to have been one such. As well as being a genuine monster as a human being, the investigation into his financial affairs is digging up information which strongly suggests that he was the sum of all nightmares for Wall Street, both as a private client in his own right and as a money manager for billionaires. A few months ago, the mystery of the Epstein fortune was why nobody seemed to have done business with this ostensible billionaire; it seems that the answer is that his client relationship wasn’t one that attracted a lot of competing bids.
The main firm to have done business with Epstein was his own former employer of Bear Stearns. According to the Wall Street Journal, not only did he attempt to penny-pinch on pricing with them (generally regarded as acceptable behaviour if annoying), but he acted “ferociously” in doing so (less acceptable; politeness costs nothing) and often leveraged his personal relationship with Jimmy Cayne, who allegedly encouraged Bear employees to “take care of” him. This last practice of “going over the head” is guaranteed to get you hated in any business environment, but particularly so in investment banking, where status matters and where chief executives aren’t answerable for the effect their favouritism has on P&L lower down the line.
As he moved on from Bear to other firms, Epstein developed a habit of trying to revisit any bad trades he'd got into by lawyering-up and accusing the sell side of misrepresenting transactions. That’s not only bad client behaviour – it’s an attack on the semi-sacred principle of caveat emptor, the basis on which all financial professionals are expected to at least pretend to deal with one another. He even tried to rip off his interior designer.
And then to end it all, not only was Epstein a horrific client, he turned out to be a massive reputational liability as well, leaving the bankers who had the displeasure of dealing with him also being made to justify themselves for not dropping him as a client earlier than they did. Poor guys – if his behaviour in these transactions is in any way typical, very few of them would have been trying to hang on to him anyway.
Elsewhere, it’s in a black metallic case roughly the size of a pizza delivery box, and it fits into the server racks in the datacentres used by big equities trading operations. It’s called the “Omnibot” from Hyannis Port Research and its purpose is to save traders’ blushes. The Omnibot is a very specialised computer which uses single-purpose chips to perform a small number of operations very quickly; checking that the order is not a fat-finger trade, that the client is approved for trading the stock in question, that the credit limit hasn’t been breached and so on.
These are the kind of things that used to be spotted by a keen-eyed trading desk junior in the days of handwritten tickets, but which have long since been automated. Because it’s so ruthlessly optimised for the task, though, Omnibot can do around 65 of these elementary checks in 360 nanoseconds, so it doesn’t slow up the order materially on its way to the exchange. It’s another example of the constant technological arms race in equities trading – in a world where you need a custom-designed piece of hardware just to keep track of typos, it’s not surprising that some firms like Deutsche are leaving the party.
Hedge funds’ descriptions of their strategies in marketing documents give away a surprising amount of information about what the manager is actually like. A wide vocabulary is associated with outperformance and lower risk; convoluted sentence structures sometimes suggest regulatory and compliance trouble (Institutional Investor)
Not that any self respecting banker would check their laptop, but several airlines are now refusing to take Macbook Pros in hold baggage due to worries about fire risk (Bloomberg)
After the Bill Winters fiasco, companies are taking another look at CEO pension funds and their tendency to generate investor complaints (Financial News)
Although the corporate case between Alphabet’s Waymo and Uber over self-driving car trade secrets has been settled, Anthony Levandowski has now been indicated on criminal charges over files that he downloaded on his way from one job to the next (NYT)
In the context of a dispute over women advisors being paid less than male counterparts, an anonymous British political operator described trying to plan Brexit as “one of the most amazing job opportunities you can get” (Buzzfeed)
Another of the most amazing jobs – Judah Elmaleh, acquitted in a French tax evasion case yesterday, was the “Head of Diamonds And Jewelery” for HSBC’s Swiss private bank (Bloomberg)
Office romances go horrifically bad; one side of the story, admittedly, but a fairly frightening tale from Google (Medium)
“Air quality, natural light and the ability to personalise work spaces with photographs and ornaments”. If you think these are normal occupational hygiene issues rather than workplace “perks”, you’re apparently luckier than many respondents to a comprehensive survey of what employees really want. “Tech based healthcare tools” was the least popular benefit (Harvard Business Review)
The “spectral centroid” is a measure of the “spikiness” of images and sounds, and it explains their emotional associations; this might be why heavy metal albums have gothic typefaces on them. (BPS Research Digest)
Photo by David Tran on Unsplash
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