The Calm Before the Storm

Would you like to know what the beginning of a global financial crisis actually looks like?

2007. I’m walking onto the trading floor at 7am with coffee in hand, just like any other day. The usual buzz: teams arriving, systems firing up, and the early morning banter heating up.

The news flow had been increasingly warning about issues in the credit complex, with overall global financial markets sentiment nervous. Metals were definitely moving, but it wasn’t to an unprecedented level.

“Morning, Wildone.”
“Morning, Dazza.”
“This is the year, mate… Arsenal are going to do it… saw them win on the weekend?”
“Dazza, I know absolutely nothing about football, and even I know they don’t have a chance.”

I sit down, fire up my systems, check Bloomberg, send a quick “Good morning” into the chats. Everything seems in order… nice start to the day. Should I go for a third double espresso before 7:45 am? Probably pushing it.

But then, there’s a shift in the energy on the trading floor. The credit derivatives desk, usually rowdy, is kicking off in a big way. That’s when I start to sense something is definitely up.

I check my risk reports - position looks solid. But the noise from the credit derivatives desk… it is definitely above normal. The brokers are coming online, and they seem focused, busy, something's in the air.

Then the ping comes in.

“Looking for some 1 month XAU vol to kick off mate.”
“Got a direction?”
“Hasn’t said, looking for a two-way.”
“Offer it 3 vols over your overnight offer, social size 20k vega”
“Cheers mate”

This guy's a buyer for sure, let's see where they are at.

The tension rises. Small talk fades. The broker didn’t flinch at my offer. My suspicions were being confirmed, and fast.

The moment I knew something big was happening. That was when the crisis began to reveal itself in its full force...