Social interactions – rules and rituals, norms and codes of practice – are the glue that holds a stock market together. This was especially so in the open outcry markets of the twentieth century. The episode looks at the strange societies of Chicago’s pits and London’s ‘Old House’. What did it feel like to cram into a trading pit or inch your way up the Exchange’s social ladder, where cockney sparrows rubbed shoulders with the old elite? A meritocracy of sorts, so long as you were a man. This episode contains some strong language.
Let’s step back to a different time. Imagine an enormous room, capped by a vast dome measuring 100 feet high and 70 feet in diameter, said to be on a par with those of the cathedrals of St Peter in Rome and St Paul in London. This was the great trading room of the London Stock Exchange, known as the Old House. A mottled marble faced its walls and pillars and the wags called it ‘Gorgonzola Hall’ after the blue cheese. There was not much furniture, just ramshackle chalkboards covered in figures. Each firm of traders – or jobbers – occupied a particular spot on the Exchange floor, where the chalkboards marked their ‘pitch’, while the brokers spent market hours in their ‘boxes’ at the edge of the floor. Business stayed in the family, and these pitches and boxes were often passed from father to son. During trading hours as many as 3000 people jostled under the dome, manning these pitches or circulating through the crowds. The room was jammed with bodies, all male; women were not allowed even to set foot on the floor.
There were games. One etching shows young jobbers, wearing proto-hipster beards and frock coats, competing to throw a roll of ticker tape over a bar fixed high up in the dome. And there were pranks. Ehatever the weather, every self-respecting member of the Exchange would come to work with bowler hat and rolled umbrella. On a rainy day it was entertaining to unfurl a brolly, fill it with a confetti of shredded paper and roll it back up again. There were nicknames as sophisticated as the japes: one man was named the Chicken, another the Lighthouse because he was ‘always moving his head around and it reminded people of the light flashing on the top of a lighthouse’. Then there was ‘the Tortoise…he was a little bit round-shouldered, he always wore a bowler hat, brown suit, carried his umbrella and his nose would remind anybody that he was a tortoise. And he used to walk very slowly through the market.’ One short, very ugly man in the mining market was affectionately named Don’t Tread in It. When business was slow, on a Friday afternoon, songs would burst out: the jobbers would sing the Marseillaise to a supposedly French colleague and slam their desk lids – the clerks had old fashioned schoolroom desks – as cannon. A thousand male voices raised in song together, echoing under the dome: noise, camaraderie and the dreaded ‘banter’. A bygone age, a different world.
And when was this? Oh, not so long ago: the Old House closed in 1966, the same year that England won the football World Cup and still very much living memory for some.
Hello, and welcome to How to Build a Stock Exchange. My name is Philip Roscoe, and I teach and research at the University of St Andrews in Scotland. I am a sociologist interested in the world of finance and I want to build a stock exchange. Why? Because, when it comes to finance, what we have just isn’t good enough. To build something – to make something better – you need to understand how it works. Sometimes that means taking it to pieces, and that’s exactly what we’ll be doing in this podcast. I’ll be asking: what makes financial markets work? What is in a price, and why does it matter? How did finance become so important? And who invented unicorns?
Let’s take stock for a moment. In the last episode I poked fun at charmless Sixtus as we explored how equity can finance all kinds of new venture. We looked at the Ponzi scheme of valuation that underpins the Silicon Valley model and more prosaic efforts nearer to home, seeking to use novel subscription methods to develop new, worthwhile and socially productive kinds of venture. That is beginning to look like a worthwhile ambition for our project of building a stock exchange, and we recognised that exchanges can come in all shapes and sizes: Sixtus’ magazine was just one end of the spectrum that stretches all the way to the global, blue-chip providers of exchange services that we know today. We recognised, though, that stock exchanges all have something in common – at least as we know them now. They are all businesses. In the second episode we explored the birth of the Chicago Board of Trade, seeing how agricultural markets and a confluence of railways, telegraphs and civic ambition led to the formation of early derivatives markets. From the beginning, these were economic entities driven by commercial concerns; it is only later, when Justice Holmes opines that speculation ‘by competent men is the self-adjustment of society to the probable’, that such matters achieve a moral mandate too. In London, as the early market coalesced from the disorganised trading in the coffee shops of Exchange Alley, the exchange took a physical form as more prominent stockjobbers purchased a space and began to charge for entry. London’s market, like that of Chicago, flourished at the intersection of commercial and political concerns. Where the Chicago Board of Trade was linked to the city’s prominence, the London exchange gathered momentum as a vehicle through which the new national debt could be bought and sold, often churned through the shareholdings of the new joint-stock companies: the Bank of England and the East India company in particular. London’s traders became the point of passage between the nation’s Exchequer, greedy for funds to fight foreign wars, and the bulging pockets of merchants looking for a reliable and safe return on their capital.
We have, in other words, begun to sketch out the material, political, and historical entanglements that go into the making of a stock exchange, and of which we must be cognisant when we seek to build our own. In this episode I will pick up a final important aspect of the function and organisation of stock exchanges: the role of the social.
——Trading pit and bell—-
Exchanges, it is clear, depend upon social interactions, habits, relationships and customs. They are, or have been until very recently, filled with bodies. You remember how I described the trading pit as a human powered computer, taking the information that flowed into the exchange as buy and sell orders and turning it into prices. This computer works quite literally by the power of voice. Every bid or offer – every attempt to buy or sell – had by law to be shouted out into the pit. In the din the accompanying hand signals did most of the work. A trader buying would turn his palms to his body, while palms out signalled a sale. Fingers could denote the final unit of the price – as everybody knew the rest of the number there was no need to count it out each time.
The anthropologist Caitlin Zaloom records these details. She visited the Chicago pits in the final years of their operation, during the late 1990s. Zaloom notes the sheer size of some of these men, some big enough to be American football players, others with built up soles to give them extra height. Traders talked about learning to control their voices, sharp enough to carry across the pit yet not sharp enough to show panic, and coordinate their shouts with jumps and looks. ‘The body,’ she writes, ‘is a key interpretive instrument for the pit trader’. The rhythms of the pit signify rising prices or falling ones, and the ambient noise shows the depth of trade. Trading must be immediate, intuitive: ‘In training their bodies as instruments of both reception and delivery of the underlying information of market numbers, the first step is learning not to calculate.’ Such essential connectedness with the rhythms of the markets had always been the sine qua non of the pit trader, captured by Frank Norris’s turn-of-the-century novel, where one protagonist would
‘feel—almost at his very ﬁnger tips—how this market moved, how it strengthened, how it weakened. He knew just when to nurse it, to humor it, to let it settle, and when to crowd it, when to hustle it, when it would stand rough handling’.
Of course, such primal, embodied trading demands a personality to match and Zaloom found the traders constructing for themselves hyper-masculine, profane, even debauched behaviours. She notes the ubiquity of the Sun tabloid newspaper which at the time carried topless photographs on page 3; I too can remember the traders’ myth that the gradient between the model’s nipples was a sure indicator of the direction of travel for that day’s market.
Zaloom records arguments and even physical fights, as does the sociologist Donald MacKenzie, who visited Chicago’s pits in 2000. One trader showed MacKenzie his spectacles, covered with flecks of spittle after the close of trading; another recalled that he could lift his feet off the ground and be suspended between the bodies of those pressed against him. Traders may not have been friends, but they worked together day after day, year after year, and got to know each other’s habits and tactics. ‘In the pits, social information is founded in deep knowledge of the local environment. Traders organise trading strategies with the situations and motivations of their particular competitors and compatriots in mind.’ (That’s Zaloom again, and as always full references are provided in the transcript on the podcast website.) Both Zaloom and MacKenzie caution us not to romanticise the pits: ruined voices and worn out bodies, financial ruin and even tragic stories of suicide, all these form the background hum to the in-your-face noise of the pit itself. Moreover, it is not clear how cleanly the human computer worked. ‘The subtle webs of reciprocity and trust needed to keep open outcry trading flowing smoothly,’ writes MacKenzie, ‘could turn into informal cartels that operated to the disadvantage of other pit traders or external customers.’ Social relationships, the very things that kept the market running, might all too easily lead it away from the longed for – though never achieved – goal of efficient market function. 
That was Chicago. London’s trading, though every bit as ruthless, had a more gentlemanly exterior. In Chicago those trading for speculative profit were known as scalpers. In London, they were jobbers, an occupation that had evolved alongside the exchange itself – as we saw in episode three – and whose name dates back to the seventeenth century stockjobbers of Exchange Alley, those low wretches so despised by Dr Johnson. Where the Chicago men crammed into a stepped pit and yelled orders at each other, London’s jobbers strolled across the floor of the house and chatted to their counterparts, eye to eye as they squeezed their rivals into the toughest bargains possible. Specialisation was tied, not to individual pits, but to areas on the floor which serviced different sectors. There was the Government broker, trading gilts in the smartest part of the house, or the mining market, and the now-offensively-named Kaffir market, trading the stocks of Southern Africa. Jobbers stood at pitches comprising little more than notice boards. Larger firms might carve out an established pitch by a wall or a pillar, furnishing it with makeshift shelves and even a seat; smaller firms simply had to stand among the crowds.
The boards listed the stocks traded, names engraved onto magnetic strips, an attempt to give some sense of permanence to the otherwise ramshackle stalls. A junior trader, a blue-button, would be in charge of marking up prices in red or blue crayon, next to the opening price, lettered in black. The boards themselves might be put to strategic use, updated a little more slowly than prices moved, obscuring market action and helping jobbers take a turn.
Communications on the floor were rudimentary, to say the least. The Exchange retained a staff of top-hatted ‘waiters’ whose function was to ensure the smooth running of trading. One of the many problems was keeping track of people in this great crowd, especially the brokers who stalked the floor in search of the best price for their clients. Waiters used speaking tubes like the ones found on old ships to speak to brokers, blowing through them first of all to make a whistle that summoned someone to the other end. If a broker could not be found a number would be illuminated, and it was up to the individual to spot their number and raise their hand. A waiter would point them to the telephone room or the meeting room where they were required: telephone booths were located around the outside of the hall and had a movable floor that sunk down when the user stepped in, flicking out a marker to show that the booth was occupied. Waiters managed the circulation of bodies around the room, preserving the rules of conduct in the seeming chaos. They even conducted the dreaded hammerings, when firms that could not meet their obligations were shut down by the blow of two gavels and the partners’ assets turned over to the administrators.
Business was conducted buying and selling according to a complicated verbal etiquette set out at length in the Stock Exchange’s Code of Dealing. Here’s an example, from the sociologist Juan Pablo Pardo Guerra’s study:
‘What are XYZ?’ Answer: ‘125.8’
Broker: ‘I am limited I’m ½p out in 250’
Jobber: ‘I could deal one way’
Broker [hoping for the one which will suit him]: ‘Very well, you may open me’
Jobber: ‘Give you ½p’
Broker: ‘Sorry, I’m a buyer at 127½’ 
It’s unintelligible to us, but perfectly clear to the jobber. No agreement has been reached, and no deal done. Traders had to use a particular form of language to avoid being snared in an accidental bargain: one might say ‘I’m only quoting’ to make this clear, just as a lawyer might raise a point ‘without prejudice’.
Jargon apart, both London and Chicago worked on the principle of the spoken deal. The entire social infrastructure served to reinforce the primacy of this bargain, epitomised in the London Stock Exchange’s motto, my word is my bond. Prices were continually in flux. Written reports flowed long behind the deals made by jobbers, spilling first onto the boards and then the settlement clerks located beneath the trading floor. Throughout the day, Exchange officers came to the pitches and collected prices, which hardened overnight into the print of the Stock Exchange’s Daily Official List and the Financial Times; by the time these printed records were made the verbal transactions of market itself had left them far behind. The slowness of any record keeping made ‘my word is my bond’ of paramount importance, for the market could only function if spoken agreements were honoured, even if the deal caused one counterparty considerable financial pain. Sanctions were informal and effective, and anyone who defaulted on a bargain would have great difficulty making another. Everyone knew one another. Like the traders in the pits, jobbers did not need to know the prospects for a company or the long-term economic forecasts for the nation. They simply needed to know who wanted to buy, and who wanted to sell. All the information was ‘on the floor,’ says one jobber, ‘eye contact, sweat, movement. You could always tell from the eyes of the junior trader whether his boss was long or short, and how badly they wanted to get out of their position’.
——— Market traders——
The Exchange was strangely meritocratic, with an apprentice-based career system that welcomed cockney sparrows as well as the dim-witted younger sons of the old elite. Although it preserved in microcosm the nuances of the British class system, it had an egalitarian demeanour where boys from the East End rubbed shoulders with graduates of august Oxbridge colleges: ‘I like talking to you,’ an old jobber told one young Balliol graduate, ‘‘cos you’re the only bloke in the market, wot I talk to, wot talks proper.’ The old Etonians drifted towards the posher firms, the gilt-edged brokers, while the lads from Hackney and Islington sought out opportunities in the less grand stretches of the market. That meritocracy did not extend to women though, and Ranald Michie, historian, records the details of the struggle to secure equality of access to the institution. In 1966 – the same year that the Old House was closed – a Miss Muriel Bailey, highly commended brokers clerk, sought membership of the Exchange, in order to apply for position as partner in her firm.
To be a partner, one had to be a member, and to be a member one had to be a man. Miss Bailey, who had run her broker’s office throughout the war and in the intervening years had built a substantial client list, naturally felt that obstacles were being unnecessarily placed in her way. The Council of the Stock Exchange agreed to support her application so long as she promised not to set her profanely female foot upon the sacred mancave of the trading floor, but the membership resoundingly rejected this proposal. That was in 1967. At least the membership proved to be consistent in its bigotry, in 1969 rejecting the membership of foreigners, defined as those not born in Britain, and voting against the admittance of women again in 1971. Nor should the Exchange itself be entirely exempt from scrutiny: in 1962 it had refused to accept a listing application from automotive firm FIAT, presumably on the grounds of being too Italian. Only in January 1973 did the membership consent to allowing female clerks to become members, and even then it took until the summer of that year before rules banning them from the trading floor were abandoned. Miss Bailey, by now Mrs Wood, was elected to the membership in January 1973, aged 66.
To become a member, even if you were a man, you had to serve a lengthy apprenticeship, joining as a youngster and working through clerical and junior status until eventually you became a dealer, then partner. Brian Winterflood – a central character in our story – was one such lad. Now in his eighties, he is a short, jovial man, still full of energy. He is known for his anecdotes, as well as his opinions – he is an outspoken supporter of Brexit – and is unerringly generous to the press. They treat him well in return, filling diary columns with stories about his long career. Sometimes these verge on the shameless, like Winterflood passing off a recent finger amputation as frostbite sustained on an arctic cruise. Despite his pleas, the paper reported, the ship’s doctor refused to operate and Winterflood had to be treated on terra firma. I noticed that Winterflood doesn’t eat dessert and suspect another later-life explanation. Luxury arctic cruises would be much less popular if one paid in digits as well as dollars, but it makes for good copy all the same.
My lunch with Winterflood was a spontaneous affair. We were supposed to be meeting in the office, but he didn’t show up. Instead Stacey, from the front of house, appeared. But Brian had called: he couldn’t find a parking place near the office, so he was going to pick me up instead. The lads on the trading desks – gender roles are still very much alive in the city, as you see – joked about the gaffer keeping a picnic hamper in the back of his Rolls, but neither materialised.
Instead Winterflood took me to a favourite spot – a stripped down Italian restaurant in Southwark – where he could chat to the staff like an old friend, sip a blend of angostura bitters and ginger beer he called ‘Gunner’, and park his modest executive runabout on the disabled-badge space right outside. On a second meeting he recounted a recent encounter with an unknown item on a cruise ship menu – poivron. He can read most French menus, he told me, but was stumped by that – still, he didn’t believe the Philippine waiter who claimed ‘Poivron’ was a region of France. The secret ingredient turned out to be leeks. Brian Winterflood, arch-Brexiter, is a most amusing man.
Winterflood is a legendary figure in the smaller-company market world. His career has tracked the markets’ ups and down more closely than anyone; in fact, his name is almost synonymous with small company trading. Growing up in a suburban household in Uxbridge, West London, his arrival in the City was the gift of a generous school teacher, who asked him what he intended to do for a living.
‘I said I don’t want to drive a bus – because my father was a tram driver,’ he recalls, ‘what I would like to do is to make some money.’
‘Well,’ replied the schoolmaster, ‘if you want to make money you should go to where money is made. I have a friend who is a partner in a stockbroking firm and I wonder if you would want to go up the City.’
‘Yes, I would’, replied Winterflood, without thinking more. And so one of the most influential men in the small company world began his career as a messenger at the very bottom of the heap.
‘Thank God I did start there,’ says Winterflood, ‘running round the City, getting to know the City, getting to know the people. It was magical, absolutely magical.’
Would-be jobbers like the young Winterflood served a lengthy apprenticeship, first as messengers, then ‘red buttons’ and ‘blue buttons’, each colour of badge denoting an increased level of seniority and certain powers and responsibilities. Established jobbers wore no buttons and junior employees would have to remember who was who, lest they disgraced themselves by speaking out of turn to a senior member. Blue buttons ran messages between jobbers and brokers, as well as marking up prices on the boards. They asked questions and learned from their employers who doubled as tutors and mentors, sponsoring the careers of juniors and preserving the future of the Exchange.
Eventually, after several years of long hours and low pay, checking bargains with longhand arithmetic and slide rules, balancing the books, and learning the etiquette of the House, the lucky ones were promoted to ‘dealer’, able to trade for the first time.
The moment of appointment was a theatrical Stock Exchange ritual, the young dealer sent up from the floor to the partners’ office to be given a badge. Another East End blue button, Tommy, whose memoires were captured by historian Bernard Attard, recalls his transition to ‘authorised clerk’ with awe:
‘I was called into the partner’s room and they said, ‘How would you like to become a dealer?’ I said, ‘I don’t know’. I was absolutely dumbfounded. Where I come from I couldn’t have anticipated anything like this. So ‘I said I’d love to, I’d love to have a try.’ So I was authorised, and I’ll never forget the first morning…’
Winterflood’s first day was quite different; not for him the stately induction in the upstairs office:
‘I had a particularly nasty senior partner,’ he remembers. ‘He was a moody so-and-so and he used to gamble everyday on the horses, his life was terrible, he ran off with another woman. The day that I got authorised to go on to the floor of the Exchange, he puts his hand in his pocket…and he says, ‘All right Winterflood, now you are authorised’, and he took his hand out like that and he gave it to me, it was my badge, my authorised badge. And he said, ‘Mind your fucking eye.’
Mind your eye – an old expression meaning ‘take care’, often translated into comic dog Latin: mens tuum ego. Winterflood remembers the sudden responsibility of holding a trading book as an authorised dealer in a partnership, trading with the partners’ own money and, moreover, their unlimited liability. Partners took a keen interest in their own property and the menacing presence of the waiters’ gavels:
‘It was good looking over everybody’s shoulder when they were [trading], but when the senior partner says, ‘Mind your fucking eye’, I mean you are terrified…I remember when he came back from a bad day at the races, which was the bookie outside the Exchange, he would sit in the pitch and say, ‘What have you done?’ I would say, ‘Well not a lot Sir, but there are one or two things that you might like,’ and he goes across and looks at the page, I say ‘Have you noticed sir, so and so,’ and he said, ‘It only pays for the bad ones.’’
This process of apprenticeship served to reproduce the social structures that held the exchange together, years spent learning who was who and what was what before being allowed anywhere near the money. Eventually it was possible to buy a ‘nomination’, a seat on the Exchange, and become a member. You could then embark on your career proper, building a reputation in a particular sector or for a particular strategy: a specialist in Tanganyika concessions, a specialist in insurance, an expert in arbitrage, in contango, a bull or a bear, depending on one’s personality, skills and good fortune.
It was the process of apprenticeship, as well as the distributed structure of the London Stock Exchange’s membership, that made the institution so extraordinarily durable and yet simultaneously so conservative and resistant to change.
So that is one last thing to add to our mix of key ideas when we come to build our stock exchange. Social relationships, webs of reciprocity and trust, and bodies – up close and personal, mostly male, I’m afraid – are just as much part of the structure and function of stock exchanges as their material architectures and political alliances. As I pointed out in the last episode, Aditya Chakrabortty identifies the alternative economic projects he has reported on as being ‘thickly neighboured’. That’s true of any exchange – even, as we shall see, those contemporary digital structures that seem to have banished bodies altogether – and will be something to which we must look if we are going to succeed. But, and as this episode has shown, stock exchanges are constitutive of community as well, forming engines through which people can be bought together in cooperative activity. Once again, we just have to choose the shape we wish that cooperation to take.
Times were hard for the London Stock Exchange during the 1960s and the depression of the early 1970s. Members held other jobs and scrabbled to make ends meet. Winterflood and his wife ran a small bric-a-brac shop named Fludds in Valance Road, at the end of Petticoat Lane. Others did worse: Winterflood recalls meeting a colleague selling carpet squares – ‘not even whole carpets, carpet squares!’ It is hard, now, to believe that finance could have been so impoverished a profession. Jobbers would talk about making their daily ‘two and six’, the cost of the train journey to work and home again.
In January 2017, just after his 80th birthday, Brian Winterflood rang the Stock Exchange bell to call time on his career. The man who ran a bric-a-brac shop to make ends meet is now a multi-millionaire, able to charter a private jet to his holiday home in Corsica or spend the winter in a Floridian holiday village where there is line dancing every evening. Winterflood Securities – Wins – the firm that he founded and sold in the early 1990s, but ran for many years after, is reported to have made £100m in 2000. How did such a change in fortunes come about? How did these impoverished market-makers go from metaphorical rags to very real riches in the space of two decades? To answer those questions we must explore the extraordinary transformation in finance in the 1980s.
I’m Philip Roscoe, and you’ve been listening to How to Build a Stock Exchange. If you’ve enjoyed this episode, please share it. If you’d like to get in touch and join the conversation, you can find me on Twitter @philip_roscoe or email me on email@example.com. Thank you for listening, and see you next time, when we get to grips with the decade of greed.
 The background detail in this chapter comes from varied sources, my own research into London’s markets, see https://research-repository.st-andrews.ac.uk/handle/10023/11688, and Ranald C. Michie, The London Stock Exchange: A History (Oxford: Oxford University Press, 2001). In 1990 Dr Bernard Attard of Leicester University conducted a series of oral history interviews with former jobbers, capturing the details of what was by then a vanished world. Transcripts and recordings can be found https://sas-space.sas.ac.uk/view/collections/lseoh.html
 Sound recording from ‘touchassembly’ via freesound.org, under a creative commons attribution licence https://freesound.org/people/touchassembly/sounds/146268/
 Caitlin Zaloom, “Ambiguous Numbers: Trading Technologies and Interpretation in Financial Markets,” American Ethnologist 30, no. 2 (2003): 264.
 Norris, p.90, quoted in Christian Borch, Kristian Bondo Hansen, and Ann-Christina Lange, “Markets, Bodies, and Rhythms: A Rhythmanalysis of Financial Markets from Open-Outcry Trading to High-Frequency Trading,” Environment and Planning D: Society and Space 33, no. 6 (2015).
 Donald MacKenzie, “Mechanizing the Merc: The Chicago Mercantile Exchange and the Rise of High-Frequency Trading,” Technology and culture 56, no. 3 (2015). Zaloom, “Ambiguous Numbers: Trading Technologies and Interpretation in Financial Markets,” 261.
 MacKenzie, “Mechanizing the Merc: The Chicago Mercantile Exchange and the Rise of High-Frequency Trading.”
 Juan Pablo Pardo-Guerra, “Creating Flows of Interpersonal Bits: The Automation of the London Stock Exchange, C. 1955–90,” Economy and Society 39, no. 1 (2010): 90.
 Eric K. Clemons and Bruce W. Weber, “London’s Big Bang: A Case Study of Information Technology, Competitive Impact, and Organizational Change,” Journal of Management Information Systems 6, no. 4 (1990): 50.
 From www.freesound .org under a creative commons licence. https://freesound.org/people/deleted_user_1116756/sounds/74460/
 From my own interview notes.
 Michie, The London Stock Exchange: A History, 453f.
 To be precise, the application was rejected on the basis that the firm’s accounts did not meet UK standards. Ibid., 477.
 http://www.cityam.com/226688/how-the-winterflood-founder-went-from-freemason-to-gangster [accessed April 2017]
 Bernard Attard, “The Jobbers of the London Stock Exchange an Oral History,” Oral History 22, no. 1 (1994): 45.
 Financial Times, 30 April 2017, ‘Winterflood’, by Chloe Cornish. https://www.ft.com/content/42764c22-29c6-11e7-9ec8-168383da43b7?mhq5j=e3