Trading Floor Antics

Phil Perkins witnessed extreme behavior and practical jokes on Salomon Brothers’ mortgage trading desk in the late 1980s.

The Great Rice Ball Battle

My first story is about an incident that became known as “the great rice ball battle.” For background, you have to know that at this time the mortgage desk was the most profitable business on Salomon’s trading floor. Profitability was high because of the advent of mortgage securitization and the lack of competition from other trading firms, which allowed for wide bid-ask spreads and extreme prices. The mortgage traders’ success gave them a larger-than-life aura within the firm.

Salomon’s mortgage traders were also larger-than-life in a more literal way. Quite a few of the corporate and government bond traders had been college athletes and still kept in shape. Most others on those desks were also fit and trim. Meanwhile, mortgage traders were the complete antithesis. Many of them were overweight and sloppy; sloppy not just in their appearance, but in how ravenously they consumed any food that was on the desk, including food not their own. Such behavior was considered totally fine.

During the holidays, brokerage firms that intermediated trades between security firms like Salomon would send gifts. Most of the gifts sent to Salomon’s mortgage desk were food, because that was what was wanted and the brokers knew their customers.

One afternoon close to the holidays, a massive order of Chinese food was delivered to the mortgage desk. Five or six delivery men showed up, their arms laden with boxes and boxes of Chinese food, enough to twice overfeed the 25-30 people on the mortgage desk.

Along with institutional-size tubs of sticky chicken wings, moo shu pork, and other sorts of things, they delivered eight large containers of white rice that was supposed to provide the foundation layer for the entrees. These were one-foot by two-feet by four-inches high foil pans with cardboard lids.

Reflecting the feeding preference of the desk, the rice was never touched. The traders piled the sesame chicken and spareribs high on their plates, or maybe just ate it right out of the cardboard containers. Within 15 minutes, all the entrees were gone, leaving just the eight containers of rice. Do a little math and you’ll figure out that there was five-and-a-third cubic feet of rice left untouched. And of course, because cleanliness, sanitation, and order were not priorities for the mortgage guys, these containers sat on top of the desk.

And the rice remained untouched until one slow afternoon in January a mortgage trader opened one of the rice containers and said, “Holy shit, there’s rice in all these things.” Amazingly, even after a couple of weeks, the rice was still kind of moist and pliable and sticky. Seemingly to prove this, the trader reached into the rice, made a kind of rice snowball, yelled out the name of a guy across the desk, and underhanded the rice ball to him.

The guy caught the rice ball and it mostly maintained its structural integrity. This trader tried throwing it back overhand. The structural integrity of the rice ball was still acceptable, although a trail of rice grains was forming over the desk and floor. But the two traders pressed the rice ball back together and continued to toss it back and forth. This seemed like fun to the other mortgage traders and pretty soon all the rice containers were open and all the traders were tossing rice balls back and forth and the trails of rice grains were getting thicker. After a few minutes, the novelty was wearing thin. But then an intriguing question occurred to the mortgage traders: “how far can you throw a soft-ball-sized rice ball?”

Fortunately, if you had to determine this question indoors, Salomon Brothers’ trading floor at One New York Plaza was ideal. It was two stories tall and extended almost the entire footprint of the building. It was quickly determined that the rice balls could reach the government bond traders 75 feet away.

The government guys were first astounded that they were being pelted by balls of rice, but they quickly decided they needed to return fire. In doing so, they were at a distinct disadvantage, because at the distance between the mortgage and government desks, the rice balls exploded on impact. But the govy guys did their best, scooping up the remnants, compressing the grains into balls, and chucking them back at the mortgage desk. Pretty soon there was dueling artillery fire across the trading floor. This carried on for a good five minutes until either the novelty wore off or the rice wouldn’t hold together anymore, I can’t remember which.

The night cleaning service did a great job vacuuming up the mess and you didn’t often observe stray grains of rice from the fight. But five years later, Salomon moved to new digs at Seven World Trade Center. The movers took away the computers, monitors, telephones, papers, and junk from the mortgage desk and broke it down. In nooks and crannies and inaccessible places was dried rice from the great rice battle five years previous.

The Stolen Dinner

The second story is about a stolen dinner. It involves a young mortgage trader who had been on the desk for less than a year. And like a lot of people at the firm, he took advantage of Salomon’s policy that after six pm you were eligible for a free meal from the cafeteria.

There were a lot of people at Salomon, particularly in corporate finance, who would work very late, sometimes even all night, and the firm decided that if you worked past 6 pm in the evenings, you deserved a free meal. This particular trader was known to stay at work until 6:01 pm, whereupon he would go to the cafeteria and order a bunch of food, more than one person could consume at a sitting, and most of it in takeout containers. And then he would go home to enjoy his meal and perhaps share it with his roommates or friends. Of course, this was a brazen gesture. Others would at least take their food back to the desk and sit there and eat it and then go home.

This behavior became known to some of the older, senior traders on the desk, and they decided to pull a practical joke on this fellow. One day this individual is on the trading desk. It’s the middle of the day. And he senses that things had gotten quiet around him and he smells a cigar. That meant one thing: that John Gutfreund, chairman and CEO of Salomon, was lurking close by. This was not uncommon and the typical response to knowing that Gutfreund was standing behind you was to bury yourself in a phone call, even if the phone call wasn’t real, or to otherwise look very busy.

Most of the time, John didn’t ask questions, because I’m not sure he would really, particularly on the mortgage desk, know what question to ask or understand the answer. It was probably simply your reaction to his presence standing behind you that he was attempting to provoke. But in this particular case, Gutfreund was playing a role in a prank that people on the mortgage desk had asked him to play. Gutfreund told the individual to hang up the phone. He probably didn’t have anybody on the line anyway. And Gutfreund said, “We know you are taking food home from the cafeteria. I’d like you to pack up your things and go down to HR, because we’re firing you.” And then Gutfreund simply and quickly turned around and walked away.

Now, at this point, the rest of the desk, who were all in on the joke, were observing this and smiling and laughing behind their phones and monitors, and trying not to let this individual know it was a joke. But their victim, upon hearing Gutfreund, simply slumped forward and placed this forehead on the desk. He was probably crying, but I don’t know that for sure. He sat immobile with his forehead pressed on the desk for a good ten minutes.

Gradually, the smirks and hidden smiles and choked-back laughter stopped on the rest of the desk. And now people began to glance at this individual and start to wonder, “Uh-oh, did we take this one a bit too far?” And before anybody could walk over and let this person know that it was all a joke, he jumped out of his chair, grabbed his suit coat, and ran as fast as he could for the elevator bank. At this point, everybody in the desk stood up and said, “Oh shit, what have we done?”

Which then precipitated a lot of arguing and yelling on the desk. And then several people ran after this individual. And, of course, by this time he’d already got in an elevator and disappeared. And so, there was a frantic search around the building and around lower Manhattan to find this guy, and keep him from doing something stupid.

Someone found him and let him in on the gag. I don’t know how that conversation went, but the next day, when he came into work, he seemed to have shrugged it all off. The effect on the rest of the desk was just as transitory. It didn’t spark any serious self-assessment, nor did it reduce the frequency or severity of pranks; that would have probably required an actual fatality. And that’s the story of the stolen dinner.

The Grapefruit Assault

The third story, like the first, is also about a broker gift, an item of food, and throwing said item of food: “the grapefruit assault.”

Unlike other brokers, this particular broker had massively misread Salomon’s mortgage desk. It sent over a really beautiful gift-wrapped box of citrus ala Harry & David. Think about somebody calling Harry & David and saying, “Send over the biggest box of fruit you possibly can.” And so, the box came to the desk, where it was ignored, because nobody on the mortgage desk would ever eat a piece of fruit.

A few weeks go by and this huge box of fruit is still sitting on the desk, unloved and unopened because it wasn’t Chinese food or pistachio nuts or beef jerky. But one slow afternoon one of the mortgage coupon traders happened to pay attention to the box, and the contents of the box, and make a series of mental associations.

Grapefruit is shaped like a ball.

I can throw a ball.

I will throw a grapefruit.

He proceeded to take the colored tissue paper off one of the individually wrapped grapefruits and yell out to another trader 15 feet away at the other end of the desk. And he threw the grapefruit at the guy, and this person deftly stuck up one hand, caught it, and flung it back. In fact, he caught and threw the grapefruit back so gracefully, without any extraneous motion, that the catch and the throw seemed dismissive. The original thrower felt that the guy wasn’t showing proper respect for the grapefruit, the grapefruit throw, or the grapefruit thrower -- himself.

Demanding respect, the first grapefruit thrower threw the grapefruit back to the second grapefruit thrower a little harder and the second grapefruit thrower threw the grapefruit back to the first grapefruit thrower harder still. Very quickly, it became a mano-a-mano macho contest. “I will throw this grapefruit so hard that you will not be able to catch it. Or maybe the grapefruit will explode all over you. I will achieve dominance over you and take your cattle and wives and land for my own.” “No, I will catch this grapefruit and demonstrate how puny and weak and unmasculine you are. I will take your cattle and wives and land.”

The contestants rose to their feet, doing full major league pitcher wind ups, and attempting to throw grapefruit strikes. The very fact that they were unsuccessful in hurting their opponent’s hands or causing the grapefruit to break simply encouraged them to throw the grapefruit harder and harder. The spectacle of the grapefruit flying back and forth across the mortgage trading desk, ever faster, elicited cheers and catcalls that eclipsed the normal noise of the trading floor. The entire trading floor stood up to watch.

Everyone except for one chap. Down the aisle probably 50 feet, behind one of the grapefruit throwers, sat a young salesperson, the only guy on the floor not screwing around and watching the toss-off. He was intently involved in a conversation, probably with one of his clients, but because there was so much cheering going on, he had hunched over and lowered his head almost to knees. He had his left index finger in his left ear to block out all the noise and he was pressing the telephone receiver, one of those old heavy black trading desk telephones, think 1970s AT&T, tightly against his right ear.

Back at the mortgage desk, the trader who had initiated the grapefruit throw decided that he was going to put an end to it. He put everything he had into throwing the grapefruit at his opponent one last time. And as the grapefruit flew down the mortgage aisle, it rose, and his opponent leaped up in the air to catch it, but it sailed over his finger tips and it had incredible velocity. As soon as the grapefruit got past its intended catcher, the whole floor got quiet. The grapefruit was a blur and it probably took less than a second to cross its distance, but it seemed to everyone to go much slower, this projectile, flying through the air, passing all these people, sitting or standing at their desks.

And it impacted directly into the side of the head of the kid on the telephone. In fact, it hit the hand with which he was pressing the telephone receiver into his ear. The sounds that accompanied the impact were noteworthy and awful. First, the smack of the grapefruit striking a human head at terminal velocity; then the gasp (“ooh!”) of everyone on the trading floor.

But the visual was even more impressive than the aural. You might be familiar with the term “pink mist” from playing first-person shooter video games or watching the Zapruder film or from being a professional assassin. Pink mist is the explosion of blood and brain and gore when a large caliber bullet impacts the head. And that’s precisely the visual that presented on Salomon’s trading floor that day. Because the grapefruit didn’t just break apart, it exploded. It disappeared into a mist of juice and pulp and fragments of rind against the side of this kid’s head.

The effect on the kid was obviously serious. He didn’t jump up and scream; instead, he toppled out of his chair onto the floor, into the fetal position, motionless. Oddly, he still held the gore-splattered phone to his head, maybe because his body was no longer receiving signal from his brain or maybe because Salomon’s training program instilled the desire to sell a bond with a one-point markup deep in the kid’s medulla oblongata. The entire trading floor was silent and still.

Then, a couple people rushed over to see if the kid was dead. His boss, the head of the sales unit, also ran over. He wasn’t unconscious, if he had been, it hadn’t been for more than a moment. “Seriously stunned” would be a layman’s description of his condition, but his colleagues got him back up into his seat. The kid had no idea what had happened. As far as he was concerned, he was sitting there trying to sell some bonds to somebody and his head exploded. After wiping the grapefruit carnage off him, they determined he probably wasn’t mortally injured, maybe just concussed.

Once the victim’s boss determined what had happened and who was responsible for it, he took off screaming down the aisle, because he was going to kill the mortgage trader assailant. The sales manager was not going to yell at the mortgage trader. He was not going to harm the mortgage trader. He was not going to get the mortgage trader fired. He was going to kill the mortgage trader with his bare hands, but he had to traverse 50 feet to do so. And, thankfully, four or five people, including some of his own sales people, tackled the manager, and held him down while the manager frothed at the mouth and clawed to break free. And that’s the story of the grapefruit assault.

Phil Perkins had an unusual path to Salomon Brother’s mortgage trading desk. He was a COBOL programmer for Merrill Lynch in 1984 when Salomon Brothers hired him away to help develop its market information and trading systems. After being a liaison between the technology group and the mortgage trading desk, the desk hired him on as a trader.

After leaving Salomon Brothers, he and two other Salomon alum ran their own mortgage brokerage firm for several years. He then spent a number of years overseas in emerging markets with Deutsche Bank in Moscow and London. After being on the buy-side in Philadelphia, he moved to Los Angeles to manage a regulator-conserved financial institution through its wind-down. He is actively involved in a number of private equity partnerships and runs a horse ranch in Los Angeles with his oh-so-patient wife, Lyles.

Have a good story for Stories.Finance??We record your story on a telephone call and you approve the transcript. Email?[email protected] ?for details.

Want more finance stories? Visit Stories.Finance or read these stories here on LinkedIn:

Meeting Michael Milken , by Doug Watson

Negotiating Away a $23 Billon Default in the 2008 Financial Crisis , by Flavio Bartmann

How Much of a Good Trade Is Too Much? A Bond Arbitrager Is Shaken and Stirred in Tokyo , by Victor Haghani

Sell-Side Research Independence in Theory and Practice: Analysts and Mortgage Traders Clash in 2007 , by Laurie Goodman

Meeting Nelson Mandela and Rating South Africa , by David Levey

The Salomon Brothers Treasury Auction Scandal , by John Macfarlane

Happy Times and Others as a Fixed-Income Strategist , by Steve Antczak

Dangerous CFOs, Imperial CEOs, Chagrined Bankers, and Warren Buffett , by Don Noe

Peasant Logic and the Russian GKO Trade , by Joe Pimbley

Death of a Trading Floor , A Photo Essay, by Trevor Murray

Investigating the 1987 Stock Market Crash , by Andy Constan

Success and Failure Gaming Insurance Company Capital Requirements , by Oussama Nasr

The Pig Next to You , by Steve Bernstein

Cultures Clash at Salomon Smith Barney , by Richard Bookstaber

When the Tech Revolution Came to Wall Street , by Marty Fridson

Unwinding Drexel’s Swap Dealer After Bankruptcy , by Wendy de Monchaux

Why Lehman Brothers Failed When It Did , by Joe Pimbley

Minting Cryptocurrencies and Creating Finance Apps , by Yazan Barghuthi

What Makes Sammy Run? A Trading Assistant Races Up Wall Street , by TC

The Human Piranha Teaches Salesmanship , by Lenny Barshack

Let’s Assume Taxes , by Andy Kalotay

Copyright ? 2022 Philip Perkins. All rights reserved. Used here with permission. Short excerpts may be republished if Stories.Finance is credited or linked.