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November 2001

Jim Trott


Strategic and commercial manager for treasury services, Reuters




       
Jim Trott
Jim Trott, who was chief dealer at the Bank of England in 1992 when Britain left the Exchange Rate Mechanism, has vivid memories of what came to be called Black Wednesday. "It was the sort of situation that if you'd known what was going to happen in advance, you'd have arranged to be on leave," he says. "But having gone through it, you wouldn't want to have missed out. It was an incredible position being between the government's objectives on the one hand and the markets on the other, with the government believing it could support the rate of Dm2.7780 to the pound."
The amount the British government spent trying to prop up the value of the pound has never been disclosed, although there have been plenty of estimates. Trott has signed the Officials Secrets Act and says the figure is something "I'll take with me to the grave".
In any event, he adds: "What happened afterwards in my view sowed the seeds for the success of the UK in the latter half of the decade. The devaluation of the pound to Dm2.17 turned out to be non-inflationary, which put us in a very competitive position for an export-led recovery. Of course it was a disaster at the time, but history tells us that it was in fact Platinum Wednesday."
As well as being ultimately good for the UK economy, the events of Black Wednesday had a positive impact on Trott's standing in the City. "He already had a lot of personal credibility in the market," says a former colleague at the Bank, "and if anything that went up after Black Wednesday, which is a testament to what he did. The way the mechanics of the deals were done was highly professional and highly calm."
The head of foreign exchange at a leading investment bank adds: "Jim Trott handled himself with great aplomb that day. He seems to have a very rare combination of an intuitive sense for the market and a healthy respect for it, allied with the discretion of a central banker. Very rarely do you have that so well encapsulated in one individual."
Born in Shepherd's Bush, west London, in 1951, Jim Trott grew up a supporter of Queen's Park Rangers football club - "not something to be particularly proud of" - and played for the first team at St Clement Danes Grammar School as a midfielder. After joining the Bank of England at the age of 18, he captained its first team for four years, playing in the Southern Amateur League. Had he not taken the banking path he would probably have joined the BBC, which had offered him a place on its training programme. "But they wanted me to take a typing course," he says, "and I was far too butch for that."
At the Bank of England, he started off in the accountants' department, and then spent time in various other departments, learning the many functions of a central bank, before "stumbling across forex in 1978".
Trott was recruited by Mike Beales, then chief dealer, and began learning about the functions of the Bank's dealing room, its unique link with government, and the relatively low priority of profit making. "The Bank became more and more hard-nosed about this in the 1980s and 1990s," he says. His experience included a four-month stint with the Federal Reserve dealing team in New York (where he was held in extraordinarily high regard) and, says the former Bank of England colleague, he soon became known as "loyal, unflappable, extremely knowledgeable about the market and very easy to get on with".
After being appointed chief dealer in 1990, Trott made it the Bank's business to deal as much as possible in the forex market - "that's the only way to find out what's going on" - while maintaining the value of the currency in accordance with the government's wishes, anticipating the government's needs and being able to deliver what it wanted at any time. It was a time, he says, when the market was changing, "when the forex market discovered the middle office".
After Baring Brothers went bankrupt in 1995, the Bank of England sent warnings to banks advising them to re-examine their middle-office expertise "looking at the risks being run and deciding whether it was the right thing for them to be amplified or reduced". In 1997, the Bank of England was made responsible for setting interest rates. Since the exchange rate was a major factor in determining rates, Trott had to prepare a regular brief for the Monetary Policy Committee. The extra work in this area was partly offset by the loss of supervision responsibilities to the Financial Services Authority. Trott also had to deal with the possible introduction of the euro, and the growing influence of hedge funds: he met most of the larger hedge fund managers with a view to understanding them better.
He made several overseas trips, including two visits to Kenya "to look at their operational side and look at the feasibility of moving towards international acceptability for the currency and codes of conduct" and to Thailand in 1998 to advise on a currency crisis.
By the time he was approached by Reuters, Trott felt that the forex department at the Bank of England "had gone as far as I could take it. I left behind the strongest team that I could have and it was a good time to move on".
He was tempted to go into the buy side of the market "because their contribution will be increasingly important over the next 10 years". That could have meant joining a large trading company, but he chose Reuters in the end "because they sit between the sell and buy sides, and so I will be ideally placed to be involved in whichever way".
"I wanted to be somewhere capable of understanding the needs of the forex markets and suggest solutions that would enable the market to go onto the next stage. I hope I'll be able to adapt my contacts to better understand between us where the market is going and see if Reuters can enhance it".






Us intermediaries – we are like US army reservists that didn’t expect to end up in Iraq. We just thought we could have good time flipping assets. We didn’t expect to end up owning the risk!

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