A Cut In Time: Trading a Central Bank Meeting.
These risk screens always tell a story.
At the AXIA trading desks.
Wednesday 18th September 2024,
London, England.
Some people take a long piss, you know. Wide stance, let it all out, shoulders back, to telegraph to busy by-passers that I too own the space. Leave the cubicle door open because good God man, we’ve got FOMC in ten minutes! In ten minutes we do battle, and everything else is of secondary importance. To show that, ya know—I own the space. It ain’t but a thing.
That right there is a trader who is switched on. You don’t lumber in; you bring Presence to the desk and our domain. You see that with the best, AXIA’s Alex Haywood once told me. That’s the answer to my question on the way into the office, this trading floor in a nondescript London townhouse: what separates the civilian who is asleep, dazed and buffeted on the Tube carriage and this special, special lot who are just ready, at all times, to spill their guts out? To take maximum risk, load the guns, load the boat—always a hairline away from total financial violence, or to pack it in and leave in but a whisper. That is control, to possess the space—Presence. Own it.
“Yeah…” and so-and-so a trader in the bathroom says, washing his hands, checking his face in the mirror. To say: it ain’t but a thing—tonight’s action—but to part with the mandatory “—well. Good luck.”
This FOMC night is positively historic. The first-rate cut to mark the end of the first proper hiking cycle in a generation or two, depending on how you count a trader’s lifespan. The abandoned 2018–19 normalisation attempt notwithstanding. But how much tonight—a twenty-five or fifty basis cut?
Two minutes.
But you can feel it, see it. It’s important, they say; overhyped, we say. Also sprach the Cypriot, our first-rate news trader, whose little avatar is now sitting on my shoulder. WWJD? He made over £300,000 on a Bank of England meeting once because no one cared—precisely because no one cared. A clear division between those with manic, total presence and those without. Clean-up on aisle five.
But these hyped meetings? They are the most dangerous; the classic crowded trade. Everyone wants a piece. Even non-financial news sites are covering tonight’s FOMC meeting. Where is the surprise? That’s what makes an outright futures trader: volatility and surprise. Own it. The rest are the scraps you throw out back to the algo-dogs.
And a cut is well priced in, remember? The rest is just splitting hairs. And you can still be split six-ways-to-Sunday until the schizophrenic order flow finally decides how to take the cut.
It’s why trading central bank meetings are some kind of super-compressed triathlon—a test of raw order flow street-fighting tactics—while demanding deep and wide macroeconomic understanding to capture the word-by-word statement science; smash the drop—then navigate and endure the next two hours. Don’t blow it all because the first raid at 19:00 turns into a drawn-out affair, something of a marathon as you navigate Powell's words—or rather, what the markets think of Powell's words. Analysts and Cavemen get equally greased; only the wily warrior-scholars survive. Look at the small to understand the whole—this job compressed into one night. It ain’t but a thing.
Ten seconds. Long ’n’ heavy—
Fed Cuts 50 Basis – 19:00:00
Clickclickclicklick—
“…that is fifty basis…” carries on the voice in the ceiling. PingPing!DingDing! shoot the audio alerts—then the sweatin’, swearin’, and shoutin’—the floor sounds off.
Instantly!—Two-Year, Gold, S&P, STIRs.
But:
In-line. Expected. Not the time to go absolutely nuts—so relays the little Cypriot trading away at his desk on my shoulder. I know what he’s thinking. Though from the complete immersion-mania he’s showing, the uninitiated would think it’s a do-or-die moment. But he always trades like this. Here trades a man who owns his domain. Presence.
But firm-wide performance on the drop was nothing outstanding. Seemingly. Some traders are up okay, but not getting wiped out here on limited opportunity is outstandin’.
How many would do the obvious and trade what has already been priced?
Yet the drop always demands to hit hard and hit fast and figure the rest out by navigating the flow. You just never know when you finally wise up, trade the opposite, and the market does… the obvious. Flow first.
Some traders took a hit on that Two-Year; others scratched. Gold was the main green-provider and S&Ps—the great ‘Spoos’—equally playing ball with some other equities traded here and there. Others are all over the STIRs; Fed Funds, SOFR.
Holster them animal spirits. This is not your gut-spilling, soul screeching super-risk day. They’re something else, a different story. Now we’re just waiting on Powell, the press conference—19:30.
“…meeting by meeting,” says the Chairman. Sell the Five-Year, respond some traders. Eh… not much; flows here and there.
“…let me jump in,” cuts in the Chairman. Haw-haw-haw, respond some reporters. And the traders are still jockeying around the markets.
But there is no real impulse; no raw cross-market flows that correlate strongly, reacting in tandem on the price ladders as if standing up like iron fillings caught in a magnetic field. You’re waiting for key information like that, to dominate all else.
The central bankers hedge their words too well; they’ve learned the game, and we’re not waiting for a slip-up, just some kind of… well, something. A little phrase or word here or there that triggers flow then cascades into something more. They can always wheel in another speaker later to downplay it. But you never know how markets react, and that’s what we’re really trading: the market’s truth. Dig it.
Then I think of the screens sitting in the building’s core, in The Risk Room, all with rows and rows of traders, their P&Ls and positions; how it must be flashing and twisting and writhing in patterns and abrupt changes, like a great old beast displacing the sea; an organism reacting to market flow and the Chairman’s words.
And these risk screens always tell a story. It is like looking up to an apartment building at night, each cell on that screen as if the living room light, making you wonder how many stories and experiences have gone by in there, and how many more to come. And to wonder what is going on there right now—one apartment is crying, and next door is rejoicing;
one young trader is down a few thousand and then recovers, and then gives it all back;
other senior traders slowly and carefully navigating—action in the Spoo, action in the bonds, building and building;
one young up-and-comer unexpectedly underperforming, chasing markets, what’s going on in there? —tomorrow is going to hurt;
one older trader going strength from strength, and there is no stopping him; just so quiet in his little green living room.
And then the usual suspects just brutally extracting ticks all over the place.
And so on, and so forth.
Look at the small to understand the whole.
It ain’t but a thing.
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Acknowledgements & Permissions: Grateful acknowledgment to AXIA for granting access to their London trading floor. The photograph, provided by Axia Futures, is used with their permission, and they retain full ownership and copyright over the image.
Disclaimer: Do Not Do Stupid Financial Decisions. This Is Not A Game.