Bulls, Bears and Other Beasts Read online

  Despite knowing the ‘robbers’ were dishonest, brokers often had to deal with these characters for buying or selling large blocks of shares. If a broker was looking to buy a big chunk of shares, the ‘robber’ would corner as much of the same stock as he could, to sell to the broker for an exorbitant profit. Similarly, if the broker wanted to sell a big lot of shares, the ‘robber’ would sell ahead of him at a high price, and then buy the shares cheap from the broker.

  Two such ‘robbers’, AS and PS, had earned notoriety for their practice of exploiting the counterparty at every opportunity. Funnily, AS and PS did not trust each other either. Occasionally, they would buy from and sell shares to each other. I was told that they would peek into each other’s sauda pads to ensure that the correct details had been entered. And yet, many brokers dealt with them once in a while because AS and PS could procure or dispose of large blocks of shares. And because the duo had deep pockets and were big risk takers too, they could hold on to those positions for a few days or even weeks, till they found another counterparty to square up the trades.

  Despite the combined curses of many a client weighing on them, AS and PS have done very well for themselves. Karma is yet to pay them a visit as I write this story.

  The trades done on the floor of the exchange had to be entered in the sauda pad. Every sheet in the sauda pad had five columns for five details about the deals – the clearing number of the broker one has dealt with, whether shares were bought or sold, the name of the stock, the quantity of shares, and the price at which the deal was done. Disputes would arise if one broker erred in recording the quantity of shares or the nature of the transaction (buy or sell) in his sauda pad. The stock exchange would then issue an objection memo, known as the vaanda kaapli, to the two members and ask them to sort out their disagreement. There was a deadline for resolution of the dispute, and the two parties would meet face to face to come to an agreement. In the majority of the cases, the two parties would know each other fairly well, so the resolution was rarely acrimonious. Sometimes you had to give an inch and sometimes you would get an inch.

  Looking back, the manner in which disputes were settled in those days appears laughable. Sometimes, the broker who was in the right would produce witnesses who had been standing next to them as the disputed trade was being done. The other broker, if unable to give counter-evidence, would have to accept his mistake.

  The colour of the sauda pad itself contained information about the traders. Broker-owners had pink sauda pads, while their employees and jobbers had blue ones. If the two parties failed to arrive at an agreement, the pink sauda pad would prevail, more often than not, since a broker was accorded a higher weightage in the caste system of the stock exchange.

  Though none of these methods were foolproof, they worked pretty well most of the time for market players to trust the system.

  4

  The Tricks of the Trade

  I became good friends with Bunty who was managing the treasury operations of a leading non-banking finance company (NBFC) of the time.

  One day he came up to me with an unusual request.

  ‘Lala, I want you to find out what jobber M is up to in the Colgate stock.’

  ‘What exactly are you looking for?’ I asked him.

  ‘He is accumulating the stock for somebody, and I am keen to know how much he has bought so far. Even better if he can tell you whom he is buying for,’ Bunty said.

  ‘M is a seasoned jobber, why would he let me in on the secret?’ I asked.

  ‘I am not saying he will tell you straightaway. But there may be a way to get it out of him; I am willing to pay up to Rs 10,000 for the information,’ Bunty replied.

  ‘Seems a tough task, because M is quite discreet about his trades, and I have not heard of any underhand dealings by him,’ I said.

  ‘Maybe you are right. But figure out a way if you can,’ Bunty said.

  That he was willing to pay Rs 10,000 for just information told me how crucial the information was to him.

  The following day, I hovered around M to sneak a peek at his sauda pad. That did not work. I then tried chatting up M when he was a bit free. But M clammed up as soon I casually mentioned Colgate. He rightly suspected that I was up to something. I did not want to play my final card – an outright bribe of Rs 10,000 for revealing his position in Colgate. If the move backfired I would lose face, not just with him, but with his friends and associates too. I again tried to peep into his sauda pad, but by now he was certain that I was prying around for information on his Colgate trades. He held his sauda pad close to his chest and shot me a dirty look.

  The only thing left for me to do was to get back to Bunty and tell him I had been unsuccessful. I knew Bunty would not hold it against me, but I did not want to give up so easily. A stock exchange clerk by the name of Rajesh, with whom I had become friendly of late, travelled most days by the same local as I did after work. I told him about my requirement and promised him money if he could fish out the details. Rajesh promised to do something about it. Two days later he got me the details. I suspect he sourced them from one of the officials who was privy to the scribblings on the jobbers’ sauda pads. I paid Rajesh Rs 5,000 for the information.

  Later that evening I met Bunty over drinks to give him the information he had asked for. He was very pleased and, in fact, surprised that I had managed to get it for him. ‘But this is going to cost you, Bunty; I had to pay Rs 20,000 to get this piece of information because I had to tap more than one source,’ I told him, after we had downed a couple of pegs.

  Bunty took a sip of his drink and gave me a knowing smile. I realized he had caught my bluff. ‘No problem, Lala. You shall get the balance,’ he said, and then added as an afterthought, ‘You are smarter than I thought, you sure will go far.’

  It was more a back-handed compliment than a well-meaning one. But I had formed the first of the many rules I would set for myself over the years. Rule number one: if you are dealing straight, you’ll get the same from me. And if you are looking to steal . . . I will deal with you likewise.

  Bunty came up with similar requests a few more times, and on each occasion Rajesh passed on the required information to me. I did make good money on these deals, but my firm gained too as Bunty routed more of his trades through us.

  There was an auction system on BSE. When a seller failed to deliver shares on settlement day, his position would be auctioned. BSE would put up the details of the undelivered shares on the notice board, and other brokers could tender shares to the clearing house. Offering brokers would quote a premium to the last traded price, and the lowest offer would be accepted by the clearing house. Sometimes, when a broker or his client defaulted on delivery and the market got wind of it, rivals would push up the price of that stock in the market and then offer shares at the auction at a huge premium.

  The AS-PS pair had a near monopoly in this market. The details of the best offers in the auction were not disclosed by the stock exchange. But I learnt from my circle of back office friends that AS-PS managed to put in the winning quotes most of the time, whenever a chunky lot of shares came up for auction. I thought over the possible reasons for this. The straightforward reason could be that they had a robust inventory of shares that allowed them to participate in the auctions more often than other brokers. The other likely reason was that AS and PS got information about rival offers from an insider, allowing them to adjust their offers accordingly.

  I had dealt with AS-PS a few times on the floor, and the experience was far from agreeable if not downright unpleasant. Their smugness was annoying, and on a couple of occasions they drove hard bargains, aware that I was trying to get my clients out of a difficult situation.

  Once, after having being shortchanged in a deal, I made some nasty remarks about them behind their backs. Word of it got to them somehow, but they seemed more delighted by my discomfiture than offended at my choice of words to describe them.

  One day they approached me just as trading for the day end
ed.

  ‘How was the day, Lala? Made some good money for your clients?’ AS greeted me with his usual, oily smile. I found it harder to tolerate AS’s fake humility than his partner’s brusqueness.

  ‘Could have been better,’ I replied, knowing they were getting at something else.

  ‘Still sore with us for the way we got the better of you in the last deal?’ AS said, trying to rub it in.

  I felt my temper rising but had to keep it in check. After all, they were powerful players.

  ‘You should be a bit more sporting, son, you have a long way to go and lots to learn; more importantly, you should be respectful of your seniors,’ AS went on, in as patronizing a tone as he could assume.

  ‘I have the highest respect for you both, in fact you both are my role models. I hope to become like you someday,’ I said with a smile, giving as good as I got.

  ‘Arre Lala, you say one thing to our face and something else behind our back. Just because you were not smart enough to get a good price from us for Ambuja, you think we are **###%^ about who will go to the extent of selling our own mothers for an extra profit? Isn’t that what you are going around telling people about us?’ AS said, still smiling.

  ‘I think somebody is misinforming you. I don’t recollect having said anything like that,’ I said with a straight face.

  It was now PS’s turn to needle me.

  ‘If you said that, be man enough to admit it. Even otherwise, it doesn’t matter what you think of us. There are too many amateurs like you who don’t know the first thing about trading and go around whining when they are beaten,’ he said, resting his palm on my shoulder. The tone in which he spoke suggested he would have loved to punch me in the face. I bristled, but tried hard to keep my wits about me.

  After that incident, I kept away from them as far as possible. The few times we ran into each other in the ring, it was an effort for us to be mutually civil. PS would glower at me and AS would have a mocking grin ready for me.

  But I could not live down the humiliating exchange I had had with them. And when I heard about the domination AS-PS enjoyed in the delivery auction market, I sensed an opportunity to get under their skin. To cut a long story short, I managed to befriend an official in that department using Rajesh’s network.

  The offers for the auction were submitted in a sealed envelope to the concerned department of the stock exchange.

  I went up to my boss and told him that I had figured out a way for our clients as well as the firm to make good money by tendering shares in the auction. Our clients had been regularly participating in the auction process, but with limited success. I did not tell my boss how I planned to swing things in our favour. All I told him was that it would cost money. He trusted me well now, and instructed the accountant to give me up to Rs 10,000 whenever I asked for it.

  My contact in the department would tip me off about the offers. I was smart enough not to be greedy and draw attention to myself. I would select two or three stocks that offered us a good chance to make a neat profit, and would quote offers accordingly. Twice, I quoted 10 paise below offers put in by AS and twice I did that with PS’s offers too. On each of these occasions, there was a large chunk of shares involved. My clients and my firm made a killing on those deals while AS and PS were left scratching their heads trying to figure out how they were being undercut and by whom.

  I must add here that I was quite inspired by the movie Trishul in which Amitabh Bachchan’s construction firm undercuts Sanjeev Kumar’s firm’s quotation by one rupee, leaving the latter fuming.

  The financial loss hurt AS-PS, no doubt, but what galled them even more was the challenge to their dominance. They made some inquiries and figured out who was stealing their lunch. Naturally, they were mad enough to want to kill me. They could not confront me on this matter because the exchange did not publish the successful offers, and they did not want to explain how they found me out either.

  But they let me know that they were aware of what I was up to.

  ‘Hello Lala,’ AS greeted me one day as I passed him in the ring. ‘Your clients must be quite happy with you, considering the profits you have helped them earn in TISCO and Century.’

  I was caught unawares, and my surprise showed. I had undercut AS on both those stocks – it had been 10 paise, as usual. AS stared at me for a few seconds and then walked off without saying anything more.

  PS was less subtle when I bumped into him the following day. I tried to avoid him, but he sidled up to me and put his arm around my shoulder as if we were the best of friends. But what he had to say was anything but friendly.

  ‘I have said this once in the past and I shall repeat it again since you seem to have trouble understanding my message. Don’t mess with your fathers in the industry, Lala, you could get hurt,’ he said, and moved on. As threats went, it could not get more explicit than this.

  A couple of weeks later, the duo accosted me just as I was about to get into the ring for the day.

  ‘Saale *%#@! you think you are smart, don’t you? How the *^$# can your firm regularly offer ten paise below our quotes?’ AS asked menacingly.

  ‘I don’t know what the hell you are talking about,’ I said, trying to stay calm.

  AS and PS looked at each other, and AS spoke again:

  ‘#@!*^$, try your acting skills somewhere else. BSE has started putting out the winning offers for the auctions on the notice board from today. Check it out. And, by the way, we know this is not the first time you have done this. $%%#@, you watch out, we will make you pay for this dearly.’

  I was at a loss for words, and that left them in no doubt whatsoever about my culpability. Then PS stepped closer to me. ‘Kid, you are from Dombivli, aren’t you? I have heard the trains on that route are quite crowded . . . ’ and then, his voice dropping to a whisper, he went on, ‘ . . . and people regularly lose their limbs or lives falling off packed trains.’

  This time they had rattled me well and good. I stood rooted there for nearly a minute after the duo had left. My hands were trembling, and I instinctively thrust them into my pockets to not let them show. I reflected on what they, especially PS, had said. Perhaps it was a spontaneous outburst arising from wounded pride at being outsmarted. Yet, knowing their uncouth ways, I was worried that they would go to any extent to settle scores. After all, how much would it cost to hire two goons to fix me in Dombivli itself, and make it look like a street brawl or a mugging attempt gone awry?

  I had friends in the market, but none in whom I could confide my inner fears. I had half a mind to complain about the duo to the authorities in the exchange. But I saw little point in doing that since these two rogues were quite influential. More worryingly, I could not complain without running the risk of my misdeeds being exposed. There was a real chance that they would carry out their threat of causing me physical harm. At the same time, I did not want to give them the impression that I was beaten. So, in the following settlement, I undercut them in two stocks, but chose those which did not cause either AS or PS a huge loss. I steered clear of the large offers in which they were involved.

  For the next couple of months, I would take a good look around before boarding or getting off the train. I also made it a point to position myself away from the footboard except while boarding or alighting.

  AS and PS would try to finger me whenever they could. I had become competent at sourcing decent lots of stocks. So if I bought a certain number of shares of company X on the floor, I knew which broker would be interested in buying that lot, and would accordingly strike a deal to sell the shares to him at the earliest. Similarly, if I had sold stock Y, I knew which broker would be looking to sell a similar lot, and I would buy it off him to square up my position.

  AS-PS were curious to know whom I was sourcing shares from or selling to, and asked their lackeys to keep track of me in the ring. Owl (I named him so because of his saucer-shaped eyes) was one such jobber who owed his existence to the duo and was forever ready to carry out their bidding.<
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  Most brokers of any significance had hotlines on the trading floor. This helped their office convey clients’ orders and also helped other brokers or jobbers reach out to them with a deal. After I struck a large deal – by my standards – on the floor, I would call up the concerned broker on his hotline and ask him if he was interested in trading with me.

  Once Owl and I were competing on the same stock. I bought a sizeable chunk at a good price, and then called the office of a broker who I knew was interested in that stock. The dealer at that broker’s office asked me to call back in fifteen minutes while he checked with his boss. When I called back after fifteen minutes, the dealer said he was not interested. I found it a bit odd because I knew for certain that the broker had been scouting around for the stock. But I did not give much thought to the incident. When I casually mentioned this to a fellow jobber, he told me that he had seen Owl call on the same hotline shortly after I had made my call. It was only then that I realized Owl was keeping tabs on the brokers I was talking to. I am sure he would have passed on the details to his masters who then offered a better quote to those brokers and snatched the deal from me.

  I had to be careful the next time, but before that I decided to have some fun at Owl’s expense. I found a chance a couple of days later. I had bought a block of Dr Reddy’s Laboratories and knew a broker who would be interested in it. But I did not call the broker straight away. I first picked up a couple of hotlines at random and got the dealers at the other end worked up by talking some arbitrary stuff. Owl could not hear what I was saying but presumed that I was trying to offload the Dr Reddy’s shares to those brokers. I knew that Owl would ring those brokers the moment I hung up on them. But I wanted to know how Owl would react when he realized he had called up the wrong brokers. By then I had become friendly with a jobber named Prakash, a couple of years older than I, who agreed to eavesdrop on Owl for me. Sure enough, when I left after my calls, Owl walked up to the hotline, probably relishing the thought of stealing another deal from me. He did not notice Prakash who was close by, overhearing his end of the conversation.