Deutsche Bank’s ex-head of global FX on crisis, survival and the problems with technology
When Kevin Rodgers left his role as global head of FX at Deutsche Bank in 2014 after nearly 30 years in finance, he’d traded just about every product in investment banking.
“My mum still thinks I was a stockbroker, but equities was the only thing I didn’t trade when I worked in banking,” he says. “My main focus was FX and commodities, but I’ve traded just about everything in fixed income.”
So why, after years as leading the biggest FX desk in the world at Deutsche Bank, did Rodgers decide to quit the industry?
“It gets to the point where you stop going in every morning and loving what you do,” he said. “It’s like having a steak dinner every day – it's nice, but at some point you just don’t want any more steak. I wasn’t enjoying it anymore, so keeping going in a job just to earn money that – frankly – I didn’t need seemed like a good use of time when I could be doing other things.”
A modern 'Liar's Poker'
These ‘other things’ include touring as an opera singer, going back to the London School of Economics to study a Masters degree in Economic History, but – mainly – writing a new book he describes as the “modern Liar’s Poker”.
Why Aren’t They Shouting, published in July, is a largely “autobiographical” book that charts the changes in the FX markets over his career and how complex technology has helped spawn crises and scandals. Ultimately, he says, banking has become a lot more “fragile” and bankers and regulators have be “eternally vigilant” to ensure that another crisis doesn’t happen “under a different guise”.
“People have this image – and it’s an easy one to fall back on – of scheming evil bankers perpetuating the financial crisis through greed,” he says. “But banking is actually people and technology. Relying on incredibly complex technology has the potential to be extremely harmful.”
The technology arms race in FX was, firstly, concentrated among a small number of large banks – because not everyone has the resources to compete – and this means not only do the main players become obsessed with rising up the rankings, but that the system overall was less able to deal with large shocks. Computers were also used to tackle ever-more complex products across the industry. Rodgers writes that at Deutsche Bank – and other large firms in the build up to the 2008 crisis – the view was that “complexity was good and would eventually be rewarded”.
Surviving in FX now
“When I first started in FX you’d have to write down any orders on a piece of paper and then a young lad called Mickey would come around with a trolley and collect them,” says Rodgers. “By the time I left, everything at Deutsche Bank was booked automatically in microseconds. This means a lot of the skills required by banks’ trading floors became redundant over the years.”
So, what's needed to survive in FX in investment banking now? “A lot of the people hired now have a computer science background and learn the more technical elements of FX when they're on board,” says Rodgers. “But the people who survived over the years still had the core skills of understanding the markets and good risk management, but were also incredibly versatile and had to adapt to a changing market.”
But, he says, the big banks will find it increasingly harder to compete in an increasingly computerised market. They have the dollars to spend on technology, but they also have legacy systems that weigh them down as more nimble start-ups emerge.
“Look at my old colleague Zar Amrolia and what they’ve achieved at XTX, or Citadel moving into the swaps market. I think there’s going to be a lot more competition from hedge funds and non-bank players,” he says. “And these are in the juiciest, most profitable parts of the business. If I were a bank CEO, this is what would keep me awake at night.”
Rodgers admits that he was lucky enough to go into trading during the “golden era” of investment banking. Then, it was the obvious choice for any top graduate, but these days they face increasing competition from big tech firms for the talent they require, he says.
However, the secret to longevity in investment banking, he says, is consistency and sticking with the same firm.
“I essentially worked at two firms throughout my career, and most of the successful people I’ve known stayed within a good institution,” says Rodgers. “They know you, you can build up trust and there are far more opportunities over the years than if you job-hop. Maybe I’m just preaching my own career, but you see more seniority, a more integrated career and, over time, more cash than if you job hop.”