After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.

I was driving back from the bottle return run, thinking about all the glass bottles and how they would be recycled.

I get 10c back a bottle but with the price of fuel, by the time I return home I probably break even on the whole deal.

I was thinking of all those different colours and remember reading about how the Chinese were a bit slower in the take-up of glass as they were, well, more into china.

Having my brain wired the way it is and leaving me to drive alone can be quite mentally draining for me as I have no one to say ‘Why is it that……’, so the question stays in my head.

Thoughts about glass and the Chinese led me to remembering how at work we would have ‘Chinese Walls’. Not ones that you could see from space but a verbal line in the sand.

I was wondering where the term came from, so I just had to pull over and Google it.

It turns out that the term came about in 1929, when Wall Street was pushed into separating a firms’ corporate arm from their army of brokers.

By separating their flow of information, it allowed for the big merchant banks to be able to advise on takeovers and IPOs, thus stopping any insider information from escaping as it was held behind the firm’s ‘Chinese Wall’.

I remember broking for one very large Merchant Bank and their Corporate arm was on the far side of the dealing desk. It was totally self-contained and they had a direct door from them to us.

The funny thing was that it could only be opened one way. We couldn’t go in but they could poke their head out, ask a question and then shut the door.

Occasionally the one-way door would be flung open and an irate corporate type would storm through and bark out some command to the chap in charge of our desk.

Normally it would be along the lines of: “Who the f$$k on this desk is buying XYZ stock?”

There was always a list sent round daily on stocks that we could not buy personally or if a client wanted one on the list, we had to seek permission from the head of the desk.

On one particular occasion of door flung open and angry red-faced banker shouting at us, a list was produced and the particular stock he was angry about was not on it.

Embarrassed by his department’s failings he tried to get back through the one way door, almost ripping it off its hinges.

As this didn’t work he then had a ‘walk of shame’ to the other end of the trading floor (with a barrage of scrunched up paper balls bouncing off of him) and back into reception, so he could get back to his desk.

We all had a laugh especially when one trader shouted out at him “we all now know what Merchant Banker rhymes with!”

Five minutes later a junior’s arm appeared from behind the door with an updated list of ‘blackout stocks’ as he was too scared to come in.

We all know what had happened. They had a corporate deal going on and the chairman of the company they were acting for would have asked him “why is your firm in the market buying stock in a company that we are just about to bid for?”

Basically, the chairman would be accusing him and our firm of insider trading. Part of the pitch in getting involved in a takeover would be the firm’s strong ethics.

As it was his department’s fault in not updating the list, he would have had a lot of egg on his face.

There is such thing as a free lunch

Anyway, what he didn’t know was that this list of ‘blackout stocks’ normally gave us the heads up that something was about to happen.

If you work for ASIC or the ASX, please look away now (see I still use Chinese Walls, Your Honour).

You see, if you had a list of ‘blackout stocks’ and a couple of mates also had their firm’s list, and two stocks matched up – BINGO! We all now knew something was about to happen.

Normally one of those companies was about to bid for another and all one had to do was work out which one, which normally was not that hard.

Two firms were banned from trading the same shares, but other firms were not banned, as they weren’t involved corporately.

So, what was meant to be a secret could be decoded by a bunch of street-wise traders and this daily flow of information kept our their steak and Penfold red lunches fuelled till another deal was decoded.


This chicken is rubbery

Now, all this information brings up a bit of a woke situation. Should we still be using the term ‘Chinese Wall’ in 2022?

So I’ve pulled over to find out and a quick Google says “an insurmountable barrier, especially to the passage of information”, which seems not too harmless, even quite complimentary in regards to China’s ability to build great walls.

But of course, according to an American judge, we should not.

Justice Harry W. Low, a Chinese American, wrote a concurring opinion specifically in order “to express my profound objection to the use of this phrase in this context”.

He called the term a “piece of legal flotsam which should be emphatically abandoned”, and suggested “ethics wall” as a more suitable alternative.

He maintained that the “continued use of the term would be insensitive to the ethnic identity of the many persons of Chinese descent”.

Now I am Googling what ‘flotsam’ means, as I have heard the term but never really knew what it means. It means ‘debris in the water that was not deliberately thrown overboard, often as a result from a shipwreck or accident’.

My 10-minute bottle run drive has now taken me an hour and a frantic Mrs. B greets me on my return to find out what took so long, as we have people coming around for dinner.

I try to point out that if she had come with me, she could have answered my original question, Googling everything as I drove along. Then I would not be late.

This didn’t seem to calm down the situation, so I had to nip it in the bud.

How about we order in honey prawns and rice from my favourite ‘ethics’ restaurant instead?


The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.