Zero Alternative (5 page)

Walker tuned him out and looked around the room, studying the familiar faces. All the Equity and Derivatives Trading areas were represented in force. Next to him a couple of older boys from the Cash desk were nervously exchanging glances with a tight group to Fontaine’s left, the Risk Arb people. In theory their books were supposed to be neutral, but when markets tanked most of their spread positions would widen and go haywire, and shakier deals could be pulled in a flash. They were going to take a bloodbath, but if the turbulence proved short-lived they should have a chance to recover. Other desks were represented by their heads, all wearing worried expressions – the only team apparently missing was Automated Trading, DM’s group.

Fontaine turned to spineless Jack Morden, who was standing next to the door with Mendes and Setter, two of Dorfmann’s most senior Volatility traders, both a few years older than Walker.
We're the linchpin
. The Vol group ran by far the biggest risks on the floor; this was not going to be pretty.

Fontaine sipped from a mug and cleared his throat. ‘Jack. Consensus here seems to be that we open down five or six per cent before stabilising.’

Morden nodded, checking with Mendes and Setter. ‘That sounds about right.’

‘What are the desk positions like down there, and lower?’

Morden looked sick. ‘Horrifying. A large client needed a lot of protection and purchased billions of Options from the desk a few days ago – and we haven’t covered them yet.’

Walker had to restrain himself. He had told the idiot to buy all those damn things back from a few other investment banks, fast. But Morden had been greedy, and now it would cost a fortune to hedge.

Fontaine grimaced. ‘How much?’

‘A lot – about ten million a point. If the market doesn’t stabilize and Option prices scream up we could be in serious trouble. Down at least a hundred bucks on that alone, maybe more…’

The door opened suddenly and DM rushed in, followed by a couple of his quants. Fontaine shot him a dark look. ‘Hello sir, you’re just in time. What’s DeepAlpha’s view?’

‘Sorry Olivier, I…’ DM trailed off and focused on a printout, his brow furrowed. ‘The market view… it’s mixed at the moment – I guess it will be clearer once the markets start trading. But Deep’s not signalling any major catastrophe ahead. When we simulated a minus-seven-per-cent opening, Alpha actually wanted to use the lower prices to buy back half of its short exposure. It doesn’t look at Options, though.’

A few people around the room audibly breathed out.

‘Really? That’s interesting. What about DeepBeta?’

Walker smiled, feeling like the kid who’s hidden the candy. DeepShareBeta was a more powerful version that DM was drip-feeding into Dorfmann’s computers. It was really just an incremental improvement to keep the bank happy while they secretly developed the real monster – Omega.

DeepOmega sat under lock and key somewhere in cyberspace, its servers scattered around the world by the secrecy-obsessed DM. The mathematician, using the cover of the Beta version, had been driving Dorfmann’s quants everywhere to produce most of the multiple parts of his Frankenstein dream. No-one knew the full picture but him – dozens of different experts worked on slices of the program that only DM could assemble and perfect in his drug-induced nirvana at home. In theory it was illegal to take that sort of stuff out of the bank, but the man was both a paranoid genius and the head of the department. Who was going to notice unless he told them?

Even Walker had no idea where the source code for Omega sat, or how to access it. His friend had one hypersecure, custom-made tablet that was the only pipeline in and out of the massive software, and the only way to speak to his oracle.

‘Beta is the same – if anything even more optimistic. But it crashed before the final run, so it’s only a preliminary,’ DM said.

Fontaine stood up and glanced at the big clock to his right: 6.47 a.m., thirteen minutes to the opening of the European Futures. The cash markets and all single stocks would open an hour later, but the Futures would drive the action, as always.

‘Fine, get back to your desks and let me know how things are going. No panic, but if the Eurostoxx breaks lower than eight per cent down on the day… I want the heads of desk in my office, pronto. Good luck guys, Dorfmann is counting on you.’

Walker resisted a gag reflex as the glass office emptied quickly, the traders eager to get back to their teams in time for the bell. He was about to leave when he heard Fontaine’s voice calling him back.

‘Yours, I need you for a minute.’

‘Sure.’ He turned around and saw the Head of Trading gesturing to a seat. ‘What’s up?’

‘I just wanted to congratulate you. Great call. I know your positions have suffered in the last few weeks, but you were right.’

Walker sat down, suddenly worried. A compliment first – that was never good. ‘Thanks. We’ll see how it pans out today.’

‘Any views?’

‘I don’t think it’s the big one, yet. We might drop seven or eight per cent, but as the Americans come in the market is probably going to bounce. And I suspect Rossini won’t say anything major in Italy today; he’ll be cautious for a while, get used to Rome first.’

‘Okay. I’m a little more worried than that, though.’

‘Are you turning more bearish than me? That’s a first,’ Walker said.

‘I’ve got an entire trading floor to worry about,’ Fontaine snapped. ‘You heard the guys, if it’s down ten per cent, or more, we’ll be in deep shit. Hundreds of bucks of losses, more if it cracks. I…’

Walker shifted, uncomfortable.
Here it comes
. Whatever it was.

The Belgian hesitated for a split second, then continued. ‘I don’t want you to hedge your book, cover your short or sell out any puts. Not without my approval.’

‘What?’ Walker lurched forward, aghast. ‘Are you joking?’

‘I’m serious. We need your Options to protect the rest of the guys who are on the wrong side of
the market.’

‘You mean I’m the only one who called this right, and now I can’t trade it? My own damn book?’ Walker seethed; this was ridiculous.

‘No, but I want you to check with me before you lock in the profits and close positions down.’

‘What if we disagree?’

Fontaine’s eyebrows arched up. ‘We’ll see.’

Walker struggled to keep calm: it wouldn’t be a great idea to insult the big head of trading. He took a deep breath, still angry.

‘This is insane. I can’t run around the floor looking for you – not today, when I’ll need to be quicker than ever. You know my style, for God’s sake. I trade my guts, especially intraday.’

Fontaine just stared at him. Walker ignored the Belgian’s look, stood up and continued. ‘If I don’t hedge in time and the market bounces, I’ll give back most of my profits.’ He paused, then continued in a lower tone. ‘You know that as well as anyone.’

Fontaine jerked out of the leather armchair, his eyes blazing. As a trader on the desk he had made exactly the same mistake on a large position a few years earlier, and the barb had cut him too close. ‘You’ll do as I tell you. If you lose out because markets come back, I’ll take care of you. Trust me, it won’t be forgotten.’

Right
. Like he hadn’t forgotten all those poor bastards screwed to get the damn fishbowl office. ‘Fine, I’ll let you know.’

Biting his lip to keep from exploding, Walker stormed out of Fontaine’s glass hovel and hurried to the fire stairs for a quick cigarette before the Futures opened.

A Phone Call

‘
Are you ready?
’

‘
Of course I am
,’
the woman scoffed
. ‘
The background stuff has come through, and I’ve met the manager. When will the target show up?
’

‘
Sometime. Soon, I imagine
.’

‘
Every extra night will cost you
.’

‘
I know
,’
the man sighed in his own nasty, annoying way
. ‘
Money is not an issue. Just make sure you do your job right
.’

‘
Have I ever let you guys down?
’
she said
.

‘
No. And now would not be a good time to start
.’

Trading - 6.56
A.M.

The deepest circle of Hell is not hot enough for you, Fontaine
.

Walker returned to his desk and sat down with a sigh, grabbing the rightmost keyboard underneath his eight monitors. He started typing away angrily and Steph glanced at him, surprised. ‘Boss, is everything all right?’

Walker shrugged and kept working. The pre-open indicator for the Eurostoxx Future was already down almost five per cent, seeming to drop a few ticks every second.

‘What are you doing – anything I can help with?’

‘Like I told you last night, I’m putting a few limit orders in the market. When it opens, I’ll buy back the Futures I sold short last Friday for a five-million profit on the gap. We’ll still be short three hundred bucks or so afterwards, anyway.’

Steph nodded, his eyes widening. The reality of trading such large sums was starting to weigh on him, now that it wasn’t a theoretical possibility any more. He looked afraid of making mistakes, the sheer size of the money involved terrifying him. But in the last few months he had been adapting, always working his head off to help make prices, speak to brokers or anything else the senior dealers on the desk needed him to do. He was a smart kid, learned fast. It was time to see if he had the fearlessness, the ruthlessness to go for blood when it was swirling in the water.

Traders needed the humility to cut positions and start again when things went wrong, but for Walker the best quality of the great ones was the arrogance to sometimes stand against the Market and say, ‘That’s enough. This is wrong and I am right, and I will prove it. With cold, hard cash.’ He blinked, just realising that Steph had asked him another question.

‘What?’

‘I said, do you need me now?’

‘No, I’m almost done. Ask around the guys and see if someone else wants help. I’ll give you a shout later, to trade Options with the OTC brokers.’

Stephane shot off towards the desks at the other end of their row and Walker concentrated on his Bloomberg terminal, ignoring the flashing messages on the instant chats.

Twenty-three seconds to 7.00 a.m
.

He took a deep breath, still seething at Fontaine. He would be damned before he let the fat bastard ruin his trading. Cursing in a low voice, he rechecked the orders in ORK, grabbed a mouse
and stared at the expanded Future ticker on the screen. Four seconds, three, two…

The numbers flashed by, so fast it was impossible to distinguish them. 2704, 2693, 2684 – the market was dropping like a stone.

‘Whoa!’ Somebody shouted from across a couple of rows away.

2654.

A blood-red, unpleasant figure. Followed by a sudden, creepy stillness.

The prices had stopped moving, only one displayed on the ticker instead of the usual two – bid and offer – that normally shifted up and down in unison.

The Eurostoxx Futures were suspended limit-down. The circuit breakers had kicked in.

‘What the hell is going on? I can’t input anything.’

Walker turned and glanced at one of the trainees who had managed to secure a temporary spot on the desk a few weeks before. ‘It’s a trading halt.’

‘What?’ The pimply young man looked confused.

‘Whenever market moves become too disorderly, the Stock Exchange freezes for a while.’

‘Why?’

Walker sighed. He didn’t mind explaining things to trainees – he had been one, a long time ago – but this kid could be slow. ‘A short break, and a new dealing price. Hopefully at the re-opening markets will behave with a little more logic. Now the forced sellers are out, and people know that at least some buyers are sniffing around. It’s only a matter of finding the level where things can stabilize. The second attempt should be much quieter, with the early panickers out of the game. Maybe.’

‘I see. So…’

‘Just wait.’

Walker turned back and glanced at his orders on the ORK monitor – they had all been filled. He’d just bought one hundred million dollars’ worth of cheap Futures in the first second of trading.
Quality
.

The voice of a broker rumbled from the squawk boxes: ‘The Eurostoxx and all European Futures markets are suspended for the next fifteen minutes. I repeat, in
fifteen
minutes there will be another opening auction, starting level 2667.’ A short pause, interrupted by the sounds of quick fingers tapping away at a keyboard somewhere.

‘Globex has also informed us that since the Dow Jones, Nasdaq and S&P Futures have all been
offered limit-down for over two hours, the US will not restart trading at all until New York comes in, at nine thirty a.m. local time, fourteen thirty in London.’

Walker realised he had been squeezing his infrared mouse like a vice and released the poor thing. He stood up, searching for tech-support to ask for a new one. From the corner of his eye he noticed that Tony Mendes was approaching his desk, a sly smile on his round face. ‘Hi mate – since the market’s dead for now, do you fancy a quick coffee and a smoke?’

Walker looked at his monitors: his risk-management system gleamed darkly in the middle of the top row, highlighting his current position and daily profit-and-loss. His book was showing a temporary gain of twenty-seven-point-four million dollars. He shrugged and decided to ignore all those urgent messages for a few more minutes. ‘Sure. Let’s go.’

The little sailing boat swayed on the waves, turning in a lazy circle around the anchor line. The woman looked at Sprague, her accomplice, who was effortlessly dragging a few weights across the quarterdeck
.

‘
I’ll take those. Go and get Tsun
.’

‘
Uh uh
.’

She liked the fact that Sprague never spoke unless it was absolutely necessary. With a grunt she shifted a heavy lead ball and then another before untangling the plastic cables they would need to tie up the thin Chinese man. Glancing behind her, she thought she could see a distant light on the horizon but the Hong Kong skyscrapers were probably too far away
.