yellow fire that carried on rolling and rolling. One of the wings with an engine still attached rose out of the spreading inferno and performed graceful cartwheels up into the sky. The lens followed it shakily until it dropped out of shot, and then the sound of the explosion and the shockwave reached the camera. There were tinny screams and frantic shouts in a language Hoffmann could not quite make out – Russian maybe – the picture shook, and then cut to a later, more stable shot of thick black oily smoke, roiled with orange and yellow flames, unfurling itself above the airport.
Over the images the presenter’s voice – American, female – said breathlessly: ‘Okay, so those were the scenes just a few minutes ago when a Vista Airways passenger jet with ninety-eight people on board crashed on its approach to Moscow’s Domodedovo Airport…’
‘Vista Airways?’ said Quarry, wheeling round to confront Hoffmann. ‘Did she just say Vista Airways?’
A dozen muttered conversations broke out simultaneously across the trading floor: ‘My God, we’ve been shorting that stock all morning.’ ‘How weird is that?’ ‘Someone just walked over my grave.’
‘Will you turn that damn thing off?’ called Hoffmann. When nothing happened, he strode between the desks and snatched the remote from the hands of the hapless quant. Already the footage was starting to repeat, as it doubtless would throughout the day until familiarity at last eroded its power to titillate. Finally he found the mute button and the room was quiet again. ‘All right,’ he said. ‘That’s enough. Let’s get on with our work.’
He threw the remote on to the desk and made his way back to the clients. Easterbrook and Klein, hardened veterans of the dealing room, had already lunged for the nearest terminal and were checking the prices. The others were motionless, stunned, like credulous peasants who had just witnessed a supernatural event. Hoffmann could feel their eyes upon him. Clarisse Mussard even made the sign of the cross.
‘My God,’ said Easterbrook, looking round from the trading screen, ‘it only happened five minutes ago and Vista’s stock is down fifteen per cent already. It’s crashing.’
‘Nose-diving,’ added Klein, with a nervous giggle.
‘Save it, guys,’ said Quarry, ‘there are civilians present.’ He addressed the clients: ‘I remember a couple of traders at Goldman who happened to be shorting airline insurance on the morning of 9/11. They did a high-five in the middle of the office when the first plane hit. They weren’t to know. None of us knows. Shit happens.’
Klein’s eyes were still riveted to the market data. ‘Whoa,’ he murmured appreciatively, ‘your little black box is really cleaning up, Alex.’
Hoffmann stared over Klein’s shoulder. The figures in the Execution column were changing rapidly as VIXAL took profits on its options to sell Vista Airways’ stock at the pre-crash price. The P amp;L meter, converted into dollars, was a blur of pure profit.
Easterbrook said, ‘I wonder how much you guys are going to make from this one trade – twenty million, thirty million? Jesus, Hugo, the regulators are going to be swarming over this like ants at a picnic.’
Quarry said, ‘Alex? We should go and take that meeting.’
But Hoffmann, unable to take his eyes from the figures on the trading screen, was not listening. The pressure in his skull was intense. He put his fingers to his wound and traced his stitches. It felt to him as if they were stretched so tight they might split apart.
7
It can’t continue forever. The nature of exponentials is that you push them out and eventually disaster happens.
The risk committee of Hoffmann Investment Technologies met briefly at 11.57 a.m., according to a note drawn up subsequently by Ganapathi Rajamani, the company’s chief risk officer. All five members of the senior management team were listed as present: Dr Alexander Hoffmann, president of the company; the Hon. Hugo Quarry, chief executive officer; Lin Ju-Long, chief financial officer; Pieter van der Zyl, chief operating officer; and Rajamani himself.
It was not quite as formal as the minutes made it sound. Indeed, afterwards, when memories were compared, it was agreed that nobody had even sat down. They all stood around in Quarry’s office, apart from Quarry himself, who perched on the edge of his desk so that he could keep an eye on his computer terminal. Hoffmann took up his former position at the window and occasionally parted the slats of the blinds to check on the street below. That was the other thing everyone remembered: how distracted he seemed.
‘Okay,’ said Quarry, ‘let’s keep this quick. I’ve got a hundred billion dollars on the hoof unattended in the boardroom and I need to get back in there. Close the door, will you, LJ?’ He waited until there was no chance of their being overheard. ‘I take it we all saw what just happened. The first question is whether by making such a large bet to the down side on Vista Airways shortly before its share price collapsed we’re going to trigger an official investigation. Gana?’
‘The short answer is yes, almost certainly.’ Rajamani was a neat, precise young man, with a strong sense of his own importance. His job was to keep an eye on the fund’s risk levels and ensure they complied with the law. Quarry had poached him from the Financial Services Authority in London six months earlier to serve as a bit of window-dressing.
‘Yes?’ repeated Quarry. ‘Even though we couldn’t possibly have known what was going to happen?’
‘The whole process is automatic. The regulators’ algorithms will have detected any unusual activity surrounding the airline’s stock immediately prior to the price collapse. That will already be leading them straight to us.’
‘But we haven’t done anything illegal.’
‘No. Not unless we sabotaged the plane.’
‘We didn’t, did we?’ Quarry glanced around. ‘I mean, I’m all in favour of people using their initiative…’
‘What they will want to know, however,’ continued Rajamani, ‘is why we shorted twelve and a half million shares at that precise moment. I know this sounds an absurd question, Alex, but is there any way VIXAL could have acquired news of the crash before the rest of the market?’
Reluctantly Hoffmann let the slats of the blind click shut and turned to face his colleagues. ‘VIXAL takes a direct digital news feed from Reuters – that might give it an advantage of a second or two over a human trader – but so do plenty of other algorithmic systems.’
Van der Zyl said, ‘Besides, you couldn’t do much in that time. A position the size of ours would have taken some hours to put together.’
‘When did we start acquiring the options?’ asked Quarry.
Ju-Long said, ‘As soon as the European markets opened. Nine o’clock.’
‘Can we just stop this right now?’ said Hoffmann irritably. ‘It will take us less than five minutes to show even the most dumb-assed regulator that we shorted that stock as part of a pattern of bets to the down side. It was nothing special. It was a coincidence. Get over it.’
‘Well, speaking as a former dumb-ass regulator,’ said Rajamani, ‘I have to say I agree with you, Alex. It’s the pattern that matters, which is why actually I tried to talk to you about it earlier this morning, if you remember.’
‘Yeah, well, I’m sorry, but I was late for the presentation.’ Quarry should never have hired this guy, Hoffmann thought. Once a regulator, always a regulator: it was like a foreign accent – you could never quite hide where you came from.
Rajamani said, ‘What we really need to focus on is the level of our risk if the markets rally – Procter and Gamble, Accenture, Exelon, dozens of them: tens of millions in options since Tuesday night. These are all huge one-way bets we have taken.’
‘And then there is our exposure to the VIX,’ added van der Zyl. ‘That’s been ringing alarm bells with me for some days now. I did mention this to you, Hugo, last week, if you remember?’ He had once taught engineering at the University of Technology in Delft and retained a pedagogic manner.
