The Fear Index (38 page)

Hoffmann hesitated. It struck him, oddly, that the policeman was right. He did need to talk to her. Or if not talk to her, at least show her – let her see it all before it was destroyed. It would explain everything far better than he ever could.

On the trading screen there was a new alert: ‘NASDAQ has declared Self Help against NYSE/ARCA as of 14:36:59 ET.’

He pressed the buzzer to let her in.

18

The flight crowd is created by a threat. Everyone flees; everyone is drawn along. The danger which threatens is the same for all … People flee together because it is best to flee that way. They feel the same excitement and the energy of some increases the energy of others; people push each other along in the same direction. So long as they flee together they feel that the danger is distributed
…

ELIAS CANETTI,
Crowds and Power
(1960)

THE FEAR IN the US markets was going viral, algorithms sniffing and sniping at one another along their fibre-optic tunnels as they struggled to find liquidity. Trading volume in consequence was approaching ten times normal levels: 100 million shares were being bought and sold per minute. But the figure was deceptive. The positions were held for only fractions of a second before being passed on – what the subsequent inquiry called a ‘hot potato’ effect. This abnormal level of activity itself now became a critical factor in the accelerating panic.

At 8.32 p.m. Geneva time, an algorithm had entered the market tasked with selling 75,000 ‘E-minis’ – electronically traded S&P 500 future contracts – with a notional value of $4.1 billion on behalf of the Ivy Asset Strategy Fund. To limit the impact on price of unloading so much, the algorithm was programmed to restrict its trading so that its volume of sales averaged no more than nine per cent of the total market at any given moment: at that rate the disposal was expected to take from three to four hours. But with the market ten times its normal size, the algorithm adjusted accordingly and proceeded to complete its assignment in nineteen minutes.

AS SOON AS there was enough of a gap, Gabrielle slid around the gate and set off across the car park. She had not gone far when she heard shouting behind her and turned to see Quarry breaking free of the group and striding after her. Leclerc was yelling at him to come back, but Quarry’s only response was to raise his arm in dismissive acknowledgement and keep on walking.

‘Not going to let you do this alone, Gabs,’ he said as he drew level with her. ‘My fault this, not yours. I got him into it.’

‘It’s nobody’s bloody fault, Hugo,’ she said without looking at him. ‘He’s ill.’

‘Still – you don’t mind if I tag along?’

She ground her teeth.
Tag along
– as if they were on a stroll. ‘It’s up to you.’

But when they rounded the corner and she saw her husband standing in the open entrance of the loading bay, she was glad she had someone beside her, even Quarry, because Alex had a long iron bar in one hand and a big red jerry can in the other, and everything about him was disturbing, psychotic – the way he stood perfectly still, the blood and oil on his face and in his hair and smeared down the front of his clothes, the fearful staring expression on his face, the stench of petrol.

He said, ‘Quickly, come on, it’s really getting started now,’ and before they had even reached him he had turned and disappeared back inside. They hurried after him, past the BMW, through the loading bay, past the motherboards and the tape robots. It was hot. The petrol was vaporising, making it difficult to breathe. Gabrielle had to cover her nose with the edge of her jacket. From up ahead came a sound like bedlam.

Alex, she thought, Alex, Alex …

Quarry cried after him in a panic, ‘Jesus, Alex, this place could explode …’

They emerged into a much larger room filled with cries of panic. Hoffmann had pumped up the sound on the big TV screens. Aside from the noise of these, a man was ranting somewhere like a commentator in the final furlong of a big race. She didn’t recognise it, but Quarry did: the live audio feed from the pit of the S&P 500 in Chicago.

‘
Here they come to sell ’em again! Nine-halves trade now, twenties trade now, evens trade now, guys, eight-halves trading as well. Once again, guys – eight even offer! Seven even offer
…’

In the background, people were screaming as if they were witnessing a disaster. On one of the TV screens Gabrielle took in a caption: ‘DOW, S&P 500, NASDAQ HAVE BIGGEST ONE-DAY DROPS IN OVER A YEAR’.

Another man was talking over pictures of a night-time riot: ‘
Hedge funds are gonna try to break Italy, they’re gonna try to break Spain. There is no resolution
…’

The caption changed: ‘VIX UP ANOTHER 30%’. She had no idea what it meant. Even as she watched it changed again: ‘DOW DOWN MORE THAN 500 POINTS’.

Quarry stood transfixed. ‘Don’t tell me
we’re
doing that.’

Hoffmann was upending the big jerry can and pouring petrol over the CPUs. ‘We started it. Attacked New York. Set off an avalanche.’

‘
Guys, we are sixty-four handles lower on the day here, guys
…’

NINETEEN-POINT-FOUR billion shares were traded on the New York Stock Exchange during the course of that day: more than were traded in the whole decade of the 1960s. Events as they happened were denominated in milliseconds, far beyond the speed of human comprehension. They could only be reconstructed later, when the computers yielded their secrets.

At 8:42:43:675 p.m. Geneva time, according to a report by the data-feed-streaming company NANEX, ‘the quote traffic rate for all NYSE, NYSE-ARCA, and NASDAQ stocks surged to saturation levels within 75 milliseconds’. Four hundred milliseconds after that, the Ivy Asset Strategy Fund algorithm sold yet another tranche of $125 million worth of E-minis, regardless of the plunging price. Twenty-five milliseconds later, a further $100 million in electronically traded futures was disposed of by a different algorithm. The Dow was already down 630 points; a second later it was down 720. Quarry, hypnotised by the changing numbers, witnessed it happen. Afterwards he said it was ‘like watching one of those cartoons where the guy runs over the edge of the cliff and stays there in mid-air still running until he looks down – then he disappears’.

OUTSIDE, THREE TRUCKS from the Geneva Fire Service had pulled up next to the patrol cars. So many men; so many lights. Leclerc told them to get started. The jaws of the hydraulic cutters, once they were put in place, reminded him of giant mandibles, chomping through the heavy iron fence posts one by one as if they were blades of grass.

GABRIELLE WAS PLEADING with her husband: ‘Come on, Alex, please. Leave it now and come away.’

Hoffmann finished emptying the last jerry can and dropped it. With his teeth he began tearing at the packet of cleaning cloths. ‘Just need to finish this.’ He spat out a piece of plastic. ‘You two go. I’ll be right behind.’ He looked at her and for an instant he was the old Alex. ‘I love you. Now go, please.’ He wiped the cloth in the petrol that had pooled on the cover of a motherboard, thoroughly soaking it. In his other hand he held a cigarette lighter. ‘Go,’ he repeated, and there was such desperation in his voice that Gabrielle began to back away.

On CNBC the commentator said: ‘
This is capitulation really, this is classic capitulation; there is fear in this market – take a look at the VIX, absolutely exploding today
…’

Quarry at the trading screen could barely credit what he was seeing. In seconds the Dow had slipped from minus 800 to minus 900. The VIX was up by forty per cent – dear sweet Christ, that was close on a half-billion-dollar profit he was looking at right there on that one position. Already VIXAL was exercising its options on the shorted stocks, picking them up at insanely low prices – P&G, Accenture, Wynn Resorts, Exelon, 3-M …

The hysterical voice from the Chicago pit continued to rant, a sob in his throat: ‘…
seventy-five even offer here right now, guys, seventy even bid and here comes Morgan Stanley to sell
…’

Quarry heard a
wumph!
and saw Hoffmann with fire coming out of his fingers. Not now, he thought, don’t do it yet – not till VIXAL has finished its trades. Beside him Gabrielle screamed, ‘Alex!’ Quarry flung himself towards the door. The fire left Hoffmann’s hand, seemed to dance in the air for an instant, and then expanded into a brilliant bursting star.