The Last Hedge (15 page)

“There is no waiting now. There is more than Jonathan Kay to think about.” Ray stopped speaking. He turned for a moment as if someone was standing behind him. He then turned back towards Dylan. “We had a problem earlier in the week.”

Ray paused as if to exhale before he continued. “King went on tilt: He’s down over ninety million in the last three days.”

“What the hell happened?”

“Well, he sees that you are making all this money, and it freaks him out. He took some of the end-of-day trade reports from the shredder and tried to reverse engineer your strategy. Of course it was with disastrous results. We got a margin call last night, so I shut him down.”

Hedge funds typically borrowed on credit, to be able to trade in larger positions. This was called margin. When the value of those positions dropped substantially, the creditor would ask for additional cash to hold the position, thus the definition of a margin call. If the firm could not put up the additional capital, the creditor or exchange would liquidate the position, often at a substantial loss.

“How much was the margin call for?”

“Three million.”

“Where is King now?”

“Probably home. I fired him, Dylan. After ten years together, I had to let Richard go.”

Dylan looked into Ray’s face and realized that Ray was as white as a ghost. His eyes were bloodshot, and his lips were cracked and parched. Dylan averted his eyes away from Ray’s, hoping to avoid showing the panic that was escalating in his own psyche. Dylan stared down at his feet below and then at Ray’s. He then saw that Ray was wearing mismatched shoes: The left foot was wearing a tasseled loafer. On the right foot was a wing-tipped brogue. Dylan stared off to the side before he could look at Ray again.

“So what do you want me to do?”

“Trade as much as you can. I want you to put as much money in play as possible. You’re making money, so I want to ramp it up.”

“It’s not what I want to do,” Ray said, as he suddenly gripped Dylan’s shoulder. His grip was getting tighter as he began to speak. “Dylan, this is not the time for uncertainty. I want you to trade as hard as you can.”

Dylan stared at the hand that was gripping his shoulders. His eyes turned towards the hand that was gripping him. “Could you let go of my shoulder, please?” Ray looked at Dylan as if he was suddenly surprised.

“I’m sorry.” Ray went back to his chair and sat. Dylan traced his movements across the room.

“Thanks,” Dylan said as he turned and headed for the door. “I’ll do what you ask.”

“It’s what we need to do,” Ray said.

Dylan did not look back as he walked towards his desk. When he got there, Binky was already waiting. Dylan sat down in his chair as Binky turned towards him.

“What did he say?”

“He said, ‘Let her rip’. We’re going to put eighty million in play today.”

“All of it?”

Dylan shrugged. “That’s what the boss wants.”

‘I don’t think this trading system can handle it.”

“Doesn’t matter. Ray wants it done, so we do it.”

Dylan and Binky sat about building that day’s trade-file manually in Excel. Though they had tweaked a manual trade file before, they had been doing so only in smaller increments of five or ten million. Even with Binky’s enhancements, the system had been groaning under its daily regiment. They had no idea what would now happen with this volume of trades. It was like going bear hunting with a fly swatter. Dylan touched Binky on his shoulder when he had finished with the file.

The Fed announcement of a rate cut came around noon, and as expected, stocks traded slightly higher. The other traders seemed focused on their screens and the general acceleration of the market. Kay’s special basket of securities had had an especially good morning. Based on what he estimated, the open positions were, Corbin Brothers were having a good day. By his estimates, that morning alone they had generated paper profits of over seven hundred thousand dollars. It wasn’t enough however. It was time to go for the kill.

“We’re ready to go,” Binky said.

“You want to pray first?”

“I left my rosary at home. Anyway,” Binky said. “Here we go.” Binky clicked a button and the file began to upload.

The trade file uploaded to the system without a hitch. The cursor on the screen became an hourglass as the algorithm ran its processing. Within seconds, it flashed the number of trades it had created on the screen. Dylan and Binky shot each other a look.

“That’s a lot of trades,” Dylan said.

“Yeah, I agree. Get your rosary ready.”

The trading system began to execute the trades at a rate of about one hundred per second. After several minutes, the pace had slowed to one or two per seconds. After five minutes, the system was completely frozen.

“Uh oh,” Binky said.

“What happened?” Dylan asked. Binky looked as if he had scene a ghost.

“The transaction log is gone on the database. I think it’s hosed.”

“What do we do now?”

“Hope we can restore the old one.”

“How long will it take?”

“Hours if we’re lucky.”

Dylan was shocked. “Hours?”

“Again, if we are lucky.”

Dylan was near panic. He would now have to explain to Ray what had happened. Before he could even move from his chair, Josh Corbin had stormed from his office and was screaming at him.

“What the fuck did you do?”

“Josh, please stop screaming.”

“The trading system is down!”

“I know that. He’s trying to fix it.”

“He?” Josh roared. “He’s the problem in the first place!”

“If you’ve got a problem, then go see Ray about it. He was the one who forced us to trade on your crappy system!”

“I’m going to see Ray now, and you’re coming with me.”

“Good,” Dylan said. “I welcome that.”

A power walk quickly became a race down the hall between the two men, who could make it to Ray’s office first. Dylan took the lead early, while Josh waddled quickly behind him. Ray’s office door was closed, and Dylan didn’t even bother to knock. When they entered, he had his head down on his desk, almost like he was sleeping. Their sudden entrance jarred him back to consciousness.

“What is it?’ Ray asked. Though Dylan had entered first, Josh was effective at getting his words out first.

“They blew up the trading system!”

“Who did?”

Josh had his finger extended towards Dylan, who had moved to a corner of the room. Ray turned towards him with a look of distress painted across his face. Dylan stepped towards Ray’s desk as he began to speak.

“We uploaded the trades, as you asked, then the database blew out. It’s a simple thing. Binky knows how to fix it.”

“Yeah,” Josh said, “But tell him how long?”

Dylan became very sheepish. He gathered his composure and looked Ray directly in the eyes. “He hopes in a couple of hours.”

“A couple of hours? That means we loose the whole day trading?”

“We can do manual trade tickets.”

“Manual?” Josh screamed.

“We don’t have the setups for doing manual trades. Our broker won’t accept that.”

“Is that true Dylan?”

“Yes,” Dylan said. “I am afraid that is the case.”

Ray began to recline back in his chair. He then doubled over suddenly on top of his table. Huge gushing sounds began to appear from his lungs.

“Quick!” Josh said. “He needs air!”

“Should I call 91l?” Dylan asked. “No, he’s just hyperventilating! Call Martha!” Dylan used Ray’s phone to call Martha while Josh attended to his brother. After Dylancalled her, he turned back towards Ray. Josh soon had him breathing from a plastic bag, using it to slow and regulate his breathing. Dylan stood there and watched. Within seconds, Martha had entered Ray’s office.

Dylan watched as Martha attended to Ray with the patience of a nurse. Ray was relaxing now, sitting back in his chair as his breathing resumed. Josh sat by his desk as Ray attempted to relax. After several minutes, he appeared to be breathing normally.

“Are you sure you don’t want to go home?” Martha asked.

“No, I’m fine,” Ray said.

“Ray, you …”

“Martha, just let me think in peace. In other words, everyone out.”

Josh left the room first. He gave Dylan a dirty look as he exited Ray’s office. Dylan and Martha exited together. Then, Dylan took her aside.

“Has this happened before?”

“I’m afraid so. He’s been under intense stress. He’s taking Xanax for the panic attacks. Other than that, there’s not much else we can do. He should be okay.”

“I understand,” Dylan said. He turned and exited Ray’s office.

“What happened?” Binky asked when Dylan returned to his desk.

“You don’t want to know,” Dylan said. “How’s the system?”

“The database is almost back. We should be back up in an hour or two.”

“Good news.”

“Yeah, I guess.” Dylan noticed that Binky had a quizzical look on his face.

“What’s up, Bink?”

“But there’s something odd here. There’s a whole other series of file servers with almost the same information.”

“Can you tell what it is?”

“That’s the thing. I’ve hacked into NASA, JPL, and I’ve never seen anything like this before. It’s almost impenetrable.”

“What does that mean?”

“You tell me, Dylan. Cause I don’t know.” From the look on Binky’s face, Dylan could tell that it was serious. He took a deep breath as he pondered the situation.

“It’s heavily password protected. Josh, or whoever encoded this, knew what they were doing. I can get in, but it’s going to take me a little extra time. I should be able to access it by tomorrow.”

“Good. And there’s one other thing: Ray told me King lost a bunch of money last week. See if you can tell me how.”

“No problem.”

“Thanks, buddy. I’ll explain later.”

“Where you going?”

“To see a friend of a friend.”

The drinking establishment that Dylan Cash preferred was a corner joint on the Upper West Side of Manhattan called Low Life, featuring a large neon cocktail glass etched in red. It was a neighborhood spot with a downtown flair. Completely dark inside, the place featured a lively bevy of attractive young females. But that was not the only reason that Dylan went there. The food was more than passable.

Doris the bartender strolled over. She was in her twenties, dark hair, soft eyes. She always spoke slowly and listlessly, like she was stoned. He knew that she smoked marijuana most days and probably that was why. She seemed to have little or no ambition in life. She simply tended bar. Of course, she possessed one of the main characteristics of any good bartender: she was a good listener.

“Dylan. What can I get you?”

“Hey, Dor,” Dylan said, as he seated himself at the bar. “How about a Belvedere martini straight up?”

“You got it.”

It was a typical weeknight; the usual casts of characters were there. Barflies. Tom was sitting in one of the usual seats in the corner. He was what most people would refer to as Regular Number One. He came in the bar most evenings around five and rarely left before eleven. Some nights, he and Doris would go downstairs and share a joint, not even hiding the fact amongst staff and regulars. He managed a string of buildings for some large real estate company downtown. Dylan found it amazing that Tom could get up in the morning, no less hold down a serious job.

Tom was from Boston. He was watching a Yankee game as usual, celebrating the demise of the Bronx Bombers. They were down 6-0 in the third inning as they were having trouble scoring runs, and giving them up too easily.

“What’s the score?”

“It’s six to nothing in the third inning. These Yankees are going to be out of it before the fourth.”

Tom spoke in that classic Boston accent, twisting his syllables as if the Boston Tea Party had transpired the night before. Dylan did not know if he had a girlfriend or wife, friend or foe, just that he loved the Red Sox and Johnny Walker Red.

“What are you up to?” Tom asked, turning his attention from the game to the highball glass in front of him.

“Not much. I just got back from Antigua about a week ago.”

“Catch any nice sun down there?”

“Nah, no pleasure from this trip. All business.”

“Yeah, everyday I’m reading about you and all these hedge fund boys. Even the guy who runs the Sox, Henry, he’s a hedge fund manager. You guys goin’ to rule the world.”

“Not me, Tommy. I’m just trying to make a living.”

Doris brought him his martini, and he paid her for the drink. Tim Conroy then slid into the restaurant and joined him at the bar. Dylan then decided it would be best to sit at a table, and the waitress secured them a quiet one in the corner. Both men ordered a beer. She brought them their drinks and also some menus.

“You can drink on the job?” Dylan asked.

“Whatever it takes to get the job done.”

Both men took sips of their beers. Their glasses were cold and frosty.

“How long have you been with the Bureau?”

“About six years or so.”

“That’s a while. What were you before that?”

“Believe it or not, I was a lawyer. Worked for a corporate firm for about six years.”

“Got tired of the paper chase and felt the need to chase bad guys?”

“Actually, I was always interested in law enforcement, and this was the most interesting way to do it.”

“Must have been a big pay cut?”

“Yeah, it was. But I’m lucky: my wife is a banker.” They both laughed.

“So what’s up, Dylan? What have you got for me?”

Dylan looked around. The place was suddenly beginning to fill. It was almost six o’clock., prime-time happy hour.

“First of all, no naked short sales, other than the easy names you showed me.”

“Not one?”

“Nothing significant. Out of roughly six thousand short sales, one hundred of those were done without locates, and of that one hundred, six were questionable. Those looked like errors.”

“Are you sure?”

“Six within six thousand is a totally normal variance.”

“So what else?”

“Well, that’s the thing. Look, Conroy, part of me doesn’t even know why I’m here talking to you; I signed a non-disclosure agreement. I could be in hot water just being here.”