Page 27 of The Fear Index


  Emerging into the cold night seemed to wake her from her trance, and she blinked in amazement at the sight of the force assembled. She said, ‘All this just for Alex?’

  ‘I’m sorry. There is a standard procedure for cases such as this. Let’s just make sure it ends peacefully. Will you help me?’

  ‘Yes, of course. Anything.’

  He led her to the front of the column, where Quarry was standing with Genoud. The company’s head of security practically jumped to attention as he approached. What a weasel he was, Leclerc thought. Nevertheless he made an effort to be polite to him; it was his style.

  ‘Maurice,’ he said, ‘I understand you know this place. What are we dealing with exactly?’

  ‘Three floors, separated by timber-framed partitions.’ Genoud’s eagerness to help was almost risible: by morning he’d be denying he ever knew Hoffmann. ‘False floors, false ceilings. It’s a modular structure, each module filled with computer equipment, apart from a central control area. The last time I was inside, it was less than half-occupied.’

  ‘Upstairs?’

  ‘Empty.’

  ‘Access?’

  ‘Three entrances. One is a big unloading bay. There’s an internal fire escape down from the roof.’

  ‘How do the doors unlock?’

  ‘Four-digit code here; face recognition inside.’

  ‘Any gate into the compound apart from this one?’

  ‘No.’

  ‘What about power? Could we cut it off?’

  Genoud shook his head. ‘There are diesel generators around the back on the ground floor with enough fuel for forty-eight hours.’

  ‘Security?’

  ‘An alarm system. It’s all automatic. No personnel on the premises.’

  ‘How do we open the gates?’

  ‘The same code as the doors.’

  ‘Very well. Open them, please.’

  He watched as Genoud keyed in the number. The gates did not respond. Genoud, grim-faced, tried a couple more times, with the same result. He sounded mystified. ‘This is the right code, I swear.’

  Leclerc took hold of the bars. The barrier was immensely solid. It didn’t budge a millimetre. You could ram a truck at it and it would probably hold.

  Quarry said, ‘Maybe Alex couldn’t get in either, in which case he won’t be there.’

  ‘Possibly, but it’s more likely he’s changed the code.’ A man with death fantasies locked in a building with a hundred litres of gasoline! Leclerc called out to his driver: ‘Make sure the fire department are bringing cutting equipment. And we’d better have an ambulance, just in case. Madame Hoffmann, will you see if you can speak to your husband and ask him not to do anything foolish?’

  ‘I’ll try.’

  She pressed the entry buzzer. ‘Alex?’ she said softly. ‘Alex?’ She held her finger on the metal button, willing him to answer, pressing it again and again.

  HOFFMANN HAD JUST finished dousing the CPU room, the tape-robot cabinets and the fibre-optic trench with petrol when he heard the buzzer on the control console. He had a jerry can in either hand. His arms ached with the weight. Fuel had slopped over his boots and jeans. It had started to get noticeably hotter – somehow he must have managed to disable the power supply to the ventilation system. He was sweating. On CNBC the headline was ‘DOW DOWN MORE THAN 300 POINTS’. He set the canisters beside the console and inspected the security monitors. By moving the mouse and clicking on individual shots, he was able to take in the entire scene at the gate – the gendarmes, Quarry, Leclerc, Genoud and Gabrielle, whose face when he brought it up occupied the entire screen. She looked shattered. He thought: she must have been told the worst of it by now. His finger hovered over the button for a few seconds.

  ‘Gabby …’

  It was strange to watch on screen her reaction to the sound of his voice, the look of relief.

  ‘Thank God, Alex. We’re all so worried about you. How’s it going in there?’

  He glanced around. He wished he had the words to describe it. ‘It’s – unbelievable.’

  ‘Is it, Alex? I bet it is.’ She stopped, glanced to one side then moved her face closer to the camera, and her voice became quieter, confiding, as if it were just the two of them. ‘Listen, I’d like to come and talk to you. I’d like to see it, if I may.’

  ‘I’d like that too. But honestly I don’t think it’s possible.’

  ‘It would just be me. I promise you. All these others would stay back here.’

  ‘You say that, Gabby, but I don’t think they would. I’m afraid there’s been a lot of misunderstanding.’

  She said, ‘Hang on a minute, Alex,’ and then her face disappeared from the screen and all he could see was the side of a police car. He heard a discussion start, but she had put her hand over the entry speaker and the words were too muffled for him to make out. He glanced over at the TV screens. The CNBC headline was ‘DOW DOWN MORE THAN 400 POINTS’.

  Hoffmann said, ‘I’m sorry, Gabby. I’m going to have to go now.’

  She cried, ‘Wait!’

  Leclerc’s face suddenly appeared on camera. ‘Dr Hoffmann, it’s me – Leclerc. Open the gates and let your wife in. You need to talk to her. My men won’t make a move, I promise you.’

  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.

  THE SECOND AND decisive liquidity crisis of the seven-minute ‘flash crash’ had begun just as Hoffmann dropped the empty jerry can, at 8.45 p.m. Geneva time. All over the world investors were watching their screens and either ceasing to trade or selling up altogether. In the words of the official report: ‘Because prices simultaneously fell across many types of securities, they feared the occurrence of a cataclysmic event of which they were not aware, and which their systems were not designed to handle … A significant number withdrew completely from the markets.’

  In the space of fifteen seconds, starting at 8:45:13, high-speed algorithmic programs traded 27,000 E-mini contracts – forty-nine per cent of the overall volume – but only two hundred of these were actually sold: it was all just a game of hot potatoes; there were no real buyers. Liquidity fell to one per cent of its earlier level. At 8:45:27, in the space of 500 milliseconds, as Hoffmann clicked his cigarette lighter, successive sellers piled into the market and the price of the E-mini fell from 1070 to 1062, to 1059 and finally to 1056, at which point the dramatic volatility automatically triggered what is called ‘a CME Globex Stop Price Logic event’: a five-second freeze on all trading on the Chicago S&P Futures exchange, to allow liquidity to come into the market. The Dow was down by just under a thousand points.

  TIME-CODED RECORDINGS of the open channels of the police radios establish that at precisely the moment the Chicago market froze – 8:45:28 p.m. – an explosion was heard inside the processing facility. Leclerc was running towards the building, lagging behind the gendarmes, when the bang stopped him dead and he crouched down, his arms clasped over his head – an undignified posture for a senior police officer, he reflected afterwards, but there it was. Some of the younger men, with a fearlessness born of inexperience, never paused, and by the time Leclerc was back on his feet they were already running back from around the corner of the building, hauling Gabrielle and Quarry along with them.

  Leclerc shouted, ‘Where’s Hoffmann?’

  From the building came a roaring sound.

  FEAR OF THE intruder in the night. Fear of assault and violation. Fear of illness. Fear of madness. Fear of loneliness. Fear of being trapped in a burning building …

  The cameras record dispassionately, scientifically, Hoffmann as he recovers consciousness in the large central room. The screens are all blown out. The motherboards are dead, VIXAL extinct. There is no sound except the noise of the flames moving from room to room as they take hold of the wooden partitions, the false floors and ceilings, the kilometres of plastic
cable, the plastic components of the CPUs.

  Hoffmann gets up on all fours, rises to his knees then lumbers to his feet. He stands swaying. He wrenches off his jacket and holds it in front of him for protection, then runs into the inferno of the fibre-optic room, past the smouldering and stationary robots, through the darkened CPU farm and into the loading bay. He sees the steel shutter is down. How has that happened? He hits the button with the heel of his hand to open it. No response. He repeats the motion frantically, as if hammering it into the wall. Nothing. All the lights are out: the fire must have shorted the circuits. As he turns, his eyes go up to the watching lens and one sees in them a tumult of emotions – rage is there, even a sort of insane triumph: and fear, of course.

  As fear increases into an agony of terror, we behold, as under all violent emotions, diversified results.

  Hoffmann has a choice now. He can either stay where he is and risk being trapped and burned to death. Or he can try to go back into the flames and reach the fire escape in the corner of the tape-robot suite. The calculation in his eyes …

  He goes for the latter. The heat has become much more intense in the last few seconds. The flames are casting a brilliant glow. The Perspex cabinets are melting. One of the robots has ignited and is also melting in its central section, so that as he rushes past it, the automaton topples forwards at the midriff in a fiery bow and crashes to the floor behind him.