Arbitrage

by Colette Kebell

  ‘Do we have cameras?’ asked Domino.

  ‘No way,’ said Lenny laughing out loud, ‘but they don’t know that. For the actors, since this is a pilot, there is a promise to put the best ones through as part of the cast, when the series begins. For the unemployed an opportunity to win a job. For today they have a day off, so to speak. They pretend to work and things like that. In the days that follow we will prepare the script for the pilot, things to be said and so on.’

  ‘I’m impressed,’ said Splinter looking around, ‘but how many people did we recruit?’

  ‘About thirty. Most of the offices are empty, and we strategically place most of the actors on the path leading to the meeting room. Here, follow me,’ said Lenny making inroads. He was dressed in an impeccable pinstriped suit that made him look like a 1930s Chicago gangster. Splinter and Hank instead looked like elegant businessmen.

  At that moment Anders arrived, dressed like a Dolce & Gabbana model. ‘Hi, guys. Lenny, have you got a good suit for me?’

  ‘Of course, upstairs there are showers and your new uniform. Come on, follow me.’

  The group walked up the marble staircase, passing through offices where young individuals were dressed smartly and pretending to work industriously, and reached the large meeting room.

  ‘So,’ said Hank, ‘just to recap the plan. Marcus will take Robert Price to lunch and will come to our office to collect the fruit of their investments. Chaz, did you bring the cash?’

  ‘Of course. Your office is the one opposite this meeting room. In the top drawer, there are two envelopes, one for Marcus and one for Price. The first full of waste paper, it has a pen mark in the corner, the second obviously is swollen with cash.’

  ‘Perfect. Then we need a persuasion. Shall we do it before or after the meeting?’

  The persuasion could happen in several ways, it was a way to give credit to what was promised during the scam. The first investment, usually a meager figure, was the first step. To make the mark believe that there was a quick way, albeit illegal, to make money. The second persuasion was a fairly high amount that was invested by the victim. Many scammers were content to stop at this point, disappearing with the investment, but the band, in this case, wouldn’t settle for a few hundred thousand pounds. They were ready for the rip-off of the century.

  The third inducement usually happened with a person not known by the victim, in this case, Anders. He had to prove that what Hank was promising was real.

  ‘I would say to do it earlier,’ said Splinter, ‘if Anders enters the scene at the end, Price may not take the bait. Maybe he would decide to leave just when our Swedish friend arrives and before he has time to explain how much money he had earned thanks to the Resurgence Equities Enterprise.’

  ‘To me, it sounds better,’ said Domino, ‘we lead Price into the office just in time to see you giving a nice briefcase full of cash to Anders, ensuring Price will see the contents. Then Anders leaves the scene.’

  ‘Approved,’ said Hank, ‘OK, everybody knows which way to act. Marcus, it’s up to you now. Go get our future benefactor and let’s get the ball rolling.’

  ****

  Splinter fetched Robert Price in a luxurious Mercedes S-class 600. There had been a lengthy discussion with Chaz the day before, who had arrived with the 500 model. ‘Nothing sounds more as if I hadn’t made it in life as a model 500!’ said Splinter visibly enraged. ‘It’s like shouting to the world I would like an S-600, but I can’t afford it!’

  Despite the grievances by Chaz, explanations of how hard it would be to find that particular model, in the end, he had succeeded. Chaz was young, thought Splinter, one day he will learn that appearance, in certain things, is everything.

  Price left the bank a few minutes later, and Chaz opened the right rear door of the Mercedes to let him in.

  ‘My dear, Marcus, my wife thanks you for the beautiful flowers you sent,’ said Price shaking Splinter’s hand.

  ‘Oh, nothing, just a gesture.’ They had spoken earlier on the phone when they had arranged their lunch. Maybe they could discuss business, Splinter had hinted.

  ‘I booked us into a downtown restaurant, and then we could go see if that Anthony Edwards has kept his promise,’ said Price.

  ‘Ah right, I’d almost forgotten,’ lied Splinter. ‘Why don’t we go there first? That will give us the occasion to have a bit of gossip in case those promised fabulous earnings are a disappointment.’

  ‘Why not? Your driver knows the way?’ asked Price.

  Splinter took out his diary and gave instructions to Chaz, which he inserted into the GPS. They arrived outside the offices of the Resurgence Equities Enterprise a few minutes later. Price was not fooled by the old building that housed the headquarters; in the centre of Brighton, it was hard to find offices and often old buildings were being converted. Splinter announced himself to the receptionist, who made them sit on a leather couch in the elegant marble lobby. Shortly afterwards Domino came to greet them.

  ‘Hello, gentlemen, Mr Edwards will be pleased to meet you, please follow me.’

  Employees were moving briskly, young men who spoke on the phone, secretaries who roamed the stairs and offices, moving folders and boxes of documents; the headquarters of Resurgence Equities Enterprise were in full swing. Price lingered longer than usual to admire Domino’s hips swaying in front of his eyes.

  They arrived at Hank Edwards’s office, and from the window wall, they could see him talking with an impeccably dressed young man. A briefcase was open on the desk, and it was filled with cash. Domino went into the office announcing the two new guests, and Anthony made a broad smile, greeted the two with his hand, and motioned to enter.

  Anders was closing the case and saying goodbye to Hank, ‘…and thanks again, this was the best investment I’ve made in years. See you next week? I have another proposal that might interest you.’

  ‘Sure, sure. Domino, please make an appointment for Mr Nilsson for next Tuesday.’

  ‘You already have an appointment on Tuesday with the Ministry,’ said the woman looking at a tablet she had in her hand, ‘but you are free Thursday afternoon at four o’clock.’

  ‘Thursday will be fine,’ said Anders. Then he saluted the two newcomers and left.

  ‘If I’m not mistaken, you owe us a bottle of whisky,’ said Price recalling their conversation.

  ‘Hello, gentlemen, please sit down, and you are wrong. The bottle was if I had not had a significant return on the investment. Here,’ said Hank opening the desk drawer and pulling out two hefty envelopes. ‘As promised!’

  Splinter slipped his envelope into his jacket pocket while Price started to count the money. ‘There are about five thousand pounds in this envelope, there is nothing in the world that can guarantee such a result in the financial field,’ said Price staring straight into his benefactor’s eyes.

  ‘Well, apparently there is something.’ Smiled Hank. ‘And if you want, I also invite you to celebrate with me. It was a wonderful week.’ With that said, Hank moved toward the elegant cabinet that contained the spirits.

  ‘Difficult to say no to a glass of good whisky,’ said Splinter. ‘In what kind of business is your company?’

  ‘We invest in the stock market like everybody else,’ downplayed Hank.

  ‘You mean insider trading? If you earn this kind of return, that’s the only way.’ Price had not mentioned that insider trading was illegal, a fact immediately seized upon by Hank and Splinter.

  ‘No, nothing like that, what we do is totally legal. I mean sometimes we bend the rules to our advantage, but I wouldn’t say it’s illegal. Maybe one of those famous grey areas that we often talk about,’ said Hank with a mischievous smile. He poured the whisky into three glasses and handed two glasses to his guests.

  ‘Could you be more specific?’ pressed Splinter.

  ‘Sure, we rely on an algorithm that identifies the arbitrages on the different stock exchanges. We buy low, and we sell at a slightly increased price, wit
hout any risk for our investors.’

  Price laughed out loud. ‘Arbitrages cancel each other, you’ll make nothing more than a few thousand pounds at the time.’

  Hank continued to smile but said nothing. He had to leave that idea developing in Price’s mind, let him come to doubt that someone had actually found the goose that laid the golden egg, the system of making money without having to worry about losing. Then Hank added, ‘That was true in the old market when there were no humans making transactions. Today it’s all electronic, orders are exchanged in milliseconds, a title which is now listed at, let’s say, twenty dollars undergoes minor variations during the day, maybe just a few pennies. But during all those hours that it’s on the market, it fluctuates. Think about how many milliseconds there are in a day, multiplied by all the shares on the market.’

  Price gasped. He had a solid financial background, but he was old-school, he had never thought about the technological side of a transaction. For that there were programmers, the only thing that mattered was to buy and sell at the right price. He remembered about some transactions he’d tried in the past and not succeeded in. Shares that were available on the market at one moment and had disappeared as soon as he introduced an order. It was hard to imagine that thousands of transactions, perhaps tens of thousands, took place simultaneously on the stock market every second without anyone actually understanding what it meant. It was something too difficult to fully comprehend. The blink of an eye was a tenth of a second, something that most people could barely register. Who could imagine how the stock market world behaved in a split-second? But Price still wasn’t convinced. ‘And how do you find them before everybody else?’

  Hank had studied the part, thanks to Logan, and now he could speak like an expert. ‘Our data processing centre is right next to the stock exchange building. This means that we receive the data a split-second before everybody else. Also, our software is very slender. New programs, cutting edge. We hired the best technicians in the world, and we pay them a fortune, traditional banks instead cannot afford to rewrite all of their software. They are already making plenty of money from commissions. This means that they are far behind from a technological point of view: their information systems are old and slow, and we beat them to the punch. Every single time.’

  ‘Damn,’ said Splinter, ‘I never heard of anything like that, despite having been in business for a lifetime. But if I think about my damn phone, which has more features than I could possibly learn, I begin to understand your logic. You are telling me that others aren’t there yet. We are exploring uncharted territory, here.’

  ‘So, if I’m building my own data centre near a stock exchange, I can do the same?’ asked Price, looking for a weakness.

  ‘Ha, ha, ha, not really.’ Hank had him in his grasp, he had interested him to such an extent that Price kept asking questions. It was clear he was trying to understand. ‘We have a few aces up our sleeve. First our programmers. Chinese, Indians, and Russians, people that write exceptional software programs. And then we spent more than a year mapping the major investors. We can calculate how long it takes them to reach the various stock exchanges.’

  Splinter saw a worried look in Price’s face, for sure he was thinking about it. But to avoid misunderstandings, he kept asking questions himself.

  ‘I don’t understand why you’re mapping large investors. And how would you map them?’

  That enquiry was the correct one. Price watched him with admiration as if Splinter had read his mind.

  ‘Large investors are key. They are those who buy and sell millions of shares at a given time. Think of the large investment funds, pension funds, etc. We want to know when they move, this is the fundamental point. If a major investor wants to buy two million shares of IBM, for example, it will be extremely difficult for them to be able to fulfil such an order on a single market, so the order is broken down across several stock exchanges. And that’s when we have the opportunity to beat them on time, gather the same shares before they are able to at a lower price and sell at the right price. Or buy what is available and when their order arrives we resell the shares at a slightly increased price. We gain in the process, without taking chances.’

  ‘But how do you know which market the order will enter first?’ asked Price.

  ‘According to recent US laws, a stock trader must always look for the best price for a share. It is a recently passed law, and its goal was to protect investors. Since we are right behind a stock exchange, we place a small number of shares on the market at a lower price, waiting for a major investor to buy them. If you want to give it a name, this is the lure. Since we sell stock at low prices, they are forced to buy on the stock market where we operate. We just sell a few hundred titles at a time and wait for the fish to bite,’ explained Hank.

  Price couldn’t believe how the system was so simple, but still, he was not convinced. His head was bursting, it was one of those moments where he could see a solution to a big problem and something was missing to complete the picture, to fully understand how the system works. ‘But how do you find the big fish? Maybe a pensioner in Nebraska has decided that very day to try his luck on the stock market.’

  ‘As I said, we have mapped large investors. We know where they are located and how long it takes to place an order. Some are in Manhattan, others in Chicago and so on. There are infinitesimal differences, mere milliseconds, but the transactions arrive at different times, the farther the investor is, the longer it will take them to reach a market. The same operation entered in Manhattan will take longer to get to the data processing centre of the stock exchange in New Jersey than the same transaction made from our offices, which are right next door. As I say, a thousandth of a second, but that’s enough.’

  Price sipped his whisky and began to think about what he had learned, trying to reach a conclusion. They were all silent for a few seconds, they needed to digest this information, and fully understand the implications.

  Splinter was the first to speak, there are no risk-free operations. ‘What’s the catch?’

  ‘There aren’t setbacks, but there are risks, quite frankly. First, every day we have to buy and sell shares to attract our prey. And this has a cost; we have those orders running at every hour of the day hoping someone takes the bait; we need a decent amount of cash to begin with. The first year we couldn’t do many transactions, so we closed just in profit. This year we have more funds and can deal with more transactions. Therefore we have a wider net if you like. The risk is always there, but the chances are so much in our favour that we always win in the long run. As the house does, at casinos, when playing roulette.’

  ‘If I wanted to invest, what are your fees?’ Price asked finally.

  ‘Twenty per cent profit. I know, it sounds usury but consider that such operations have a cost; I assure you that our costs are very high, but conditions are so favourable that the operation is almost without risk.

  ‘What do the authorities have to say about it?’ asked Splinter.

  ‘All legal. In fact, we are among those who, as they say, provide liquidity to the market, so there is no reason to investigate. If you ask me, the financial authorities don’t even have a clue what we’re doing.’

  ‘I do not invest cash,’ said Price, remembering the man who had just left the office with a suitcase full of money.

  ‘No cash. We have our bank accounts, and we transfer the funds into the United States. Some of our clients ask us to pay the profits in cash to avoid telling their wives,’ said Hank.

  ‘Or the tax man,’ said Splinter.

  The three laughed loudly, almost at the same instant. Now their tones were relaxed, and Price would definitely invest.

  ‘What do you say, Marcus. Shall we have a go?’ asked Price of his companion.

  ‘I would say that we can try, just to see what happens.’

  Hank looked at his watch and saw that Domino was waiting at the door with a new client, played by Lenny.

  Price and Splinter
realised that their time was over and it was time to leave, but they also registered that there were other interested parties to do business with Hank Edwards. If they wanted a piece of the pie, they would have to act quickly.

  Hank accompanied them to the door and, before sending them on their way, he said warmly, ‘If you’d like to leave your details with my assistant, she will give you all the information you need to make the first investment.’

  The two nodded. The trap was set.

  CHAPTER 36

  ‘Chief Superintendent Ross, Brighton Police,’ he said after lifting the receiver. As the conversation progressed, Ross’s face went from disbelief to surprise to settle back down on resigned. He got up in a hurry to get to the office that had been assigned to Corrigan.

  ‘Incredible news,’ he said breathlessly upon entering the Interpol agent’s room.

  ‘What’s going on?’

  ‘Amelia Mortcombe was killed in Leamington last night,’ said Ross, no half measures.

  Corrigan was shocked. ‘That’s not possible,’ he faltered. ‘How did this happen?’

  ‘From the account made by the local police, she was found dead in the train station public toilet. There was another victim, and they think it was an execution. The company doing the cleaning spotted a closed bathroom, and after repeated attempts to try to open the door, they called a supervisor. When they prised the door open, they found these two women killed by gunshots. Maria Benhauer of Stuttgart and our Amelia Mortcombe. There will be an autopsy of course, but the cause of death is evident, several gunshots that shattered her face. They found the victims’ documents and they are discounting a robbery gone bad since there was cash on both of the victims.’

  ‘Who could have wanted her dead?’ said Corrigan.