The Fear Index

17





The most vigorous individuals, or those which have most successfully struggled with their conditions of life, will generally leave most progeny. But success will often depend on having special weapons or means of defence …




CHARLES DARWIN, On the Origin of Species (1859)




ZIMEYSA WAS A nowhere land – no history, no geography, no inhabitants; even its name was an acronym of other places: Zone Industrielle de Meyrin-Satigny. Hoffmann drove between low buildings that seemed to be neither office blocks nor factories but a hybrid of both. What went on here? What was made? It was impossible to say. The skeletal arms of cranes stretched over construction sites and lorry parks deserted for the night. It could have been anywhere in the world. The airport was less than a kilometre to the east. The lights of the terminals imparted a pale glow to a darkening sky corrugated with low cloud. Each time a passenger jet came in low overhead, it sounded like a rolling wave breaking onshore: a thunderous crescendo that set Hoffmann’s nerves on edge, followed by a whining ebb, the landing lights receding like flotsam between the crane spars and flat roofs.

He treated the BMW with extreme care, driving with his face up close to the windscreen. There were a lot of roadworks, cables being laid, first one lane shut and then the other, creating a chicane. The turning to Route de Clerval was on the right, just past a distribution centre for auto parts – Volvo, Nissan, Honda. He indicated to turn into it. Up ahead on the left was a petrol station. He pulled up at the pumps and went into the shop. CCTV footage shows him hesitating between the aisles, then moving decisively to a section selling jerry cans: red metal, good quality, thirty-five francs each. The video is time-lapsed, making his actions seem jerky, like a marionette’s. He buys five, paying for them in cash. The camera above the till clearly shows the wound on the top of his head. The sales assistant subsequently described him as being in an agitated state. His face and clothes were streaked with grease and oil; there was dried blood in his hair.

Hoffmann said, with a terrible attempt at a smile, ‘What’s with all the roadworks?’

‘It’s been going on for months, monsieur. They’re laying fibre-optic cable.’

Hoffmann went out on to the forecourt with the jerry cans. It took him two trips to carry them to the nearest pump. He began filling them in turn. There were no other customers. He felt horribly exposed standing alone under the fluorescent lights. He could see the sales assistant watching him. Another jet came in to land directly over their heads, making the air tremble. It seemed to shake him from the inside out. He finished filling the last can, opened the rear door of the BMW and shoved it along to the far side of the back seat, stacking all the others in a row after it. He returned to the shop, paid one hundred and sixty-eight francs for the fuel and another twenty-five for a flashlight, two cigarette lighters and three cleaning cloths. Again he paid in cash. He left the shop without looking back.





LECLERC HAD BRIEFLY inspected the body at the bottom of the elevator shaft. There was not much to see. It reminded him of a suicide he had once had to deal with at the Cornavin railway station. He had a strong stomach for that kind of thing. It was the unmarked corpses who looked at you as if they should still be breathing that got under his skin: their eyes always seemed so full of reproaches. Where were you when I needed you?

In the basement he talked briefly to the Austrian businessman whose car Hoffmann had stolen. He was outraged, seemed to hold Leclerc more responsible than the man who had committed the crime – ‘I pay my taxes here, I expect the police to protect me’ and so forth – and Leclerc had been obliged to listen politely. The licence number and description had been circulated as a high priority to every Geneva police officer. The entire building was now being searched and evacuated. Forensics were on their way. Madame Hoffmann had been picked up at the house in Cologny and was being brought over for questioning. The office of the chief of police had been notified: the chief himself was at an official dinner in Zurich, which was a relief. Leclerc was not sure what else he could do.

For the second time that evening he found himself climbing multiple flights of stairs. He felt dizzy with the effort. There was a tingling in his left arm. He needed to get himself checked out: his wife was always nagging him about it. He wondered about Hoffmann and whether he had killed his colleague as well as the German in the hotel room. On the face of it, it seemed impossible: the safety mechanism of the elevator had plainly failed. But equally it was a remarkable coincidence, one had to say, for a man to have been at the scene of two deaths in the space of a few hours.

Arriving at the fifth floor, he paused to recover his breath. The entrance to the hedge fund’s offices was open; a young gendarme was standing guard. Leclerc nodded to him as he went past. On the trading floor, the mood seemed not merely shocked – he would have expected that, after the loss of a colleague – but almost hysterical. The employees, previously so silent, were huddled in groups, talking animatedly. The Englishman, Quarry, almost ran over to him. On the screens, the numbers continued to change.

Quarry said, ‘Any news of Alex?’

‘It appears he forced a driver out of his car and stole it. We’re looking for him now.’

Quarry said, ‘This is unbelievable—’

Leclerc cut him off. ‘Excuse me, monsieur: could I see Dr Hoffmann’s office, please?’

Quarry at once looked shifty. ‘I’m not altogether sure about that. I think perhaps I ought to call in our lawyer …’

Leclerc said firmly, ‘I’m sure he would advise full co-operation.’ He wondered what the financier was trying to hide.

Quarry backed down immediately. ‘Yes, of course.’

Inside Hoffmann’s office there was still debris on the floor. The hole in the ceiling gaped above the desk. Leclerc looked up at it in bewilderment. ‘When did this happen?’

Quarry grimaced with embarrassment, as if having to confess to the existence of a mad relative. ‘About an hour ago. Alex pulled down the smoke detector.’

‘Why?’

‘He believed there was a camera inside.’

‘And was there?’

‘Yes.’

‘Who installed it?’

‘Our security consultant, Maurice Genoud.’

‘On whose authority?’

‘Well …’ Quarry could see no escape. ‘Actually, it turns out to have been Alex.’

‘Hoffmann was spying on himself?’

‘Yes, apparently. But he couldn’t remember ordering it.’

‘And where is Genoud now?’

‘I believe he went down to talk to your men when Gana’s body was discovered. He also handles security for this whole building.’

Leclerc sat at Hoffmann’s desk and started opening the drawers.

Quarry said, ‘Don’t you need a warrant to do that?’

‘No.’ Leclerc found the Darwin book, and the CD from the radiology department of the University Hospital. On the sofa he noticed a laptop lying discarded. He went across and opened it, studied the photograph of Hoffmann, then went into the file of his exchanges with the dead man, Karp. He was so absorbed, he barely glanced up when Ju-Long came in.

Ju-Long said, ‘Excuse me, Hugo – I think you ought to take a look at what’s happening on the markets.’

Quarry, frowning, bent over the screen, switching from display to display. The slide was beginning in earnest now. The VIX was going through the roof, the euro sinking, investors pulling out of equities and scrambling for shelter in gold and ten-year Treasury bonds, the yields of which were falling fast. Everywhere money was being sucked out of the market – in electronically traded S&P futures alone, in the space of little more than ninety minutes, buy-side liquidity had dropped from $6 billion to $2.5 billion.

Here it comes, he thought.

He said, ‘Inspector, if we’re done here, I need to get back to work. There’s a big sell-off underway in New York.’

‘What’s the point?’ asked Ju-Long. ‘We’re not in control anyway.’

The edge of despair in his voice caused Leclerc to look up sharply.

‘We’re having a few technical problems,’ explained Quarry. He could see the suspicion on Leclerc’s face. It would be a nightmare if the police inquiry moved on from Hoffmann’s mental breakdown to the breakdown of the entire company. The regulators would be all over them by morning. ‘It’s nothing to worry about, but I ought just to talk to our computer people …’

He started to move from the desk, but Leclerc said firmly: ‘Wait, please.’ He was looking out over the trading floor. Until that moment he hadn’t really registered that the company itself might be in difficulties. But now he noticed, in addition to the anxious groups of employees, several others scurrying around. There was a definite message of panic in their body language, which at first he had ascribed to the death of their colleague and the disappearance of their leader, but now he realised it was separate to that, wider. ‘What sort of technical problems?’ he asked.

There was a brief knock on the door and a gendarme stuck his head into the room.

‘We’ve got a trace on the stolen car.’

Leclerc swung round to face him.

‘Where is it?’

‘A guy at a petrol station in Zimeysa just called. Someone matching Hoffmann’s description driving a black BMW just bought a hundred litres of fuel.’

‘A hundred litres? My God, how far is he planning to go?’

‘That’s why the guy called. He says he didn’t put it in the tank.’





FIFTY-FOUR ROUTE DE CLERVAL turned out to be at the end of a long road that took in a cargo-handling facility and a waste-recycling plant before dwindling into a cul-de-sac beside the railway tracks. The building stood out pale in the dusk through a screen of trees: a boxy steel structure, two or three storeys high – it was difficult for him to estimate the height in the absence of any windows – with security lights mounted along the edge of the roof and video cameras protruding from the corners. They turned to follow Hoffmann as he passed. A small slip road led up to a set of metal gates; beyond was an empty car park. The whole site was secured by a steel perimeter fence surmounted with triple strands of razor wire. He guessed it might have been built originally as a warehouse or distribution centre. It was surely not custom-designed: there had not been enough time. Hoffmann drew up in front of the gates. At window-level next to him were a keypad console and an entryphone; beside them the tiny pinkish elephant’s-eye of an infrared camera.

He leaned over and pressed the buzzer and waited. Nothing happened. He looked across at the building; it seemed derelict. He considered what was logical from the machine’s point of view, then tried keying in the smallest number expressible as the sum of two cubes in two different ways. At once the gates began to slide open.

He drove slowly across the car park and along the side of the building. In the wing mirror he could see the camera following him. The stink of the petrol on the back seat was making him feel ill. He turned the corner and pulled up in front of a big steel shutter, a truck-sized delivery entrance. A video camera mounted above it was trained directly on him. He got out of the car and approached the door. Like the offices of the hedge fund, it was controlled by face recognition. He stood in front of the scanner. The response was immediate, the shutter rising like a theatre curtain to reveal an empty loading bay. Hoffmann turned to walk back to the car and saw, as he did so, in the distance on the other side of the railway tracks, a travelling light show of flashing red and blue moving very fast; a scrap of siren from the police car carried in the wind.

He drove quickly into the bay, lurched to a halt, turned off the engine and listened. He couldn’t hear the siren now. It was probably nothing to do with him. He decided he would close the shutter behind him in any case, but when he examined the control panel he couldn’t find a light switch. He had to use his teeth to tear open the plastic packaging around the torch. He checked it was working, then pressed the button to close the shutter. There was a warning buzzer; an orange lamp flashed. Darkness descended with the steel slats. Within ten seconds the bottom of the shutter clattered against the concrete floor, extinguishing the thin line of daylight. He felt alone in the darkness, the victim of his own imaginings. The silence was not quite absolute: he could make out something. He took the crowbar from the front seat of the BMW. With his left hand he shone the torch around the bare walls and on to the ceiling, picking out yet another surveillance camera, perched high in the corner looking down at him malevolently, or so he thought. Beneath it was a metal door, again activated by face recognition. He tucked the crowbar under his arm, shone the torch on to his face and tentatively pressed his hand against the pad. For several seconds nothing happened, and then – almost, it seemed to him, reluctantly – the door opened on to a short flight of wooden steps that led up to a passage.

He shone the torch along it to another door at the far end. Now he could hear clearly the faint hum of CPUs. The ceiling was low and the air was chilled, as in a cold store. He guessed there must be under-floor ventilation as there had been in the computing room at CERN. He walked warily to the end, pressed his palm to the sensor and opened the door on to the noise and lights of a processor farm. In the torch’s narrow beam the motherboards sat on steel shelves that stretched ahead and to either side, exuding the familiar, oddly sweet electrical scent of burned dust. A computer servicing company had attached its sticker to each of the racks: in case of problems please call this number. He walked on slowly, shining his torch to right and left along the aisles, the beam disappearing into the darkness. He wondered who else would have access. The security company, presumably – Genoud’s outfit; building services for cleaning and maintenance; the computer technicians. If each received instructions and payment via email, the place could presumably function independently on outsourced labour alone, without any need of its own workforce: the ultimate Gatesian model of the corporate digital nervous system. He remembered that Amazon in its early days used to call itself ‘a real company in a virtual world’. Maybe here was the logical progression in the evolutionary chain: a virtual company in a real world.

He reached the next door and repeated the procedure with the torch and the recognition sensor. When the bolts had slid back, he paused to examine the door frame. The walls were not structural, he saw, just thin prefabricated partitions. He had imagined, looking at it from the outside, that the building would consist of one big space, but now he realised it was honeycombed: it had a cell-structure like an insect colony. He stepped over the threshold, heard movement to one side, and wheeled round as an IBM TS3500 tape robot rushed towards him along its monorail, stopped, plucked out a disk, and whisked away again. He stood and watched it for a moment, waiting for his heart rate to settle down. He detected a sense of urgent activity. When he moved on, he saw that four other robots were racing to complete their tasks. In the far corner his torch showed an open metal staircase leading to an upper floor.

The adjoining room was smaller and seemed to be the place where the communication pipes came in. He shone his flashlight on two big black trunk cables, the thickness of his fist, emerging out of a closed metal box and descending like tuberous roots into a trench that ran under his feet and up into some kind of switch array system. Both sides of the aisle were protected by heavy metal cages. He already knew that the fibre-optic pipes GVA-1 and GVA-2 both passed close to Geneva airport en route to Germany from the fibre landing site at Marseilles in southern France. Data could be transmitted to and received from New York at the same velocity as particles shot around the Large Hadron Collider – a fraction below the speed of light. VIXAL was astride the fastest communications link in Europe.

The beam of his torch traced other cables running along the wall at shoulder height, partly housed in galvanised metal, emanating from beside a small door. It was padlocked. He fitted the crowbar into the U-shape loop and used it as a lever to wrench the shackle free of its housing. It came away with a shriek, the door swung open and he shone his light into some kind of power control room – electricity meters, a big fuse box the size of a small closet and a couple of trip switches. Yet another video camera regarded him steadily. He quickly flipped the handles on the trip switches down to OFF. For an instant, nothing happened, and then somewhere in the big building a diesel generator shuddered into life and, bizarrely, all the lights came on. Hoffmann, in a fury of frustration, took a swing at the camera lens with the end of his crowbar, poking his tormentor in the eye, smashing it to a satisfactory number of pieces, then set about the fuse board, splintering the plastic casings, only finally giving up when it was obvious he was having no effect.

He turned off the torch and retraced his steps to the comms room. At the far end he presented his face to the sensor, struggling to maintain an even expression, and the door to the next room opened – not another antechamber, it turned out, but a huge open space, with a high ceiling, digital clocks to mark the different time zones and large TV screens, obviously modelled on the trading floor at Les Eaux-Vives. There was a central control unit consisting of a six-screen array and separate monitors showing the output of the security cameras in grid form. In front of it, instead of people, where the quants would have sat there were ranks of motherboards, all processing at maximum capacity to judge by their rapidly flickering LEDs.

This must be the cortex, thought Hoffmann. He stood for a while in wonder. There was something about the absorbed and independent purposefulness of the scene that he found unexpectedly moving, as he supposed a parent might be moved by witnessing a child for the first time unselfconsciously at large in the world. That VIXAL was purely mechanical and possessed no emotion or conscience; that it had no purpose other than the self-interested pursuit of survival through the accumulation of money; that it would, if left to itself, in accordance with Darwinian logic, seek to expand until it dominated the entire earth – this did not detract for Hoffmann from the stunning fact of its existence. He even forgave it for the ordeal it had subjected him to: after all, that had purely been for the purposes of research. One could no more pass moral judgement on it than one could on a shark. It was simply behaving like a hedge fund. Briefly Hoffmann forgot that he had come here to destroy it and bent over the screens to examine the trades that it was putting on. They were being processed at ultra-high frequency in tremendous volumes – millions of shares all held for only fractions of a second – a strategy known as ‘sniping’ or ‘sniffing’: submitting and instantly cancelling orders, probing the markets for hidden pockets of liquidity. But he had never seen it done on such a scale before. There could be little or no profit in it and he wondered briefly what VIXAL was aiming to achieve. Then an alert flashed on to the screen.





IT WAS APPEARING at that instant in dealing rooms all across the world – 8.30 p.m. in Geneva, 2.30 p.m. in New York, 1.30 p.m. in Chicago:



The CBOE has declared Self Help against the NYSE/ARCA as of 1.30 CT. The NYSE/ARCA is out of NBBO and unavailable for linkage. All CBOE systems are running normally.





The jargon masked the scale of the problem, took the heat out of it, as jargon is designed to do. But Hoffmann knew exactly what it meant. The CBOE is the Chicago Board Options Exchange, which trades around one billion contracts a year in options on companies, indices and tradable funds – the VIX among them. ‘Self Help’ is what one US exchange is entitled to declare against another if its sister-exchange starts taking more than a one-second time period to respond to orders: it is the responsibility of each exchange in the United States to ensure that they don’t ‘deal through’ – that is, offer a worse price to an investor than can be obtained at that precise moment on an exchange elsewhere in the country. The system is entirely automated and operates at a speed of thousandths of a second. To a professional such as Hoffmann, the CBOE Self Help alert gave warning that the New York electronic exchange ARCA was experiencing some kind of system breakdown – an interruption sufficiently serious that Chicago would no longer re-route orders to it under the National Best Bid and Offer (NBBO) regulations, even if it was offering better prices for investors than Chicago.

The announcement had two immediate consequences. It meant Chicago had to step in and provide the liquidity formerly offered by NYSE/ARCA – at a time when liquidity was, in any case, in short supply – and it also, perhaps more importantly, further spooked an already jittery market.

When Hoffmann saw the alert, he didn’t immediately connect it with VIXAL. But when he looked up in puzzlement from the screen and ran his eye over the flickering lights of the CPUs; when he sensed, almost physically, the phenomenal volume and speed of the orders they were processing; and when he remembered the immense unhedged one-way bet VIXAL was taking on a market collapse – at that moment he saw what the algorithm was doing.

He searched around the console for the remotes for the TV screens. The business channels flickered on at once, broadcasting live pictures of rioters fighting police in a big city square in semi-darkness. Piles of garbage were on fire; occasional off-camera explosions punctuated the chatter of the commentators. On CNBC the caption read: ‘BREAKING NEWS: PROTESTERS SWARM STREETS IN ATHENS AFTER APPROVAL OF AUSTERITY BILL’.

The female presenter said, ‘You can see police actually hitting people with batons there …’

The ticker in the bottom of the screen showed that the Dow was down 260 points.

The motherboards churned on implacably. Hoffmann set off back towards the loading bay.





AT THAT MOMENT a noisy cortège of eight patrol cars of the Geneva Police Department swept down the deserted Route de Clerval, slammed to a halt beside the perimeter of the processing facility, and sprouted along its length a dozen open doors. Leclerc was in the first car with Quarry. Genoud was in the second. Gabrielle was four cars back.

Leclerc’s immediate impression as he hauled himself out of the back seat was that the place was a fortress. He took in the high heavy metal fence, the razor wire, the surveillance cameras, the no-man’s-land of the car park and then the sheer steel walls of the structure itself, rising like a silvery castle keep in the fading light. It had to be at least fifteen metres high. Behind him armed police were disgorging from the patrol cars, some with Kevlar body armour or blast-proof shields – pumped up, ready to go. Leclerc could see that if he were not very careful, this could only end one way.

‘He isn’t armed,’ he said as he passed among the deploying men, clutching a walkie-talkie. ‘Remember that – he has no weapon.’

‘A hundred litres of gasoline,’ said one gendarme. ‘That’s a weapon.’

‘No it isn’t. You four need to deploy to the other side. No one tries to go in without my orders, and absolutely nobody shoots – understood?’

Leclerc reached the car containing Gabrielle. The door was open. She was still in the back seat, clearly in a state of shock, and worse was to come, he thought. He had continued to read the exchanges on the dead German’s laptop as the patrol car raced across Geneva. He wondered how she would feel when she discovered her husband had invited the intruder into their house to assault him. ‘Madame Hoffmann,’ he said, ‘I know this is an ordeal for you, but would you mind …?’ He offered her his hand. She looked at him blankly for a moment, then took it. Her grip was tenacious, as if he was not helping her out of a car so much as hauling her out of a sea that threatened to sweep her away.

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.