The exclusion zone

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The Adventures of Opco Boone, Legal Ace™

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Und wenn Sie lange genug in einen Abgrund blicken, wird der Abgrund in Sie zurückblicken.

— Nietzsche

In the distance, smeared across the low Foothills of the Iron Mountain, the wrecked superstructure still smokes, menaces, reminding everyone: a monstrous and inhuman force, temporarily at bay, but apt at any moment to flare, or spume or erupt.

IOSCO damping crews work night and day, as they have now done for 15 years. Convexity poisoning is now rare: un-piloted drones patrol the excesses where once helicopters, crewed by doomed regulators flew sorties over the firms collapsed reactors dropping millions of tonnes of liquidity onto the exposed cores. A UN task force established, formalised then reinforced a strictly-policed exclusion zone around the site.

Within it: what once was a mighty peak is now a ringed, deep, smoking crater. The giant machines of capital regulation, their titanic wheels standing fully fifty yards high, are as ants crawling along the  brittle rims of this giant scorched cavity as they corkscrew into the abyss. A sulphurous mist still wafts from the deeper recesses, where superheated pools of contaminated preference periodically belch into the atmosphere, prompting the feeble men and women, encased in hulking vol-proximity suits labour to scramble to the relative safety of their vehicles.

Now giant leverage ratio bulldozers shunt contingent convertible equity around the salted earth forlornly trying to cover up the still-boiling chasm, where toxic remnants of risk weighting calculations, melted like cheese, still bubble away. Deep in the pit, what is left of that once great capital structure crumbles and collapses in dusty, crumbling cliffs under the swinging gantries of the massive vega-dampeners and liquidity-cooled preference drills.

A BCSB peace-keeping force declared a 100 mile exclusion zone. They encased it in concrete, but already gap loss radiation is leaking out. The Geithner-counter pops like a corn fryer.


Nature has returned and reclaimed the remaining structures. All the base’s defensive lines were arrayed around the exclusion zone. Firebreaks, air gaps, liquidity hoses, regulatory perimeter patrols and elevated sentry posts circled a sand-raked no-man’s land around the double layered razor wire fences appointed at the wreckage of Lehman Brothers.

Every now and then the risk radar squawks with alarm and a further tremor shakes the ground, or a small mismatch bomb catapults out of those infernal depths. Mainly they fall safely, but have been known to crush the occasional long/short hedge fund that had wandered too close to the NPSI perimeter.

The fence is imposing, but not impregnable. The patrols are less frequent now, and instructions are no longer shoot to kill.

Rubberneckers and gold prospectors grow bold. They say there is dark magic in there among the desiccated carcasses and sulphurous pits, for those who have the nerve to take them; those brave or cavalier enough to breach the defensive perimeter.

Unregulated crypto-tokens form and crystallise on the rusted hulks and gantries, every now and then blooming quickly into the atmosphere. Street kid day-traders, hopped up on Vega and swaddled in heavily modded Teflon stop-loss ’chutes bust through the fences, clambered on the crypto structures hoping to catch a ride  off them, holding on for dear life.

Authorities blast out periodic warnings on the Tannoys rigged up around the compound, but the kids aren’t tuned in on that freek. Also not helped by equivocal messaging from the war ministry and contractors, sniffing legit innovation and waxing long about game changing paradigm shifts in finance. Bullshit talks in this game. For the most part the regs just ignore the kids, putting a few smeared carcases down to youthful irrational exuberance and the sad externalities of freedom to trade.

Amulets and talismans lie buried beneath a warm cloak of ash. One need not push far into these salted badlands, it is said, to uncover well-prized tokens of forbidden sorcery. That they are not officially confirmed nor denied only adds to conspiracy.

When asked why they let these supernatural legends smoulder, the regulators shrug: what else can they do? Issuing a denial would only fan the flames of conspiracy.

But no-one — as best as anyone knows — has found one.

“Would you tell anyone if you found such a thing?”

So, Squid kids, joyriders and the devil-may-care cut fences and go foraging, only to return bombed out and jibbering, in need of rehab like a wasted bombed-out veteran of the Vega dens. No one learns.

“These clowns don’t know how to learn a fucking lesson,” says Wickliffe when he is asked for a statement, as routinely he is. The perimeter guards have their “phasers” — Phase 5 regulation margin cannons — set to auto. “We just wax the little shits when we find them. It’s the only close-out methodology they understand.”

Desiccated ISDA slit trenches, running in diagonals behind the wire bales, still scar the undulating land beyond the razor wire. They are undisturbed, desks and belongings where they were abandoned, a mute poignant requiem for the fallen. Beyond them, much of the land, though out of bounds, seems now verdant and balmy, disappearing into the wet mist that shrouds the lower reaches of The Mountain.

Algernon Farquhar strides the perimeter. He looks back. Every time he sees them, he remembers like it was yesterday.

Lehman endgame

“Well, this is it, lads.”

The company was grim. Wordless.

But General Prince had a gleam in his eye. “When the music’s on, you gotta get up and dance, son. Forward!”

Prince egged the ISDA men on. They mounted the slimy ladders, slick with recent volatility showers, and vaulted wide-eyed over the parapet, half-cantering, half-stumbling into the hail of bullet swaps and tracer rounds that were already darting around the battlefield.

“Go on, my lovelies!” he murmured, and the detachment swung up onto the bulkheads of a structured investment vehicle as it rolled onto the field.

Algy slid into his usual turret, handling secondary market making. The forward facing credit traders were hopped up and singing. In the engine room the roll mechanics were humming sweetly. “Listen to her purr, Alge,” shouted credit officer Dan Grade over the measured growl of the twin repo 105s.

Hulking shadow banks hosed the combat theatre, this way and that, with black gouts of crude liquidity from their transverse-mounted rehypo gantries. In an environment as hot as this is was like jet fuel. Some spontaneously sparked and flared as it sublimed in the atmosphere, creating an other-worldly halo of sparkling signals. The fluid drenched everything, its viscous essence raining down, staining faces and running down wet limbs and tranches. Thick rivulets of opaque liquidity coiled and looped on the wet earth forming dark deep pools. Nascent primordial HFTs flipped, flopped and floundered, drunk on the vital energy. There was this mad, wild, exuberant energy. Ball lightning leapt and sparked and crackled. Ozone fizzed and choked the moist air among us. Me and Algy just blammed away on our masters, high on distilled finance.

I can still remember the moment it turned.

A cry, from a remote sentry, stationed out east. At first, amongst the fog and mud and flashes and all the flying flak and mess of battle, we didn’t hear it. We thought it was just an over-amped private, hopped up on credit, seeing phantoms in the golden firing sky. But there it came again, and again, insistently, driving into the rhythm of the engagement zone, such that we felt it as much as we heard it. We are all young sappers, in love with commercial life and soaking up the adrenal-thrill of combat. But it was persistent. It spread, some infectious ripple, electrifying the battlefield.

“Liquidity drain! Liquidity drain!”

We watched in horror as the combatants turned. The order flow gouting from the ALD turrets slowed to a dribble. The HFT fish sucked and slurped but the dark pools were running low.

“What the hell is happening —” Algy squealed but Chuck was behind 7s, screaming, “Dance, motherfuckers, dance!”

Algy loosed off another round of decks — a whole goddamn magazine of ’em — but nothing was landing, and then our first war machine thunder across the trenches, ploughing through the mire, churning up the dark pools, converting everything behind us to an impassable, entropic emulsion. We blammed out repo lines from financing turrets either side of the main control deck where those mighty tank tracks ground through the calcifying earth, relentlessly, remorselessly crushing everything in their path. And we could see it, dead ahead, this awful, gaping, sandy maw, big enough and deep enough to swallow the SIV whole.

The steerco just thundered onward, possessed perhaps but the notion that the SIV would overcome it. All the while the crater expanded, visibly, in front of us.

I looked at Algy. Perhaps the steerco crew hadn’t heard.

“Hey!” Algy hollered down the comlink.

Only static.

The SIV thundered on, still under full sail, its IRS cannons blazing, its portfolio-rebalancing gyros spinning wildly, working overtime to keep the issuance platform level upon the desolate and rocky terrain.

“Keep hedging, Boone. Back in a flash."

Algy flipped his ISDA to AET, vacated his seat, jumped down into the main NJ control room, nimbly navigating an aluminium ladder.

Perhaps they didn’t believe their impregnable, state of the art combat facility, with its deflection shields and arbitrage armour, front and rear, was vulnerable to naturally occurring phenomena — phenomena we caused with our total risk-redistributive war — but the SIV lumbered mechanically, unthinkingly, wantonly to its own doom. Suddenly it was no agile spitting war machine, but a docile, stupid ruminant beast, placidly moving forward towards the bolt, volunteering its own carcass for slaughter.

Vol flak crumped left and right. Still, the SIV’s repo lines were fixed. Still its portfolios engines rebalanced, relentlessly throwing out credit quality for cheapest to deliver. The margin call turrets spun wildly firing tracers randomly into the sky

Algy popped back up. Terror galvanised his face.

“What is it?” I asked

“It’s the credit trading team. The whole lot has been whacked. They've taken out the left front side.”

“What?? But —”

“I know, boss. Look.”

She pointed downrange.  A delta-one equity light armoured personnel carrier spinning and roiling in the mud. The tank commander poking out of his turret screaming “where’s my fucking CDS??”

But it was no good. He spotted the flaming CVA Jeep moments before he was mown down. Crazy. It was friendly fire: recoil from a margin battery, thrown out of alignment by the credit ice, and presently shelling its own systematic internaliser.

I can still remember the looks on the faces of that poor unit of Austrian regional Bankers, hooked up to the SIV with an umbilical, drunkenly funding its asset inventory shouting at the SIV crew, screaming about their promised yields, as the great contraption collapsed into the sinkhole, dragging its repo counterparts, financers and their operations, credit and risk detachments with it. The bankers stood stiffly on a wooden platform above the sinkhole resisting all offers  if help, defying gravity and refusing to be lowered, garbling about book value accounting. The platform confused and the fat Germans feel into the maw.

The screaming — the gurgling, foaming fear as it tipped, over balanced and collapsed into the stupendous crater that had appeared infront of it, plunging down, amplifying the very size of the abyss.