I Fought ACME9 and ACME9 Won: Part 15 Keep Quiet when There Is Panic in the Streets

Monday morning Orange called a group meeting. He said that the firm was in the process of raising capital, and needed to appear cautious in the face of two disastrous days. Therefore, it had been decided that everybody would stop trading for a short period of time. They didn’t want us to increase our risk or decrease it. We were assigned each other’s accounts to look for risk management ideas, positions to buy in with little or no upside that could blow up in our face. Essentially, they wanted us to sit on the sidelines and let whatever was going to happen, happen.

A lot of traders were enraged. Nothing like this had even remotely happened in the two years that I had been at ACME9. Some of the others had even done well during the sell off, and a chaotic situation, like the one we were in, promised a lot of opportunity as well as a lot of risk. Personally, I didn’t care. Even though I felt that, with my experience, I would do well in this environment, it seemed like Orange had my back. It was their money and I resolved to just try and be helpful, while they were having stressful times. The partners didn’t say much during this period, although they occasionally mentioned that this type of situation was part of the business and that they were handling it accordingly.

At this time, they also made a ludicrous decision about the baskets. Instead of anticipating the failure of the baskets, they decided to gamble. They decided to run only 75% of the basket. The way the market had been running they actually needed to run the baskets at 125% to get neutral. Instead they decided to make a huge bet that the market would recover. I hated this decision, and when it went badly, I had to wear the losses that it caused in my personal account.

The next week was just horrible. The market continued to fall. Everyone continued to lose money, and there was absolutely nothing we could do about it but sit and watch. We had to come in all day and literally do nothing. The partners even encouraged people to take some vacation time. The trading floor, which was usually pretty jovial, resembled a morgue. Everybody was miserable, and the partners were nowhere to be found. No one had a clue what was going on.

The losses went on for another week and a half. The traders did nothing but sit there quietly and avert their eyes from any possible interaction.

Marsellus eventually called a meeting for all of the traders. Things were ugly, and I kept telling myself, don’t say a word. Don’t ask a question, don’t make any comments. At one point, Floyd quibbled about something, and I said to myself, “what a moron he has to be to argue in a situation like this.” If only, I’d taken my own advice.

Marsellus assured us again that periods like this were part of the business, and that we shouldn’t be too shook up. He told us that it was time to act like a team and that we shouldn’t think that the market owed us any money. He promised that every trader would have a meeting with their superiors, where they would discuss how well or badly they had traded during the last few months. Not only did this not happen, we never even had our mid year reviews.

Here’s where I essentially lost my job. It didn’t happen for another six months, but this is what I believed black balled me forever.

Marsellus told us that the firm had a lot of new plans and that it would be completely restructured by the end of the month. In the mean time, so they could better manage their risk, the partners had decided to take every single account in the firm and merge them together.

This is where I got into trouble. It’s fine to say that the market doesn’t owe you anything, but things were starting to settle down. About half the money that I’d lost was gone, but the other half was due to prices being outrageous in a time of fear. If the market did indeed settle down, as they almost always do, my account was sure to make a lot of money back. It would be one thing if the firm was planning on closing these positions, but they weren’t they were going to hold on and try to make the money back. Under this new system, if the money came back, none of the traders would get any credit for it. The only thing that would show up under our names was the initial meltdown, not the settling down period.

I did my best to preface my question, and God knows that I shouldn’t have asked it, but I knew that I was getting screwed, and I’d already been through so much nonsense.  “I understand that you’re trying to maximize the firm’s ability to handle their risk, but we get judged on our P&L numbers and it seems like we’re losing accounts that have a lot of edge in them.”

In fact, my account currently had about 2 million dollars in theoretical edge. Not only that, but it had been risk managed for three straight weeks. With the market settling down, who would want to give that account away for nothing? Would they really want to back someone, who wouldn’t be upset about losing such an account? Everyone with a brain was feeling the same way, but I was the only one stupid enough to say anything about it.

Marsellus went ballistic on me.

1. He told me that I wasn’t being a team player (the team was about to be broken up anyway, and although I didn’t know this, he did.)
2. He said that he had never made a single personnel decision based solely on P&L numbers (this would be revealed as a lie in about 7 days).
3. He reiterated that we shouldn’t act like the market owed us anything (then why weren’t they closing the positions instead of merely moving them? In fact, the first day that this went into effect the firm made 4 million dollars. Losing my account cost me about $400,000, half of my losses.)

I was screwed. A month ago I had been up $800,000 for the year, but now having had the stakes raised and my account mangled, it looked like I hadn’t made a penny. Throw in my very public reaming out by Marsellus, and I knew this couldn’t end well.

I Fought ACME9 and ACME9 Won: Part 16 Who Wants to Make a Really Crappy Deal?