There were thirty-seven transactions.
"Let us start from the beginning, Dixon. Tell me about these documents.
How are they generated?"
"You understand my business, Stern."
"Indulge me," he answered. The truth, of course, was that he could keep none of it straight. Other lawyers--a huge finn with offices here and in Chicago--attended to Dixon's regular business affairs. Stern learned what little piece he needed to deal with each problem that came his way and, at its conclusion, let all of it--practices, regulations, terms of art--fly from his mind, as in the aftermath of an exam. Oh, he knew the rudiments, the definitions: a futures contract was a transferable obligation to buy or sell a standard amount of a particular commodity for an agreed price at a fixed date in the future. But the markets had moved well past the point they were at when Dixon had started decades ago, and only farmers sold futures to secure harvest prices. Today the play, as Dixon put it, was in money; the markets sold futures on the markets: on bond and currency prices, on stock indices, options on futures themselves. The talk out in the trading room when Stern visited Dixon's offices was well beyond him, about basis trades and hedging yield curves. For all the arcana, Stern tended to recall Dixon"s confession that the first people known to write futures on the stock market's prices were the bookies in Vegas.
"Take the first trade here, for Chicago Ovens," said Stern, pointing to the subpoena. This client was a huge bakery concern, part of International Provisions, which produced a third of the bread one saw on supermarket shelves. Stern had visited with their lawyers in Chicago.
"As I understand it, this is a typical transaction. They wanted to be certain they can buy wheat in December at a favorable price. So they instructed you to buy them ten million bushels of wheat for December delivery. Correct? Now what happens at MD?"
"Okay," said Dixon. "Every order we get, no matter where it comes from, gets written up on our central order desk, which is here in our offices in the Kindle Exchange. Then they transmit the order to our booth on the trading floor at whatever exchange the future is traded on. Grains and financials in Chicago. Food and fibers in New York. Small lots we'll do here. This one obviously went to Chicago. The order goes into the pit and our broker yells it out till he finds traders who want to sell December wheat. Maybe they're selling for farmers, maybe speculators. Doesn't matter. Then at night the exchange clears the trades--you know, matches them to make sure that MD bought ten million Dec. wheat and someone else sold it. Next day we send our confirm to the client and make sure they've got enough margin money on deposit with us to cover the position.
That's the whole story. There're a million variations. But that's the basic. Right? That's the paper trail they're following."
Stern nodded: all quite familiar. He studied the subpoena again, then asked what sense Dixon made of the list of trades, but his brother-in-law merely shook his head. They had been placed by five different institutional customers over a number of months. Stern had spoken last week in Chicago with the lawyers for two of these customers--a large rural bank in Iowa, and the baker, Chicago Ovens. It seemed likely, therefore, that the government had subpoenaed trading records from the other flue customers as well. Stern told Dixon he would have to contact them.
"What for?" he demanded. It did not attract business to tell customers that a federal grand jury was raking through your records.
"To determine what information they provided." One of the perpetual problems of a grand jury investigation was developing even a rough estimate of what the government knew. Most companies or individuals were not bold enough to disregard the FBI's usual request to keep the agents' questioning secret.
Dixon continued to venture mild objections, but eventually he gave in.
His
"Let us start from the beginning, Dixon. Tell me about these documents.
How are they generated?"
"You understand my business, Stern."
"Indulge me," he answered. The truth, of course, was that he could keep none of it straight. Other lawyers--a huge finn with offices here and in Chicago--attended to Dixon's regular business affairs. Stern learned what little piece he needed to deal with each problem that came his way and, at its conclusion, let all of it--practices, regulations, terms of art--fly from his mind, as in the aftermath of an exam. Oh, he knew the rudiments, the definitions: a futures contract was a transferable obligation to buy or sell a standard amount of a particular commodity for an agreed price at a fixed date in the future. But the markets had moved well past the point they were at when Dixon had started decades ago, and only farmers sold futures to secure harvest prices. Today the play, as Dixon put it, was in money; the markets sold futures on the markets: on bond and currency prices, on stock indices, options on futures themselves. The talk out in the trading room when Stern visited Dixon's offices was well beyond him, about basis trades and hedging yield curves. For all the arcana, Stern tended to recall Dixon"s confession that the first people known to write futures on the stock market's prices were the bookies in Vegas.
"Take the first trade here, for Chicago Ovens," said Stern, pointing to the subpoena. This client was a huge bakery concern, part of International Provisions, which produced a third of the bread one saw on supermarket shelves. Stern had visited with their lawyers in Chicago.
"As I understand it, this is a typical transaction. They wanted to be certain they can buy wheat in December at a favorable price. So they instructed you to buy them ten million bushels of wheat for December delivery. Correct? Now what happens at MD?"
"Okay," said Dixon. "Every order we get, no matter where it comes from, gets written up on our central order desk, which is here in our offices in the Kindle Exchange. Then they transmit the order to our booth on the trading floor at whatever exchange the future is traded on. Grains and financials in Chicago. Food and fibers in New York. Small lots we'll do here. This one obviously went to Chicago. The order goes into the pit and our broker yells it out till he finds traders who want to sell December wheat. Maybe they're selling for farmers, maybe speculators. Doesn't matter. Then at night the exchange clears the trades--you know, matches them to make sure that MD bought ten million Dec. wheat and someone else sold it. Next day we send our confirm to the client and make sure they've got enough margin money on deposit with us to cover the position.
That's the whole story. There're a million variations. But that's the basic. Right? That's the paper trail they're following."
Stern nodded: all quite familiar. He studied the subpoena again, then asked what sense Dixon made of the list of trades, but his brother-in-law merely shook his head. They had been placed by five different institutional customers over a number of months. Stern had spoken last week in Chicago with the lawyers for two of these customers--a large rural bank in Iowa, and the baker, Chicago Ovens. It seemed likely, therefore, that the government had subpoenaed trading records from the other flue customers as well. Stern told Dixon he would have to contact them.
"What for?" he demanded. It did not attract business to tell customers that a federal grand jury was raking through your records.
"To determine what information they provided." One of the perpetual problems of a grand jury investigation was developing even a rough estimate of what the government knew. Most companies or individuals were not bold enough to disregard the FBI's usual request to keep the agents' questioning secret.
Dixon continued to venture mild objections, but eventually he gave in.
His
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