Why Did Nick Kokonas Shut Down a Risk-free Trade?

Nick Kokonas shut the trade down because it worked too well. The exchange was owned by the broker groups, and they would not run fiber under the pits, so he paid the union crew in cases of Jameson to pull the line. He says he can admit that now. Think of apples at $3 on one side of a pond and a buyer paying $5 on the other. The first session made a couple hundred thousand dollars with zero market risk.

That was the danger. A $2 million day of picking the banks' pockets would have been the last day, because the people who could kill the trade would notice. His crew had spent about seven months building it. He turned it off anyway, then asked for a pilot so the same gap could be used quietly for years instead of one obvious session.

The pilot is what let it grow. Within six months they were a couple of percent of daily volume on the American Stock Exchange. He says that year the firm made over $100 million in arbitrage profits. He was 31. His own first million had come around 28, the stake was the bankroll, and his piece of the firm was tiny because the trade needed other people's capital. Jim Hansen, his first employee, became his partner. They reached about 35 people and merged with a New York firm that had more money.