Posing In The Pits


By David Greising and Laurie Morse

John Wiley & Sons 337pp $24.95

When you think of undercover cops, you usually picture police posing as fences, drug buyers, prostitutes, or their customers. This book tells of a sting of a different sort. For more than two years, four agents from the Federal Bureau of Investigation worked in the commodity futures trading pits at the Chicago Board of Trade and the Chicago Mercantile Exchange, trying to nab traders cheating customers. Their investigation became public on the night of Jan. 17, 1989, when the agents, accompanied by government lawyers, began knocking on the doors of traders and brokers caught in the trap.

The FBI men faced a fascinating challenge. None of them had ever been a trader, and all had to learn the grueling floor-trading business well enough to pass as credible neophytes and draw seasoned professionals into their confidence. They also had to understand the rules well enough to know when the law was broken. By day, they traded with government money--often not too successfully. By night, they transcribed incriminating conversations picked up by hidden tape recorders and made notes of what they had learned.

Authors David Greising, a Chicago correspondent for BUSINESS WEEK, and Laurie Morse, of Knight-Ridder Financial News, place the scandal in historic context. Impropriety, they tell us, isn't new to the pits. They examine the cliquish power structure at the exchanges and the lax regulatory environment that let lawlessness flourish.

The story hasn't ended. Of the 48 people indicted, 22 pleaded guilty and 13 have been convicted. Most traders were acquitted of at least some charges--hardly a resounding success for the government. Still, this recounting provides a look inside a wild, little-understood business.

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