Turns Out ‘Black Edge’ Is a Hedge-Fund Term, Not a Fungal Disease

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Black Edge-positive? Photo: Ronda Churchill/Bloomberg via Getty Images

Each of the two big Steve Cohen magazine profiles out this week — one from Bloomberg Businessweek and the other from literary journal n+1 — has its merits.

In Businessweek, you get a look at how federal enforcers used incredible sleuthwork to catch Mathew Martoma, an accused insider trader at Cohen's giant hedge fund SAC Capital, and are levering their success to try to get Cohen himself. In n+1, you get a slightly more prolix version of Cohen's story that refers to him as "the Art Collector," like he's a member of a boy band, along with "the Cute One" and "the Guy With Frosted Tips."

I like n+1's piece for implying that Cohen is lonely and empty inside like Willem de Kooning; I like Businessweek's for introducing us to the term "black edge" — which is apparently how SAC Capital traders refer to inside information about stocks and other trades that brushes up against the fuzzy line separating legality from illegality.

A trader’s edge is his advantage; it’s the work he’s done and the things he knows about a company. “Black edge,” according to people familiar with the inquiry, is likely a term for information that cannot be doubted and that no one else has. It’s the kind that can make a trader millions and the kind that can put a trader in jail.

As Matt Levine notes, the investigation into Cohen and SAC is both impressive and slightly worrisome to behold, since it raises the question of whether our regulators are doing what we'd ideally like them to be doing. Should they be going after insider trading to the exclusion of all other financial crimes? Is catching Cohen really worth devoting ten billion man-hours (my estimation) to finding out whether he ever traded based on illegal inside information or knew that his subordinates were doing so? And — the age-old question, at least where lawyers and compliance officers are concerned — shouldn't we do a better job of defining "illegal inside information" anyway?

You should ponder these as you read both pieces. And then you should thank your lucky stars for Cohen, since — whether he's guilty of insider trading or not — there is not likely to be another hedge-fund guy interesting enough to appear in both business magazines and highbrow lit journals for another few decades.