One of the side effects of the Ivan Boesky investigation casts doubt on the game of arbitrage - perhaps not so much a game as the world's second oldest profession. Those money changers who were driven from the temple 2,000 years ago were also practicing arbitrage: buying Greek coins at a discount in Rome and swapping them for Roman coins in Greece.

Some arbitrageurs have gotten famous, as well as rich; Bernard M. Baruch comes to mind. Mr. Baruch operated in the classic fashion, trading on price differentials in stocks listed on both the London and New York exchanges. He also played the takeover game.In one classic case he bought up a western smelting and refining company for the Guggenheim brothers so they could merge it into their American Smelting and Refining Co. For his services, Mr. Baruch was paid $1,000,000. And this was in the days before the Securities and Exchange Commission.

Mr. Baruch, as with Mr. Boesky, liked to do part of his securities trading with small brokerage houses, particularly ones that could come up with a lot of cash on demand. W.B. Hibbs, who had a small brokerage house in Washington, D.C., was one of Mr. Baruch's favorites.

Mr. Hibbs not only kept a vault full of cash for customers like Mr. Baruch, he insisted that all of the cash be in freshly minted bills. Today, no brokerage house will even accept cash, much less keep any one hand.

Mr. Baruch was also an active commodity trader, but apparently not Mr. Boesky, although commodity arbitrage is a natural thing, as many products, like wheat and gold, are traded in a number of different markets around the world. The two men are alike in one respect, however: they have both written books about their life's work.

Perhaps because he didn't have the junk bond market to support him, Mr. Baruch favored larger profits on comparatively smaller positions than Mr. Boesky. According to the SEC documents made public so far, Mr. Boesky was often content with no more than a few dollars a share in a takeover situation.

Because Mr. Boesky customarily held 100,000 shares or more when he was stalking a takeover candidate, the total amount of his profit in a deal could be quite large. In the takeover of Houston Natural Gas, for example, Mr. Boesky held more than 300,000 shares; his profit was $12 a share.

On another takeover, Mr. Boesky made only $1.27 a share. On some deals he lost money. One of Mr. Boesky's better trades was a 166,000 share position in General Foods, taken over by Philip Morris last year. He made about $30 a share on that takeover.

Sometimes his informant, Dennis Levine, traded for his own account and sometimes not, content with Mr. Boesky's promise of a 5 percent share of the profits. With Mr. Levine providing advance word of a takeover, many of these deals were risk-free.

Mr. Boesky, tipped in advance by Mr. Levine, traded not only his own money but also that of his company, Ivan F. Boesky & Co. When Texaco bought Getty Oil, Mr. Boesky's firm was reportedly holding 2,000,000 shares. Profits were said to be upwards of $100 million.

For a small speculator, these numbers are awesome. What is the tax liability? How much was paid in brokerage fees? It is possible for a small speculator to make money in turn-around situations, like Long Island Lighting when it went down to $4 a share and then ran up to $8.

But the profits are not all that great, even in a stock that doubles. Someone who bought 1,000 shares, say, in a stock that ran up a point and a half might feel pretty proud of it. After all, the profit was $1,500, and made quickly, too. But when the turn-around brokerage fee of $500 is deducted, the short term capital gain is $1,000 - and for most speculators the tax is half of that.

The $500 that is left - the new tax law may offer some relief - doesn't seem worth the effort, much less the risk. So all of us who try to outsmart the stock market have naturally been envious of Mr. Boesky - as well as a bit jealous, at least until now, of his skill. Or what we thought was his skill, until it turned out that the game was rigged in his favor.

He doesn't say this in his book, Merger Mania, published last year by CBS's Holt, Rinehart & Winston. The style is college-level textbook, almost down to a quiz at the end of each chapter. Any speculator, large or small, could learn more about the profession of high-stakes arbitrage by reading the testimony given by Carl Ichan last year to Congress on his takeover of Trans World Airlines than Mr. Boesky reveals in his book.

Still, there is one interesting development that could make Mr. Boesky's book a collector's item: his publisher has withdrawn the book from the market. It may still be available from some libraries. If so, there is one section that is interesting, in light of Mr. Boesky's agree ment to settle SEC charges of insider trading by paying a record $100 million in penalties and to plead guilty to one count of a federal felony charge that carries a minimum of one year in prison.

This is the section entitled: Sources of Information. In it Mr. Boesky praises the SEC's disclosure rules, which have made the arbitrageur's job far easier. When a disclosure filing is made at the SEC, he said, the professional arbitrageur usually will have someone on hand at the SEC in Washington, D.C., to receive a copy of the S-14 (disclosure form) within minutes of its release.

Mr. Boesky does not take the trouble to explain what should be done when the disclosure form is released. Presumably shares in the company to be acquired should be bought - except that in all too many cases the shares have already run up nearly to the final purchase price - leaving slim pickings indeed not only for the public, but also for Mr. Boesky's fellow arbs.

That is the way it has been these past five or six years. Reading Mr. Baruch's book, more or less between the lines, maybe that's the way it always will be, SEC to the contrary notwithstanding.

For the full story: Log In, Register for Free or Subscribe