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Prosecutors Request Closed Courtroom For Goldman HFT Programmer's Trial
dave562 writes "Goldman Sachs' lawyers have asked the Federal judge to seal the court room during the trial of Sergey Aleynikov. Aleynikov was one of the programmers who developed Goldman's High Frequency Trading (HFT) programs. What does this say about the state of the financial industry? Given the problems HFT seems to have caused over the last few years, shouldn't more light be shined into the dark corners of how it works?"
If it is a program, there are assumptions. If those assumptions are false, then the program is exploitable. If the program is exploitable, it will be exploited. If it is exploited, people will lose their shirts while others make a fortune. The rich don't want to be fleeced automatically by computers, they just want to fleece others with computers.
That is all this is.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
but something seems unexpected about this level of concern by the Justice Department.
Obviously they know that "pay no attention to the computer behind the curtain" isn''t going to cut it. One suspects that the government is less interested in protecting Goldman's trade secrets than in making sure the public doesn't find out just how badly computerized trading has made it impossible for normal people to compete in todays stock market.
Or maybe the massive drop off in political contributions from Wall Street following all the tar and feathering they have been getting from the current administration (far beyond the taring and feathering that they DO deserve) has gotten some peoples attention and they really are concerned with their ability to fund raise, I mean the ability of companies not to be unjustifiably victimized just because they happen to be *gasp* profitable.
-jon
if i remember correctly the Judge can seal trade secret documents - they are openly reviewed by both sides and the Judge under contempt to repeat/reuse out side of the court & case. The documents would be put into record as sealed evidence for the case.
in that way - the actual proceedings do not need to be closed only the content of a few documents.
'...if only "Jumping to a Conclusion" was an event in the Olympics.'
yeah but the fishy thing here is that it is not the Goldsack lawyer that requested the secretly but the federal prosecutor...
Jehovah be praised, Oracle was not selected
HFT is already pretty exclusionary, so I'm not sure that's the real issue.
Also, barring a screw-up at the PTO, you'd have to actually be ahead of the curve on HFT techniques and would only get a monopoly on those advances - not on anything necessary to doing HFT today.
And given the short expected lifetime of an HFT algorithm (particularly if one is optimistic enough to hope that the practice might become illegal in the near future) I'm not sure you'd want to invest in a patent, whereas protecting a trade secret is actually made easier if the time horizon is short.
If it were just the HFT source to be protected, then the judge can seal a few documents or clear the court for a few witnesses. That's not a good enough reason to close the entire trial.
The first article you're referring to is about Goldman's aggregate trading PnL, not just the part from HFT. Across the whole trading floor, it isn't so hard for them to make money so much, mainly because
1) GS is a big broker who sees lots of flow. The franchise traders can thus use their knowledge of the flow to get their own positions on.
2) They market make some high margin derivatives, where they can charge big spreads against their fair value calculation. So, for instance, they can make a market in a correlation (which by definition varies from -1 to 1) and make a market something like 0.2-0.4, where they think it's worth 0.3. Thing is, each tick (0.01) can be worth millions. Book a few of those a week, and you make money.
I hadn't heard about the network taps though. Would be interesting, have you got a link? 2ms seems like a lot, considering everyone in the HFT game is colocated. It would hardly take that long to send some messages back and forth within a building.
You don't have to let them do that.
How do I "don't let them do that?"
What are my legal, efficient means to initiate change and reverse the inertia of corrupt lawmaking?
(I hope you don't say "voting" and mean it seriously)