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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?"
I could see the closed doors. If the guy says he didn't, and then they start pulling up source code, then I would personally not be happy if that source code was just shown to the world if I was working on a closed source project
The world is how you make it
Not that I approve of HFT in any way shape or form. But this guy is going to be talking about the system that allows the to have an edge over their competitors. If I were in that company's position, I'd very much like that testimony to remain sealed as well.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
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?
No... then they’d actually have to fix it...
Alexander Peter Kristopeit bought his basement from his mommy for one dollar.
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
Normally, I'd nitpick about how the Federal Prosecutors asked for this and not Goldman's lawyers. However, with the political and economic landscape being what they are, federal prosecutors have really become Goldman's lawyers.
My postings are informational and does not constitute legal advice. Act on it at your risk.
How is this type of computer system that trades before anyone else even CAN considered fair or even legal? You get to control and possibly even direct the market with this tool.
This is a monopoly on the stock market, WAY too much power in the hands of one company.
He who knows best knows how little he knows. - Thomas Jefferson
HFT algorithms are considered trade secrets and there is big money behind each one. A firm whose HFT algorithm were made public would be at a serious disadvantage in competing with other firms. It might even be possible to game the algorithm and cost the firm big money.
Just do not allow those firms to act as a market maker, broker, banker and a trader at the same time.
Those firms should only be allowed to act as one part of the system and be restricted from taking advantage of acting as a multi-role entity by the law.
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.'
Courtrooms have been closed several times before to protect trade secrets. The Supreme Court case Ruckelshaus v. Monsanto opinion points out that once secrecy is lost, the property interest is forever destroyed and that it should be protected during the process. There are many other ways to preserve secrecy so closing the courtroom may not be necessary in all cases but that may be the only way to protect the trade secret in this situation.
OK, for all you whiners about the evils of software patents, this is what you get - secret algorithms.
And this is a problem because?
'Secret algorithms' are far less painful than patents, because anyone can produce their own algorithm, whereas no-one can use tech covered by even the stupidest and most absurdly obvious patent without risking a long and expensive court battle.
Of course no sane legal system would close a sourt just because someone's 'secret algorithm' might be mentioned.
Not -1000 troll, just 0 Anonymous Coward. According to the final SEC report (read pages 5-6), you are right, it was a poorly written automated sell-order script that caused the crash, and high frequency trading algorithms helped the market *recover* as fast as it did.
Why is HFT legal but beating them at their own game is illegal? http://news.slashdot.org/story/10/10/15/0139217/Norwegian-Day-Traders-Convicted-For-Manipulating-Computer-Trading-System
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.
Vast disparities in wealth are incompatible with democracy and civil society. You can't have either when one small group of people gets to play by a completely different set of rules than everyone else. Given that you, personally, are more likely to get hit by a meteor and then struck by lightning than you are to accumulate your own vast wealth, and given that you, personally, benefit immensely from living in a democratic civil society, you, personally, should be against vast disparities in wealth. This applies to the 99.99 percent of people who will never accumulate more than a million in assets in their lifetime. Why let that .01 percent make the rules? They are making the rules, but you are the majority, meaning, you are letting them make the rules. You don't have to let them do that.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
It is about the fact that Goldman Sachs had, and continues to have, network taps that are closer to the exchange computers than anybody else. They have latency advantages of up to .2ms on trades, which is a gigantic window if they can cache other orders and jam theirs into the front.
Others have pointed out that Goldman Sachs record is statistically IMPOSSIBLE. See Seeking Alpha here:
http://seekingalpha.com/article/154083-goldman-is-its-trading-performance-statistically-reasonable?source=commenter
Also, the exchanges have seen rashes of NOP orders placed. Fake trades designed to jam the queues to create artificial windows of opportunity to front-run big market movements. Goldman Sachs is probably (fuck probably, they are certainly) gaming NBBO and pocketing the difference millions of times a day.
For the less market knowledgeable out there (basically, most of Slashdot), they are running the scam Richard Pryor did in Superman, or in Office Space. They are skimming pennies off the market by seeing a trade ahead of it hitting the exchange, then jamming NOP orders in while they calculate and move a trade ahead of that to piggyback on the effect of the larger trade on share price.
Denninger has been all over this story:
http://market-ticker.org/akcs-www?singlepost=2139302
Sergey's code probably contains stuff in it that jams NOP orders into the system, or shows how it using something simple like the dragon tools or plain ol' tcpdump to inspect orders as they fly-by on the tap. In fact, Sergey's code may PROVE beyond a reasonable doubt that Goldman Sachs is tapping the NYSE Exchange computers ethernet feeds. That would be a bombshell of the first order.
Like I said, look beyond the technical press and look at the financial press. Goldman Sachs is coming to the poker table with a marked deck and it can be statistically proven.
HFT is a smoke screen. The frequency of trading is moot. if I can look at the world's trades before they hit the exchange and process and effect NBBO, I now have a license to print money. Doing it high frequency just makes the printing press run faster.
Perhaps because the last few times we've seen political action to enforce a relative parity of wealth, we've seen Russia and China become places that nearly no American would want to live. Some of this is due to propaganda (zomg, Socialism!), and some of it is due to the massively authoritarian nightmares and abuses of human rights that we've seen them devolve into.
It's possible that our belief that it's better here is a delusion. I doubt that, though.
Perhaps because the last few times we've seen political action to enforce a relative parity of wealth, we've seen Russia and China
Hint, Russia and China are doing it wrong. Hell, their income inequality is barely any better than ours. Fact is you can lower income inequality through policy without becoming a totalitarian hell hole. Look at central Europe.
Give me Classic Slashdot or give me death!
You don't think they deserve due process? You don't think any of them might have legitimately acquired their wealth?
This is the core reason why nothing will change in this country. If everyone thinks they will get to the top, nobody will want to put any effort into changing the system. We have a majority of the population that is jumping up and down for some of the table scraps, but they will never, ever become part of the stupid-elite. The fact that so many people are delusional enough to assume that money equals happiness proves that we have to many people that have their priorities mixed up. Money isnt going to fix your life its only going to complicate the many problems you already have that you are not dealing with on a personal level and those problems will be transferred to innocent people because you have money and dont know how to use it. I dont hate you for it. I feel sad for you wasting your life for something that matters little in the grand scheme of things. :(
Vast disparities in wealth are incompatible with democracy and civil society. You can't have either when one small group of people gets to play by a completely different set of rules than everyone else. Given that you, personally, are more likely to get hit by a meteor and then struck by lightning than you are to accumulate your own vast wealth, and given that you, personally, benefit immensely from living in a democratic civil society, you, personally, should be against vast disparities in wealth. This applies to the 99.99 percent of people who will never accumulate more than a million in assets in their lifetime. Why let that .01 percent make the rules? They are making the rules, but you are the majority, meaning, you are letting them make the rules. You don't have to let them do that.
Most people who accumulate a million bucks are fairly ordinary, not the type you tend to hear about on television. Middle aged people who've worked their whole lives and spent frugally.
You're right that people ought to be under the same law, but what makes you think some people are above the law? We regularly hear about CEOs and other types who end up in jail. Apparently really nice jails, but jails nonetheless. Sure, money makes some people more powerful than others, but mostly you have to stay within the law to make a bunch of money.
The real danger is that by trying to right the wrongs, you create a socialist dystopia that's meant to be fair, but isn't. Hand out welfare payments meant for people who can't find a job, and find that suddenly the working poor are worse off than the nonworking. You also end up relying on the state to plan everything, make every decision. Guess what, people who work for the government are fallible too.
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)
Neither Russia nor China had any interest in enforcing a relative parity of wealth. This is absurdly obvious with even a cursory look at rich party members vs. the average person. But of course, both Russia and China are trotted out by the existing ruling class to scare the masses against change.
Mind you, I am vehemently opposed to forcing wealth parity. Achievement and accompanying reward must be driven by an individual's own merits and drive, and nothing more. I do realize that sadly, in today's society, that's just as much of a fantasy as a free market, or forced wealth parity, but I digress. :p
Socialism does not necessarily involve gulags and show trials, in the UK we managed to introduce a national health service, state pensions and so on without recourse to violence, because the vast majority of people agreed with them.
To have a right to do a thing is not at all the same as to be right in doing it
So someone that comes up with a damn good idea that improves lives worldwide shouldn't be allowed to be comfortable in life for his/her work?
There's a big difference between being comfortable and being a billionaire, you utter twat.
Personally speaking, I will take great pleasure in joining the millionaire club at some point down the road: you can hate me all you want, I won't care
As Chesterton said, to be clever enough to get all that money, one must be stupid enough to want it.
To have a right to do a thing is not at all the same as to be right in doing it
I keep about $500 in checking to pay bills. The rest of the cash is in my home, which when the whole freaking thing ends up collapsing, I will have access to my money
What makes you think your money will be worth anything if everything collapses?
To have a right to do a thing is not at all the same as to be right in doing it