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Ex-Goldman Sachs Programmer Found Guilty

Posted by kdawson on from the something-about-crime-and-time dept.

Readers twoallbeefpatties and ngrier wrote in essentially simultaneously about the guilty verdict in the trial of former Goldman Sachs computer programmer Sergey Aleynikov. We've discussed the case several times before. The trial itself was sealed from the public to prevent discussion of GS's high-frequency trading system. Reader ngrier summarizes: "After just three hours of deliberation, the jury found Sergey Aleynikov guilty of intentionally stealing proprietary Goldman Sachs code. As he had admitted copying the code as he was preparing to join a startup competitor in 2009, the case hinged on the intent. He faces up to 10 years in prison."

22 of 244 comments (clear)

  1. Where is wikileaks when you need them by entotre · · Score: 5, Insightful

    High frequency trading has no social benefit. If wikileaks could leak all source code of that type I would applaud it.

    1. Re:Where is wikileaks when you need them by entotre · · Score: 5, Insightful

      It assures that the market maker receives more money for a share than they would otherwise. The buyer then pays more money to a bank that cannot control its risk. I see no benefit in that.

    2. Re:Where is wikileaks when you need them by hedwards · · Score: 5, Insightful

      No, he's correct about that. High frequency trading and technical analysis are trading strategies that don't depend upon the underlying company to make money. High frequency trading is worse because of the way that it works.

      Unlike technical analysis which relies extensively on group think, high freqency trading, relies upon the knowledge of what the future price for a share is going to be and then slams in a trade that will, assuming it gets there in time, result in guaranteed profit.

      It's basically a continuation of a practice which used to be pretty common. Stock brokers would have access to the price of company shares the next day and would be able to act upon that information in a way that the general public wouldn't.

      The TL;DR version, high frequency trading is parasitic and needs to be stopped for the good of the market.

    3. Re:Where is wikileaks when you need them by geekoid · · Score: 4, Insightful

      which is why ever trade, buy sell, no exceptions should be taxed .01% we could remove the payroll tax, no taxes at all fro anyone under 200K, and get back on top with out education programs.

      Wall street impacts our lives a lot. Everyone ones like,. High Freq trading can cause market crashes by mistake.

      --
      The Kruger Dunning explains most post on /. http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
    4. Re:Where is wikileaks when you need them by hedwards · · Score: 5, Insightful

      You've been lied to. It's a bit like saying that the guy with the X-ray specs who wants to play poker is good for the game because it means that you don't have to wait for somebody else to fill out the quartet.

      The problem is that while he does indeed have money, he also has X-ray specs which allow for him to have an unfair advantage over the other players.

      High frequency trading is ultimately a scourge, the mechanic they use is a bit of sleight of hand to take advantage of momentary price fluctuations which leave them in the position where they're able to slam in an order for a guaranteed future profit, where other investors are locked out. It's something that I could do as well, if I were told what the price would be in the future and had the means of slamming in a bid in time to capitalize on it. There's little value to that sort of high finance piracy.

      Even without that behavior, there's plenty of liquidity, the high frequency trading tends to target portions of the market, not the market as a whole, and even smaller trading stocks, there's typically plenty of liquidity for reasonable players.

    5. Re:Where is wikileaks when you need them by Yvanhoe · · Score: 5, Insightful

      And I may add that his kind of claims is made by people who "know nothing about the market", like Warren Buffet...
      As a reminder, he asked for higher taxes for high incomes and to take measures against short-time speculation, which he apparently don't really like :
      "We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.' "

      --
      The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
    6. Re:Where is wikileaks when you need them by Yvanhoe · · Score: 4, Insightful

      The value of a company doesn't change in a few milliseconds instantly. Making investment decisions on so short scales is not really investments. There has been many voices to call for a change in the way transactions are processed. Instead of a first-arrived-first-served approach, using a bigger time step, like a second or a minute (personally I don't see why a whole day would be bad) and randomizing the orders would smoothen the values and iron out the speculation.

      It really looks like high-frequency trading doesn't improve the accuracy of prices. It increases its precisions but we don't really have a way to measure if it is meaningful. Converging to a precise number doesn't guarantee that this number isn't arbitrary. To be fair, it is hard to imagine that these small scale variations at very high frequency is anything more than noise.

      --
      The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
    7. Re:Where is wikileaks when you need them by vux984 · · Score: 5, Insightful

      High frequency trading actually facilitates more accurate pricing of securities because of the liquidity it introduces to the market.

      Liquidity has value. But HFT algorithms front running trades that would already complete without them aren't providing liquidity.

      The benefit of accurate pricing is hard to explain fully without getting deeper into the economics of markets,

      If market pricing were to consistently deviate from actual pricing by measurable amounts this would be relevant. But HFT algorithms front running trades to arbitrage fractional cents aren't providing any benefit whosoever.

      The animosity you raised is probably due to a perceived lack of contribution (no tangible products produced).

      We perceive a lack of contribution because there is a lack of contribution.

      But actually, facilitating better pricing will route investment into areas that deserve it (e.g. to the guy who produces 2 potatoes per unit resource instead of 1.5 potatoes).

      Sure. If pricing was that far out of whack. But we don't really need to "facilitate routing investment" to the guy that produces 1.50042 potatoes instead of the resource that produces 1.50041. The only person who cares about that difference is trying to profit on that 0.00001 delta.

      The sum effect of these actions is a raised social utility.

      The sum effect of these actions is parasitic to actual investors leading to a diminished "social utility". (whatever that is supposed to mean.)

    8. Re:Where is wikileaks when you need them by igreaterthanu · · Score: 3, Insightful

      high freqency trading, relies upon the knowledge of what the future price for a share is going to be and then slams in a trade that will, assuming it gets there in time, result in guaranteed profit.

      (emphasis mine.)

      The guaranteed profit part is only a very small subset of HFT.

      Most of the time it only takes part in transactions which has some expected gain, but by no means always makes said gain. By doing this millions of times per day, in theory, it averages out.

      Just like a bank will borrow people's money and loan it other people, at a profit, thus making the market more liquid by matching borrowers and sellers and taking the risk on themselves; these HFT traders buy and sell stock, providing liquidity and taking on risk themselves for a small profit (which gets multiplied by a large factor when done million times)

      Sure it's not ideal, but can you come up with a better system?

      --
      I dream of a nation where a man is not judged by his skin color but by an number assigned by a credit rating agency.
    9. Re:Where is wikileaks when you need them by timeOday · · Score: 5, Insightful

      The problem is that while he does indeed have money, he also has X-ray specs which allow for him to have an unfair advantage over the other players.

      To emphasize this point, here are quotes from an article last year on this same story:

      Loopholes in market rules give high-speed investors an early glance at how others are trading... some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds -- 0.03 seconds -- in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

      Sounds like plain old insider trading to me. Maybe worse, since it's the market-maker who's taking kickbacks.

    10. Re:Where is wikileaks when you need them by vinn01 · · Score: 5, Insightful

      No, it's not insider trading. It's called "front running"...

      "The unethical practice of a trading ahead of your client based on knowing how your client is going to trade"

      In plainer English - it means that the trader (high frequency in this case) is using their position (X-Ray specs) to see some orders ahead of everyone else. The trader then puts in their own order ahead of all the others. Since the trader's order was first, and the market moved in that direction - guaranteed profit. Then they dump what they bought immediately and look for the next order that they can front run.

    11. Re:Where is wikileaks when you need them by CodeBuster · · Score: 1, Insightful

      High frequency trading has no social benefit.

      Seriously people, how can this be modded insightful? No social benefit whatsoever? I don't have much sympathy for Wall Street traders, especially when they lose, but even I can acknowledge that professional traders, high frequency and otherwise, have an important role to play in the marketplace: they provide liquidity. I don't know about the rest of you, but I like being able to tender my shares on the exchanges and know that there will always be a buyer, no questions asked, whenever I am ready to sell. Liquidity is the oil which lubricates the engine of the marketplace and without liquidity there would be even wilder price swings, greater uncertainty and still higher unemployment. The Wall Street traders may not be saints, but credit should be given where credit is due (pun intended): liquidity is NOT worthless.

    12. Re:Where is wikileaks when you need them by quarterbuck · · Score: 3, Insightful

      It is not front running exactly - at least from the High frequency traders perspective. They don't have clients (other than themselves). It is the exchanges which are allowing their clients to be front-run.
      In that sense, HFT guys do have insider information received from exchanges that some client is about to trade.
      So either definition seems OK.

      --
      http://slashdot.org/submission/1062723/Cheap-mobile-data-plan?art_pos=2
  2. Steal from a company, go to jail... by spagthorpe · · Score: 5, Insightful

    Steal from a few hundred million, get fat bonuses....

    --

    WWJD -- What Would Jimi Do?
    (Smash amp, burn guitar, take home the groupies)

  3. Smooth Criminals by MoldySpore · · Score: 5, Insightful

    Goldman Sachs are the criminals. Why aren't they all on trial too? All this guy did was steal a little code. They've been robbing their customers for years.

    --

    "I hope you know how very lucky you are to know me, because I am so incredibly incredible."

    1. Re:Smooth Criminals by pyite · · Score: 4, Insightful

      They've been robbing their customers for years.

      Their customers, who are by and large not idiots, would obviously leave them if this were the case. Yet, they do not leave. They realize the simple truth that Goldman is extremely good at what they do and that includes helping customers make money.

      Just because you don't understand something doesn't make it bad.

      --

      "Nature doesn't care how smart you are. You can still be wrong." - Richard Feynman

  4. Re:Good grief. by timeOday · · Score: 5, Insightful

    But it proves once again, wealth is not about creating value, but owning it.

  5. Good God by genfail · · Score: 5, Insightful

    Ten years for just stealing a little code. Damn you would think he gambled with investor funds on risky phantom products that sent the whole economy into a tail spin. But I guess that's what they call their business model.

  6. Re:Good grief. by anton_kg · · Score: 1, Insightful

    the only missing portion is "sealed from public". The HFT is illegal by itself. The GS business (bonuses, etc) is legal rape. But they are f#$ing powerful and want to show everyone: "don't mess with us or end up in jail for long".

  7. high frequency trading needs to be outlawed anyway by circletimessquare · · Score: 5, Insightful

    high frequency trading demands you have the screamiest servers the shortest fibre optic hop away from wall street. meaning it turns what should be an egalitarian marketplace of equals into one where those with the most power and resources are able to extract a tax of sorts on regular traders by engaging in high speed tricks

    just put a "heartbeat" into the market: all trades operate on a FIFO queue that is released on a regular interval: every 3 seconds, every second, every 10 seconds, every 500 milliseconds, whatever: the point simply being that no trades can operate faster than this "heartbeat", thereby putting all trades on an equal footing

    otherwise, the stock market will be abused by its richest players. when that happens, small time and mom and pop stock market traders will feel abused, and opt out, and the market will ossify into corruption

    the point of a well-regulated marketplace is to keep the marketplace fair and healthy and a place of equals. so deny the powerful this unfair leverage and unfair ability to siphon off a tax on all other traders just by doing little fast tricky trades that have no real value whatsoever other than to take money from the slower smaller players

    --
    intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
  8. A bank VP once told me... by gestalt_n_pepper · · Score: 3, Insightful

    "If you're going to commit crimes, son, start with the legal ones."

    This was at Crocker Bank in the 80s, which was subsequently bought by Wells Fargo, who laid off thousands, including me. When that happened, I suddenly saw his point.

    --
    Please do not read this sig. Thank you.
  9. Re:high frequency trading needs to be outlawed any by Cryacin · · Score: 1, Insightful

    Dude, whatever you're smokin, do you have any left?

    --
    Science advances one funeral at a time- Max Planck