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Prosecutors Request Closed Courtroom For Goldman HFT Programmer's Trial 250

Posted by timothy
from the sealed-in-carbonite dept.
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?"
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Prosecutors Request Closed Courtroom For Goldman HFT Programmer's Trial

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  • by Stregano (1285764) on Thursday October 28, 2010 @02:11PM (#34053372)
    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
    • by Archangel Michael (180766) on Thursday October 28, 2010 @02:16PM (#34053468) Journal

      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.

    • by mcgrew (92797) *

      They cited a federal law to protect owners of trade secrets and a desire not to cause the investment bank to be “re-victimized” through the release of confidential, proprietary trading secrets.

      “Any public disclosure of a trade secret poses the substantial risk that the trade secret’s value to its owner will be significantly diminished, if not destroyed outright,” Assistant U.S. Attorney Joseph Facciponti wrote.

      I don't understand why trade secrets shoud be protected. Wasn't pate

      • Re: (Score:3, Insightful)

        by ottothecow (600101)
        The issue here is that trade secrets are *not* protected. If they had a patent, then the open doors wouldn't matter since they had already exposed the inner workings in the patent filing.

        Trade secrets only stay secret if you keep them that way. This is no different than if Coke asked for closed doors when it was going to present its secret formula.

        • by khallow (566160)

          This is no different than if Coke asked for closed doors when it was going to present its secret formula.

          True, BUT the courts would be likely to grant Coke's request precisely to help protect their formula from public disclosure.

          • And that is how the justice system works.

            If coke were accusing an employee of something relating to millions of dollars where they needed to present part of the formula as evidence and the court denied their request for closed doors, they might be forced to not present the evidence or not pursue trial at all. The formula is worth far more than one trial so they would probably walk away from having to publicly display it--if the employee was actually guilty of something, he would run free since coke would be unable to present key evidence.

      • by khallow (566160) on Thursday October 28, 2010 @02:57PM (#34054178)

        I don't understand why trade secrets shoud be protected.

        Because it can cause billions of dollars worth of harm to Goldman. It's reasonable to make this request.

        Wasn't patent law allowed under the Constitution to prevent just this sort of thing?

        No. Patent law was designed to encourage companies to reveal their relevant trade secrets in exchange for a temporary monopoly.

        • Re: (Score:2, Insightful)

          by TheoMurpse (729043)

          Before anyone jumps in to argue that patents protect what would be otherwise trade secrets, so there need be no protection for trade secrets, the point is this: you can't force someone to reveal their secrets, so you induce them but guaranteeing them if they reveal the secret, they'll have the full might of the government helping them out.

          If your unpatented trade secret is revealed, you have recourse against the person who leaked it (often an employee with shallow pockets filled with dust, not greenbacks),

  • Trade Secrets? (Score:5, Insightful)

    by RingDev (879105) on Thursday October 28, 2010 @02:11PM (#34053394) Homepage Journal

    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

    • Re:Trade Secrets? (Score:4, Insightful)

      by Hatta (162192) on Thursday October 28, 2010 @02:43PM (#34053934) Journal

      Yes, if I were manipulating markets I wouldn't want that to get out either.

    • Re: (Score:3, Interesting)

      by JonySuede (1908576)

      yeah but the fishy thing here is that it is not the Goldsack lawyer that requested the secretly but the federal prosecutor...

      • Which Goldman Sachs lawyer? Since Aleynikov is being prosecuted criminally, not sued, it's the federal prosecutor in court claiming wrong-doing; Goldman Sachs' lawyers aren't representing either side.

      • by khallow (566160)

        yeah but the fishy thing here is that it is not the Goldsack lawyer that requested the secretly but the federal prosecutor...

        It's common sense. By making the request, you avoid having the opposition use it as a means to delay progress of the trial. Expediting the trial is a good, short term prosecutor move.

    • Re: (Score:2, Interesting)

      by Benfea (1365845)

      This software didn't allow Goldman Sachs to have a competitive edge over their competitors, it contributed to a massive financial collapse that resulted in taxpayers being robbed trillions of dollars. If this were a murder trial, should we make the trial secret because the gun manufacture doesn't want his competitors to know what kinds of springs he used?

      This isn't about protecting intellectual property, it's about reminding we mere peasants that don't have as much influence over our government as our lords

    • If I were in that company's position, I'd very much like that testimony to remain sealed as well.

      And it's the courts' job to keep rich people happy.

    • Re:Trade Secrets? (Score:4, Interesting)

      by jeff4747 (256583) on Thursday October 28, 2010 @04:30PM (#34055870)

      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.

  • No. (Score:3, Insightful)

    by clone53421 (1310749) on Thursday October 28, 2010 @02:13PM (#34053424) Journal

    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...

  • I see this in the same light as google. What if google was asked to present their "secret algorithm" in open court so that counsel could better understand what they have been doing with private information? I know a lot of people who would love to hear that testimony.
    • Re: (Score:3, Interesting)

      by Amouth (879122)
      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.
  • by jcrb (187104) <[jcrb] [at] [yahoo.com]> on Thursday October 28, 2010 @02:16PM (#34053472) Homepage

    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.

    • by khallow (566160)

      but something seems unexpected about this level of concern by the Justice Department.

      I don't know why you'd think that. The DoJ has an interest in removing obstacles to progress of the trial. The defense could use this issue to delay the trial significantly.

      • Re: (Score:3, Insightful)

        by sumdumass (711423)

        Your also forgetting that they have an interest in prosecuting without issues that could cause a verdict to be over turned.

        With all the political fevoring out there and general distaste for wall-street right now, releasing this information or making this public could raise a number of legal and ethics challenges causing something to be overturned or vacated on appeal.

        Suppose releasing this information caused a public outcry which tainted the jury or worse yet, caused protests on the court house steps that i

  • Goldman's Lawyers (Score:4, Insightful)

    by Sonny Yatsen (603655) * on Thursday October 28, 2010 @02:22PM (#34053554) Journal

    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.

    • They don't call it Government Sachs for nothing. Take a look at who is at GS that used to be in the Federal Govt, and visa versa. This just stinks. And that which smells like shit usually is the Bull Shit they're trying to pass off to the public.

  • Unfair advantage (Score:5, Insightful)

    by digitaldc (879047) * on Thursday October 28, 2010 @02:25PM (#34053606)
    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.
    • They aren’t legal, but they do indicate that the system is broken. It’s susceptible to what amounts to a denial of service attack.

    • by BabyDuckHat (1503839) on Thursday October 28, 2010 @02:35PM (#34053790)
      High-frequency trading supports a very important function of providing liquidity that allows the free flowing of, um, high-frequency trading and uh, high-risk prop-desk front running, and hmmm, other important and productive economic activities that benefit everyone and not just the rich elite. Seriously, stop asking questions about it.
    • by davev2.0 (1873518)
      Anyone can create a HFT system to automate buying and selling. All one needs is the skill and money to set up the system.

      It is not a monopoly on the stock market because every medium to large trading house has its own HFT system. It does put individuals and smaller trading houses at a disadvantage but HFT generally takes advantage of small changes in price by volume. We wouldn't make much if we bought 100 shares of a stock that dipped by $.01 for one second, but Goldmans and the like can make a return on
    • How on earth is this a monopoly on the stock market? If Sachs can legally employ this system, then so can you. If you think you have a better system and you can convince enough people with enough money to let you build it then you can compete with Sachs. This is called a level playing field.
      • Re:Unfair advantage (Score:4, Informative)

        by Anonymous Coward on Thursday October 28, 2010 @02:49PM (#34054036)

        The only reason these systems work is because they have special access to the data. They can see trade data a couple hundred milliseconds before anyone else and can place their trades a couple hundred milliseconds faster than anyone else. If you can't see the tactical advantage of effectively seeing the near future and be able to react faster than would-be competitors... well then I guess I really don't know what is left to say.

        • There is no "special" data. You can get it too.

          • by hedwards (940851)
            Not really, by the time you get it it's already obsolete. And good luck actually using the information as you have to be pretty much across the street using a computerized platform to make any use of it.

            It's basically just a fancy form of insider trading which the SEC hasn't felt like cracking down on yet. Back in the 20s they had a similar scam going. The price for tomorrows stocks would be provided to select brokers the day before. It's just now that the time interval is smaller than what it used to be
            • by davev2.0 (1873518)
              No, you can get access to the same information that Goldmans and the rest have access to, you just have to do what they do and buy the access. And, to be honest, even if you had the same access for free and an HFT system, you probably couldn't by enough stock using HFT to matter. Most individual traders buy less than 1000 shares. HFT systems buy hundreds of thousands if not millions of shares at a time.
          • by compro01 (777531)

            The special part of the data is that you have it a some milliseconds before anyone else does, by dint of having your servers physically right next to the exchange.

          • Re: (Score:3, Insightful)

            by firewrought (36952)

            There is no "special" data. You can get it too.

            Yep... anybody can just saunter into NYSE, plug their laptop into the same colocation racks [advancedtrading.com] as G. Sachs, et. al, and immediately being making money the ULLDMA [wikipedia.org] way.

        • This "special" access is available to anyone willing to pay for it. If you choose not to pay the higher price for faster market data, then I don't think you can blame the other guy for being faster. For what its worth, the really cutting edge market data solutions are all third party and available to anyone who will write a check. The costs of these things quickly skyrocketed past the point where it made sense for each firm to build their own system.

          • Re:Unfair advantage (Score:4, Informative)

            by jeff4747 (256583) on Thursday October 28, 2010 @04:38PM (#34056026)

            This "special" access is available to anyone willing to pay for it.

            We're not talking about paying a few extra bucks on your ETrade account to remove the 15 minute embargo.

            Goldman arranged for their servers to be co-located with the stock exchange's servers. Which means they get data faster and can place trades faster than anyone who is not located in the exchange's data center. That kind of access is not available to anyone but the largest investment banks.

            • Re: (Score:3, Informative)

              by Kevin Stevens (227724)

              That is a completely false statement. Small firms are a lot more likely to use colos than the big banks. As I posted before, there is information on how to get colocated with NYSE right on their website:
              http://www.nyse.com/technologies/sfti/1228187874506.html [nyse.com]

              The costs run about $10k/month/rack if I remember right.

              There is no spooky back-room stuff going on here.

      • by hedwards (940851)
        It's not a monopoly, but it is a form of insider trading. Why the SEC isn't all over them for it is beyond me. They use the HFT in order to place trades during the window of time after they find out what the next price is and before the public does. Allowing them to place these very fast trades which guarantee them profit each time.
    • by khallow (566160)

      How is this type of computer system that trades before anyone else even CAN considered fair or even legal?

      Well, the HFT system itself is obviously legal. But why would I care if it is "fair"? You could always spend a few tens of millions of dollars to get your own HFT system and code monkeys.

      This is a monopoly on the stock market, WAY too much power in the hands of one company.

      Is it? The whole point of the trial was that a programmer is accused of stealing the code for a competitor. Presence of a competitor implies absence of a monopoly.

      • by mea37 (1201159) on Thursday October 28, 2010 @03:30PM (#34054788)

        I keep hearing that "anyone" can do this. Please point me to where I can sign up to collocate my server with the market computers - because that is actually necessary to set up an effective HFT system.

        The ability of an elite few to buy access to information about the value of an item, when that information is unavailable to others with whom they will buy and sell that item, is a violation of free market premises.

        Much of what the SEC regulations do is to produce a free market. This is what many political pundits fail to understand - the "free" in free market does not mean "unregulated". The best regulatory approach in the world would never create a 100% ideal free market - money will always be able to buy research - but there's a difference between "not being able to produce a perfectly flat playing field" vs. "allowing people to artificially create an information assymetry, with the express purpose of taking profits from those on the other side of the field, with an insanely high barrier to entry for those who want to join you". HFT is the latter.

        HFT is a practice that should be regulated out of existence.

        • Re:Unfair advantage (Score:5, Informative)

          by HiddenL (967659) on Thursday October 28, 2010 @03:49PM (#34055140)

          I keep hearing that "anyone" can do this. Please point me to where I can sign up to collocate my server with the market computers - because that is actually necessary to set up an effective HFT system.

          http://www.lightspeed.com/?page_id=5068 [lightspeed.com]
          http://www.limebrokerage.com/contact_us.shtml [limebrokerage.com]
          http://www.ften.com/buy-side-products/vx-velocityxpress.html [ften.com]

          They all offer colocation services.

        • Maybe I’m being naïve here, but I’m assuming that anyone can go to New York with a couple of hockey bags full of money, lease some space as close as physically possible to the Exchange and then get MCI or Verizon or Sprint or whoever has the fastest ping time to the NYSE servers to get you a data connection. I didn't realize that Goldman Sachs servers were actually collocated with the NYSE servers. Even so, with a local fiber connection your hypothetical system should be fast enough to comp
        • Re: (Score:3, Insightful)

          by khallow (566160)

          I keep hearing that "anyone" can do this. Please point me to where I can sign up to collocate my server with the market computers - because that is actually necessary to set up an effective HFT system.

          I haven't done this, but contact the major stock exchanges. I imagine all the major ones and a few minor ones offer collocation services.

          Much of what the SEC regulations do is to produce a free market. This is what many political pundits fail to understand - the "free" in free market does not mean "unregulated". The best regulatory approach in the world would never create a 100% ideal free market - money will always be able to buy research - but there's a difference between "not being able to produce a perfectly flat playing field" vs. "allowing people to artificially create an information assymetry, with the express purpose of taking profits from those on the other side of the field, with an insanely high barrier to entry for those who want to join you". HFT is the latter.

          I don't know. Paying to get an information asymmetry sounds very natural to me. And I doubt the barriers are "insanely high" else the stock market would be losing money.

          HFT is a practice that should be regulated out of existence.

          You need to come up with a reason first. Whining that someone spent gobs of money to get a nonexclusive trade advantage is not a legitimate reason.

        • Re: (Score:3, Insightful)

          by bertok (226922)

          I keep hearing that "anyone" can do this. Please point me to where I can sign up to collocate my server with the market computers - because that is actually necessary to set up an effective HFT system.

          The ability of an elite few to buy access to information about the value of an item, when that information is unavailable to others with whom they will buy and sell that item, is a violation of free market premises.

          Much of what the SEC regulations do is to produce a free market. This is what many political pundits fail to understand - the "free" in free market does not mean "unregulated". The best regulatory approach in the world would never create a 100% ideal free market - money will always be able to buy research - but there's a difference between "not being able to produce a perfectly flat playing field" vs. "allowing people to artificially create an information assymetry, with the express purpose of taking profits from those on the other side of the field, with an insanely high barrier to entry for those who want to join you". HFT is the latter.

          HFT is a practice that should be regulated out of existence.

          This came up before on Slashdot, and the regulation to introduce is simple: Change trading from a "first come, first served" system into something like a "turned based" game. The exchange should disseminate information and accept trades only at widely spaced "ticks", say, once a minute, or even further apart.

          Nothing of value is lost, but the ability to gain an unfair advantage through high-speed trading vanishes.

      • Re: (Score:3, Informative)

        by hedwards (940851)

        Is it? The whole point of the trial was that a programmer is accused of stealing the code for a competitor. Presence of a competitor implies absence of a monopoly.

        No it doesn't. It implies that somebody wants to compete, it does not imply that they're already in the market.

    • Re: (Score:3, Insightful)

      by Kevin Stevens (227724)

      Anyone with reasonably deep pockets can build one. Speed advantages in the stock market have always existed. Why do you think the floor brokers are there? They wanted to be able to trade on information first. People are just going all OMG about it because its on computers, and therefore somehow scarier to them (and you even see this on Slashdot, which is strange).

      You can't control or direct the market with these systems any more than a guy in the pit that can yell BUY faster than everyone else. You need to

    • by rgviza (1303161)
      eTrade and everyone else has the same shit for consumers to do their own HFT trading. You set your margins up on a stock and when it hits a target price, the system does something (usually buy or sell) automagically. HFT is just Goldman's trademark on the Same Shit Everyone Else Does(TM). It's nothing special. All you need to do to get it is sign up for an electronic trading account. They have the same thing for equity, bond, and currency trading. A lot of them are programmable and you can write your own s
      • Re: (Score:3, Insightful)

        by jeff4747 (256583)

        eTrade and everyone else has the same shit for consumers to do their own HFT trading.

        Nope. You are talking about limit orders. Completely different thing than HFT [wikipedia.org]. In Goldman's case, they're really talking about what Wikipedia calls "ultra-low-latency direct market access (ULLDMA)", which is only available if you are a very large investment bank and can convince the stock exchange to put your server in their data center. That kind of access is not available to everyone.

        • Re:Unfair advantage (Score:4, Informative)

          by Kevin Stevens (227724) <kevstev@g[ ]l.com ['mai' in gap]> on Thursday October 28, 2010 @05:22PM (#34056658)

          Actually, HFT is largely a small firm game. Some big banks do it, but not all, and they are usually small operations.

          The typical profile of an HFT firm is 20 guys in a smallish but nice office, kind of like a startup's, but a bit more grown up. It's not that hard to get your box in a colo w/ NYSE, you just have to pay them. They recently built a huge new datacenter for this very purpose.

          I haven't personally made the call to ask about requirements, but I worked at an 8 man startup firm and we threw around the idea of colocating. Being able to was never an issue, it was the cost that deterred us.

  • No big surprise (Score:4, Informative)

    by davev2.0 (1873518) on Thursday October 28, 2010 @02:30PM (#34053706)
    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.
  • Easy fix (Score:4, Insightful)

    by whiteboy86 (1930018) on Thursday October 28, 2010 @02:36PM (#34053802)
    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.
  • OK, for all you whiners about the evils of software patents, this is what you get - secret algorithms.

    US law used to disfavor trade secrets, encouraging patents. Patents have a limited life, and disclose the technology. Trade secrets have a potentially unlimited life, and no disclosure requirement.

    Note that in dealing with Microsoft's technology, patents were a minor headache for interoperability, but secret APIs have been a huge obstacle to interoperability.

    • Re: (Score:3, Insightful)

      by 0123456 (636235)

      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.

      • Of course they would, or they would open themselves up to a possible lawsuit asking for damages in the amount of possible profits (+ penalty, interest, legal fees) lost because of it.

        • by 0123456 (636235)

          Of course they would, or they would open themselves up to a possible lawsuit asking for damages in the amount of possible profits (+ penalty, interest, legal fees) lost because of it.

          So you're going to sue the government because your 'secret algorithm' was important evidence in a criminal case?

          How can anyone determine whether a court case was legitimate if they're not allowed to see the evidence? Closed courts in all but the most extreme cases go completely against the very basis of the anglo legal system.

      • by Kijori (897770)

        Of course no sane legal system would close a sourt just because someone's 'secret algorithm' might be mentioned.

        I fail to see what is "insane" about closing the court for the part of the case that involves trade secrets that, if revealed, would have a huge financial impact on a very large company.

    • That is an interesting point, but it disregards the notion that I can patent portions of (for example) High Frequency Trading, so that no one else can do it (without infringing) until my patent expires.
      • Re: (Score:3, Interesting)

        by mea37 (1201159)

        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 se

    • by mea37 (1201159)

      There's a big difference between software that one company is using in-house, vs. software that a company is selling for others to use. Preserving trade secret protection on, say, the GIF encoding algorithms would've been pretty much impossible.

  • Not Unheard Of (Score:5, Informative)

    by al3k (1638719) on Thursday October 28, 2010 @02:48PM (#34054026) Homepage
    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.
  • Useless (Score:2, Insightful)

    by wervr (712696)
    • Re: (Score:3, Insightful)

      by davev2.0 (1873518)
      Actually, this is part of why they want to protect the algorithms. The Norwegians figured out the system, but if the HFT algorithms are made public, it will be a lot easier for people to game the whole system.
    • by sumdumass (711423)

      Because they are not one in the same.

      The HFT is supposed to only be an action only to reaction to the market, the news article you linked to is where they manipulated the market for their gain which is illegal even though it primarily exploited a HFT program. Now, this court case is similar only in that it revolves around a HFT program. It's about someone taking the code and transporting it somewhere to use to their benefit/whatever (stealing trade secrets).

      You can do whatever you want to gain an edge in th

  • Hyperfast trading is a window into the future (a few milliseconds into the future, but a window into the future nonetheless). Imagine you could go back in time and pick stocks . . .. That's what those sons of bitches are doing--completely lawfully thanks to elected officials who believe in "deregulation" . . .

    The effect is a tax--a Wall Street tax--on every transaction they involve themselves in. They get to drive the price up before you buy--and take a little slice for themselves.

    Yeah, small government

    • by MaWeiTao (908546)

      Humans will find a way to exploit any system. Look at any online RPG out there. They all start with the most level playing field imaginable and strive to ensure equality. And yet eventually you end with haves and have-nots.

      What we need is regulation that is flexible and able to respond to a changing environment. We also need regulation that doesn't favor special interests and don't compromise. Perhaps a true free market would eventually work through any problem, but I think it's likely that most problems wo

  • pick a frequency, any frequency: 100 millseconds, 3 seconds, 1 second... all trades are queued and batched in those intervals, nothing faster. so it is not possible to game the system with more hardware with crazier algorithms and faster connections to wall street

    otherwise you simply have domination of the entire stock market by a few wealthy players. small investors will leave, or continually suffer an invisible tax on every one of their trades

    its a classic case of the largest players in a marketplace abus

  • by GPLDAN (732269) on Thursday October 28, 2010 @04:31PM (#34055896)
    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 [seekingalpha.com]

    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 [market-ticker.org]


    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.
  • I'm sure this is all about PR and has nothing to do with trade secrets. "Government" Sachs isn't terribly popular right now and they really would like to maintain a low profile.

    And I'm sure part of the defendant's strategy is to shine particularly bright lights on directives from Goldman management about HFT and how they wanted to control/manipulate markets.

    This kind of testimony in open court would be a PR disaster for Goldman and they know it. The last thing they want these days is another "Evil" tag.

I'm all for computer dating, but I wouldn't want one to marry my sister.

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