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The Courts The Almighty Buck United States

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

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 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 jcrb ( 187104 ) <jcrb&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.

  • Re:Trade Secrets? (Score:0, Interesting)

    by HomelessInLaJolla ( 1026842 ) <> on Thursday October 28, 2010 @02:27PM (#34053640) Homepage Journal

    There is a point of view, however, that questions the legitimacy of HFT to begin with (that appears to be an agreement with parent). HFT contributes to a system which affects salaries, wages, retirement funds, mortgage rates, interest rates, insurance premiums, and a host of other factors important to people who have no control over the profit margin retained by stock market manipulators. Honestly that rationale can likely be applied to the whole of the stock market: aside from a few quarterly reports or year-end summaries the market value of a company has little or nothing to do with the success or failure of its real world products. A particularly good example is that of the grocery store. Why should those people work for near minimum wage, why should you pay more for a bag of corn chips and a jar of salsa, just because somebody wanted to gain an edge in HFT?

    If I were the judge I would refuse the request and leave the courtroom open. Industry trade secrets mean nothing if the American public deserves to know how it is being swindled en masse.

  • by Amouth ( 879122 ) on Thursday October 28, 2010 @02:45PM (#34053966)
    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.
  • Re:Trade Secrets? (Score:3, Interesting)

    by JonySuede ( 1908576 ) on Thursday October 28, 2010 @02:49PM (#34054032) Journal

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

  • by mea37 ( 1201159 ) on Thursday October 28, 2010 @03:34PM (#34054862)

    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.

  • Re:Trade Secrets? (Score:2, Interesting)

    by Benfea ( 1365845 ) on Thursday October 28, 2010 @03:34PM (#34054866)

    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 and ladies do.

  • 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.

  • by LordNacho ( 1909280 ) on Thursday October 28, 2010 @08:16PM (#34058152)

    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.

  • Re:Money (Score:3, Interesting)

    by aaandre ( 526056 ) on Thursday October 28, 2010 @08:43PM (#34058306)

    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)

Executive ability is deciding quickly and getting somebody else to do the work. -- John G. Pollard