Former Goldman Programmer's Conviction Overturned

i_want_you_to_throw_ writes "The legal woes will soon be over for Sergey Aleynikov, a former Goldman Sachs Group computer programmer who had been convicted of stealing part of the Wall Street bank's high-frequency trading code. A federal appeals court overturned his conviction and recommended acquittal. We previously discussed this story when he was sentenced to 97 months in prison. It will be interesting to see their reasoning (an opinion is to be released) as well as what this may mean for other programmers developing high frequency trading code."

In essence

[Anonymous Coward]

He took a copy of the code of an internal tool, not something that they sell to customers. Would you really consider it evil to save a copy of your log viewer, for example? The law was intended to protect sold products.

relax people it's a technicality

[alen]

his lawyers convinced an appeals court that coding for a system meant to buy and sell stock across state and international borders wasn't "interstate commerce"

I suspect congress is going to amend this law soon

Prosecution flubbed it

[GlobalEcho]

If you read TFA looks you find that, in their eagerness to get the maximum news and sentence, the prosecution chose the wrong statute to charge him under. If they had just treated this like any other case of illegally copying an employer's code and not tried to get cute with the "interstate commerce" bit, they would have had a rock-solid conviction.

Re:90% reduction

[GlobalEcho]

For what it is worth, academic research indicates that HF trading significantly increases liquidity. The main people it hurt were the floor-based stockbrokers. There is a natural human tendency to detest the "middleman", who appears to generate nothing of value, in all economic endeavors. One notices it for market makes, car dealers store owners and so on. But middlemen actually do provide a valuable service to society. In Nature's Metropolis by William Cronon there is a fascinating study of the mutual resentment of the wood wholesalers, hardware store owners, and the public in the 1800s, even as everyone was getting much richer and healthier.

Re:90% reduction

[Anonymous Coward]

Middlemen usually start providing value, but then become entrenched and start to exploit the system often buying government influence to require middlemen. Manual trading on the floor continued well after it made any economic sense, because it helped a lot of powerful people skim money from the market. Alcohol distributors are another great example of such abuse (see three-tiered system).

Re:90% reduction

[AuMatar]

Because you aren't. If you were investing in a company, you'd be giving them capital to use for purchasing/hiring/research. Unless you're buying in an IPO or secondary, you're not giving the company any money at all. So it's not investing, it's legalized gambling where you wager on companies, not invest in them

Re:90% reduction

[barc0001]

Actually, it would be better to simply get rid of algo trading by adding a $0.001 "tax" to each share traded. That would affect "real" trades very little, but would completely obliterate the profitability of algorithmic extreme-transaction-volume trading. To be absolutely clear we are not talking about your ability to trade stocks yourself through something like E-Trade, we're talking about brokerage houses doing hundreds of thousands of transactions per day trying to carve additional profit for themselves. Have a look at this TED Talk on the matter that was posted to /. a while back for some further perspective.
http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html
The relevant bit starts at around 2:45.

Re:90% reduction

[ed1park]

Warren Buffett has a great solution for this. A 100% capital gains tax on short term investments! (less than 1 year)

Re:90% reduction

[pclminion]

So if a company has a good long-term outlook and I buy in, and the stock does well for a period of time, then six months later the CEO dies in a car accident and is replaced by somebody who immediately starts running the company into the ground, I shouldn't be able to exit my position and take what little gains I can before they become losses? You want me to just hold on and get fucked because the situation changed dramatically? Am I supposed to read the future? It's one thing to speculate, it's another thing to be in for a long haul and decide (rationally!) to abort when things take a turn for the worse.

Re:90% reduction

[umghhh]

Not really true. The trade in stocks is a valid function of stock markets. This indeed provide liquidity and equalizes the prices between different market places. It is also not realistic to call people buying stock and selling it next day - speculators - this does not have to be the case and there may even be regulations forcing some of the actors to do so (pension funds or banks may be required to sell if certain things happen etc) . It is however not true that the frequent traders did decrease the price either. The price decreased after more actors started playing, market got deregulated etc. The frequent trading did change the character of the game though - especially as high volume frequent trading agents can see in 'the future' essentially ripping off everybody else. They are also indeed pure speculators that do not bring much to anybody else and instead bringing barriers into the trading for everybody not only with this 'looking in the future' thing but because of the weight of their trades everybody else is outsmarted or even the price is influenced in a way not having anything to do with real economy and possibly profits are made in such way too. It also must be remembered that albeit there are claims to contrary there is very little that frequent traders actually create. In general more frequency is not really needed there and some limits were in place. You may argue that either limits in frequency or tax on operations or some mix of both or some other feature. OC you are on the losing side of the argument if you claim such things as the HFTers have enough money to convince lawmakers of that their righst are god given and do not have to satisfy any need of a nation.

Re:90% reduction

[drsmithy]

a good example is steve j. people pretty much viewed him as *the* man with the plan, and the brain behind all of apple's recent success. did the company fall apart when he passed away? nope, stock is still going up. apple has built a culture around steve's thinking.

Well, let the body get cold before you get too carried away. Come back in a few years after they've been through a few product cycles without The Steve.

The last time he left it didn't work out so well.