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from Commentaries:
To catch a rogue quant
The case of a computer programmer accused of stealing the secret codes used in Goldman Sachs' rapid-fire stock trading platform shows that even a titan of Wall Street can be caught napping at the switch.
Sure, it was Goldman that went to the Federal Bureau of Investigation after discovering that a former employee allegedly downloaded copies of the "source code" for the firm's stock trading system.
Federal authorities say that a few weeks ago, Goldman began monitoring its computer network for illegal file transfers and it was during one of those electronic sweeps that the actions of Sergey Aleynikov, the former employee, were apparently detected.
Goldman, however, might be guilty of falling too much in love with technology to ferret out any bad apples. When Aleynikov told his employer that he was leaving to join a Chicago firm that engaged in the same kind of "high-volume automated trading" that he was doing at Goldman and would be paid nearly three times his $400,000 annual salary for doing so, surely that should have raised suspicions?
Goldman did have Aleynikov sign a standard confidentiality agreement when he joined the firm in May 2007. But it doesn't appear that Goldman had any kind of agreement preventing Aleynikov from immediately signing on with a competitor.
Management at Goldman should wonder whether its great success at so-called quantitative trading has spawned a degree of jealousy among the computer geeks who make nice salaries, but don't receive the kind of big bonuses that investment bankers and prop traders take home.
After all, as federal authorities say in the criminal complaint filed against Aleynikov on July 4, the trading platform the 39-year-old Russian immigrant worked on will "typically generate many millions of dollars of profits per year." Bonus envy is certainly bound to crop up with someone working on a trading system that's almost literally printing money.
from The Great Debate:
Was Goldman’s trading software stolen?
--Matthew Goldstein is a Reuters columnist. The views expressed are his own.--
Did someone try to steal Goldman Sachs' secret sauce?
While most in the United States were celebrating the Fourth of July holiday, a Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution.
Authorities did not identify the firm, but sources say the institution is none other than Goldman Sachs .
The charges, if proven, are significant because the codes that the accused, Sergey Aleynikov, tried to steal are the secret sauce to Goldman's automated stock and commodities trading business.
Federal authorities contend the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major financial institution generate millions of dollars in profits each year.
The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and using secret mathematical formulas, allows the firm to make highly-profitable automated trades.
The US Assistant Attorney said in court:
“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said.
So when Goldman manipulates the market it is okay, but when someone else does it it’s “unfair”.