
Goldman Sachs will open-source some of its trading software - newleaf
https://www.wsj.com/articles/goldmans-trading-floor-is-going-open-source-kind-of-11554285602
======
pantaloons
Of course, if this technology was able to price securities better than the
market (the fundamental job of almost every market participant), it would be
printing money and they would not release it.

This is not the secret sauce, but probably an implementation of a set of
standard well known pricing and risk models. That's still useful, and can be
expensive to develop, so thanks Goldman.

~~~
lordnacho
> the fundamental job of almost every market participant

Not true. You might make an argument that this is the effect of having them
together in a market, but that's not their job:

\- Market maker: hang around the market offering to trade with anyone (pref
retail) at a spread. Doesn't care whether TSLA is gonna be able to make all
those Model 3s.

\- Pension fund: make sure they can pay the liabilities that are coming due.
If that can be locked in, happy to pay a bit more than fair value to do so.

\- Hedge fund: make absolute returns. Buy before it goes up, sell before it
goes down. Whatever form of voodoo (or skill) fulfills this is fine. This
doesn't have to mean finding the right price (could just mean you guess which
way it's going), though of course often it is part of the objective.

\- Broker: finds people on both sides of a trade. Doesn't care terribly much
except to create excitement.

\- Banks: lend money/securities and offer services to all of the above. Create
research to make people trade. Securitise stuff so people can trade it. Often
do a bit of everything.

Source: used to run hedge funds.

~~~
ionwake
Hope you dont mind me asking a slightly unrelated and possibly dumb question.

Im a programmer, but on the side have made on average 150% profit in share
dealing over the passed 5 years, but more importantly, a much higher return in
other assets to 2 orders of magnitude higher.

My question is - would experience / gains like this - if i had proof etc - get
me an interview in a fund as some type of well paid (6 figure atleast)
analyst?

~~~
lordnacho
Yes, go on LinkedIn, there's a bunch of recruiters hawking jobs at funds.
Generally they want a Sharpe ratio above 2.5, $10M profits a year.

And you need to know what machinery you'll need too. Capital requirements,
counterparty agreements, access to stock lending, cost requirements, IT
requirements, everything.

Some of the newer shops say you can keep your own IP. Haven't checked whether
it's true, but most people I know are sceptical.

~~~
yyyyip
ok while we're playing "ask a hedge fund guy"

Say I set up a fund holding a low cost s&p500 index ETF, but at the end of
each year sold naked puts with a ~1/25 risk of ruin to earn ~4% return.
Therefore my fund consistently makes 4% over the market index, except for 1/25
years when it explodes and loses everything. Because the volatility is low, my
sharpe ratio is good (until it explodes), correct?

Assuming it can stay in business >10-15 years won't I be a billionaire hedge
fund manager by then and then change to a low risk strategy that only makes
1-2% more than market index with very low risk of ruin and just let my
investors lose interest and quit the fund over the next decade while I
continue to earn fees from them?

~~~
lordnacho
Investors will ask you what you're up to, and if you're just doing that they
won't invest. They also keep an eye on whether you're doing what you say.

Anything that's both simple and mechanical is gonna have problems attracting
investment. The guys you're talking to are gonna have problems justifying
giving you 2/20 for buying a fund and selling options.

Or should. I've met a lot of investors who didn't ask the right questions.

Regarding the Sharpe, if they know what they're doing they're not just using
the textbook version either. There's a paper by Andrew Lo about it, well worth
a read, not terribly complex math.

~~~
DennisP
Would that be this paper?

[https://www.researchgate.net/publication/228139699_The_Stati...](https://www.researchgate.net/publication/228139699_The_Statistics_of_Sharpe_Ratios)

~~~
lordnacho
Yes

------
r_singh
To a regular software developer who uses (and does extremely minimal
contributions) open source software regularly, this seems more for marketing /
branding (even from an HR perspective) than for anything else (like a
contribution without returns in mind).

We're reading about how GS "will" open source some software on WSJ, it would
be better to just see a blog announcement with a link to the repository.

------
mortdeus
What about that dude who they put in jail for open sourcing software he
developed in a personal side project while under contract with them?

Didn't they like completely throw the book at him by charging him under that
completely insane law the Computer Fraud Act?

~~~
infinite8s
You have a citation? The only case I know about is a programmer who ftp'd a
whole bunch of internal code to a site in Germany before his last day of work.

~~~
Havoc
Yeah that one. Was internal code (well derived from code off stackflow) but
completely harmless. The response - GS getting the FBI to go after him was
wildly disproportionate.

~~~
tptacek
You sound like someone who definitely has a lot of the surrounding context and
some of the intimate details of this story. Can you tell us more?

~~~
qohen
Michael Lewis wrote an article about Sergey Aleynikov for Vanity Fair which
led him later to write, "Flash Boys" \-- it's online and worth your time [0].
Some interesting bits include:

* Advice and information that could keep a programmer out of jail.

* There's the description of Aleynikov's jailhouse enlightenment -- there is no other word for it -- e.g. what his lawyer says:

 _“Every time I would come to visit him in jail, I would leave energized by
him,” she says. “He radiated so much energy and positive emotions that it was
like therapy for me, to visit him. His eyes opened to how the world really is.
And he started talking to people. For the first time! He would say: People in
jail have the best stories. He could have considered himself a tragedy. And he
didn’t.”_

* There's the discussion of how no one involved (except Aleynikov) actually understood anything about the case and how Aleynikov's attempts to help clarify things were used against him.

* And, then, there's the _piece de resistance_ , where Michael Lewis convenes a jury of cynical programmers -- i.e. some people who actually have a clue -- to meet Aleynikov and judge his actions (spoiler: their cynicism about the case is replaced with incredulity when they talk to him and realize he didn't care about Goldman Sach's "secret sauce" trading algorithms, etc.).

(Also, Lewis discusses his article in a Q&A in Vanity Fair [1] where he gets
to talk about his own reaction to it all).

Again, well worth your time.

[0] [https://www.vanityfair.com/news/2013/09/michael-lewis-
goldma...](https://www.vanityfair.com/news/2013/09/michael-lewis-goldman-
sachs-programmer)

[1] [https://www.vanityfair.com/news/2013/08/michael-lewis-on-
gol...](https://www.vanityfair.com/news/2013/08/michael-lewis-on-goldman-
sachs-programmer)

~~~
harryh
I dunno about this one essay, but let's all remember that Flash Boys is a very
bad book that gets almost everything wrong.

Read the extensive rebuttal for all the details:

[https://www.amazon.com/Flash-Boys-Insiders-Perspective-
High-...](https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-
Frequency-ebook/dp/B00P0QI2M2)

------
kyleblarson
Anyone who thinks GS is taking any action without the intent of profiting from
said action is hopelessly naive.

~~~
alkibiades
that can be said of any corporation. or most humans

~~~
mactrey
Or any life form, really.

------
manmanic
Am I the only one who thinks they want to push the market into applying
strategies that they can then trade against? This is classic Wall Street,
persuading the masses to take the wrong side of bets.

~~~
i_am_nomad
That was my first thought too. And even if that’s not what GS intends to do,
it will still be the end result, because their non-public automated trading
will quickly become adversarial to this.

------
voisin
This is quite a change from when they ruined a man’s life for using Github.

~~~
geodel
Not really. If someone try to do something what they consider stealing, they
will still pursue the case with all legal might.

~~~
NowThenGoodBad
Hey, serious question but off topic from the thread:

You used the word "what" where we would normally use the word "that".

I've heard this done during speech numerous times from everyone ranging from
fluent native speakers to learning nonnative speakers. Was there a specific
reason you did it here?

~~~
losvedir
It's a British dialect thing, but not sure if that's the case with the poster
here. See: [https://english.stackexchange.com/questions/162619/usage-
of-...](https://english.stackexchange.com/questions/162619/usage-of-what-for-
that-or-than-in-bre)

~~~
mhh__
Emphasis on _a_ British dialect. There are many and most (by geographically
area) don't use what in that context. Except for emphasis e.g. The way Jeremy
Clarkson says "an ..." where he shouldn't.

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kartan
[https://www.businessinsider.com/goldman-sachs-is-making-
its-...](https://www.businessinsider.com/goldman-sachs-is-making-its-trading-
tech-open-source-2015-8?r=US&IR=T&IR=T)

"Aug. 12, 2015, 12:33 Goldman Sachs is going the way of Google and Facebook.
The investment bank is giving away some of its trading technology to clients
through open-source software, according to The Wall Street Journal...."

Am I missing something?

------
ForHackernews
How much do we wanna bet this is just a recruiting gimmick?

~~~
gfiorav
Oh, you mean like them offering a VP position (without telling you maybe half
of the people there are VPs)?

~~~
z2
It may be more like saying they support open source in the same way companies
rushed to say they are green, for their image. The plethora of VPs is partly a
sales thing, so that every client gets to meet with a VP. Just like how every
sales person is a director or similarly inflated title at other companies.
Hopefully one knows this before taking such a job!

Edit: After RTFA, it seems to be 2.5 things: \- Crowdsourcing ideas while
getting everyone to conform to their platforms \- Image improvement to appear
innovative \- Speculating: monetization of old code that doesn't actually work
anymore

~~~
chaosbutters
just like I'm a sr engineer but still basically do a tech's work. Inflated
titles at companies is a joke

------
UnpossibleJim
This is an honest question, and forgive me if it's a bit naive, but if they
release trading software to the masses under the assumption that the vast
majority of users will make few changes, can they rely on the herd to buy
enough stock in their software's predictions at a slower rate to get an
uptick?

~~~
infecto
Take it with a grain of salt since I did not see the actual source and the
article is paywalled. They are probably just releasing the tooling, not actual
strategies.

~~~
blihp
And even if they do provide strategies, they would likely be
obsolete/unprofitable ones as examples of how to use the system.

------
beloch
Goldman Sachs does nothing that fails to profit Goldman Sachs.

This might be just PR, in which case the code could be useful for some.
However, they may be doing this is because they found something that they can
exploit if other people are using this code. It might be nothing particularly
bad for a given user, but if a big block of investors begin using code Goldman
Sachs knows intimately, the market may suddenly start doing stuff that just
happens to fall to Goldman Sach's advantage.

~~~
qpotlpus
No company does anything which doesn’t benefit them whether via tech
development, attracting programming talent, reputation etc... That is why they
are companies not humans. Don’t confuse the two or pile on GS just cause they
are GS.

------
alexeiz
I spoke with some developers from Goldman several years ago. They couldn't
even access Github website from work. Open source software and libraries were
not regarded well either. Things may be changing, who knows. My impression was
that Goldman is one of the most restrictive places to work.

------
mehdizare
On Github, they only posted LICENSE, [https://github.com/gg4real/gs-
quant](https://github.com/gg4real/gs-quant)

------
SanchoPanda
Please pretty please open source plottool

------
AtlasBarfed
Probably a poison pill that Goldman has engineered countertrading schemes
against.

Not unlike the magic numbers the NSA suggested for various encryption schemes.

------
holografix
Maybe pull request trolling could be a thing? Pull requests that print “why
hasn’t anyone involved in the GFC gone to jail?”

------
gcb0
it will probably make money, but this is the same as sp500 et al being public
list of components. they know that showing their "secret" will influence the
irrational market to folow suit, hence showing sp500 components will make more
people buy into those and make sp500 even more profitable.

this can be an attempt at the same for the new generation. if your algo is
making money and it can benefit from a mass adoption of the same strategy (or
more likely they have a secret tweaked one that takes that more into account)
why wouldn't they offer it in the open?

