Surely they've had people quit to work for competitors in the past. People who knew exactly how their code and current strategies operated. All this guy did was actually copy the code, which is clearly IP infringement, but not necessarily so much more damaging in practical terms.
Don't underestimate the vindictiveness and competitiveness of these financial guys.
Obviously, this is nearly impossible to police.
Program (or quant) trading accounted for 40.4% of all NYSE trading volume during the week of 6/15 - 6/19. Goldman's program accounted for the more of this than any other firm, almost 1.2 billion shares, or 20.6% of all program trades. Ostensibly, this guy made off with the algos responsible for (.206 * .404 =) 8.3% of all NYSE trades. It's quite possible this is the world's most valuable source code. There are lots of people claiming that the code is useless without their infrastructure, but knowing exactly how GS makes their trading decisions allows anyone who holds the information to engage in front-running, or set traps for them by pushing stock prices one way or the other in order to trigger their system to buy or sell.
Even stranger, the report for the following week:
shows an incredible increase in quant trading share, making up 48.6% of all NYSE trades, but Goldman isn't even on the list (after leading it the previous week). NYSE claims this is an error:
Surprisingly, GS is up 2% on the day.
Something majorly fishy is going on.
> Major developing story: Matt Goldstein over at Reuters may have just
> broken a story that could spell doom for if not the entire Goldman
> Sachs program trading group, then at least those who deal with "low
> latency (microseconds) event-driven market data processing,
> strategy, and order submissions." Visions of swirling, gray storm
> clouds over Goldman's SLP and hi-fi traders begin to form.
Once a competitor gets their hands on your model, you might as well trash it, since they could use it against you; and places like GS spend BILLIONS on their models, so if this guy really got all (or even just some) of their source code out, the firm is going to take a big hit, and it's not just going to be a short term bump in the road either.
Quant trading algorithms, like most stochastic trading approaches, lose their effectiveness over time as the market internalizes them and as knowledge dissipates naturally (not necessarily through leaks). The best of the best individual quant trading algorithms have a half-life that does not exceed one month. And we're talking exceptional here. Also, at any given time many, many algorithms will be running simultaneously; complementing, overriding eachother as necessary.
So there's a lot of churn overall. The code that someone picks up in this way contains a single snapshot of this transient trading strategy, not particularly useful to run on their own. You're right that, what really sucks for Goldman is that someone could find some basic patterns inherent to their trading platform and trade "against" Goldman.
The catch is that this sort of maneuvering happens all the time. Sure it's going to be painful in the near term for the Goldman quant guys, but they don't need to start from scratch necessarily.
I can't believe Reuters is talking like a warez kid.
(It makes me cringe too, though.)
I really, really need to leave the Midwest. He was basically a dev lead?
Also, the field is pretty stressful from what I hear. Not that some dev shops aren't the same way though...
Sounds to me like he was in fact a programmer.