Did someone try to steal Goldman Sachs’ secret sauce (source code)?

Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by ShabbyDoo on Monday July 06, 2009 @10:09AM (#689643)

Here's what's not clear to me... Was the code simply a low-latency platform for making arbitrary automated trading decisions, or did it include trading strategies as well? hachiya's link suggests that the major value was the microsecond latency of the platform. If that's the secret sauce, I would think it could be replicated without resorting to espionage.

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Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by profquail on Monday July 06, 2009 @10:58AM (#689744)

It's really both. Data comes in from various sources with low latency (you get the data right as trades happen, not the 15-minute delay you'd get at Yahoo Finance or something), then the system runs the data through various trading models they've developed and makes trades automatically.

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.

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Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by mustpax on Monday July 06, 2009 @11:42AM (#689813)

I disagree about the short term bump part.

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.

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Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by mediaman on Monday July 06, 2009 @12:07PM (#689867)

I think it can last longer than a couple months. I worked on some relative value trading algorithms in connection with work that a b school prof was working on, which got picked up by some of the major HF players. It continued to work for a couple years before the correlations faded away.

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Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by byrneseyeview on Monday July 06, 2009 @12:49PM (#689935)

Relative value and high-frequency trading are very different animals. With relative value, you probably don't even know if you have statistically significant results for a couple months; with HF, you have evidence within hours.

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Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by rjurney on Monday July 06, 2009 @12:42PM (#689920)

Do these things really work, or are they random and software validates a belief in them?

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Re:Did someone try to steal Goldman Sachs’ secret sauce (sou... by rdtsc on Monday July 06, 2009 @02:39PM (#690189)

It's the low latency that works more than the actual trading algorithm. Algorithms eventually get diluated into the market as there are so many of them.

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