I've had the opportunity to talk to a few journalists covering this, and my previous life has given me a view of GS, and how they protect IP...
I of course talk to some of the stream of algotraders leaving GS, and so although I have no first hand knowledge I have access to an interesting stream of views, albeit one with noise and bias. But for obvious reasons I have avoided talking to them, lest they put something in writing that could be misinterpreted.In fact I habitually tell ATs to purge any home work files very thoroughly, my gold standard here is to physically destroy the disk, since file recovery with a $1-5K budget will get quite a lot back.
He is not a client or candidate of ours which means a) I am allowed to talk about this, b) I only know what I'm told.
I am told he'd been sucking stuff out for a while, which is odd, since if someone working for me was stealing serious stuff from my firm, the latency would be how long it took security to arrive at his desk, not days and certainly not weeks.
He says he was working at home, and his behaviour appears to be consistent with that, especially the weak measures he took to hide what he was doing. He's a low level network guy, been there done that and as I spent an hour explaining to one journalist there are many ways one might acquire the source code leaving no trace at all.
Of course P&D use a technique for catching this stuff, that from the deposition, GS are unaware of... but even that can be traduced.
One assumes GS locked down USB ports, though this is surprisingly difficult to do properly.
You may have noticed that several of the follow up articles mentioned the serious pay differential between ATs at GS and what they can make elsewhere. I believe that most of this is down to htem talking to me
I can't pretend to fully know the internal political dynamics that drive GS bonuses, perhaps you could see it as like the view I have of the Iraq war from TV and newspapers.
But I get the Aljezeera feed, and never watch Fox except to use it as a threats on my kids for misbehaviour.
It's clear to me that GS has not treated the ATs as well as they would like. They have used emotive language to me about this, though given that most earn >= 20 * the average Joe, they aren't exactly slaves.
Slaves can't quit, but these guys can & do quit (pretty much all guys, women are hen's teeth in this sector), however GS appears to have got seriously pisѕed at this, enough to try very specific legal remedies.
It is interesting to me that as yet they don't seem to have played the vicarious liability card against the new employer. Possibly because anyone who can pay people at 0.1 Hz can fight back.
The choice of day to arrest the guy, was a mystery until you think it though.
Who amongst us if arrest on July 4th could find a vicious lawyer quickly ?
I could, but being a HH is borderline criminality anyway
I interpret this as a softening up tactic. This sends a message to other staff who are thinking of leaving and helps GS negotiate.
He's admitted to taking some files, but a good defence can be made of the fact that this is a standard work practice in most industries.
Equally interesting is the way that certain parts of GS seem to have stopped trading for a while. I assume that here we have an audience who knows that even if someone takes a copy of your source code, your executable still runs.
There's multiple interpretations.
One is that GS feared that they wold be gamed against by someone knowing their strategies. That's hard but possible. However to work a game against a strategy takes time to figure out, and the time sclaes here don't easily fit.
The other is the nature of AT systems. Although much work goes into technical stability, the algos themselves are inherently unstable. They exploit defects in the market, and stop working when they heal, or conditions change. They can decay or suddenly stop working, and a good % of the code and work load is to catch the fadeout and stop trading in the right timesecale. Then you either rejig the strategy or go find a new one.
If you lose the people who built your algo system, then getting to the point that you trust it again is not quick or easy. ATs are very secretive naturally, so anyone not in the core team would easily be mystified. As an example of one FI system I had to go and fight, the variable names bore no resemblance to their nature, but instead were letters from the Klingon alphabet. Some of the Windows source code I once had to meddle with had puns pased upon Def Leppard (80s rock band) .
Thus losing your people can get very expensive, very quickly, and people will get angry both with each other ,and the guys who left. Someone obviously knew someone at the FBI...
I doubt it will help GS even in the short term, in fact I see it costing them real money. Inevitably some security measures will be put in place, both technical and procedural, that will get in the way of development that by its very nature needs to be highly flexible and responsive.
Protecting source code is fiendishly difficult,
Imagine (for instance) having to demonstrate "need to know" each time you want to look at a part of the code you want to adapt or fix.
What if your supervisor isn't their to let you in ?
How do you monitor the supervisor ?
If you look at "too many" modules will get grief ?
GS and other ATs must guard against highly motivated, highly skilled people who have real money to use in buying gear. If your code makes $10M a year, it can justify technical gadgety, or simple bribery.
