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Goldman Sachs will open-source some of its trading software

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Re: Goldman Sachs will open-source some of its trading software

#91

Post by DennisP »

lordnacho wrote: post #87
yyyyip wrote: post #78

Earlier quoted context omitted.

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 st…

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…

Would that be this paper?

https://www.researchgate.net/publication/228139699_The_Stati...

Re: Goldman Sachs will open-source some of its trading software

#93

Post by chrisfinazzo »

nickles wrote: post #49
chrisfinazzo wrote: post #34

Earlier quoted context omitted.

It's a bit disingenuous to say that BB's don't have a stake in HFT. At the time of Aleynikov's case, Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume.

> Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume. I took 'secret sauce' in GP's comment to mean 'profitable strategies'. Don't confuse volume with profitability. It's conceivable that a BB would deliberately lose money in some activities to have clients give them other, more profitable flow/business.

That's true. It's "LeFevre's corollary", if you will :)

N.B, Lapdance not gauranteed

Re: Goldman Sachs will open-source some of its trading software

#94

Post by chrisfinazzo »

baybal2 wrote: post #36
chrisfinazzo wrote: post #32

Earlier quoted context omitted.

Funny story, my neighbor is a partner in the law firm that represented Aleynikov. https://arstechnica.com/tech-policy/2009/07/goldmans-secret-...

Did the guy managed to get attorney fees from them?

Oh, the firm got paid, but you have to think they feel for the guy a bit.

Re: Goldman Sachs will open-source some of its trading software

#95

Post by qohen »

tptacek wrote: post #81
Havoc wrote: post #77

Earlier quoted context omitted.

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.

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?

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...

[1] https://www.vanityfair.com/news/2013/08/michael-lewis-on-gol...

Re: Goldman Sachs will open-source some of its trading software

#96

Post by harryh »

qohen wrote: post #95
tptacek wrote: post #81

Earlier quoted context omitted.

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?

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…

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-...

Re: Goldman Sachs will open-source some of its trading software

#97

Post by yyyyip »

lordnacho wrote: post #87
yyyyip wrote: post #78

Earlier quoted context omitted.

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 st…

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…

But it would be pretty easy to obfuscate the whole thing behind a few layers of "We've got 50 PhDs working here, we run black box algorithms" etc etc, the strategy could be artificially made a couple of orders of magnitude more complex while still producing the exact same outcome.

Do hedge fund investors keep an eye on whether you do what you say? How did Bernie Madoff go for so long if that's the case?

Of course the mechanism is simple and mechanical, but that isn't how you'd market it to investors.

I'll go read the Lo paper...

Re: Goldman Sachs will open-source some of its trading software

#98

Post by lordnacho »

DennisP wrote: post #91
lordnacho wrote: post #87

Earlier quoted context omitted.

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…

Would that be this paper? https://www.researchgate.net/publication/228139699_The_Stati...

Yes

Re: Goldman Sachs will open-source some of its trading software

#99

Post by lordnacho »

yyyyip wrote: post #97
lordnacho wrote: post #87

Earlier quoted context omitted.

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…

But it would be pretty easy to obfuscate the whole thing behind a few layers of "We've got 50 PhDs working here, we run black box algorithms" etc etc, the strategy could be artificially made a couple of orders of magnitude more complex while still producing the exact same outcome. Do hedge fund investors keep an eye on whether you do what you say? How did Bernie Madoff go for so long if that's the case? Of course the…

The 50 phds thing is exactly what certain large firms are doing. The emperor's new hedge fund. I know people who've worked at major firms, and they've told me what they do. But you are going to have a hard time doing a startup with 50 phds.

Madoff was the cause of all the due diligence, though I'd say Europe was a bit different from the US at the time.

Re: Goldman Sachs will open-source some of its trading software

#100

Post by baybal2 »

chrisfinazzo wrote: post #94
baybal2 wrote: post #36

Earlier quoted context omitted.

Did the guy managed to get attorney fees from them?

Oh, the firm got paid, but you have to think they feel for the guy a bit.

I mean did he get it from of Goldman, not the client.
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