A GS programmer was arrested at the airport last year?! trying to smuggle out propriety code that belonged to GS. To suggest this type of stuff doesn't happen, sheer naivety. Congress legally insider trades. Every IB and Bank insider trades. Look at the Treasury, FED, CFTC and SEC - all EX Goldman Sachs! But insider theft doesn't occur on prop desks??? Ya, okay....
I don't need to qualify your opinion , I have evidence from 44 profitable automated/mechanical strategies back tested for last 10 years.
He was caught with Goldman's own code, not caught trying to sell reverse engineered strategies from Goldman's customers. That's completely different from what we're supposed to be discussing. That episode would fall under corporate espionage, which most definitely exists. If the guy had been caught with a bunch of code Goldman had written as part of a project to duplicate their profitable customers' strategies, it would be an example of what this thread is about. So, I'm still waiting for one solid example.
Most of the discussion in this thread is concerned about the prevention of *internal* theft....scroll
Anyone can decode a strategy when he has the code. But not when he has only a number of trades. That was the problem discussed here.
The idea of this thread is to have a broad-based discussion on a wide spectrum of topics - regarding every aspect in which your trading strategy can be compromised - reverse engineering, theft from internal employees, brokerage employees stealing your code, stealing code from your co-located machine/data-center, your software provider stealing your code etc. and what are the steps you can take to minimize the danger.
Really? I didn't realize the thread was about internal controls and security procedures at major investment banks like Goldman. Even so, the guy from Goldman was trying to steal Goldman IP, so it's still not analogous to a trading software vendor stealing code from a retail customer. I'm just going to bow out at this point. You guys can discuss whatever paranoid delusions you want to. Try trading with your tinfoil hat on. I hear it keeps out the mind-reading rays that steal your strategies. I'm just glad to see my competition worrying about such trivia, to be honest.
Dude, it happens all the time, most cases just never make it to the courts or public because many hedge funds and sell-side desks design very opaque contracts on purpose. Hedge funds have never been more active to "harvest" strategies. They are right now on a "hiring binge", on the surface saying they want to hire PMs and have them bring on board their successful strategies (with track record). Once the code makes it into the firm it is so fast copied or reverse-engineered that you cannot even blink faster with an eye. The only protection against that are solidly programmed and obfuscated code libraries. I generally test fund's attitude towards that by saying that "I am happy to bring my strategies on board but I like to trade them in a black box type of fashion and that I am very solid coder and am confident the code cannot be reverse engineered. I also built in a permission algorithm that connects to an outside server and should I ever leave the firm and take my code with me (the one I brought with me not in-house written code) the permissions will be revoked and the strategy cannot be traded anymore". Guess what happens then: I hit brick walls. In almost all cases funds used all sorts of excuses that such deal would not work out. No logical explanations given, only obscure excuses. Makes it very clear what they are really after. I am not saying there are no other funds out there. Some more trustworthy firms who look to seed traders mentioning they would not have any objections about my policy whatsoever. This, in my opinion, is the only way to protect against outright theft. Do your own work and never trust anyone, no broker, no hosting firm, no hedge fund, nobody. If you have something that generates risk-adjusted stable streams of PnL then you are on most investors' most wanted list, well not you but your code.
you are the one being naive. Get a life and yes please bow out of this thread you are clearly not qualified in terms of experience with such issues to talk here. Or you are on the other side hunting exactly for what you call others paranoid about.