Shit, I really do want to get away from this thread because it's full retard, but I'd rather not let my statements get mischaracterized. You are talking about professionals trying to steal from other professionals, not brokers trying to steal from retail traders. At least stick to the original thesis I was calling paranoid if you are going to criticize my position. I already admitted that "corporate espionage", which I would say your example amounts to, exists and part of the reason we know it exists is because people get caught and prosecuted for it. But the OP of this thread wasn't talking about someone who was working in the context of interviewing at a hedge fund to become a PM and may have been suckered out of some IP, he was talking about a retail trader who was having some success but then worried that his success would draw attention from others, up to and including the possibility they'd try to steal his strategy. That was the only hypothetical I was discussing. If the thread was about whether or not you should divulge details in a discussion with a hedge fund you are interviewing with, any response from me would have been totally different. It's amazing just how little your response actually addresses anything I've said. It's like you were responding to someone else who said something else. Don't make me out to be some wet-behind-the-ears kid who doesn't know that every single word said or not said in the context of speaking with the money sharks matters, because that's completely untrue. In those situations, paranoia is entirely justifiable. The guy with the retail account at IB probably can rest easy at night, though, because I doubt any hedge funds will be installing keystroke monitors on his computer via the Stuxnet virus any time soon.
The only real protection against free-loaders in this example is to form a CPO instead of a CPA. When it really comes down to it though, you shouldn't be accepting every client who wants to participate. I have a direct relationship with every client. I know what type of person or organization they are. Most people are in a situation where they wouldn't really gain anything to try to run the system on their own. Why put that kind of effort into running their own program, when they could participate in yours for zero effort, no headache, and they are free to go about doing something more productive with their time? I make sure that every client understands this and I actually prefer clients who really have no interest in trading at all. Family offices, HNWs, etc. generally have better things to do with their time. Even FoFs make more money if they just focus on capital placement and funnel money into profitable systems. As soon as any of these groups tries to run a discretionary trading desk, they take on more headache, more expense, and they stray from their core profit drivers.
It's threads like this that make my business next to impossible to grow. All it does is fuel the paranoia over getting strategies stolen. Are there scumbags out there - of course but not everyone. I host servers & provide connectivity for a couple of legit market making firms as well as a couple mid/small hedge funds (and a few trusting individual traders). They have no problem with trust or paying me every month. I don't even know if I have access to their source code or strategies, I have admin & backup rights over all their stuff so probably... I know I can see pretty much everything that the NYSE guys have just because of compliance & reporting - but I have better things to do and I'm so much happier not trading anymore. My business would be great if I could add 15-25 more individuals or small groups... but they are all PARANOID and think that someone is out to get them. Please read this 100 times if needed to get it through your head: I want you to pay me for IT related services. I want to take your money and as much of it as possible... BUT I can't take blood from a stone just like you can't pay me if you aren't profitable. It is in my best interest for you to make millions or billions of dollars so that you can pay me and I can earn a living. Please understand that there are scumbags out there - but the paranoia isn't justified.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=231864&perpage=40&pagenumber=4 Many thanks Epic. I think your another comment above would be also very helpful. Do you still allow that remaining client having trading access in real-time?
Trust me I know how slimy Wall Street can be - but if all you do is spend your time trying to protect yourself you let them get the better of you and you will never trade a single share. I know people who have made a living from stealing other's strategies and I know a lot of lower tier bucket shops still try to operate that way. If you don't have a head on your shoulders you are going to get taken advantage of no matter what... but again, stop spreading the paranoia and fear to everyone else. Everything, especially in trading, is going to be full of trade-offs. If you take the easy way out - going to the cheapest no-name prop shop because they will give you the leverage and rates you want... using a programmer who is cheap/free and promises the world because you don't want to hire your own or take on a partner and split P&L... If you take the easy way out of things you will get taken for a ride but short of cutting corners and being foolish all you need to do is worry about yourself and your trading. There is no one looking out for you but you. That's all you need to know.
Here is an interesting comment from another thread: http://www.elitetrader.com/vb/showthread.php?s=&postid=3041893#post3041893
To begin with I am purely discretionary and have no dog in this fight -- no code to protect. Winston, you have always been generous with your advice on hardware etc. here on ET and to the extent you promote your business you have always taken the high road. You are a class act and, I believe, one of the good guys. But what do I really know about a man I have never met? Even a cursory reading of a few of Shakespeare's History plays -- he was after all a master of human interaction -- gives some solid sense of the evil which lurks in many hearts. In fact his own writing of history is perverted by his need to tailor it to suit the ruling families. While paranoia is always a mistake since it warps your judgement and frequently makes you vulnerable to the very thing you fear most, many people in the industry (and to be fair in business in general) are sufficiently flawed to make one man's paranoia the next guys prudent way to operate. What you own and value you have an obligation to protect. How far you go to do that is a matter of personal choice.