If you haven’t already read it, you should read Michael Lewis’ story on Vanity Fair about Goldman’s prosecution of Sergey Aleynikov in 2009. I recall the case when it first hit the wires, thinking that Goldman’s complaint that the code Sergey took when he left the firm could destabilize the financial system was incredibly silly. But like most people, I assumed that Sergey must have nicked Goldman’s HFT strategies and was guilty of theft.
That’s clearly what we were supposed to think. But in fact, Sergey wasn’t involved in the trading side of things at all. He was the brilliant back-end programmer who was brought in to speed up the uncompetitive latency of GS’s HFT systems.
There were many problems with Goldman’s system, in Serge’s view. It
wasn’t so much a system as an amalgamation. “The code-development practices in IDT were much more organized and up-to-date than at Goldman,” he says. Goldman had bought the core of its system nine years earlier in the acquisition of one of the early electronic-trading firms, called Hull Trading. The massive amounts of old software (Serge guessed that the entire platform had as many as 60 million lines of code in it) and nine years of fixes to it had created the computer equivalent of a giant rubber-band ball. When one of the rubber bands popped, Serge was expected to find it and fix it.
After studying its system, Sergey concluded it was such a mess that they should just scrap it and build something again from scratch, but his bosses vetoed that plan. So Sergey set out to fix the latency of GS’s systems by decentralizing it.
But most of his time was spent simply patching the old code. To do this he and the other Goldman programmers resorted, every day, to open-source software, available free to anyone for any purpose. The tools and components they used were not specifically designed for financial markets, but they could be adapted to repair Goldman’s plumbing.
So lots of little patches where put into GS’s code base, most of them hacked from code under an open source license, and GS’s managers would go in and strip OS licenses off and replace it with Goldman legalese.
Anyway, Sergey’s name starts to circulate around the street as one of the best HFT programmers in NYC, and he gets poached by a new hedge fund startup to build an HFT system from scratch. Double the sallary and the opportunity to do something cooler than constantly fix Goldman’s dogfood system.
Before leaving, he uploads a bunch of code to a subversion repository. Not the strats–he didn’t work with those–just a collection of patches and fixes that he used, most of it OS code taken from the internet. It was like taking a notebook, a collection of reminders for solving IT plumbing problems. It was of no use to anybody else and certainly wasn’t Goldman’s secret sauce. Arguably, it wasn’t even Goldman’s property.
What transpires is a total miscarriage of justice. One can’t help but speculate that GS’s motives were to use Sergey’s prosecution to create the impression that its systems were better than they actually were. Who knows. Read the whole story.