Ex-Goldman Programmer Found Guilty

I agree with the prevailing sentiment on HN that (a) it's too easy to get an indictment (the grand jury is supposed to be adversarial against the prosecutors and isn't) and (b) prosecutors bias --- my belief is: primarily bias towards cases they can win easily --- has subverted the goal of prosecutorial discretion.

But the facts of this case suggest a theft that could reasonably be valued at extremely high numbers. For it to be heard in court doesn't sound like a miscarriage of justice.

Your source, by the way, does not support your assertion about Lewis contracting experts reviewing the source code presented as evidence during the trial. Which makes sense: what would make you think Lewis would have access to it in the first place?

For the major commercial brokerages (at big investment banks, like RBC), it is literally their whole job to move large blocks of tradable instruments without moving the market in the process. Shopping large blocks is supposed to be difficult, because things are priced by the law of supply and demand.

If you're trying to sell (in RBC's case, for a client) 1000 lots of XYZ, you have an extremely important piece of insider information about XYZ: there are about to be 100,000 new XYZ shares on the market. Your attempt to sell all 100,000 is going to reduce the price of XYZ. Naturally, you want to capture the highest possible price for XYZ, so, naturally, you want to conceal your intent to sell 100,000 shares all at once.

Meanwhile, the market wants to do the best job possible of capturing all available information about XYZ and building into the current market price. Anything you do to tip your hand about your giant order will be analyzed by some market participant and used to execute a profitable trade (in this case, profiting by placing trades based on the [accurate] prediction that the price is going to fall).

The whole of _Flash Boys_ considers this trade a form of frontrunning, despite the fact that the traders doing it have no fiduciary responsibility either to RBC or to RBC's clients, and despite the fact that RBC's desire to sell at high prices involves RBC themselves exploiting an information asymmetry. In Lewis' world, the market is supposed to sit back and transact 1000 lots of XYZ without adjusting the price until after the giant corporations making that trade are done. It follows logically from Lewis' argument that market-making is itself somehow unethical.

This seems like minutiae, but (at least for the portions of the book about "level playing fields" and electronic markets) the theme running through the book is that markets should behave themselves and continue working in a way that matches the expectations of the equities desk at RBC. That's silly, but fine, until Lewis extrapolates from that the idea that these broken expectations harm Main Street investors. They don't, except to the extent that those investors predicate their returns on the largesse of big companies like RBC. The Chief Investment Officer at (unassailably awesome) Vanguard is on the record repeatedly about how electronic trading and HFT have improved returns for value investors and passively-managed funds.

Anyways, no harm done...it's just a few pg funbucks.

There are a lot of things which go into creating value for a company. Trade secrets are one of many factors. Execution, connections, business relationships, location (or locations for retail establishments), and more, all come into play.

Taking two well-known examples, the real value for both Coke and KFC is far less in the specific product forumulations of both companies -- those are effectively McGuffins. Rather it's in Coke's set of contracts with bottlers, distributers, retailers, and restaurants (many of which will carry _either_ Coke, _or_ Pepsi, but not both), etc. There are even "open source" colas whose recipies are published, but which don't have the market reach of the majors. For KFC, it's more a matter of retail outlets and supply chains -- having a global branding campaign, advertising and marketing, real estate in specified locations, and relationships with suppliers such that ingredients and product are supplied to these.

Yes, there are companies which do rely to a much greater extent on trade secrets, and there's some case to be made for some level of protection over these, particularly in tech. Michael Wolf's "Burn Rate" or ... I'm trying to remember the author and book, about the "Go" PDA who had their idea arguably poached by Microsoft. But in truth, execution and capitalization matter a tremendous amount, and exclusive knowledge of a specific concept, not so much.