Blogs from December, 2010

The trial of a former Goldman Sachs programmer who allegedly stole part of the code for Goldman's wildly profitable high frequency trading practices began today in New York. White paper by attorney R. Tamara de Silva argues that high frequency trading, conducted by Goldman and other firms is illegal and constitutes front-running and trading on insider information.

The Federal Bureau of Investigation arrested Mr. Aleynikov in July 2009 after Goldman reported the suspected theft of source code used by investment bank to make lightning fast trades in markets around the world. Free on bail since his arrest, the 40-year-old Mr. Aleynikov faces up to 10 years in prison if convicted of stealing trade secrets.

"The Securities Acts came into being with provisions against insider trading and front-running because it was recognized that cheating and unfair advantage harms a free market and is at war with any well-functioning mechanism for price discovery. If the high frequency trading firms are allowed to continue cheating because of the established use of smart routing, in time everyone else will be unable to compete, including all investors and traders other than large volume high frequency trading firms." Said Ms. de Silva.