Could someone comment on the legality or ethics of a prop firm watching the orders and/or trades of one of their successful traders for the purpose of learning their strategy, then disseminating the (new and unique) trading strategy to other traders in order to increase trading volume at the firm. Is that legal? If so, is it ethical? What action, if any, would you suggest a trader take if they find out their brokerage firm is doing this?
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Firms stealing strategies....
- Thread starter praetorian2
- Start date
Quote from Tea:
I do believe that brokers study successful traders accounts to figure out what they are doing. If you had access to that type of information - wouldn't you do the same?
Here is a cure for this over-curiosity syndrome.
Open two accounts (different brokerages). Every now and then enter a trade in one of the accounts and exit it in the other. That way you will be technically flat the trade. Then at a later time, reverse both trades to be flat in each account.
It will cost you an extra commission and bid-offer spread. Extra margin if you hold overnight. Money may be shifted from one account to the other depending on what it does while you are "technically flat".
I think this would work especially well if you call in your orders.
The above relates to futures.
yes, unfortunately i have resorted to this, spend a lot of time transferring in between acounts now, which is bringing up suspicions as well. A broker will join in a successful traders position, i know, I have done it too back in the day :O
Quote from bespoke:
At a prop firm, there is a manager account which sees all trades. It's very easy to automate a program that mimics every trade. Don't ask me how I know, I just know.
I heard that at World Trade Securities they give high payouts to good traders (basically making no money on them because how can they with such high payouts) but this is done so they can steal their strategy and open corporate offices in China for like 100 people and teach strategy to them but pay them salary and some little payout. Thats why they have that thing on their website TradeSnorting its pretty much trade stealing.
Quote from swiftmike99:
I heard that at World Trade Securities they give high payouts to good traders (basically making no money on them because how can they with such high payouts) but this is done so they can steal their strategy and open corporate offices in China for like 100 people and teach strategy to them but pay them salary and some little payout. Thats why they have that thing on their website TradeSnorting its pretty much trade stealing.
this is slanderous, you seem to have hated WTS from their very beginning. so what is the real story, why do you hate this firm so much?
Start on this page of the Bright thread and you'll see where this thread got revived again:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=121562&perpage=6&pagenumber=28
Some traders have said many years back they took a profitable strategy to Bright to later have it taught in their classes, to which Don says no, but other Bright traders do say they like the "free flow of information" that Bright offers newbies.
I like Bright as a firm and Don's participation here so I don't want to take a side on that, but am curious if other traders feel as I do where I am nervous to go to any firm that offers training and tries to cultivate new traders? I would be worried that if my strategies did get out and 50 guys piled into it there would be no margin in it for me anymore.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=121562&perpage=6&pagenumber=28
Some traders have said many years back they took a profitable strategy to Bright to later have it taught in their classes, to which Don says no, but other Bright traders do say they like the "free flow of information" that Bright offers newbies.
I like Bright as a firm and Don's participation here so I don't want to take a side on that, but am curious if other traders feel as I do where I am nervous to go to any firm that offers training and tries to cultivate new traders? I would be worried that if my strategies did get out and 50 guys piled into it there would be no margin in it for me anymore.
i'm fully auto, so i've thought about this quite a bit. especially since a few of my strategies would be very sensitive to it.
the conclusion i've come to is that the only way to "limit" strategy leakage is to be involved with firms whose owners or whose clearers have little to no tech savvy, do not have an internal team of active traders/market makers, and whose said firms are quite small (<50-100 traders). so, anyone who clears through GS, anyone who writes their own API's, and anyone who has a swarm of neophyte's constantly coming through... fogeddaboudit. Retail vs prop makes no difference here. The odds are if you fit any of the above, there's an above avg chance, if you're really killing it, people will be taking a look at what you do.
Re: legality... would be impossible to prove. only way to maybe have a chance is if the bastards actually tried to get into your box (if colo'd), and you had a little camera in their that was filming their greedy little eyes when peaking in. much easier to just RE the trades though.
rufus has some great posts on here talking about this at the higher up levels... believe me, it happens more than you think.
the conclusion i've come to is that the only way to "limit" strategy leakage is to be involved with firms whose owners or whose clearers have little to no tech savvy, do not have an internal team of active traders/market makers, and whose said firms are quite small (<50-100 traders). so, anyone who clears through GS, anyone who writes their own API's, and anyone who has a swarm of neophyte's constantly coming through... fogeddaboudit. Retail vs prop makes no difference here. The odds are if you fit any of the above, there's an above avg chance, if you're really killing it, people will be taking a look at what you do.
Re: legality... would be impossible to prove. only way to maybe have a chance is if the bastards actually tried to get into your box (if colo'd), and you had a little camera in their that was filming their greedy little eyes when peaking in. much easier to just RE the trades though.
rufus has some great posts on here talking about this at the higher up levels... believe me, it happens more than you think.
Quote from SProbability:
Maybe I'm being very naive here, but how can a strategy be reverse engineered?
Thats exactly what I was thinking... maybe some strategys can be but I highly doubt my system could be reversed engineered.
As far as technical analysis goes, there are x number of variables and x number of confluence points between all those variables; not to mention other non-technical triggers that would make the task of reverse engineering virtually impossible.
Quote from propseeker:
i'm fully auto, so i've thought about this quite a bit. especially since a few of my strategies would be very sensitive to it.
the conclusion i've come to is that the only way to "limit" strategy leakage is to be involved with firms whose owners or whose clearers have little to no tech savvy, do not have an internal team of active traders/market makers, and whose said firms are quite small (<50-100 traders). so, anyone who clears through GS, anyone who writes their own API's, and anyone who has a swarm of neophyte's constantly coming through... fogeddaboudit. Retail vs prop makes no difference here. The odds are if you fit any of the above, there's an above avg chance, if you're really killing it, people will be taking a look at what you do.
So basically all hedge funds automated strategies are being stolen. I say this becaue they all clear and are setup through the big prime brokers.