Regulators probing legendary hedge fund’s secret trading code

[Sig]

But you're saying that you do have enough information to say that there is no conspiracy theory going on here. You continue to insinuate that they aren't doing anything wrong/illegal, so it follows that you should be saying that you believe nothing will be found.



Here is a direct quote from the article: "James Rowan, the fund’s chief operating officer, said that he was concerned that source code could “leak,” "

If the fund's COO is concerned about a leak, how did we all read this wrong?

Rowan does go on to say that "There is no probe of Renaissance,” and that he was misquoted, and furthermore “I was referencing a comment letter provided by the Managed Funds Association regarding the CFTC’s proposed Regulation AT.”

So what is the real story here? Did he say he was concerned about the code leaking, and then take it back saying that he didn't say it? This certainly sounds more plausible to me because info getting out that Renaissance having to show code to the government would be big news. If you know a huge shipment of gold bricks is going to sitting over the weekend at some depot, this will clearly attract lots of potential heists. (and this very same thing has happened in the past)

Of course in the end, the article finishes by stating that nobody said anything and neither party is commenting.

You might not want to jump on conspiracy theories, but it sounds like you're believing everything that officials tell you and taking it at face value. Either you believe that the COO said he was concerned about a leak or you don't believe this, but its all in the article so you cannot say the readers were jumping to conclusions.

Take your meds dude!

 

[Gotcha]

Take your meds dude!

Oh I see, you couldn't argue with facts anymore since I showed direct links and quotes.

 

[birzos]

My guess is that they fully believed in their technical analysis without enough regard for human nature and the random nature of the market when you have so many participants. Its like a retail trader convinced that something has to happen because of how perfectly set up the move is, but then of course something else happens.

Sounds like for LTCM, the opposite of what was supposed to happen actually happened if someone else found out what these guys were doing. I think its kind of like during WWII after the allies were able to crack codes and track the U-boat movements. They always knew where they were going to be, even though the U-Boats had no idea their position locations were compromised.

Exactly, human nature will break technicals without warning, odd how the inconvenient facts get in the way when it is well documented that institutions were frontrunning LTCM unwinding. On an evolutionary scale RenTec have perfected what LTCM started, as they haven't imploded people behind the scenes are becoming nervous and wanting their IP.

Once the algos are 'appropriated' the decay starts, most in an industry do not have the ability, experience nor drive to perfect a strategy and so need to obtain it another way. You can then ask did LTCM fall due to the same fate, questions only a handful will ever know the answer to, and something RenTec wants to eliminate.

 

[d08]

Likely there are shady practices. They do have a lot of smart people on board but we don't really know if that's all a cover. Plenty of businesses use fronts to look respectable.

 

[lovethetrade]

My perception and intuition is they're not dodgy. The culture of the business would be influenced largely by James Simons and he comes an academic background, he's a mathematics professor and codebreaker. He doesn't need to cheat and risk his intellectual edge and business spanning several decades.

If he came from a traditional banking or sales background like others that have been convicted or investigated I might think otherwise.

They're not competing for investor's funds also, another reason why they probably don't need to cheat.

 

[quant1]

From what I und

At the same time, how can we be sure that there isn't something fishy going on? Spoofing is just so common, and I see so much of it in the futures that its a joke to say its illegal, but still, if code is found that shows they purposefully do it, it could be a game changer.

from what I understand, Rentech isn't trading HFT (they could but apparently don't). It's clear that HFT margins and capacity are ill suited for their size. I doubt that there are non HFT players that partake in spoofing.

 

[quant1]

Can you not read? The Russian financial crisis happened. It had absolutely nothing to do with someone getting access to their "secret sauce".

For the no wild-eyed conspiracy types, they were essentially arbing a spread on fixed income that gave a very reliable but minute profit. They levered it up to turn that into a reliable but larger profit. Then suddenly the Russian financial crisis caused a hiccup that required them to post more margin than they had, so they had to sell out at firesale prices. They were still right, eventually it went back to small and reliable, they just weren't robust to the black swans. Or as they say they were picking up nickels in front of a steam roller.

Exactly right. Had they accounted for
/understood the distribution of said spread in the tails, they'd likely put less position on when the spread was small and stack a ton on when it was wide. They would have made a killing if they could have traded. Instead, they had to sit on position and got blown out.

 

[quant1]

So you're going on record to say that Renaissance is doing everything by the books, including no spoofing in their code, no insider info, and all trading is done with the utmost respect for every rule?

I don't want to jump on any conspiracy theories either, but "facts" when it comes to trading are just as ambiguous as "facts" in politics. The truth of the matter is that you can hardly explain anything in trading with facts as its all just far too complex with too many participants.

lol there are many things that are well defined in trading. The reason it seems so ambiguous is likely the plenitude of poorly formulated "trades" that people believe have "edge". If Rentech is trading arbs (especially large scale and hard to model ones) then it is clear why the make money and can specifically point to said inefficiencies.

 

[Macca1]

From what I und

from what I understand, Rentech isn't trading HFT (they could but apparently don't). It's clear that HFT margins and capacity are ill suited for their size. I doubt that there are non HFT players that partake in spoofing.

Exactly. Renaissance are possibley the biggest victim of HFT.

https://www.google.co.nz/amp/s/www....-a-killer-flash-boy-app-and-you-can-t-have-it

 

[Macca1]

My perception and intuition is they're not dodgy. The culture of the business would be influenced largely by James Simons and he comes an academic background, he's a mathematics professor and codebreaker. He doesn't need to cheat and risk his intellectual edge and business spanning several decades.

If he came from a traditional banking or sales background like others that have been convicted or investigated I might think otherwise.

They're not competing for investor's funds also, another reason why they probably don't need to cheat.

All excellent points.