What keeps a brokerage employee from shadowing your trades?
- Thread starter Aston01
- Start date
Paul rotter used multiple brokerages to build and reduce positions to mitigate this threat. He was proper big, 10% of daily bund volumes.
These are things that really happened, and from some of them I was witness when it happened:
So your broker is a minor problem. The software you use is a much bigger problem. XXX..... and all the others are potential dangers. They don't have to analyze anything and you cannot mislead them with fake orders and multiple brokers. They can simply download your whole strategy if they want. Virusses are in general installed while opening attachments in emails. For software developpers it is far more easy. They can incorporated it and you will install it yourself for them.
- A Trader from a big German bank showed his tradingsystem years ago on a presentation from Dow Jones Telerate. He used a PCsystem called Teletrac. I had a Teletrac too and knew that it was possible to steal his system because you could easily edit all code. I was witness when it was really stolen during this presentation. I actually saw a printed copy of that system. This can and will never happen, but it happened.
- A lot of resellers of software can easily steal your trading program once you installed their software. You have no control over what they install and internet made it very easy to send and receive any information to the reseller. They pretend to need a constant connection with your PC. Years ago this was not necessary. If you give me the opportunity to install "very good trading software" on your PC, I can send you within a few days a hardcopy from every tradeplan you installed on your PC. This can and will never happen, but I am sure it happens.
- I know a reseller that uses Gen-DelfInject in his software. If you remove the dll your program does not work anymore. Why does he need DLL injection? He sold to thousands of clients all over the world and is still in business. He has a lot of clients ( he told himself thousands in the US) using several of the biggest trading platforms in the US. I tested his software on a separate PC only used for testing and removed everything again (restored a disc image) when i found out what could happen. But I am sure he is very honest and would never have bad intentions.
Microsoft: DelfInject.gen!X is a generic detection for malicious files that are obfuscated using particular techniques to protect them from detection or analysis
Thank you so much for sharing this info. But it is scary to know all this ! I was not aware that it could be so easy for the program developers to steal such sensitive information from the Trader's PC. :eek:
Interesting to read similar thoughts from Rotter. Likely due to the size he was trading and familiarity with the subject he was mindful his activity could possibly be parsed by interested parties be it the broker, clearing house or etc., which was partially the motivation for using multiple brokerages.
When I was a client 20+ years ago at a large mutual fund family, I had a private contact/salesman for my (large) account. I recall phoning a buy of a gold fund for a few months and asked him to execute it for me. As part of his due diligence, he asked my reasoning which I told him. Talking to him a few days later he boasted about copying my trade for his own account. (I was surprised as I suspected it was not allowed, however, I didn't care because I play the market not any one individual). Some weeks later on the fund popped giving me a pretty sizable gain and while talking to him next time, I mentioned that he must be pretty happy with me because of the gold trade that I happened to get correct. He explained that he had sold in a panic when the trade went against us a bit, whereas I had a much wider stop loss. I was really surprised and hung up the phone in shock. I have thought about that day a lot since.
In a chat room 10 years ago or so, I was very experienced with a few others and lots and lots of amateur daytraders. I quickly realized that one trader (M) was posting trades and slamming the beginers by reversing against them in size. I mentioned his antics - detected on my tools, to another trader in the room telling him I was monitoring the situation. Suddenly I had 6 or so including my friend turn on me in the room. I didn't know he was in on that fairy ring doing the same thing. At one point M, who had never posted to me directly, asked me how much I had made. I told him the truth - I was down 12000 dollars that day. There was a pause and he came back and called me a bad trader and procceeded to boast of his winnings that day. I knew why I was down 12000 but my losses intimidated him (?), whereas I was not concerned in the least. It was a bad day for my account. I knew why I was down 12000 (a 3% move in silver down that day). I finished 7K or so down by the end of the day. I didn't care but they sure did. (Why would that matter. I don't care if you are down 20 dollars or 20 million. I only care my size and tolerance risk.) M had disappeared from the trading room a year later when I checked back. He blew out his account and moved on according to others in the room.
Maverick is correct. Even if someone copied your trades one for one, their risk tolerance, knowledge, conviction and makeup are different. Since then I conclude that I could post my trades and most people would still manage to lose money. It is why I never bother with journals or sharing trades (except for only H who I did 2 live real trades with explaining what I was doing to teach. Words seemed too slow to be helpful). To be statistically significant, there are not enough trades. I would never copy someone else for any other reason than to test their premise to see if I wanted to work further with the concept. There is no magic in trading so stop looking for it.
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There is a collorory to this reasoning as well. If any retail edge, really was working dramatically, like a snowball it would gain people following, until the size caused a specialist to defeat it. Someone always has to take the opposite side and why would they if you were consistently winning. Who would take something they were pretty sure would lose? Of course large players paint the tape and try to push you out of positions. You would do the same if you were large and could detect activity - thus HFT evolution for example. The market defeats almost all methods given time IMO!
This guy who puts Gen-DelfInject in his software works for clients trading with:
- Tradestation
- Metastock
- Ninja Trader
- Ami Broker
- MT predictor
- Multicharts
I am not an expert but I think you can monitor all in and out going data. But even then you don't know exactly what is happening. On top of that if they try to steal 1 time every month your tradeplans it will only take seconds. And it can be hidden as they control the program they installed on your PC.
Just because something was generically flagged as suspicious doesn't necessarily mean its being used in a black hat fashion. Maybe there's a legitimate need for DLL injection based on all the different platforms supported without first class ability to hook in to things via a documented API. It's not clean but it may be the only option. You have to consider the ramifications he would suffer if someone actually reversed engineered anything suspicious actually going on.
The problem is we don't know. But in past this was never necessary. I mean before the internet started. So at that time everything worked without these potential dangers.
The software I speak about was written for every platform seperately so no need for multiple platform support. Each platform has his own version. The use of the software is al so very limited, he uses a print from your cpu to identify the use of the software. Put it on another PC and it will not work. Even if you restore it on the correct PC you might get in trouble.