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Citadel Calls Former Head Of HFT Trading's Current Venture, "A Veritable Pirate Ship Of Illegal Activity"

Tyler Durden's picture





 

A peculiar escalation developing in Chicago (what is it about that city) was today's development in the Citadel - Teza Technologies lawsuit.  As a reminder, Teza is the firm run by former Citadel head of HFT and quantitative trading, Misha Malyshev, who got unmasked when it was made clear that he had recruited Sergey Aleynikov from Goldman, and was preparing to launch a quant trading group despite his non-compete with Citadel (which may very well be the reason for the entire Aleynikov fiasco after all). What was surprising in today's hearing was the proclamation by Citadel lawyers that Teza is a "veritable pirate ship of illegal activity."

Whoa, big words there. And probably not half wrong (which i guess means half right, thus preventing someone from suing us for agreeing or disagreeing with what was said). Big enough, that apprently none other than head honcho Ken Griffin was among those present for today's hearing. And likely big enough, because if anyone should know it is Citadel: after all Malyshev made $1 billion for Citadel last year when the firm was down almost 55% (oh yeah, and all those amazing profits Citadel has had so far? Well, they kinda need 100%+ returns just to get above the high water mark... oops), and was the sole profitable group. Which should also answer some of those question regarding the profitability of High Frequency Trading groups.

Also, another reason why the case has gotten such prominence - the enforcability of non-compete lockups. From Crain's:

The case has also garnered attention because of the small window it has
opened on the secretive, lucrative and fast-growing world of
high-frequency trading.

Citadel's lawyers claim that Teza is a competitive enterprise that has
been recruiting talent, building databases of historical and real-time
market, constructing a super-fast trading engine and developing trading
signals and strategies in an effort to be able to engage in
high-frequency, low-latency trading.

Such trading, theoretically, would allow it to predict the price of a
financial instrument one second in the future and profit from that.

Yet Zero Hedge's focus is mostly drawn on the wonderfully visual illegal activity pirate ship. Just what is it about this pirate ship that the firm's lawyers know? After all, Malyshev, together with Simons, are two of the foremost brains in the field of HFT, which for a while has been getting some peripheral blogger and lately mainstream, attention. Is there something rather big brewing in the quantitative arbitrage and ultra-low latency marketplace? Zero Hedge is procuring the transcripts from the recent depositions by Mr. Aleynikos and Malyshev and will provide these, together with out commentary, to our readers shortly.

h/t Jim Bianco

 


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Fri, 10/09/2009 - 18:08 | Link to Comment Miles Kendig
Miles Kendig's picture

Takes a pirate to know one.  Looking forward to the follow up reading.

BTW, doesn't Janet Tavakoli call Chicago home?

Fri, 10/09/2009 - 18:51 | Link to Comment ZerOhead
Fri, 10/09/2009 - 18:52 | Link to Comment Miles Kendig
Miles Kendig's picture

hahahahahahahahaha bwaaaahaaaa!!!

Thanks for the Friday pick up.

Fri, 10/09/2009 - 23:02 | Link to Comment glenlloyd
glenlloyd's picture

Argh Matey! Ben be a butt pirate and Barney's Fannie Mae be the answer!

Fri, 10/09/2009 - 18:07 | Link to Comment Leo Kolivakis
Leo Kolivakis's picture

In the ultra competitive world of "alpha", these "wizards" will end up canabilizing their profits. The pendulum swung too far into the quant side and it will come back to bite them in the ass.

Fri, 10/09/2009 - 18:11 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

Hmm. Ass biting pirates.. Sounds like the plot to a soft porn movie.

Fri, 10/09/2009 - 18:17 | Link to Comment buzzsaw99
buzzsaw99's picture

What was surprising in today's hearing was the proclamation by Citadel lawyers that Teza is a "veritable pirate ship of illegal activity."

Better watch out Teza, GS will be jealous. Arrgg!!

Fri, 10/09/2009 - 18:24 | Link to Comment deadhead
deadhead's picture

Thanks for the update TD.

Speaking of Chicago, I am really curious as to why nothing has developed on the whole Blagoevich (sp) matter....the prosecutor is well known for his aggresiveness yet i've heard nothing.  even though Blago is a fruitcake, his book and his recent appearance on Jon Stewart are interesting in that he keeps insisting, almost in a daring, challenging "i told you so" fashion that once people hear the tapes, they will be shocked (i'm guessing there are some rahm, valerie, etc obama types on there).

He indicated it his killing him not to tell people what is on the tapes but he is under a court order of nondisclosure.  I can't wait to hear the tapes.

 

Fri, 10/09/2009 - 18:46 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

IMHO, I suspect Blago knows where some bodies are buried, regardless of his actual involvement.

Those type of people are always dangerous to the powers that be, one of whom might have just won a special prize. The fact that no one has taken him out indicates he has some physical evidence that might change hands in the event Blago steps in front of a bus.

Fri, 10/09/2009 - 18:53 | Link to Comment Miles Kendig
Miles Kendig's picture

Superfly taught me that if you are going to work the powers that be you had better have a good insurance policy.  I took that lesson to heart.

I am Miles Kendig and I will never go back for any amount of money.

Sat, 10/10/2009 - 09:00 | Link to Comment bonddude
bonddude's picture

Throw Rezko into that group too. I am shocked that he still lives.

The ONLY answer is he has evidence that will be delivered upon his untimely demise.

Fri, 10/09/2009 - 20:29 | Link to Comment JohnKing
JohnKing's picture

December 8, 2008

Blagojevich threatens to stop the state’s dealings with BoFA.

December 9, 2008

Blagojevich Busted.

 

Fri, 10/09/2009 - 23:15 | Link to Comment Anonymous
Sat, 10/10/2009 - 08:35 | Link to Comment Anonymous
Fri, 10/09/2009 - 18:32 | Link to Comment BobPaulson
BobPaulson's picture

Will the increasing complexity and speed of trading eventually be its own demise? What replaces it? Can you turn back the clock? I'm not surprised when the nuts and bolts of trading come down to software that the systems are riddled with holes. Only an Enron type egomaniac can look at these systems and not see the growing vulnerability to security. 

It's like asking the DEA to not be on the take. It won't work unless you make it impossible. When there is $o much to be made, enforcement is futile. The temptation is too great.

 

Fri, 10/09/2009 - 19:16 | Link to Comment Anonymous
Fri, 10/09/2009 - 21:41 | Link to Comment deadhead
deadhead's picture

not a one today....

they update pretty quick on bank failure friday. 

Fri, 10/09/2009 - 19:28 | Link to Comment Shylock81611
Shylock81611's picture

The kettle calling the pot "black."

 

This is why Griffin is the most hated man in Chicago.

Fri, 10/09/2009 - 23:04 | Link to Comment glenlloyd
glenlloyd's picture

no banks failed = FDIC broke

Sat, 10/10/2009 - 00:21 | Link to Comment JohnKing
JohnKing's picture

Such trading, theoretically, would allow it to predict the price of a financial instrument one second in the future and profit from that.

Front running isn't wizards work but it's nice to have them on staff for window dressing.

Sat, 10/10/2009 - 02:26 | Link to Comment Hephasteus
Hephasteus's picture

Installation wizard demands the deactivation of all running programs?

http://freakshowplanet.com/fun/freaks/5178-freaks.html

Sat, 10/10/2009 - 07:06 | Link to Comment Jendrzejczyk
Sat, 10/10/2009 - 08:28 | Link to Comment Anonymous
Sat, 10/10/2009 - 08:28 | Link to Comment Anonymous
Sat, 10/10/2009 - 08:32 | Link to Comment Anonymous
Sat, 10/10/2009 - 08:54 | Link to Comment bonddude
bonddude's picture

Ye better be givin' me the secret algos else yer gonna walk the plank matey !!!

Sat, 10/10/2009 - 12:30 | Link to Comment Anonymous
Sun, 10/11/2009 - 02:58 | Link to Comment Hephasteus
Hephasteus's picture

That's funny you should say TOAST.

There's a song called Toast from Pol B and Binary Mind. They are not main stream but you can find thier album called Scout Summer Camp on Jamendo. The song has samples of Mr T, cartoon characters, etc.

Douche bag and JP morgan have to set up the IMF and the derivatives based bullshit debt structure or they die. Personally I'd prefer to kill a basket of soliders instead of just one country.

 

Sat, 10/10/2009 - 12:52 | Link to Comment Michael
Michael's picture

I would like to see a list for all the hiding places of the bad debt and the amount of money in each hiding place.

Sat, 10/10/2009 - 15:58 | Link to Comment torabora
torabora's picture

If you were privy to such a list, you would either be in on it with the criminals or you wouldn't last long.

Sat, 10/10/2009 - 21:40 | Link to Comment Careless Whisper
Careless Whisper's picture

Crain's on HFT: "predict the price of a financial instrument one second in the future and profit from that"  Hmmm, hadn't thought of it that way.

Looking forward to reading those depositions ...could be very interesting

Mon, 10/12/2009 - 10:33 | Link to Comment Anonymous
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