Jane street suing MLP
Jane Street Group sued Millennium Management and two former traders over their alleged theft of a highly confidential and “immensely valuable” proprietary trading strategy.
In a complaint filed Friday in federal court in Manhattan, Jane Street said former traders Douglas Schadewald and Daniel Spottiswood, who resigned earlier this year to join Millennium, had been “intimately involved” in the development of the strategy. According to the suit, they are now using it at Izzy Englander’s hedge fund group in violation of confidentiality agreements.
The complaint is interesting - much of it redacted. Anyone have color on what they were trading? Complaint explicitly says it wasn't related to previous experience in VIX and SPX vol
Very interesting. Hope someone can spill the tea
Yeah, crazy. My connects at the tiptop prop shops are saying the two of them were developing an insane VIX trading algo at JS based on # of BBL surgeries done per day and then Englander (notorious for having >3 bbl’s done) poached when he heard the news in the the HF GroupMe. Will keep you guys posted.
this is just cringe, would delete
Hardest thing to understand is seemingly the guy quit one day and joined a competitor the next day.
If this guy was so involved in developing a huge strategy, how did Jane St not have him on a 2-3 year non-compete?
Maybe they did and it just wasn't enforceable somehow? Or he's just making so much money + MLP is paying for the lawyers so neither he nor MLP cares what Jane Street does.
My guess is that's exactly what this lawsuit is about -- they guy probably *does* have a 2 year non-compete but ignored it to go to a competitor anyway and that's why they're now suing him. All the accusations about "stealing a trading strategy" are just window dressing for Jane Street to emphasize to the judge why they want the non-compete enforced.
The full complaint is public (with minor redactions) and there is no mention of a non-compete clause in his contract. I'm perplexed that Jane St just took his word rather than pre-emptively including a strong non-compete when he originally joined them.
I and many on this site are bound by multi-month non-competes even though the IP we generate is worthless compared to what this dude had in his hands. Jane St hired this guy in 2018 and "forgot" to include a non-compete? Sounds like negligence.
Can confirm. No need to do any research into related strategies guys. Nothing to see here guys, carry on.
Will be interesting to see two big firms fight it out this time.
And of course it happens all the time. Why do you think people (traders/Pm) move to other firms? To develop new things from scratch?
After going through the case file, seems like it is volatility related with both defendants working on option desk at JS and one guy in charge of executing with intra-day signals but it is clearly not simply spx option, vix future etc. My best guess could be some other niche vol products.
can someone link the complaint please
Link: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rEXVjFfBUnn4/v0
read through the complaint as well. is it just me or does it seem like JS doesn't really have a case?
I think it’s obvious they took some IP but hard to prove
Exactly what i was thinking. Ppl leave to use knowledge they've gleaned from former employers to compete all the time. I don't think there's a case unless it's proven they took code with them, which i can't think they'd be stupid enough to do.
It's interesting because most of the HFT arbs run by these shops are mostly technology and infrastructure advantages that can't be easily replicated at a new shop. JS famously doesn't even have non competes because they believe that other places won't have the built in infra to replicate their strategies. I'm at a similar shop and think about hopping to a MM, but realistically I don't see how I could replicate any of the strategies I'm running by myself in a new environment.
Just speculating here, but the fact that they were able to replicate the strategy in weeks at Millennium might point to less of a general HFT strat but an inefficiency with a certain data provider /exchange that gave them an information advantage. There has been instances of certain crypto exchanges misquoting prices or other inefficiencies that large prop firms stayed away from because the market opportunity was too small or due to regulatory risk, that was exploitable quit easily if you knew about it. Maybe this was something along that lines.
Perfect example of the latter is the semi famous FTX leveraged product rebalance strategy.
I'm also at a similar firm, but I don't buy that. Sure, a startup HF would need several years to build up the infra needed to run your strategy; but established firms like Citadel, Millennium, Hudson River, PDT, RenTech, Point72, etc will all already have similar infra -- maybe better in some ways, worse in others, but similar enough you'd recognize it. It'd take you some time to recreate your strategy on the new system (like you said, even if you took the code with you, you couldn't just run it as-is) but if you know "these are the five key insights that drove most of our PNL last year" then you could be profitable at a new shop in the first year.
I'm at one of those firms you listed, and maybe because I'm still relatively junior, but talking informally with people at MM the infra sounds a lot worse. Millenium from my informal discussions sounds like every pod is for themselves and they basically have to rebuild infra for each pod.
Even if infra is similar, replicating a strategy in just weeks is insane. This probably means a level of premeditation where they were actively rebuilding the strategy on the side during their time at JS.
Would this type of stuff affect your future employment prospects? Would firms be less willing to hire you because they're worried about their trade secrets?
Quite the opposite I think
Getting sued for making too much money and cutting into the competition's profits is the only surefire way to get an inbound call from Kenny and Dmitry.
My buddy was re hired by his former boss (named in the suit) and started at MLP about a month ago.
He's not shared any info (with very good reason) on what the strat is or what's happened so far. JS doesn't have non-competes but you do sign an NDA.
If this doesn't work out for him then he's back to enjoying early retirement it seems
Anyone has color what type of strategy/asset class this is related to?
https://www.bloomberg.com/news/articles/2024-04-19/jane-street-s-secret…
Matt Levine provided a good summary in today's newsletter. Jane Street doesn't have a case IMO.
Hm I didn't think Matt Levine's article made such a judgement. MLP was sued years ago by Rentec along very similar lines and they settled and fired the traders..
Bloomberg reported that the strategy was in the India options market and made $1bn in PnL for Jane St last year, their most profitable strategy
Dang. I was wondering how they made all of those billions in a tough year for the Asian market.
Looks like strategy is related to options trading in India. No wonder JS was hiring India option trader actively. With the huge volume trading on NIFTY options, looks possible for scalable strategy.
Lol probably they were front-running some Indian billionaires trading Nifty and SPX options. The Indian market is def less transparent compared to the US cause their fund management compliance rule isn't as strict as SEC's
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