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The Goldman Information Leak

|Includes: Goldman Sachs Group Inc. (GS)

Goldman claims that the result of the theft of its data are very immaterial. The prosecutor of the alleged criminal says that it could be used to manipulate the market unfairly. The truth is probably somewhere in between. It was probably true that the algorithm would be "market moving" in the short term, but would be "immaterial" in the long term. Which statement was true would then depend on the time period.

Note, also, that Goldman made a lot of its money on so-called high frequency trading,  is another indictment of another "new era" technological advance. It is an unfair advantage conferred by high-speed computers that is not available to the average person. It was condemned by JP Morgan, ordinarily a capitalist institution. It could be prevented by the simple expedient of requiring that all bids remain in place for at least one second, the equivalent of the uptick rule in short-selling. Otherwise, Goldman (and its minions) would be able to exploit the rest of the markets.

More to the point, Goldman was paying a computer programmer a substantial amount of money, $400,000 a year, to produce "algoorithms" that have a high intensity of use, but would have a short shelf life. The programmer would shortly have to write a new program to "manipulate" the market. Robert Frank, the Cornell professor was right when he opined that the coming century would be more like Darwin than Adam Smith.