21 November 2010
FBI: Trader Found Guilty As The Developing World Of High Frequency Trading Scrutinized
Samarth Agrawal, a former High Frequency Trader has been found
guilty of stealing trade secrets from his former employer, the
investment banker, Societe Generale (SocGen).
The New York court found the 27 year old Indian citizen had taken
code home finding he intended to take the information to his new
He now faces the prospect of up to 10 years in jail.
In the investigation carried out by the FBI, SocGen, acknowledged
that the company had sent several years and millions of dollars
developing the software that generally follows every trade of shares, or
As computers become increasingly sophisticated every minor change
in price or quantity is monitored on the stock market. High Frequency
Trading allows traders to buy and sell shares at speeds never seen
before. Positions can be held for hours, minutes, but often seconds as
traders go in and out at enormous speed.
Yet it is only with software that picks up changes in pricing that
facilitates this new market technique. With that said, such data has
been followed since the late 1970’s but it’s real introduction into
mainstream markets began in the 1980’s.
Today High Frequency Trading accounts for up to 70% of all trades
in America with brokers investing significant money and time into
catching minute trends.
With any new financial trend comes a new set of problems for
finance companies and police to stop inappropriate or illegal behavior.
It was only after video monitors picked up Agrawal copying data that the
security system was altered.
There was much debate over why the Agrawal took home printouts, he
maintains that given he was under scrutiny his boss gave him permission
to study the system at home. The FBI maintained a very different story:
“As the Manhattan federal jury has now found, Samarth Agrawal was a
thief who hoped to make a small fortune by stealing and copying
sophisticated computer code that was the equivalent of gold bullion to
his former employers. Today’s verdict sends a clear message that this
office and the FBI will investigate and prosecute the theft of
valuable trade secrets for the serious crime that it is,” said a statement after the jury found him guilty.
As a young man Agrawal accepted a position at SocGen in 2007 and
moved through the ranks to be employed as a High Frequency Trader. At
the time of his arrest he had negotiated a new job with Tower partners
that offered him an annual income of $575,000 plus 20% of all profits he
brought to the company!
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