Regulators probing legendary hedge fund’s secret trading code in payback to GOP for election losses
Federal regulators are probing the secret trading code at Renaissance Technologies, the massive quantitative hedge fund run by James Simons and Robert Mercer, The Post has learned.
The Commodity Futures Trading Commission has recently asked to dig into the trading software at the $65 billion hedge fund, James Rowan, the fund’s chief operating officer, told an audience of hedge fund managers on Tuesday in New York, according to two people who were in the audience.
But Renaissance, which is about as secretive as it is lucrative, is pushing back against the CFTC’s request out of fear that the code will “leak,” Rowan told the managers, according to those present.
A spokesman for Renaissance Technologies declined to comment.
Jonathan Hitchon, chief operating officer of quantitative hedge fund Two Sigma, which manages an estimated $40 billion, was also on the panel echoing Rowan’s concerns. Hitchon is on the board of the Managed Funds Association, which called out the CFTC for “overreaching in its authority” in a letter sent last month.
The pushback by Simons’ firm is the latest sign that the government is plowing into so-called “quant funds,” which use highly technical trading algorithms to try and beat the market. It is a growing area in the hedge fund space as more hedge funds, including Steve Cohen’s Point72, are increasingly hiring more developers to build algorithms.
These algorithms are often black boxes, and are so complicated that it would be nearly impossible to figure out what they’re designed to do, or why they do it.
Regulators are concerned there could be an illegal trading practice, like creating fake orders to move the prices of illiquid stocks, which is known as spoofing.
Last year, when the CFTC first outlined the regulations that would allow it to scrutinize hedge funds’ algorithms. Other major funds, like Citadel and Two Sigma, slammed the proposal, saying that sharing the code made it more likely it could fall into the wrong hands.
Even the CFTC also admitted last year that there are problems with its plan to require quant funds to share code.
“This requirement has garnered an enormous amount of attention from market participants concerned with the prospect of handing over highly valuable, proprietary business source code to an agency of the US government that has an imperfect record as a guardian of confidential information,” CFTC Commissioner Christopher Giancarlo said in September.
Renaissance is complying with the CFTC’s request for the code, and is exploring ways it can share the code in a secure setting but not have it left sitting on a CFTC file where it could be vulnerable to hacking and being leaked, Rowan said.
Trading algorithms are extremely valuable to financial firms, and Renaissance isn’t the first to go to great lengths to keep its source code secret.
In 2009, ex-Goldman Sachs programmer Sergey Aleynikov was arrested for taking the bank’s proprietary code — a charge he has twice been acquitted of, though he’s still facing charges on an appeal.
That code was Goldman’s “secret sauce,” New York District Attorney Cyrus Vance Jr. charged in 2012.
The CFTC did not respond to requests to comment.
The CFTC wants to see if Mercer helped rigged social media to make Trump win
“I think you’d have to be an idiot to think we could win the House with Pelosi at the top,” said Rep. Filemon Vela (D-Texas), who supported Pelosi in her last leadership race. “Nancy Pelosi is not the only reason that Ossoff lost. But she certainly is one of the reasons.”
“#Ossof Race better be a wake up call for Democrats – business as usual isn’t working. Time to stop rehashing 2016 and talk about the future,” Rep. Seth Moulton (D-Mass.), a rising star for the party, tweeted on Tuesday night.
“I think it’s very concerning that that tactic still has some punch,” added Rep. Tim Ryan (D-Ohio), who challenged Pelosi for minority leader last November. “Again, it’s part of the broader national brand that average people don’t feel connected to the Democratic Party. Walk up the street and ask 10 people what the Democrats stand for, you’ll get 10 different answers. That’s no way to build a national party.”
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Pelosi told her members in a closed-door meeting on Wednesday morning that Ossoff “was a candidate who was young and enthusiastic, and attracted national support,” according to Democratic sources. Pelosi also pointed out that Ossoff lost by only a small margin, far less than the previous Democratic candidate had done in the Georgia 6th District in November.
Pelosi, though, admitted that “A loss is a loss. It is a setback. Unfortunately, a loss for us. But not good news” for Republicans. Pelosi also cautioned her members not to overreact to the results of this specific race.
Pelosi didn’t talk to members about the GOP ads focusing on her. No members brought up the issue of her leadership or said she should step aside.
Pelosi pointed out that Democrats won the special-election fights during the 2009-2010 cycle, only to lose 63 seats in November 2010, while in 2005-06 — when Democrats won the House — they lost several special elections.
And Pelosi talked about how the recent shooting of Rep. Steve Scalise (R-La.) may have aided GOP candidate Karen Handel. Republican outside groups tried to tie that shooting to the frenzy of anti-Trump rhetoric among Democratic supporters, as the shooter posted strongly negative comments against the president on his Facebook page.
Yet the fact remains that with President Barack Obama out of office, Pelosi is once again the Democrat that Republicans most love to hate. She has been on the national scene for 14 years, and Republicans have long made the phrase “San Francisco values” a pejorative for any Democratic challenger.
And Democrats — despite the fervor among their base — are being forced to acknowledge that an anti-Trump message is not going to be enough by itself to win in 2018. President Donald Trump may have historically bad poll numbers this early in his presidency, but Democrats are likely to need more than that to get back in the majority.
Karen Handel is pictured.
Georgia special election: 4 takeaways
By SCOTT BLAND
Pelosi still has a lot going for her. She remains the most successful non-presidential political fundraiser in U.S. history, raising more than $560 million for House Democrats since she became leader in 2003, even though critics say all the money doesn’t matter if they keep losing. There’s also no question that Pelosi remains popular with many House Democrats, despite her detractors.
“I think she’s one of the best speakers ever and I am glad to support her,” said Rep. Keith Ellison (D-Minn.), a leading progressive who lost a race for Democratic National Committee chairman earlier this year.
“This is nothing new,” said Democratic Caucus Chairman Joe Crowley (N.Y.) of the GOP’s Pelosi bashing. “I think we’ll have an opportunity to look at all the ads on all sides that were ran, all the issues, all the warts that existed in evaluating the results of this election. But the day after is a little too soon.”
Some Democrats who are running statewide — either for governor or Senate — say the party must not try to nationalize every race. Instead, they must focus on local issues in order to reach voters. And official Washington’s obsession with the Trump-Russia probe, while vitally important, is not something average voters are focusing on daily.
“I think what people are looking for is that they want to believe someone knows where they are coming from. They want to believe that you’re a decent person,” said Rep. Tim Walz (D-Minn.), who is running for governor. “I think the race in my district, I think that President Trump would still win it, although it would be closer. That’s totally on him and really doesn’t have to do with us.”
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Nancy Pelosi, Keith Ellison, House Democrats, Joe Crowley, Tim Ryan, Party Leadershi,p Karen Handel, Tim Walz, Filemon, Vela ,Jon Ossoff