IP protection
Recently heard story about a mid sized MMHF(~5b aum) asking every systematic pm to turn in their code and explain their strategy trade by trade, otherwise you’ll be let go. Frankly what stops every other fund from doing this as firms always claim that any ip owned by employee is firm property? so theoretically they have legal rights to do this, then do you lose your ip ownership the moment you join a firm?
I interned at a pod shop where pms were also asked to do the same thing. My pm just retracted the more important parts of his codes and turned it into a very simplified version, so my guess is that the IP here would be a more sophisticated version of a basic algorithm? Just my two cents bc I was only an intern at the time and didn’t get much exposure to the systematic side of it
"turning on your code", what do u mean ?
You work on company's computer so they have access to all your code no matter what, don't they ?
Also when leaving, it seems obvious to me they won't let you leave with your code or anything that comes from the company computers/servers.
Explaining trade/trade is a bit weird though.
But explaining the overall strategy and the rational to your boss seems fair to me.
The code is sitting in company’s pc for sure, but practically it’s not of much value to another person to see a folder consisting of hundreds of python files with random bugs here and there except the pm himself. What I heard the firm does is to have you sit down with their internal quants/traders from a centralized team and explain the structure of the code as well as pointing them to the right direction of which line of code generates which signal that leads to which trade…
Tbh never thought of a strategy that would need hundreds of Python files.
Been a quant for 7 years, running my own strategies for 3, and a dozen of file/few thousands lines of Python are surely enough.
Never thought also of anyone serious having a code with "random bugs". Your code is robust or is not. Of course bug might happen but should remain exceptional.
Except super advanced high frequency or market making strategies (which should not be coded in Python anyway), I don't see what would need hundreds of files (except if poorly coded).
But maybe missing some pictures of the quant/systematic world
I don't think there is any law saying the employer owns the IP but it is a very common contractual provision. At least in prop trading I believe it is uncommon but not unheard of for PMs to retain the IP/code they develop at the firm. It would also be uncommon for a firm to officially allow you to bring outside IP or claim that any of your pre existing IP belongs to them (commonly it would belong to previous employers in any case). It is also typical for at least the firm's lawyers to claim they have no interest in any IP, trade secrets or confidential information of your previous employers although the reality may be quite different in practice. I don't have direct experience with MM HFs but would guess it is similar in terms of contracts/IP.
In the interest of keeping employees/PMs many firm also honor verbal agreements/understandings with employees that are more generous towards employees/PMs than the legal contracts or don't fully press every contractual/legal right they have in most cases. Depending on how the firm is structured they might not have much use for code of former PMs due to maintenance considerations as well as some risk from running code no one at the firm fully understands.
As far as explaining the strategy trade-by-trade that is quite different and unlikely to be a contractual provision. Compliance will often wants some explanations but typically for complicated quantitative models it is difficult to say more than some model output X and then some optimize/execution engine decided to trade based off that alpha. Most quant strategies trade quite frequently so giving detailed explanations for each trade seems like an unrealistically large amount of work however.
In this situation I've seen PMs encrypt parts of the code and make it decrypt and run only with a manual command each day. The code is still owned by the firm and the contract has been followed, just that it happens to be useless without the PM employed there. Usually these PMs won't give their analysts access to it either, so working for them is unpleasant.
This "encryption" could be as simple as multiplying parameters with a secret key and dividing by the key to get the original value. The firm would not even be able to detect this on their own.
The odds are, you didn't come in to the firm with the code. And if you did, you probably didn't put in your employment agreement how to divide up the IP. It isn't that you "lose your ip ownership the moment you join the firm," it is that you don't have the IP rights that your comment implies.
When you generate code on company time using company materials, it will likely not be your IP. It isn't that you lose your IP ownership, you just don't have it for that to begin with.
And... yeah. Every other fund can do this. But this is a giant pain to do. The thing that stops everyone from doing this is largely no one cares enough to put in this effort. Also, the HF should already have the code. At an absolute bare minimum, a HF of that type of size should absolutely be tracking everything that is done on their hardware and systems. It is just that understanding the why behind that this really adds value to (which is a real value-add compared to just having the code)
And yet only a few firms understand that while they own the IP of course, systematically farming it out to other internal teams is a great way to make sure you don’t get good talent putting in human/time capex to build something if mothership makes sure they can’t realize returns.
Of course things should never be brought to or taken from the firm, but a podshop where firms compete internally should not be hijacking the work of Team A and making it available to Team B
The big firms all do this at some level already. They all run alpha capture/best ideas teams that effectively copy the positions of the good pods, even if they don't use the code directly.
Which fund are we talking about? Perhaps we should list similar ones so that people can make more informed decisions. I’m sure many quants are sensitive of their ip
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