Thursday, February 25, 2010

Trick or treat

We've had a great first week of opening. The enthusiastic response to our business model, the number of people requesting a login, the behavior of our system. All went really well.

We anticipated we would get questions around three topics: asset classes available, tools and libraries, privacy and security. Guess what? Home run, got questions on all of them.

This post is probably the first one of a long series regarding security. Concerning the other two topics, it is only a matter of aligning priorities of clients to our capacity of development.

Is Algodeal a threat to my intellectual property or is it helping me growing it? What ensures me they are not going to steal it, sell it to third parties or worse? To answer these questions, all the companies which have tried to apply an internet paradigm to a traditional business field had to go through the same process I am.

Let's look at one company facing a massive privacy issue: Google and its Gmail service. Google stores impressive amounts of information related to the private life of millions of people.
Their offering was breaking the classic rich-client software mode; emails are now accessible from anywhere and changing PC is not a nightmare anymore.
How did they made users confident? By communicating a lot on their privacy policy and tools they were putting in place. They had no choice: Google have complete access to Gmail data; there is no way around it. It took some time but users ended up understanding that the tradeoff was in their favor, and that Google would not read or sell their emails.
The vast majority have now adopted the Gmail model and they get the leverage of the proven Google technology.

How does this apply to Algodeal? Well, I went to talk to my tech team telling them I had a lot of pressure from users regarding privacy and having the code source posted to our servers.
The answer came back very swiftly. I was told that, whatever the format used to transfer the strategy to our system, there was always a way to decompile/crack the strategy. Sending strategies inside DLLs or encrypted libraries would not bring us much. Reality is, the strategies are on our servers and we have to defend our strict privacy policies:

  • When you use Algodeal services, we make good faith efforts to provide you with access to your strategies and personal data and either to correct data or strategies if it is inaccurate or for deletion purposes.
  • Algodeal runs posted strategies against historical data sets and creates performance reports, such as the scorecard.
  • Algodeal may contact you in order to enter into an agreement allowing Algodeal to use your strategy.
  • Alogdeal will not sell, rent or otherwise share your personal information with any third parties except in the limited circumstances such as when we believe we are required to do so by law.
  • Algodeal requires opt-in consent from clients to access their strategies in order for Algodeal employees to operate, develop or improve our services. These individuals are bound by confidentiality obligations and may be subject to discipline, including termination and criminal prosecution, if they fail to meet these obligations.
  • If Algodeal becomes involved in a merger, acquisition, or any form of sale of some or all of its assets, the buying or newly formed entity will be bound to maintain the privacy policy rules of Algodeal.

How many of you have a Gmail account? Well, those who do should be able to understand the trade-off between posting source code of a strategy to Algodeal and leveraging the platform investment capability.

Don't have an Algodeal account yet? Get one here.

Benjamin Filippi
Managing Director

10 comments:

Anonymous said...

Great concept - when will you have a GUI based code generator to broaden the assumed initial target market beyond quant devs to include traders?

Benjamin Filippi said...

At this point we do not aim to create a meta language or pseudo language allowing a lego approach.

We have been contacted by independent developers coming more from a MetaTrader world willing to offer coding services to "non-geek" traders ( http://www.trading-automatique.fr/ in french... ). As soon as I have more english friendly geeks I will advertise for them as well.

We are also looking into simplifying our API and making as user friendly as possible.

Nicolas Vitale said...

I do not want to spam but as Benjamin speaks about us, I just would like to give some precisions.

We are also offering our services to english speaking traders ;-) http://www.trading-automatique.fr/consulting-and-programming-services.html

User friendly API is good, but for Algodeal I think we are expecting more "professional" API than the classical retail one as MQL4 ou EasyLanguage. But is just my opinion.

Benjamin Filippi said...

Thanks for the precision on your website Nicolas!

Joshua said...

This doesn't address my (and probably others) intellectual property concerns. There is nothing to prevent you from stealing someone's strategy and claiming (as per terms in the User/Quant contract) you already developed something significantly similar.

Furthermore, what's with being registered as a "limited liability one-man business with registered capital of 100 Euros"? That sets off alarm bells for me.

You need a stronger way to ensure our intellectual property. Comparisons to Google (a registered corporation with billions and a deserved reputation) don't cut it. Now I'm not saying that you would steal our work, but with it being so easy to do, the burden of proof that you won't is on you.

Benjamin Filippi said...

Josh

regarding the capital we waited for our AMF registration ( French SEC of FSA ) to go through. We had the approval end of March to operate as an investment company and we have the obligation to capitalise at the level of 600 K euros before June. Hopes this will stop your alarm bell then.

I know I will have to spend a lot of time justifying our business is not about your code but giving our investors access to a large set of strategies and you to their deep pockets.

I hope I gave you a start of an answer

Best

Ben

Anonymous said...

The google analogy just doesnt cut it at all. Drop it. It doesnt help your point at all.

At the end of the day there is no intellectual property to be lost in most peoples email use, and there is so much email that google will be hard pressed to find it in the very rare cases that there is.

We can upload our strategy, never hear from you again as you are sunning yourself with it in the Carabean.

Anonymous said...

I have developed and back tested my strategies in TradeStation Easy Language. I have setups to transmit signals to any platform and brokerage. Can I transmit the signal to your platform for testing. Redeveloping these strategies in another language or porting it to a new platform is tedious. Also the issue of security and proprietary content is taken care of.

I am interested in offering the signals for testing and for investors to subscribe or setup a fund. Please let me know your thoughts. Check out the website: www.chicagofuturestrading.com for performance data.

Regards,

Stan.

Eric Lefevre-Ardant said...

@anonymous we realize that it is difficult to make users confident that we won't steal the strategies. Some things like having an external auditor check what we do and publishing what happened during the year might help, we'll see.

We've also received some strategy authors in our offices in Paris so that we could establish a more personal relationship. That works well, so maybe we'll expand that in the future.

In the end, we want to be in business in the long run, because our main investor (a family office) has significant amounts to invest. And for this, we need to have a steady stream of new strategies. If it becomes known that we steal strategies, that won't last long (and our investors will not want to get a bad reputation themselves).

We also expect strategy authors to maintain their strategies regularly. We do not have the resources in house and we cannot know the strategies as well as the original authors.

I hope this makes our position clearer. Please do consider visiting us if you are in the vicinity.

Eric Lefevre-Ardant said...

@stan
We do not support sending signals to our platform. Our idea is that we will host the (selected) strategies ourselves. For this, we need not just to see the orders, but also to make sure that the strategy was not over-fitted.

In fact, we have seen many strategies that seem to get a high score, but in fact have made assumptions that are too risky in our view.

Also, we would like to get a portfolio of strategies that make different assumptions, in order to lower the risk. It is too difficult to see this in the signal.

Another thing is that, in practice, we will occasionally change the money allocated to a strategy. The code is the best indicator of that possibility.

In the end, we need to be able to select strategies for live trading. Just seeing the signal is not enough.

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