May 25, 2023
Jump Trading Star Quant Can’t Hold Secret Code in His Head to Take to Rival
(Bloomberg) -- The star quant trader at the heart of a London poaching lawsuit between Jump Trading LLC and a hedge fund said it was impossible to remember the millions of lines of secret code and then take them to set up lucrative strategies at a rival.
Lawyers for Damien Couture, who left Jump last March, said in a court filing that he had access to the high-frequency fund’s core software, but could never dream of retaining the code that underpins its trading models. He’s facing a suit from Jump accusing him of breaching a non-compete agreement and that he should be prevented from joining Verition Fund Management for as long as another year.
At Jump, Couture adapted the fund’s traditional focus on trading in fractions of seconds with strategies that traded over minutes or even longer. The fund’s lawyers said he was entrusted with confidential information that in some cases had a “shelf-life” of over two years.
“He is likely to cause immeasurable and, or, undiscoverable damage” to Jump by misusing secret information should he be allowed to breach the agreement, the fund’s lawyers said in a court filing. Jump has twice failed to block the move in court ahead of a trial later this year.
The lawsuit underscores the clamor for talent when it comes to algorithmic trading where secrets are fiercely guarded and firms will go to extreme lengths to protect. Courts in London have hosted funds quarreling over traders and their closely held trading strategies, which they argue can’t be unseen.
It’s also a sign that high-frequency traders and hedge funds are increasingly competing against each other. Lawyers for Jump said Verition, which has $6.7 billion under management, isn’t recognized as being as successful as Jump in quantitative “low and medium” frequency trading.
Read more: The Triple Jeopardy of a Chinese Quant Who Stole Hedge Fund Code
The claim explores the “unusual lengths” that Jump took to persuade Couture to join the firm in the summer of 2015. Couture was flown to the fund’s headquarters in Chicago and invited to a BBQ at the home of the chief operating officer, Matt Schrecengost. There he met senior members of the management team and their families a few weeks before signing his contract.
Couture was also among the highest paid of all employees in terms of base salary. By 2021, Couture’s bonus alone was set at around £1 million ($1.2 million), according to his lawyers.
The next year, Jump alleges that Couture was dishonest about his future plans, saying that he falsely told his managers he intended to set up a new low-frequency trading business and was looking for seed funding.
For his part, Couture denied that, and said that a Jump managing director told him that the fund wanted to enforce the non-compete agreement because “it did not want the other members of the trading team believing or assuming that they could leave.”
Couture denies that he breached any non-compete restrictions and argued the agreement was unique in that it could extend a further 12 months. Additionally, Jump was continuously tweaking its codes and as such, “confidential information becomes obsolete” within a year, his lawyers said.
The covenant was so broad it would “prohibit him from doing any role in financial services which he might reasonably have done. It would also lead to a significant atrophying of his skills,” they said. Jump is still paying Couture while the dispute plays out.
Lawyers for Couture and Verition didn’t comment on the suit and a lawyer for Jump didn’t respond to a request for comment.
Verition argued the agreement couldn’t even be enforced and it wouldn’t be seeking any of the secret information. “Mr. Couture has not been asked for this information, and will not be asked for the same by Verition.”
Couture said he irregularly accessed what is known as the Jet source code, the “backbone” of the trading software when seeking to investigate occasional errors in the high-frequency code. “It would not be possible for an individual to retain such code in their head.”
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