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Morning Coffee: 26-year-old trader & colleague accused of selling Jane Street's "shocking" secret. 91-year-old hedge fund legend's approach to longevity

As electronic trading employers go, Jane Street is relatively chill. As we noted recently, it doesn't impose non-competes to prevent its people joining other firms when they leave. In its own words, it prides itself on an "open collaborative culture." But it does react when necessary.

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Two ex-Jane Street traders have provoked a reaction. Daniel Spottiswood, who graduated from Duke University in 2020 and who we estimate to be circa 26-years-old, and Doug Schadewald, a longer-in-the-tooth Harvard mathematics graduate in his mid-30s, have prompted Jane Street to make its first ever attempt to sue former employees. The firm is accusing Spottiswood and Schadewald of taking a very lucrative and very secret trading strategy to hedge fund Millennium, which it's suing too. 

Millennium declined to comment on the allegations, which are detailed here. Jane Street claims that Millennium offered Schadewald, who'd worked there for six years and who was head of its S&P 500 options desk, an "atypical and above market" amount of money to move to the hedge fund. Millennium's lavishness reportedly included a “significant pay increase” and “profit sharing arrangement.” It's not clear how much the more junior Spottiswood received, but Jane Street says the big pay for his boss reflects the expectation that Schadewald would deploy the mysterious money-making strategy there. By poaching Schadewald in particular and by paying him “millions of dollars," Jane Street says Millennium intended to "avoid the time, risk and expense of developing its own successful trading strategy.”

It's not clear what the secret strategy is exactly, but the Financial Times notes that it's not actually based on “sophisticated automated computer programmed trades.” Bloomberg observes that it's based on "certain signals and strategies, and methods of analyzing and interpreting those signals." It involved "inconsistencies" and understanding of "latencies" and "inefficiencies." Jane Street says Schadewald "repeatedly stressed how unusual and counterintuitive" the strategy was, and that Spottiswood was "consistently shocked" at its profitability. Either way, the mystery strategy can "reliably predict future market activity." 

In the absence of the industry-standard non-compete agreements, which can last as long as two years for senior people and which are even imposed on junior quants at rival firms, Spottiswood and Schadewald left Jane Street and went to work almost immediately at Millennium. Jane Street claims that it became aware that the two men were deploying its secret strategy in their new jobs at the hedge fund when, "a new entity entered the market and placed trades mirroring the Trading Strategy.” Jane Street's own trading profits then fell 50%, and it says a broking firm stopped dealing with it because someone else was using a strategy the same as its own. 

Curiously, even though the strategy is top secret and very valuable, Jane Street appears to have revealed it to its interns in the past. Its complaint notes that Spottiswood, who was himself an intern at Jane Street before he joined full-time, advised the firm against making the strategy available to interns because of the risk of IP (intellectual property) "leakage." 

Separately, if you've worked in financial services for a few years and are feeling tired, then former mathematics professor and hedge fund manager, Edward Thorp, has some tips. 

Aged 91, Thorpe weighs 155 pounds — only 2 pounds above his weight at age 17—and can do two chin-ups and 15 pushups. Bloomberg says he's devoted considerable time to studying how to live long and stay young. It includes "defense" (minimizing bad outcomes like car accidents or skiing accidents, eating carefully and exercising - but not too much) and proactivity (regular checkups). If you exercise moderately and eat well, Thorpe thinks you can add six years to your lifespan. 

Meanwhile....

Macro trader Ben Melkman is joining Bridgewater, where he will be a peer to the deputy CIOs and will seemingly be building a macro team. (Twitter/X) 

Jamie Dimon didn't sound optimistic on Friday, even before the attack on Israel. "The global landscape is unsettling—terrible wars and violence continue to cause suffering, and geopolitical tensions are growing. Second, there seems to be a large number of persistent inflationary pressures, which may likely continue. And finally, we have never truly experienced the full effect of quantitative tightening on this scale. We do not know how these factors will play out." (Bloomberg) 

UBS hired two more bankers from Barclays in the US: Kevin Cullinan and William Burns are joining as MDs in TMT. (Financial News) 

Barclays hired Rafael Abati from UBS (and Credit Suisse) as co-head of its energy transition group in Europe, the Middle East and Africa. (Financial News) 

Goldman Sachs appointed consumer technology banker Cosmo Roe as head of global luxury and beauty. “Although we’re going through a slightly more fragile time in terms of consumer demand, I think the long-term thesis around structural growth in the luxury market [remains intact].”  (Yahoo) 

Ruffer asset management is cutting 20 jobs. “Too many of the things which were meant to go down went up, and a few — only a few — of the things that were meant to go up went down”. (Financial Times) 

A Deutsche Bank analyst quit his job to found a restaurant chain and works harder than ever. He curtailed his honeymoon to attend a restaurant opening. “I felt like I needed to be there and make sure that we were preparing properly for the opening. In hindsight, I would never do that. But when you’re in the thick of it, you lose perspective.” (Fortune

Jung's five pillars of a good life: Good physical and mental health; good personal and intimate relations, such as those of marriage, family, and friendships; seeing beauty in art and in nature; a reasonable standard of living and satisfactory work; a philosophical or religious outlook that fosters resilience. (Atlantic) 

How to remove yourself from the hedonic treadmill. (Vox) 

After 22 years at Goldman Sachs in London, a banker left to become a vicar. "I feel a lot of joy and a strong sense of purpose, particularly being so close to the pain and need in the world." (Business Insider) 

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AUTHORSarah Butcher Global Editor

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