1. Everyone is getting very excited about the alleged theft of Goldman algorithmic trading code. The truth is, as far as I can judge, that there is quite an appreciable level of transfer of algorithms and ideas between proprietary trading groups, and that this kind of thing happens much more often than people let on. People on all sides of the Street tend to embrace people who come to their firm from other firms with ideas (not code) and bitterly resent those who leave, unless they’re the ones leaving. The whole US economy and market is not going to collapse because of this, or it would have already. Or maybe that’s why it did ?

2. Someone principled and old-fashioned briefly bemoaned to me last week the fact that such a large fraction of daily stock trading volume was being run by hedge funds and investment banks doing algorithmic trading. Wasn’t investment supposed to be governed by the aim of directing scarce resources to productive use in the economy?

I wanted to make the standard argument that all this algorithmic trading led to greater efficiency and execution and a more rapid approach to fair value, but I didn’t. Instead I simply said that there is no turning back the clock, and we agreed on that.

Still, the recent Reuters headline “AQR Launches Momentum Funds for Retail Clients” made me think again about the way in which the icing on the cake has a tendency to become the biggest part of it.