Morning Coffee: The difference between earning $500k and $2m in algo trading.  Jefferies cut an MD weeks before bonuses

As the old proverb has it, if you constantly demand the impossible, you will inevitably get the unethical.  Evan Pfeuffer, a former managing director a trading platform, may have reason to meditate on that, if his testimony in an ongoing lawsuit is anything to go by.

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Pfeuffer, who was working for trading platform BTIG, says he received a "very aggressive" pitch to move to a new job at rival trading platform StoneX, which was building its own algorithmic trading offering. As its starting pitch, StoneX offered him a $300k basic salary with a $200k bonus guaranteed in his first year. However, if Pfeuffer outperformed, he was told he might be able to earn $2m.

That turned out to be a big ask. Pfeuffer says he was set some “completely unrealistic” deadlines for getting the new systems up and running at StoneX, and that he was under “enormous pressure” to modernize StoneX's lagging technology because the firm had made unrealistic promises to shareholders that it would deliver automated trading systems within a year.

Can you guess what happened next? BTIG says Stonex wanted to steal BTIG code for its own trading systems. Unusually, Pfeuffer agrees. He's been saying things like, "I smuggled code out of BTIG in ways carefully designed to avoid detection by BTIG’s security and compliance monitoring,” and “StoneX’s management instructed us to copy code, product designs, and whatever else was needed so that we could avoid the years it would otherwise take to build StoneX’s systems and products from scratch.”

StoneX says these allegations are "baseless" and is defending itself. 

Pfeuffer's statements, however, provide an interesting perspective on what it's like when you're aggressively hired from your electronic trading job by a rival firm, and what might be expected of you. At the bottom of the case is the fact that StoneX wanted to get into algorithmic trading and needed someone experienced in writing code to build systems.  Pfeuffer was that person, and StoneX wanted him badly. It wasn't all (allegedly) about stealing code. Pfeuffer says there were also suggestions that he might want to “code from memory” some of the work he had previously done for BTIG. BTIG has brought claims against both of the employees that Pfeuffer recruited from them, but not against Pfeuffer himself.

As ever, it's complicated. People are allowed to move jobs, and they are allowed to work in the new place using the skills they have acquired over the course of their career. Pfeuffer claims in the latest affidavit that he actually stole code from BTIG by scrambling it and emailing it to himself, but on a previous occasion he said otherwise. “Coding from memory” isn’t necessarily or obviously a crime – there are only so many ways to write an algorithm, and most of them aren’t trade secrets.

All you can really conclude from the current case is that if someone has offered you two million dollars to do something you think is impossible, you might want to re-evaluate some of the choices that led you to this point.

Elsewhere, the financial year for Jefferies ends in ten days’ time, which is one of the reasons why it’s typically the first major Wall Street firm to pay bonuses. Consequently, someone leaving Jefferies around this time of year is unusual – it’s like leaving a bulge bracket firm in January, or a European major at any time in Q1.  But Global Capital is reporting not only that Jefferies has parted company with Aaron Fernandes, its co-head of Asian and European emerging markets, but it was the company that let him go.

Back in 2017, Fernandes was considered a “big hire” from Barclays and there’s currently no clues to be gained from his LinkedIn page, which was reposting favourable news stories about Jefferies as recently as a month ago.  When this sort of thing happens, there’s usually some sort of story to it which eventually comes out, but for the time being, the most important implication is that Fernandes won’t necessarily be having his past bonuses clawed back.

Meanwhile …

Ken Griffin confirms that we have reached “Peak Pod-shop” and that asset flows into multistrategy hedge funds are “basically a push”.  He also suggests that the “basis trade” (a very profitable but potentially crisis-generating hedge fund speciality dominated by athletes called Jonathan) is on its way out. (Bloomberg)

The trouble with setting up a fintech culture is that people object vehemently if you want to get a bit more bankerish.  Staff at Starling Bank are being asked to come in to the office for ten days a month and (as well as pointing out that the company doesn’t actually have enough desks for them to all do that at the moment), they have responded by accusing the CEO of creating a “bland grey corporate hellscape filled with dead-eyed zombies who care about nothing more than doing the bare minimum, clocking off and collecting a paycheque”. (Finextra)

Having noticed that larger banks have all but abandoned the oil and gas sector in favour of deals with better ESG credentials, UK boutique Shore Capital is assembling a dream team of bankers to take market share. (Financial News)

Jes Staley’s attempt to clear his name after leaving Barclays has now reached the British courts, so he can expect an extremely painful period in his life to be very publicly religated.  So far, we’ve already heard that it was a tip-off from JPMorgan which caused the Financial Conduct Authority to start asking questions about his association with Jeffrey Epstein, and that Epstein kept on emailing Staley’s (adult) daughter. (Bloomberg)

Leveraged finance bankers at SocGen in London would be well advised to practice self-control if they happen to have a naturally puerile sense of humour – their new boss will be former NatWest banker Etienne Hairy. (Financial News)

There must be someone in your office or on the trading floor who is suitable for nomination to the Dull Men’s Club, which currently has 1.3 million members (NY Magazine)

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