Two Wall Street &#34;golden boys,&#34; using mysterious quantitative strategies, helped their company earn over a billion dollars in the Indian market.
Soon after, another well-paying hedge fund giant extended an olive branch to them.
They accepted the offer.
However, this triggered a fierce and protracted lawsuit between their old and new employers.
Recently, the case took an unexpected turn.
<h2>Involvement of Two Major Institutions</h2>
The case involves two extremely prominent buy-side institutions: Millennium and Jane Street.
Previously, the two institutions made headlines over the &#34;poaching of key employees&#34; incident and decided to take the matter to court.
As information about the case gradually emerged, the two employees, located in different places, were accused of &#34;taking confidential information&#34; when leaving Jane Street to join Millennium.
Surprisingly, the employees accused of &#34;defecting&#34; did not take &#34;confidential materials&#34; related to U.S. stocks, but rather involved a trading strategy for derivatives in an emerging country.
Their &#34;old employer&#34; made a profit of 1 billion dollars in just one year on the related &#34;confidential&#34; strategy.
Such a niche overseas strategy, which allowed the hedge fund to earn nearly &#34;a full pot,&#34; naturally led to a &#34;long-distance pursuit&#34; of the departing employees.
<h2>The Two Traders' &#34;Remote Collaboration&#34;</h2>
The two individual defendants involved—Douglas Schadewald and Daniel Spottiswood—both worked at Jane Street, but they were not located in the same place.
According to legal documents, at the time of the lawsuit, one was residing in New York, while the other was living in Hong Kong, both holding positions as traders at Millennium.
Due to limited information, we cannot ascertain whether the two worked in the same city while at Jane Street.
Both Jane Street and Millennium have offices in the aforementioned two cities.
Information shows that Douglas was employed at Jane Street from October 1, 2018, to February 5, 2024, while Daniel entered Jane Street as a summer intern in 2018 and was employed by the hedge fund from August 17, 2020, to February 23, 2024.
From the timeline, it can be seen that their departures were closely timed.
More critically, Douglas and Daniel did not have a &#34;gap period&#34; after leaving; they immediately joined Millennium in February 2024.
Regarding the work value of these two young individuals, Jane Street previously stated:
&#34;Jane Street spent years and significant capital... developing a profitable, confidential, and innovative trading strategy... Douglas and Daniel were deeply involved in the development and implementation of this specific proprietary strategy, thus possessing the most valuable proprietary and confidential information.&#34;
In the documents, Jane Street firmly asserted: &#34;(Before the two switched jobs) Jane Street had not found any evidence indicating that other institutions had discovered or implemented the involved trading strategy.&#34;
The two took away confidential information from their old employer and brought it to their new employer.
<h2>What Confidential Information is Involved</h2>
During the court hearing before the two giants reached a settlement, more key information was disclosed.
This Indian options trading strategy, embroiled in &#34;ownership&#34; disputes, generated up to $1 billion in profits for Jane Street Capital in just one year in 2023.
Capital Deep Dive found that the Indian stock index options market has rapidly expanded in the past two years, beginning to secure a place in the global securities market. It is reported that in 2019, India introduced weekly expiration contracts for stock index options, replacing traditional month-end expiration contracts, after which various investors began to pay more attention to this derivative.
According to statistics from the International Futures Industry Association, in the second quarter of 2024, the trading volume of stock index options on India's two major derivatives exchanges (National Stock Exchange of India, Bombay Stock Exchange) exceeded 36.8 billion contracts, doubling compared to the same period in 2023, and accounting for more than two-thirds of the global trading volume of futures and options across all exchanges.
Other statistics show that in February 2024, the nominal trading volume of futures and options in India reached $6 trillion.
By mid-October 2024, retail traders accounted for more than one-third of the trading volume in India's derivatives market, prompting the Securities and Exchange Board of India to issue a risk warning and triple the minimum trading amount.
It is evident that the trading varieties in which retail investors &#34;flock&#34; to participate naturally attract &#34;hunting&#34; by hedge institutions, enabling significant alpha excess returns.
<h2>Vague &#34;Millions of Dollars&#34;</h2>
When Jane Street Capital filed a lawsuit in April 2024, it mentioned a &#34;sensitive information&#34; in the documents:
&#34;Based on information and belief, Millennium provided Douglas with millions of dollars to avoid the risks, time, and costs required to independently develop a successful trading strategy; this carefully orchestrated plan is currently and/or will bring significant unexpected gains to Millennium, at the expense of Jane Street Capital's interests.&#34;
In Jane Street Capital's view, Millennium, as a competitor, spent millions to pry away &#34;exclusive code.&#34; However, the aforementioned &#34;sensitive information&#34; is quite vague; how much money is specifically involved?
What is the nature of this money?
How was this information obtained?
The outside world does not know.
<h2>Settlement Between Both Parties</h2>
A few days ago, Jane Street Capital reached a settlement with Millennium and the two involved employees in the Federal Court of Manhattan, New York, but the specific terms of the settlement were not disclosed.
It is reported that in the U.S. legal system, a settlement refers to an agreement reached through negotiation between the parties involved during the litigation process, without seeking a court judgment.
Generally speaking, the specific content of a settlement agreement is confidential, and the compensation amount involved is not disclosed to the public, as settlements help protect trade secrets or the reputations of both parties.
This case was exposed to the public in April of this year and reached a settlement in early December of this year, with the process being quite tumultuous
In the relevant court documents, the core strategic details alleged to have been stolen have all been &#34;edited.&#34; However, the defendants have raised objections from the beginning regarding whether the strategies of Jianjie Capital can be considered trade secrets.
The two traders further claimed that the Indian options model they created during their time at Jianjie Capital was based on their own experience and expertise, rather than any secret &#34;algorithms or automated signals.&#34;
As of now, the case has &#34;suddenly concluded,&#34; but it has revealed that hedge funds are targeting the Indian options market, which can be considered a significant clue!

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