Renaissance Technology’s Atomic Clock Trading Algo Fails to Get U.K. Patent
(Bloomberg) -- Renaissance Technologies LLC’s quest to legally protect a valuable trading program that helps it outrun the competition has hit a snag in London.
The U.S. fund was denied a British patent for the computer system that enables it to synchronize trades across multiple exchanges at the same time. On Friday the quant giant, one of the industry’s most successful hedge funds, went to a London court in a bid to overturn the decision.
Renaissance has been trying to get patents for the similar systems in the U.K. and the U.S. since at least 2015. The invention consists of not only sophisticated algorithms and banks of computer servers located at financial exchanges, but atomic clocks -- precisely calibrated to vibrations of irradiated cesium atoms -- to sync orders to within a few billionths of a second.
The secretive fund, founded by mathematician and former code breaker Jim Simons, was refused the British application because patent officials found it to be nothing more “than an administrative step regarding the timing of transactions.” The firm’s U.S. application is still outstanding, according to patent records.
A spokesperson for Renaissance declined to comment on the suit.
With a patent, Renaissance can block competing firms from copying its approach, which would help the firm maintain its edge. The firm said it developed the system to prevent high-frequency traders from detecting its incoming orders only to race to another exchange to trade against them.
At the hearing Friday, Renaissance’s lawyer Nick Zweck sought to set aside the decision, saying the U.K.’s patent office was wrong to say that the system was a “business method” that couldn’t be protected from copying.
The system allows a large trade to be broken up into smaller orders and for them to then be placed simultaneously at multiple exchanges. By locating computer servers at the exchanges themselves, the fund gets around issues with latency or the time taken for the order to travel a distance to execute a trade.
“The invention solves this technical problem by providing a technical solution,” Zweck said. “A new physical arrangement of hardware is more than just a method of doing business.”
But lawyers for the patent office said that the arrangement of the servers near the exchanges, whether they be in New York, London or Hong Kong, simply circumvents time lags rather than reduces them with a new invention.
Renaissance mostly manages its own internal capital after investors pulled $11 billion from the fund in seven months. Meanwhile Renaissance insiders have been reaping fat returns, with Simons himself making billions of dollars last year alone.
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