Jane Street-Millennium Trade Secrets Fight Ends in Settlement

Jane Street Group and Millennium Management agreed to settle a lawsuit over the alleged theft of a secret billion-dollar India options trading strategy, effectively ending a court battle that captivated Wall Street.

In a filing Thursday in Manhattan federal court, the parties said they had agreed to dismiss Jane Street’s lawsuit against Millennium and two traders, Doug Schadewald and Daniel Spottiswood, who left the proprietary trading firm to join Izzy Englander’s hedge fund group earlier this year. Terms of the settlement were not disclosed.

The resolution ends a case that had pitted two of Wall Street’s biggest names against each other and raised the question of whether a trading strategy could be protected as a trade secret. The court fight also spotlighted international firms’ growing interest in the Indian securities market.

Jane Street sued Millennium, Schadewald and Spottiswood in April, claiming the two traders had taken an “immensely valuable” trading strategy with them. It later emerged at a court hearing that the strategy involved India options and had generated $1 billion in 2023 profits for Jane Street.

In separate statements, a Jane Street spokesperson and a lawyer for the two traders both said Thursday that the case was “resolved on mutually agreeable terms.” Millennium, where Schadewald and Spottiswood continue to work, declined to comment.

Novel Disputes

The allegedly stolen strategy as well as many other details of the case were redacted from court filings. But Schadewald, Spottiswood and Millennium disputed from the start that Jane Street’s strategy could be considered a trade secret.

The two traders claimed credit for building the Indian options business at Jane Street but said it was based on their experience and expertise rather than any secret “algorithms or automated signals.”

Though trade-secrets suits are fairly common on Wall Street, most have been over client lists and business plans. The Jane Street-Millennium fight was perhaps the highest-profile example of a more novel breed of disputes focusing on quantitative or automated trading activity itself.

Citadel Securities last year sued a pair of ex-employees alleging they took confidential strategies from the firm while forming a high-frequency crypto startup. BTIG LLC has accused rival brokerage StoneX Group Inc. of stealing code for automated trading technology.

Ryan Baker, an intellectual property lawyer in Los Angeles, said the law “contemplates formulas, methods or processes as trade secrets,” so is broad enough to cover trading strategies. The key is to show that the secret holds “independent economic value from not being known” and is being protected by reasonable efforts, Baker said.

‘Dumb Strategies’

US District Judge Paul Engelmayer, who oversaw the case, initially expressed skepticism about whether Jane Street had identified an actionable trade secret. He subsequently ordered Jane Street to provide a more detailed filing on its strategy and to share it with its former traders. However, the judge later threw out counterclaims by Millennium and traders, who argued Jane Street brought the suit in “bad faith.”

Jane Street recently highlighted alleged comments by Schadewald criticizing Millennium’s “dumb” strategies before he joined that firm, aiming to push back on defense arguments that the ones at issue in the case were “textbook.” If the strategies were well-known, other Millennium traders would have been using them, Jane Street said, but that hadn’t been the case.

“Indeed, before he joined Millennium, Schadewald derided Millennium’s volatility traders, saying ‘none of those guys can make money’ because ‘they all do the same dumb strategies,'” Jane Street said in its filing.

Schadewald’s alleged statements, part of a Jan. 18 text message conversation, came to light because, just before reaching a settlement, the parties were exchanging evidence in preparation for trial. The process threatened to make public more information both firms might prefer to keep to themselves.

For its part, Millennium touted Jane Street’s record profits from India trading since Schadewald and Spottiswood left to argue it suffered no economic harm from the alleged trade secrets theft. Millennium also unsuccessfully sought to force Jane Street to disclose the compensation of eight senior officers.

Record Revenue

The lawsuit also brought attention to Wall Street’s growing focus on India, where the options market has exploded in size in the last five years. Along with Jane Street and Millennium, Citadel Securities and Jump Trading have also become active in that market.

But the revelation that Jane Street was making billions raised eyebrows in India, as many retail investors have been suffering heavy losses in options trading. The country’s securities regulator in September introduced a set of measures aimed at shielding those small investors.

The settlement comes days after Bloomberg reported that Jane Street had $14.2 billion of net trading revenue for the first three quarters of 2024, already surpassing the 12-month record it set last year.

Jane Street said in April that the suit was the first it had brought against former employees, noting that it doesn’t require staffers to sign non-competition agreements. But Schadewald and Spottiswood, who said they left Jane Street largely due to unhappiness over pay, said their former employer was using the trade secrets case to try to intimidate other workers who might be thinking about leaving.

The case is Jane Street Group LLC v. Millennium Management LLC, 24 cv 02783, US District Court, Southern District of New York (Manhattan).

Top photo: Wall Street near the New York Stock Exchange in New York, US. Photographer: Michael Nagle/Bloomberg.