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tablebear
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Joined: January 18th, 2011, 8:02 pm

is a 2 year non-compete common?

January 19th, 2011, 6:25 pm

I just got an offer from a US firm that has a non-compete clause for 2 years after termination of employment for any reason. The clause says I can't work in any firm with similar trading strategies anywhere in the world. No compensation for this clause is mentioned. It's for a position pretty much at the core of of the firm's strategies, but not in management.Anyone else dealt with / dealing with the same situation? Is it likely to severely limit negotiating power? Thoughts and suggestions are welcome.
 
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Hansi
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Joined: January 25th, 2010, 11:47 am

is a 2 year non-compete common?

January 19th, 2011, 6:45 pm

Check the search, there are a few threads dealing with the same issue.
 
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frank255
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Joined: January 17th, 2011, 4:07 pm

is a 2 year non-compete common?

January 19th, 2011, 6:46 pm

I read up about these once and one thing I took away is they're serious about it they'll offer some sort of compensation for it. If you take compensation it's somewhat more likely to get upheld depending on where you are.Joel has some nice thoughts on this: http://www.joelonsoftware.com/articles/ ... 00071.html
 
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tablebear
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Joined: January 18th, 2011, 8:02 pm

is a 2 year non-compete common?

January 19th, 2011, 7:10 pm

Thanks!I agree with Joel on this one. I know tribalism and tribal attrition is somewhat common in finance, but non-competes seem like a very heavy handed way in dealing with it. From what I have read as well, firms are usually not serious about enforcing it, but they just want the option of making it difficult for you to work for a competitor in case you hold a lot of their secrets when you leave. I wonder how it might affect raises, promotions and bonuses while you are still working at their firm though.
 
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DominicConnor
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Joined: July 14th, 2002, 3:00 am

is a 2 year non-compete common?

January 21st, 2011, 5:52 pm

tablebear is right on both counts, it's to improve their negotiating position.Also be aware that the people you are dealing with today may not be in the same position in a few years time.A scenario that's easy to see is where a new boss comes in, he isn't a great fan of your work, and certainly ain't your friend. Want this guy to have a two year veto on getting paid ?Your firm may get taken over and shaft you on bonus, what are you going to do... leave ?oops you can't so if they offer to pay you in equity in a non-listed firm, you'll be happy with that OK ?The term "similar trading strategies" completely bewilders me.I'd bet money that their strategies have mean reversion in them.That's not a deep insight of mine, just an observation that a large of all strategies have some MR in there somewhere, it's not unknown for there to be relatively little else.Maybe also volume weighting, maybe they use regression to estimate some values ?Perhaps they use C++ ?You should see where I'm going here...To someone outside the industry, ie a court, I would given even money that I could knock up a strategy "similar" to yours, even though I have never seen it, and you haven't actually said you have one.If I were your headhunter (and by this point you ought to be wishing I was), I'd already have done a couple of things...First I'd have got a reassuringly expensive lawyer to check the contract, that lawyer needs to be familiar with the very specific laws where the contract is hosted. Be aware that just because you are in NY and the firm is in NY, it may not be NY law, or it may be, it's like that.Oh yes, and the law may change during the life of the contract. Enjoy.If there is no cost to screwing with you, but a potential downside of you competing against them, then they have a strong incentive.Also, if you disclose to a future employer that you have this term, it's going to be really rather tougher to get a job, and after a two year break, your career is unlikely to be so good.It may even be the case that it makes you someone they choose to fire. Given the choice of letting go two employees of equal value in a team, one with a short non-compete, one with a longer one, the incentive is to fire they guy who will compete with them less, which in this case is you. So we have to take the worst case scenario, but negotiate as if we are bestest friends.I'd certainly push hard for compensation that reduces their incentive to screw you, and gives you income if they veto your next job.For a start you need a good leaver/bad leaver clause. Basically if they fire you without good cause, or make you redundant, then the shut out period is cut hard, and it is longer if you quit.A good structure is that they must pay you a fixed % of your pay including bonus for as long as they want you not to work.A basic piece of economics is that zero price = infinite demandThis needs a little finesse, because stopping you taking job A may mean that it takes a while for decent job B to turn up.Another counter offer is to say you will give X notice and Y gardening leave where you can't work for anyone else, but again you are paid.tablbear asks:"I wonder how it might affect raises, promotions and bonuses while you are still working at their firm though.Bonuses are incentives not to leave, if your incentive to leave is reduced, then the pressure is downward on your bonus.
Last edited by DominicConnor on January 20th, 2011, 11:00 pm, edited 1 time in total.
 
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tu160
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Joined: October 23rd, 2007, 1:14 pm

is a 2 year non-compete common?

January 22nd, 2011, 3:03 am

Last edited by tu160 on December 9th, 2011, 11:00 pm, edited 1 time in total.
 
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DominicConnor
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Joined: July 14th, 2002, 3:00 am

is a 2 year non-compete common?

January 22nd, 2011, 4:12 pm

TU160 yes, you're right, gosh some people might use both CORRELATION and MEAN Reversion !!!!!!!!!With an algo trading strategy like that one could but the world with the profits We're both being facetious here, but you're casting the dice if you think that you can prove that your strategy is in no way similar to a court, and even so it is expensive.TU160 is also right that they may go after your next employer, though there exist things one can do about that...
 
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tu160
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Joined: October 23rd, 2007, 1:14 pm

is a 2 year non-compete common?

January 22nd, 2011, 11:34 pm

QuoteOriginally posted by: DominicConnorWe're both being facetious here, but you're casting the dice if you think that you can prove that your strategy is in no way similar to a court, and even so it is expensive. TU160 is also right that they may go after your next employer, though there exist things one can do about that...Could you elaborate a little? I am especially curious about certain situation: let say I run equity derivatives desk in a huge bank and I want to hire somebody with NCA in commodities. There are definitely commodity desks in my bank. How could I handle this situation and prove that my new employee will not participate in commodity component of our business?
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