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SEC wants prospectus source code to be published
The US Securities and Exchange Commission are proposing new rules involving the prospectuses for public offerings of asset-backed securities including publishing the source code used to calculate the contractual cash flow provisions.
Requiring that the source code used to perform the financial modeling for a prospectus be made available is an excellent idea. A prospectus document contains a huge number of technical details and more importantly for anybody trying to understand the thinking behind it, a lots of assumption. Writing a program requires that all necessary details be enumerated and appropriately connected together and more importantly creating code that can be meaningfully executed usually means making explicit any assumptions that were previously implicit.
There are parallels here with having access to the source code and data used to make climate predictions.
The authors of the proposals are naive to think that simply requiring source to be written in a language for which there is an open source implementation (i.e., Python) is all they need to specify for others to duplicate the program output generated by the proposer (I have submitted some suggestions to the SEC about the issues that need to be addressed). The suggestions that a formally defined language be used is equally naive.
The availability of this source code opens up some interesting commercial prospects. No, not selling analysis tools to financial institutions but selling them program fault information, e.g., under circumstance X the program incorrectly predicts A will happen when in fact B will actually happen. Of course companies know this will happen and will put a lot more effort into ensuring that their models/code is correct.
Will these disclosure rules change the characteristics of financial software? One characteristic that I’m sure will change is the percentage of swear words in the comments and identifiers.
How not to treat loyal customers
The designer of Python is about to get some on-the-job education in how loyal customers should be treated. The latest release of Python, version 3.0, is the first that is “ever intentionally backwards incompatible”, see the release notes for the litany of broken constructs. Just in case customers are slow to get the message, this latest release is also 10% slower.
If, six months from now, most people/sites are running Python 3.0 we can deduce that very few significant programs are written in the language. On the other hand if very few people/sites are running Python 3.0 we can deduce that many users of the language have significant amounts of code written in the language. At least one measure of program language usage puts Python in the top 10, so there should be plenty of data points.
Should we expect some back-peddling in 2009? Perhaps not; the tone of the release notes is breathtakingly casual about the pain users will experience if they update, not even trying to soften the blow by selling the benefits of the latest release. The ‘you are with me or against me’ attitude is nailed to the mast with “It is not recommended to try to write source code that runs unchanged under both Python 2.6 and 3.0;”
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