UPDATE 1-US jury starts hearing SocGen code theft case

* Charged with copying and printing secret trading code

* Faces maximum 10 years imprisonment if convicted

* New York trial expected to last two weeks (Adds evidence of notes, testimony, lawyer quotes)

By Grant McCool

NEW YORK, Nov 9 (Reuters) - A former Societe Generale (SOGN.PA) trader was no run-of-the-mill thief but someone who stole valuable secret computer code from the French bank's lucrative high-frequency trading system to use at a new job, a U.S. prosecutor told a jury on Tuesday.

A lawyer for Samarth Agrawal, 27, the accused man, told the jury that Agrawal had stolen nothing and would testify during the two week-long trial in U.S. District Court in Manhattan. [ID:nN08225152]

"Samarth Agrawal was a thief, but he wasn't just an ordinary thief," prosecutor Thomas Brown said in opening arguments. "He didn't steal cash or gold or diamonds. He stole something much more valuable. He stole a powerful way to make millions of dollars on the stock market."

A citizen of India, Agrawal was arrested on April 19 after U.S. prosecutors accused him of copying and printing the Societe Generale code last year so he could build a similar system for Tower Research Capital LLC hedge fund, which had offered him a job.

Under questioning by Agrawal's lawyer, the government's first witness, a former Tower partner, testified that Tower had wooed Agrawal in part to establish a competitor within the company to David Faucon, the person credited with designing the original SocGen system. Faucon is chief executive of an arm of Tower.

Agrawal's lawyer, Ivan Fisher, told the jury in his opening statement that "Mr Agrawal is not a thief. He stole nothing." Agrawal had permission from supervisors to have access to the code and to take it home with him, Fisher argued.

High-frequency trading, or high-speed automated trading, has become an increasingly important business, generating millions in profits for banks and brokerages. The algorithmic code that each institution uses is a closely guarded secret.

The trading in shares by computers takes place in milliseconds and it came under scrutiny by securities regulators after the May 6 stock market "flash crash". [ID:nN03293998]

NOTES AND PRINTOUTS

During testimony by the government's first witness, former Tower partner Prashant Lal, prosecutors showed jurors transcripts of recorded conversations between Agrawal and Tower representatives discussing the trader's notes.

"I have lots of notes, which legally I can share with you once," Agrawal said, according to the transcript in evidence. "Whatever I can ask, I am asking and writing it, so my room right now looks like ... a zoo."

The government says that when FBI agents arrested Agrawal they found more than 500 pages of algorithmic code and notes in the bedroom of his apartment in Jersey City, New Jersey.

Agrawal, dressed in a dark suit, sat almost expressionless in court. He has been jailed since his arrest. When he first arrived to sit at the defense table, he turned back to smile at his parents, who traveled from India to attend the trial.

The former trader, who worked at SocGen's New York office from March 2007 to November 2009, faces a maximum of 10 years in prison if convicted of theft of trade secrets.

His lawyer told the jury that a supervisor of the SocGen system, Richard Idris, copied units of the code into a computer folder for Agrawal. Fisher said this was done to comply with orders from a manager, Marc Buchdahl.

"Buchdahl said, take it home and work on it weekends, that's how Mr Agrawal obtained these documents, these printouts, that's why he brought them home," Agrawal's lawyer said.

A spokesman for the bank has declined to comment on the trial. A representative for Tower also declined to comment.

The case echoed the July 2009 arrest of a former computer programmer of Wall Street's most influential bank, Goldman Sachs Group Inc(GS.N).

The trial of the programmer, Sergey Aleynikov, is scheduled for Nov. 29. He has been accused of stealing code in 2009 to take to his new employer, Teza Technologies LLC, a high-frequency trading start-up in Chicago. [ID:nN05231272]

The cases are USA v Agrawal, U.S. District Court for the Southern District of New York, No. 10-417 and USA v. Aleynikov in the same court No. 10-96. (Reporting by Grant McCool; Editing by Gary Hill)