How One Goldman Sachs Trader Made More Than $100M • Hacker News Board

Re: How One Goldman Sachs Trader Made More Than $100M

#101

Post by riskneural » Thu, Oct 20, 2016, 8:46 AM UTC

mathattack wrote: post #54

lordnacho wrote: post #18

Like the article says, it's very hard to distinguish between market making and prop trading. Especially in illiquid stuff like corporate bonds, the MM needs to hold positions for extended durations, so they have a valid excuse to not be closed down entirely by Volcker. The real reason they make all that money is flow. The guy on a desk like that knows what customers are calling, what they're concerned about, roughly…

Surprised their VAR (which is a crap way to measure risk) is not even halved in relation to before the crisis. People were definitely chucking it about back then, and the mood these days is like a morgue. If you get better at measuring risk, VAR can go up. For instance, if your models assume that asset classes act in an uncorrelated manner, then VAR may be very low. You improve the model to capture correlation, and V…

Expected shortfall, the average of the worst five percent of events, I like more. Easy in Monte Carlo, not analytically.

Re: How One Goldman Sachs Trader Made More Than $100M

#102

Post by lmm » Thu, Oct 20, 2016, 8:51 AM UTC

smallnamespace wrote: post #42

jhulla wrote: post #23

Earlier quoted context omitted.

Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…

If you prevent banks from doing the riskier forms of market making, then that responsibility will move to firms that don't have access to customer deposits. Because their capital base is less stable, they will be more prone to stop making markets precisely when you need them most. That will probably make extreme volatility events like flash crashes much more likely. This is already happening today to some extent: [1]…

That's fine. The market is effectively becoming more sensitive; it's reacting to news quicker, rather than creating an illusion of stability.

Re: How One Goldman Sachs Trader Made More Than $100M

#103

Post by ptaipale » Thu, Oct 20, 2016, 9:02 AM UTC

TwoFactor wrote: post #17

temuze wrote: post #6

How to get around the WSJ paywall: - Copy the URL - Paste the URL into the Facebook textbox where you would create a post - Click on the preview, so the referrer url is Facebook Could probably make a Chrome extension for this...

Click the "web" link under the article title, then click on the first result.

And when you click the first result, open it in incognito/private window. Otherwise WSJ sees your cookies and knows you've been there before.

Re: How One Goldman Sachs Trader Made More Than $100M

#104

Post by osullivj » Thu, Oct 20, 2016, 9:05 AM UTC

Sarki wrote: post #99

nstj wrote: post #83

@dang - the profits were for the firm, so the title is clickbaitish. Suggested alternative: "How One Goldman Sachs Trader Made His Firm More Than $100m"

"The gains were the work of Tom Malafronte, a managing director on the bank’s high-yield-bond desk in New York." A "Managing Director" so I'm pretty certain that he didn't do it himself, his team(s) did. Frankly annoyed by this recurrent praise for management people, at this level such a guy never dips a toe in the trenches.

MD on a major bank trading floor is very much a hands on job. Probably supervising between 2 & 20 junior traders, ultimately tesponsible for their positions, and setting strategy. An IT MD in a bank would have headcount in the 100s.

Re: How One Goldman Sachs Trader Made More Than $100M

#105

Post by MagnumOpus » Thu, Oct 20, 2016, 9:26 AM UTC

ksec wrote: post #91

alfalfasprout wrote: post #66

Earlier quoted context omitted.

He'll likely get something in the ballpark of 5-10% as bonus. That's the typical rate at a desk where he's primarily making money from flow.

So he make 5-10M Bonus? Is this a lot in Investment Banks? ( Absolutely no idea about their payscale. )

It is a lot, but it is not unheard of.

An average well-established seasoned trader might earn anywhere between 400k and 2m a year dependent on luck and skill and general company profitability - but in every given year, there are probably a few dozen traders in every top-10 investment bank who make 10 million plus (though they are generally heads of desks or the partners in charge anyway).

Re: How One Goldman Sachs Trader Made More Than $100M

#106

Post by zump » Thu, Oct 20, 2016, 9:38 AM UTC

osullivj wrote: post #104

Sarki wrote: post #99

Earlier quoted context omitted.

"The gains were the work of Tom Malafronte, a managing director on the bank’s high-yield-bond desk in New York." A "Managing Director" so I'm pretty certain that he didn't do it himself, his team(s) did. Frankly annoyed by this recurrent praise for management people, at this level such a guy never dips a toe in the trenches.

MD on a major bank trading floor is very much a hands on job. Probably supervising between 2 & 20 junior traders, ultimately tesponsible for their positions, and setting strategy. An IT MD in a bank would have headcount in the 100s.

What's their bonus like?

Re: How One Goldman Sachs Trader Made More Than $100M

#107

Post by zump » Thu, Oct 20, 2016, 9:40 AM UTC

ksec wrote: post #91

alfalfasprout wrote: post #66

Earlier quoted context omitted.

He'll likely get something in the ballpark of 5-10% as bonus. That's the typical rate at a desk where he's primarily making money from flow.

So he make 5-10M Bonus? Is this a lot in Investment Banks? ( Absolutely no idea about their payscale. )

Question.. if employees at a bank are making these kind of salaries, why doesn't everyone do it?

Re: How One Goldman Sachs Trader Made More Than $100M

#108

Post by nstj » Thu, Oct 20, 2016, 10:31 AM UTC

Sarki wrote: post #99

nstj wrote: post #83

@dang - the profits were for the firm, so the title is clickbaitish. Suggested alternative: "How One Goldman Sachs Trader Made His Firm More Than $100m"

"The gains were the work of Tom Malafronte, a managing director on the bank’s high-yield-bond desk in New York." A "Managing Director" so I'm pretty certain that he didn't do it himself, his team(s) did. Frankly annoyed by this recurrent praise for management people, at this level such a guy never dips a toe in the trenches.

What's a management person?

Re: How One Goldman Sachs Trader Made More Than $100M

#109

Post by missbit » Thu, Oct 20, 2016, 10:46 AM UTC

jhulla wrote: post #80

smallnamespace wrote: post #42

Earlier quoted context omitted.

If you prevent banks from doing the riskier forms of market making, then that responsibility will move to firms that don't have access to customer deposits. Because their capital base is less stable, they will be more prone to stop making markets precisely when you need them most. That will probably make extreme volatility events like flash crashes much more likely. This is already happening today to some extent: [1]…

There is always a market for your asset. You might not like the price. Market makers that are not tied to TBTF banks would actually be more responsible because there is no safety net. Aggressive traders who understand market structure can and will profit. I remember flash crash days - my trading platform stopped responding - I could not get quotes and I could not do trades. I desperately wanted get a fill at the flas…

which platform was that? I am on IB & schwab. I've noticed on high volume days the Schwab desktop platform is not as available. Plus, Schwab has no up/down status page. Interactive Brokers has been more available & has the up/down status.

Re: How One Goldman Sachs Trader Made More Than $100M

#110

Post by missbit » Thu, Oct 20, 2016, 10:53 AM UTC

jhulla wrote: post #23

lordnacho wrote: post #18

Like the article says, it's very hard to distinguish between market making and prop trading. Especially in illiquid stuff like corporate bonds, the MM needs to hold positions for extended durations, so they have a valid excuse to not be closed down entirely by Volcker. The real reason they make all that money is flow. The guy on a desk like that knows what customers are calling, what they're concerned about, roughly…

Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…

Could AI be used to simply monitor markets & look for asset bubbles forming? Just to give a warning sign to regulators?