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The Quants Run Wall Street Now

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Re: The Quants Run Wall Street Now

#131

Post by SEJeff »

tptacek wrote: post #69
SEJeff wrote: post #61

Earlier quoted context omitted.

This is massively incorrect. If Virtu only made $1 trading, they would still make massive amount of $$$ via exchange rebates, as they are a designated market maker. In fact, they aren't the only market maker that does this. A market maker guarantees they'll take trades on both sides of the book, so long as their strategies aren't grotesquely losing, they'll always come out ahead due to exchange rebates. http://www.in…

For whatever it's worth and on the off chance that this short-circuits a really common message board pathology, and allowing that I'm only commenting here because I read all of Kasey's comments: he's got HFT experience too. I think he's just saying that particular metric is missing context: a lot of crappy businesses could claim never to have lost a dollar trading, while still as businesses losing tens or hundreds of…

Ah fair enough, in that case I'd agree, but it didn't appear to be what he was saying in the comment I responded to. I've got going on 10 years of HFT experience as a Software Eng / Systems monkey and try to at least set the record straight. If you don't understand simple HFT economics such as Maker/Taker rebates, you have absolutely no business whatsoever commenting on market making firms, especially Virtu, which is fundamentally (until they close their KCG acquisition and do execution for more banks at least) a very large and very sophisticated Designated Market Maker.

I'm only responding to you, because you're my fav HN personality and tend to have a lot of interesting things to say at ChiSec :)

Re: The Quants Run Wall Street Now

#132

Post by nullnilvoid »

nradov wrote: post #126
nullnilvoid wrote: post #118

Earlier quoted context omitted.

Why do the poor have to get a second job in order to get 2x margin? Why do they have to jump through the hoop when the rich don't have to? If the poor have $2,000, why cannot they use margin as leverage? The opportunities are not equal there.

Why is life not perfectly fair for everyone? If the margin trading limit was lower then the news would be full of sob stories about how greedy brokerages let unsophisticated people get in over their heads and then took their life's savings on a margin call. Sometimes stocks go down.

It is not fair for everyone. But this is an artificial, unneeded hoop that could be easily removed. If we set it at $25,000, does that prevent "unsophisticated people take their life's savings on a margin call"?

Re: The Quants Run Wall Street Now

#133

Post by brobinson »

matheweis wrote: post #106
dsacco wrote: post #79

Earlier quoted context omitted.

I trade options using Livevol data. Good historical options data doesn't come cheaper than about $3,000/year (I'm willing and grateful to be proven wrong, but I've looked).

CBOE (the actual exchange) is about $500 per symbol for EOD + greeks for the entire last ~15 years.

How valuable is EOD data actually?

I saw that the CBOE also offers 3:45pm data before the spreads widen up (sometimes drastically) when positions get unwound.

Re: The Quants Run Wall Street Now

#134

Post by mrkgnao »

yourapostasy wrote: post #125
dsacco wrote: post #81

Earlier quoted context omitted.

There are a few reasons. 1. Almost all buyers are institutional funds or individuals with the means to trade as well-informed investors. To put it succinctly, they're in it as serious business, because it's incredibly expensive. They have no incentive to make the edge they just purchased for five - six figures public. 2. These vendors go to various lengths to protect the data, including steganographic "trap streets"…

Sorry, I should have clarified my question. Why aren't the exchanges themselves publishing the data onto torrents? My layman's understanding is the more actors that participate on the exchanges, the more volume, the more the exchanges profit. If this is true, then making the historical trading data would encourage more entrants onto the exchanges, and the exchanges would earn far more than selling the data to a few l…

I think it's not like there are tons of qualified people with a great interest in quant-y things whose only barrier to entry is a lack of data. It's sort of a monopoly+monopsony thing (I guess, this is highly likely wrong) where there's no incentive to expanding sales further because you're already hitting almost the entire market, and entry to the market isn't a problem for potential buyers.

Re: The Quants Run Wall Street Now

#135

Post by princeb »

tptacek wrote: post #46
cheez wrote: post #26

Earlier quoted context omitted.

For the most part, execution does not require high math, but the modeling required to find arbitrage or alpha does. So for example, managing an index weight fund is simple on the face of it but when and how you choose to rebalance your portfolio can affect your drift. This is the part that requires high math. This is even more important if you're talking a billion dollar fund as opposed to a 100,000 personal account.

What's the "high math" we're talking about here? Stochastic calculus?

for index funds the core problems are estimating risk and return, minimizing effect of uncertainty and std err on portfolio tracking, and fast optimization for large portfolios (>1000 assets).

these are fairly long term problems so stochastic calculus not too useful here. portfolio risk is a very classic stats field.

Re: The Quants Run Wall Street Now

#136

Post by intended »

charsifood wrote: post #91
dluan wrote: post #65

My question for these new would-be quants is, how do you see your work? I know there are certain types of smart whizzes who see working for Google/Facebook/Amazon as some sort of intellectual step down, or where in finance the value to society is some handwavy "market-making" argument (depending on how philosophical you get), but presumably these types going into this are also tenure-track, research producing scienti…

You speak as though there's an enormous gulf in producing social value between working at Facebook and working at Renaissance. Speaking as a physicist who left the field, the vast majority of research physicists are not going to make a significant impact on advancing human knowledge. They're all too busy teaching bored undergrads, competing for underfunded grants, and politicking to get their name onto more papers. I…

If you did do math, and you did make a lot of money - wouldn't it have only been possible because

> the vast majority of research physicists are....all too busy teaching bored undergrads,

?

Re: The Quants Run Wall Street Now

#137

Post by Ntrails »

dsacco wrote: post #127
SirLJ wrote: post #104

Earlier quoted context omitted.

Thanks,but you don't have to prove anything to me... my trading account is my proof that I don't have to compete with the flash boys to make money, so I don't care about tick data...

Alright, could you help me understand what type of data it is that you purchased from ebay? And what type of strategy you're using, at the highest level? Are you trading equities? Derivatives? Can you at least tell me how long you typically hold a position? I'm not interested in your actual strategy, I just want to understand what you're doing categorically to see if there's any way it can possibly work instead of be…

You can come up with "long term" (hold times of weeks I guess) trading ideas with nothing more than close prices right? On the assumption that you only ever trade the auction you'd be getting a reasonable approximation of your actual experience.

I mean, I'm not sure I accept the premise that there's enough information there to find significant alpha - but if you assume that he's using a different data source for that, he can test the trading performance on close prices alone.

Re: The Quants Run Wall Street Now

#138

Post by infinite8s »

dsacco wrote: post #127
SirLJ wrote: post #104

Earlier quoted context omitted.

Thanks,but you don't have to prove anything to me... my trading account is my proof that I don't have to compete with the flash boys to make money, so I don't care about tick data...

Alright, could you help me understand what type of data it is that you purchased from ebay? And what type of strategy you're using, at the highest level? Are you trading equities? Derivatives? Can you at least tell me how long you typically hold a position? I'm not interested in your actual strategy, I just want to understand what you're doing categorically to see if there's any way it can possibly work instead of be…

Maybe he's the one selling the data.

Re: The Quants Run Wall Street Now

#139

Post by epmaybe »

bmpafa wrote: post #123
tptacek wrote: post #72

Earlier quoted context omitted.

There's nothing handwavy about the liquidity argument. Improving liquidity reduces the cost of trading for almost everyone in the market and thus makes almost everyone just a little wealthier. That means ordinary people, like schoolteachers and custodians, retire with a bit more money, and are a bit more comfortable; it means lots of people can donate just a bit more money to charitable causes without crossing whatev…

I think that, in terms of social value, the point of diminishing returns for market making and liquidity has long since passed, especially wrt social value for Avg. Joes & Janes. I def. don't hold Facebook etc in a much higher regard here, but if we're talking about brain drain from socially useful fields, I don't think anyone can credibly argue that finance (esp. HFT et al) provides any meaningful social value. In f…

Every time someone brings up social good, I keep wanting to know what that means. Can we have a truly objective definition of 'social good'? Or is it entirely dependent on the individual person's definition of what that means to them.
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