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High-Frequency Programmers Revolt Over Pay

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Re: High-Frequency Programmers Revolt Over Pay

#111

Post by noname123 »

wglb wrote: post #78
noname123 wrote: post #27

Earlier quoted context omitted.

Umm, yes and no. Example, I'm Fidelity Bob Fund Manager; after extensive research, I decide to make a decision to buy 200,000 shares of AAPL. So I enter my buy order into my OMS screen, which slices and dices these 200,000 shares into blocks of 100 shares (as for traders not to front-run me, because a naked buy order of 200,000 shares will drive the price up and I'll overpay long after my transaction is completed). H…

But HFT dealers stopped trading that day is not entirely true. Some HFT traders (not dealers) stopped at the flash crash, but others stayed in, partly because they were obligated to due to their liquidity agreements with the exchanges, and partly in retrospect to make bags and bags of money. If the latter were not in the market, you would not have seen the flash-uncrash that was the recovery, and it would have been 1…

Yes. You are both right and wrong. Dealers are obligated by their contractual agreements to make offers to trade; but what exchanges didn't specify are what prices their dealers could offer for their trades.

If the dealers don't want to trade, they just make their buy and sell limit orders to be way out of the normal price band. Hence, I want to buy Accenture at $0.01 and sell Accenture at $1000. Yea, I'm meeting my exchange contractual obligation, but who's going to trade with me now?

What happened during the flash-crash is that people's market stop-orders were getting triggered after the initial crash, when the market went down 20%; when all other human traders stepped out of the market, but there were still tons of market stop-orders to sell; guess whose limit buy orders were matched? Accenture buy order at $0.01.

To be fair though, a lot of those ridiculous trades were later busted by the exchanges. But the irony of the whole crash is that the HFT traders actually fanned the fire on the crash and then later rode the wave all the way back up (for the trades that weren't busted anyways).

Re: High-Frequency Programmers Revolt Over Pay

#112

Post by gloob »

anamax wrote: post #24
mailanay wrote: post #10

Earlier quoted context omitted.

Imagine liquidity as tank full of fuel in your car. The possibilities of going with a full tank are endless. More fuel than tank's holding capacity is pretty much useless.

> More fuel than tank's holding capacity is pretty much useless. And what, exactly, is the "tank's holding capacity" for liquidity?

Whatever number happens to mesh with the poster's predetermined position on the matter. If they think that HFT isn't "real work"[0], they'll set the level low. If they're a free-market fetishist, they'll say the tank is indefinitely large.

Metaphors are rarely a useful approach to understanding something.

[0] An amusing position for a programmer to take, considering we make completely intangible stuff while spending hours a day sitting on our asses, but one that a lot of people on this site seem to hold.

Re: High-Frequency Programmers Revolt Over Pay

#113

Post by jbooth »

gsmaverick wrote: post #103
chopsueyar wrote: post #83

Earlier quoted context omitted.

So a decrease in liquidity will cause an increase in volatility?

Possibly, but the biggest difference would be the increase in the bid/ask spread.

I don't see why high-frequency trading contracts that spread.

If they overlap very briefly (say, across different markets) and nobody else has noticed yet, a trading program jumps in and arbs the difference. That increases the spread.

Re: High-Frequency Programmers Revolt Over Pay

#114

Post by redrobot5050 »

pierrefar wrote: post #61
patio11 wrote: post #2

I think financial industry programmers are at the leading edge of this phenomenon (much like quants were the leading edge of programmers being paid for value rather than for hours), because they're the programmers who can most easily demonstrate that their code directly made a company millions. They're not the end of it by a long shot. Take A/B testing, analytics, conversion optimization, etc. If you are good at thes…

The problem with performance-based pay is that there are quite a few variables outside your control. Say you're doing a simple A/B test that you've correctly deployed. Now imagine Big Boss Man (or Big Client Man) decides to change something else on the website that is likely to affect the results of your test. What do you do then? Suppose the website goes down and the company doesn't make its millions and now they ca…

Well, in the case of these financial programmers, they negotiated a simple percentage of the daily take. In a sense, they've negotiated themselves into the "VISA" position. Use me, and life is much easier and you make more money over all -- but I get a cut out of every transaction I helped you with.

Again, for these programmers, who are literally in the business of making money, its a great approach.

Re: High-Frequency Programmers Revolt Over Pay

#115

Post by coliveira »

rwmj wrote: post #70
tom_b wrote: post #11

Earlier quoted context omitted.

I'd actually love to see more jobs that offered the opportunity to work with a small base salary but increased compensation levels based on measurable results. I'm really curious about non-startup work models that would encourage this. So far, the easiest path would seem to be via consulting, where you sold your services as business services that happened to be software-based rather than as a "warm body" to staff som…

Surely you can just invest a large proportion of your salary in company stock and achieve the same end?

With stocks, if you can't have control over how the company is managed, you're just playing lottery.

Re: High-Frequency Programmers Revolt Over Pay

#116

Post by redrobot5050 »

infinite8s wrote: post #96
rwmj wrote: post #70

Earlier quoted context omitted.

Surely you can just invest a large proportion of your salary in company stock and achieve the same end?

Usually company stock is offered on much better terms when it is part of your pay package.

Most corporations don't offer enough stock in their employee stock ownership plans for this to really be effective. You have vesting (which means you have to wait before it can be sold) and dilution.

You can also have situations in large corporations where your performance was incredible, and by every measurement you brought millions into the company. However, some guy in division X lost billions and the stock tanked.

There was an AIG employee who wrote to the NYTimes about how his bonus was retroactively taxed 95%, and he claimed it was because of this exact situation. He had nothing to do with AIG's collapse. He was part of a highly profitable division, and was asked to stay on to help turn AIG around faster. That people were upset that he got his contractual 1.2 million bonus was lost on him.

Re: High-Frequency Programmers Revolt Over Pay

#117

Post by yummyfajitas »

noname123 wrote: post #111
wglb wrote: post #78

Earlier quoted context omitted.

But HFT dealers stopped trading that day is not entirely true. Some HFT traders (not dealers) stopped at the flash crash, but others stayed in, partly because they were obligated to due to their liquidity agreements with the exchanges, and partly in retrospect to make bags and bags of money. If the latter were not in the market, you would not have seen the flash-uncrash that was the recovery, and it would have been 1…

Yes. You are both right and wrong. Dealers are obligated by their contractual agreements to make offers to trade; but what exchanges didn't specify are what prices their dealers could offer for their trades. If the dealers don't want to trade, they just make their buy and sell limit orders to be way out of the normal price band. Hence, I want to buy Accenture at $0.01 and sell Accenture at $1000. Yea, I'm meeting my…

But the irony of the whole crash is that the HFT traders actually fanned the fire on the crash and then later rode the wave all the way back up (for the trades that weren't busted anyways).

You are conflating two separate groups:

A) Conservative HFT funds who left the markets due to a fear of broken trades.

B) Risk taking HFT funds who stayed in the markets, hoping to make money off volume/higher spreads.

Group A "fanned the fire" by pulling liquidity out of the market. Group B "rode the wave", and in the process mitigated the flash crash [1].

It's a fallacy to lump all HFT firms together.

[1] The market crashed and corrected itself in 10-15 minutes. Without HFT firms, it's likely that it would have corrected itself much later (if at all).

Re: High-Frequency Programmers Revolt Over Pay

#118

Post by Eliezer »

sfk wrote: post #69
jacquesm wrote: post #57

Earlier quoted context omitted.

> You clearly haven't worked in finance. Chase Manhattan bank, the Netherlands branch, formerly the Nederlandse Crediet bank, about 3 years from when I was 19 to when I was 21, both as a systems level programmer as well as an application programmer. > However they are conflating programmers and quants here Yes, but I didn't, I only spoke about the programmers. They do not come up with the models, they just lay the br…

Please refrain from using the bricklayer image here. It is demeaning, silly and wrong. In order to implement a mathematical model, a programmer has to: a) Understand the model. b) Come up with a fast algorithm for the specification. c) Prove the algorithm correct. d) Make no mistakes implementing the algorithm. All of this has nothing to do with bricklaying. Moreover, it's quite ironic that the geniuses who come up w…

And if there are lots of programmers who can do that once the algorithm has been given them, then the position will be filled by lower bidders who are willing to take salaries and don't demand slices of the cake. It doesn't matter economically how much it feels like artistry if there are lots of people who can apply the same artistry and who all want the job. Supply and demand.

Re: High-Frequency Programmers Revolt Over Pay

#119

Post by coliveira »

jmillerinc wrote: post #98
kiujhyghjkl wrote: post #41

Earlier quoted context omitted.

>b) is taking all the risks of running it The bank's customers are taking the risk of running it not the traders - it's not the trader's money

Of course, but the traders are taking risks in the sense that they can get fired for losing money. Programmers generally won't. They have a lower-risk, more secure job.

If it turns out that the reason for losing money is the faulty code from a developer, he can lose his job. So I don't see where the security is.

Re: High-Frequency Programmers Revolt Over Pay

#120

Post by nivertech »

jamii wrote: post #97
Sukotto wrote: post #86

I'm interested in playing with algorithmic (maybe even HF) trading to see if it's fun. Can anyone recommend a source of data on the cheap so I can papertrade? Clearly realtime data feeds are going to cost... but isn't there some public repository of historical data someplace?

We are actively looking for market makers for smarkets.com . No fees and very little competition, it may be worth checking out if you want somewhere easy to get started. We just released a public API: http://apidocs.s3-external-3.amazonaws.com/index.html

Do you make markets yourself? If I take the trouble and make markets for your exchange, will I be competing with another market makers and market participants only or with the exchange too?
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