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Coders who trade: Wall Street designs its staff for the future

bloomberg.com

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Re: Coders who trade: Wall Street designs its staff for the future

#141

Post by twic »

mrchicity wrote: post #116
colordrops wrote: post #64

Earlier quoted context omitted.

I apologize for the off the wall comment. Every time I read about wall street programming, I've got this subliminal voice in the back of my head wondering how anyone could find the motivation to do this work. I'm obviously revealing my biases against the financial industry here. Also, I'm unable to make myself do work if I don't see it contributing to some greater vision or cause. Are there people out there who love…

I do HFT and think about this a lot. I am essentially a middleman that facilitates trading across: 1. Time - I quote buy and sell prices continuously in Microsoft stock trying to earn the spread between them. You want to buy stock and my offer to sell is the cheapest in the market. We trade. Later, someone else comes along to sell and I have the highest bid, so I buy the stock back from them. In between I'm exposed t…

> As a thought experiment, consider the #3 ETF trade I described. If I can't immediately hedge my risk and instead go into a batch auction for each stock, how will that affect the price I offer in the ETF?

My idea for this is that when you rest an order, you should be able to attach a set of hedge orders to it that will initially be inactive, but will fire when the owning order is filled. This would let everyone get hedges done at better-than-HFT speed, and make things like speed bumps or batches a lot more tolerable for market makers.

You'd want some kind of pro-rata, or multiple orders at fill thresholds, so you could show big size and respond sensibly to partial fills. You might want alternative hedges to cope with price moves in the hedge target. You might want some mechanism whereby the exchange will pull the owning quote if the hedge disappears. There's all sorts of fun you could have.

For this to work really well, you'd want the hedges to be processed synchronously with the fill of the owning order, so there's no HFTable window of vulnerability between fill and hedge. That couldn't be done across different matching engines in the typical architecture current exchanges use. For futures, though, it might be workable - i think all the different expiries of a given underlying, and their spreads, are already handled synchronously, so that the exchange can do implied matching. That might not include some of the more exotic constructs which aren't in the implied chain, though.

Re: Coders who trade: Wall Street designs its staff for the future

#142

Post by twic »

ForHackernews wrote: post #95
throwaway129999 wrote: post #33

Earlier quoted context omitted.

I'm in the range of 3-5 years out of undergrad, working at a quant firm. My total gross comp for this year will be about 400-450k, majority of that is bonus. By quant firm I mean either a proprietary trading firm (no outside investors) or a hedge fund (takes outside money), but not a bank. I have a CS background but have self-studied in stats, and received mentorship from people with strong math backgrounds. Main adv…

This sounds really interesting to me. Are there other downsides to watch out for? I imagine the security environment is very restrictive: no work from home? No root access on your workstation? What kinds of skills do you need to get into this area?

The security varies a lot. At one hedge fund I interviewed at, security was almost MI5-like - no phones in the office, no direct internet access, etc. At the place I ended up working, it's rootapalooza. Not in prod, obviously - there it's sudo-a-gogo.

Re: Coders who trade: Wall Street designs its staff for the future

#144

Post by cocoablazing »

colordrops wrote: post #64
chollida1 wrote: post #2

I liked this article because the roll of the programmer on wall street has been going down recently from my perspective. Programmers used to work along side quants and were well respected. This was generally because practicing quants didn't used to be able to program. This was especially true in the 80s and 90's where programmers and quants where almost valued identically as one required the other to make things happ…

I apologize for the off the wall comment. Every time I read about wall street programming, I've got this subliminal voice in the back of my head wondering how anyone could find the motivation to do this work. I'm obviously revealing my biases against the financial industry here. Also, I'm unable to make myself do work if I don't see it contributing to some greater vision or cause. Are there people out there who love…

Most of the quants and quant devs I work with are out-of-work physicists who want to provide for their families. Most of them would rather be tenured. I work in this industry because I cannot find employment in my field of engineering near my friends.

Re: Coders who trade: Wall Street designs its staff for the future

#145

Post by closeparen »

55555 wrote: post #119
aaronchall wrote: post #114

Earlier quoted context omitted.

> zero value to society What value are financial services? Do you - have a bank account? checking? savings? money markets? - monitor your accounts online? do transfers? - have an investment account? save for retirement? - have life or disability insurance? pool risks and hedge against them? - have a city or country that needs to raise money, borrow from others? - have a company that needs to issue stock for capital i…

> if your firm created no value for society, it would go out of business. This is silly wishful thinking. There are plenty of businesses that are sustainably built on screwing people over or simply extracting money from them. > What value are financial services? I don't think he's talking about financial services like retail banking. I think he's talking about HFT activities other than market making. Legal front-runn…

>screwing people over or simply extracting money from them.

People enter these transactions because there's something in it for them, even if you think it's too little.

Re: Coders who trade: Wall Street designs its staff for the future

#147

Post by mrchicity »

twic wrote: post #141
mrchicity wrote: post #116

Earlier quoted context omitted.

I do HFT and think about this a lot. I am essentially a middleman that facilitates trading across: 1. Time - I quote buy and sell prices continuously in Microsoft stock trying to earn the spread between them. You want to buy stock and my offer to sell is the cheapest in the market. We trade. Later, someone else comes along to sell and I have the highest bid, so I buy the stock back from them. In between I'm exposed t…

> As a thought experiment, consider the #3 ETF trade I described. If I can't immediately hedge my risk and instead go into a batch auction for each stock, how will that affect the price I offer in the ETF? My idea for this is that when you rest an order, you should be able to attach a set of hedge orders to it that will initially be inactive, but will fire when the owning order is filled. This would let everyone get…

This sounds similar to OneChronos, though I don't know if they've launched anything: https://www.onechronos.com/

You're right that there's precedent for this:

-Implied engines as you mentioned where traders can atomically express a view on the term structure without legging risk. For the benefit of non-finance readers: Say you believe the fair price difference between Dec and March futures is 2 index points, you could quote in the spread between the contracts (long one, short the other) buying 1.75 selling 2.25 without being fastest to respond to every shift in the index itself. Your order in the spread will create implied orders in the underlying contracts themselves and you can only be filled if both your long and short trade.

-IEX's D-Peg effectively runs a high frequency pricing model inside the matching engine to predict when an adverse price tick is likely.

-I think D.E. Shaw has a patent on a domain-specific language for complex orders where they can be priced off any other instrument(s), ratios between instruments, features of the order book, etc.

The real problem with batch auctions is coordination. So long as you have other exchanges trading correlated assets in continuous time, there will still be a race to adjust orders in the batch auction market after a pricing signal occurs. Even with a random delay or crossing time, it's still beneficial in statistical expectation to be faster.

You'd need to trade most similar products worldwide on a single platform. Since exchanges are a network effect business, this would likely lead to monopoly profits for the exchange operator.

I'm not sure "no high-speed arbitrage/monopoly exchange" is net better than "some high speed arbitrage/competing exchanges." I suppose you could have the government run the exchange as a utility, but that would stifle innovation. A lot of things we now take for granted started in experimental ATS and ECN startup markets.

Re: Coders who trade: Wall Street designs its staff for the future

#148

Post by carterschonwald »

log_base_login wrote: post #77
colordrops wrote: post #64

Earlier quoted context omitted.

I apologize for the off the wall comment. Every time I read about wall street programming, I've got this subliminal voice in the back of my head wondering how anyone could find the motivation to do this work. I'm obviously revealing my biases against the financial industry here. Also, I'm unable to make myself do work if I don't see it contributing to some greater vision or cause. Are there people out there who love…

I think it helps to understand that the financial sector provides capital that serves to energize virtually every other sector in every industry. Without finance, there is no biomedical research (private especially). Without finance, there is no aerospace advancement. Without finance, there is no alternative energy. Being able to facilitate a more liquid, more transparent financial sector is, in my opinion, a calling…

WELL said! :)

I stumbled into finance a few years ago and I’ve had overall the best bosses and work env ofanyone I know. I’m also doing a more audacious program of research engineering/ computer science than I could likely do anywhere else.

I like to sometimes describe my work as some combination of “making the systems that fund aerospace at least as reliable as commercial aircraft”, as transparent as intergalactic vacuum, and easy to use to boot! Or at least that’s the idea :)

On the hft front I recently started at poking at how to get accurate time on a dev computer, which gets fiddly the moment you want really interesting accuracy on commodity hardware :)

Re: Coders who trade: Wall Street designs its staff for the future

#149

Post by marvin »

naturalgradient wrote: post #3

Can anyone comment on how competitive salaries are there actually? Right now, for top tier PhD graduates in machine learning, it's about 300-400k at big tech companies starting out, and ~200k for master's degrees. From what I read and heard, banks are not really willing to pay up competitively for software?

As a Norwegian software engineer, my mind boggles when reading the salary discussions of engineers based in the big cities in the US.

Most engineers here are paid a small fraction of the numbers you cite, even though we are decidedly a first-world country. I guess good ML people will probably get over 100k here, but I haven't heard of anyone near 200k. Any thoughts as to what causes the massive difference?

Re: Coders who trade: Wall Street designs its staff for the future

#150

Post by candiodari »

jasode wrote: post #101
colordrops wrote: post #64

Earlier quoted context omitted.

I apologize for the off the wall comment. Every time I read about wall street programming, I've got this subliminal voice in the back of my head wondering how anyone could find the motivation to do this work. I'm obviously revealing my biases against the financial industry here. Also, I'm unable to make myself do work if I don't see it contributing to some greater vision or cause. Are there people out there who love…

>farming money for a bunch of questionable people. The "questionable people" include grandparents, firemen, teachers, etc with pensions and retirement funds. >I don't see it contributing to some greater vision or cause. [...] I guess it's just a case of lack of empathy on my part. Your sentiment is common and I think it's caused by people not connecting the dots from grandparents' retirement pension to the hedge fund…

> That said, can we "reconfigure society" so that all this competitive activity of shuffling money from one pile to another isn't done? Maybe.

Your proposals boil down to ending deficit spending. Aside from the authority issue (no single entity has authority to do this, not even congress, definitely not the president), that means the US Federal government has to cut $650 billion dollars in spending.

Or to put it more directly: We currently have pensions, social security, an army (meaning having an army at all). Pick 2. The other one gets destroyed.

Still sounds reasonable ?

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