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How to Build an Exchange (2017)

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Re: How to Build an Exchange (2017)

#121

Post by pclmulqdq »

Pepe1vo wrote: post #119
pclmulqdq wrote: post #85

Earlier quoted context omitted.

There is a little bit of survivorship bias here: in the 2000's, the two main languages of HFT were C++ and Java. By 2015, all the Java shops (and many of the C++ shops too) had failed. Lots of companies tried to do something other than C++, but most of them chose wrong.

That's not true, I've worked at IMC and they extensively use Java for their production systems. The performance critical parts are a mix of hand crafted assembly, C, C++, FPGAs and a dozen other esoteric languages/techniques no ones ever heard of.

So you're saying they're a C++ shop that uses other languages when appropriate? Like every other C++ shop in trading?

Re: How to Build an Exchange (2017)

#122

Post by dasil003 »

hansvm wrote: post #84
dasil003 wrote: post #43

Earlier quoted context omitted.

Not many at Google receive that much in their offer letter, but with the stock appreciation over the last decade and stacked refresher grants, I'd be willing to wager there were thousands making >$1M as of Nov 2021 (many fewer since the stock has fallen though).

If Google is offering an initial total cash equivalents of $300k (say $140k salary, $480k/4 stock, 15% annual bonus on each), that's roughly the same deal as somebody else getting a base salary of $300k. The fact that a particular investment decision (GOOG) can accidentally push the individual's yearly increase in net worth past $1M isn't a good way to judge what Google is actually offering: Anyone with a base salary…

Well first of all, my point was that over the last decade Google has likely paid more individuals 7 figures than JS or Citadel has. Obviously this is subject to the risk of stock performance, and if your point is that cash is better than stock, I agree with you 100% (especially today when tech stocks are still arguably over-valued).

On the other hand, this, my friend, is absolute nonsense:

> Anyone with a base salary of $300k can obtain a similar payoff structure by taking out a $550k loan to invest in GOOG, and taking out additional smaller loans at each stock refresh.

This is only equivalent if you ignore downside risk, which in the case of an average young professional with no significant assets could ruin you. The RSUs give you significant upside over 4 years with absolutely zero risk.

Also you said this:

> The fact that a particular investment decision (GOOG) can accidentally push the individual's yearly increase in net worth past $1M

This makes me think you might not understand how RSUs work. They are W-2 income at the valuation at the time of vest. What we're talking about is 7 figure annual income. Not investment gains over time.

Re: How to Build an Exchange (2017)

#123

Post by kortilla »

dasil003 wrote: post #122
hansvm wrote: post #84

Earlier quoted context omitted.

If Google is offering an initial total cash equivalents of $300k (say $140k salary, $480k/4 stock, 15% annual bonus on each), that's roughly the same deal as somebody else getting a base salary of $300k. The fact that a particular investment decision (GOOG) can accidentally push the individual's yearly increase in net worth past $1M isn't a good way to judge what Google is actually offering: Anyone with a base salary…

Well first of all, my point was that over the last decade Google has likely paid more individuals 7 figures than JS or Citadel has. Obviously this is subject to the risk of stock performance, and if your point is that cash is better than stock, I agree with you 100% (especially today when tech stocks are still arguably over-valued). On the other hand, this, my friend, is absolute nonsense: > Anyone with a base salary…

> Well first of all, my point was that over the last decade Google has likely paid more individuals 7 figures than JS or Citadel has

No, they granted stock initially and set aside those shares for the employee. The market paid the employees the gain between the initial grant price and the sell.

> This is only equivalent if you ignore downside risk, which in the case of an average young professional with no significant assets could ruin you. The RSUs give you significant upside over 4 years with absolutely zero risk.

You didn’t understand the example. The person taking the loan gets $300k/year cash and the Googler gets $180k/year. Setting aside $120k/year for the loan makes the risk the same so you won’t be “ruined”. Google failing in either scenario means they each have $180k in annual cash leftover.

Re: How to Build an Exchange (2017)

#124

Post by rusebor »

have been wondering for a while why HFTs exist when exchanges have holidays and trading hours [1]?

doesn't the sub-milisecond speed contradict to the several hours pause in trading?

wouldn't be possible to impose some kind of a delay (say an hour) on all participants?

[1] https://www.nyse.com/markets/hours-calendars

Re: How to Build an Exchange (2017)

#125

Post by moeymo1 »

pclmulqdq wrote: post #85
hardwaregeek wrote: post #59

I've always been curious whether someone will succeed in using the same development strategy as Jane Street, namely using a non-C++ language as their primary language. I suspect OCaml may have been a very good choice back in the early 2000's simply because C++ was a much different language and there weren't many options for other languages. Building up an ecosystem was not a bad plan because most languages did not ha…

There is a little bit of survivorship bias here: in the 2000's, the two main languages of HFT were C++ and Java. By 2015, all the Java shops (and many of the C++ shops too) had failed. Lots of companies tried to do something other than C++, but most of them chose wrong.

This is factually incorrect, and saying a trading shop failed because of language choice is, um, less than smart.

Re: How to Build an Exchange (2017)

#126

Post by noloblo »

hardwaregeek wrote: post #59

I've always been curious whether someone will succeed in using the same development strategy as Jane Street, namely using a non-C++ language as their primary language. I suspect OCaml may have been a very good choice back in the early 2000's simply because C++ was a much different language and there weren't many options for other languages. Building up an ecosystem was not a bad plan because most languages did not ha…

anyone use haskell?

Re: How to Build an Exchange (2017)

#128

Post by dasil003 »

kortilla wrote: post #123
dasil003 wrote: post #122

Earlier quoted context omitted.

Well first of all, my point was that over the last decade Google has likely paid more individuals 7 figures than JS or Citadel has. Obviously this is subject to the risk of stock performance, and if your point is that cash is better than stock, I agree with you 100% (especially today when tech stocks are still arguably over-valued). On the other hand, this, my friend, is absolute nonsense: > Anyone with a base salary…

> Well first of all, my point was that over the last decade Google has likely paid more individuals 7 figures than JS or Citadel has No, they granted stock initially and set aside those shares for the employee. The market paid the employees the gain between the initial grant price and the sell. > This is only equivalent if you ignore downside risk, which in the case of an average young professional with no significan…

No, I understood the example perfectly, it's you who doesn't seem to understand the downside risk. You would need a $480k loan to buy the four years of stock because you are buying it before you've done the work to earn the $480k. A loan is something you have to pay back, so if the stock tanks you have to make up the difference. In order to be equivalent, the terms of the loan would have to be pegged to the stock price on the downside (so if stock price was cut in half you would only owe $240k), but not on the upside (so you get all the gains). No one in the world will give you a loan with these kinds of terms.

Re: How to Build an Exchange (2017)

#129

Post by hansvm »

dasil003 wrote: post #128
kortilla wrote: post #123

Earlier quoted context omitted.

> Well first of all, my point was that over the last decade Google has likely paid more individuals 7 figures than JS or Citadel has No, they granted stock initially and set aside those shares for the employee. The market paid the employees the gain between the initial grant price and the sell. > This is only equivalent if you ignore downside risk, which in the case of an average young professional with no significan…

No, I understood the example perfectly, it's you who doesn't seem to understand the downside risk. You would need a $480k loan to buy the four years of stock because you are buying it before you've done the work to earn the $480k . A loan is something you have to pay back, so if the stock tanks you have to make up the difference. In order to be equivalent, the terms of the loan would have to be pegged to the stock pr…

That's only relevant if you're leaving Google before the 4yr period is over and also if you don't know roughly what subset you'll stay for (where you'd just take a smaller loan to represent the first N years of vesting).

Also, the cost of options to completely mitigate the incremental risk beyond that of an ordinary Googler is small (cumulatively a little less than the cumulative cost of interest for the loan). It's a small point that matters if you go out to actually implement the idea, but in the context of comparing Google (X total cash equivalents in their normal structure) to some other company (X salary), the investment opportunities in GOOG are sufficiently comparable that it might be reasonable to upweight Google's TC to 1.1X or so (or downweight it because you're restricted to GOOG itself and don't have more options), but I still think it's unreasonable to call it anything like 3.5X. Those aren't million dollar contracts; they're $X contracts paired with a forced investment that anyone else could choose to make without a huge downside (ignoring the much rarer actual $X contracts).

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