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Understanding Jane Street

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Re: Understanding Jane Street

#181

Post by keepquestioning »

srfvtgb wrote: post #178
keepquestioning wrote: post #4

My greatest regret is not getting into this firm

So you didn't get as rich as you could have and might not get to retire at 30, go live your life. A friend of mine and I both applied for a HFT firm out of university, he got in and I didn't, but based on how he described it over about 18 months working there, my greatest regret would have been taking that job, it sounded like a dismal place to work (with platinum handcuffs).

Perhaps it would be worth it because he can retire 20 years earlier than you?

Re: Understanding Jane Street

#182

Post by lordnacho »

julianeon wrote: post #32

Something I don’t understand: Why haven’t their gains been arbitraged away? Conceptually what they do seems simple enough; and presumably you just need capital to do it. Hell, their own former employees could theoretically compete against them - as could many traders who would pay to learn those strategies. So why are they still making so much? I don’t understand why their “advantage” hasn’t been arbitrated away into…

Because they are the ones arbitraging the gains away. That's why there's no opportunity left for you average punter to just start his own little script that take orders from one market and put them on another.

All the players that are left are highly sophisticated technologically, but also in terms of ecological position. For instance you have Citadel doing PFOF with Robinhood. Once you lock in a deal like that, you have a special position in the market. Having access to lower fees is also an important part of the game, and it only happens for players who are already in the game.

Re: Understanding Jane Street

#183

Post by pvitz »

adament wrote: post #147
blitzar wrote: post #142

Earlier quoted context omitted.

Hull's Futures, Options and other derivatives was on the bookshelf of a friend who worked at JS - it was their bible. I always throught market microstructure was more important, but they insisted a disciplined application of the maths (as per the bible of Hull) was where the magic really was.

If you come from a pure math theory first background I would advise starting out with Björks “Arbitrage theory in continuous time”, I personally found the lack of rigor and superfluous examples in Hull frustrating and found Björk much more approachable then you can look into Hull for real life practicalities like daycount conventions, etc. If you want to go into complex derivatives pricing I would advise looking at t…

I would also suggest to forget about Hull and Wilmott and would suggest to start with the excellent book by Shreve: "Stochastic Calculus for Finance. Volume II: Continuous Time Models".

Then, you can quickly read Bjoerk, work through Brigo/Mercurio (if you like that style) or Andersen/Piterbarg. Alternatively, if you want to fully dive into into the subject after Shreve, Musiela/Rutkowski: "Martingale Methods in Financial Modelling" is wonderful.

Re: Understanding Jane Street

#184

Post by howling »

> The other mitigation strategy is: just buy some puts.

I wonder who are the counterparties selling puts to Jane Street. My cynical view is that they are losing overall but the traders don't care because they are winning in short term (when nothing happens) and may have already changed their job when the market crashes.

Re: Understanding Jane Street

#185

Post by benreesman »

ivalm wrote: post #168
benreesman wrote: post #96

Earlier quoted context omitted.

You're the best kind of correct, which is technically correct. But what I said is that "multiplied by every retirement account we're talking real money". Which is no-qualifiers correct. That ETF that you should have your roll in? It's buying and selling securities all the time, and encountering friction along the way. And whether people have ETFs or individual equities in their (hopefully tax-advantaged) retirement a…

> That ETF that you should have your roll in? It's buying and selling securities all the time, and encountering friction along the way I really hope it isn’t, or it would be making lots of tax events! I hope it’s doing in-kind transactions like all the normal ETFs. > Citadel paying 2x for PFOF on Robinhood vs. Schwab to get optionality on internalizing against dumb flow? Yeah, that's pretty iffy. But in general advan…

I didn't think that a digression about the tax optimization opportunities of in-kind securities swaps would be enlightening to a general audience.

As for your second point, I guess neither of us works at Citadel so we're both guessing, but if you agree that there is a market for order flow and that the most charitable interpretation of why that would be the case is because of the attached optionality for internal netting, then you're sort of making the assertion that all PFOF is equally valuable, which would be a hell of a coincidence.

As a sort of side note, I regard the cherry-pick the parent with ">" prefixes and go after snippets of what they posted as basically the lowest form of discourse on HN in spite of how popular it is, and I would encourage anyone to try to reply to someone's entire comment rather than just trying to find the weld points and lean on those spots. It's pretty weak.

Re: Understanding Jane Street

#186

Post by fiprofessor »

j7ake wrote: post #124
TrackerFF wrote: post #106

Earlier quoted context omitted.

> I would venture to say the average Jane street worker has done more good for society than the average cancer researcher or Alzheimer’s researcher. Might be one of the more arrogant things I've read. And I frequent WallStreetOasis.

Are you up to date with the current state of Alzheimer’s research ? Much of it has been shown to be fabricated ie average alzheimer researcher has probably made zero impact. https://www.science.org/content/article/potential-fabricatio... Also I said the average researcher, meaning taken from the global population, ie not from a top institute. Jane Street is highly concentrated in talent that produce real results in t…

It's wildly inaccurate to say that much of Alzheimer's research has been shown to be fabricated. The article you link to is about one person's work. Even though he is a very influential researcher, there must be at least thousands of people doing research on Alzheimer's disease, if not more.

Re: Understanding Jane Street

#187

Post by hawk_ »

adave wrote: post #152

This reads like a very rosy picture of what these firms actually do. Surely they are secretive and tight lipped about all the money being made in low risk trades. There are known loopholes that market makers get to exploit since they help keep the casino going. No need to make its a noble profession or compare to impact to actual economy or mankind. These are the worst of the worst when its comes to exploitative and…

> to make money over retail trades

You can call them vampire squid from hell but they don't exactly take money from retail, they tighten spreads for them if anything.

Re: Understanding Jane Street

#188

Post by fiprofessor »

benreesman wrote: post #153
SilverBirch wrote: post #137

>the winners get a job from which people routinely retire rich in their 30s, and the losers... don't Honestly, I find this ridiculous. Firstly, Yes, working at Jane Street is a well paying job and you'll do well out of it. No. People aren't routinely retiring in their 30s. I don't understand where this absurd idea comes from. Look at all the rich people in the world, look at how old they are, and ask, are they retire…

I think the author meant "could retire very comfortably in their 30s", and you're correct to point out that's not what it literally says. But as for "could"? Shit you can do that at Google, Microsoft, Amazon, Meta if you're in that league and start out of undergrad. In my experience (more than a few of my FAANG-era colleagues either came from or went to high-technology finance), people don't actually leave Google to…

> I think people go to high-technology finance because they want to test themselves against a harder class of problem in a more adversarial setting against people who feel the same.

Maybe this is so at other finance firms, but my experience with developers who go to Jane Street is quite different. Because Jane Street heavily advertises OCaml as part of its recruiting strategy, I know many people who ended up there just because they wanted to program in OCaml while still getting FAANG comparable salaries. They don't care at all about finance (at least initially, maybe it becomes an acquired taste for some).

Re: Understanding Jane Street

#189

Post by draw_down »

badpun wrote: post #162

Curious how people are so interested in Jane Street, ostensibly because they do technically challenging work, but much less so about other places where the work is at least just as challenging, but the money sucks.

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