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Takeaways from the Jane Street bond prospectus

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311–320 of 343 posts

Re: Takeaways from the Jane Street bond prospectus

#311
post #212

Earlier quoted context omitted.

They provide market liquidity. The chances that a seller and buyer come together at the exact same time across the 7.5 hours of open market operations is fairly low, so they buy from sellers and sell to buyers and hold in between to keep the markets liquid. This liquidity costs(often advertised as the bid/ask spread). We could essentially close them down if we moved all trading to say 1 hour a day. Though most retail…

> They provide market liquidity. I actually know a little about this space. You know what the easiest response is that is always the answer ? "We provide liquidity". Sounds important, most people don't get it, it works. But it's not like the market is going to grind to a halt if Jane Street disappears overnight. Of course, people will say that. Not people telling you the truth. I actually considered "but, but, THE LI…

Agreed, orders maybe wouldn't fill quite as fast, but it's not like markets would fall over and die.

Re: Takeaways from the Jane Street bond prospectus

#312
post #276

Earlier quoted context omitted.

First, I never said it was a great idea, or that we should . It's not about envy or not. Liquidity provides a great service, if we need long market hours. If we don't need long market hours, it arguably provides little to no value. Yes it would massively reduce liquidity, that's the point :) Yes volatility would go up during that hour(especially at the beginning), because everyone would have to figure out the new pri…

> If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off. This is categorically false. Long electronic trading hours are simply a better solution, a more fair s…

You seem to imply I think it's better without them. I'm not saying that at all. I'm saying we could do it without them, if we, collectively, wanted to. Is there a cost to that? Of course there is, there is a cost for any big change like this.

Private Equity seems to do just fine without any of these liquidity problems.

Bond Markets are completely private still, sure some market makers are now playing in that space, but it's still completely private transactions and you are on your own to find buyers and sellers. Seems to work well enough.

Certainly public markets and stock exchanges are great inventions, but we didn't have market makers in the early stock markets for a very long time. Well one might argue JP Morgan(the man, not the bank) was THE market maker for all of the NYSE early history. He certainly bailed out the markets once or twice before the Fed existed and decided to do the job for him.

So we can absolutely do it without market makers. So I stand by it being a trade-off. If one really wants to kill off market makers, we can, that doesn't mean we should.

> The more you restrict transactions and reduce liquidity the less utility an asset has. This is one of the often overlooked reasons Bitcoin has more intrinsic value than is assumed at first by observers.

This would imply that Cash should be more valuable than it is? USD cash has near infinite liquidity, but at best it's worth around 0%/yr real return.

Re: Takeaways from the Jane Street bond prospectus

#313
post #311

Earlier quoted context omitted.

> They provide market liquidity. I actually know a little about this space. You know what the easiest response is that is always the answer ? "We provide liquidity". Sounds important, most people don't get it, it works. But it's not like the market is going to grind to a halt if Jane Street disappears overnight. Of course, people will say that. Not people telling you the truth. I actually considered "but, but, THE LI…

Agreed, orders maybe wouldn't fill quite as fast, but it's not like markets would fall over and die.

Yes they would. It would be a significant and catastrophic mistake to restrict trading based on feelings of envy. It would be technically negative in every measurement possible.

So many poor policies originate from Envy and poor reasoning not grounded in logic and understanding of free markets and economics. This would be yet another classic example of that.

Re: Takeaways from the Jane Street bond prospectus

#314
post #280

Earlier quoted context omitted.

I'm actually not a libertarian. I guess I'm your standard European socialist: I'm all good taxing (us) rich and providing for the poor. It still is a choice whether one chooses to work, as evidenced by those who chose not to. Edit: the "luxuries" was slightly tongue in cheek and perhaps didn't land well. Anyway, you're free to move to the wilderness, hunt/grow your own food, build your own shelter, and do without the…

You could have fooled me because that is the same immature definition of voluntary and choice that libertarians espouse. Voluntary is not binary. If someone put a gun to your head and told you to eat shit you technically have a choice but it's not much of choice is it?

> If someone put a gun to your head [...]

That would be a rather easy choice to make!

We aren't entitled to a roof over head and food etc, that's all I'm saying. We should be grateful when we happen to luck into circumstances (such as a job) that allow us to have roof/food. It's not something everyone has.

Saying we were involuntarily forced into having a job/roof/food feels very strange when compared with the people who weren't forced to have either of these three things.

Re: Takeaways from the Jane Street bond prospectus

#315
post #212

> Jane Street is stupidly profitable — net trading revenues of $4.4bn in the first quarter, after a $10.5bn haul in 2023, and a profit margin north of 70 per cent — but it bears repeating. That is the fourth straight year of net trading revenues exceeding $10bn. Gross revenues came at a record $21.9bn in 2023, up 34 per cent from 2022. Yes, I suppose this is all something to get all starry-eyed over, Jane Street encr…

They provide market liquidity. The chances that a seller and buyer come together at the exact same time across the 7.5 hours of open market operations is fairly low, so they buy from sellers and sell to buyers and hold in between to keep the markets liquid. This liquidity costs(often advertised as the bid/ask spread). We could essentially close them down if we moved all trading to say 1 hour a day. Though most retail…

> They provide market liquidity.

That's funny, people say the same thing about ticket scalpers.

Re: Takeaways from the Jane Street bond prospectus

#316
post #312

Earlier quoted context omitted.

> If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off. This is categorically false. Long electronic trading hours are simply a better solution, a more fair s…

You seem to imply I think it's better without them. I'm not saying that at all. I'm saying we could do it without them, if we, collectively, wanted to. Is there a cost to that? Of course there is, there is a cost for any big change like this. Private Equity seems to do just fine without any of these liquidity problems. Bond Markets are completely private still, sure some market makers are now playing in that space, b…

This is you:

> You seem to imply I think it's better without them.

Yet these are also all you:

> We could essentially close them down if we moved all trading to say 1 hour a day.

> If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off.

I responded that it is incorrect. You claimed that restricted hours and/or auctions are not necessarily worse, implied better for various envy based objectives that are commonly voiced in many of the comments under this article.

I am contenting that Continuous CLOBs with extending trading hours are technically better markets in every possible measurement. That is my position, it’s unambiguous and different than yours. I’d suggest you would prefer ambiguous positions that would elicit agreement and convey virtue than to take a hard stand for or against a topic.

> Private Equity seems to do just fine without any of these liquidity problems.

PE notoriously has liquidity issues. There are private platforms for qualified investors. PE also is focused on primary issued securities not secondary open free markets which we are discussing. So your observation is both irrelevant and incorrect.

> Bond Markets are completely private still, sure some market makers are now playing in that space, but it's still completely private transactions and you are on your own to find buyers and sellers. Seems to work well enough.

Bond markets are very very far from private. They are completely open but just not to small time investors other than indirectly via ETFs, which ironically the article explains is a massive source of income for Jane Street as they transfer institutional liquidity and prices into individual accessible ETFs. However the underlying cash and futures and options markets on both government, municipal, and corporate bonds are completely public and to any operator who can post the required collateral and meet the technical participation requirements. Trade sizes are often $1M notional minimal. In fact corporate and government bond markets are highly competitive and have extended trading sessions. So again you are technically incorrect.

> Certainly public markets and stock exchanges are great inventions, but we didn't have market makers in the early stock markets for a very long time.

Yes you did. Market making was a dedicated profession going back to the earliest exchanges and markets, including in Dutch empire, also in Roman empire times. Gold market makers / dealing in bazars is 1000s of years old. I have no idea why you would believe such an incorrect opinion.

> Well one might argue JP Morgan(the man, not the bank) was THE market maker for all of the NYSE early history. He certainly bailed out the markets once or twice before the Fed existed and decided to do the job for him.

JP Morgan was a market manipulator and crony capitalist who using corruption bailed himself and his associates out of loses using the FED. Your example is extremely ironic if you actually understand what happened.

> So we can absolutely do it without market makers. So I stand by it being a trade-off. If one really wants to kill off market makers, we can, that doesn't mean we should. > > The more you restrict transactions and reduce liquidity the less utility an asset has. This is one of the often overlooked reasons Bitcoin has more intrinsic value than is assumed at first by observers. > This would imply that Cash should be more valuable than it is? USD cash has near infinite liquidity, but at best it's worth around 0%/yr real return.

This is a misunderstanding of the liquidity premium. Holding all other attributes constant of an asset, the intrinsic value, the income rate, all other relevant factors, then a more liquid asset vs less liquid asset with the same other attributes will have a higher market value. This is basic stuff.

Re: Takeaways from the Jane Street bond prospectus

#317

Interesting, yesterday there was a thread on reddit in /r/ExperiencedDevs asking "What place is known as the ones with the best engineers now? One where if you saw that place on their resume you'd automatically assume they were good?" And one of the answers was Jane St. Apparently they produce great engineers.

It could also be that are really good at hiring people who would have become great engineers no matter where they worked.

Re: Takeaways from the Jane Street bond prospectus

#318
post #97

Earlier quoted context omitted.

I've only ever heard of Jane Street because they're one of the few companies that did OCaml.

See. That’s how they have marketed to this demographic.

Architecting their entire tech stack around marketing towards the dozens of us who like unusual languages is certainly a strategy.

Re: Takeaways from the Jane Street bond prospectus

#319

I often discuss Jane Street as a great model of employee branding. They do well placed adverts/sponsorships (e.g. Standup Maths[0]), they produce a quite decent quality podcast (Signals and Threads [1]), and they have consistent monthly puzzles [2]. That level of investment in branding only makes sense, I think, at a large size. I'm kind of surprised they only have ~2500 people. [0] https://www.youtube.com/user/stand…

Jane Street has been doing this since they were much smaller. I interned there when they had like 300 people, and they were actively cultivating a great brand as an employer back then too—and looks like they've really made it work over the last decade! My impression with them in general was that they were willing to do lots of things that did not "conventionally" make sense at their size, and those things paid off. T…

curious why did you end up leaving? Since the company is known to be this amazing.

Re: Takeaways from the Jane Street bond prospectus

#320
post #312

Earlier quoted context omitted.

You seem to imply I think it's better without them. I'm not saying that at all. I'm saying we could do it without them, if we, collectively, wanted to. Is there a cost to that? Of course there is, there is a cost for any big change like this. Private Equity seems to do just fine without any of these liquidity problems. Bond Markets are completely private still, sure some market makers are now playing in that space, b…

This is you: > You seem to imply I think it's better without them. Yet these are also all you: > We could essentially close them down if we moved all trading to say 1 hour a day. > If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given po…

You are missing the forest for the trees and misunderstanding what I'm trying to convey.

Even if we shifted to 1hr trading a day, we would still have market makers, but they would charge a lot more and a lot less people would use them. They would become more like pawnbrokers or middle-men, not be considered a must-have, like they are considered now. Much like your market makers of old.

For institutional investors, most all of their trading is already done either right at market open or right before market close, so it wouldn't be much of a shift for anyone except for retail investors.

I never said JP Morgan was a great guy. I basically agree with your characterization of JP Morgan. That said, he totally saved the NYSE and the larger American economy a few times anyway.

You are partially there in your understanding of the bond markets. There are public bond markets(NYSE, NASDAQ as examples) in the US, but they act very different from the stock markets, and they don't represent most of the actual bond market that is traded every day. The NYSE bond market still does public auctions of bonds for example.

There are MANY private bond markets. They don't regularly/always intersect. Bond markets as they exist today are still very new, and still not well understood. Pimco basically created the first ever regular bond market only a few decades ago. Before that pretty much all bonds just got stuck in some insurance companies filing cabinet never to see the light of day until it was time to collect a coupon. Even now a large portion of the bond market does effectively the same thing, except it's a digital file these days instead of a filing cabinet.

If I show up @ Brokerage A with 5M and want to trade bonds, they will for sure let me talk to their actual bond desk, but that doesn't mean they can facilitate my trade. I may have to shop around a few different bond desks to get my trade done. It obviously depends on how big that bond desk is and if they have any expertise in the particular bond I want to trade.

For stocks, if I show up with 5M and want to trade a stock, any brokerage anywhere well let me buy the stock.

TRACE, the system FINRA uses to monitor and manage the US OTC bond market doesn't even track all bond trades. Though they do track most of them now, however.

Certainly the bond markets are slowly becoming more public, but they are nowhere near public yet.

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