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Understanding Jane Street

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381–390 of 392 posts

Re: Understanding Jane Street

#381
post #373
post #311

Earlier quoted context omitted.

> it’s because you’re either very lucky (and congrats to you) or you’re very passionate. It's never because you're very passionate. Passion has basically no correlation with financial success. Millions of passionate artists, musicians, writers, and all of them broke as can be, most working shit jobs to pay the bills wishing they could just be passionate and make money from that. Passion is bullshit. The real path to…

> Passion has basically no correlation with financial success. Have you got any evidence for this? I would expect that passion correlates with hard work, and hard work seems to be necessary for success. I agree that many artists are passionate, but surely people can also be passionate about doing things like writing software or other activities that are valued highly in the market.

i think extreme tails of "success distribution" gives a distort impression of odds.

Re: Understanding Jane Street

#382
post #378

Earlier quoted context omitted.

It's hard to continue this conversation in good faith without pointing out that you literally have no idea what you're talking about. You don't know what HFT firms or what market making actually is, yet you don't mind throwing out outrageous accusations of fraud and illegal activities with zero evidence to back it up. Your entire argument is "I don't know what they do, and they make money in finance, so they must be…

> who is taking the other side of your order? Literally anyone. Literally any other market participant with interest in longterm ownership. > Your entire argument is "I don't know what they do, and they make money in finance, so they must be doing it illegally." The burden is on you to provide evidence to back up your claim. That's not my argument. Snakes bite. Highly profitable, speculative, and complicated US finan…

> Literally anyone. Literally any other market participant with interest in longterm ownership.

You don't know what you're talking about. If there were no market makers, your orders probably wouldn't execute within any reasonable time frame.

> That's not my argument. Snakes bite. Highly profitable, speculative, and complicated US financial firms have consistently grown to threaten the stability of US financial systems before collapsing. Precedent matters. When an assertion violates a precedent, it's what must be proven. Your assertion has the burden of proof, and it's an incredibly high one at that.

That is your argument. Snakes bite? So, therefore, what? Financial companies commit fraud as their primary form of operation? What kind of argument is that? It's ludicrous.

> complicated US financial firms have consistently grown to threaten the stability of US financial systems before collapsing

I cannot emphasize this enough. You literally have zero idea what HFT firms actually do day-to-day. Many people use the word literally when they mean figuratively. I actually mean literally in this case. Comparing HFT firms to banks selling mortgage-backed securities is like comparing your local florist to a drug cartel. In fact, it's probably more like comparing a piece of wood to drug cartel. They're entirely different things. HFT firms don't even sell anything.

> Precedent matters. When an assertion violates a precedent, it's what must be proven.

The precedent you name is totally irrelevant. It's like saying since drug cartels do illegal things (they do), then this piece of wood lying on the ground in the forest is also breaking the law by existing. That's how disconnected the two things you're comparing are, but, again, since you literally have no clue what HFT firms do, you don't even understand that.

> Your assertion has the burden of proof, and it's an incredibly high one at that.

Wrong. You can claim that, but like all of your other claims, it's entirely false.

> Medallion is one of the most well regarded and profitable hedge funds in modern American history. It's a grandfather to modern HFTs. Even its sterling record is highly suspect.

I truly don't think you're even reading what I'm writing, or if you do, you keep moving the goalposts (not that it helps your case--you're still 100% wrong regardless of how much further you try to move it). HFT firms are not hedge funds. Stop comparing them to hedge funds, unless you think comparing a piece of a wood to a drug cartel is a useful comparison, in which case there's no point in talking anymore.

Also, "The Medallion fund [...] is a grandfather to modern HFTs" is such a vague and meaningless statement. Sure they have some algorithms, but lots of investment firms do. So what?

But if we follow this absurd line of reasoning, if your grandfather committed a crime (which even in this analogy, they didn't), does that mean that their grandchildren do also? Of course not.

> Smart people need to spend their time on engineering, medicine, and research. The amount of human capital wasted on silly little financial machinations these days sickens me. I go back and read about financiers jumping from building back in the 20s and I understand it completely.

This is a totally reasonable opinion, but entirely divorced from the question of whether or not HFT commits fraud. Again you have provided literally (not figuratively, but literally) zero evidence to back up your claim.

Your entire argument seems to be:

- Some financial firms have done bad stuff in the past

- HFTs are financial firms (sort of, but whatever)

- Therefore HFTs must be committing fraud

That's literally your argument as far as I can parse it. If you read that, that's just so patently absurd that I don't think I can do anything more to highlight how absurd it is. Its absurdity stands on its own. Maybe something like:

- Some people have committed crimes in the past

- You're a person

- Therefore you're a criminal

Re: Understanding Jane Street

#383
post #377
post #373

Earlier quoted context omitted.

> Passion has basically no correlation with financial success. Have you got any evidence for this? I would expect that passion correlates with hard work, and hard work seems to be necessary for success. I agree that many artists are passionate, but surely people can also be passionate about doing things like writing software or other activities that are valued highly in the market.

Do you have any evidence that it does ? We live in a culture that wishes passion lead to success. It's what we're taught as children here. It's what we want to be true. And yet I find no strong evidence anywhere supporting the assertion that it does; just people claiming that it's up to those who doubt to disprove it. Passion is a fairy tale adults tell each other because it's nicer than the reality that dumb luck an…

A simple "no" would have been fine.... So, no strong evidence anywhere, huh? I'm gonna set myself a five-minute timer. "Passion" isn't well defined, so I'll look broadly. And I'll look for correlations rather than causation: it's hard to imagine a natural experiment that increased someone's passion. Let's hit G Scholar and search "passion and achievement".

Boom!

https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-6494...

> The present paper reports two studies designed to test the Dualistic Model of Passion with regard to performance attainment in two fields of expertise. Results from both studies supported the Passion Model. Harmonious passion was shown to be a positive source of activity investment in that it directly predicted deliberate practice (Study 1) and positively predicted mastery goals which in turn positively predicted deliberate practice (Study 2). In turn, deliberate practice had a direct positive impact on performance attainment.

https://journals.sagepub.com/doi/abs/10.2466/pms.110.C.1029-...

> The major purpose of this study was to test the hypothesized paths from dualistic passions through achievement goals to subjective vitality and performance in sports. 645 high school athletes participated. The proposed structural equation model, with relationships between dualistic passions and subjective vitality and sports performance mediated by achievement goals, fit the data well, especially for mastery-approach and performance-approach goals.

Probably best because of its wide scope and broad sample:

https://www.pnas.org/doi/abs/10.1073/pnas.2016964118

> In three large-scale datasets representing adolescents from 59 societies across the globe, we find evidence of a systematic cultural variation in the relationship between passion and achievement. In individualistic societies, passion better predicts achievement and explains more variance in achievement outcomes. In collectivistic societies, passion still positively predicts achievement, but it is a much less powerful predictor.

This took me 3 minutes. I don't claim these studies are the last word on the subject. I just wish people were a bit more curious - passionate even - about checking their own beliefs.

Re: Understanding Jane Street

#384
post #65

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…

If lone wolf day traders can make good money why can't they?

[deleted]

Re: Understanding Jane Street

#386

> 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.

They don’t really have to be losing in the long term, being short deep out-of-the-money puts nets you an option premium if the underlying never crashes, and once you delta-hedge that position, you can remove the tail risk from your portfolio

Yes it's not necessary for them to be losing in the long term for Jane Street to be profitable, but I suspect they are.

Re: Understanding Jane Street

#387

Earlier quoted context omitted.

Had "The Man Who Solved The Market: How Jim Simons Launched The Quant Revolution" on my shelf for several years as an out-of-the-blue birthday present but I finally got around to reading it earlier this year and I'd absolutely recommend it. The emphasis on published work rang a bell, but thumbing through the book I can't find it off hand.

I enthusiastically second "The Man Who Solved The Market".

I also enjoyed the book and tried to find out more which I wrote about here (in my non-monetized blog): https://sileret.com/blog/renaissance_technologies/

Re: Understanding Jane Street

#388

Most of this article is pretty interesting and unusually insightful about quant firms. But I find this sentence to be utterly disgusting. > Trading is a lottery operated by market makers, and like the lottery its social function is to convert mass innumeracy into funding for better causes. It’s basically saying “we should have your money because we know better than you”. Maybe true, but I find it a very weak argument…

Isn't this what taxes are?

Also just ignore that line, it's not actually true.

Re: Understanding Jane Street

#389

Why do all these companies with pretentious attitudes exist when the average* software still takes 30 seconds to show a paragraph of text? Ironically whenever these companies take the security test, they not only fall flat on their face, but are proven to not have the slightest clue how to do basic stuff like string escaping. I actually looked at the code for one of the top Haskell companies with the same attitude, a…

What does string escaping have to do with market making?

Re: Understanding Jane Street

#390

What tax do these type of companies pay? I'm gonna guess they aren't paying the "retail" short term capital gain tax.

These kinds of firms are one big reason we need a sales tax on stock trades. Stable, long-term investments are much better for the economy.
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