
How to Get a Job at a High Frequency Trading Firm - shogunmike
http://quantstart.com/articles/How-to-Get-a-Job-at-a-High-Frequency-Trading-Firm
======
kayoone
While i find the technological challenges in HFT very exciting, i would never
want to work for the companies benefitting from that work. If that means i
will make less money and someone else will come in and do it, then so be it.

~~~
gaius
There is a thing in most kinds of investing and trading called _slippage_.
This is when you decide you want to buy something at say $100/unit but by the
time your order reaches the market, the price has moved, maybe it's $101,
maybe it's $99. If you are buying a lot, then it's unlikely there's a single
counterparty you can trade with, so you will actually be doing it as many
smaller trades. Sometimes slippage moves for you, sometimes against but that's
not the kind of trading you want to do because it involves taking on more
risk, you want confidence that the price you ask for is the price you're going
to get, and you don't want your trades to affect the price. HFT techniques are
invaluable here.

~~~
anologwintermut
As would trading on a clock. If the market only updated once a second or even
a far smaller interval, this whole insane business would be mostly irrelevant.

~~~
easytiger
Then proximity to the second tick would be the game. What you are advocating
would have people sending orders in the future to arrive at the gateway as
timer expires.

~~~
anologwintermut
Perhaps I'm missing something, but why would it matter? Trades execute at the
state in t-1 at time t. Assuming people's orders are secret in that interval,
you don't actually care when your trade gets queued.

~~~
easytiger
because if the trade comes in too early it would automatically rejected by the
g/w. Also how could the orders in a published orderbook be secret?

~~~
gamblor956
You are misunderstanding what he's saying.

He's saying that you could use a periodic-submission order system. Say that
the period is (for ease of discussion), 1 hour, ending on the hour. All orders
made during the hour are queued up and simultaneously executed at the start of
the next hour. If there are too few bids/offers to satisfy all trades, then
trades are satisfied using some fixed rubric (i.e., pro rata, max/min price
buyer/seller will accept, etc.) Until execution, the orders remain secret (not
published to the orderbook). In theory, this allows people to place orders
based on a known price.

In practice, in the past (before electronic trading took over), the published
orderbook was updated manually as traders submitted bids, offers, and executed
sales information to the exchange.

~~~
gaius
Unfortunately there is actually no such thing as "simultaneously", because
these are not discrete events; for every buyer, there will be 1-n sellers, all
of whom are involved in other trades of their own. You _have_ to impose an
order on trade execution, and each trade will take some finite amount of time
to process.

~~~
anologwintermut
So you randomize instead of doing first come first serve. Everyone who got
there orders in by the deadline gets an equal shot. You do verifiable
randomness to prevent the exchange from messing with trade orders.

If you do a simple two phase system, you don't have to worry about the
exchange leaking orders. You send in a cryptographically binding commitment to
your order(this hides the order now, but prevents you from changing it later).
After the time period is up, the exchange publishes a commitment to their
randomized order of trades , then every party reveals their actual order. Then
trades execute.

~~~
gaius
Sorry, but that's ridiculous. You can't know in that situation what inventory
anyone will have at the time you actually make the trade!

I don't think you quite understand that these trades aren't simply converting
money to something else. They are actually buying and selling _things_ ,
abstract things to be sure, but things that your counterparty will either
already own or be able to acquire on your behalf. You might as well say Amazon
should send things to random addresses and everyone has an equal chance of
getting what they ordered.

~~~
anologwintermut
I think your Amazon point is rather inaccurate. With amazon people are
ordering different products at fixed prices from one seller. In this case, the
question is how do we actually determine the price for one product(say
Google's stock) given many buyers and many sellers all with different price
points. It's not the same thing at all.

Someone/some algorithm has to match offers for sale with offers for purchases.
Buyers are willing to buy at up to some price and seller sell at down to some
prince. The question is when the matching is done, how frequently and whether
you gain any advantage by being faster (other than having marginally more time
to analysis). By contention is that you can accomplish this.

While this may not work for, I don't think amazon or anything like that has
much to do with it.

------
bagosm
I thought there was a consensus in this community on how the leading traders
just squeeze money out of all other wannabe sharks. The skills I find most
relevant are low ethics and networking (not the technological type of
networking).

~~~
pron
Let's put it this way: if the character of the people you work with matters to
you, then HFT is not something you'd want to do.

~~~
theorique
Sources?

Are HF traders known to be objectively more “evil” people than others in the
finance industry, or vicars of country churches, or social workers, or cabinet
ministers? If so, I’d love to see the studies.

~~~
pron
I base this on the few people I know in this industry. Not scientific by any
means.

Now, people are hardly ever "evil", and they certainly never consider
themselves evil. But even strangers would hardly call traders evil; they're
just... how shall I put this... if you know some people working on (in?) Wall
Street then you know the type. Of course, there are plenty of technical people
working on the highly technical aspects of HFT with little regard to the
domain itself, who don't fit the prototype; still, there are very few
idealists in that industry.

~~~
javert
> they're just... how shall I put this... if you know some people working in
> Wall Street then you know the type.

Well, I don't know anyone working on Wall Street and I don't know the "type."
Can you give concrete examples or details to substantiate your claim and make
it specific? What is it in particular that you object to about these people?

No offense, but as a disclaimer, I don't want to come across as giving your
claim too much credence. In the abstract, any form of trading is a life-
supporting activity (someone is voluntarily choosing to trade with you to
mutual benefit) and thus is noble, other factors being equal (e.g. you're not
committing fraud, etc.).

~~~
pron
You're right. I'm sorry for taking the ad-hominem path. We should discuss the
practice, not the practitioners (what is it that some Christians say? Love the
sinner, hate the sin? ;)

~~~
javert
I'm actually still curious about your anecdotal experience, though, if there's
anything you'd like to share. Just because quants are not evil "in principle"
doesn't mean there might not be certain personality traits that pop up often.
I don't know anybody who works in that space.

~~~
pron
I don't think it would be appropriate at this point in the discussion. There
are numerous articles and books about Wall Street culture; some of them are
very true to life.

------
erikig
I'm surprised that the morality of HFT firms keeps coming up even among
technically enlightened audiences.

I'll preface this by saying I'm not a HFT or affiliated to one but I strongly
believe that HTFs and UHTFs play a valuable role in well regulated markets. We
can argue endlessly as to whether the financial markets are well regulared but
for this discussion let us assume they are pretty close and that if they
aren't there's an HFT out there that's working to discover why and capitalize
on it.

HFTs also provide massive liquidity and allow people that trade large
positions (Pensions, Insiders e.g start up founders etc) to enter and exit
into the market without causing massive waves in the instruments they are
trading.

~~~
pron
I think we should be delighted that the morality of anything comes up among
technically enlightened audiences. For years, us engineers have been accused
(often justly) for not caring.

The value HFT, day trading, and stock traders in general provide is far from
clear-cut. When considering the merit of some economic enterprise you can't
just take into account its local effects. For example, casinos also provide
value: they provide entertainment and they feed a lot of people. But it's
uncertain whether our society is better off with them or without them.

------
pron
If we put aside for a second the overall sleaziness of this industry that
makes working for it very unattractive, isn't HFT at a dead end? Do people
still make a lot of money off it? Hasn't it reached the tail-end of
diminishing returns?

~~~
kasey_junk
It really depends on how you define HFT. If we define it as the author does,
then it's not so much a dead end, rather it is really hard to move in on. I
like to think of latency arbitrage (including pairs trades, exchange arb,
etc.) as a utility. It takes a massive amount of investment, but if you do
that you can get a very steady return. The problem is that in most of those
trades there is no money in being the second best. These leads to an
environment where the people already invested are in an arms race to keep at
the front.

If on the other hand, you are talking about other forms of algorithmic
trading, there is still money to be made by being smart, having insight,
having better procedures, or faster time to market etc. The arms race in
latency arbitrage has actually made a lot of this easier as it has
dramatically brought down the cost of entry to the non-bleeding edge of
latency use cases.

~~~
pron
> there is still money to be made by being smart, having insight, having
> better procedures

Other than algorithmic speculation (sentiment analysis, etc), is it still
possible to come up with better (non-speculative) procedures that yield
substantial profit?

~~~
kasey_junk
Depends on what you mean by "non-speculative" & "substantial". All trading is
"speculative" in some sense, but yes you can still make a tidy living in the
algorithmic trading space.

------
chinmoy
I'm happy to see this pop up on HN since HFT is something I've been looking
into lately. If you're interested to dig deeper into HFT and algorithmic
trading, 'Inside the Black Box' will be a good read. Link:
www.amazon.com/Inside-Black-Box-Quantitative-Frequency/dp/1118362411

If you want to take your reading further, there are some great recommendations
on the review section. And just to get an insider look into quant traders and
the effect HFT can have on the market, I also recommend these two short
documentaries made by the dutch national TV:

1\. Quants: The Alchemists of Wall Street
[https://www.youtube.com/watch?v=ed2FWNWwE3I](https://www.youtube.com/watch?v=ed2FWNWwE3I)

2\. Money & Speed: Inside the Black Box
[https://www.youtube.com/watch?v=aq1Ln1UCoEU](https://www.youtube.com/watch?v=aq1Ln1UCoEU)

------
Choronzon
Keep the following in mind..

HFT is not very profitable anymore.There are a fair number of companies in the
field now.

HFT tends to be algorithmically simplistic.This is not because stupid people
are working there but its very difficult to have algorithmic complexity and
speed,and speed is more important.

It is very much a winner takes all game,profits are not evenly
distributed,being fast is VERY important.

However good you are you are not a trader.You are a codemonkey. You will never
be rewarded or compensated as a trader in most of these firms(some firms like
Rentech are an exception to this,but rentech is not typical high frequency).

Your hourly rate will probably not be worth it. When you factor in variable
compensation(ie bonus) which is not guaranteed and horrible working hours you
would in most cases be better off with some boring bank java contract for
compensation.

------
leokun
> While many UHFT firms have moved towards custom hardware (both for
> processing and networking), some less latency-sensitive systematic trading
> firms still make use of multithreaded C, C++ and Java (with custom garbage
> collection).

Aside from the hiring theme I have a question. I'd think given that network
speeds would start being the bigger bottleneck. Is location at all important
to these firms? The speed of light is fast, but the closer you are to the
exchanges, the better the advantage over competitors must be.

~~~
jhspaybar
I can't find the story now, but I read about an HFT making a play on the
bid/ask spreads between new york and chicago, they spent a large sum of money
to build their data center somewhere in the appalachians to save themselves
something like 3 ms in total transit time.

~~~
junto
I think you are referring to an article called "Barbarians at the Gateways" by
Jacob Loveless, that recently popped up on HN:

\- Web:
[http://queue.acm.org/detail.cfm?ref=rss&id=2536492](http://queue.acm.org/detail.cfm?ref=rss&id=2536492)

\- PDF:
[http://portal.acm.org/ft_gateway.cfm?id=2536492&type=pdf](http://portal.acm.org/ft_gateway.cfm?id=2536492&type=pdf)

------
known
You may have to leave your CONSCIENCE at your home.

------
Choronzon
On the topic of the utility of HFT my personal opinion of is it reduces spread
costs but adds systemic fragility. I actually doubt stock markets are socially
utile,let alone HFT but that is an argument for another day.

The real trading problem when we look at access and information asymmetry is
not HFT but dark pools.HFTs typically all compete for the same pie anyway.

------
CmonDev
Not a helpful guide as the paths listed almost guarantee that qualifying
person would be aware of ways to enter. Would be more interested in the guide
"Hot to get a job in HF while being a mainstream web dev who graduated from an
unknown uni".

------
jgalt212
HFT is

1\. not a growth industry

2\. the regulators are keen to clamp down on this sort of activity.

As such, anyone with the intellectual chops to master HFT, I'd suggest they
apply it to greener pastures. Wasn't AdMeld started by former HFT people?

~~~
gaius
That's what I think of, sure, when I think of where programmers could best use
their talent for the advancement of mankind. Not curing cancer or AIDS with
protein folding, not probing the mysteries of the universe at the LHC, but
finding new ways to make people click on ads.

~~~
javert
jgalt was intentionally giving selfish reasons for people to not go into HFT.
Apparently he doesn't share with you the premise that people ought to work on
whatever "advances mankind."

