
Bootstrapping an Ultra Low Latency Trading Firm, Part 1 - veyron
http://veyronb.wordpress.com/2011/07/31/bootstrapping-an-ultra-low-latency-trading-firm-part-1/
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FireBeyond
From the article: "And if you are careful enough to save money (for example
living at home saves about 3K a month when all is said and done) and not
increase your expenses too much (no need to get a Porsche when a BMW or VW
suffices), it’s not hard to save 200K by the time you turn 24."

Uhh, sure? 200K at 24, in savings?

So that's about 250K pre-tax. Say you graduate high school at 18, find a
magical job that gives a high school grad $42,000 a year, and spend /not one
cent/ for six years, maybe... (or extrapolate outwards).

Or maybe you go to college. Graduate, let's say, age 21... In this economy,
how many college graduates walk out of school into an $85,000/year job and no
living expenses...

Never underestimate the value of a silver spoon in your mouth... and never
underestimate the power of denial about just how silver your spoon is.

~~~
veyron
Unfortunately I had no silver spoon :/

Due to family financial pressures, I had to graduate early. Fortunately I was
taking enough credits to graduate a year early.

I really didnt want to discuss numbers, but I realize that the comment seems a
bit misguided if not put in perspective. I started out with salary 250K (not
including signing and year-end bonus), but most of my salary excess went to
helping out my parents, so I really couldnt save much. Most of the savings
came from saving bonus checks and not increasing spending when I was promoted.

My remark about the car specifically was to point to the fact that almost all
of my coworkers were fortunate enough not to have that type of family
pressure, so they could afford to get nicer cars (my BMW is a 40K 3-series,
for which I could take a lot of deductions because I was running a startup at
the time, compared to some of my subordinates driving 160K porsches). It's
easy to say that you won't scale up your expenses when your income rises, but
its hard to do so when your coworkers and social network are scaling up much
faster than you.

~~~
ad
If it is not too personal, why did you stop? Also, do you prefer comments here
or on your blog? To answer your last question in the blog: yes please keep
going!

~~~
veyron
Oh no the fund is still running. After building a ton of python and C programs
to automate basic tasks, thanks to the magic of cron, I stopped doing a lot of
the day-to-day work. And now I have some time on my hands :)

There was another discussion in <http://news.ycombinator.com/item?id=2828538>
and I got the impression that people were interested in HFT, if not
necessarily supporting it. Furthermore, I find that many people in the
industry are surprisingly tight-lipped over the most mundane things (god
forbid someone finds out about struct.unpack or RDTSC). My motives are fairly
straightforward:

1) discuss some of my experiences for those who are interested in seeing how
to bootstrap a trading operation;

2) convince people that finance startups exist and have interesting
challenges; and

3) excite some people to the extent that they would like to work with me.

I'm honestly not excited by most of the traditional candidates from finance
recruiters, mostly because the market is flooded with excel-happy windonauts
that couldn't even do basic excel tasks (like calculating a pnl given a CSV --
I would use awk, but that's not a traditional windows thing) and "linux"
developers who don't know how to use grep or perl/python.

Also, the last time some tried a retrospective
[<http://news.ycombinator.com/item?id=2162346>], I got the impression that he
was looking for a job. And given that the blog was taken down, I'm guessing he
found one :P

As far as comments are concerned, at least I get an email when a comment is
made at the blog. I dont get an email here, and see an item like this if I
happen to stumble upon the post.

------
alsocasey
Favourite quote: "It's not hard to save 200k by the time you turn 24."

I'll continue reading for the technical insights, but honestly, this reflects
a certain lack of perspective.

~~~
spullara
I think there is an implicit assumption that you already work for a trading
firm.

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bhickey
I'd like to go on the record as the pessimist in the room. If you go down this
path, I strongly believe that you're going to lose your shirt building a
bankruptcy machine. In many ways, the markets are a mechanism for transferring
your money to the pockets of people who started out with more money than you.

~~~
FireBeyond
I'd strongly suspect that this guy is definitely in the upper middle, to begin
with. "Why buy a Porsche when a BMW will do?", complaining about the duldrums
of a six digit income... talking about being easily able to have quarter of a
million in savings at age 24... etc, etc.

~~~
bhickey
We could be charitable and assume that he graduated from high school and
college in 6 years, and was immediately hired into a well-paying job at age
20. With four years of pre-tax income at $140k, $200k in savings isn't out of
the question. (Assuming a 30% marginal tax rate we get a post-tax savings rate
of 51%.) Not typical in the slightest, but not impossible, especially if
you're from a pampered background.

That aside, claims like this show a lack of perspective and the slightest
overconfidence can cut everyone down.

------
ScottBurson
Here's another question I'm curious about. Given that you've decided to start
an automated trading firm, how much better off are you going for microsecond
timescales rather than, say, seconds or minutes?

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SeoxyS
Would be very interested to see the rest of the story. I've always had a
lingering interest to bootstrap a trading algorithm. It doesn't even have to
be HFT.

~~~
SkyMarshal
These might interest you:

[http://www.amazon.com/Quantitative-Trading-Build-
Algorithmic...](http://www.amazon.com/Quantitative-Trading-Build-Algorithmic-
Business/dp/0470284889)

<http://collective2.com/>

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ajays
As an ML/AI guy, I'm curious about the problems encountered by HFT systems.
What I would love to see is some data, along with the desired outcome. Maybe
also include the amount of time available to make the said decision. One could
go further and institute a "Netflix prize" with such data.

Right now, I'm clueless about what kind of data these systems deal with, and
what are they supposed to do.

Any HFT/ULLT people willing to share data?

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arange
Many of the items discussed in this pre-article seem way overkill for what the
author seems to be trying to do. It doesn't take much to create an account
with a reputable broker like Interactive Brokers that has a good live API for
auto-trading (and support paper trading to test your code without using real
cash). There are no upfront fees on many brokers and the commission is often
minimal depending on the transaction. eTrade has similar APIs. Historical data
is available at minimal cost through a sites like eoddata.com. Also,
especially if you're just starting and experimenting with formulas, using your
personal laptop/desktop with a live feed from IB is more than enough to act on
live tick data for the symbols you're interested in.

~~~
veyron
You can't do ultra low latency trading on IB or any of the discount brokerage
houses. Essentially, your order goes through their system before it goes out
on the broad market, and that (time) cost is orders of magnitude larger than
the internal system cost. Also, the (economic) costs of doing business with
that type of broker are comparable to to the profits.

There are difficulties with simulating at this level, and I will go into this
later, because the quality breaks down. Many ultra low latency trades involve
some sort of rebate capture (profiting off of the fact that the exchange gives
you money if you provide liquidity to the markets), and that requires some
sort of model for how the rest of the market would react to the presence of
your extra liquidity.

------
veyron
New post: <http://news.ycombinator.com/item?id=2835656>

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jimlast
This is very interesting. Would love to see more posts about it as you go.

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somecoolguy
What did you major in when you were in college? Finance?

~~~
veyron
math,cs,philosophy

~~~
somecoolguy
I'm majoring in CS right now. What type of courses would you recommend that i
concentrate on if I am interested in HFT?

And how did you learn trading strategies? Did you take any finance type
classes in college, or did you learn them all on your own?

