If this stuff floats your boat I'd also recommend any of Carl Cook's talks, e.g. https://www.youtube.com/watch?v=NH1Tta7purM. Optiver is AFAIK in a somewhat different business than Jane, but they're also players (or were last I had any inside baseball).
Too many people got their worldview on this industry from "Flash Boys", and I say this as a Lewis fan, is criminally stupid at best and in bad faith at worst (if you want a well-researched, accessible alternative: https://www.amazon.com/Trading-Speed-Light-Algorithms-Transf... is about a zillion times better).
It's a pretty short list of places I'd ever go through some grueling and semi-arbitrary gauntlet to work for, but Jane is on it for sure.
I hope the author(s) do Medallion next.
Medallion has probably gotten more scrutiny than any other fund, yet 3 decades later it's still as opaque as ever beyond vague 'statistical methods'. It makes a lot of money no matter what. It's more tight-lipped and exclusive than Jane Street. I don't even think anyone knows even if it's doing market making or not. Or if it's making short-term directional bets. You would think after 30 years stuff would leak and the edge would be gone. Employees are paid enough to not disclose, and likely are divulged only a small part of the overall method/system, so only a handful of employees will know how it works in its entirety. What it's doing has to be on a very large scale and in a big and liquid market to be so consistent and profitable.
Of course, the 30%+ annual returns almost every year for 30 years doesn't hurt the mystique either ;)
It's interesting that their other funds are far more mundane in terms of performance and last I heard Medallion can't hold much capital (~10B or so I've heard in whispers), but there is definitely something interesting as hell going on there.
Near as I can tell it's the hardest job to get on Earth. Rumor mill is that they pre-screen candidate based on their citation record in the literature, though that's obviously hearsay and I don't know if it's true.
The emphasis on published work rang a bell, but thumbing through the book I can't find it off hand.
Everything about them is boring. They're well paid sure, but they're based in long island and hire mostly grey beards and don't overhire. Compare that to Jane Street hiring interns jumping through silly hoops like betting poker chips on puzzles. It's a bit of a farce.
Theoretically other firms could copy this, but the main goal of a hedge fund manager is keeping AUM. High AUM and poor performance is better than low AUM and strong performance. So its a lot easier to optimize on maximizing AUM and managing your brand. There aren't a lot of mathematicians that start hedge funds so the people starting them already seed the company with the wrong culture to replicate RenTech.
What I've been told is that Rentech also effectively use their public funds as a source of revenue to juice development of proprietary platform, so some of it is business cunning rather than a hard technical edge.
They were also got on the quant train very early.
https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-tr...
The speed (latency) of the EM spectrum is the effective celerity of the medium: this doesn't differ in the air between microwave and shortwave in any meaningful way.
The speed (throughput) achievable on a given frequency is limited by the period of that frequence, high wavelengths can modulate more signal. Microwaves are higher frequency than radio by definition, so they have a higher throughput.
Neutrinos don't exceed the speed of light, and make a very bad medium of transmission given the near-complete lack of interaction with baryonic matter.
0. https://www.bloomberg.com/news/features/2019-03-08/the-gazil...
That's more than enough on the instrument math side, most of what you'll see is pretty mundane stuff, unless you end up on an exotics structuring desk.
I'd also note that JS and other MMs mostly don't do anything requiring you to know the intimate details of these things, a lot of it is understanding how the market works rather than the deep instrument math. That might mean other kinds of math of course.
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.
I've been trying to put myself through YouTube night school on some of this stuff, and MIT OCW has great resources as well at significantly less cost than going to MIT ;)
This is a pretty reasonable jumping off point for their corpus of financial engineering stuff: https://www.youtube.com/watch?v=HdHlfiOAJyE.
I'm fortunate enough to work with a person who actually understands derivatives trades with some sophistication, but that's a happy accident and the more people have access to good online resources the better!
Edit: I forgot to mention this book (https://www.amazon.com/Algorithmic-Trading-DMA-introduction-...) in the spirit of something more technical than the general-audience one I linked above. I have some nitpicks with it as well, but I've gotten value out of it.
(And to pile on, The Blind Side was the touching story of how Lewis’s prep school classmate, an Ole Miss booster, gamed the system to provide improper benefits to a high school recruit.)
It's a decent book, and a decent movie (kudos for one particular scene where I recognized data from the actual LoanPerformance database) I actually prefer the movie Margin Call for more accurately capturing the feel of the crisis from inside a bank.
On a different but related note, I also really enjoyed the Compleat Ubernerd, written by Tanta, all about mortgage servicing in the mid 2000s: https://www.calculatedriskblog.com/2007/07/compleat-ubernerd...
I'm not sure how it has aged (no Dodd-Frank updates, the author has passed away) but it was glorious in its time.
It certainly seems like an interesting place to work, but I find their hiring process as a bit of a red flag. Places that hire like that confuse me, because it seems it's going to apply a very selective filter to applicants that make it through. And I don't meant selective in the sense of technical ability but more emotional, social, and thinking styles. I get incredibly nervous in technical interviews and with a wide background, I don't always know certain bits of computer science. So, I do terrible in these style of interviews, because they do nothing to expose what I do know or how I really think on projects.
As another point of why I don't think they work, they almost are never two-way. And if they were, it would show the pointlessness of them. If I asked interviewers a bunch of questions about things that I know about, then we'd just be trading blows, which is pointless.
This is a bit like saying you find the hiring process at the NFL or for SEAL teams a red flag. You either fall through the selection sieve or you don't, that's the whole point. The filter has served its purpose, and they end up with the elite high-performing teams they desire. There's nothing wrong with you or the filter if you don't make it. The filter clearly does work because Jane St prints cash like the Fed and is one of the top MM firms out there.
Of course Jane Street is successful! There's no question there. However, I don't think it's much of a question that they probably miss out on some great candidates that don't fit into that type of hiring process. It's possible they view those as acceptable losses.
> it's an interesting format: viewing an industry through the lens of a particular firm
What's interesting about that? Almost every other article does that.
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 retired? No! People who are driven and smart don't suddenly earn their first $5m go off and buy an annuity. They're more likely to go off and found their own trading shop at 30 than they are to retire.
Secondly, you know what happens to people who don't get hired after their internship at Jane Street? They go to HRT, to G Research, to Jump, to Citadel, to Optiver, to IMC, to XTX, if they're really unsuccessful they'll go to Google, Microsoft, Amazon, Meta. These are not people desperate for a job.
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 go to Jane for the money (which is similar at the p99), if you're a baller willing to pull the hours you can make many millions a year in either place.
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.
That's anecdotal, but my sample size is more than two or three.
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).
That and among developers, I think Jane Street has hit "mythological status". I've known about Jane Street since I was an undergrad looking for internships and it was always talked about like: "oh yeah, that's where the REALLY smart people go to work". I think a little part of going to work there for everyone is figuratively one-upping your friends from college, you made to the place where geniuses worked.
Yes, these are some of the highest paying companies on the planet. Your statement is not a put-down of Jane Street.
I guess I must not be driven, because I would. Or at least something close enough to that. $5m just earning interest at 5%ish is way more income than I need to live the lifestyle I want.
I'd buy a few acres in the middle of no where, build a nice house, grow a big garden, raise my daughter as a nice family man and never work again.
Obligatory "Office Space" scene on "what would you do with a million dollars": https://youtu.be/4lmW2tZP2kU
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 financial success is a combination of: being born to parents with the means and motivation to see you well education; being born lucky enough to be a little bit clever; being lucky to pick a career that makes a lot of money, often only by ignoring idiots who say 'follow your passion; putting in a lot of hard work to get good at something that is in-demand.
Or the usual answer: just being born wealthy and wouldn't-you-know-it you wound up wealthy too.
No but having the freedom to start your own trading shop (or company) is hugely different than having to stick with a job you mostly don’t like to pay the bills
This kind of debate needs to be backed up by numbers or it won't be very productive. To get started we should know the percentage of millionaires in their 30s who are still working, and the ones who aren't working but are looking for a job.
Personally I can think of several things I would do with $5m other than buying an annuity. If you have that kind of money you are basically set for life if you make a few right choices.
Stepping down and just starting to live on annuity might not fit to what they have come to expect.
Great film.
Re EA: quoting my boss, EA isn't really a dominant thing in the market maker space, it's pretty much only espoused by a couple high profile individuals (mainly, SBF).
Re strategy: point about how there's little strategy involved in being a market maker is off-base. Everything is ultimately strategy: do I continue to pour resources into a strategy that is losing money in the hopes of eventually seeing pnl? What markets should I focus on? What is the best use of time for each employee that maximizes pnl/head? etc etc
One thing that I thought article got right is that most work involved in market making is about avoiding trades, not making them. Capturing the bid ask spread is conceptually easy. The hard part is avoiding trading with toxic counterparties.
Part about put options is especially apt. Market making during a crash / recession (like right now) is especially difficult because all the non-toxic counterparties have stopped trading as much (people like to trade a lot more during a bull market than a bear one). By setting up a structure such that you profit during a crash (either by buying puts, leaning net short, or through some other method), you introduce an uncorrelated return stream that can really help.
The article doesn't say it's dominant, it says "There is a weirdly high overlap between quant finance and Effective Altruism in general, and between Jane Street and EA in particular (it is emphatically not 100%)"
I know quite a few EAs who work or worked at Jane Street, much lower profile than SBF. What the article misses is that a lot of EAs specifically went into finance because if you're looking to earn money to donate it's one of the places you can earn the most, and not because of "where they advertise jobs" or "overlap in outlooks".
Usually, flow from other MMs isn't toxic.
Toxic flow can also just be someone who's executing a very large order, even if that counterparty isn't informed. If you fill them as they are starting to work their order, you could get run over as they continue to finish that order and push the price against you.
isn't selling puts directional? One strategy could be something like trying to find a way to bet on volatility but without a negative carry or at least as small as possible...this is hard to do. Taleb's universa fund tries to do this.
It’s actually quite easy to argue with that. It’s 1 (or 2 at best) data points. 6.3bn is meaningless without knowing the capital put to work to achieve that. And finally if your 10x YoY it’s just as likely you had a bad year before as a good one this year.
You could maximise more good by first working at Jane Street in your 20s, retire by 30, and then set up your own smal fusion/cancer research lab where you can do research without being tied to government funding and politics. By 30, many cancer researchers have barely finished their PhDs, so you won’t actually be that far behind scientifically, but you’ll be far ahead financially.
[edit] To add one prominent example - it's doable, as Jeff Hawkins demonstrated. Founded Palm, made money, then created his own brain research lab. As far as I understand, the neurological community has not embraced his ideas with open arms, but they are at least intrigued by his universal computational model of the brain. So that's a pretty big accomplishment.
So either he's withholding whatever concrete insight he found, or he hasn't found it yet - I believe the latter is more likely.
I know multiple people who have done this.
If you want a famous person, look at Paul Erdős. Always jumping into new areas of mathematics and solving problems at the cutting edge.
Or, to get to the current subject, Taleb using his background as a trader to jump to a career in academia, where many consider(ed) his research cutting edge.
He already had a PhD so it's not surprising he was able to enter Academia. But outside his books I'm not aware of anyone talking about his Research much.
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.
For fusion research, the quantitative skills from many Jane Street people can easily transfer to make meaningful contributions to fusion research.
Or you can take your ~10M or whatever in earnings during a decade as an OCaml programmer at Jane Street and fund a cutting-edge cancer research lab?
Are you reading yourself after you type?
Might be one of the more arrogant things I've read. And I frequent WallStreetOasis.
This is just blatant Jane Street (and more generally, hedge fund) propaganda.
Yes, you serve some role within the financial system, but you're not really relevant to society imminently and to non-western societies generally.
Who do you think is supervising the high school student? Where does the idea for the project come from? Where does the money supporting the high school intern' experiments come from?
I understand that (as the article mentions) these folks clean up when the wheels have already come off anyways, but day-in-day-out, the spread on AAPL is one tick ($0.01) nowadays, rather than the 1/8ths that you'd get quoted by some loud guy from Jersey 30 years ago.
Citations on this stuff are hard to come by, but it does seem at least directionally true that these advanced actors are making less money over time even as the problem becomes harder. If that's true, it's money not going into the pocket of a middle-man somewhere. Multiply that by everyone's retirement account and we're talking real money.
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 account, across everyone with a retirement account it adds up.
I know that people often have a low-key axe to grind about advanced market actors being "bad", and I know that politicians go to the well with this narrative all the time, but it's misleading at best and usually just demonstrably wrong. And with nothing but respect, I tend to bow out of conversations where people push the issue past a comment or two.
There are exceptions: 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 advanced actors are slicing strips of meat off of each other to the benefit of 401ks everywhere.
That is, in my view, at best an ancillary goal (notice that most money in the markets doesn’t participate in buying shares from the company itself).
That may be what you want the markets to be about but every other participant has other desires from the markets and the great thing is they can all get what they want from them.
Don't cut out the best part of the quote :-)
A lot of people trying to change their careers would like to have a talk with you about this, I bet.
Ph.D in CS is 5-10 years ahead of newbie trying to learn computers
Its funny that the article uses a “chess champion” and a “concert pianist” as examples to to argue that you don’t question their occupations when it comes to being a benefit to mankind or not. I mean, the huge fucking salaries, where does the money come from? from fucking trees?
WTF! Seriously? I predict this will be one of the first article/HN post that has negative publicity for Jane Street .
I'm still waiting to see them bragging about having top proctologists in their team ;)
They tend to be on the regulatory side.
Even if you retire with 10M by 30 you aren't going to run a world class research center with that kind of money for very long, or at all. Hell Land, buildings and equipment probably eat most of that right out of the gate. MIT's Plasma Science and Fusion Center had to shut down when their funding dropped from $28 to $14M per year. So at 10M you could Fund, forget about building, a center 1/3 the size of MIT's for 1 year.
Nice try to justify your bullshit job, though.
It's also something that people almost never seem to execute, usually it ends with "make money and donate a small amount of it".
But the tech blog is really good too.
If you want the best price, you need to have all of the market participants bidding together. Market hours serve as a coordinated period in which ~all market participants agree to be online and bidding. Prices, thus, get stale overnight. But we assume that that is mostly okay, as business is normally conducted during business hours, and we assume that transactions can wait until the next day. ACH transfers take multiple days! (technically so do stocks, but that's mostly invisible to retail traders).
If you're a retail trader, I would caution you somewhat against trading after-hours; there is very little liquidity and it could cost you 100s of bps more.
You can trade outside of market hours just fine and many products (e.g. E-mini S&P 500) trade all night. It's just that a lot of companies publish news right after the market closes so prices are more volatile. And people sleep or play videogames at night so there's less liquidity.
> 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 for the social function of a quant firm. Especially when lotteries are essentially a form of regressive taxation.
Also just ignore that line, it's not actually true.
I think people want to convince themselves that they're interested in high paying jobs such as those at Jane Street because that would make their lifes much easier (they could go work there and make lots of money). Similarly, some women try to convince themselves that they love this well-off, solid guy who's courting them - marrying such guy would make their lives much easier and nicer.
- lifestyle - how much does this job affect my work/life balance? Do I have to travel far / work late?
- challenge - how hard is it? Will I enjoy the work?
- impact - what's the mission of the company? What am I contributing to?
- salary - how does the job fit with my financial goals?
- prestige - can I talk about / be celebrated for what I do?
Possibly other factors as well. But if everything is equal, but one job pays more than another (and if it's Jane Street, one year's work might be 3 years' work somewhere else) then it makes sense to take it.
What money bought them, and why I now want more than I have, is the ability to delegate both tasks, but even more importantly worry, to others. If I have a brand-new car with a warranty, I spend zero worry that it’s going to break down. If I have a hot shit CPA and/or lawyers and stuff, I spend zero worry than I’m going to dick up my taxes or something. If I have a rhodium-plated health plan, I don’t worry (much) about getting sick. Ditto fitness trainer, ditto housekeeping service, ditto laundry service.
What this really buys a passionate hacker (really a passionate anything) is time unencumbered by stress, which is very different to just time. I can really focus on whatever I want to.
Usually this means I have to work hard and stress about technical stuff, but I far prefer, borderline like, being wrapped around the axle on technical stuff. I hate worrying about that other stuff.
How anyone could fail to consider this a reasonable tradeoff is beyond me.
I'd love to know where this claim comes from! I'm not sure how much/what supporting evidence there is. It doesn't fit _my_ experience of people in Quant Finance. Of course, what does "routinely" mean here? 20%? More?
* not even average, this describes almost all software made in the last 20 years.
Filter out those who made bets too big to avoid outliers.
The 100 poker-chips interview thing = interview BEFORE internship.
As you would expect, a job offer is based on full internship performance.
I don't have personal experience but I have friends who interviewed there.
> One example of this is NAV trading (Jane Street has a paper here), where an investor wants to place a large trade in an ETF and agrees to buy it at some future point at whatever its net asset value is, less some small fee.
Should this say "agrees to buy it at some future point at whatever its net asset value is *NOW*"? Otherwise, I'm confused, why wouldn't the investor just buy it later?
I think they mean that the buyer will agree to pay $5000 now for say 10 shares (close to current valuation), and get it in a week regardless if they will be worth $0, $5000 or $100000 at that point. They would prefer to buy it now, but can't, and thus are willing to pay a fee to make it happen.
However, the motivation (and pricing) is different from futures trading: here the buyer would prefer to buy the asset immediately, but because of market inefficiencies or unavailability it's not possible. So some dealer figures he can make that happen in a week, takes a small fee, and agrees to the trade. In the meantime, the dealer might want to buy something that correlates with the value of the actual asset to cover his bet -- e.g. they might be able to buy most of the stocks in the ETF in roughly the same amounts, and just accept the remaining risk.
There is however a chance that they will not be able to complete the transaction.
https://www.janestreet.com/wp-content/themes/janestreet/pdf/...
I'm gonna guess they aren't paying the "retail" short term capital gain tax.
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 a commodity business.
So you're actually right more than you think. Plenty of teams that make money do stop making money over time (or make less). I'm sure there were teams at Jane Street over the years that have folded or dissolved because they stopped making money. But as a firm, they may be making more money.
In the HFT firm I used to work for, that one team went from making $500k/day to $0/day. But another team went from making $30k/day to $2M/day. That's right, a team of 12 people making $2M/day. They probably ate most of the former team's lunch. That's how it goes, survival of the smartest and fastest.
So why hasn't Jane Street's edge been arbitraged away? Some of it has, probably by people within Jane Street who found even more edge. When you have hundreds of the brightest minds in the world, who's going to eat your lunch but yourself (and a few other high quality trading firms)?
But ultimately your assumption is wrong. What they do is not simple at all. It is not like building a simple CRUD application. Throwing money at the problem does not mean you will succeed. You will most likely fail. Strategies that used to work may no longer work when markets change, and markets are always changing. So some traders may try to take their ideas and apply them elsewhere, and they may have some limited success (not to mention the high quality speed and infrastructure you need to win), but when the market changes in 6 months, are you smart enough to keep up?
Are you able to elaborate on this?
I’m assuming that teams wouldn’t be sharing strategies with other teams. Is that accurate?
Would these other teams be independently finding some strategy that is either directly better than another internal team or is having some indirect impacts on other teams?
Correct. At least at this firm I was at (different firms have different org setups and therefore incentive structures), each team was a silo. All the teams shared the common core infrastructure to talk to exchanges, but that was it.
Teams have negative incentives to help each other.
> Would these other teams be independently finding some strategy that is either directly better than another internal team or is having some indirect impacts on other teams?
Exactly. You have no idea who you're trading with. It could be against other teams in the company or other players in the market (probably a mix of both).
That happens, with mixed levels of success. But these firms are more than just IP. Their moat is:
- Lower fees, negotiated based on their volume and relationships. Crucial given margins of 0.02%.
- A well-oiled machine that makes the machine. This includes culture, branding into recruitment pipeline, and so on.
- IP has a short half-life. The machine that makes the machine is more important.
- Scale advantages -- code sharing between teams and asset classes, which is hard to replicate in a small group.
- You need to have perfect execution on every vertical to have a good shot. Devs, researchers, operators, relationships.
It's also common for that IP to not all be known by a single person. Division of labor can be used to protect IP.
"Making high performance CPUs that are also highly power efficient should make a ton of money. Why isn't everyone doing it?"
Well, turns out that isn't exactly something that a small group of engineers can whip up in a garage anymore. Same goes for highly efficient market making systems.
HFTs came into their own over the past decade or so -- during a time of falling interest rates, unprecedented growth, and notable lack of regulation in financial markets.
One of these things is not like the other. I'd be entirely unsurprised to see most HFTs turn out like Lehman Brothers, Enron, or AIG. They all lasted more than a decade or so. But their gains were fraudulent and they failed spectacularly.
{x} came into their own over the past decade or so, during a time of falling interest rates, unprecedented growth, and notable lack of regulation in {x's field}.
That said MMs have mostly consolidated heavily over the last decade (due to many firms collapsing against competitors) so in some ways the business has been commoditized. Not sure if true of MMing ETFs as an authorized participant (JS bread and butter) though, idk much about the logistics there.
The costs of maintaining a trading platform are very high. You have to be colocated with brokers/exchanges, and have a full market data and trading platform optimized down to microseconds. You need a large data and processing farm to backtest your algos. You need the legal structure to dodge all the tax. You need access to lots of GPUs and FPGAs to train your models and execute fast.
Or they can take a strategy built on advantageous relationships with banks providing credit for leverage, an accurate and clean history of the markets and prior data to feed models, all run by teams who know what they're doing and who are constantly working to improve the edge the entire firm has, and try to do it all themselves after only really working in one small area.
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.
The given reasons for using Ocaml outlined in this article is interesting. It makes reasoning about complex systems easier. And making an "esoteric choice" earlier has advantages in hiring.
Assuming you give back to keep it going.
I don't have the advantage of secrecy where I'm at. But I'd be willing to guess that strategy could apply to other languages and markets.
Have fun first movers.
- OCaml does type inference, so you don't actually declare the types and have the compiler check them, as stated in the article.
- Investors are not market-makers, the two words actually refer to the two types of opposed participants in the market.
- OCaml is the language used for research, but they actually have a lot of developers working on the compiler and on libraries for OCaml which are themselves implemented in C or C++.
- Jane Street is hiring massively and not nearly as exclusive as advertised here, though they do indeed pay slightly above the average. Most likely they had a few good years and are investing the cash they made into hiring expensive staff.> OCaml does type inference
This is an uncharitable interpretation of the author's intent.
> Investors are not market-makers This is a very uncharitable interpretation of the source:
"In one sense, every investor is a market maker and the only difference is their timeline. Jane Street is far along the continuum towards strict market-making: being willing to buy and sell assets at a price close to, but not exactly at, the market price."
> they actually have a lot of developers working on the compiler and on libraries for OCaml [..] in C or C++
Yes, and? The author still makes the correct point that they gambled hard on OCaml.
> Jane Street is hiring massively and not nearly as exclusive as advertised here
I bet they're hiring very selectively for the high value core jobs discussed, even if they have a large support staff that does things like writing OCaml infrastructure in C/C++ and gets paid much closer to non-hedge-fund rates.
In addition, perhaps a small point relative to the first, but in Ocaml, the arithmetic operators perform no type inference; there's a separate operator for float-addition versus int-addition, and so on. This somewhat limits your exposure to potential automatic type conversions.
In Ocaml-world it is customary to write .mli files that specify the types of exported functions and modules. Those are then checked by the compiler against the .ml file with the implementation. In the .ml file you indeed use type inference over annotations almost all of the time.
The Ocaml compiler is largely written in Ocaml. C and C++ are not used very much at Jane Street as far as I know.
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 manipulative behavior to make money over retail trades just as a Hedge fund selling CDO's to pension funds.
Like what? I work at an HFT and I'd love to deliver a new strategy to my manager.
You can call them vampire squid from hell but they don't exactly take money from retail, they tighten spreads for them if anything.
[1] https://www.investopedia.com/terms/f/frontrunning.asp#:~:tex....
If anything, having that many achievers results in bored people doing things that are suboptimal for the performance of the firm as a whole. Whole divisions of wasted talent spawn and self perpetuate.
It's the hiring process hazing ritual that sets the allure, there's not much else to it.
1. What do these firms typically look for in support staff? I’m asking about non trading/quant roles like recruiting/ops/facilities management?
2. What’s the potential upside, not specifically financial, but more along career growth and opportunities for different roles within the firm if you join in a support function?
Appreciate any insight you may have.
Regardless of what the individual you responded to thinks.. Firms like this have very difficult interview processes. They are looking for something "Special" and this excludes the vast majority of applications.
I took a taxi to my interview, and the taxi driver himself told me he drives many people to the location for interviews, and drives a lot of unhappy people back (failed the interview).
It should tell you something when even a local taxi driver knows how difficult it is to get into these places.
I will try to answer your questions as well:
1) I did support work when i was at "hedge fund" - They want people who can think outside the box and be a culture fit. their culture is well known, and you either fit in or you don't. There is no "faking it".
They generally hire fresh grades from ivy league schools. This way they can indoctrinate the culture. This is not always the case, but probably 70% of their employees were done this way.
2) Many of my former coworkers are now CEO's, COO's etc. Besides the money the culture encourages you to push past your limits and grow. One guy was a developer, he's now the CIO for an international makeup company..
At the firm I worked at, it did not matter what your role was. If you wanted to change groups, you would be given a fair chance to take the tests. if you passed, you were in the new role. The tests were INTENSE... but many "techs" moved to business roles over the years.
There are many support roles, one is research, and that can mean sorting through a daily pile of a few thousand "documents" (ranging from a single paragraph to a thousand pages) and sorting them into groups, and then being able to rapidly summerise the salient features.
This bleeds into training AI to do the same .. while remaining aware of the nature of the material to be a human check on the AI.
There are also roles for people that can map or otherwise visualise data, pander to the needs of the core earners so that they never need reach far for what food, drink, personal life support they need, etc.
If you're aiming for support you likely want to present your discretion and ability to seamlessly play well with others as dynamics and demands change.
Could I have made more money at Jane St? No idea. Probably? But money isn't exactly holding me back right now.
Would I have felt like I was working on interesting problems? For me, personally, I don't think so. I don't find abstract problems as interesting as I do practical ones, and, practically, working at Jane St is working to make a few rich guys incrementally richer. Not really a problem I'm interested in, I guess.
(As an aside, it seems to me retention is much higher in tech than it is on Wall St. The rosy view of this seems to be that Wall St pays so well that everyone retires early, but then again, there's a reason they call it "compensation.")
You have to make your own choices. Jane St has a gleaming reputation--and maybe, for you, it would have been a perfect match!--but not getting hired there seems to me to be a strange thing to consider a "greatest regret."
People don't leave.
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.
2. You have to solve over the phone very hard math questions to make it past the initial screening stage. I dunno what comes after that.
The highest-stakes gambling events in the world are typically very discreet, invite-only affairs. One that might be close to the top in terms of available winnings happens at the end of Jane Street internships: interns get a stack of 100 poker chips and spend half a day getting asked brainteasers and then betting on their confidence in the answers. Some of these questions might be pure math and probability questions, some might be more abstract bets on making a market in some outcome, and apparently one of the questions is a tough probability question where part of the prompt is to bet on how long it will take to get the answer.1
I dunno why brain teasers are so important. I increased my account by 5x since the lows of covid to present with simple large cap tech and etf strategies (tesla ,tqqq, tecl, amazon, and others ). I don't need to mentally visualize 3d shapes intersecting 2-d planes or count colored vertices of hypercubes to make money or develop good strategies. Just some basic calculations and some other analysis..maybe advanced high school level. It's like if you want to find good traders, look for people with good track records.
If I were going to start a fund, I would do away with the puzzles. Instead what I would do is look for people who seem to have good track records on reddit or elsewhere and some decent risk management, like on wallstreetbets. There are thousands of users there and then I would try to find the best ones and try to quiz them on risk management to see if they are relying on luck or have a system. Recruiting from reddit or twitter is harder than linkedin, but I think the quality is better because you are seeing actual traders in their element. instead of hoping that puzzle skill will lead to trading skill, you just pick people who are already good.
Continued:
The other mitigation strategy is: just buy some puts. Markets usually don't crash upwards, but they do have a habit of crashing downwards. And for a market-maker, a crash is a uniquely interesting situation: volume is high, spreads rocket up because people are afraid to trade or don't have the liquidity, so an active participant can make a staggering amount of money. (I liked this Reddit AMA: "Yeah, 08-09 was insane. I've heard stories. No one knew what the fuck was going on and everyone was on edge. Then it all turned out fine and everyone got PAID.")
Puts bleed out a lot. Even during bear markets they lose money if the path dependency is unfavorable. The covid crash would have been perfect, but the 2022 bear market has been much more gradual, so puts would have done more poorly.
Yes, the 'crashing down' aspect is captured by the skew or smile. That's why a 20% ITM put will have a much higher IV than a 20% OTM call or be much higher than predicted by the volatility of the underlying. In some cases it will be massive...like a 38% IV compared to 11% for the underlying. So many people have tried to make put strategies work, and I have yet to see anyone do it, but if someone actually could I imagine they would not tell.
Looking for people with good track records is a terrible way to choose traders. See: https://m.youtube.com/watch?v=zv-3EfC17Rc
Tldw: meets a person, picks 5 horse winners, gets then to invest. How did he pick 5 winners? Emails 1000s of people, using a permutation per person. The person who sees the 5 wins thinks he has a system.
Real life version: 1000000 monkeys given ability to trade. Scratch bum=buy, scratch head=sell. One of the monkeys will certainly have a good trading record by the end of it.
But all you need is a bull market to 50-100x your money with 3x funds https://i.imgur.com/PF7XEaR.jpg
If 7/10 past decades are a bull market then odds are you will make good money.
Market neutral strategies are different though.
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https://www.wolframalpha.com/input/?i=3000*%28%28integrate+1....
A calculation i ran to answer this problem shows that if you have $10k and split $3k of into cash that yields 3%/year and the $7k is put into TQQQ, which generates a long-term CAGR of 53%/year, approximates the actual returns of TQQQ .
So this turns the $10k into $1.5 million over 12 years, which is close to the actual result (100% or $10k invested in TQQQ at the start), assuming a crash happens every 8 years (modeled by exponential distribution and based on empirical evidence going back the past 100 years) and and then after TQQQ falls about 70% the $3k cash is then put into tqqq. After crashing, the above formula assumes that TQQQ races higher in order to maintain it's long-term CAGR, so buying the dip helps a lot.
So generally speaking, keeping 30% in cash/bonds equals the result of 100% fully invested if you buy the dip. The downside is if there is no crash you will lag.
There are various tweaks like above to improve risk adjusted returns. It's not that hard to do if you have a basic knowledge of calc and stats.
The markets are not predictable based on past history. Whenever you have a model that shows they are, you are either cherry-picking or have been lucky. Even more, there are far too many external phenomena affecting the fortunes of an individual company to be able to reliably make the kinds of bets you are taking about.
> After crashing, the above formula assumes that TQQQ races higher in order to maintain it's long-term CAGR, so buying the dip helps a lot.
This is the funniest assumption by far. All (public for profit) companies try to "race higher" at all times. Sometimes they succeed, sometimes they stagnate, sometimes they crash. Right after a crash is when you have the highest chance of it never coming back up. The CAGR is a historical observation, not some kind of parameter of a forward-looking model.
The highly mathematical quants hired by trading firms are doing something pretty different. They are trying to find opportunities for profit wherever they exist using advanced techniques. It is much different to you or me casually using what seems like a "common sense" approach. Most people who say "of course it will..." find that the next quarter is the exception to their definite rule about how everything works.
You've already made the assumption that you can detect the market bottom to select when to drop the $3K, which is ludicrous, and begs the question if you're know where the bottom is why not put the full $10K in then with maximum upward leverage.
You are likely the same, though you don’t know it.
Now if you manage to grow your portfolio 5x again between 2022 and 2024, that will be something.
You managed to make money on a levered high-beta strategy in a zero interest rate environment? If you don't know who the rube is in a market, it's you. Add a bit of volatility and the smart kids at Jane Street will eat your portfolio. They are on both sides of every trade, taking your money no matter what you do.
The days of the "good track record" traders in the public markets have been over for 15 years. Forget your strategies, park your money in SPX and thank me later.
You can make your substantive points without that.
I also worked at a hedge fund myself, and i was not a "referral" either.
They post positions online, apply. if you have the skills they are looking for you can get in.
Did you apply and get rejected?
