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Featured Do quant algo and HF trading jobs still exist?

Discussion in 'Career Advice' started by Peter Wagner, 1/26/14.

  1. Peter Wagner

    Peter Wagner New Member

    At the end of last year I sent a State-of-the-Talent-Market email to colleagues. In that mail I wrote:
    @Ken Abbott, a frequent contributor to QuantNet, replied to my mail:
    Subsequently, he asked if I would elaborate on the job market in algo and HFT for this blog.

    The simple answer is yes, there are jobs in Algo/HFT, and some of them are paying very well. However, that jaw dropping salary that you heard from a friend is only going to the very best individuals with rarified talent.

    I have a large hedge fund client that is a pioneer in algo trading. I recently presented a candidate for a quant role at the firm, and the first thing the recruiter asked me about him was, “Does he have any medals?” “Medals?” I asked. “Yes, from math Olympiads.” As we talked further, it became clear that winning a medal at your country’s math Olympiad was okay, but really they’d prefer someone who had done well at the International Math Olympiad… Rarified indeed.

    As with most things, there’s a spectrum of jobs in this area. The above speaks to the jobs that are responsible for the high salaries and subsequent buzz around algo/HF trading. Here’s what I actually see in the market:

    Buy Side - Hedge Funds
    - Larger, well capitalized funds are looking for unique talent and may pay extremely well
    - Smaller funds want this talent too, but they can only pay by promising a reward based on returns. The majority of these funds struggle to make money, are very volatile, and the rewards tend to be marginal.

    I worked with an individual who worked at five funds over a period of ten years. I asked him to explain his work history, since hiring companies would need to understand why he moved around so much. His story, which I’ve seen numerous times, was Fund A failed, so I moved to Fund B, then B failed, so I moved to Fund C, which failed, etc. His earnings over the period weren’t any better (and probably were worse) than if he had taken a good quantitative developer job at an investment bank.

    What they look for when they hire
    - Best of the best talent. You do not need a Stanford or MIT degree, but you’ll need to impress a lot of people who interview you with your sheer intellect (a top school helps for entry level jobs, as these firms recruit heavily from top schools). An A level talent for Goldman Sachs may be a B+ player for a top hedge fund. These funds are relatively small and can afford to be selective. They usually hire opportunistically when they see the level of talent they want.
    1. Algo/HF
      - The funds that participate in algo/HF trading generally look for the following:
      • PhD in a quantitative field
      • Experience with high performance computing
      • Excellent software development skills – the ability to turn quantitative analysis into systems
    2. Macro
      - Macro funds look for a very different profile. They use third party products for trade processing, risk, regulatory reporting, and other needs. The main challenges involve system integration and the ability to make adjustments on the fly to accommodate new trade types and new requirements. Typically these funds stress:
      • Excellent software development skills (C# front to back is the norm)
      • Excellent communication skills – nobody has time to explain things twice in a fast-paced trading environment
      • Good instincts and the ability to work independently – you need to be able to understand how things are done at the firm, and do it w/o being managed
      • Experience with a variety of financial products, trade booking, order management, and risk
    Sell Side - Banks
    With current regulations, banks can’t invest their own money in algo trading. However, they do employ algo/HFT quants and developers to conduct business on behalf of their clients and as market makers in fixed income markets.

    Most algo dev/quant roles are on the equity side, as firms seek an execution advantage in equity markets which are now almost entirely electronic. Complex algorithms are deployed to assess market microstructure across a myriad of exchanges. I see roles in this area with some regularity. Generally these are dev/quant roles with an emphasis on excellent C++ skills and a strong background in a quantitative field.

    Fixed Income
    Fixed income markets have slowly moved to electronic exchanges over the course of the past two decades, but the migration has accelerated due to recent regulation that requires the majority of fixed income derivative contracts to be traded on exchanges.

    Algo roles in fixed income are concentrated on automating the process of making markets on electronic exchanges. For example, quoting a credit default swap involves a complex assessment of the market including analysis of the underlying equity where there is far more liquidity. Each fixed income instrument requires a different type of analysis. This is a new field, and trading desks are looking for outstanding individuals to research and implement strategies. These jobs pay well, but there aren’t a lot of them.

    What they look for when they hire
    1. Equities
      - Top notch developers with significant experience in high-performance computing
      • C++ used almost exclusively
      • R and KDB+ skills are often desired
      - Knowledge of equities market microstructure
      - Knowledge of machine learning and data mining
      - MS or PhD in a quantitative field
    2. Fixed Income
      - Top notch quantitative skills – generally a PhD in a quantitative field is required
      - Knowledge of machine learning and data mining
      - Knowledge of fixed income products – cash and derivatives
      - Software development skills

    The above observations are generalizations. Every company has its own way of operating, and needs differ from firm to firm. And of course every individual offers a different blend of experience and abilities. If you’d like to discuss any of the above topics or determine if your background qualifies you for a specific role, I’d be happy to talk to you. You can reach me at peter@affinityny.com.
    LinkedIn profile: www.linkedin.com/in/peterwagner123 (I keep a listing of active quant roles here)

    Peter Wagner has a masters in computer science and spent 20 years developing trading and risk systems for major investment banks. He formed Affinity Resource Group in 2011 to apply his experience in the field to help firms find talented IT and quantitative professionals.
    #1 Peter Wagner, 1/26/14
    Last edited: 2/27/14
    Quants, Eric Xue, niravpatel and 38 others like this.
  2. niravpatel

    niravpatel New Member

    Dear Peter Wagner,

    As of now, I'm working on getting PhD in condensed matter physics from university of Tennessee, published 3-papers in peer reviews journal and 1 more has been submitted (in less than 3 years of grad.-school and only 2 years of actual research work). 1 of these paper was monte-carlo technique development, and 1 other was on further parallelization of this technique using MPI. However, this codes were written in fortran as used by most scientific computing (because others in group do not understand C++). However, I confident that I can write the same in C++ using Object Oriented Programming this is not an issue for me. More over, before I graduate I'll work on getting a certificate John Hopkins for Data Science, which will shape my introductory skills in R programming, Data Visualization, Data Analytics and Machine learning.

    Recently, I have figured out that finance will be a good fit for me. From these set of skills do you think that I would be suited for a well paid Algo/HF trading jobs? Do you have any further recommendations for me? I'm still new to this area and exploring my interests.

  3. HF Recruiter

    HF Recruiter New Member

    Yes, I am a HF recruiter and have recently launched a buyside role for quants. Please see the below spec and qualifications: if you think you are a good fit for this role, please send your resume to Quant.HF.Recruiter@gmail.com - hoping to confirm candidates before 3/24.


    Client:An institutional investment office for a single family and its global charitable foundation is seeking a quantitative investment analyst to support its internally managed systematic, quantitatively and thematically driven investment strategies.

    The role requires working closely with the firm’s portfolio managers in the construction and management of domestic and international equity focused investment portfolios. These portfolios serve to achieve one or more of the following aims: exploit market inefficiencies with typically a 6 month to multi-year hold period; provide liquid and cost effective access to alternative equity risk premia; and/or express a high conviction macro or thematic view held by the firm.


    - 2 to 5 years relevant work experience in the investment management industry (either sell side or buy side) implementing quantitative approaches to designing and optimizing equity oriented portfolios. In particular, prior professional experience in developing and implementing equity risk premia based strategies is highly desired

    - Strong quantitative and advanced statistical skills as well as adept data management and computer programming skills to efficiently manipulate large financial data sets

    - A high degree of proficiency with leading financial market databases including Bloomberg as well as statistical packages such as R/Matlab

    - Undergraduate degree in a highly analytical discipline and an advanced degree (masters /PHD) in a quantitative discipline (science/math/engineering/operations research/quant finance)

    - Strong communication skills


    Please describe your experience implementing quantitative approaches to designing and optimizing equity oriented portfolios.

    Are you familiar with Bloomberg and highly proficient in Matlab and R? Please describe/ list any other programming languages you are proficient in.

    Do you require US work authorization?
  4. Joy Pathak

    Joy Pathak Swaptionz

    Great piece.

    Here is my two cents:

    Regarding the algo trading in sell-side. This is a huge area of growth actually. It is not just market making and electronic trading for clients. That is a big part of it and the best and fastest algorithms are helping banks increase market share. Ex. I refuse to trade with banks who have less than a certain hit ratios with me (number of trades they win over what they see) usually. This is a massive area of growth and banks are aggressively hiring people who have strong quantitative and programming skills here and pay very well. They are also hiring non quants who have a very deep knowledge of the markets to educate the quants and develop better market making strategies.

    The second tier to the above "algo trading" desks is pure prop trading algorithms as you would find at hedge funds. Several banks have built out desks recently that have algorithms running pure prop strategies. There are banks with teams of 4-5 "algo traders" who are basically programmers and 1 or 2 strategists (who are basically your typical sell-side trader usually) to run these teams. They are usually working in sync with the "market making" electronic execution team but run pure prop strategies to make PnL. There is a big demand for these teams especially this past year. Some shops in these teams are making 50mm + with very small use of balance sheet so they are extremely profitable for the firm.

    Majority of the algo trading and algo execution related jobs will be coming up in the above two set up teams at banks in my opinion. The main demand will be for senior sell-side traders who can educate and help quants build strategies (basically turn their discretionary strategies into algorithmic) but there will be a need for young programmers who can grow to become full out algo traders.

    Most of the above are in fixed income especially in US Treasury markets.
    loser and Andy Nguyen like this.
  5. pingu

    pingu Well-Known Member

    I wouldn't call them "pure prop" strategies because that would violate Volker. I would say they have algos that implement hedging strategies expressing a market view at the same time so they are positioned to make PnL.
  6. David.Wan

    David.Wan Member
      C++ Certified

    My two cents is that hit rate is simply a ratio on how competitive you are among the brokers... As a matter of fact this was originally introduced in base ball analytic... to be more sophisticated one can use normalised hit rate but still I don’t find it interesting. The math behinds is very simple compared to pricing theory... the most complicated modelling I have seen on this matter is the testing of the statistical significance on the hit rate so the measure can be trustworthy... and one will often find themselves sucked into “left join” all day for this type of work... don’t want to be a whistleblower but I hope one knows what they are getting into before they decide to go this route...
  7. Joy Pathak

    Joy Pathak Swaptionz

    lol sure. I am not on sell-side anymore. Dont care.
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