Bootstrapping an Ultra Low Latency Trading Firm, Part 1(veyronb.wordpress.com)
veyronb.wordpress.com
Bootstrapping an Ultra Low Latency Trading Firm, Part 1
http://veyronb.wordpress.com/2011/07/31/bootstrapping-an-ultra-low-latency-trading-firm-part-1/
24 comments
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.
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.
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.
What did you major in when you were in college? Finance?
math,cs,philosophy
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?
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?
This is very interesting. Would love to see more posts about it as you go.
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.
These might interest you:
http://www.amazon.com/Quantitative-Trading-Build-Algorithmic...
http://collective2.com/
http://www.amazon.com/Quantitative-Trading-Build-Algorithmic...
http://collective2.com/
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.
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.
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.
That aside, claims like this show a lack of perspective and the slightest overconfidence can cut everyone down.
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.
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.
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.
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.
And I can appreciate the response... the information you're providing is absolutely interesting... perspective is different, nothing more... Is hard to discuss such things without some numbers... keep writing. :)
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!
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.
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.
Presumably, the kind of person who would start their own HFT company is earning more than 85K/year out of college. Close to double that if they're a trader at a bank, potentially more if they're at a smaller firm and do well.
Still, 200K after two years of work is a tall order after taxes and living expenses. But given four or five years, it's not that surprising.
Still, 200K after two years of work is a tall order after taxes and living expenses. But given four or five years, it's not that surprising.
> In this economy, how many college graduates walk out of school into an $85,000/year job and no living expenses...
Probably the same people actually able to set up a HFT shop. Let's face it, this isn't for everyone. I don't think we should be crucifying the author on this particular point, it seems like there is a lot of interesting information to be had here.
Probably the same people actually able to set up a HFT shop. Let's face it, this isn't for everyone. I don't think we should be crucifying the author on this particular point, it seems like there is a lot of interesting information to be had here.
FTA: "Many successful people are persuaded not to try. For most people, a steady $500K/yr is enough to keep them happy, especially if they are protected from the risks of the business."
I'm pretty sure he's starting out making $500k (as a quant, I guess), not $42k. Other sections of the article imply that he was working at in finance and then decided to go out on his own.
I'm pretty sure he's starting out making $500k (as a quant, I guess), not $42k. Other sections of the article imply that he was working at in finance and then decided to go out on his own.
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?
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?
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?