Seems to me that firms like two sigma and jane street form some sense of "mystique" about them with regards to how elite their developers are. But once you get inside, most people are writing run of the mill software. Google has the same tactic, even paying below market rates to people willing to work their for the brand. Jane Street does pay very well, but still, most of their hiring is based off of prestigious colleges, less off of people who have written brilliant software. Not that they arent smart. I've just seen enough marketing, and met too many people working at these firms to give them much credit from an "elite software" perspective.
With so much money on the line, hedge funds and other trading firms focus a lot of effort on marketing and building up a perception that they truly are something special (at least those that take outside client money). Internally, things could be rather mundane, and even downright awful (from a technology perspective). Not commenting on Jane Street in particular, just the industry in general.
Source: I've worked at a hedge fund and I've seen how the sausage is truly made. Many friends have told me similar stories about other firms.
Also having worked for a hedge fund, they're generally going to do their best to get you at the lowest salary possible. The overall benefits might be good, but they're going to do their best to low ball on the salary, "you'll make it up at bonus time!" Bullshit, You have to negotiate with hedge funds and be willing to walk away from a shit offer. I started at one a year out of college. Made 3x what I did as an intern. I was happy, at first. You can budget around a salary for rent, utilities, etc. You can't budget hoping for a bonus to make ends meet.
Took me about 3 years to realize I was being paid half of my coworkers doing the same to lesser jobs as mine. Took me resigning with an offer in hand for twice what I was making before they upped their offer. I stayed for another 3 years before I got so fed up with the bullshit I actually left for a lower paying job (also less stress).
Yeah worked in the industry as well, there's a story an older buddy used to tell when he worked at PIMCO in the 90s. Bit different than a quant fund but still applies. They hired a few Harvard Economics PhDs, who when looking at their macro economics material for institutional investors, claimed it was all wrong/didn't make sense. Bill Gross, the fund manager, told them it was to "get the money in the door from the fucking clients, we make gut bets on the market". Then fired the guy
It's a prop trading firm. It's pretty important to distinguish between hedge funds that take public money (which are generally probably low quality, as the OP described) and prop trading firms that only or primarily trade their own money (Two Sigma, Renaissance, Jane Street, Jump trading, etc.). The latter deserve their mystique, because you only trade your own money if you are actually beating the market.
Difficult question, at least if you'd try to argue without politicizing too much. I'd say it's a false dichotomy to equate 'making money on the stock market on your own investments' with '(negatively) extracting value'. On the whole of it I'd argue that the existence of a stock market is a public good since it makes capital more liquid, more accessible and more transparent. Going from that to argue that firms that invest purely for themselves deliver a whole lot of positive externalities would be hard for me. I'd call it Lawful-Neutral. It's wholly within the rules of society, doesn't create very clear negatives and clearly delivers positives for those involved (employees, stockholders, etc.).
If you have a 'millenial mindset' and want to work where you directly and positively impact society, I'd choose elsewhere. From a Peter Singer-like perspective, if you'd earn top dollar there and spend at least a modest amount giving to the right charities, you might still be making the world a better place, even compared to the other place.
I'd maybe agree with your points, except the last point: if these traders keep all/most smart people from the job market, then even your dollars would not make a difference. Of course this is overblown but it is similar to the concern that "all of our smart people are trying to make people click ads".
I think the way to think about it is that this "make people click on ads" problem needs to be solved. Just like this "value assets efficiently" problem needs to be solved. And if you can contribute to solving either problem more efficiently, that frees up the next smartest person to do something more directly productive.
I would say yes, they do make a positive difference for society, but in a fairly abstract way.
Efficient capital markets are an extremely important part of a market economy. They allocate capital where it will do the most good. Firms like Renaissance make that process more efficient. That is, they take a process that used to require 1000 MBAs working full time, and they accomplish it with 4 physicists, and automate it. This frees up the 1000 MBAs to go do something more productive with their time.
I think it's easy to be dismissive of this sort of value creation because of how abstract it is, and how concentrated the wealth creation at a firm like Renaissance is. However, I think the value add to society is actually real.
There are legitimate questions about the value being added by ultra high frequency firms. The ones that engage in market making are definitely adding value, but the ones that are doing things more like front-running or statistical front-running are a lot more questionable.
I think this deserves a little bit more scrutiny in particular because the OP is asking about making a difference.
1. I would argue they're not a net positive. Making markets more efficient is fine but markets are already extremely efficient. The biggest social good can be achieved by working on issues that are classical market failures and full of externalities. Climate change, healthcare, basic science, education and so on. The man-hours invested in these prop trading platforms compared to the benefit to society is maybe positive under the microscope, but negative when one considers opportunity cost.
2. They're freakishly proprietary. They're corporate black boxes full of 200 IQ people who could be solving and distributing knowledge, but they're basically locking them in the basement to make money. Put any of those researchers into a public university and over the course of their career, they could educate thousands of fine researchers.
Not JS, but I've worked for a couple of competitors and can confirm. There were a few truly brilliant individuals, but most of the staff was unexceptional, and the general level of the tech varied between standard corporate and outright appalling. It turns out that if you have enough money, you can simply keep throwing programmers into the firefight until something sort of works. They're truly too rich to fail.
But, not an enjoyable ride if you actually love quality tech.
5 years ago, I had an interview with Jane Street. At that time I was interested in functional programming but not in OCaml. I think I had a fair chance but I bombed a technical interview. I do not have a "prestigious college" background and at that time I only had like a year of PHP experience. The interview format was also quite good.
I am not sure if the software they are writing is "elite" but OCaml is raising the bar a bit higher.
This kind of elite mystique was also summoned in many posts in the "Who's hiring" thread a few days ago. It's important not to be too discouraged by all of this when looking for a job. Yes, there are really good programmers, but how many can there be, realistically?
i asked this question at my Jane Street interview, but never got a real answer: how does a market making latency arb firm handle GC pauses that are inherent with any GC language? OCaml is better in this regard than, say, the JVM, but it still seems problematic. I know they wrote some FPGA compiler stuff with OCaml, but I can't imagine that all of their execution is running through FPGAs. Even if it's possible, it seems like an uphill battle; something like Rust would probably be easier to deal with (at least for their realtime code).
From what I've heard Jane Street's bread and butter isn't latency sensitive market making on public equities, but creation/redemption arbitrage on ETFs, especially ones that hold a lot of relatively illiquid stuff like various fixed income ETFs. Creating and redeeming those ETFs might involve pricing an emerging market sovereign or corporate bond that might have only traded a few times in the last year. So their expertise is more around smartly trading really weird stuff as opposed to the pure speed players like Jump, Citadel or Virtu Financial.
That said JS is probably in a lot of different products, some more latency sensitive than others, but speed isn't what they are known for.
OCaml is a general purpose language that provides an equilibrium between the avoidance of bugs introduced by state (like all functional languages), speed, and polymorphic type inference. At the time of adoption, the other choices were Haskell (too academic, not practical), Erlang (no type inference, not suited for large code bases with complex business logic), and lisp (too slow, loose/optional type system). The last time I checked, OCaml was third only to C and C++ in terms of speed. It is also important to consider how intellectually stimulating it is to write OCaml. If you can achieve the three things mentioned at the top of this paragraph while also creating a brand of gravitas and intellect that attracts top-tier talent, of course you would choose OCaml.
Would a new, uninitiated market maker write something in OCaml? Unlikely, as they would probably use C++, Rust, or Scala with a 1TB heap and GC disabled. Ignoring the learning curve and time/dollar constraints of starting a hedge fund, I would choose OCaml over the three mentioned.
At the time of OCaml choice at JS (I guess it was circa 2008-2010; I also strongly suspect that it was not at the start of JS) Haskell already had multithreaded RTS with very green threads, software transactional memory and multicore support.
> At the time of OCaml choice at JS (I guess it was circa 2008-2010; I also strongly suspect that it was not at the start of JS)
You're right that it wasn't OCaml from the beginning, but I believe it was quite a bit earlier than that. The firm dates to 1999-2000, and OCaml came into the picture sometime around 2004.
The reason they avoided Haskell, supposedly, is the lack of predictability in its performance, largely due to its laziness. OCaml, meanwhile, has a fairly straightforward compilation that allows moderately experienced developers to have a very good idea of what the corresponding machine code will be.
Presumably Jane Street didn’t choose C++ because they wanted to reduce bugs introduced by the preservation of state; the killer of prop shops. F# was developed six years after their founding, hence too young, and more importantly, a Microsoft-owned clone of OCaml. I don’t think it even ran on Linux before 2015. Today, F# might just suit the job, assuming you are open to being locked into the .NET family. An interesting idea to say the least.
Why C++ now? Still the fastest and tons of quants and highly skilled programmers know it. When you consider the correlation between C++ developers’ technical acumen and quantitative skills, coupled with the maturity and increasing convenience of the ecosystem, it makes sense.
.NET (redone as Core) was a much worse choice 20 years ago than it is now of course. If they would fully open up the debugger, I would prefer it over the JVM. OCaml is more open (for .NET Core, there is still no good open debugger and the JVM suffers from Oracle keeping closed performance enhancements which, in my experience, do make big difference) than either of them, but not many people like programming it so it is hard to find people.
Not really, everything related to app development is just gone, dead, with Qt and wxWidgets being the remaining survivors.
VCL is only available to corporate shops and those that aren't into FOSS religion.
MFC is in maintenance mode, and so far Windows developers are more keen moving into one of .NET UI stacks while keeping some C++ code as COM/DLLs or even C++/CLI, than jumping into UWP/WinUI. It remains to be seen if WinUI 3.0 will change the migration trend.
Then on mobile OSes, it isn't even an option, unless you want to write your own GUI from scracth using OpenGL/Metal/Vulkan.
I think you are ascribing too much thought to Jane Street's decision to use OCaml. I think it was a good choice, on balance, but from what I heard/read when I worked there it was mostly just circumstantial.
Worked in HFT and funds, there's a bit more to the taxonomy:
- Trading completely based on the current prices. If you're doing purely arbitrage, eg looking for the ask to go under the bid (elsewhere), you are gonna have to be really, really fast, because that kind of thing is so very obvious nobody hasn't thought of it.
- One step from from that is passively leaving an order in and hoping for the same thing. Eg you leave a bid in a less liquid market, below the bid in the main market, and hope someone hits you. You then immediately throw that onto the main market. Gotta be super fast to do that, because of course everyone else can see someone traded.
- Market making based on some form of ML on the orderbook, basically imbalance. Here you need to do more than just comparing two prices. You also aren't entirely leaning on the current price to offload your position, you might hold onto your position a bit. So now there's risk involved, and you might need to decide how big a position you want. And not everyone will have the same position, so not everyone is after the same trade.
- Market making based on multiple orderbooks. Say you have an ETF basket, and you want to be able to make bids and offers around it, as well as the underlying shares. So then you have a different position to everyone else, there's a fair bit more information to digest, and there's a fair bit more modelling which will mean different participants have different decisions. This means your decisions will not be contested in the same way that obvious arbitrage would be.
Ive worked a couple java based hft platforms at major firms. You write code that never gcs after startup. That means not using certain language constructs and rewriting almost every library along with using off heap memory.
I have personally worked on systems that would run an entire week between deployments and never gced.
As others have mentioned, they have ways of writing OCaml specifically to not trigger the GC or perform any excessive allocations. Helps when you have your own version of the compiler and a branch of the language itself.
I feel like the jane street tech blog has exceptionally good quality, with a really nice mix of academic and practical ideas thrown in. Do you happen to know of any other video series with this kind of exposition?
Unfortunately I agree with you Jane Street's tech blog and published lecture series are great and probably the best I know of. They make for great advertising to boot. Lecture series like Jane Street's are common in larger trading firms (more than 100-150 headcount) but I haven't seen one of JS' caliber yet.
If you welcome general corporate blogs, I think Google AI's technical blog is quite good. Their frequent publications on distributed computing strike a good balance of academic and practical ideas:
I don't know what Jane Street does, and can't speak for them. That being said, I've heard of some firms using the JVM that just tune things such that the garbage collector will never trigger, and then they restart the VM every night.
Unfortunately I don't have a citation for that. I think I've seen it talked about before here on HN before.
I suspect at least one use case has gone away since the Fowler wrote that: wanting to saturate the write channel into a database in general. Consistent hashing document DBs like DynamoDB, Cassandra, etc. are basically infinitely scalable for writes. It's not clear to me if LMAX still makes sense if you want to assemble the db writes into a strongly ordered stream.
You can write zero-alloc OCaml code, since the standard compiler is very predictable in when it will allocate closures, etc. The Flambda compiler makes things even nicer in removing allocations for some common idioms.
If you don't allocate, you won't garbage collect. GC pauses would be really bad, but you can avoid them, or at least avoid them happening at bad times, if you're careful. It does requires knowing in some detail how Ocaml manages memory.
In Elixir/Erlang there is no global pausing for garbage collection, instead each process is individual garbage collected. And I remember hearing about a strategy that allows you to avoid it entirely by ensuring your process's lifetime is short enough (or heap size big enough) that it basically never happens despite the BEAM (Erlang VM) running with garbage collection.
Edit: my point is that it is likely avoidable through certain coding practices in garbage collected environments.
This is only possible due to the way that the BEAM VM and its languages are architected; the gc itself is "not the smartest", but it doesn't have to be because there is no shared memory and process boundaries are failure domains.
This is a really fascinating question. When I chatted with some of the Jane Street crew at NeurIPS they were adamant in the benefits of OCaml's Hindley-Milner type system.
I didn't ask, but am curious, how that compares to the type guarantees of Rust? Would moving to Rust cause them to lose that advantage of compile time error catching? I've never written a line of Rust (hopefully that changes soon) so I don't know, but am certainly interested.
Rust type's system has a similar power level to OCaml's but without modules (which are used heavily at JS) and with linear types/lifetimes. Rust would probably be a good fit for JS, but of course it takes a lot to overcome the momentum of 20 years of using primarily one language.
I've written a java compiler that does GC and watched that part work; no pauses even for data structures with loops, and generally excellent performance. Not released yet, because I've also watched other parts not work.
But GC without pauses: That worked. And I was relieved² when I saw that my ivory tower worked, after many people had told me it couldn't possibly ;)
This is the third time I've watched this video (admittedly with a bit of distraction today). After the first time I went off and learned about modular implicits, which appear to be a huge ergonomic improvement, especially the way the JaneStreet library APIs are designed. The second and third times I got increasingly sad that so much brain power is being sucked up by algebraic effects, to the detriment of other advancements. Oh well, that's their decision to make; JaneStreet continues to do huge service to OCaml in myriad ways, and I really value these tech talk videos as part of that.
the sheer amount of money in American politics amazes me. Here in Germany, which is no small country, the largest parties maybe spend 20 million over an entire election cycle. And the discrepancy to the small parties is maybe 10x or so. And I find that obscene already
The Bloomberg numbers shocked me too. 400 million or something before the general election has even started, you could probably feed tens of thousands of starving children with that kind of cash, and they're blowing it on TV ads
Corruption is mainstream in the US. People don't appreciate how bad the situation is when money can buy politicians and subvert the majorities interests. It seems dramatic to say, but it's like a waking nightmare to me, seeing this in what I used to think was a country of high principles.
The prevailing wisdom on Wall Street is that an anti-capitalist would be devastating to the economy, so this should be no big news. Keep in mind that quant firms like Jane Street aren't necessarily long-biased on their positions, so it's likely ideologically motivated.
I have no doubt that a Sanders presidency would have a negative effect on Wall Street profits (which is why you see people like Ron giving millions of dollars to prevent it) but that's hardly a measure of the health of "the economy."
Perhaps you misunderstood what I said by long-biased, but companies like Jane Street, Two Sigma, RenTech will be just fine (and will probably adapt better than most) to structural changes and a decline in growth of the economy. The tax rates will hit individuals, but probably not as much as his donation set him back, so it's almost certainly ideological. Clearly you are passionate about Sanders, and that's fine, but it seems you are slandering this guy for no good reason.
It's strange to me that you seem to assume higher taxes on top earners (which is probably the conclusion I parse out of Sanders and his proponents, though they would face opposition in Congress to get there) necessarily means that economic growth will decline. Speaking historically, the United States has gone through periods of high growth with top marginal tax rates at something like 90%.
Higher taxes are not the only economics implications of a Sanders presidency, especially when you look at some of the governments Sanders has praised over his career. A better tax structure is necessary and the easiest thing to do, but I don't trust Sanders to figure that out. Even Warren comes up with a wealth tax instead of just fixing the income and capital gains tax brackets.
Hint: add three more brackets with 4mm+ at 50%, 20mm+ at 65% and 100mm+ at 80% and do the same relative adjustments for capital gains. No need for the government to seize the means of production when you haven't tried the obvious thing. Our current tax brackets are a joke, topping out around 500k when some people make 10,000 times that.
> especially when you look at some of the governments Sanders has praised over his career.
Can you be more specific here?
I mean, there can be praise for some governments without saying we advocate for everything they do. It's possible for instance to praise Cuba for health care outcomes without wanting to become Fidel Castro. There are also some ridiculous insinuations that Sanders is some kind of Chavista, which to me is a bit of a flag that someone isn't serious about their anti-Sanders discussion. I would say he advocates for more of a European type of safety net.
> No need for the government to seize the means of production
From Wikipedia (prior to elected office): advocated for nationalization of major industries, including those in the manufacturing, energy and banking sectors. In 1974, he advocated for a marginal tax rate of 100% on income over one million dollars, saying that "Nobody should earn more than a million dollars"
Amtrak was the one that came to mind for me. Nationalizing rail service has been pretty common in multiple countries over time. Sometimes private utilities also get absorbed by local governments. The history of fire departments in this country has a lot of that. The UK has an even longer list, you will note. Mexico nationalized gas stations in the 20th century.
I want to address your points re Cuba and Venezuela.
I'm going to start with Venezuela since I am a Venezuelan-American and you might not like what my views are on the topic. First of all, I always assume good faith, even when it comes down to Sanders, unlike Michael Moore, for instance.
Sanders expressed his support of Chavez in many of his writings. So, you might not consider him a Chavista, but he's definitely praised Chavez at least up to 2011 .
I know this is anecdotal, I visited Venezuela many times: 2005, 2008, 2009, 2011, 2013. Believe me, anyone with good faith could not have praised whatever was going down there in 2011. 2000? I can give you the benefit of the doubt. Chavez had only been in office for ~3 years by the time and hadn't shown what an awful dictator he was going to become.
Have you been to Cuba? Again, this is anecdotal, but nothing like first hand experience on a matter to make some people understand what the ugly reality is outside whatever some organization states on what the state of those countries are.
Trust me, you don't want to be in a Cuban hospital.
>> No need for the government to seize the means of production
> I do not believe Sanders proposes that.
Here's a video  where Chavez is seizing the means of production on national TV.
I find deeply sad when some Americans try to justify certain candidates who have supported awful governments, like Chavez's or Castro's.
I am not a fan of Chávez or Maduro or Evo Morales and that sort. There was some more optimism when that political wave started, and I in particular used to be more optimistic about them than I am today. This is probably true of a number of American left leaning people.
I have not been to Cuba. I hope to some day. (I speak fluent Spanish btw and hear about these places in their original, local non-US sources.) I do understand that they are said to have good health care outcomes, which is especially remarkable given how the rest of their economic system is going. The United States health care system is very terrible.
> Here's a video  where Chavez is seizing the means of production on national TV.
Yeah he does look kind of like a dumbass appropriating buildings on a whim without investigation or any kind of review (for the TV cameras and that silly applause), that was pretty much his way, but it's important to note that Bernie Sanders is not Hugo Chávez and can't be held responsible for the actions of another person, living or dead.
Sanders proposes a wealth tax as well. Not knowing that, coupled with ludicrous fears about him “seizing the means of production”, strongly indicates a questionable origin for your impression of Sanders.
The same thing goes for governments that he’s praised, a completely manufactured controversy. It is not condoning authoritarianism to say, for example, that China outperforms the US in infrastructure. People get hysterical about insufficient condemnation of the Cuban regime; I wonder how many are even aware of the murderous right-wing military dictatorship that the US installed and the communists replaced. It’s a very similar situation with respect to Nicaragua. Somehow the outrage about authoritarianism is missing as long as the US is directly profiting from the oppression. See Saudi Arabia vs Iran.
> Sanders proposes a wealth tax as well. Not knowing that
This is my point. They propose a radical new tax that requires measuring people's entire net worth, instead of fixing what's broken using our existing infrastructure which measures forms of income and money flow, because they are clueless, and it's good politics right now. The guy is a self proclaimed socialist, and that means socializing things .
I'm not interested in getting deep into another Sanders argument; looks like he is done. Of course, I'd like to see an inventive, creative, data-driven leader -- think Elon Musk, but without a social media presence. But that'll never happen.
If measuring wealth is a problem, I'd look into inflation, and Land Value Tax. Inflation would depreciate money, and land value tax would erode physical possession. Then we can redistribute.
Land value tax in particular seems particularly interesting: if generalised to comprise (almost) all of tax, we can expect a drastic simplification of tax collection, and much less paperwork for everyone when doing all kinds of exchanges, paying an employee, selling goods… at least for unregulated activities. And of course, it would make accumulation of wealth more difficult.
Another route, that several countries have partially and successfully taken, is devoting part of salaries to the common good (tax salaries, at it were): a bit to pay for retirement, a bit to pay for hospitals, a bit to pay for unemployment… this could possibly be generalised to outright communism, where the means of productions are no longer owned by capitalists. (I would avoid a command economy however. We most probably want local stuff to be managed locally. For instance, only people living within 1Km of a bakery should have a say about what the bakery should do, and the people working there should probably decide how they want to work.)
The more pressing problem however is handling the coming recession: as energy (oil, coal & stuff) decreases, so will the GDP (it has already started). I don't know how an "ideal" should look like, but it's certainly not a system that assumes growth that isn't there. I'll just note that without growth, inequalities tend to be much less tolerable.
Compare the junior software engineer who spends months writing an elaborate new system, full of bugs, to the senior developer who addresses the same problem with 10 lines of code. Which camp do you think your proposals, or any wealth tax proposal falls into? As opposed to just fixing the tax brackets, and not re-writing any code.
Depends. How big is the rest of the project? I assume the 10 lines of code you are speaking of are a delta. But depending on the rest of the project, the consequences of that small fix could reach further than anticipated.
The new system may be full of bugs, but why would the old system be any better? I've seen old systems. Some of them get their bugs fixed. Many get their bugs worked around, either by the devs, but often by the users themselves: "don't click here, it makes the program crash!"
As for Land Value Tax, do not confuse land with other kinds of wealth. Land doesn't move. Its surface doesn't change. It's market value can change, but it's not wildly fluctuating, like, say, Oil. That makes it much, much easier to tax than whatever property you build on top of it, or goodness forbid whatever precious trinket you might store in that property.
The other proposition, taxing salaries, works today. Taxing more or less salary is just a knob to turn. And at the time such taxes were put in place in France after WW2, the change was swift, and the "new system, full of bugs" worked. Communism (or something close to it) worked, in a Western, democratic country. Okay, it was only applied to school, roads, hospitals, retirement, unemployment insurance, energy… but that's already a pretty big deal, don't you think?
We could "just fix the tax bracket", but then my first reflex would be have a top marginal rate at 100%. I want a limit on maximum individual income. Something like $10M per year to begin with. That may seem ludicrous, to inflict such a brutal end on the American Dream itself. That's it, game over, no one will get rich ever again. But really, that dream is a lie to begin with.
Better yet, we could tether the limit to the median income. Want to get rich? Make your country rich first. That at least should appeal to patriotism, which I believe is still fairly strong in the US.
I dunno, the trading tax Sanders is proposing would hurt these firms a lot more than a traditional hedge or mutual fund. Moreover, it's banks that would be hit the hardest, and they have less exposure to beta than even the market neutral buyside guys.
I can assure you with 100 percent certainty that Rentech et al will relatively thrive with the trading tax.
This tax will reduce liquidity perhaps, make the market pricing inefficient (larger spread). This will hurt mutual funds the most by increasing their baseline costs. Which in turn will hurt pension funds, endowments, etc.
RenTech and others will thrive in the midst of those inefficiencies.
No, sorry, false. A sentence of the form, "which is why <person> does <thing>", i.e. "<person I never met> did <thing> because <reason I impute>" is never, ever a statement of fact. It is _always_ an opinion and an attempt at mindreading. And in this case, it's ill-informed. As lend0000 has repeatedly told you, firms like these are not exposed long to the market. Hence, "likely ideologically motivated", unlikely a nefarious ploy, but again this is speculation.