Richard Bucker

High Frequency Trading Lacks Real Discipline

Posted at — Aug 2, 2012

Or let me word it this way. Programmers who build and support high frequency trading systems lack any discipline and quite possibly impulse control. In my estimation they are no different than day traders who are desperate to make a buck a fraction at a time. Market Makers are no different and cut from the same cloth.I recently interviewed with 4 different Quant and Market Maker companies in CT, NY, and NJ. I took personality tests, IQ tests, math acuity tests, programming tests, multiple phone interviews, and day long onsite interviews. As for the 15 onsite face to face interviews only 2 brought written questions and only 1 actually read my resume in advance of the interview. And all of them asked fermi questions, save one.There are an amazing number of other similarities:(a) The number of PhDs(b) The number of transactions(c) The same general approach to HFT(d) The same general org chart and functional diversification(e) The same approach to development, testing, and deployment(f) The same lack of production discipline… and the list growsFor all of their brain power KCG failed to detect the problem in the first few minutes. Common sense would dictate that secondary and tertiary systems should have been monitoring transaction volume based on past performance and future expectation as part of any release so that if these systems detected something that was out of variance it should have alerted operations staff within seconds of the event and not hours. Furthermore, the system should have been able to rollback to the previous day’s configuration in order to resume normal operations. At the very least the system should have been terminated immediately. This is what I would consider block and tackle operational infrastructure. They should have taken lessons learned from the space program. Instead, my interviewers concentrated on completely non-relavent and subjective indicators.Asking a perspective employer in NYC about their production discipline cost me an offer. Meanwhile the next day KCG crashed and burned.PS: To the programmer who posted on reddit a number of months ago who justified his 500K salary. I hope you have made enough money to retire. You and your ilk are irresponsible and dangerous to our way of life and you should not be allowed to practice as a programmer under any circumstances.As for the managers, directors, partners etc at the quants and market maker firms. You might be smart too but you do not know everything…. anymore.