Quant Jobs So Convoluted And Opaque, Even Supervisors Have Given Up On Understanding What Is Going On
Even as the entire HFT industry is on edge, and fighting against very justifiable allegations that it is setting the market up for another October 1987 type event due to the increasing preponderance of computerized trading, the ever so vocal industry leaders have had no time to do precisely the one thing that they are accused of: understanding their own business. According to a recent survey by Finextra.com, two thirds of quant analysts think their supervisors do not understand the work they do. Some more not very surprising details about an industry much more concerned about defending its revenue streams than protecting investors (other than Goldman Sachs):
86% of quants feel their supervisors' level of understanding of the job of a quant is the same or worse than it was a year ago. In addition, 70% feel that the level of understanding of the role of quants within their institutions has decreased or has not changed at all from a year ago.
Perhaps all HFT/algo/Flash/Dark Pool etc. defenders can instead do one or two refresher courses so they atually know what the hell they are talking about instead of just following the Goldman patented formulation: "blah blah blah liquidity blah blah blah spreads tighter blah blah blah no more market crashes blah ever blah blah blah where is my G-V parked blah?"
Paul Wilmott, who has been a vocal supporter of the fight against the visible and invisible threats associated with quant strategies noted: "These numbers are alarming. They indicate that even with the events of the past year, financial institutions are still not taking the importance of financial education seriously, especially as it pertains to improving relationships and understanding between quants and their managers."
As HFT now amounts for well over half of all stock volume trading, a major crash in any of the core infrastructure pipelines would lead to a virtual standstill of the market. Yet the Senior Supervisors Group (SSG) that comprises watchdogs from seven countries (United States, Canada, France, Germany, Japan, Switzerland, United Kingdom) says that "underlying weaknesses in governance, incentive structures, information technology infrastructure and internal controls require substantial work to address."
Just like the Fed and the administration, the quant industry is busy yapping and doing all it can to protect its livelihood, when instead it should be reading up on SPARC-cluster (yes yes, we know, we know) manuals and how to stuff a few gigabits down an OC-12 fat pipe, all the while churning the crap out of AIG and making $0.001 on every trade.
h/t Margaret
(6 votes)
on Wed, 11/04/2009 - 22:02
#120542
In other words, the SSG can't figure out what the fukk is going on. The boyz at the screen are hooked on Red Bull HFT trademania churning a profile name and gaming in the volume heatmap suckers at a penny pull per trade.
Brilliant work by the Senior Supervisors. Kudos all around the globe.
on Wed, 11/04/2009 - 22:08
#120545
Pointing out that mathematicians and programmers always like to think they know more then their supervisor. Just because they are arrogant as all heck doesn't mean they are right.
on Thu, 11/05/2009 - 08:06
#120701
As both a grunt and management in some extremely high tech companies, I can tell you that this doesn't surprise me one whit. The important distinction is whether the supervisors know A) what the quants do (product) as opposed to B) how they do it (process). If they don't know A, they should be fired or stung up by their buster browns. Not knowing the details of the process is par if they 1) have never actually done it (typical) or 2) been away from it for awhile. More forgivable.
on Wed, 11/04/2009 - 22:12
#120550
They don't need to understand the work they do. They only need to understand; 1. how to spend their bonuses; 2. how to get bailed out.
on Wed, 11/04/2009 - 22:14
#120552
Recall from 2.27.07 when we were collectively told by the NYSE that "the computers just went on the fritz" .. as Tyler and others have so frequently detailed across the pages of ZH, this is yet more prescient insight into a central aspect within the fundamental landscape of the future of allegedly "electronically driven" market crashes.
on Wed, 11/04/2009 - 23:51
#120607
I remember 2.27.07. It was a very orderly collapse. If there were system issues then just think what would happen now.
I think the real issues is what happens when a crash is 'engineered'. The overnight futures markets have become accustomed to being supported on the bid side and rarely fail to recover when individuals selling comes into play.
Should an enterprising QuantMan decide to actually sell overnight with some energy and double down early on bad news during the opening hour, I think major damage could be done.
I never go to sleep with a long position.
on Thu, 11/05/2009 - 05:35
#120679
I have been thinking about that very item for a long time, you could have a few rouge traders/quants crush low volume overnight futures in contracts like the NQ-100 , and then have the correlation bots crush the more liquid ones like the ES.
With brokerage leverage it would probably take only a 50m account.
on Wed, 11/04/2009 - 22:20
#120555
forget that, I reread the post.
on Wed, 11/04/2009 - 22:19
#120558
Al Gore from Newsweek interview:
Gore acknowledges that CO2 accounts < than 45% of so called green house gases *note that the human caused climate change community does not include water vapor as a greenhouse gas (if it did then CO2 would be in the 1% range.
"Does that worry Gore? "Over the years I have been among those who focused most of all on CO2, and I think that's still justified," he says on his patio. "But a comprehensive plan to solve the climate crisis has to widen the focus to encompass strategies for all" of the greenhouse culprits identified in the NASA study."
http://www.newsweek.com/id/220552/page/3
on Thu, 11/05/2009 - 00:16
#120624
Makes sense, add water vapor to the list of pollutants.
on Thu, 11/05/2009 - 09:04
#120731
All the C02 stuff--it is becoming more and more clear that all of it has just been a huge money-making scheme utilizing government to bludgeon everyone.
on Thu, 11/05/2009 - 08:21
#120707
Water vapor? Are we going to start a cloud exchange? Don't tell me we are going to have a water exchange....wait....I am gonna have to (TM) that one. That's mine!..GS if you want to start one you are gonna have to see me to start a water exchange. I will lease water in water towers from cities and move it through a series of interconnected pipes and trucking. I can sell on spot and have a futures market. There are a bunch of tankers in SE asia doing nothing right now....All I need is a crisis at the right time (GS boys can help with that)... and just need to wait for the money to roll in...
on Wed, 11/04/2009 - 22:27
#120564
Considering most quant jobs require Ph.D's, I'm not surprised.
on Thu, 11/05/2009 - 05:27
#120674
+1
I graduated from a top comp sci school and minored in statistics, a hedge fund recruiter called me during the summer for a programming position, and I asked "do you have any open quant positions?"
She laughed and said , "you don't understand, you don't qualify, your competition consists of physics and math phd's , all graduating from MIT,Caltech, Berkley, etc."
so this stat doesn't surprise me at all
on Thu, 11/05/2009 - 07:02
#120690
Gee, I wonder why we always "need more bright young people to go into engineering"? Maybe it's because those people can start off making $50k doing engineering or $500k doing Wall Street casino-rigging. Plus, in engineering, there is actual responsibility.
on Thu, 11/05/2009 - 08:36
#120715
Taking the ultra long view this is becoming
a gigantic problem
our brightest minds go to an industry that does nothing
to advance our society.
They need to implement a global capital gains tax and
peg it at 65%
any one who doesn't partake gets a military embargo.
on Thu, 11/05/2009 - 13:42
#121060
Actually, the starting pay is higher in technical fields than Wall Street or prop shops, although there is much more potential upside in the latter cases, down the road. Just to clear something up, not that many technical people go to Wall Street - quantitative trading is an extremely small part of their business - it's still very much BSD trader dominated (or not even traders, just BSD i-banking).
on Wed, 11/04/2009 - 22:51
#120576
I think we've finally reached the pinnacle of sickness here in the USA. Time to shut down the robo-humans.
on Wed, 11/04/2009 - 22:52
#120577
What does this say about the compliance people?
on Wed, 11/04/2009 - 22:57
#120579
often i have wondered if there is a level of complexity, in any system, beyond which the probability, rises asymptotically, for repeating and compounding malfunctions and then total system breakdown, and thus the system can not evolve in complexity beyond this level
on Thu, 11/05/2009 - 00:30
#120633
U sir, are a tool
on Thu, 11/05/2009 - 00:36
#120636
U sir...are a tool
on Wed, 11/04/2009 - 23:00
#120581
What is so complicated?
A third grade math student can figure out that the tiniest wiggle in stocks is entirely dependent upon the micro-tick movements in the EUR/USD.
Not really rocket science.
on Wed, 11/04/2009 - 23:13
#120589
True enough.. I think I understand it and I am real to earth Jethro Bodine on the schooling thing...
on Thu, 11/05/2009 - 00:31
#120634
RobotTrader-
Where is the EUR/USD going to be in 48 days?
I'm new to this and need to rebalance my stock portfolio.
You seem to know, and your sage advice would be much appreciated.
on Thu, 11/05/2009 - 03:45
#120661
It will most likely be higher, altough it can be lower as a reaction instead.
Flat is not an issue. Except for pizza's.
Seriously man, your guess is as good as RobotTrader's or mine.
(Free charts and opinions are available all over the web with no guarantee of any quality at all.
As an alternative you can always listen to Cramer. His attention span is getting very 'intra'-day too.)
One thing I can assure you; there will be as much volatility as tomato sauce.
I fully agree with RT's assesment it is all way too much correlated to the Eur/usd
and/or Usd/Jpy. It feels like a passenger in a car with a drunken driver going way too fast.
You might get lucky but somehow you know the probability is against you.
(Right now I'm in the car banking on a re-visit of the 1.5000 level.)
It is probably safer to have a pizza without a napkin instead.
DG.
on Wed, 11/04/2009 - 23:05
#120584
Does this finding form the basis for plausible deniability?
on Thu, 11/05/2009 - 01:08
#120641
Sorry, but this is pretty bad "reporting" - what is the state of this same metric in other professions - e.g. what percent of insurance industry management understands what their actuaries actually do? or hospital administrators etc.
on Thu, 11/05/2009 - 01:52
#120648
California was almost killed by Enron. Bear, Lehman, et al were expunged. US is next. Happy trading.
on Thu, 11/05/2009 - 04:22
#120663
Heh. My Dispatcher knew nothing. He handed me the load papers and pointed at map. Here and a foot away on a map and 10 states over there is where I need to be 4 days from now.
The best of Bosses are those that are shoveling the blacktop next to you and yelling at you to hurry up. You put up with the abuse and the job. You can drink with your Boss later that night like the Japanese do when work is clocked out.
If you cannot stand your incompetent boss, you either became a boss or found another company with halfway decent leadership.
Nurse Supervisors have lost the ability to care for patients. Now they sit by the phone waiting for the next complaint to roll in before taking action on the helpless worker who screwed up.
Hmm. Do I want to hammer employees? Or do I want employees to hammer me?
One goes back to the movie "Karate Kid" when the Bonsai is trimmed for hours, days or even weeks. It takes a long time to get anything done. But boy it's done right... like Southern Cooking.
Those who try to trim Bonsai in 60 seconds end up with a stump and a angry boss wondering how much of the idiot's paycheck to dock while customers scream for expensive new Bonsai.
Hmm. a bit stressful dontcha think?
What a shame. Trying to buy the world in 15 seconds and gone in 60 before the World becomes self aware of the rape.
on Thu, 11/05/2009 - 04:34
#120667
To Freakunt Flyer,
I'm currently studying some actuarial exams. It's a rigourous course, 13 exams in total that covers the "basic" topics. The candidate then moves into several specialist courses after this. To be a senior actuary takes around five years, including a full set of exams passes of what most people (even people who read this site) would consider very high level exams, and then there is continuous professional development. So generally actuarial managers (I assume) will have at least this background.
Hope that helps
on Thu, 11/05/2009 - 05:29
#120677
Sort of like central banks not understanding what money is.
on Thu, 11/05/2009 - 05:55
#120684
Well, I guess if all these quant guys are as bright as Merton et al were at the LTCM, we can expect the same result...
DavidC
on Thu, 11/05/2009 - 06:50
#120689
Yes, quants are complicated, and very hard for supervisors to understand, but they are very effective in what they do. Combined with HFT they can make lots of money for those having the resources to use them (e.g., GS and other large, professional firms.)
But an individual investor can also make a very good return without access to quants, with plain, good old market timing. It just takes more time to get there.
time123
admin: http://invetrics.com
P.S. Its DJIA index timing signal is up 68% this year and it is free of charge to individual investors.
on Thu, 11/05/2009 - 07:16
#120693
suck a clock spam man.
on Thu, 11/05/2009 - 07:08
#120691
Amen. You don't need to make $3-billion a quarter to live well enough. But make sure you keep some gold, because as long as the war continues, the USD will continue to fall. Thus it has been always.
on Thu, 11/05/2009 - 07:21
#120694
Supervisors just need an abstract understanding which is what they have. WTF are they going to do with the detailed knowledge anyway? If a supervisor knows that much I'd be suspicious that they would break out and try to implement what they learned on my job at their new startup company like you know who did....
on Thu, 11/05/2009 - 08:24
#120708
TD - Post this link to your site. Great debate between Santelli, David Goldman and Liesman: http://www.cnbc.com/id/15840232?video=1319216699&play=1
on Thu, 11/05/2009 - 08:50
#120721
Quant trading brought to you by the same kinds of folks who developed the A bomb and H bomb.
on Thu, 11/05/2009 - 15:33
#121222
Are you insinuating that these kids are the ones who cultivated the Q bomb? I thought Barney Frank already took care of that...
(Insensitive, yes, but I had to say it)
on Thu, 11/05/2009 - 11:25
#120840
In other news, the quants don't understand what they are doing. See swans, black.
on Thu, 11/05/2009 - 13:20
#121017
I was a computer programmer at 3 companies with 4 bosses, and only 1 out of 4 was a decent programmer, and no way in hell could 2 levels above me program... Having said that, they were mostly reasonable managers - they knew what they wanted the applications to do, and whether they worked.
on Thu, 11/05/2009 - 15:30
#121217
I would definitely leave the SPARC-clusters up to the kids (i.e.- programmers) and just make sure I remembered where I left the G-V, too!
on Thu, 11/19/2009 - 23:06
#136930
Quiz by Peter Carr: Are You a Trader or a Quant?
http://www.bit.ly/4DRpTX
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