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A great time to work in HFT, banks score cool points

While traders the world over held their head in their hands as markets plummeted on Monday, high frequency trading firms were in dreamland. The sort of volatility that had evaded them suddenly appeared and made Black Monday one of the best days HFTs had ever seen.

“Our firm is made for this kind of market,” Virtu CEO Douglas Cifu, told the Wall Street Journal, only adding to HFTs popularity. “These are the kinds of days everyone here is working for,” added Brian Donnelly, CEO of Volant Trading. This was the best day since the 2010 flash crash, he added cheerfully.

If you want to know exactly how they did this, check out this animation of Michael Lewis’ Flashboys, which has of course turned HFTs into the new pantomime villains of the financial sector.

At least to Joe Public. To a lot of people working in the financial sector, they’ve become a mysteriously alluring, high-paying, highly quantitative employer that remains out of reach for most. But the last 12 months have not been good for HFTs, which have cut pay, cut headcount and generally struggled against low trading volumes and low volatility.

Separately, if you’re wondering how large banks are competing against fintech start-ups, it’s by becoming fintech start-ups themselves. Or at least part of them.

In-house innovation teams at banks like J.P. Morgan and Wells Fargo have been developing apps and other funky digital products for clients in order to boost company loyalty and score some ‘cool’ points with technologists who have traditionally shied away from the financial sector, despite the high pay.

“People that are jumping to try and be more like technology companies than banks are making a really giant, risky leap, and I think they are getting confused in terms of what matters,” said Kelly King, chief executive officer of financial services firm BB&T Corp.

Just Switch Off (eFinancialCareers)

The ideal investment banker is battle-hardened, cold and unemotional, and will do anything for a client. Just don't slouch around in a cheap suit, or we'll have a problem.

Gaming the System (eFinancialCareers)

Trading games are being included in the recruitment process of both investment banks and hedge funds, but not only for unearthing traders.

Wells Fargo Staffs Up (Bloomberg)

Wells Fargo has made three “marquee hires” at managing director level as it looks to expand its investment bank.

Bounce Back (Bloomberg)

Panic over: it’s been the best day for stock markets since 2011

Back From the Hamptons (Dealbook)

Hedge fund managers and brokers alike have been cancelling their holidays to reassure clients during Black Monday.

Buy-side Benefits (Financial Times)

Banks are bemoaning “overzealous” interpretations of EU bonus laws that are resulting in them losing more talent to hedge funds and asset managers.

Insider Trading at JPM (WSJ)

An investment banking analyst at J.P.Morgan, who tipped off two friends about an upcoming merger, has been found guilty of insider trading

Unicorn Hunting (Mashable)

Fintech companies who burn through their investment capital under the assumption they can always raise more are in for a wake up call.

The Great Outdoors (Reuters)

Lazard has hired Nathan Pund, a former U.S Navy intelligence officer, for its investment bank to advise on active-lifestyle and outdoor brands deals.

Unexpected Stresses (Financial Times)

The unexpected effect of financial crises: during the 2008 financial crisis in Iceland, babies who were in their first trimester were born 120g underweight

Quote of the Day: 

“It tastes like bottled water as long as you can psychologically get past the point that it’s recycled urine and condensate that comes out of the air,” the glamour of being an astronaut.

AUTHORPaul Clarke
  • Ro
    Robert Arvanitis
    27 August 2015

    Trading is an accomodation to securities issuance, so that long term issuers can be matched to shorter-horizon investors. That accomodation is worth a few cents at best, for service and inventory risk.
    IF a trading desk makes more than a few cents, then it is stealing from someone else in a zero sum game.
    Proof - HFT never take inventory risk. HFTs get special bids like fractional cent prices, and "hide not slide." Take those away and their theft of pennies goes away.

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