Voices of finance: computer programmer at a trading company
Just liked this.
Voices of finance: computer programmer at a trading company | Joris Luyendijk | Comment is free | guardian.co.uk
|
Quote:
|
We meet at the Royal Exchange Grand Cafe just off Bank, at the heart of the City of London. It's around 6pm, there's a light drizzle and outside on the street the heels of business people's shoes go tick-tack on the pavement, like tap dancers, each moving to their own metronome. The computer programmer is in his mid-30s and dressed in jeans and a shirt. As we are sitting down he says he doesn't like the area around Bank: "There's no greenery here, if you need to go out for a walk to think." He orders a cola.
"I am an IT guy with a strong background in maths. I have co-written the program for our high-frequency trading systems 'the engine', as we call it. I come into the office around 7am, well before the stock market opens. My team and I need to check and double-check all our systems prior to trading. With so many trades taking place each day, it's important to ensure everything is accounted for correctly before and after trading. During the day our team monitors the engine as it buys and sells, thousands of times. Lunch is 10 minutes, the time required to run across the street, grab a sandwich and get back.
"Compare the movements of shares on the stock market with waves. Our company is like a surfer trying to spot a wave, ride it for a tiny moment and then get out again before it breaks. On any given day, our computers buy and sell shares tens of thousands of times, holding them for very short periods of time, sometimes even less than a minute. No human being, or collection of human beings, could do the volume of trades computers are doing at the moment at stock exchanges across the world. This is not stuff that was once done by humans and now taken over by computers. This is something new altogether.
"We constantly check for bugs, disruptions or indications of incorrect activity. Even if the engine misbehaved for just a second, the number of trades it could do in that time is enormous. Thus it is important to monitor it as closely as possible. The mark of a good program is not just how it performs during normal operations, but also how it reacts to unexpected events. It is important to ensure that there are several layers of fail-safes built into the engine itself.
"Another natural safety valve is your collateral. When you buy stock on the exchange you need to have capital, obviously, to pay with. So suppose our computer goes nuts and embarks on a buying spree, it will automatically stop when our collateral runs out.
"The day gets slightly more tense as we draw nearer to 4.30pm, when the market closes. Once closed, any mistakes can't be corrected until the following trading day, so could end up being expensive.
"Real stress occurs when the machine does something unusual and you can't figure out whether it's an internal bug or something in the market. Humility is essential for programmers like me. You must always assume something is your own fault. If you are arrogant and you tend to blame a bug on the outside world, it is likely you'll miss a bug of your own.
"Success in the business of high-frequency trading? One way is brute force. The faster your computer, the faster your program can act. We are talking about milliseconds here, so even the speed of light is significant. The other driver is the quality of the program itself. Part of my work is constantly trying to improve it, make it work faster, more efficiently.
"Improvements in the program's logic can see the biggest gains. Even if you use a bigger computer and speed up the code by 100%, it will never be as fast as if you didn't have to run that bit of code in the first place. This type of solution is the most satisfying.
"And then there's the computer program itself, the black box that decides what and when to buy and sell. The key term here is correlations. We take all data from a subset of shares at the London Stock Exchange, the shares we have decided to trade in. This dataset is about 3GB, and it consists of each and every movement of the share that day. We call these movements 'ticks'. We analyse the patterns of these ticks for our subset of shares and seek out correlations. For example, when Vodafone goes up, Deutsche Telekom probably will too, because they are in the same industry. That is a very crude correlation. Our model has hundreds of variables, and every day we look for new patterns.
"It is highly complicated stuff and it has nothing to do with analysing a particular company's value or strength. It is about historical patterns of trading which we project on to the future.
"There are peculiar sides to this. One is a so-called black swan event, something entirely new, unforeseen and unprecedented that you couldn't have modelled for it it's new so it could not logically have shown up in historical patterns.
"Another peculiar aspect is that there are more companies like ours, so when we analyse market movements we need to take into account the activities of those other companies and include these in our model. Meanwhile the other companies are doing the same so you get into a 'they know that we know that they know' situation.
"I have always loved maths, the precision and beauty of it. An answer is either right or wrong. So it's really very ironic for me to have ended up in this one area of maths that is all about correlations and approximations. No exactness here. But I don't care. I expect to make enough money to be out of this business in a few years. I think I would like to go back to university. I have become very interested in the humanities and philosophy.
"I just feel incredibly lucky to be living now. What would I have been doing with my maths skills 100 years ago? Or 100 years from now? This is exactly the right time in history to have these skills. And I have them."
|
'Capitalism is survival of the fittest, and sometimes it's not pretty' | Joris Luyendijk | Comment is free | guardian.co.uk
|
Quote:
|
What is it like to be commented on by over 60 people? The computer programmer at a high-frequency trading (HFT) firm just found out, when his "Voices of finance" monologue went online last week. We meet again over a Coke to dig deeper into some of the points raised by the comments; about survival of the fittest and downshifting your life when you have kids.
"That's right. I couldn't show the portrait to anyone at work, as they don't know I am doing this. But I sent it to my parents and siblings. They said two things: everybody hates you. And we finally have some idea what your job is.
Look, I am not ashamed of what I do. Others may choose to devote their programming skills to making the NHS work better. If that's their choice, I'm happy for them. Luckily we live in a country where people are able to make choices like that. You don't have to agree with everyone's choice, but you have to respect it.
Capitalism means trading on markets, that's what our program does. We are simply the extreme and fastest version of the principle of trading. The comment that we add nothing is basically irrelevant. What does a second-hand car salesman contribute to society? He doesn't improve on the car, he is simply making money from the difference between what sellers and buyer are prepared to pay.
A handful of commenters suggested HFT would fade away as technology progressed
Every few years some "expert" or another comes along to say we have reached the limit of X, Y or Z. They say that everything than can be achieved has been done and that we are at the peak of that particular field. The only thing all these experts have in common is that they have all been wrong. Human ingenuity has to date been endless. In fact, I find it arrogant to think that at some point we will have invented everything. With respect to HFT, in the 1990s, the critical timeframe for trading was minutes. Then it was seconds, then milliseconds, and now micro seconds. But it can never go to zero.
Another line of comment was anger at the financial sector generally, and the bailouts
Some of the commenters figured out that I work for a hedge fund, meaning we use money given to us by clients. Hedge funds did not receive any bailout money. They also seem to think that these traders effectively trade with a safety net because of these bailouts. Clearly since no bailout money is given to hedge funds, they don't have this safety net. Furthermore, the structure of hedge funds is significantly different to that of banks ensuring that the risk/reward ratio is better aligned. Hedge funds have so-called "high watermarks", which means that if we lose our clients' money we have to recoup all of it before we make anything ourselves. This is different at many banks, where every new year you start with a clean slate.
People seem to say, everything is the bankers' fault, or everything is the computers' fault. They tend to point to the crashes as evidence of this. I disagree with both. I think crashes are simply part of the system. That's why you always hear "the worst crash since". Crashes are an intrinsic part of the system, they clear out deadwood. You can't have capitalism without crashes. It's survival of the fittest and sometimes it's not pretty.
Perhaps some people might say, yes, capitalism comes with crashes but this computer technology causes more of them, and worse crashes than we'd have had otherwise. Well, you just have to look at the two biggest crashes in history. The 1929 Wall Street crash and mortgage crisis three years ago neither of those were caused by, or made worse by computers.
How about the Flash Crash in May, when prices suddenly dived 8% for no apparent reason?
We still don't full understand what caused that. Did high-frequency trading cause it, or mitigate its effects? There is no conclusive evidence either way.
People might say this is a reason to ban HFT. Don't allow something you don't fully understand
As I said, there are many layers in these computer programs to maintain stability. Simply banning something because you don't understand it is foolish to say the least.
Take Fukushima. You might say, we need energy but we may not want energy from sources that are technologically so complex that they outstrip human beings' ability to control them
Accidents happen, that's how the principle of survival of the fittest operates. In Fukushima we'll find out what caused it and learn from it.
When the effects of a crisis are truly catastrophic, does that still apply?
We all know that California will be totally destroyed at some point by a huge earthquake. This is going to happen. Surely it's madness to live there so why do people still do it? It's because until the earthquake happens, life is extremely nice over there. The benefits outweigh the cost, even if ultimately the cost will be their own lives.
The earthquake is a given, technology is a choice
How are you going to stop computers from trading? Where do you draw the line? Is a computer allowed to help you make a trade? What constitutes "helping"? Are you allowed to use a calculator? My problem here is that if you are going to erect barriers and make rules, you affect negatively the principle of the survival of the fittest. For that to operate, you need as free a system as possible. Only then can weaknesses and inefficiencies be fully rooted out.
I can just see the comment section light up in anger. Another point raised came from somebody who goes by the name of Lightfinger
"The problem is they develop a taste for a lifestyle in keeping with the job. One or two has gone and done something entirely different but the majority have found themselves burnt out, skint, physically f'ked and out on their ear when they stopped being productive. Two to my knowledge were dead before 40."
I hope it won't happen to me. Burn-out is a real issue. I play sports to manage the stress, I'm incredibly competitive so any sports will do to channel my frustration and anger.
Commenter Chumbaniya said:
"As a programmer myself I can appreciate some of the difficulty and pressure of a job like this. Actually creating the algorithms sounds like something I'd be interested in doing, but the maintenance must be extremely stressful, knowing that you need to diagnose and fix bugs as fast as humanly possible because every second they are in play they could be losing you a lot of money."
It takes a toll, and quitting in time can be hard, Lightfinger is right about that. The key is not to upgrade your life too much, don't let your lifestyle grow with your current income because downshifting that lifestyle later on will be hard. So don't upgrade. But then I have to choose a school for my kids. Do I send them to the best and most expensive one, which I can afford now, or to one that is not as good but a lot cheaper so I can still afford it if I'd quit this job? It's tough, your wife gets used to a standard of living, and I know that regardless of what I do next, I will always be working very hard. So why not stay on in this job that pays very well? You can see how these things may play out.
Finally the funniest comment, by triggerfish999
"I worked in the dealing room at a big Japanese bank at Broadgate a few years ago. I wrote a load of end of day risk analysis reports (I too was a programmer). Me and an Aussie systems admin guy used to sit at the back of the trading floor and we had a ball. Watching the Forex traders shouting, and the money market traders bellowing at the gopher who had let the printer run out of paper. It was high pressure stuff cos we got it in the neck when things went wrong
But it was a lot of fun, esp on a Friday afternoon when we'd send sound files out to desk computers and play toilet flushing sounds. I mean stuff used to happen that could cost millions, and we were totally focussed on fixing that when it happened (we were good at what we did), but we also had a total laugh. It was good fun..."
|
__________________
Standard disclaimer: the disgusting statements contained in this post are the views of the poster, and unless specified do not represent the views of the moderators or the site's owners.
|
Linear Mode
