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One of the most closely guarded secrets in the competitive world of high-frequency trading is how these black-box firms go about recruiting talent. With high-frequency trading dominating the markets, there is increasing demand at HFT firms for workers with the right skills, especially programmers, strategy builders and quants who can work with complex data sets and build high-performance trading systems. Some observers even believe that the real battle lines on Wall Street will be drawn over hiring programmers and developers, as opposed to traders.
"There's a big push in the space to find people with physics, heavy computer science and quantitative finance degrees," relates John Netto, president of M3 Capital, a proprietary trading firm in New York that also serves as a consultant to the alternative investment space. HFT firms want "big, strong mathematical backgrounds to put together these strategies."
According to Petter Kolm, deputy director of the mathematics and finance program at New York University's Courant Institute, whose master of science of mathematics in finance program specializes in quantitative finance, "What they need is people with very strong programming skills, so they get them directly out of schools or through other channels. It's called 'real-time system experience.' These are people who have the experience of writing code and analyzing huge amounts of data and the ability to move data back and forth quickly. Those types of generic computer science skills are always attractive."
But with the proliferation of proprietary trading shops and hedge funds that leverage high-frequency strategies as well as agency brokers doing low-latency algorithmic trading, such candidates are difficult to find, experts say. Joe Long, a quantitative-trading executive recruiter at I-NET Technologies in New York, says a programmer who is good at making a system run very fast in C++ could make as much as $500,000 at a hedge fund. "We do a lot in the $300,000 to $600,000 range with a developer that understands Unix. The technology skills are difficult to find," he reveals.
"Good programmers are hard to find," confirms an executive with a proprietary trading firm in Chicago who spoke on the condition of anonymity because he did not want to reveal any proprietary information. "That's why people spend so much time and resources finding them. They command big salaries, and they are highly competitive."
And it isn't only the large ultralow-latency firms that are seeking these skills. "We share the same technological burdens and data flow requirements [that] the ultrahigh-frequency shops do," says the executive, who notes that while speed is important to his firm, which specializes in options and options volatility trading strategies, it is not in the same camp as "ultra" high-frequency shops such as Getco or Sun Trading. "We're also dealing with the massive data crunch, processing markets, and analytics and strategies."
From Ivy Halls to Wall Street
To find qualified candidates, the firm often recruits from master in financial engineering (M.F.E.) programs around the country, the executive reports. The firm also targets candidates with straight engineering backgrounds. One of the benefits of M.F.E. program graduates is that they "have both the higher level math and engineering skills so they know how to build things," he says.
Many HFT firms search for the best and brightest by recruiting out of top universities, such as M.I.T. and Carnegie Mellon. "You go to the big technical engineering schools -- it's not any secret that people are trying to tap that," the executive says. In some cases, he notes, high-frequency trading players, along with proprietary trading shops and trading software firms, even are donors to the engineering and quant finance schools, helping them assemble trading rooms.
The benefit of hiring young minds is that they look at problems in different ways, sources say. But if firms hire fresh talent from the top M.F.E. programs, they will need to train them in the details of the business. If they're designing systems for options trading, for example, "You do need to know what puts and calls, deltas and gammas are," the Chicago prop trading executive says.
In his firm's case, "[New hires] are mentored by senior people in the firm," he relates. "We need to get them up the curve in what types of problems exist in the business." Other firms also have internal training programs (see related sidebar).
In addition to recruiting at top universities, computer-driven trading firms also hire experienced developers from other industries. On the networking side, firms might target talent from a company such as Cisco or another big telco firm, "because you're moving packets of data and switching," the executive relates. But, he cautions, network professionals coming from other industries may not be familiar with the speeds that high-frequency shops require. "No one is dealing with the kind of speeds in trading that these high frequency guys are. Even if you take someone who ran big networks at big banks, the transactional speed is not as high."
Of course, high-frequency trading firms also are hyper-competitive with each other, and often they will lure talent away from a competitor. For example, several industry sources cite HFT start-up Teza Technologies, which hired
Sergey Aleynikov, the ex-Goldman Sachs programmer who is accused of stealing code from the investment firm's stock and commodities trading platform.
Given the demand for at sub-millisecond and even microsecond executions, one can understand why Aleynikov's skills were in demand: His bio on LinkedIn claimed he was responsible for development of a distributed real-time colocated high-frequency trading platform. On the social networking site, Aleynikov described the platform as "a very low-latency (microseconds) event-driven market data processing, strategy and order submission engine."
There also is speculation that Aleynikov was of interest to Teza because he had previously worked at IDT, a telecom company in Newark, N.J., where he had experience with order routing and switching -- that experience may have been even more valuable than what he had learned about the Goldman trading system. With Aleynikov's knowledge, Teza reportedly was willing to pay him $1.4 million, more than triple his $400,000 pay package at Goldman.
It's Who You Know
Given the risks inherent in hiring new employees (as the Teza-Goldman case suggests) and the tight-knit nature of the HFT community, however, people tend to ask colleagues if they can recommend anyone -- who maybe was let go recently -- who has the right skills, sources say. And since brokers build relationships with people in different firms over time, they are another source of recommendations in the recruiting game.
"You're looking for a very unique skill set," notes Brian Tahan, VP, Advanced execution Service (AES), Credit Suisse. "If you throw this out on Monster.com, you're not going to be hit with [qualified candidates]. It's also difficult to walk into M.I.T. or Stevens Institute of Technology and ask, 'Who do you have?' "
But it's not clear that high-frequency trading firms prefer to poach talent from Wall Street firms. Several recruiters say that some quant firms, such as Getco and Renaissance Technologies, don't hire from Wall Street.
"They'd rather hire developers from outside the financial industry -- from Google, Microsoft and Amazon," says Edward Guy, managing partner at Nations Staff, a financial technology recruiter in New York. "They like those guys who work with very fast systems and are more about pure development." Guy adds that automated trading firms want people that think outside the box.
Many HFT firms believe that it's easier to teach candidates about the business than to teach them about technology. "That's not uncommon," acknowledges Credit Suisse's Tahan. The idea is that candidates who have master degrees and Ph.D.s in scientific fields have the aptitude to pick up the finance side. "Whether that's true or not, that's the reason for the decision [to go outside the industry]."
Adds Nations Staff's Guy, "The new hires don't need to know about the financial markets. It could be that they build systems for books, airline tickets or stocks. As long as you have the right mentality."
In 2007 James Simons, CEO of Renaissance Technologies and a former math professor, publically stated that the hedge fund manager only hires scientists (e.g., mathematicians, astronomers and computer scientists) to develop its automated trading strategies. "We haven't hired out of Wall Street at all," he said in a speech to the International Association of Financial Engineers, according to a Reuters report.
Supply and Demand
Another reason for looking outside the capital markets industry is simply because that's where the available technology talent is. Three years ago trading firms would have had to compete for these candidates with mortgage desks, which were hiring 50 at a time. But with the implosion of the real estate market, there now is larger supply of willing candidates. "That helps shape the strategy too -- where the availability is going to be," the executive from the Chicago prop trading firm says.
And with high-frequency trading in the headlines this past year, many more potential candidates than before are aware of the high-frequency trading specialty -- and of the profits HFT firms are raking in. "It's got sex appeal," he says of high-frequency trading. "Whereas three years ago, the high-frequency trading firms may have had a hard sell, it's probably getting easier because of the way the market has transformed."
Still, quantitative trading firms have very high standards and can be extremely selective in whom they ultimately hire or even grant a telephone interview to. "We need people who are sure bets, and we need people who will be able to hit the ground running," says Peter Fraenkel, chief technology officer at Pragma Securities, who adds that Pragma, a pure agency brokerage firm that executes trades on behalf of its clients, is highly quantitative and develops algorithms and optimal execution services. As such, the firm cannot take advantage of narrow skill sets, which can make recruiting challenging.
"It's not enough to hire somebody who has abstract math skills or happens to do well in technical subjects," Fraenkel explains. "They also have to be adept at using computers and software tools to handle the massive amount of high-frequency data that includes every single tick and quote that occurred during years of trading days. So this isn't regular database skills. Our quants have to program 95 percent of the time, whereas a developer has to program 100 percent of the time."
Going forward, with the growth of high-frequency trading and algorithmic trading strategies overall, sources expect there to be ongoing demand for technology talent. But this doesn't mean that high-frequency shops will be go on a hiring binge.
Unlike some of the biggest players -- including D.E. Shaw, SAC Global and Renaissance Technologies, as well as the proprietary trading desks of bulge-bracket firms such as Goldman Sachs, Morgan Stanley and Deutsche Bank -- most high-frequency trading shops are smaller boutique firms, so they don't need to hire that many people. For instance, Getco, the Chicago-based electronic market maker that does 15 percent of the volume in U.S. stocks, has just 225 employees, according to the company's spokesperson.
"These small businesses tend to hire more under the radar screen," explains New York University's Kolm. "It's more like cherry picking, and they tend to reach out to their informal network through contacts and asking people for references."
In fact, while there have been a number of high-profile moves lately by Wall Street executives leaving exchanges for high-frequency trading shops, some sources say the developers are becoming more important than the traders. "The more important [hires] are the guys who you never heard of, building feed handlers and other parts of systems," says one source who spoke on the condition of anonymity.
"In our world," adds the Chicago prop trader, "There are many instances where a strong developer would be more valuable than a strong trader."
High-Frequency Trading Firms Seeking Tech Talent by Advanced Trading
"There's a big push in the space to find people with physics, heavy computer science and quantitative finance degrees," relates John Netto, president of M3 Capital, a proprietary trading firm in New York that also serves as a consultant to the alternative investment space. HFT firms want "big, strong mathematical backgrounds to put together these strategies."
According to Petter Kolm, deputy director of the mathematics and finance program at New York University's Courant Institute, whose master of science of mathematics in finance program specializes in quantitative finance, "What they need is people with very strong programming skills, so they get them directly out of schools or through other channels. It's called 'real-time system experience.' These are people who have the experience of writing code and analyzing huge amounts of data and the ability to move data back and forth quickly. Those types of generic computer science skills are always attractive."
But with the proliferation of proprietary trading shops and hedge funds that leverage high-frequency strategies as well as agency brokers doing low-latency algorithmic trading, such candidates are difficult to find, experts say. Joe Long, a quantitative-trading executive recruiter at I-NET Technologies in New York, says a programmer who is good at making a system run very fast in C++ could make as much as $500,000 at a hedge fund. "We do a lot in the $300,000 to $600,000 range with a developer that understands Unix. The technology skills are difficult to find," he reveals.
"Good programmers are hard to find," confirms an executive with a proprietary trading firm in Chicago who spoke on the condition of anonymity because he did not want to reveal any proprietary information. "That's why people spend so much time and resources finding them. They command big salaries, and they are highly competitive."
And it isn't only the large ultralow-latency firms that are seeking these skills. "We share the same technological burdens and data flow requirements [that] the ultrahigh-frequency shops do," says the executive, who notes that while speed is important to his firm, which specializes in options and options volatility trading strategies, it is not in the same camp as "ultra" high-frequency shops such as Getco or Sun Trading. "We're also dealing with the massive data crunch, processing markets, and analytics and strategies."
From Ivy Halls to Wall Street
To find qualified candidates, the firm often recruits from master in financial engineering (M.F.E.) programs around the country, the executive reports. The firm also targets candidates with straight engineering backgrounds. One of the benefits of M.F.E. program graduates is that they "have both the higher level math and engineering skills so they know how to build things," he says.
Many HFT firms search for the best and brightest by recruiting out of top universities, such as M.I.T. and Carnegie Mellon. "You go to the big technical engineering schools -- it's not any secret that people are trying to tap that," the executive says. In some cases, he notes, high-frequency trading players, along with proprietary trading shops and trading software firms, even are donors to the engineering and quant finance schools, helping them assemble trading rooms.
The benefit of hiring young minds is that they look at problems in different ways, sources say. But if firms hire fresh talent from the top M.F.E. programs, they will need to train them in the details of the business. If they're designing systems for options trading, for example, "You do need to know what puts and calls, deltas and gammas are," the Chicago prop trading executive says.
In his firm's case, "[New hires] are mentored by senior people in the firm," he relates. "We need to get them up the curve in what types of problems exist in the business." Other firms also have internal training programs (see related sidebar).
In addition to recruiting at top universities, computer-driven trading firms also hire experienced developers from other industries. On the networking side, firms might target talent from a company such as Cisco or another big telco firm, "because you're moving packets of data and switching," the executive relates. But, he cautions, network professionals coming from other industries may not be familiar with the speeds that high-frequency shops require. "No one is dealing with the kind of speeds in trading that these high frequency guys are. Even if you take someone who ran big networks at big banks, the transactional speed is not as high."
Of course, high-frequency trading firms also are hyper-competitive with each other, and often they will lure talent away from a competitor. For example, several industry sources cite HFT start-up Teza Technologies, which hired
Sergey Aleynikov, the ex-Goldman Sachs programmer who is accused of stealing code from the investment firm's stock and commodities trading platform.
Given the demand for at sub-millisecond and even microsecond executions, one can understand why Aleynikov's skills were in demand: His bio on LinkedIn claimed he was responsible for development of a distributed real-time colocated high-frequency trading platform. On the social networking site, Aleynikov described the platform as "a very low-latency (microseconds) event-driven market data processing, strategy and order submission engine."
There also is speculation that Aleynikov was of interest to Teza because he had previously worked at IDT, a telecom company in Newark, N.J., where he had experience with order routing and switching -- that experience may have been even more valuable than what he had learned about the Goldman trading system. With Aleynikov's knowledge, Teza reportedly was willing to pay him $1.4 million, more than triple his $400,000 pay package at Goldman.
It's Who You Know
Given the risks inherent in hiring new employees (as the Teza-Goldman case suggests) and the tight-knit nature of the HFT community, however, people tend to ask colleagues if they can recommend anyone -- who maybe was let go recently -- who has the right skills, sources say. And since brokers build relationships with people in different firms over time, they are another source of recommendations in the recruiting game.
"You're looking for a very unique skill set," notes Brian Tahan, VP, Advanced execution Service (AES), Credit Suisse. "If you throw this out on Monster.com, you're not going to be hit with [qualified candidates]. It's also difficult to walk into M.I.T. or Stevens Institute of Technology and ask, 'Who do you have?' "
But it's not clear that high-frequency trading firms prefer to poach talent from Wall Street firms. Several recruiters say that some quant firms, such as Getco and Renaissance Technologies, don't hire from Wall Street.
"They'd rather hire developers from outside the financial industry -- from Google, Microsoft and Amazon," says Edward Guy, managing partner at Nations Staff, a financial technology recruiter in New York. "They like those guys who work with very fast systems and are more about pure development." Guy adds that automated trading firms want people that think outside the box.
Many HFT firms believe that it's easier to teach candidates about the business than to teach them about technology. "That's not uncommon," acknowledges Credit Suisse's Tahan. The idea is that candidates who have master degrees and Ph.D.s in scientific fields have the aptitude to pick up the finance side. "Whether that's true or not, that's the reason for the decision [to go outside the industry]."
Adds Nations Staff's Guy, "The new hires don't need to know about the financial markets. It could be that they build systems for books, airline tickets or stocks. As long as you have the right mentality."
In 2007 James Simons, CEO of Renaissance Technologies and a former math professor, publically stated that the hedge fund manager only hires scientists (e.g., mathematicians, astronomers and computer scientists) to develop its automated trading strategies. "We haven't hired out of Wall Street at all," he said in a speech to the International Association of Financial Engineers, according to a Reuters report.
Supply and Demand
Another reason for looking outside the capital markets industry is simply because that's where the available technology talent is. Three years ago trading firms would have had to compete for these candidates with mortgage desks, which were hiring 50 at a time. But with the implosion of the real estate market, there now is larger supply of willing candidates. "That helps shape the strategy too -- where the availability is going to be," the executive from the Chicago prop trading firm says.
And with high-frequency trading in the headlines this past year, many more potential candidates than before are aware of the high-frequency trading specialty -- and of the profits HFT firms are raking in. "It's got sex appeal," he says of high-frequency trading. "Whereas three years ago, the high-frequency trading firms may have had a hard sell, it's probably getting easier because of the way the market has transformed."
Still, quantitative trading firms have very high standards and can be extremely selective in whom they ultimately hire or even grant a telephone interview to. "We need people who are sure bets, and we need people who will be able to hit the ground running," says Peter Fraenkel, chief technology officer at Pragma Securities, who adds that Pragma, a pure agency brokerage firm that executes trades on behalf of its clients, is highly quantitative and develops algorithms and optimal execution services. As such, the firm cannot take advantage of narrow skill sets, which can make recruiting challenging.
"It's not enough to hire somebody who has abstract math skills or happens to do well in technical subjects," Fraenkel explains. "They also have to be adept at using computers and software tools to handle the massive amount of high-frequency data that includes every single tick and quote that occurred during years of trading days. So this isn't regular database skills. Our quants have to program 95 percent of the time, whereas a developer has to program 100 percent of the time."
Going forward, with the growth of high-frequency trading and algorithmic trading strategies overall, sources expect there to be ongoing demand for technology talent. But this doesn't mean that high-frequency shops will be go on a hiring binge.
Unlike some of the biggest players -- including D.E. Shaw, SAC Global and Renaissance Technologies, as well as the proprietary trading desks of bulge-bracket firms such as Goldman Sachs, Morgan Stanley and Deutsche Bank -- most high-frequency trading shops are smaller boutique firms, so they don't need to hire that many people. For instance, Getco, the Chicago-based electronic market maker that does 15 percent of the volume in U.S. stocks, has just 225 employees, according to the company's spokesperson.
"These small businesses tend to hire more under the radar screen," explains New York University's Kolm. "It's more like cherry picking, and they tend to reach out to their informal network through contacts and asking people for references."
In fact, while there have been a number of high-profile moves lately by Wall Street executives leaving exchanges for high-frequency trading shops, some sources say the developers are becoming more important than the traders. "The more important [hires] are the guys who you never heard of, building feed handlers and other parts of systems," says one source who spoke on the condition of anonymity.
"In our world," adds the Chicago prop trader, "There are many instances where a strong developer would be more valuable than a strong trader."
High-Frequency Trading Firms Seeking Tech Talent by Advanced Trading
