Transition from HF Quant/Analyst to HFT
Hi all! I’m currently a quant/analyst in a semi-systematic pod at a Tier 1 MM (think Citadel/BAM/Millennium). Daily work is 60% quant-y (e.g. signal generation, alpha testing) and 40% trading/fundamental analysis. Really like my team/work - lots of variety and I get to trade a few asset classes - but frustrated by the fact that we are not “as systematic as we can be” - signals act more as a screening tool than to produce automated, actionable trades.
I’ve been looking at HFT opportunities and am evaluating whether I should make a move to a quant trading role there. The idea of a more process-driven trading seat is interesting to me, plus I think the culture would be more up my alley (younger, more cerebral crowd vs mostly old school punters currently).
Was previously BB S&T and have sat on both fully systematic desks and the complete opposite side of the spectrum (think cross-asset exotics), so would like to think I’d be able to contribute some interesting perspectives.
Has anyone done something similar, or currently work at a HFT and can opine?
YoE: 6 since grad / 2 on buy side
Depends what you mean by HFT/quant trader. If you mean shops like Optiver/JS/DRW/CitSec/Akuna, a lot of their quant trading roles are also semi-systematic. Their delta1 desks are usually closer to fully systematic side though. Shops like HRT/Headlands/IMC are also close to fully systematic.
Congrats on working at a Tier 1 MM. That's never easy to get there.
At the moment, presumably you're currently working on more MFT style strategies based on how you described your team's trading. With this in mind, coupled with the fact that it doesn't sound like you've ever worked in HFT before, you should understand that the HFT world is very different from the MFT world. Even though you will be working on "quant trading" strategies, the skillset for building HFT quant trading strategies is not the same as MFT quant trading strategies. HFT looks at very short-term signals involving the orderbook, exchange messaging, order types, queue positioning, exchange matching engine etc, it can also become extremely technology focused e.g. looking at communication protocols, message processing, latency etc. Many of these signals might not have any fundamental reasoning, which can be challenging for some people (especially if you come from more fundamentally oriented trading). I've also left out a large part of HFT which is market making, where you're not intentionally taking a directional view on the market. The point of all this, is that you may find it difficult transitioning to this new world and it would suck if you didn't enjoy it. It's also much harder to move from MFT -> HFT, than vice-versa, due to the change in mindset and the different alphas you look at (personally, I was lucky, and went from HFT -> MFT).
I'm not saying you shouldn't do it, I'm just saying you should be aware of the differences between where you're at and where you're looking, because it might not be what you expect..
Thank you for the feedback - this all makes sense. I realize that the nature of signals would be quite different, but given I’ve market-made exchange products I have a good sense of what these would look like. Are there any textbooks / resources / humans you’d recommend to polish up on skills that are considered more important in the HFT space?
Would you also be open to sharing your experience? Curious what prompted your switch to MFT, and how you are liking the role. (Maybe I’m in the right place after all!)
No worries.
HFT is another one of those disciplines where alot of the knowledge is obtained on the job due to it's secrecy and how specific/specialised it is. In saying this, there are a bunch of general principles that everyone is aware of, so any off the shelf HFT textbook will provide you the basics. Highly recommended HFT traders that I follow are: Haim Bodek (HFT veteran and controversial whistleblower), and the Narang brothers (Manoj and Rishi) - I suggest consuming any material they have released e.g. books, podcasts, videos.
From my experience, I didn't intentionally make the move from HFT to MFT, it kind of happened organically. I spent a large part of my early years in HFT (~5 years), and I was only focusing on a couple of products. I found this to be quite limiting, especially so early in my career, and I wanted to see how other products traded. I joined another prop trading firm, where they did both HFT and MFT. This is where I gained exposure to more products and the MFT world. Coming from HFT where you generate such consistent PnL, my first impression of MFT wasn't great and I couldn't understand why traders would opt for a lumpier PnL stream. However, I didn't realise the many other benefits that come with this trade-off i.e. higher capacity, lower alpha decay, lower maintenance, less reliance on technology etc. These benefits are what eventually converted me to focus on MFT strategies.
Overall, I'm very grateful that I was able to spend time in the HFT space because it's made me a more balanced trader/PM. But having worked in both areas, I think I have slightly stronger preference for MFT. Partly due to my personality where I'm a little lazy and always try to get the most return out of the least amount of effort. HFT requires a consistent and considerably amount of effort and upkeep (not to mention costs!) - you can never take your eye off the ball, otherwise you'll lose your edge and end up making donuts. In saying this, HFT provides such regular PnL, requires little margin capital and the feedback loop is super fast - you know very quickly whether a strategy is working or not. In the end, I think it just comes down to your personality and what you value in a strategy..
Thank you so much! Some good homework for me over the weekend.
I agree on the lumpy vs alpha decay comparison - let me do some more digging to make sure I’m thinking about it the right way (and this is not just another case of the classic grass-is-greener). I appreciate the insight and your sharing your experience.
Hi, I'm interested in MFT, could we PM?
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