Central Risk Book Trading
Hi guys,
Recently got a full time job at GS/MS/JPM at NY for the central risk book desk. Not familiar with the business so I have quite some questions:
- How much risk does the desk take, and how much of it is based on personal decision vs. algos?
- I heard it is more like a developer position and you dont learn as much on market sense / how to trade flow yourself. Is it true, and is it still a good starting career for someone who is looking to work in a more discretionary trading desk?
- Is this a sustainable career, esp comps?
Many thanks for insights!
From my limited knowledge:
Hi, thanks for your insights!
Is there any reason why US vs Europe are so different into taking prop positions? Is it a better opportunity if I can do it (hypothetically) in Europe as that will be more prop?
Also, I am not really from a engineering background, so I am not actively looking to go into data science after the job, but rather staying in banks (lateralling) / buysides. So I want to see if this job is possible to stick to for a long time / transitioning to another more flow job in banks
Worked as CRB Trader for 2 yrs in BB, though in different region. Just take this as a grain of salt.
How much risk does the desk take, and how much of it is based on personal decision vs. algos?
-> Depends a lot in how the mgmt view the team, and overall strategy in client servicing. In some banks they would solely view the team as providing best execution service, no matter the loss they incur. As long as they interact more with the flow and maintain bank franchise, they don't care.(Of course, the bad thing about this is that the senior mgmt would see that the teams not making money, hence provide less bonus...so everyone leaves) On the other hand with some luck you'd have mgmt who is very supportive of the desk and let you take more risk, have more discretion(By this I mean, interact more with dumb money and omit the smart money from Citadel, MLP to the market.) and also have larger books for some discretionary position as long as you maintain sane level of crossing rate. About ur 2nd question, it depends on how you define personal decision. One of our main jobs is to develop our own model to be calibrated to our trading framework. So the research based in data analysis is the key to developing our decision.
I heard it is more like a developer position and you dont learn as much on market sense / how to trade flow yourself. Is it true, and is it still a good starting career for someone who is looking to work in a more discretionary trading desk?
-> 100% of the work is coding, but personally I think that statement is bs.
Is this a sustainable career, esp comps?
- I think it's a good place to start ur career if ur interested in the Quant trading space. It gives u great opportunity to learn how to think systematically, and the math inside the work is highly relevant to HF, and market making so it gives you good exit opps. And some who are not that interested I. alpha research can choose to exit to quant developer position in HF/MM and they manage/construct the whole trading system there. You can still decide to stay in the bank. My impression is that every bank will still need VRB, but person with relevant expertise is always short on supply. Job stability wouldn't be an issue in the bank.
Feel free to ask more questions if you want.
Hi, thanks for the detailed reply, really appreciate it. A few follow ups:
Thanks a lot!
No need. No one ever learn KDB before joining a firm, but learn it after you join. If you have some basic SQL, it should be fine. Functional SQL query is quite a pain but you should be able to pick it up as long as you spend more time. If you really want to come prepared, tryreferring to kx website. Or can read Nick Psaris' book.
Rather than learning KDB/Q, I would recommend brushing up on ur own language. Either Python or C++ youd realize how much they are going to be used.
Obviously good to brush up on Linux knowledge as well.
As I said earlier, it depends on how the senior mgmt views the team. I was lucky to have a senior mgmt who was very supportive of the team, so was able to display more macro views and have some directional bet. (Obviously this would have to be done in the name of pre-hedging). Could trade futures, options for those, I think those banks you mentioned would have mandates for CRB to trade.
Other than that, you need to have working knowledge of rates and fx, and for some cases NDF as youd be trading other regions names. (For US, I'm not sure though if you'd trade LATAM stocks)
I don't think CRB won't restrict the traders to gain market knowledge nor to have their own view on the macro side..or even some equities(Literally ur managing a book that's somewhat inventory of the bank...how can it be not related to market)
3. Forgive me for lack of knowledge on this part, but from my short experience, I think all the equities desk have similar prospect in terms of taking risk(except for some prime desks), and it's exit opps..all the desk you mentioned would have decent amount of risk appetite, while they do have some different exits. (Either to MM or HF). About my current position sorry I can't disclose now...Just ignore my title.
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Thank you for your reply!
Could you elaborate a bit on functionality vs alpha seeking? As I still havent hit the desk yet I am not sure what I would be doing, only that my manager told me to practice my coding beforehand. But I assume "coding" apply to both of them.
functionality is the helping your internal traders save money on tcost. If a trader wants 1million shares of AAPL, they will create a lot of market impact by doing a market order of the full 1million shares. CRB comes here and absorbs that 1 million shares, and then gives the internal trader a price that's better than just offloading into the market. CRB will also try to cross or match the 1 million shares with a different trader on the floor (ideal situation). All of this is done in a systematic way. Your job will vary greatly from building/mainitaing analytics to cailbrating inputs to your systematic trading model. Alpha seeking is finding features or X that has predictive powers of returns. Different firms have different testing process of when something is "predictive", but that's the jist of it. Coding does apply to both of them. Just be comfortable with coding in python, a lot of the learning happens on the job anyways. If you're good on coding, then you can move on to factor models. There's the Barra risk model handbook avaliable online
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