Big Trouble at Hudson River Trading

Seems that the current market environment has not been good to HRT. The headhunter community is swamped with senior talent looking to find a culture with less infighting and finger pointing. Declining trading revenue, ballooning head count and costs seem to be the culprit. Apparently management thought paying new college grads the same or more than senior personnel wouldn't be a problem. This is almost the same move Raj Fernando from Chopper Trading made when Brandon Moran (Chopper's only profitable trader) retired to go whisper to horses. When HFT firms get desperate, they start spending like crazy on new talent, and the senior people get declining bonuses. If you don't believe me, ask anyone who worked at Getco around the time of my last post.

Comments (18)

Nov 14, 2013

Very interested in this, source? Also what's your stake in this?

Nov 15, 2013

HRT has always marketed itself as a place for only the super elite. And in a way, they were successful. While many we're turned away or looked sideways at the gimmicks, (you are so super duper smart just to get a second round interview that you earned an iPad or other apple product ) enough people took the bait to give the firm an extremely high quality workforce. Unfortunately, the rubber never hit the road in a big way. They did ok with a 20-40 person head count, and in a higher volatility market. Fast forward after some partnership re-arrangement, and you have less competent minds making decisions with over 100 mouths to feed and a lower PnL.

What is likely keeping the place from falling apart is the very punitive retention clause: quarterly bonuses (which also causes lots of dram) that you only get 1/8th of your bonus for the next 8 quarters. The people trying to leave are now realizing they have to give up 2 years of income if they want to stay in the industry. Nobody else in the industry does this. Great for the firm, but not for it's employees.

So why is the firm struggling? My thoughts are that all the giveaways and elite marketing created a selection bias. Those who could see the emperor wore no clothes chose to step away. At the same time, the more myopic both in their firm choice and ability to understand the market accepted offers willingly.

Nov 14, 2013

Just curious: do HFs start hiring people with less/different experience? I'm gearing up for grad school and want to take a stab at trading if I can.

ALSO: good call on getco

Nov 15, 2013

I wonder if OP is a disgruntled former employee...

Nov 15, 2013

It does look like the OP signed up just for this post.

I think the way to think about that bonus policy is that you're getting 10/32 of the full bonus the first year and 26/32 the 2nd year. You should take that into account if you work for them. Other firms have escalating bonuses as well; HRT is just redoing it to have a psychological effect. It's pointless to think about leaving money on the table when there is an infinite time horizon built into the policy.

Nov 18, 2013

Most firms in the industry pay the whole bonus within 1 year. If an employee leaves with the intention of going to a competitor, the firm may enact a "garden leave". Basically paying someone to not work at a competitor for about a year. What I am pointing out is that the HRT bonus schedule is much more punitive to the employee, and is not industry standard. The people leaving now are realizing they don't get to keep what they thought they earned.

Nov 18, 2013

I briefly talked to them at my school's career fair a few weeks ago - it's purely algorithmic (automated) trading. They exclusively hire math/physics/CS/engineering majors, and their "traders" are officially called "Algorithm Developers." I didn't spend much time there since they said they didn't hire interns (but did get a sweet bag of swag including a nice beer mug, a 1 GB flash drive, and one of those nice, reusable coffee mugs).

I don't think it's a hedge fund though, is it? I had the impression they don't take outside capital, but I could be wrong.

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Nov 18, 2013

extraordinary environment (and corresponding compensation, 2-4X standard pay), but my understanding is that it's like 15-20 people .. very CS kind of place.

as for concepts, the hearsay tells me it's got a HF-like quant developer culture (t-shirts to work, office drinking) but they are technically a "prop-shop" (since they don't take outside money, they don't have to worry about withdrawals, investors, marketing)

Nov 18, 2013

how good is their performance in this turmoil?

Nov 18, 2013

talked to one of the founders. This is a very CS place. Don't think they have had a losing month yet.

Nov 12, 2018

HFT firms almost never lose any money. That doesn't mean they're making much money though. And they certain aren't anymore nowadays.

Nov 18, 2013

They're heavily reliant on CS stuff. Their main goals are low-latency high frequency stuff (as in, intense memory optimization), although not sure if it's market-making.

Last year, if you even made it to a second round interview on-site, you got to pick between either a Kindle DX , an Xbox 360, or an ipod Touch. Ridic.

Nov 18, 2013
b5thsymphony:

They're heavily reliant on CS stuff. Their main goals are low-latency high frequency stuff (as in, intense memory optimization), although not sure if it's market-making.

Last year, if you even made it to a second round interview on-site, you got to pick between either a Kindle DX , an Xbox 360, or an ipod Touch. Ridic.

Oh come on! That is just silly.

Nov 18, 2013

if you are looking for quant related job, they mainly recruit from very top schools (think about MIT, Harvard, etc)

Nov 18, 2013

This shop looks interesting. Has anyone interviewed there?

Nov 12, 2018
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