Wall Street

In man vs. machine battle, man seeks upper hand

Jim Kim — Mon, 18 Aug 2008 08:58:02 -0400

There has been lots of talk about how human traders are being disintermediated by electronic trading services. Working as a cash equities trader hasn't carried a lot of cachet on Wall Street for years now, but the credit crisis has bumped up trading volume and presented an opportunity for humans to reassert themselves, notes Financial News Online. Algorithms did fare well in the face of great upheaval, and while not giving up on the idea, more buy-siders are willing to re-involve human traders who can provide a soft intuitive touch. This, however, will only dent the profound trend toward electronic services. According to the Tabb Group, the buy-side expects it will execute about 50 percent of orders using sales traders by 2010. That's down from 82 percent in 2005. The traders that will survive are those that come up with really good ideas and services. It's all about value add now. Hedging strategies is one area ripe with potential. Anything that crosses asset classes is another.

For more:
- here's the Financial News Online article

Uptick rule to make a comeback?

Jim Kim — Thu, 14 Aug 2008 11:06:52 -0400

Short selling has been a big regulatory concern lately. As you know, at some point, regulatory change gets very expensive. Recall that Regulation NMS ended up costing Wall Street firms hundreds of millions of dollars. We've suggested that the recent rule banning naked shorting of some financial stocks could end up costing firms whose systems aren't set up for it. Now comes news, from Traders, that the SEC is considering a return to the old uptick rule, which was nixed by Reg SHO. This is part of the recent movement to curb shorting in the wake of the Bear Stearns fiasco. The intentions are honorable, but you have to wonder if such a rule can really exist in an era of penny increments and high volume. Many will say no. It may be that a version of the former rule can be created--perhaps at larger increments--that can have a legitimate impact. If so, you can bet it will add to systems costs.

For more:
- here's the Traders article

So you want to be a quant?

Jim Kim — Wed, 06 Aug 2008 17:04:25 -0400

Quants are in heavy demand these days, despite the recent hedge fund turmoil. In a way, it's "Revenge of the Nerds" meets "Wall Street." The geekier the better. Computer science is almost passé. Math and physics are way "cooler." If you could come up with a credible new take on, say, string theory, it might get you an interview at Goldman Sachs. Make sure you also note that you programmed an online craps game in high school for fun, and put it on the Net. They love that stuff. Advanced Trading notes that universities are responding to the demand with MFE (Masters in Financial Engineering) programs. To the real quant snobs, this may end up being the equivalent of an MFA for writers. For now, it's a good way to get started.

For more:
- here's the Advanced Trading article

Related Article:
Quant funds at a crossroads

Goldman Sachs vs. Credit Suisse in dark pools

Jim Kim — Fri, 01 Aug 2008 07:26:56 -0400

Two of the biggest names in the dark pool industry have escalated their rivalry, reports Dow Jones, via the Wall Street Journal's Marketbeat blog. Back in May, Goldman Sachs inked a deal to link its Sigma X service with similar dark pools of liquidity operated by Morgan Stanley and UBS. Credit Suisse was left out. Credit Suisse is "calling 'no fair,' and pushing for SEC regulation that would force all of the more-than-40 dark pool operators to open up to everyone else." There's a certain appeal to that. As long as these liquidity sources remain fragmented, you really have to wonder about best bids, offers and such. Sigma X owns about 26 percent of the industry's market share, while Credit Suisse owns about 16 percent (Tabb Group's liquidity Matrix). The two biggest players have apparently never gotten along. In the past, the SEC has suggested that it would wait for some consolidation before deciding what to do. Credit Suisse is not sitting back. It has inked a linking agreement of its own with Instinet (see next item).

For more:
- here's the article

Wall Street IT spending to rise

Jim Kim — Sun, 20 Jul 2008 08:28:03 -0400

The conventional wisdom as of late has been that IT budgets would take a hit across Wall Street, what with the credit crunch and all. But that may not be the case at more than a few companies, according to a new survey from IBM and Securities Industry and Financial Markets Association (SIFMA). Asked to compare 2007 IT budgets with 2008 budgets, one-third of respondents suggested their 2008 budgets were higher. Of course, that means two-thirds suggest their 2008 budgets will be at the same level or lower. As for 2009, the majority of IT budgets were expected to remain at the same level or increase, easing declines from 2008. One surprise: small firms seem to be most aggressive about spending, notes Wall Street & Technology. Risk management and compliance will drive much of this increase in spending, especially in areas exposed by the credit crunch.

For more:
- here's the Wall Street & Technology article

Wall Street turns to video game technologies

Jim Kim — Fri, 20 Jun 2008 10:41:09 -0400

The need for speed is as acute as ever on Wall Street. Just about all the hot technologies are, in some form, all about cutting the cost of latency in the most efficient way. So it is not surprising that some Wall Street firms are eyeing video game technologies. Nvidia, the Silicon Valley graphics chip maker, is creating high-performance computing appliances based on more powerful GPUs that have found some buyers in the oil and gas industries, and at universities, reports FinanceTech. Some think they would work out well in a trading environment. GPU vs. CPU will be an interesting battle to watch. There are some advantages to GPUs; they're more powerful and more energy efficient. But the key will be the software, and how fast optimized financial applications can be developed.

For more:
- here's the FinanceTech article

To get a job, get tech savvy

Mon, 05 May 2008 06:59:54 -0400

We've seen a really interesting move over the past few years to meld the trading function with technology. One indication is that the divide between the traders and the system-developing geeks has been obscured somewhat. The rise of so-many financial engineering programs reflects the movement. ITG is out front in recognizing that it needs employees at all levels who are tech-savvy as well as trading-savvy. It has overhauled its recruiting practices to reflect its needs, according to Advanced Trading. Quant-types are, of course, still in heavy demand. But ITG is pushing its focus on technology skills to traders as well. There's a fine line between the system-creating geeks and the actual traders. Of course, a foreign language would help, too.

For more:
- here's the Advanced Trading article

SPOTLIGHT: iPhone vs. Blackberries

Mon, 21 Apr 2008 06:59:52 -0400

Apple aims to make the iPhone a staple of the corporate world. It just upgraded its SDK for corporate apps. But on Wall Street, we can only imagine how it could possibly overtake the BlackBerry. You never know. Music-to-trade-by may be just the thing for some. Article