Technology was the focus on the second day of our MarketsWiki Intern Education Series at IIT.
Joseph Niciforo, managing member, HC Technologies, kicked off the program talking about how, as “time frames in trading have compressed to sub microseconds and we approach the speed of light, perhaps there may be room for a different type of trader.”
Niciforo started out in the industry under the tutelage of Paul Tudor Jones, who taught him to be disciplined and trade slowly, building his account. After one trade went spectacularly wrong and he lost a large sum of money, he learned never to violate his risk management plan again.
Now, at Tudor, he said, “We are seeking to find new macro traders. Returns of macro funds aren’t what they used to be, so people are getting out of the space.”
Niciforo has helped start a company called Launchpad, a joint venture with Tudor Investment Corp. that is looking for young macro traders. The company is attracting talent into the HFT space from banks, which are no longer involved in proprietary trading, and from other hedge funds.
“We’re finding a real hunger for mentoring, and Tudor portfolio managers are actually interested in doing that.”
Ed Haravon, the COO of Spot Trading, spoke on the intersection of humans and technology.
“For the most part, the financial industry at large – including proprietary trading firms, exchanges, and other services providers – really functions as applied technology companies,” he said. “We’re very focused on solving problems, and have become firms composed of problem solvers.”
That creates a lot of opportunity new people coming into the industry, he said. If someone is the type of person who is competitive within a team framework, or is always looking to see how he can beat the other team, those are the kinds of people companies are looking to attract to the business.
He added that, far from being startups, the businesses in the trading industry and in Chicago are “real businesses” and the technology solutions they are coming up with are having an instantaneous impact.
“You can get your hands on technology and tools that are innovating fast and gain that experience early in your career,” he said.
Another great opportunity in the industry is in risk management technology, and Chicago is the risk management capital of the U.S., he said.
“For the past seven years we’ve had zero interest rates, the stock market has gone straight up, and we’ve had a long period of low volatility. I can’t predict when that will change, but we know markets are cyclical, and there will come a time when the world will need to hedge risk, and the place to do it will be in the Chicago derivatives market, and that will be a big boost to the industry.”
Mark Haraburda, managing director at Barchart, said it was important to know the purpose, the players, the types of markets and the instruments in the financial markets. He outlined those points and explained the importance of such things as price discovery and risk transfer and market data.
“Market data has grown with the growth of electronic trading, and that has led to larger volumes of data, and we’ve had to come up with technical solutions to manage that data,” he said.
Financial technology also includes wealth management, lending, insurance, trading software, cryptocurrencies and more, and firms are working with more and more advanced code, he said.
“It’s now easier for firms to host infrastructure and start data systems at a much lower cost.”
John Avery, head of managed services solutions, capital markets, Americas at SunGard, said the post-2008 financial crisis regulations and costs to comply with those rules have forced firms to reduce spending on revenue generating opportunities. Instead the bulk of their spending is on compliance.
“Firms no longer have the money to spend on operations and technology. The focus is on what happens after the trade is made. There is extra plumbing work behind the scenes to finalize and settle the transactions,” he said.
He also talked about how fintech sits at the intersection of Main Street and Wall Street. People in the industry should note who the big players on Main Street are – Google, Amazon, Facebook and Apple.
“The way we use computers has changed dramatically, as has the way we buy goods. So main street has also changed dramatically,” he said.
Sungard wants to apply the Main Street technology to Wall Street and capital markets and other financial services. The firm has created a Coder Cup, in which teams compete to create new products. They also are interested in using Google search technology to solve consolidated audit trail processing, he said.
Rick Tomsic, the CEO of Tradovate, stressed that “motivation and vision have no age limit,” so young people shouldn’t feel they need to have 20 years in the industry to look at things from a fresh perspective.
“You also use technology very differently than I do, and there is value in that to employers,” he told the interns in the room.
He also said that he approaches every business decision like a trade, thinking “What’s the worst that can happen?” If you can live with the worst outcome, then everything else is positive.
It is important to know your own strengths, and to dream big,” he said. And there is no better time than in youth to take big risks, before “life gets complicated.”
Kapil Rathi, vice president of options business strategy for BATS, provided practical advice on “the soft skills” young people need for the first days at work.
The best thing about starting a new job is that you are starting with a clean slate, he said.
“You haven’t done anything wrong to anyone yet. Nobody hates you on day one. And you have a free license to ask questions. No one will hate you for asking questions, because they don’t expect you to have all the answers.”
The downside of a new job is that, since people don’t know you yet, you lack credibility.
“You are also under very high scrutiny, and if you dig yourself a hole right away, it will be an uphill battle from there,” he said.
Everyone makes mistakes, and the common pitfalls of a new job are: trying too hard too early, trying to put your stamp on things, setting unrealistic expectations, and trying to do too much.
Also, knowing the answer to everything.
It’s important to get a head start by learning as much as you can about a company before day one, he said. And don’t be a “me” player or blame others. Perhaps most importantly, “manage” your boss – be sure to communicate with him or her, ask for feedback on how you’re doing, and be indispensable.
The bosses in the audience were glad to hear that.