mrchicity

Agree completely. This is one of the worst things you can do, even if the code isn't particularly confidential. It is such an easy case to win. Worse yet, you expose your new employer to enormous liability and can taint their entire code base if left undiscovered for a long time. If I saw tons of source code of unknown provenance committed by some new guy, I'd be scared shitless.

If you're lucky, it might only cost you millions of dollars:

https://www.houstonchronicle.com/business/article/Decadelong...

Or you could end up in jail:

https://en.wikipedia.org/wiki/Sergey_Aleynikov

https://en.wikipedia.org/wiki/United_States_v._Agrawal

Non-competes are fine so long as:

-You are in a role with high search/discovery costs but low replication costs: A quant developing predictive signals, a salesperson or attorney building a client base, a researcher improving Google's machine learning techniques, a chemical engineer at a petroleum company improving their processes, a pharmaceutical researcher, a chef trying new dishes hoping to find a hot new idea.

-Your work can't easily be protected by a patent. If you're developing brake pads or some other consumer product, the company should protect itself with a patent instead since competitors will just buy the product in the open market and reverse engineer it. However, even for these cases, knowledge of ideas that failed is a valuable roadmap for a competitor.

-The non-compete is specific and targeted to direct competitive behavior. For example a law partner should be blocked from taking his book of business to another big law firm for a period, but working as a judge or government official should be permitted.

-If unpaid, the period should be short. For a year or more, there should be significant compensation to enforce. The primary purpose should be protecting the company, not trapping employees or lowering compensation. For retention, bonuses and deferred compensation should be used instead.

If used fairly, non-competes are good for both the employer and employee. Businesses that share ideas openly, with mutual trust among employees, tend to perform better. People in R&D all work very hard, and eventually each should generate results, but some people are just lucky and discover great ideas sooner. If all your lucky guys/gals walk out the door immediately, the company can't invest as much in R&D.

And NDA/confidentiality contracts can only do so much. In obvious cases like a salesperson downloading his client list and profit numbers, or an engineer putting the source tree or product designs on a USB stick, it's a slam dunk case. But you can't vacuum someone's head. Someone who created a system at one company will likely create a similar system elsewhere. It's hard to make the case that a different system with some similar ideas, thought processes, or architecture is a direct copy.

Various reasons, see: https://en.wikipedia.org/wiki/Electricity_on_Shabbat and https://en.wikipedia.org/wiki/Activities_prohibited_on_Shabb...

It's important to note that not every member of a religious group interprets rules or follows them in the same manner. There are strict Orthodox Jewish sects that hew closely to these laws, and I've known many people from a Reform Jewish background who don't even keep Kosher. You see the same thing in Christianity with branches having varying degrees of liberal/strict rules. Individuals within those groups are even more varied still--for example many Catholics visit the Church only for Christmas/Easter and use birth control.

Talmud scholarship in general is an important part of some Jewish people's culture. They have a rich history of debating rules/their interpretations and applying them to hypothetical or actual life situations. It's a great way to practice critical thinking skills.

A Shabbat oven could square with the spirit of the law if you do all your prep the day before and put it in a timed oven to enjoy later. Pretty similar in principle to people in an agrarian society harvesting before their day of rest so they can enjoy a meal together without laboring.

Islamic finance is a similar work-around, since charging interest (riba/usury) is against some interpretations of Sharia law. Banks structure special products that don't make guaranteed interest payments: https://en.wikipedia.org/wiki/Islamic_banking_and_finance#Su...

I actually quite like the idea of setting aside some time for family and community without work, modern machinery or electronics.

Sounds similar in operation to a Shabbat Elevator (https://en.wikipedia.org/wiki/Shabbat_elevator) which visit every floor automatically, but still have traditional doors and don't run on a looped circuit.

The debate over whether such devices violate religious rules is pretty interesting. I have to imagine if there's an omnipotent deity looking upon on his followers from on high, he'd be thinking something like: Very clever, humans, but you know exactly why I made the rule, and it wasn't so you could win on a slight technicality by not pushing any buttons.

Are men more accepting of high risk, low QOL careers? You don't see many women on oil rigs or driving long-haul trucks, either, even though it can be quite lucrative relative to the skill level required.

Software jobs have little in the way of on the job training, "up or out" career progression/compensation, unstable employers, long hours/crunch times/getting called at night, management pressure and constantly changing goals, frequent skills turnover, age discrimination, abstract work without a concrete purpose, etc. etc.

Let's say someone with the mental acuity to become a Pediatrician can also become a reasonably decent Software Developer for some FANG. The expected value of the Pediatrician's annual earnings is $150k a year and the Software Developer's is $250k, but with much higher variance and personal stress.

Is it irrational to pick Med School instead? Maybe the question we should be asking is why men are stupid enough to flock to tech or other workaholic fields (big law, investment banking) in the first place.

"Unfortunately the [group engaging in negative activity] is also almost entirely comprised of [x]." where x is some immutable or deeply personal characteristic, is advancing an offensive stereotype.

Possibly has to do with wealth? When you have little, you have to prioritize finding a job that pays as much as you can possibly make. STEM jobs top that list easily. If you have a lot, pursuing a more leisurely or personally rewarding job is possible.

My family came to the US as fairly poor immigrants from Portugal. My mother worked at the time, went to college at night to earn more, which was unusual then. She didn't this out of some sense of pride or feminism, but because she simply had to. The area where I lived had other poor immigrants from Romania, Armenia, Soviet Union, etc. and many of the mothers worked very hard outside the home as well.

FreeBSD's new CoC wouldn't ban a sexist comment like this, because of the odd "oppressed group" language. Hopefully it was just a copy/paste mistake from the Geek Feminism code.

There's no place in a software project for insulting someone's gender, race, religion, sexual orientation, etc. just because it's a more typical one. There are certain toxic community members who use well-intended rules like this a shield while they proceed to insult certain groups or stereotype them.

Better to avoid that type of discussion entirely. It's a software project, not a place to discuss politics or race relations. Hopefully they take a look into this and adopt a more neutral CoC like LLVM's: https://llvm.org/docs/CodeOfConduct.html

You're both right. There are traders who beat the market in a way that's clearly statistically significant and doesn't involve selling tail risk or other cheats. However, they can stop being successful at any time.

To give a concrete example, GETCO circa 2009 was the premiere HFT firm trading 19% of US equities market volume and earned high 9 figures in trading profits on a tiny capital base. They were doing millions of little trades daily and made profits almost every day, if not every day. The odds of someone doing that due to chance are infinitesimally small.

They had been doing this since the early 2000s, quietly building an empire, and the people there were incredibly bright. They had their pick of the litter from every top school and one of the toughest interview processes. Retention was impressive, too, as the firm made many employees into millionaires in their early 20s and gave them plenty of autonomy. You'd look at this operation and expect it'd never end.

But it did, and quite quickly. Competitors eventually learned what they were doing and saturated the market. Their market share plummeted, as did profits, while the cost base grew. High speed data and microwave lines became a new cost of doing business. Layoffs happened. Once loyal employees defected and with them went even more of the firm's ideas.

Eventually they got a soft landing by buying out KCG, and the entire operation was later acquired by Virtu, but from what I understand, few of the original GETCO trades still exist or make any profits.

So I believe they won due to skill at the time, not luck, but more skillful competition came along to replace them. Some small group will always beat the market, but I'd need more evidence to believe one group would do it for a long time. Brain power and guarding IP are necessary but not sufficient.

I think it's a case of bad optics. Most leveraged ETFs or ETFs that hold futures and constantly pay roll costs just slowly decay. They're not suitable for the average mom & pop, but holders have ample time to see their investment going poorly and get out. It's hard to feel super bad for them and they're less likely to complain loudly.

Meanwhile XIV did the complete opposite. Because of the VIX futures term structure it was actually earning roll premium most days. That plus declining volatility caused its price to march steadily upward for almost two years. It looked safe and some people put lots of money in, even bought on margin. Then one day they lost 80-90% with much of the losses in after hours trading.

It's like the difference between a company having kinda crappy management that spends too much on executive perks vs. outright fraud like Enron. Sharp moves that wipe people out completely without warning will get outsized attention.

Awesome post and your meta-analysis rings true even on tiny time horizons.

Years ago I traded energy futures and we hired someone away from a rival. He knew a trick for seeing crude oil price changes on CME a few milliseconds before they sent the updates in their data feed. For a brief period we were printing money across the energy complex, but eventually it stopped working well. The guy who taught us the trick jumped from firm to firm, many others independently learned it, and it became the worst kept secret in trading: https://outline.com/MHp6Yu

If you've done this earnings forecasting yourself, how much size can you trade before the market moves enough to make the risk/reward unfavorable? For a retail guy it's probably not an issue, but curious if major funds are doing it at scale.

How does selling to hedge funds work when the information is valuable only insofar as few others have it? I suppose you could have an exclusivity contract but there's a strong incentive to sell to multiple buyers. Is it more of a relationship/reputation type setup? Are there brokers of some sort that help filter disreputable sellers out?

Please read the prospectus for these products. Leveraged ETFs aren't appropriate for long term hedging.

Not sure what you mean by splitting pennies, earning the bid/offer spread? That's common but the person who paid the spread to them got to trade instantly instead of waiting for another natural buyer or seller. The spread is payment for providing a service, just like an insurance company earns the spread between what you pay in premiums and their expected losses on claims. High speed market makers compete with each other so the spreads they end up earning are tiny.

The majority of high speed traders are trading their own account and don't have customer orders to front run. If you prefer a loose definition of front running to mean something like "reacting to changes in the market faster than others" then yes, but I don't see anything problematic with using public data to make your prices more accurate faster.

If you believe markets operate well without intermediaries, there are block crossing services where institutional investors can try to match up with one another. I'm sure institutions would prefer trading that way, but it turns out finding someone trying to do the exact opposite trade at exactly the same time is very difficult--volume transacted on these systems is small.

I would agree with you 99% of the time, but not for these products.

Professional fund managers who want to insure against volatility can easily trade VIX futures or index options. They wouldn't use an ETP that can only replicate daily returns which erodes longer holding period returns, with high internal fees, daily roll costs, etc.

Same goes for other products like 3x inverse leveraged oil ETPs. The Southwests and Exxon Mobils of the world would never hedge with those. They'd go to ICE/CME or have a bank/energy producer write a bespoke forward contract.

The people trading these exotic products are the /r/wallstreetbets crowd. They're basically gambling instruments because of the amped up returns. They aren't suitable for the retail investor because they can't understand the mechanics, and professionals have better choices. Really no reason for these to exist, and I wouldn't be surprised to see more scrutiny after retail traders lost everything in inverse VIX this week.

Why's it a waste? Low latency traders facilitate risk transfer in thousands of instruments at razor thin margins using automation. They keep prices efficient through arbitrage or predictive modeling. Even during extreme market stress I can trade SPY in my brokerage account within a penny of its true value. If the S&P 500 index futures or the S&P 500 stocks move, someone will update the price of SPY instantaneously.

You want them competing with each other. To win they have to make the tightest price before a competitor, which either lowers their margins or requires them to bring new information to the market sooner.

If you accept that markets require intermediaries to bridge liquidity gaps in time, place, and product, then high speed traders are far less wasteful than the firms they replaced. Consider this: In 2000 Goldman Sachs bought Spear, Leeds & Kellogg (SLK), a large NYSE dealer. SLK employed 2500 people and earned over a billion dollars annually. That's one firm on one exchange. Each market had thousands of men in jackets yelling at each other, making a much bigger spread on transactions, and giving less accurate pricing.

Today there are a couple thousand people involved in low latency trading across all markets/firms and the entire industry makes a few billion dollars a year. Teams with a handful of quant researchers make markets in every listed stock globally.

Depends on competition. Suppose you pay $300k a year in SF and the guy/gal in India's next best alternative is working for a local company making $50k which pays for a very nice lifestyle there. If you pay $100k, you're still substantially above most competitors, and the employee will be very happy.

Now with more competitors, salaries will probably end up rising close to SF ones--which are likely near to the upper bound, marginal value produced by the employee.

I think the continuous price/time priority limit order book is flawed, but the least bad option out there, similar to democracy. Speed will still matter in batch auctions if other continuous exchanges trade correlated products--the only way to prevent that is to force all trading to happen worldwide on the batch auction exchange, leading to monopoly rents for the exchange operator. Is it better to have high fees without arbitrage than extremely low fees and tiny arbitrages where fast traders are netting fractions of a basis point? It's not clear to me.

Also lots of liquidity in ETFs and other derivative products is provided based on being able to hedge quickly in other tickers with high probability. If I'm making a market in XLF (S&P Financials ETF), but my orders to hedge in BAC, GS, MS, C, ... all get held up in a batch auction, that's extra risk. I can't make a tight spread, large size market in the ETF since the price of the basket components can drift away after I get a fill.

Budish also argues that arbitrages aren't competed away. It's true that arbitrageurs will never eliminate arbitrages, only make them last for shorter periods of time. However, natural market participants can change their behavior to eliminate them, and they have.

If everyone trading S&P 500 futures also traded SPY with orders that arrived simultaneously, fewer arbitrages would exist to be exploited. You don't even need to be fast to do this, just precise with timing. This kind of routing is very common in equities markets and it's a big part of why many early HFT scalping models no longer work regardless of how fast you are.

You need to prioritize orders in the market by some objective metric. You want a metric that rewards good behavior and punishes behaviors you don't want, for the market as a whole, not just any one participant.

Almost all markets now prioritize on price. An incoming sell order will interact with the highest priced bids first, and an incoming buy order will interact with the lowest priced offers first. Think that's common sense? In the pit days, markets were sometimes prioritized based on whether the guy was your cousin or if your dads were fishing buddies. Better price? Oops, didn't see you, pal.

But say 15 traders all want to buy at the best price. Who gets filled when a seller comes in with a market order? You could:

1. Prioritize equally: Give everyone bidding an equal piece. Fair's fair.

2. Prioritize by size: Bid more contracts at the price and get a bigger piece. You wanted it more than anyone else.

3. Prioritize by time: First to bid at the price gets filled first, then second, and so on.

Over years many ideas have been tried and nearly all markets worldwide have settled on 3 or some variant of it, why? Batching orders together as in 1 encourages people to split their interest into many small orders. It also discourages traders from sticking their neck out to make the best price first. Why bid alone when you can wait for others to bid with you? Likewise with 2, traders will try to game the system by placing very large orders and are rarely willing to improve prices.

So we end up with 3 which causes some speed jockeying in return for forcing traders to bid their true values right away to undercut on price, to everyone else's benefit. In return, they get rewarded with trading first.

Depends how you mean exploit. Not a lawyer, but to a first approximation, doing anything in markets to elicit a response from others rather than for bona fide economic reasons is illegal market manipulation so active exploitation is rarely done at serious firms. It's usually individual day traders or offshore boiler room type groups.

Passive exploitation, as in detecting predictable future actions, is probably common, if unintentional. Most automated traders are searching for anything that predicts an imminent price change, on average. Predicting future actions and predicting prices are roughly equivalent. As you move along the continuum from straightforward arbitrage to esoteric black box quant stuff, it becomes more and more difficult to understand how or why a trade even works. I'm sure there are models that predict prices very well solely because they've locked on to some combination of tells unintentionally leaked by another algo.

Here's an example of someone who built a model to detect algorithmic iceberg orders reloading: https://mechanicalmarkets.wordpress.com/2015/04/30/market-da... - he makes an interesting point that any quant data mining order book event sequences that predict strong price movements would find the same pattern easily.

This sounds similar to OneChronos, though I don't know if they've launched anything: https://www.onechronos.com/

You're right that there's precedent for this:

-Implied engines as you mentioned where traders can atomically express a view on the term structure without legging risk. For the benefit of non-finance readers: Say you believe the fair price difference between Dec and March futures is 2 index points, you could quote in the spread between the contracts (long one, short the other) buying 1.75 selling 2.25 without being fastest to respond to every shift in the index itself. Your order in the spread will create implied orders in the underlying contracts themselves and you can only be filled if both your long and short trade.

-IEX's D-Peg effectively runs a high frequency pricing model inside the matching engine to predict when an adverse price tick is likely.

-I think D.E. Shaw has a patent on a domain-specific language for complex orders where they can be priced off any other instrument(s), ratios between instruments, features of the order book, etc.

The real problem with batch auctions is coordination. So long as you have other exchanges trading correlated assets in continuous time, there will still be a race to adjust orders in the batch auction market after a pricing signal occurs. Even with a random delay or crossing time, it's still beneficial in statistical expectation to be faster.

You'd need to trade most similar products worldwide on a single platform. Since exchanges are a network effect business, this would likely lead to monopoly profits for the exchange operator.

I'm not sure "no high-speed arbitrage/monopoly exchange" is net better than "some high speed arbitrage/competing exchanges." I suppose you could have the government run the exchange as a utility, but that would stifle innovation. A lot of things we now take for granted started in experimental ATS and ECN startup markets.

I do HFT and think about this a lot. I am essentially a middleman that facilitates trading across:

1. Time - I quote buy and sell prices continuously in Microsoft stock trying to earn the spread between them. You want to buy stock and my offer to sell is the cheapest in the market. We trade. Later, someone else comes along to sell and I have the highest bid, so I buy the stock back from them.

In between I'm exposed to price fluctuations, so sometimes I make money and sometimes I lose, but I make a profit on average by charging a spread between my buy/sell prices and predicting small price movements. The two of you could have met had you waited, but I let you lock in a sure thing by bearing risks you didn't want. Think of this like insurance. Odds are you spend more on car insurance than you're expected to receive in payments, otherwise the insurers would go out of business. But you probably prefer spending $1000 a year vs. spending $0 most years and $30000 once in your life.

2. Place - You're in the US and want to buy Nokia stock. Someone in Finland wants to sell for a cheaper price. You don't have access to the European exchanges and she doesn't have access to US exchanges, but I do. I trade against both your orders and earn a couple cents per share in profit. I helped you meet halfway across the world and also keep prices efficient to reflect global supply and demand.

3. Product - You want to invest in an index ETF that holds 40 different stocks. I quote an offer to sell based on where they're trading in the market plus a small profit margin. You buy my offer. I turn around and buy the stocks to hedge my risk.

I'm better at trading than you are and have very low costs. Even considering my profit margin, it's cheaper and less risky for you to buy the ETF from me than 40 individual stocks. I keep the ETF and stock prices aligned and also helped people who wanted to sell stocks get their orders filled. Win win win.

I think the work I do clearly benefits the market and natural investors. All of these trades are competitive too, so I can only earn razor thin margins per trade, or someone else will undercut me.

I do sometimes question how the market picks winners and losers, typically based on speed. Is someone whose system is hundreds of nanoseconds faster more deserving of arbitrage profits? Do high technology costs naturally lead to consolidation and reduced competition? https://faculty.chicagobooth.edu/eric.budish/research/HFT-Fr... this paper has some interesting thoughts on the topic.

FWIW I do think continuous price-time priority trading is flawed in that it creates an arms race in speed, but it's the least bad option. Other mechanisms like batch auctions are even worse. As a thought experiment, consider the #3 ETF trade I described. If I can't immediately hedge my risk and instead go into a batch auction for each stock, how will that affect the price I offer in the ETF?

PS: I do think it's a fun job. You get to play with cool technology and it's like a game that gets harder every day against very skilled opponents. Even the arms race isn't all bad. HFT firms have effectively bankrolled modern innovations in high speed ethernet, FPGAs, low latency kernel bypass networking, etc. that have knock-on benefits for other applications.

Most money in Medallion is from employees with a bit from friends and family. You can't invest in it at all, because they don't need or want your money. If they're fooling anyone, they're just fooling themselves, or maybe using it as marketing for their other funds.

In absolute terms Renaissance isn't even spectacular. There are capacity constrained traders whose Sharpe Ratios and return on capital are multiples of RenTech's. What's impressive is that they manage to do it with a billion dollar AUM. That's small compared to some of the biggest HFs, but far more than a typical high turnover strategy can put to use.

Virtu trades far more than 3 million shares a day. They may even make 3 million trades a day.

If you've seen a system like this in action, it's a beautiful thing to behold and cannot be mere luck. Transactions stream in constantly. It's not just one big, lucky bet, but thousands of tiny bets with a slight edge. A plot of profit & loss with respect to time looks like an almost perfectly smooth upward line. And if you're good, you can do this every single day for years and years.

Still, I wouldn't say guys like that have beaten the market in a real way. I've certainly never felt like I did. This style of trading doesn't need outside capital and can't scale. If I gave you $100 and armed you with a scalping bot, I bet you could easily turn it into $200 buying hot tickets on Ticketmaster and reselling them. But would anyone call you a genius trader? Could you do it with a million? A billion?

As a business net of all costs like employee compensation and technology, returns to owners are pretty lousy. Compare owning Virtu stock to an index fund since their IPO. Ouch.

reinforce the quality of the product to make the buyer feel good purchasing again? odds are if someone's of a certain age/relationship status and buying a pregnancy test, they're trying to conceive and will possibly buy more.

Merely anecdotal, but I've run heavy multi-threaded compile tests on my 1950x for days to check whether the chip was stable when overclocked, and have never seen it segfault. That was my main purpose for purchasing the CPU. I use it for that all day every day.

If I were spending millions on Epyc servers, I'd certainly test this on a reasonably large sample before committing.

5% is a lot these days, and that Intel CPU will beat Ryzen clock-for-clock as well. Laptop manufacturers are fighting over every percentage point of gains these days, not trying to move backwards. People want to see all day battery life with reasonably good performance.

I like AMD and want more competition for Intel. If you have a use that scales across many cores, AMD is a great value for workstations. Their new server lineup is pretty compelling too. But if they want to win in mobile they need to be better on power and thermals even for normal users who won't use the iGPU's capabilities heavily.

Laptop RMAs are way more expensive since they have to swap the entire board w/CPU or reflow solder on a new chip. Can't imagine any OEM will willingly take that hit. Since these issues are well known, I'd bet AMD has to fix them; OEMs will mandate it as part of QA. Either that or they'll force AMD to eat the costs like Apple did with NVidia.

Didn't know that. Since they know how to fix it on TR/Epyc, why would they release a brand new line with the same issue?

Does this exist on Epyc platforms that don't use a traditional chipset?

This is bad, but seems like more of an incremental issue than anything. Can you audit every line of source in your system? No closed source drivers or firmware on any devices? No devices on your network with vendor controlled firmware? You log all network I/O through a passive tap? For the average user targeted by a state actor this makes little difference.