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If you know and can speak about enough to do a blog post on this, could you consider it? I'd love to hear more about the different systems capabilities and how

by jbooth 16y ago

If you know and can speak about enough to do a blog post on this, could you consider it? I'd love to hear more about the different systems capabilities and how that affected the different big houses' ability to trade effectively in a storm.

yummyfajitas 16y ago
I don't know much more than what I put into my post, which is more or less standard industry knowledge. One more thing I should mention - this isn't a purely IT-driven story. Goldman doesn't simply have better IT than Citi or the Morgans. Citi has had many mergers and acquisitions (e.g., Vikram Pandit came onboard when Citi bought his hedge fund), whereas Goldman is mostly homegrown. Even if Goldman's geniuses ran Citi, they would still never be able to do what Goldman did.
noname123 16y ago
The issue with real-time P/L and risk calculation is not necessarily IT but your math models valuing your positions in very hard to value securities. For instance, a liquid stock such as MSFT is easy to value; just look at the last traded price. Chances are, if you are liquidate your entire holding of MSFT (even if you are a big fund or bank), it'll fall roughly in the range of couple of cents of last traded price. A fairly illiquid stock such as a penny stock or a stock with relative low shares float; if you were to close your position as a bank, you are probably unloading/covering so many shares that it'll affect the price of that stock significantly. So you need to model that into your P/L model. Things get even messier with a derivative, because let's say you are trying to sell an option position. Whoever your counterparty you sold your option contracts too, probably has some counter-strategy in which they might hedge their option transaction with an underlying equity or with another option spread at a different price whose counterparty might choose to hedge with an underlying equity position. All of which would in term affect the underlying equity pricing and how the options call/put parity is re-adjusted and then in terms, the pricing of the option contracts you just traded. So you need to model that. So in your derivative pricing model, you might have to consider underlying pricing/volatility/liquidity, options pricing/time-decay/liquidity, futures pricing, currency exchange rates (for an ADR security) and how all of them all interact and influence one another. And even with the math aside, constructing and consolidating all exchange/quote systems that trade all of these products is a system integration nightmare.

by jbooth 16y ago

yummyfajitas 16y ago

I don't know much more than what I put into my post, which is more or less standard industry knowledge. One more thing I should mention - this isn't a purely IT-driven story. Goldman doesn't simply have better IT than Citi or the Morgans. Citi has had many mergers and acquisitions (e.g., Vikram Pandit came onboard when Citi bought his hedge fund), whereas Goldman is mostly homegrown. Even if Goldman's geniuses ran Citi, they would still never be able to do what Goldman did.

noname123 16y ago

The issue with real-time P/L and risk calculation is not necessarily IT but your math models valuing your positions in very hard to value securities. For instance, a liquid stock such as MSFT is easy to value; just look at the last traded price. Chances are, if you are liquidate your entire holding of MSFT (even if you are a big fund or bank), it'll fall roughly in the range of couple of cents of last traded price. A fairly illiquid stock such as a penny stock or a stock with relative low shares float; if you were to close your position as a bank, you are probably unloading/covering so many shares that it'll affect the price of that stock significantly. So you need to model that into your P/L model. Things get even messier with a derivative, because let's say you are trying to sell an option position. Whoever your counterparty you sold your option contracts too, probably has some counter-strategy in which they might hedge their option transaction with an underlying equity or with another option spread at a different price whose counterparty might choose to hedge with an underlying equity position. All of which would in term affect the underlying equity pricing and how the options call/put parity is re-adjusted and then in terms, the pricing of the option contracts you just traded. So you need to model that. So in your derivative pricing model, you might have to consider underlying pricing/volatility/liquidity, options pricing/time-decay/liquidity, futures pricing, currency exchange rates (for an ADR security) and how all of them all interact and influence one another. And even with the math aside, constructing and consolidating all exchange/quote systems that trade all of these products is a system integration nightmare.