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defacto standard for professional traders and finance What do professional traders do nowadays? My impression was it is already bots talking to bots and/or ind

by a_imho 8y ago

defacto standard for professional traders and finance What do professional traders do nowadays? My impression was it is already bots talking to bots and/or index funds outperforming/on par with actively managed funds.

MagnumOpus 8y ago
True-ish in the small parts of the markets that are extremely liquid (top 500 global stocks, us treasury bond futures). Very untrue for the vast amounts that aren't -- ten thousands of different corporate and government bonds, thousands of leveraged loans, more fancy securities like convertible bonds, credit default swaps or contingent-convertible bank bonds get traded over Bloomberg chatrooms (think Whatsapp groups with lots of additional features but lots of regulatory red tape). In these markets passive funds underperform active funds by vastly more than the fee differential - and that is not coincidental.
fnord123 8y ago
bots only work on highly liquid contracts (which makes them more liquid). When you have much less liquid contracts you generally have people making the deals through chat (e.g. InstantBloomberg (IB)) or on the phone.<GO>1<GO>
FundThrowaway 8y ago
This whole index funds outperform actively managed funds claim needs a lot more context. I always see adverts from people like Vanguard claiming such things but they are always just talking about raw returns they never take into account risk adjusted returns or the like. Not all returns are the same, you need to think about the risk taken to get those returns, a market neutral actively managed portfolio may return less than a passive fund but it's volatility will be much lower to.
vostok 8y ago
1) Index funds have human traders. 2) Human traders will generally trade products that aren't automated or will trade products that are automated in sizes that aren't automated. They will also oversee the automated trading.

by a_imho 8y ago

MagnumOpus 8y ago

True-ish in the small parts of the markets that are extremely liquid (top 500 global stocks, us treasury bond futures). Very untrue for the vast amounts that aren't -- ten thousands of different corporate and government bonds, thousands of leveraged loans, more fancy securities like convertible bonds, credit default swaps or contingent-convertible bank bonds get traded over Bloomberg chatrooms (think Whatsapp groups with lots of additional features but lots of regulatory red tape). In these markets passive funds underperform active funds by vastly more than the fee differential - and that is not coincidental.

fnord123 8y ago

bots only work on highly liquid contracts (which makes them more liquid). When you have much less liquid contracts you generally have people making the deals through chat (e.g. InstantBloomberg (IB)) or on the phone.<GO>1<GO>

FundThrowaway 8y ago

This whole index funds outperform actively managed funds claim needs a lot more context. I always see adverts from people like Vanguard claiming such things but they are always just talking about raw returns they never take into account risk adjusted returns or the like. Not all returns are the same, you need to think about the risk taken to get those returns, a market neutral actively managed portfolio may return less than a passive fund but it's volatility will be much lower to.

vostok 8y ago

1) Index funds have human traders. 2) Human traders will generally trade products that aren't automated or will trade products that are automated in sizes that aren't automated. They will also oversee the automated trading.