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Investment banks don't even have the secret sauce, hedge funds like Renaissance Technologies and D. E. Shaw & Co. are the ones that have it

by trpc 8y ago

kranner 8y ago
Investment banks have proprietary trading desks that are effectively hedge funds.
- jen20 8y ago
  GS used to be nicknamed “the worlds largest hedge fund”. They have plenty of world class proprietary tech, but the OP is right: this is not likely to be secret sauce at all.
  - JackFr 8y ago
    That's Harvard's endowment. Harvard University itself exists at this point merely as a tax dodge for the $37 billion AUM hedge fund.
- ryeguy_24 8y ago
  I don’t think this is accurate. Regulators release the Volcker Rule to shut down prop trading at banks.
  - govg 8y ago
    There still exist principal investing groups, as well as market making groups that can contribute to the bottom line.
    - ryeguy_24 8y ago
      Right. They have tons of trading activities that are non-proprietary. I’m sure they can always hide some positions that are truly proprietary but largely they are not supposed to put on positions for their own gain.
  - nickles 8y ago
    The Volcker rule contains exemptions for certain prop trading activities. For example, trading in US government bonds is exempt.
    - rbavocadotree 8y ago
      Here's nice flowchart[0] to determine what counts as proprietary trading. There is a surprising amount that is still allowed. https://www.davispolk.com/files/DavisPolk_Final_Volcker_Rule_Flowcharts_Prop_Trading.pdf https://www.davispolk.com/files/DavisPolk_Final_Volcker_Rule...
- deleted 8y ago
  [deleted]
chrisfinazzo 8y ago
It's a bit disingenuous to say that BB's don't have a stake in HFT. At the time of Aleynikov's case, Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume.
- nickles 8y ago
  > Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume. I took 'secret sauce' in GP's comment to mean 'profitable strategies'. Don't confuse volume with profitability. It's conceivable that a BB would deliberately lose money in some activities to have clients give them other, more profitable flow/business.
  - chrisfinazzo 8y ago
    That's true. It's "LeFevre's corollary", if you will :) N.B, Lapdance not gauranteed

Investment banks don't even have the secret sauce, hedge funds like Renaissance Technologies and D. E. Shaw & Co. are the ones that have it

by trpc 8y ago

Investment banks don't even have the secret sauce, hedge funds like Renaissance Technologies and D. E. Shaw & Co. are the ones that have it

kranner 8y ago

Investment banks have proprietary trading desks that are effectively hedge funds.

jen20 8y ago
GS used to be nicknamed “the worlds largest hedge fund”. They have plenty of world class proprietary tech, but the OP is right: this is not likely to be secret sauce at all.
- JackFr 8y ago
  That's Harvard's endowment. Harvard University itself exists at this point merely as a tax dodge for the $37 billion AUM hedge fund.
ryeguy_24 8y ago
I don’t think this is accurate. Regulators release the Volcker Rule to shut down prop trading at banks.
- govg 8y ago
  There still exist principal investing groups, as well as market making groups that can contribute to the bottom line.
  - ryeguy_24 8y ago
    Right. They have tons of trading activities that are non-proprietary. I’m sure they can always hide some positions that are truly proprietary but largely they are not supposed to put on positions for their own gain.
- nickles 8y ago
  The Volcker rule contains exemptions for certain prop trading activities. For example, trading in US government bonds is exempt.
  - rbavocadotree 8y ago
    Here's nice flowchart[0] to determine what counts as proprietary trading. There is a surprising amount that is still allowed. https://www.davispolk.com/files/DavisPolk_Final_Volcker_Rule_Flowcharts_Prop_Trading.pdf https://www.davispolk.com/files/DavisPolk_Final_Volcker_Rule...
deleted 8y ago
[deleted]

chrisfinazzo 8y ago

It's a bit disingenuous to say that BB's don't have a stake in HFT. At the time of Aleynikov's case, Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume.

nickles 8y ago
> Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume. I took 'secret sauce' in GP's comment to mean 'profitable strategies'. Don't confuse volume with profitability. It's conceivable that a BB would deliberately lose money in some activities to have clients give them other, more profitable flow/business.
- chrisfinazzo 8y ago
  That's true. It's "LeFevre's corollary", if you will :) N.B, Lapdance not gauranteed