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> But not once - not from word of mouth, or directly from them, or someone, ever, anywhere - have I heard a common sense way these guys make money due to intell
by amluto 4y ago
> But not once - not from word of mouth, or directly from them, or someone, ever, anywhere - have I heard a common sense way these guys make money due to intelligence, instead of due to a scam or due to luck.
Financial markets have a fascinating property: any well-known strategy that can be implemented at reasonable cost [0] stops working. This is because people implement it and the profit goes away. If Jane Street has a common sense strategy or three that makes money, they’re not telling you about it.
(I’m taking about actual market profits here. It is well known that you can make lots of money by charging fees on a lackluster fund as long as you can find investors.)
[0] The cost issue is real, and the relevant parameter is some combination of profit (revenue - opex), capex and risk. For example, one can make money (revenue) by being the fastest market on the block. But the revenue there is approximately bounded and competition has driven the cost up to insane levels, so it is not straightforward to do this profitably.
- somuchfordonor 4y agoI see a lot of variations on these arbitrage and secrecy themes. Arbitrage that sticks around for years: those are scams dude. They involve collusion, not intelligence. I understand it might not be illegal collusion, but if either side of the transaction being scammed found out, they would find someone else to work with. Trust me, I know. I've worked in ad tech.
- solveit 4y agoI mean, yeah. For arbitrage to stick around for years it requires that the person who first found it be years ahead of the curve, and that's really hard to do just by being smarter than the competition. The vast, vast majority of these will be collusion, or regulatory capture, or literal fraud, or whatever where the competition knows full well what you're doing, but can't/won't jump in for completely unrelated reasons. But finding lots of different things to arbitrage and consistently being two weeks ahead of the competition is something you can do with a dedicated team of smart, experienced people, and this is the business model that Jane Street and others claim to be running.
- DebtDeflation 4y agoThe obvious suspicion, for any company that is both a market maker and doing prop trading, is that they're engaging in some sort of front running. They're probably doing it in a highly obfuscated non-trivial way otherwise they'd get caught quickly, but nevertheless are using their visibility into trillions of dollars worth of order flow to shape their own trading strategy.
- bwi4 4y agoI just assume everyone but retail has order flow data now.
- adamsmith143 4y ago>Trust me, I know. I've worked in ad tech. Trust me I know about the inner workings of the Financial world because I did an internship at a Digital Marketing agency and totally didn't get coldly rejected by Jane Street when I applied for their Head of Trading position that I totally deserve because I'm like way smarter than those Harvard Math 55 morons. Lol this is S tier cope or A tier trolling.
- itsdrewmiller 4y agoThe original comment addresses that concern: >Why in the absence of any positive evidence, like "oh here is our genius but nonetheless expired" trading strategy, which anyone could have furnished in the last two decades, they agree, oh it must be real? I agree that there should be some obviously awesome things these funds did that they can share now given they are no longer able to exploit them. I have no idea if they have done so and I and GP are just not aware of it.
- jeffreyrogers 4y agoThere are known expired strategies that generated large profits for long periods of time. In some cases the people involved in developing the strategies have directly published things explaining what they did.
- 121789 4y agoDo you have any examples? Would be interested to read sone
- elijaht 4y agoArticle mentions one (bitcoin arbitrage)
- taliesinb 4y agoI'd be fascinated to read these published things if anyone can point to them!
- jeffreyrogers 4y agoThe books and articles by Ed Thorpe are a good place to start.
- tych0 4y agoAnd at least in SBF/Alameda's case, they did, and you can google it. IIUC it was basic arbitrage, the hard part was figuring out how to interface with Japan's banks. Maybe the guy is a bad dude, I don't have a horse in that race. But lots of trading strategies that have worked in the past are well known.