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As far as Rentech goes, they are top notch and seem to have very robust models. Hopefully someone can start a thread trying to have reasonable debate about there methods (given the Jim Simmons has actually made some generic claims about what they do). The hire lots of signal processing people.

Unless your stated period of returns is less than a year, I would bet size that your claim is not true.

If you are willing to pay up to the offer on SPY or many other liquid names, you will get all the size you want. For example, VXX has a thick book even at 6:00 pm.

If you'd like to post a formalized construction of the model you're considering I would be happy to give more details. But as I read it, your initial model is simply addressing the relationship between 7 variables at the same time. Call each variables Xi(t) where i is an index from 1-7 and t is...

If you do a triangle between USD, EUR, GBP your main risk is that you will slip and get values that don't satisfy the arb condition. You're still completely hedged once the total transaction is complete. In practice, unhedged times are as low as micros as are these arb opportunities. This is why...

I'm not sure what you mean. How so?

I think it's largely a matter of trade frequency versus number of products. As frequency increases, you'll likely require higher resolution data. If you're reading for dollars per trade versus pennies then the execution assumptions can be relaxed. On the other hand, for pennies, much of the...

OTC credit derivatives (CDS and such)? I'm a bit confused.

Credit spreads have negative vega. An increase in vol would hurt such a position.

Easiest way is to trade a strategy uncorrelated to SPY. Stat arbs tend to trade for wild prices during high vol events (like a large market selloff ). You'd effectively be long vol trading such strategies. The key is to be efficient even when vol is not very high.

No claim to specify methods, but it seems signal processing is of great interest there.

I see the confusion. I'm saying that you should have separation between the models for alpha and execution. And then, you backtest using both at the same time. Basically, you want to be able break apart the effects of the models to the greatest extent possible.

Sounds like a very reasonable way to start out. You definitely have the right skill set. The way to work around the unexplained losses situation is by decoupling alpha models from execution models. If you have an alpha model that back tests well but fails live, then you can test the model over...

One other feature that's not being thoroughly discussed here is Reg NMS. No matter what, orders (besides inter market sweeps) will be filled at NBBO. Not to mention, if the market moves then your order is a sitting duck for a whole 350 micros.

Many interesting and some inaccurate comments in the mix here. I'll say that I have had a lot of contact with the HFT space and this diagram isn't exactly an accurate depiction of the HFT world. First, trades cannot occur outside of the NBBO due to Reg NMS. Therefore, any fill that the BD...

Based on my understanding, you plan on deploying your own systematic strategy. There are several items to consider: - what frequencies will you be looking at? This will dictate tech infrastructure, broker/execution infrastructure, strategies, as well as costs and expected variance of PL. -...

It all seems a bit odd to me. These are not prop shops in the sense I'm familiar. More akin to the arcade type shops. It's very strange to even think about PL in a risk limit way, most desks are given the ability to mark to some theoretical price and risk compares this to consistency vs mark...

One concern will be that the ETF will become disjointed from NAV. The futures will trade but a circuit breaker can stop the mechanism which keeps market vs NAV in line.

What you are talking about implicitly is mean reversion. If you split out the market by sector, the weighted average of each sector should equal the market. Both outperforming and underperforming sectors should converge to the market average in the long run.

This is incredibly misguided. How do you explain statistical arbitrage or flat arb? And by virtue of creating efficiency you have to be fast. This is backward thinking. HFT has a bad PR problem due to the loonies (Haim Bodek, Brad Katsuyama, etc) yelling about spoofing and queue hoping but...