Algo/Auto/HF Trading

Quote from bone:

So, no way on God's green earth those firms are going to let a newbie trade remotely.
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I don't quite understand that. Doesn't the admin portion of the platform permit them to set max losses for each trader position as well as a loss threshhold for the day ?
How is that really affected by being present or not ? Remote traders could have the same limits as the local traders.
Other than a verbal tongue lashing, what else can be done differently that requires the trader to be present ?
 
Quote from syswizard:

I don't quite understand that. Doesn't the admin portion of the platform permit them to set max losses for each trader position as well as a loss threshhold for the day ?
How is that really affected by being present or not ? Remote traders could have the same limits as the local traders.
Other than a verbal tongue lashing, what else can be done differently that requires the trader to be present ?
More...

If the firm, by exchange membership rules requirements, cannot take trader capital contributions, then prudence dictates it. A newbie whom you do not really know and with no skin in the game risking firm capital remotely - that is not prudent. And that is why the futures prop trading business model is so very different than the equity prop trading business model. I have seen prop firms do it from time to time here in Chicago, and they always get burned on it big time. And the trader sitting in the firm's office space with management around him is going to behave in a more prudent manner as well.

I'm not justifying it, just reporting what I know to be fact at least from the viewpoint of the Chicago Prop Trading Firm viewpoint.

Even with TT X-Risk or Sunguard risk management systems set on the most conservative settings imaginable, a trader's automation setup can exponentially compound those risk parameter in terms of losses in a timespan of milliseconds. Seen that personally as well. And then after you lock the trader out of the system, your staff has to figure out WTF he just did and the staff has to go about unwinding it. A trader running serious automation like RTS or Portware blasting a co-located server with super high frequency orders will out-race the Risk Manager's system every time. Even if your risk settings were for 1 lot orders with a maximum position limit of 5 lots, that trader can load you up with 5,000 in a matter of a few seconds because the firm's position limits are much larger than the individual's and the Risk Limits got out-raced by the fraction of a blink of an eye. Seen that happen as well.

If it were profitable and made business sense with newbies, they would be doing it.
 
Thanks for that explanation.
Once again, the platform software needs good failsafe logic to detect and then prevent more than x orders in y milliseconds...with x and y being configurable globally and by trader.
 
Quote from syswizard:

Thanks for that explanation.
Once again, the platform software needs good failsafe logic to detect and then prevent more than x orders in y milliseconds...with x and y being configurable globally and by trader.
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That is certainly a big part of it, but sound business sense and the exchange rules for member electronic firms is the other big piece.

You would never be able to find a principal investor at a member electronic firm willing to back a newbie remotely who wanted to trade futures. Makes no sense from a sound business perspective. The firm is taking all of the downside risk. And if that newbie is located outside the State where your firm is incorporated you might not be able to engage that employee with an enforceable employment contract.

A newbie must be willing to do what all those before him was willing to do. A newbie must be so loyal and committed and confident with his or her trading system that he is willing to sign a rather stringent employment contract, move to Chicago, rent a cheap studio apartment, and get on the "L" or a bus and commute to the member firm like every other newbie. Especially if the newbie has no skin in the game and the firm is taking all the downside risk. And taking the side of the firm principal for a moment, if the candidate is not willing to do that, do you really want to put the firm's capital at risk for such an apathetic person ?

Once you've fulfilled the terms of your employment contract and have built up some capital, then sever your relationship and go out and trade wherever you want. Until that time, in the futures arena at least, no free lunch.
 
Syswizard -

I think you are correct on all points that these type of opportunities should in theory be available without relocation and reporting to an office. I think as firms see their edges slipping there may be a shift to finding strategy talent wherever they can.

Some folks already have remote deals for trading systems and the question becomes how they got them. I would guess that they started in an office, knew someone, or had a very detailed proposal of a system they wanted to trade that they submitted for review - compelling enough for a firm to give them a shot.

There used to be a company trying to grease the gears on the latter option: www.algodeal.com - I think the website is still up. It's a neat idea to provide grid computing and to "crowd source" trading talent. They aimed to take the friction of trust and relationship-building out of the equation. They went out of business - I think because the crowd never showed up in large numbers. There is something that "feels right" about giving an opportunity to someone in India's slums with an internet connection the ability to develop trading systems. However, it never happened. I used their platform to test some published systems. It was nice to submit a hundred backtest jobs at once with different parameter permutations to their grid and reduce the order involved in testing.

Maybe someone will do something similar to that again.

Are you trading equities or futures?
 
Futures/Options...simply because I don't have the capital for equities.
AlgoDeal: interesting, but not what the market needs.

It needs a service with low commissions, a good scriptable trading platform that also has a risk management overlay. Basically, it would emulate a high frequency trading firm's set-up....for prop traders.
 
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