Are financial programmers under paid?

[TigerBalm]

I mean the guy that writes the FIX engine, or the middleware/communications foundation, or the order manager, or etc etc etc.

In my work (sell-side algorithmic trading dev : VWAP, Volume Inline, etc, my engine does most of the work, and the dealer monitors it to make sure it doesn't do anything strange when faced with unusual situations (stock hits limit up limit, etc. It's not at all a stretch to say that w.r.t. the execution, the engine is doing the work, while the dealer is just monitoring it. However, as several of you already mentioned, it's a matter of perception : dealers think they "own" the order. They say, "my IBM order". Programmers are, by nature, self-effacing and think they own the faults. They feel guilty that the engine / algo / FIX component didn't do the right thing in X circumstance. Programmers often don't realize that they actually know more about the business than someone who is merely monitoring the orders by virtue of having to take care of every/most cases that can occur. Note : I am talking about sell-side (broker) businesses, not a hedge fund or prop desk situation, where I would not make such claims : clearly, in such cases, whoever owns the model / discretionary idea that makes the moolah should get the majority of credit.

So yes, there is definitely scope for change. I've realized that I, and most other programmers, by nature, are not experts at selling our services; we are experts at attention to detail and holding the tangle of technicalities together. While the truth is that this is what actually gets the job done, the social truth is that the aggressive-sounding dealer takes credit.

The good news is that there is a certain change in mass consciousness that is happening in the industry : for example, when I was at UBS, the head of dealing in Hong Kong clearly mentioned in one talk that he thought of the dealers as glorified keyboard punchers while it is automation that does most of the work. Another example was a hedge fund manager wanting to hire algo programers as execution traders because "anyway, they know the exchange rules and how the system works much better".

 

[rufus_4000]

Quote from nitro:

Awesome. The world loses another great scientist [I don't know who he is but he sounds like a star] to trading because he is undercompensated. I think we should also go and round up all the nurses, pharmacists, and other highly educated people and turn them into traders because that is where people get compensated. Seriously, listen to yourself!

IMHO, you are right, the reason that *anyone* (traders, technologists, operations person, etc) would work in finance is to make money. It is not to work out some scientific discovery, benefit mankind, or anything like that. And, we all know that, the price of a good is *precisely* what the market is willing to pay for it, we can all argue what the "theoretical price" should be, but the market set it. Let's say we take some1 with a PhD who could be doing work on next break through String theory, that person decided to apply their skills in wall street, that makes that person "greedy" by definition. He/she is no different from a guy who makes cold calls hawking penny stocks. He is on wall street to make a buck, plain and simple. Truth hurts, but it is what is.

While there is some truth in that the current generation of Wall street leaders, Blankfein, Pandit, etc, are all "former" traders. So it is natural for them to empathize with the traders more. And aside, this "rise of traders" in the last 10 yrs, as versus the "bankers" in the 1990s (Mack, O'Neal, Corzine, all started as bankers), I believe significantly "magnified" the risk taking culture on wall street, made the economic crisis much worse as a result.

The point is, a trader, is directly responsible for result of the trading operation (that the system supports). Your example of a fighter pilot is probably relevant, sure the avionics developers wrote a brilliant fly by wire system, that takes the human out of the picture in 99.99% of the routine operation. But when the fighter registers a "kill", who gets the "star"? the pilot? Please, feel free to argue with the Air Force that avionics developers would be recognized directly. Instead, at best, the pilot would mumble something like, "I would like to thank the folks at Lockheed Martin for building a beautiful machine".

So my "solution", currently in the little trading operation that I own / run, is to make *all* technologist to be responsible for some aspect of the trading operation, whether it is backtesting regression, or real-time model adaption. The point is that I try not to have "pure" technologists (or traders, my emphasis is that everyone should be able to write and understand code (and just to get the pure technologists into a frenzy, the base language is C, not even C++, then again, my staff sort of can play with whatever language they like, provided they can convinced others to use it too, haha.). Yes, even the operations staff). This way, the bonus scheme becomes in my opinion, much more even and fair. The only notable downside is that I have no idea what to put on their business cards, so I let them chose themselves. Interestingly, a slight majority picked "quantitative trader", and the rest picked "quantitative analyst / programmer". But then again, the firm is by no means "normal".

Just to be clear, I have a slight dislike of the type of ppl (and there are a lot of them on wall street), who believes that technology is an "end all on its own", not a "means to an end". So they would focus on "technology for technology's sake".

 

[hilojack]

Quote from rosy2:

working inside an organization and taking there edge elsewhere is always an option and done all the time.

And herein lies the problem. Programmers are mercenaries. Their resumes are 3 pages long with all of the "jobs" they've had in the last 5 years.

Some have skillsets that are market specific and thus deserve to paid more highly than some guy who can just write code. In order to get paid in this business, you need to generate revenue, not just save costs.

And you also need to be LOYAL. Guys want guarenteed salaries, profit share, bonus payments but never want to share in the downside risk. They scoff when asked to sign non-competes and NDAs and like rosy said, steal shit all the time.

So why would anyone who has done the heavy lifting (raise capital) give you anything more then they could pay some H-1B?

Do you have an edge? Are you sharing it with your employer? Hell no, you keep that shit for yourself. And the second someone offers you 10K more you're out the door. Taking all that you can.

That's why half the programmers at big operations don't even know if what theyve written is profitable. And I've heard of more than 1 firm that has guys code nonesense just so they can't figure out what works and what doesn't.

You show me a guy with a 5 year career and a 1 page resume who's willing to wait his turn and I'll show you a guy who'll be loaded.

The rest of you mercenaries just keep trying to fight the good fight. When you'll learn is that you actually need to pick a side and stick with it, and only then will you reach your financial potential.

 

[hilojack]

Quote from nitro:

Sure, that can work in finance. What about when a (Bio)Chemistry major goes and discovers a new molecule that is key in curing some disease at MRK or PFE? What does his Chemistry, Biology etc teachers see from that? Their salary.

My point is that no one is an island in the modern world, and yet, we continue to compensate as if these are all lone geniuses like Einstein that worked it all out by himself in 1905.

"If I have seen further, it is because I have stood on the shoulders of giants" - Isaac Newton

When I started in the business I worked on stock option plans for pharmaceutical and biotech companies and let me tell you, these guys were getting PAID.

Not only could their work have a social impact, some these guys were making far more then some of the top dogs on the street.

Of course they had to wait a full 5 years for the options to vest, which must seem like an eternity for some of you "I write code pay me NOW" guys. LOL

 

[rosy2]

Quote from hilojack:



You show me a guy with a 5 year career and a 1 page resume who's willing to wait his turn and I'll show you a guy who'll be loaded.

loaded with debt. people in this business (traders, programmers, analysts) are loyal to other people, not firms. and that guy with a 5 yr career at one firm got lucky by starting at a shop that took off. there are so many startup shops that fail so then you move on to the next one.

 

[slacker]

Quote from nitro:

I am not suggesting that programmers are underpaid by 1000%. I claim most are underpaid by 50%, evenly across different domains.

I would divide programming talent into 2 groups. One group 'writes to specification' and understands the technical environment more than the specific user solution being delivered. The second group is creatively trying to develop new user solutions and expand the competitive advantage.

The first group of 'food for code' group is way overpaid. I had a software problem last year that I had working but not just the way I wanted. I posted a part I was having problems with on eLance and had a solution in 2 days with bids from 4 different countries. Total cost $60 from a Russian PhD who understood the 3D problem I was trying to solve inside and out.

The 'code for food' guys are now competing world wide. I went to a seminar last year on global outsourcing. A 'fully bundled' cost for a coder in California is $200- $300k a year. Fully bundled cost in Pune or Banglore is $40k. Management infrastructure and telecommunications make it easy to outsource anything you would have given to a 'code for food' coder years ago. US cannot compete in the 'write to spec'.

'Code for food' programmers is a commodity resource in oversupply.

The second group is the creative innovators who are underpaid but a very very small population. If you are in this group you should be starting your own company and stop bitching about how the 'big guy' is not paying you enough....

If you are bitching about pay; you are probably in the first group and not the second. (You may not know this, but it is something to think about...)

People can change from 'code for food' to 'code for solution' but there are so few good examples that it is hard to do.

Good luck.

 

[lolatency]

Quote from rosy2:

loaded with debt. people in this business (traders, programmers, analysts) are loyal to other people, not firms. and that guy with a 5 yr career at one firm got lucky by starting at a shop that took off. there are so many startup shops that fail so then you move on to the next one.

Not to mention that if you stay in 1 place for 5 years, your skillset can decline depending on how open the environment is. They don't compensate you for loss of marketability, so it is better to take the extra 10k and run.

 

[hilojack]

Quote from lolatency:

Not to mention that if you stay in 1 place for 5 years, your skillset can decline depending on how open the environment is. They don't compensate you for loss of marketability, so it is better to take the extra 10k and run.

Exactly. So I guess this ends the debate. Programmers are NOT underpaid. Carry on.

 

[shortie]

Quote from nitro:

...
Since when is the complexity of what you do related to your compensation? Trading is incredibly boring most of the time. I contrast it to being a fighter pilot where 95% of the time you are bored out of your mind, and 5% of the time all your training and flight hours are put to the test. The difference being that all you do is win or lose money as a trader, whereas in the case of fighter pilots life is at stake. Their pay? waaaaaaaaay less than a typical trader for similar complexity profiles....

many traders have died fighting the market

 

[jack hershey]

Quote from slacker:

I would divide programming talent into 2 groups. One group 'writes to specification' and understands the technical environment more than the specific user solution being delivered. The second group is creatively trying to develop new user solutions and expand the competitive advantage.

The first group of 'food for code' group is way overpaid. I had a software problem last year that I had working but not just the way I wanted. I posted a part I was having problems with on eLance and had a solution in 2 days with bids from 4 different countries. Total cost $60 from a Russian PhD who understood the 3D problem I was trying to solve inside and out.

The 'code for food' guys are now competing world wide. I went to a seminar last year on global outsourcing. A 'fully bundled' cost for a coder in California is $200- $300k a year. Fully bundled cost in Pune or Banglore is $40k. Management infrastructure and telecommunications make it easy to outsource anything you would have given to a 'code for food' coder years ago. US cannot compete in the 'write to spec'.

'Code for food' programmers is a commodity resource in oversupply.

The second group is the creative innovators who are underpaid but a very very small population. If you are in this group you should be starting your own company and stop bitching about how the 'big guy' is not paying you enough....

If you are bitching about pay; you are probably in the first group and not the second. (You may not know this, but it is something to think about...)

People can change from 'code for food' to 'code for solution' but there are so few good examples that it is hard to do.

Good luck.

Adding the comments of nitro (money scale), lolatency (the difference btween retail and others AND his cost analysis of setting up) and Rufus (about team players ovrlapping) to your comments, really rounds out the contemporary opportunity.

A small shop that is more retail oriented than equipment support oriented is where a programmer can really contribute and get very rich.

The rate of doing laps in processing data is very slow and so little processing equipment or volume of data is involved. Now, only about four platforms (retail state of the art) are required for the bandwidth (meaning the diversity of raw data feeds since no platform supplies all) required to have all the decision maKing info to be automated in hand.

The team player's wealth could be built with a lifestyle component and a wealth building component. Starting each team member at a milion a year for each component and doubling annually would only take an initial capitalization 50,000 bucks total for a team of ten. If OPM were added probably only another dozen people would be required to process the OPM at a maximum level of capital.

In detail, this is paying weekly 4,000 dollars to each person and at the end of each quarter contributing 250,000 dollars into an employee pool for a million dollars the first year total. The next year everything is doubled, etc. Folding the operation could be done in five years so other more important objectives could be taken on. There would be an initial trading level of 80 ES contracts. That would be increased over time up to the current market capacity of 10,000 contracts.

Using contemporary platform coding (what is available retail as cut and paste) about 2,000 lines would be required for the team to operate with one or two persons trading for everyone. To get 2.000 lines of coding done by cutting and pasting would take about four levels of debugging by starting with an operating system of about 150 lines initially. This level would be about 4 to 7 trades a day which could be done manually until the 150 lines were checked out.

Later, to add worth to the company for the third team wealth building aspect, making money by having ownership in the company, the capital of the corporation could be grown by increasing the trading frequency to an optimum of about 40 trades a day and upsizing to a portion of current market capacity. The P/E ratio would be industry standard at the beginning and the stock price could follow a lower set of curves where the lower curve would be a ten year Vangard curve ( See page 295 of "Bogle on Mutual Funds") or a compound doubling of P/E and E quarterly to take the company from the industry standard to a "growth" company.

Onviously, it would be mostly a "code for food" plus lifestyle company since the "code for solution" is already complete (that is this is a normal trading money velocity for accomplished retail traders and no scaling issues are involved) from a retail point of view.

Your shop would probably enjoy taking a cruise with this team of guys. Suggest an itinerary.......