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Career in financial services........Money+Power+Contacts

Discussion in 'Education & Personal Growth' started by Nettem, Oct 2, 2011.

  1. Nettem

    Nettem New IL'ite

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    The Real Story of Trading Software Espionage..........

    While the 32MB of Goldman Sachs' proprietary algorithmic trading code allegedly stolen by Sergey Aleynikov makes for great news, it also highlights the new significance of high-frequency trading — which is built on this technology — in the marketplace.

    Much has been made of the 32MB of Goldman Sachs' proprietary algorithmic trading code ("trading secrets") allegedly stolen by Sergey Aleynikov, now portrayed in the financial media as the new Julius Rosenberg, Aldrich Ames, Robert Hanssen and John Walker all rolled into one. That may prove to be true; but while it makes for a great news story at this point in time, it highlights the new significance of high-frequency trading — which is built on this technology — in the marketplace.

    We are all keenly aware that electronic routing and execution has become the mechanism by which our capital markets operate. Algorithms account for more than 25% of all shares traded by the buy side today — a number steadily rising for several years now. However, the incredible capabilities offered by technology have given meteoric rise to a relative few high-frequency proprietary trading firms that now wield far greater influence on the markets today than most people recognize. The familiar names of Lehman, Bear and Merrill are being replaced by less familiar ones like Wolverine, IMC and Getco.

    For example, high-frequency trading firms, which represent approximately 2% of the 20,000 or so trading firms operating in the U.S. markets today, account for 73% of all U.S. equity trading volume. These companies include proprietary trading desks for a small number of major investment banks, less than 100 of the most sophisticated hedge funds and hundreds of the most secretive prop shops, all of which operate with one thing in mind — capture profit opportunities by being smarter and faster than the closest competition.

    They are, as a rule, secretive, stealthy, smart, and relatively unknown. The key to being smarter is their unique technology that enables them to profit on a number of these quantitative strategies, which they will protect at all costs.

    The Value of High-Frequency Trading Strategies

    Proprietary trading takes in a number of unique strategies, including market making, arbitrage (ETFs, futures, options), pairs trading and others based on the linked trading of more than one asset class, e.g., futures index and cash equities. In fact TABB Group estimates that annual aggregate profits of low-latency arbitrage strategies exceed $21 billion, spread out among the few hundred firms that deploy them. While we know all the large investment banks such as Goldman Sachs are committed to prop trading profitability, the hundreds of smaller, private high-frequency prop shops extend much greater influence in the marketplace by providing liquidity that keeps activity flowing.

    While none of us knows the ingredients of Goldman's "secret sauce," we can say that any algorithmic code in and of itself is precious but has limited value until placed in the right circumstances. Those circumstances are not available to just any Tom, Dick or Sergey, but represent the core strategy of the fast-rising high-frequency trading firms.

    First, strategies that optimize the value of high-frequency algorithmic trading are highly dependent on ultralow latency. The right decisions are based on flowing information into your algorithm microseconds sooner than your competitors. To realize any real benefit from implementing these strategies, a trading firm must have a real-time, colocated, high-frequency trading platform—one where data is collected and orders are created and routed to execution venues in sub-millisecond times.

    Next, since many of these strategies require transacting in more than one asset class and across multiple exchanges often located hundreds of miles apart, i.e., New York to Chicago, that infrastructure will often require round-trip long-haul connectivity between the data centers.

    Last and most important, this code has a limited shelf life, whose competitive advantage is diluted with each second it is outstanding. While a prop desk's high level trading strategy may be consistent over time, the micro-level strategies are constantly altered — growing stale after a few days if not sooner — for two important reasons. First, because high-frequency trading depends on ridiculously precise interaction of markets and mathematical correlations between securities, traders need to regularly adjust code — sometimes slightly, sometimes more — to reflect the subtle changes in the dynamic market. The speed and volatility of today's markets is such that the relationships forming the core of our algorithm strategies often change within seconds of our ability to implement the very strategies that exploit them. Second, competitive intelligence is so good across all rival trading firms that each is exposed to the increasing susceptibility of their strategies being reverse-engineered, turning their most profitable ideas into their most risky. As a result, any firm acquiring the "stolen" code would gain benefit from it for no more than a few days before that firm would need to adjust the code to the dynamic conditions. Since these changes build on themselves, in a matter of weeks that code would look quite different from that which was originally "stolen."

    There's no doubt that Goldman Sachs, or any other proprietary trading firm, could indeed lose tens of millions of dollars from its proprietary trading if their strategies are stolen — and that is very serious. The competitors that obtain access to these trading secrets could (and would) use it to front-run or trade against it, ruining even the most well-planned tactics. This news story contains many very important subplots: trading espionage, the necessity for a trading firm to have sophisticated security systems built around its technology, the requirements for risk management, and even the potential for proprietary trading software to be targeted on a wider scale for terrorist activity; but more than anything else it highlights the critical role played by high-frequency prop trading in this new market.
     
  2. Nettem

    Nettem New IL'ite

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    The problem with cable news thinking.....

    Not only the networks of all political persuasions that come to mind, but the mindset they represent...

    Cable news thinking has nothing to do with fires or with politics. Instead, it amplifies the worst elements of emotional reaction:


    1. Focus on the urgent instead of the important.
    2. Vivid emotions and the visuals that go with them as a selector for what's important.
    3. Emphasis on noise over thoughtful analysis.
    4. Unwillingness to reverse course and change one's mind.
    5. Xenophobic and jingoistic reactions (fear of outsiders).
    6. Defense of the status quo encouraged by an audience self-selected to be uniform.
    7. Things become important merely because others have decided they are important.
    8. Top down messaging encourages an echo chamber (agree with this edict or change the channel).
    9. Ill-informed about history and this particular issue.
    10. Confusing opinion with the truth.
    11. Revising facts to fit a point of view.
    12. Unwillingness to review past mistakes in light of history and use those to do better next time.
    If I wanted to hobble an organization or even a country, I'd wish these twelve traits on them. I wonder if this sounds like the last board meeting you went to...
     
  3. Nettem

    Nettem New IL'ite

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    The Unemployed Millionaire: Escape the Rat Race, Fire Your Boss and Live Life on YOUR

    The Inspirational Story of Becoming The Unemployed Millionaire

    At just eighteen years old, Matt Morris started his first business. At twenty, he dropped out of college to pursue business full-time. At twenty-one, he was homeless, $30,000 in debt, living out of his beat up Honda Civic and bathing in gas station bathrooms.

    Late one night after showering naked in a church parking lot underneath the gutter runoff from the roof, he made a life-changing decision to re-invent himself and his career. Through his commitment to personal development and modeling the success of others, by the age of twenty-four, Matt was earning a six-figure income as an entrepreneur. At twenty-five he was generating over $100,000 a month through marketing online, and by the age of twenty-nine, Matt was a self-made millionaire.

    His journey to becoming a millionaire was not without struggle. At twenty-seven, after a partnership gone bad, his companies were almost $100,000 in debt. Through his creative marketing and unconventional business strategies, he rebuilt his companies and paid off that debt within six months.

    In January of 2005, Matt became the Founder and CEO of Success University which became the #1 most popular personal development website in the world with over 100,000 customers in 190 countries. After generating over $20 million in less than 5 years, Matt sold the business to a $100 million company.

    Matt shares his inspiring story in THE UNEMPLOYED MILLIONAIRE (Wiley, $22.95, October 2009) and explains how to emulate his success. Matt dispels the conventional myth that generating millions requires huge capital investments, years of experience, and long hours working in a stuffy office. The lowering of trade barriers and the technical advances of the Internet have made it possible for virtually anyone to set up a business anywhere and instantly market to hundreds of millions of consumers around the world.

    Matt reveals the specific money-making formula he used to earn over $1 million six separate times, showing readers how to turn their own ideas into successful, million-dollar business ventures within 12-24 months—all on their own terms. THE UNEMPLOYED MILLIONAIRE delivers a truly unique, unconventional approach to business success combined with a desirable lifestyle.

    As a dynamic speaker, best-selling author, and young success story, Matt has been featured on national and international radio and television and has addressed audiences of tens of thousands of people in approximately 20 countries around the world. In addition, Matt is partnering with Feed The Children, a non-profit organization that has grown into one of the world's largest private organizations dedicated to helping hungry and hurting people. Last year, Feed The Children shipped 133 million pounds of food and other essentials to children and families in all 50 states and in 34 foreign countries, supplementing more than 760,000 meals a day worldwide. Matt will be donating parts of his royalties of every book purchased online to this organization.
     
  4. Nettem

    Nettem New IL'ite

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  5. Nettem

    Nettem New IL'ite

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    SAFE FOOD GUIDE...........A consumer’s guide to GM free food..By GREENPEACE

    SAFE FOOD GUIDE...........A consumer’s guide to Genetically Modified(GM) free food..By GREENPEACE
     

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  6. Nettem

    Nettem New IL'ite

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    The Six Mistakes of Man - according to Cicero ( 2000 years ago)

    1. The delusion that personal gain is made by crushing
    others.
    2. The tendency to worry about things that cannot be
    changed or corrected.
    3. Insisting that a thing is impossible because we cannot
    accomplish it.
    4. Refusing to set aside trivial preferences.
    5. Neglecting development and refinement of the mind,
    and not acquiring the habit of reading and studying.
    6. Attempting to compel others to believe and live as we do.
     
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  7. renutn

    renutn Gold IL'ite

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    Re: The Six Mistakes of Man - according to Cicero ( 2000 years ago)

    Point 1 goes for both men and women...
    Rest I feel man has changed now ...
     
  8. Siri1

    Siri1 New IL'ite

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    Re: The Top Ten Reasons Working for Someone Else Is Not Smart..in USA

    Seriously? Well there many factors to consider to work for yourself in USA...i dont think the above article has taken immigrants into consideration....what about visa's? i dont think you can business on H1? will this be applicable to immigrants in USA? i dont think so ...on the other hand this is applicable to everyone who is living in thier own country and they are free to do anything ...no offence just my opinion....great post though
     
  9. Anikha

    Anikha Silver IL'ite

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    Re: The Top Ten Reasons Working for Someone Else Is Not Smart..in USA



    " If you are not fascinated of Communism & Girls in your youth , something is wrong with you "-- this is
    my Political Science sir used to quote.....in my college....

    Yet , no wise young man would try Communism or Girls , cause they are petrified of getting scorched ......

    Same holds true ,,, with "Own Successful business " fascination ..........
    If you are not attracted of being your own boss , at some point during your career , something is wrong with you ........

    However , when \ if the business goes downhill , you loose ' More ' than just a mere boss ........

    I'm sorry , if I sound pessimistic , I suffered losses in business ............
     
  10. Saisakthi

    Saisakthi IL Hall of Fame

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    Re: Live a healthy life(I Know this is not possible for us, but try !)

    :thankyou2: for sharing such important health tips, Hope it brings attention of many readers.
     

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