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I was curious what kind of company needed to develop all these different kinds of advanced tech. Turns out it's just so they can be sneaky and trade shares quic

• plst 1y ago
  Can someone who actually understands the topic explain to me (or link good resources) why/if what they do is useful to anyone? Or are they literally just in the business of making money? (anyone except themselves of course. I'm serious, any hints of irony are unintended)
  • logicchains 1y ago
    HFTs competing with each other at market making lower spreads; the cost retailers/institutions need to pay to enter a position. Prior to algorithmic trading, you might need to pay a whole percentage point or more (100 basis points), now spreads on the most popular products are so tightly quoted that it can cost less than 1 basis point (0.01%) to enter a position.
  • doovd 1y ago
    It's a common rhetoric from someone who has no clue about financial markets (the person you replied to). Suppose you want to invest in S&p500 so you want to buy the ETF. Someone like Jane Street can create sell you this ETF, and take care of the risk that comes along with it. For example, the price they sell you this ETF should take into account the pricing of underlying stocks. While it sounds trivial, doing this profitably (and therefore sustainably) is a tough job. And doing it competitively to offer you a good price on it is an even tougher job.
    • monospacegames 1y ago
      Is that why they got banned in India recently? Because they were too good at offering complex financial instruments to customers at competitive prices? Ultimately companies like Jane Street have no moral rudder and it is a waste of talent for smart young people to work for them, but we are so far beyond such considerations at this point that it sounds naive to even suggest that maybe talented people should work on things that make society better for everyone and care about the moral implications of their work. Instead everyone is looking for a way to contribute to the coming dystopia in whatever way they can because that's where the money is.
      • looperhacks 1y ago
        They got banned because they were accused of pretty bad market manipulation (which Jane Street denies of course)
      • infecto 1y ago
        At the end of the day they are a prop firm. They are a business trying to make money and part of that is market making but it’s not solely market making. You may not like it but we function in a capitalist society and as such the efficiency of markets is part of that. To have that happen usually requires the market as a whole participating and that includes firms like Jane Street. In the India case I don’t know if what they were doing was illegal or not, India is complicated and the laws there in my opinion are influenced not as much by standards but how well you scratch the itch of others. It is clear the option markets in India was/is highly inefficient in that Jane Street was able to pull the rug over and over. I would be curious who the counter parties were and if this is more about pride of Indian financial institutions not being competent instead of this being illegal. Thinking more about Hindenburg and how India reacted. In the US it feels like a gray area because at the end of the day the options market was clearly clueless on how they should be pricing the options. Speaking from a US perspective people get thorny on these topics but I think it’s great that folks are always pushing the boundaries. This type of law is tested and we figure out what is ok and what is not. It’s often not cut and dry. Maybe Jane Street was entirely in the wrong in India and they will pay a price. Maybe not. Hopefully their markets learn and benefit from it. I don’t believe any of us are in a position to say how folks should be spending their time. If we went down that road we could probably argue it back to nobody should be working and should simply be farming for our own food.
        • whitexn--g28h 1y ago
          The majority of counterparties were regular citizens, who did not understand that what Jane Street was doing was even possible. Money is debt, you can’t make it without someone else owing it. Taking billions in profits from India’s stock market is pretty straightforward, millions of Indians lost their savings.
    • Shacklz 1y ago
      > It's a common rhetoric from someone who has no clue about financial markets (the person you replied to). I think what OP meant is that producing all this fancy advanced tech just to play the financial game isn't all that much benefit for society. And when looking at societal development in the last couple of decades with the increasing gap in distribution of wealth, social mobility and overall life expectancy declining and other such metrics, I think it's a valid standpoint that maybe, the collective smarts of our society could be allocated a bit better than putting them into companies like Jane Street; as impressive as their work is.
      • fHr 1y ago
        That is true but capitalism sadly encourages the more profit the better. With making less and less in traditional research jobs for example and rising costs, this positions come more attractive by the second. It is sad to see.
      • deleted 1y ago
        [deleted]
    • blargey 1y ago
      That's a terrible example - how much room for improvement is left for the VOO-tier sensible, simple investment vehicles that matter to normal people with their monthly 401k buys? 1/10th of a BP? 1/100th? Is Jane Street hiring to chase diminishing returns to such broadly relevant, already-efficient markets, or to cook up new market-manipulation schemes of the sort that got them kicked out of India, that are antithetical to the market integrity such firms are supposed to provide? The notion that efficient markets require firms like Jane Street to endlessly chase extra "edges" is a false dichotomy. The world would be a better place if intelligent people made more of the concrete products and services that get priced, than if they chased butterflies to expose that price one minute earlier to concentrate ever-more ephemeral, irrelevant arbitrage opportunities into their own little house like a Maxwell's Demon of the stock market.
  • dn97 1y ago
    the premise here is that market makers and arbitrageurs are crucial for efficiently allocating capital. enabling sellers to sell to the highest bidder and buyers to buy from the cheapest vendor means less capital wasted(?) in my experience Jane Street make no attempt to defend the financial system; such societal benefits are obvious or implicit. whether you (or they!) really buy that is irrelevant
  • infecto 1y ago
    Market makers or other similar HFT are providing liquidity in an efficient manner to the markets. The benefit is often debated but for the majority of retail and institutional investors, spreads have never been lower. Instead of a guy at the floor swallowing large margins up, you have bots electronically vacuuming pennies. Of course the whole point for a firm like Jane Street is to make money. To make money means they are competing with someone and that someone could be a loser depending on the scenario. My own opinion, most folks don’t like market makers or folks who work in financial markets are simply not well informed. The efficient allocation of capital is a valuable service to humans in a capitalist society. People often forget how wide spreads were in the past and that humans were swallowing that margin up with little competition. Now market making is highly competitive and because of it investors both small and large benefit from it.
    • Balinares 1y ago
      The societal value of liquidity and a narrower bid/ask spread, while non-zero, is not even remotely commensurate with the bucketloads of cash that the top firms bring in. It's mercenary work, plain and simple. Advanced, interesting, full of juicy maths, highly competitive, rewarding, but mercenary. No one's doing this job for the good of the world, come on. Give some of your earnings to trans defense NGOs, now that makes a difference and I'll be personally grateful.
      • infecto 1y ago
        I don’t disagree that people don’t get into HFT because they’re trying to save the world. It is mercenary in the sense that the rewards attract talent. But calling the work itself valueless misses the point, liquidity and price discovery are public goods. You notice them most when they don’t exist, and the cost of capital spikes for everyone. As for the “bucketloads of cash,” that’s just how competitive advantage in markets gets priced. If firms didn’t deliver something real, the money would dry up quickly. Markets are brutally efficient at punishing dead weight. Philanthropy is great, give to causes you care about. But it’s worth recognizing that the system enabling those donations in the first place is the same one that relies on liquidity, efficient spreads, and functioning markets.
  • rufus_foreman 1y ago
    What use was it to anyone when Gerolamo Cardano devised the rules of probability in order to win at gambling?
  • jt2190 1y ago
    > Or are they literally just in the business of making money? All for-profit businesses can be viewed abstractly as “in the business of making money”, so this doesn’t really distinguish Jane Street in any way. > … why/if what they do is useful to anyone? The utility that Jane Street provides is to the be a persistent buyer and seller of equities. Basically you can call them at any time and buy shares or sell shares. Most shareholders do not trade very often so without a “market maker” like Jane Street it can be a lot of work finding a buyer/seller who is willing to trade on your schedule at the current market price. You’ll have to pay them extra to convince them to trade, which makes it harder to trade profitably. Jane Street significantly lowers the price and makes trading easier (“provides liquidity to the market”).
    • infecto 1y ago
      I do like this take and one of the reasons I don’t like how many folks pile in on the same theme “these folks are wasting their lives”. We could make the same reductionist conclusion for probably most of the people here on HN.
      • achierius 1y ago
        Both ad tech and quant work are essentially involuted in that you're spending ever greater amounts of effort and manpower to squeeze out marginal gains because of how much profit doing so provides. Society would not significantly notice or suffer if we spent half as much time on things like this. There are much bigger things we need to do.
  • pedroza_alex 1y ago
    AFAIU the service HFT forms provide to the market is liquidity. Basically allowing you to sell stocks/options as soon as you feel like it. In turn that leads to more efficient markets since prices converge to their "correct" value faster.
    • Balinares 1y ago
      HFT is a different thing from what is being discussed in this thread. With HFT you're talking custom ASICs running within light-nanoseconds range of the target exchange. Ocaml very much isn't in this picture. This is about human-speed trading. Which also provides liquidity and correction of instrument prices towards their fair value, just at a different level. The societal value of either is debatable all the same, mind you. It's more that wherever you have markets, you have money-making opportunities that can be leveraged, and therefore are.
      • wk_end 1y ago
        There’s a few orders of magnitude between “human-speed trading” and the absolute bleeding edge of HFT. A company like Jane Street still does automated trading far faster than any human could. Sure, Jane Street probably isn’t the fastest in the business, but I wouldn’t be surprised if they’ve got FPGAs or ASICs, dedicated high speed pipes to shave off milliseconds of latency, things like that.
  • wyager 1y ago
    I used to work there, so with the appropriate deference to that Upton Sinclair quote about paychecks: Market makers like JS vastly increase market liquidity across all sectors, which is required for modern high-efficiency economies to work. McDonalds prices are possible because there's enough liquidity in corn futures. More abstractly, high market liquidity corresponds to higher-confidence information about the future, which hedge funds generate (and distribute for a low fee via markets), allowing for more impressive planning ahead. Also, you know how when you buy stocks it doesn't cost you anything and you often get better-than-public-book execution prices? That didn't happen prior to modern electronic market makers. Multiply that efficiency gain by umpteen trades every day. In general, "being in the business of making money" inherently requires you to do something useful to get paid, to the extent you're not just abusing a principle agent problem or something. The most credible argument for hedge funds making money without doing something useful is that they're doing cantillon effect harvesting or something. I think that's pretty small overall.
  • marklar423 1y ago
    Here's how I think about it: - Money (the concept) is useful to society as a store of value, so you don't have to waste effort bartering for things. - Adding on to that, credit is useful to society since it lets humanity even more efficiently allocate its good and labor (stored as money). - Finally, stocks, insurance, and other financial instruments are additional advanced developments on top of credit, where groups of humans (companies) can take on even more risky endeavors supported by investors or insurers. So my view is companies like Jane Street facilitate these complicated value transfers, to let (e.g.) a spaceship company draw on resources generated by growing crops, selling shoes, giving haircuts, etc via a convoluted path through stocks, ETFs, whatever.
• blitzar 1y ago
  People in glass houses shouldnt throw stones. Tech is more parastic.
  • infecto 1y ago
    While a little harsh I don’t entirely disagree. Depending on your lens, very few of us here on HN are doing something valuable for society.
    • lurking_swe 1y ago
      they are 100% correct. Are the bright minds at Meta making the world a better place? What about OpenAI? Is the damage AirBnb has done to many communities (and housing stock) useful? It’s debatable for sure…and hilarious coming from tech folks on this forum. Pretending we’re righteous doctors or something LOL. Give me a break. For context i’m a software engineer that’s very grateful I don’t work in the ad, retail, or any other “dark pattern” space. But most tech jobs _are_ like that!
• MontyCarloHall 1y ago
  Agreed. Amongst the top 5% smartest quantitatively-minded kids I knew in college, I’d say ~25% of them ended up at quant shops like Jane Street, sometimes straight out of school, sometimes after doing a PhD. I can only imagine what good that brainpower could do for humanity if it weren’t occupied finding cleverer ways to manipulate electronic money.
  • dude250711 1y ago
    > I can only imagine what good that brainpower could do for humanity if it weren’t occupied finding cleverer ways to manipulate electronic money. Maybe humanity can start paying them decent money first?
    • achierius 1y ago
      You're right, we should fix our economic system so that it better incentivizes things we care about rather than stuff like quant research.
      • infecto 1y ago
        But what system should we use that fixes our economic system? This is not so much a defense of capitalism but asking what would be a better replacement. Capitalism in my opinion is the best solution so far that helps drive society forward when society is made up of all types of folks with different opinions and views of the world.
      • nh23423fefe 1y ago
        Why did you say we, when you meant I?
  • smokel 1y ago
    They could spend their time playing chess, solving Fermat's last theorem, or invent space weapons. And why stop at humanity?
    • 1y ago
• PartiallyTyped 1y ago
  Reality is far more sad. Companies like JaneStreet, 2Sigma, etc employ some of the best software engineers, mathematicians, physicists and what not just so they can - have better weather forecasts to identify whether a 1 degree delta in South CA can increase oil costs cents on the barrel, - run pandemic simulations to identify how the spread might happen and where inflation will rise so they move faster, - track occupancy rates for pharmacies, hotels, casinos, etc via satellite imaging to identify spikes in usage, - track the tiniest of things like butterfly populations to identify increase in earnings for certain brands of hotels, - build some of the most efficient software and write their own compilers all so that they can move money around [and do so quickly]. Finance is not alone either. A non-trivial amount of big tech is on tracking users and serving ads better. Do I blame the engineers? No. I am just lamenting the state of society since this is how we have the brightest among us function and work.
  • PartiallyTyped 1y ago
    Exercise for the reader; stay a while, and listen. Once you start noticing things changing, try to identify how you could profit off of it. If it's a change, then there's profit to be made somehow. Any anecdote is a potential lead.
  • infecto 1y ago
    Could we not make the same statement for most of the jobs people work here on HN?
    • achierius 1y ago
      Anyone who works in ad tech, sure. But plenty of people here do work on real products. Planes need software, browsers need security patches, hell even your accounting app is good value over the days of doing that all by hand.
      • infecto 1y ago
        Fair, but let’s be honest: even in your accounting app example, the “value” is ultimately in helping a business capture margin more efficiently. That business, in turn, is usually extracting value as a middleman somewhere else in the chain. Same with ad tech, finance, or even a lot of enterprise software, you’re greasing the gears of profit capture, not curing cancer. That’s not a moral indictment, just a reminder that most of our jobs (mine included) exist to make capital move faster or stickier. Calling one sector “real products” and another “not benefiting society” is a bit of a convenient fiction.
• _Algernon_ 1y ago
  Plenty people of here work doing basically the same to maximize the amount of time people, including children and teens, spend staring at rectangular lights to show them ads. Some amount of extremely competent engineers worked on the tech that made it possible to target beauty ads to insecure teen girls when they deleted a selfie. Some amount of extremely competent engineers where complicit in building the tech that stoked the fire under the Rohingya genocide. I could go on, but I think you get the point.
• disqard 1y ago
  Jane Street is in hot water in India: https://www.bbc.com/news/articles/c5y0zgrevl1o https://www.bbc.com/news/articles/c5y0zgrevl1o Basically, SEBI investigated Jane Street's trading on January 17, 2024, when the firm allegedly made about $86 million in a single day through what regulators term "intra-day index manipulation." HFT and Ads are two places which (currently) print money, so it vacuums up all the talent, and puts it to use growing their already-huge revenue streams.