RE: Coding the Capital Markets

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I went along to the CodeMesh Alternative Programming Conference today and though most of the talk of functional programming languages such as Clojure, Scala and F# went over my head, I did pick up on some interesting points from technology insiders in the capital markets around three areas: hiring talent; open source and R&D; and social/mobile technology.

Hiring Talent

  • I was told that investment banks always hire programmers that already have experience in financial services – meaning there’s a small pool of experts who are swapped around. Ideally they will hire the best programmer from a direct competitor to get the double whammy of hurting their operation while improving their own.
  • Though these banks often hire graduate programmers it’s not often that they reach out to established programmers in other industries to try to move them into financial services. They just rely on the attractive wage to bring the skilled individuals to them – though wages for IT are diminishing. Interestingly I was told that programmers – even hard working quants with PhDs in Maths developing new algorithms – are not really appreciated by the bank for coming up with innovative programming. The stark message is: deliver results or you are fired.

Hearing the above makes me think that there’s a trick or two being missed here… all credit to the firms that attended or spoke at the alternative programming conference this morning where for the first time they had a dedicated track for finance and banking – but perhaps there’s more that can be done to reach out to the wider programming community to encourage an influx of new talent and ideas into the industry.

Open Source and R&D

  • Trading firms are interested in Open Source technologies but a number of criteria need to be met before they will consider adopting something: does the open source technology have an engaged and active community? Will the open source technology be supported or do I have to build/pay for a support team? Is it fast enough to meet my needs? Often the current in-house legacy technology is bought and paid for, so there needs to be a compelling case for change – either that that product is near ‘end of life’ or there’s a significant and quantifiable cost benefit.
  • On the plus side, investment banks are fertile ground for new ideas and technologies and, as long as they can be comprehensively tested to prove results, there’s opportunity for vendors to make a lot of money. Investment firms – particularly HFTs – are always on the lookout for something that can save them costs and improve performance (even shaving off a few nanoseconds), as long as the risks to security and regulation have been addressed. I asked about ‘cloud’ technology in capital markets, and the response was that though it was used inside the firm’s data centres, a third party cloud solution was unlikely to be adopted due to the lack of control and the fact that a third party would be unlikely to take on the legal liability for any financial losses due to a technical error.

I guess there were no surprises to me on hearing the above points, but the evangelical/nerd part of me that loves the idea of promoting open source technologies was given a reality check. Plainly the IT/development function in trading firms do not like risk, and only invest once there’s a proven case for clear rewards.

Social/Mobile Technology

  • The trend for using sentiment analysis through social media such as Twitter to inform trading algorithms has been covered in the press extensively. What I hadn’t heard till someone in the audience mentioned it today was that apparently you can now colocate next to twitter’s servers?
  • Investing in and developing mobile technology is a high priority for trading firms. I heard about the increasing trend to allow employees to bring-your-own-device into work (though less about giving the choice to the employee, and more on saving the costs of paying out on blackberries/mobiles for all), with new security measures for wiping all the banks records from the mobile remotely being investigated. It also seems to be a prevalent trend to develop a convenient app interface for all new client/consumer-facing systems.

What’s clear from all of the above is that some really innovative technology applications are being used by global trading firms, however, due to the competitive and secretive nature of the industry a lot of this innovation is being done in silos – even within the same bank!

Perhaps more could be learned and achieved if the consideration was not ‘what can we hide?’ about the world of trading, but more ‘what can we share’?

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