How to move from prop to MM for quant?
Been at a technology first HFT prop firm, think JS/HRT, for several years now out of college as a quant. My current firm does not allow us to invest in our strategies and has team politics that stifle earnings so I’m thinking about moving to a MM like citadel/MLP, where there is a chance for larger ownership for alpha generation.
the issue is that the entire tech stack we use is bespoke internally, and I’m just focused on optimizing a small part of a much larger process, with 90 percent of my days just coding in python / C++, I don’t see how I could even be productive in a new environment without at least a year of ramp up. There’s just so much tooling I would have to recreate from scratch.
our entire code base is public to every developer, but I don’t see a clear way for me to even recreate our strategies at a separate firm even if I could take every line with me because it’s just millions of lines of micro optimizations, with no easily transferable alpha, maybe this is unique to higher frequency strategies?
Long term does it make sense to switch internally to a more mid frequency strategy, where the alpha is less technology based and more transferable?
If any veterans have made a jump like this and could share their perspective it would be appreciated. Especially the tooling at these MM shops for quants.
Transitioning from a high-frequency trading (HFT) prop firm to a market-making (MM) firm like Citadel or Millennium Partners (MLP) as a quant involves several considerations, especially given your background in a technology-first environment. Here are some insights and steps you might consider based on the WSO dataset:
Leverage Your Technical Skills: Your experience with Python and C++ is valuable. MMs also rely heavily on technology and quantitative analysis, so your coding skills and experience in optimizing trading strategies are transferable. Highlight these skills when applying.
Focus on Transferable Quant Skills: While the bespoke tech stack at your current firm might not directly transfer, the underlying quantitative skills and principles do. Emphasize your ability to analyze data, develop algorithms, and optimize trading strategies.
Networking and Research: Connect with professionals who have made similar transitions through platforms like LinkedIn or forums like Wall Street Oasis. Their insights can provide you with a clearer understanding of the expectations and the transition process at MM firms.
Prepare for a Learning Curve: Acknowledge that there will be a ramp-up period as you adapt to new tools and environments. Be open about your willingness to learn and adapt during interviews. Many firms value the ability to learn and adapt over immediate productivity.
Consider Strategy Adaptability: Moving internally to a mid-frequency strategy could be a strategic move. Mid-frequency strategies might offer more transferable skills and knowledge that could be more appealing to MM firms, as they often balance technology and market understanding.
Understand the MM Environment: MMs like Citadel and MLP have their own proprietary tools and platforms. While you may need to recreate some tooling from scratch, these firms also invest heavily in technology and have resources to support your transition. Researching the specific tools and technologies used at these firms can help you prepare better.
Highlight Your Unique Experience: Your experience in a high-tech, HFT environment is unique. Use it to your advantage by highlighting how it has equipped you with a deep understanding of market microstructures and the ability to work under pressure.
Prepare for Interviews: Focus on demonstrating your quantitative skills, problem-solving abilities, and how you've contributed to your current firm's strategies. Be ready to discuss your specific role in optimizing parts of the trading process and how those skills can be applied in a MM context.
Veterans who have made this jump often emphasize the importance of being adaptable, continuously learning, and leveraging your existing skills to make a compelling case for your transition. The tooling and environment at MM shops may differ, but your core quantitative skills and technological proficiency are highly valuable and can serve as a strong foundation for your move.
Sources: Prop Trading (MM) v.s. BB Sales and Trading, Q&A: ex-McKinsey EM and current L/S hedge fund analyst, Q&A: I worked as a CTO at prop-shop doing high frequency trading (HFT), Prop vs MM PM terms, Switching from Quant Research to Quant Dev?
Maybe I have the wrong impression but I don't think of JS or HRT as particularly technology first HFT firms (compared to say Virtu or IMC) and I would say much if not most of what JS does is not really HFT either although definitions of HFT and mid frequency vary widely. Obviously recreating an entire's firm pipelines/strategies is not easy or practical but some people have success building simpler versions that have less capabilities but still good enough to hopefully generate low tens of millions in pnl which although challenging is a lot more realistic than initially making hundreds of millions or billions like their previous firm. There are even some multimanger HFT firms like Tower although I don't know the success rate of new PMs there. I would guess most of the successful ones have a good idea of what is important in generating pnl at their old firm, a few new ideas and can also capitalize on using newer and more specialized code than their previous firms as there are often some legacy choices that would be made differently in hindsight.
To the extent you can develop unique expertise at your current and can bring some of the best ideas in that area to another firm you can also progress in your career e.g. your current firm X is very strong in product Y and then you join firm Z which is building a new desk to trade product Y and use your knowledge about the nuances of trading product Y. Even in this case you would probably need to know the top 5 or so more important ideas for trading product Y at your current firm instead of trying to recreate all of the potentially hundreds of ideas your current firm has implemented in that area. There are probably some areas where this type of move is easier so if you can switch to one of those areas within your firm that could open up more possibilities in the longer term.
For both of these cases a few years of experience is on the early side especially if you have a lengthy non-compete as you are potentially much more expensive than a new grad and may not have enough expertise to personally generate substantial pnl.
To be honest, no one on my team develops new signals at my firm. We have existing signals related to momentum, order book pressure, etc that we apply to our markets. It is very much a black box and I'm more of a ML engineer trying to squeeze relatively small improvements from optimizing these signals. Trading is fully automated too.
Tower is dominated by a french group and an indian group, and from what I heard if you don't fit into one of those cultures it can be tough to last there.
Yeah the end goal might just be to ride it out for as long as I can and then transition to tech for an early retirement.
To the extent you understand the black box and can build a simpler version from scratch you could probably be a successful PM yourself at Tower or a similar firm and don't have to worry about the politics of existing large pods. If you take very little risk and don't rely much on firm infrastructure payouts can be significantly higher than typical payouts at MM hedge funds and 10-20MM of pnl would be a very good result for a small team. If you don't understand the alpha generation process or don't have access to key parts then your options will be more limited and you may have to focus on becoming an expert in one niche and find another firm looking to hire an expert in that niche. Another possibility is to wait until another boom cycle like 2021-2022 where firms hire very aggressively and it will likely be easier to move then.
I moved from prop at a quant shop to a MM. it was as easy as learning the language of fundamental analysis. These hedge funds want smart young people. If you are extremely smart (most quants) and can pick up new topics quickly (also most quants) then you are a great candidate. The hard part is being personable (not most quants).
That’s the sell. Obviously I’m underplaying the “learning the language of fundamental investing” but all in all, you get the point…
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