Merry Christmas

santatrading

The end of 2014 has been intense. A lot of things to do, unrelated to HFT – I decided to set up a new book company in Brussels with an untypical associate. This new firm, named Vies parallèles (a tribute to Plutarch’s Parallel Lives) will start in March 2015 with the crazy project to publish the first of the ten volumes of Hungarian writer Miklós Szentkuthy’s St. Orpheus’ Breviary series. The second volume will be published in 2016… and the last one in 2025 (for the English readers who could be interested by reading the books of the “Hungarian James Joyce”, in 2012 Contra Mundum released in English the first volume.) It was quite exciting to create a book design/layout which has to work for the next ten years.

Back to HFT and market microstructure, I wanted to review the last Paris conference Market Microstructure: confronting many viewpoints where most of the speakers gave very interesting talks, but since I was invited to present my own anthropological researches in front of all these speakers, that would be a little discourteous to criticize some academic presentations I found too much theoretical because of the lack of data; but, after all, this was the aim of the conference: confronting different theories. I’m still working on the (last) part V of “HFT in my backyard” series (the past and the future of information transmission between financial exchanges), but I am still waiting for additional information about some future transatlantic projects. I should post this last part on January 5, 2015.

I have to tell you the truth: I got distracted by the reading of more than 1500 fascinating pages about high-frequency trading. Early november I checked the stats of the blog and I realized that most of the (sometimes addicted) readers of my microwave series are HFT and EMM firms (but that goes without saying). I was amused to parse the logs and find the names of banks or those of companies I talk about (Jump Trading, DRW, Optiver, Flow Traders, KCG, etc.), and I was also happy to find firms I hadn’t never heard of, such as Chopper Trading, Xr Trading Formerly Rho Trading Securities or Wolverine Trading Technologies (all from Chicago). One of them, a Houston-based firm, is Quantlab Financial, LLC. I quickly googled the name “Quantlab” and I realized the company was not a small prop shop at all, and then I found this Wall Street Journal story ($) about two former employees of Quantlab accused by the firm of stealing HFT codes then used by SXP, the new company co-founded by the two ex-employees and a lawyer (you can read here another article about the case). Since I talked a lot about religion and monks in my presentation at the Paris Market Microstructure conference, and since SXP had its beginnings in a monastery, I decided to download the case records through Pacer in order to learn more about the affair.

I was not disappointed. There are 106 files/1653 pages (FBI interviews, court hearings, phone records, etc., with a lot of technical details about HFT, coding, co-location, statistical arbitrage, short-term predictions… and Carl Gauss). In short, the court files highlight the “black boxes” of high-frequency trading and all these pages are gold for who wants to learn a little more about the small world of HFT (the alleged theft is not the most interesting part). This case is a little old (2007-2008) but that’s interesting because SXP was founded just after Reg. NMS was established. I really have to finish the “HFT in my backyard” series, so that I could have time to start a new series about monks, arbitrage and HFT. “‘It reads like a John Grisham novel,’ Chicago securities lawyer Andrew Stoltmann, who is not involved in the case, said after reviewing key filings. ‘Absolutely incredible.’” I confirm: this case is juste in-cre-di-ble. Merry Christmas!

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