People setting out to pursue a career in the quantitative trading industry won’t always know what questions they should be asking of prospective employers. As a result, they are susceptible to making a mistake in choosing their first job. That mistake could lead to later giving up on the industry, when in fact you may be well suited for success. Without experience, it is easy to make an error; but I want to provide some guidance to help you avoid some common pitfalls.
Here’s a checklist of key structural questions you’ll want to understand before choosing your first firm. These questions will help you understand how well you’ll be able to learn and grow in a given company. You’ll want to learn and grow throughout your entire career, but it is especially important at the beginning when you have the least experience.
Ideally, for each of these seven questions you’ll want your first company’s answer to be “no”. “Yes” answers indicate additional challenges for you as you build your career. “Yes” answers don’t necessarily indicate a bad job, but they do indicate additional layers of risk. Below the list, I’ve provided some additional context.
- Are brainteasers, gambling, poker, or mental math questions used in the interview process?
- Will you have a 2 year noncompete?
- Will you be blocked from accessing any part of the source code?
- As a researcher, will you be the primary on-call trader monitoring any live trading processes?
- Will you be blocked from viewing the PnL of any strategies that utilize your research?
- Are strategy parameters manually changed based on judgment calls during the day?
- Are there other employees in the company in direct competition with you?
- Are brainteasers, gambling, poker, or mental math questions used in the interview?
If a company asks these types of questions, it is potentially a sign they value manual, non-automated trader intuition and decision making more than quantitative, algorithmic, and research-driven approaches. If your background is quantitative, you will want a company that will value those skills the most highly. At ‘trader’-centric firms, quants have less influence over the trading strategy and more limited career prospects. - Will you have a 2 year (or greater) noncompete?
Non-compete agreements are a fact of life for quants working in the trading industry, but the lengths of those agreements vary widely (the standard term is 18 months). Non-competes exist to help protect the intellectual property you’ll be developing. However, 18 months should be sufficient to protect your work. Longer terms can sometimes be designed not to protect the company as much as to limit the employee’s career options. Even if you join a good company, there’s always a chance of ending up in a weak team, or with an inexperienced manager, being paid unfairly, or simply not fitting in perfectly. With a 2 year noncompete, other companies may be much less willing to hire you. - Will you be blocked from accessing any part of the source code?
Some companies encrypt or password-protect parts of their source code. This goes beyond taking adequate steps to protect proprietary property, like securing an internal filesystem from external intruders or preventing employees from copying files off the company network- these companies even prevent their own full-time employees from seeing parts of the existing codebase. To people outside the industry the idea of encryption might sound sufficiently strange that they wouldn’t think to ask. However, it is actually quite common in quantitative trading firms. Having parts of the source code blocked limits your ability to learn, collaborate with coworkers, and make an impact. - As a researcher, will you be the primary on-call trader monitoring any live trading processes?
Companies that highly value research will have separate dedicated operations and trading teams to handle the majority of the routine day-to-day tasks of running and monitoring an automated trading system.
At some companies, often those with roots as floor traders or click traders, or those that struggle to manage unstable operations processes, ‘quant traders’ are expected to do both research and operations. While this might seem exciting at first, monitoring live trading, monitoring system health, and ensuring system functionality is a full time responsibility and will severely reduce your time available to concentrate and do high quality research. - Will you be blocked from viewing the PnL (revenue) of any strategies that utilize your research?
One of the main attractions of working in trading is the fast feedback you get on your research. You can think of an idea, implement the idea, and then see the results within a few days. This tight feedback loop compares favorably to, say, a Physics department, where a single idea could take years to validate. However, some companies separate alpha signal researchers from strategy developers. If you’re separated from the trading PnL, then you can’t get real-time feedback. Companies might do this to prevent their secrets from leaking out easily, but there are plenty of successful companies that trust their employees and encourage loyalty in other ways. - Are strategy parameters manually changed based on judgment calls during the day?
It’s almost impossible to do proper statistical analysis of your ideas on historic data if ‘click-traders’ are tweaking parameters, because you can’t model the human element. That kind of company is a good place to be a ‘click-trader’ – not a quant. - Are there other employees in the company in direct competition with you?
Okay, final question! This is important to ask, because some companies have employees or teams directly competing with each other so that the company is diversified in its revenue streams. But for your career, you want your company to invest fully in you. If there are competing teams, you don’t know whether you’ll end up on one that eventually wins- or loses. There will also be fewer opportunities to learn from others; you don’t get the benefit of collaboration with the widest group of other quants. Finally, this type of structure tends to foster a cut-throat, ‘zero-sum-game’ culture.
I hope you can get clear ‘yes’ or ‘no’ answers on all 7 of these questions from all your prospective employers. Consider a vague or indirect answer as a ‘yes’. Don’t let yourself be persuaded just because you’re less informed than you will be later in your career. Finally, it is never a bad idea to double check with friends or classmates that are now in the quantitative trading industry. Forewarned, you can avoid these 7 problems that I’ve seen through my friends’ experiences, and get to work on the fascinating problems tackled in quantitative trading.