Will the hefty pay packets on offer to HFT tech talent continue?
With more hedge funds entering the high frequency trading fray, demand for the already much sought-after (and highly paid) technical expertise looks set to sky-rocket. But how long can these astronomical pay packets last?
One the one hand, firms are looking to take on developers to put together rapid-fire trading programs to take advantage of tiny buy and sell imbalances.
Such low latency systems are likely to receive significant investment, suggests Mark Holt, the chief technology officer at hedge fund BlueCrest - one of the main players in the HFT space.
"There's an arms race going on - what took 10 milliseconds now takes 10 microseconds. The space between the algorithms and the exchange is reducing year on year," he said in an (apparently rare) interview with Reuters.
Still, the real money is to be made programming trading strategies into these systems - such people can take home upwards of $500k a year, says Irene Aldridge, managing partner at ABLE Alpha Trading and author of a new book on high-frequency trading.
"It's a simple supply and demand issue," she says. "There are very few programmers with sufficient knowledge of both economics and statistics, which is why the price is so high for these people. However, my feeling is there will be a lot of programmers switching over from traditional IT fields into the high frequency sector, and salaries will fall as a result."
One pioneering hedge fund in the high frequency space - Renaissance Technologies - apparently employs an army of physicists, mathematicians, astrophysicists and statisticians to develop its strategies. What's more, over a third of its 200 employees hold PhDs.
"It's useful to have these people onboard because they have a statistical background. However, companies which rely on mathematical personnel who have no exposure to the financial world are taking a significant risk," says Aldridge.
She says that trading models with successful long-term credentials are based on significant economic phenomenon, which can often be overlooked by purely statistical strategies.
However, just as high-frequency trading has come under increased scrutiny in the US, the UK Treasury is set to cast its watchful eye over the practice. Paul Myners, financial services secretary to the Treasury, says he will listen to concerns being raised about the HFT sector.
