High frequency trading firms are supposed to pay well. After all, they don’t need many actual people – algorithms place trades instead of human beings, and the few humans that write and manage the algos are supposed to cash in on the results. How is it then, that at least one top firm pays a fraction of any self-respecting hedge fund?
Sun Trading International just released its results for the year to December 31st 2016. During that time, the average of 26 employees at the London-based operation was paid $241k (£189k), down 8% on one year earlier.
$241k is a lot of money. But it’s not exactly hedge fund territory. After all, Balyasny Asset Management paid people an average of $794k per head for the same period.
Sun’s figures suggest HFT isn’t the pot of algorithmic gold it’s made out to be. Nor is there some kind of uber quant creaming money off at the top end: the highest paid individual at Sun International earned $366k last year. On this basis, the company looks more egalitarian the average hedge fund.
What’s up with the HFT high pay generator? Try falling profitability (profits fell 21% at Sun Trading International last year), increased regulation, low volatility (creating fewer trading opportunities), high data costs, high trading fees and the high cost of the technology systems that underpin it all. Revenues at Sun Trading International rose 16% last year, but the company’s net loss went from $1.5m to $2.1m.
Pay aside, Sun’s results also reflect just how hard it is to get a job with an HFT. Last year, the firm only employed seven traders at its international operations. This was one fewer traders than the year before. If you’re quantitatively inclined, you might be better off trying your luck at a systematic hedge fund instead.