Rishi Narang on High Frequency Trading and the Components of a Black Box
Rishi Narang is a trader with an impressive background, having been part of the financial markets for more than 20 years. He got his start as an analyst at Citibank before he co-founded TradeWorx (a high-frequency hedge fund, which was previously a fintech company) with his brother Manoj Narang.
Rishi has also been the founding principal at T2AM since 2005, which is a fund of funds that specializes in short term quant trading strategies.
Not only that, but he wrote the book “Inside the Black Box,” and was in a VPRO documentary called “Money & Speed: Inside the Black Box.”
During this interview Rishi discusses what comprises of a black box, why humans have better advantages over computers and vice versa, the non-textbook definition of alpha and discussions on high frequency trading and speed.
What’s Covered in This Interview:
- Where traders are often discovered and how they’re evaluated before an investment
- Rishi describes how a “fund of funds” operates
- Why the term “high frequency trading” is a poorly defined term on its own, and describes three defining characteristics that can help traders better understand what it really means.
- Rishi’s opinion on common criticisms on trading
- What Rishi thinks are special risks that are inherent to quantitative trading.
- What the typical structure of a black box is like, such as the individual components that form a black box and how they all interact.
- How the sources of latency HFTs make money. Rishi also talks about their strategies and how they aim to minimize.
- Rishi’s take on Michael Lewis’ book “Flash Boys” lack of evidence.
- HFTs front-running orders.
Links and Resources:
- Inside the Black Box – Rishi’s book on quantitative and high-frequency trading.
- The Truth About High-Frequency Trading – Another book Rishi wrote that covers what high frequency trading is, how it works, and why it can be a problem.
- Money & Speed: Inside the Black Box – A by VPRO which features thought leaders in the quant area such as Rishi Narang and Eric Hunsader of Nanex.
- @RishiKNarang – Follow Rishi on Twitter.
