Journey Into High-Frequency Trading With Varun Rajput | Connect With Purpose

In this episode of Connect With Purpose, Augusta welcomes Varun Rajput, a partner at Algoquant with a rich background in high-frequency trading (HFT).

Varun shares his inspiring journey from Goldman Sachs to starting his own HFT firm. He discusses the importance of technical skills, problem-solving, creativity, and teamwork in the HFT industry.

Varun also offers insights into hiring, retaining talent, and maintaining work-life balance through meditation, exercise, and biking.

Join us for an insightful conversation on what it takes to succeed in HFT and the future vision for Varun's firm.

Takeaways:

• The journey into high-frequency trading is often characterized by a significant leap of faith, and personal determination plays a crucial role.
• Technical skills, particularly in programming and algorithm development, are paramount for success in high-frequency trading firms.
• Character traits such as resilience and problem-solving aptitude are essential for thriving in the competitive landscape of trading.
• Building a strong team and fostering a collaborative environment are key to sustaining success in the high-frequency trading industry.

Check Out AAA Global:

www.aaaglobal.co.uk

Companies mentioned in this episode:

• Algoquant
• Goldman Sachs

Welcome to Connect With Purpose and today I'm joined by Varun Rajput who is a partner at Algoquant and has done amazing things within the HFT space. So thanks so much Brew for taking part on this today.

And I think the first, the first thing I would just love to kind of understand from you is how you got into HFT originally and you know, your journey so far.

First of all, thanks Augusta for inviting me and having me. My journey getting into HFT is a very long one and much can be described as a leap of faith.

You know, just in simple phrase, a leap of faith because I was working at Goldman Sachs and we were always thinking about doing something of our own and those conversations at lunchtime and we were anyways passionate about writing good systems, event processing systems and all that which is core to any trading system. So bringing up. And we were anyways exposed to a lot of quants, a lot of buzzwords, meeting a lot of big guys at Gulman.

So it was very inspiring and kind of, it was kind of kindling a fire among us as well that we have to do something of our own. So once it became reached a tipping point, our inspirations and our enthusiasm, we then took a leap of faith. Let's get started.

We had friends and we had the confidence in our hard work and skill that we should be able to go through, you know, swim through these hard waters of high frequency trading.

And that eventually happened and there was a little bit stroke of luck as well that I found the right people to work with and that's how my journey started in high frequency trading.

Amazing. Did you start as a, as a developer then at Goldman Esports or you were, or you were?

Yes. So I was, I was more.

I was on the tech side at Goldman but at that time the, this, the Butler team that we were working on was, was working very close with the Strads and quants at Goldman because we were the only C team doing currency and commodities trade processing. And the commodities was a pretty big desk at Goldman, especially the OTC desk of commodities are very big doing all the crude oil trades and all.

So we used to get a lot of flavors into the quants, the graph based databases, how valuations are done and all that stuff. So not purely quant but yeah, we were getting exposed to a lot of.

Do you think that, do you think that having that technical skill set as a developer set you apart in terms of being able to start this HFT firm? Do you think that's what, you know the g. You Gave you many weight the head start over somebody who wasn't that technical.

Yes, I would say because see, the thing is like when you, when you value a quant trading firm, essentially you value the trading systems, right? Because algorithms in general, everybody says that you never know in what scenario they work, which markets they will work.

But if you have a good trading system, like for example a valuation system or a good event processing system, then that is valued. So because we had that skill in us, we had observed a lot of systems.

One of the good things about us, like me and my other groups who started with me was we were very good observers and we were very good learners. Though we might not be.

We might be a part of a team where some grades are working, they have built some systems, but we used to sit late or whenever used to get time and read their code and understand from them what is the inspiration, where this is coming from, what kind of a problem are they solving? And that, you know, kind of build were the building blocks to build a trading system.

Because you get to know that what, how exactly you have to approach it, what exactly should be the foundation of it. So it is a plus to be strong in technology when you are starting a high frequency trading firm.

But definitely you also need the algorithms to trade and all that stuff. And that's where I was fortunate that I met the right people. But they also wanted the strong technology, ultra low latency systems to trade on.

And slowly and slowly over the period of time, the boundaries have merged. There's no tech, there's no con.

Now everybody kind of tries to acquire as many skills as they can and it's becoming more competitive, it's becoming more like you need to have all the right set of skills.

But at one time you might be focusing on purely a tech task and after that you might be focusing on completely mathematical or an algorithmic based task.

So when you hire today, do you look for that combination skill set, that mixture of people who can.

Yes, I definitely have like if there is a guy who's very senior quant and I'm hiring as a him as a quantitative researcher or a senior quantitative researcher, I would at least ask them a question that are you hands on in C or in Python, whichever language they use for their research? Definitely in senior people you will not be that grilling them on coding and all that stuff.

And as junior you get into then I have a more robust and more grilling rounds on tech as well, especially coding skills.

What, what degree do you like people to come from then if they're entry level people. What, what, what degrees do you tend to like to see people from?

See, I feel like the core of this field is mathematics and mathematics is the foundation of computer science and engineering. So my preference always the candidates from computer science engineering.

But then it is basically like because lot of computer science, a core computer science branch as it is taught in the National Institute and the Indian Institutes will involve a lot of mathematical courses, right? Like your discrete mathematics, functional programming and those are, and lambda calculus.

So those are the foundations of the programming because you, if you can write your C code as mathematical functions using lambda calculus then you have reached somewhere like functional programming. So computer science I will always look for. But unfortunately the way computer science is taught in many institutes, it's very different.

You know, everybody has their own flavor, everybody has their own approach in teaching computer science engineering courses. So now it comes down to how good a person or the candidate has done in his four years at college, how many different research projects has he done.

So then it becomes more like if not the courses that they have done then what hands on experience they have done, what projects they have done so they can gauge that the foundation is strong. Because we don't we when we are hiring someone, we want them to, to at least be at the bar that we have set for the team.

Somebody lower the bar will not be accepted.

And when you're hiring what, what kind of characteristic traits do you look for? Do you think a lot of this is based on someone's character as well? It's just that their intelligence and their technical ability?

No, I give a lot of weightage to characters, especially the attitude or you can say the way they are approaching a particular problem and the way they are listening to instructions.

For example, if I find someone I'm giving an instruction or asking them a question and sometimes the questions are open as well, you know, and it is intended that way because I want to analyze how they are observing in what dimensions and what directions their brain can think. An open problem and they can ask me back for certain question, certain cases.

I have felt that certain candidates are taken aback by an open question, by an open ended question. They want a very closed form and they are right at that.

But the purpose is also to engage in a, in a way that you communicate to the interviewer in a way that you can clarify. And that shows a lot about attitude.

Whether the person is a listener or is someone who thinks that he knows a lot and that he can do better or he is cut out for something very different.

So these Are the things that I will always look for that how observant you are and in what many ways you can think about a problem when it is not in a closed form.

So problem solving is a very big part of what this means?

Yes, yes, yes. Problem solving, yes, that is.

And my views, and let me clarify also the thing is my views on computer science engineering could be very purist, but that doesn't mean that we are only looking for certain set of people. As you said, problem solving is the main attribute that we are searching for.

If a person is good in problem solving, I think he has a good chance in getting selected.

Do you think creativity then is also a very important part of this industry? Somebody who could think out the box and sensitive?

Yes.

So essentially like, like a lot of times people think that writing programs or doing software engineering is a very mundane kind of a thing and which I differ from it. It's also something to do with creativity, how creative you are and the imagination, the imaginative power of your brain.

So it's like sometimes I can Nate or I can. The analogy that can be given is writing poetry, right?

That you have to think of something out of the box to come up with certain beautiful lines and all that. Everybody. A particular problem can have multiple solutions, but the best solution is one which is really, that really stands out.

Something that somebody has done really well. Something out of the box thinking. So that's where one, this is one application of creativity. Another application of creativity would be imagination.

How far can you think? Many times we are limited by an imagination that we can't come up with all the test cases.

And many times real life problems are like we have to imagine all different scenarios and come up with different test cases. And that is not written in any book.

It's your out of box thinking, your power of imagination that you can come up with all different cases and then what you bring out that you release in production will be more stable.

Otherwise it always that you write a code, you release in the production, it breaks and then you realize oh, I didn't think through these real life scenarios, but they do exist. So creativity definitely is required in this field which helps in out of box thinking.

Can you think of an example where you know, your imagination maybe helped you or, or. Or you didn't use your imagination enough when, when writing the code.

So, so I didn't say that to put get myself under the spot. But now if you have to, if you have asked.

So see many a times now I have after so many years essentially like when I am Working with my people that have worked with me now.

So I'm better in the terms that I can come up with a lot of different cases because by experience I have learned a lot of different cases and all that stuff. But taking back two days in Goldman.

So Goldman had a very complex architecture wherein objects written in one location would get synced in multiple locations and there were cases where it will break and something was breaking, you know, and it was breaking for a very long period of time. And our team got involved in investigating that.

I think that was one of my good contributions at that time that I was able to come up with certain cases where things would break, where the whole ring sync will break. And yeah, so that is one thing that I can come up with.

But lately if I say any example, then I would be kind of holding a bias against myself because now things are pretty repetitive for me after years and years of seeing similar problems. So it would be not fair to the, to others who work with me on those problems.

But yeah, this is something that I can cite from my early career that was that I was able to do something different because of neat thinking at that time out of the box.

What you said is quite interesting, Chris. Do you think then that the more experience you have in this industry, the more problems, the better your problem solving becomes?

Because you've seen things so many times, you become better and better and better the more senior you get.

So it only happens when you are observant, when you are passionate about it because it is very easy to get bored and get burnt out that you feel like it's no longer exciting. For me in my particular case, problem solving everyday real life.

Solving everyday real life problems, either it is in computer science or in quantitative mathematics is interesting to me. So I'm evolving every day and I learn every day. So I never feel the wear and tear that comes from boredom, from monotonicity. Right.

That everything has become very monotonic. So that is not my case.

So I am evolving every day and with experience I am training myself in thinking of all different possible cases that I can come up with.

Makes sense. So when you decided to start, start your own high trading firm, I know you said that you had found you had found the people to start with.

How does that look like? Like where do you start? Was it that you just started from, you know, your. An office somewhere and started developing Udo?

What was the first thing that you, how did you start?

Yes, my journey is something that we should not be citing a lot because mine was completely brute leap of Faith. So I have a. I have. One thing I was fortunate was that I had good friends with me all along and, and I met good people as well. So I.

So I will start with this.

That current generation, I see a lot of people, young people who are doing startups now, they're very well prepared, they're very well planned to have a business plan and all that stuff, which is a good thing as well. But apart from that, what you need is that hard work and that skill and that tenacity that you would somehow survive.

So there's a saying that sometimes those win who keep postponing the loss, right? So if the defeat, essentially. So if you are postponing your defeat, there are more chances that you would win eventually.

So on the same lines, essentially, Mike's story is more about hard work, having the closest and the trusted friends. And with all the hard work you found, you landed up that your hard work eventually paid good returns.

And where I was lucky that whatever business mistakes I made, I was able to overcome with him because I was in a set of good people on this. I would say that everybody should have a good business plan, what they're achieving, what they are not.

But another thing about business is that the attention, again, attention to detail. What exactly you're doing, what exactly you're solving, what is your cost, what is your return on that? Cause when will the revenue start?

These are the things that everybody thinks that they are looking at, but sometimes they miss the finer details and devil is in the detail, right? So if you pick up those ideas, then everything becomes really easy. It will flow smoothly.

It won't be as tough as some examples where people are not being able to achieve what they set out to do. But I feel that a lot of cases that I have seen, if people have these basics strongly done, they are successful. And.

And did you start in the Indian markets when you started your own, your own firm? Have you always that's how you began?

No, I, I wasn't. I was always looking for partnerships essentially. So I was not. I, like, I always knew that I don't want to do everything by my own.

So I always was looking for good partners to work with so that we can distribute the work. And I always wanted to do more than one thing in my life, so. And that was my quest essentially to get the right set of partners to build a business.

And when I eventually got it, then there was no looking back from it. We don't see, the thing is like, it's not about the mistakes. Mistakes do happen.

And it's always the mistakes that improve you or make you a better person in terms of the business, in terms of the skills. So that is a very essential part of the journey of making those mistakes, of committing those mistakes. Right.

But what happens next is learning from them and improving and not repeating those mistakes. So then you see your efforts bearing fruit and your business essentially start to get some revenues or you know, things becoming brighter, smoother.

So in terms of the business acumen you need to run a high frequency trading firm, do you think you need, do you think you need a lot of like business, business skills or do you think that the technical ability set you ahead in this?

Yeah, so this is very, kind of a very. My personal observation on this particular area of business. I think this business is more about technical skills.

So yeah, in terms of the business acumen, maybe if you can say that again. What, what is your thoughts on importance of business acumen in this industry?

I think it's the, the business acumen is the technical skill here because it's a very technical skill driven business essentially like and everybody values the skill. If you have the skill, you would be making money. And that's when you get your investors, you can hire talented people.

So it's all driven in this industry. It's very simple.

If you know, you know this math, you know this software, your software is having this kind of latency is amicable for your kind of alpha, you would make money. That's all. That is the strategy saying there is more on the business acumen. It's more.

This is, this business, this particular industry is more technical skills driven. Because if you have the skills in terms of the algorithms, the software, the c. The latency that can have. You will be making money in the market.

And once you are having any slight, if you show any slightest revenue from your systems, you get all the support post that then you can hire people for all the other things like regulatory side of the things or hiring better talent to build a team. But it is very much driven by biotechnical threats.

And this is the good thing about this industry is that you can, if you just have the skills, you can do very well in this. You don't need anything else.

Makes sense. And I know before we joined this call you said it's a very private industry.

How do you successfully attract the talent that you want to be able to grow?

Yes, that's a very good question.

And that is where I always seek guidance from you that what we should do better, how we should project ourselves essentially because it is A very closed door kind of a setup in this industry you don't need much, there's no sales, there are no clients. If you have your group of people, you have the capital within the group, you have the market access within the group, then what else do you need?

You have just work, put your heads down, get your other systems ready, see the alpha, see the correlations and go live in the markets. As simple as that. Right.

But if, if everything you have, but this particular bit of the business is most crucial, which is the alpha generating revenues that is missing, then everything falls flat. So, so since it's a very close group, you don't need lot of people, you didn't, you don't need lot of connections.

Especially in the proprietary trading part of the business.

There are lot of other part of the business wherein you are facing clients, you are managing someone's wealth and generating returns that I, I'm, I'm not talking about that way of doing business or that particular branch of this industry. I'm talking about the proprietary side of the thing which I come from.

It's, it's very closed door and it is and it is not because that people are not wanting to venture out and do networks are that there is no need as well.

If you have the right set of the people within the group that you have started with, then everything is done, you know, as far as the connections and networking is concerned.

But you, one thing I've realized is that you do need to have certain platforms, especially of the people coming from this industry like minded where you can join them and meet them and brainstorm certain things and hence spread the word essentially because a lot of hiding happens by the word of mouth.

You know, even if you like someone and the other candidate likes your form as well, many times it is their peer to peer conversation that they're having which is eventually proves to be the final decider whether they will join a particular firm or not. So a lot of these things, so humans, interpersonal things will always happen.

But I, my personal say is definitely this is a proprietary, the proprietary quant trading side of the business is very close though.

Yeah.

Do you, do you find that it's harder today to get talent than it was when you first started or do you think it's got easier because I know it's got more competitive but do you think it was easier now or back when you started?

No, it is definitely more competitive, more tougher to find talent now and when there's so many reasons and you know very well it's becoming More and more tough to get the right set of people on board.

Do you think that's because there are more firms or do you think that's because firms have just grown so much or because the talent's also going into other industries?

It is, it is all essentially like many, there's a reason wherein there is a lot of competition, one firm versus another. There's. There's a lot of competition in terms of who is often the what.

And then people also, when they are, when they build certain type of skills, they are venturing out in different industries as well. So it is all a combined effect which kind of makes things more and more tougher and competitive.

And, and if you're talking about that best, the, the creamed in a cream kind of candidates, right? So that's very hard. It's becoming very hard to, you know, attract them. And package is not the decider, essentially.

So when package and your enumeration was the decider, it was pretty easy. But that is, I think it is the portal in everybody's list because everybody is offering a package right nowadays.

So it's all the other things that come on top of it that is becoming a decider. So because it's very tough, you know, if it was easier to just attract someone, buy the package, it would have been very easy.

But that's no longer the case. That's what our observation experience is.

Do you, do you think that retaining talent has become harder or do you think that hasn't changed?

No, I can talk about myself, I can talk about Alukon essentially. So we have invested in people having a long term view. And that is where most of my people whom I started with are still with me.

Many of my employees are still with me. And we have a very low rate of attrition essentially.

And that is some people do leave because they have other ambitions or other things that you can control. But I have tried to retain my people because we always believe in having a long term view on our people.

And what has worked in our favor is that we hire people, we train them and we try to build the skills within the firm itself instead of thinking that skills would come from outside. And with this approach, essentially we are able to retain a people for a longer period. And I would like to.

My ambition on that side would be that the set of people that have joined, have done well, should stay till their lifetime and they retire from Alacon. So that is the view. So for us, retention is not an issue.

We always take care of our people and the core group of people itself speaks for itself that most of our people are still there with the firm.

That's testament to the culture. So I think that's excellent. You spoke earlier about obviously you need character and resilience in this, you know, challenging world of hft.

What have you done personally to stay in the game? Maybe like to keep your. To keep your head in the game to prevent burnout. Do you, you know, do you meditate? Do you exercise?

What do you do to kind of keep yourself still focused?

So, yeah, that's, that's why I say that certain things I feel like I've been lucky that I. I had certain concepts of life, very clear funnel that was that I don't want to do everything by my own. So I had a good team.

I have good set of partners who are working with me who are sharing responsibilities so that I can take out their time whenever I feel burnt out to do something to recharge myself. And few of the instruments that I use is just yoga, meditation. But apart from that, I love to disconnect. So I am a bike lover. So.

And that I am kind of bringing and infusing, kind of infecting everybody in the firm with this that now everybody. So last year our best performers, we gifted bikes. So essentially that is one way.

But whenever my employees come with me, come up with me to write or there is breakfast, right? Or longer, we ensure all safety. So whosoever is listening to the Tarukant is a very safe. Keeps other people safe.

So we don't go on any rides up unless everybody is well geared up.

So coming back to the point that you asked is that yes, I disconnect often and at regular frequencies when I feel it's becoming overwhelming for me and I'm not able to do my best.

So that is the time when I rather go on a tour on my bike or with my set of selective people whom I go with or every day I have this meditation and yoga that I do which is helping me earlier when we were young, when we were starting this firm and it was like I was like, okay, five hours is good enough sleep and I can do it in five or four hours. The moment you know, you hit your 40s or you know all that, you feel that you know this is no longer true. You need a good sleep cycle.

So that I have improved trying to sleep well. And apart from that is my regular meditation. And whenever it gets to the tipping point, taking a break.

And sometimes it is the family break is with the family sometimes or often there is a Break where I'm alone and touring on my bike.

Amazing. I think that's. I think that's really good advice to people. It's. It's a marathon, not a sprint. It's about staying in the game.

Yes. So that's true. This is exactly. Thanks for putting this.

This is what I tell to my people, that it's not about that few years that you make money and be done with it. It's about that whole lifetime that your firm is standing, your test is standing. You're continuously making money.

That is an achievement that we can talk about. A very small sprint is nothing to talk about. It's a long run. That is, that we would be very proud of if it happens and we succeed in that.

What's your vision for the firm? Dot. What, what, what would you be proud of with Algoquant? Long term? Say, you know, 10, 10, 15 years from now?

So, so, so Algoquant is a big firm. There are a lot of different functions. So part of the function that I run, I would like to see it be a global leader in prop. Quant trading.

And that is more mathematical, like core mathematics being the foundation of its quantitative trading across different markets in the world.

Because I was very inspired by one firm's introductory line that they kind of predict almost all the instruments that are trading in almost all the markets in the world every day. And that is the statement, if you can make that you are essentially almost predicting all the tradable instruments right across all the markets.

That is something that is. That is a pretty strong line as an introduction.

So somewhere there we would like to build our firm on the quantitative trading side to be, to be present in major global markets and having major market share.

Makes sense. And then the question that I always ask everyone who comes on this podcast is what is your purpose? So what is your purpose within work?

Why are you working?

Yeah. So another thing is that I love what I do. Essentially. It's not. Not a job for me. And this is a very honest statement.

And every day, getting into the office on time, dressed up for work, those are the few things I picked up while working at different firms. And those have shaped me the way I am right now. So I look up to my day and I'm very. I'm always excited about the work that I do.

So the drive comes from that enthusiasm of solving problems. And it is inherently I am in.

Interested in this inherently I'm interested in the mathematics that runs along every day, the numbers that we see every day.

And when, when, when you get challenged by all the talented people around you, that is another inspiration to kind of pick up from there and get inspired and also inspire others. So I can't imagine my life doing anything other than this. And this is what I wanted to do. And thankfully, by God's grace, I was able.

I'm one of those few who are able to do what they always wanted to do. So for me, it's like, it's very simple for me, because I love this. I love the adrenaline rush. I love being there. I love looking at all.

I, I love being in those tricky situations when your decisions matter, when you have to control your nerves. All those situations I enjoy. And that is where my, you know, my, my enthusiasm comes.

I think this has been a really interesting chat. And thanks so much, Run for all your advice and yeah, thank you.

Sam.