About Quant Trading

We get many questions about quant trading, so don't worry if you have some too! Quantitative trading is quite a niche industry and despite a recent surge in popularity, people still tend to give you confused looks when you mention it. This page attempts to answer some of the most common and relevant questions surrounding quantitative trading.

Whilst quants are utilised in numerous industries, CQS focuses on proprietary ("prop") firms that trade in high-frequency, a group of firms that have exploded in popularity in recent years. Some of the bigger firms with offices in Australia include IMC Trading, Optiver, Susquehanna International Group (SIG), Akuna Capital and Vivienne Court Trading (VivCourt).

Please note: some of the information provided on this page is focused specifically on high-frequency prop firms, as mentioned above. Such information is marked with an asterisk (*).

What does "quant" even mean?

The word "quant" is short for quantitative analyst. Referred to as the "rocket scientists of wall street" by Investopedia, they utilise various mathematical and statistical techniques to create models that identify profitable opportunities within financial markets. 

Why should I become a quant?

There are numerous reasons that one might want to become a quant. Some of the most popular include:

• Intellectually stimulating
• Collaborative and dynamic work environment
• Relatively flat organisational structure
• Utilises math, finance and coding
• Generous remuneration

How do I become a quant?*

Despite the complex nature of the job description, applying to become a quant actually requires little pre-requisite knowledge. Despite having a basis in financial markets, firms do not require you to have any previous financial knowledge (although having an interest in the financial world definitely helps). Instead, they seek candidates who have excellent soft skills, in areas including problem-solving, analytical skills, teamwork, competitiveness and resilience. Ideal candidates also demonstrate facets of a growth mindset, always being willing to ask questions and eager to learn new things.

The "easiest" way to get into quant firms as a student is by applying to their student programs. There are 3 main categories of programs for students to apply to; graduate, penultimate and more recently, pre-penultimate as well. More information on these can be found under the "Student Programs" tab.

Whilst it is usually not required, having a background in coding, particularly Python, is one of the best hard skills that an applicant can have when applying to a quant firm. Again, however, success in applications is not dependent on how much you know, but rather on how you learn new concepts and how you're able to apply relatively basic concepts, such as probability and expected value.

What are "high-frequency proprietary firms"

Note that this is a slightly more advanced question and should be read purely out of the interest of the reader. The two components to this question are the ideas of "proprietary" and "high-frequency". Proprietary trading firms (aka "prop firms") trade with their own money in hopes of making a profit for themselves. This is in opposition to say a hedge fund, which trades with clients' money and earns money themselves via commissions and fees. 

Furthermore, high-frequency trading (HFT) involves trading with relatively large volumes at very high speeds, done through an algorithm or another automated system. HFT generally involves a "neutral" position, one where the firm is not affected by movements in stock price (through equal buying and selling or adequate hedging). This again contrasts hedge funds, which often take more long-term "directional" positions, essentially gambling on a stock's value going one way or the other through intensive research and analysis. The infamous GameStop short squeeze of 2021 was a result of one of these large directional positions. Famous hedge funds include Bridgewater Associates, Renaissance Technologies and Two Sigma Investments. Citadel is another famous hedge fund, however, their subsidiary Citadel Securities is comparable to the likes of high-frequency prop firms.

Within HFT, there is semi-systematic ("high touch") and systematic ("low touch") trading. Semi-systematic trading relies more on live input as a trader reacts to the market (i.e. is more "high touch"), whereas systematic trading relies more on the algorithm to trade during market hours, before analysing these trades retrospectively. Particular firms are known for having more of a "high touch" or "low touch", but will ultimately still utilise both.