Payout for running my strategies.

rabidMonkey · Post by **rabidMonkey** » Fri Jun 01, 2012 1:36 am

I'm talking with a firm that will financially back my HFT strategies. They will supply the money and access to data/execution. I do not have to put any money of my own in.

The payout is 35% of net profits with the ability to go up slightly from there if the returns meet certain expectations. This seemed a little skimpy. However, I wanted to see what the experts of NP thought..?

Thank you.

redandtheblue · Post by **redandtheblue** » Sat Jun 02, 2012 6:26 pm

I'll bite. Why is this an unfair ratio?

What % do you think is fair?

Hansi · Post by **Hansi** » Sat Jun 02, 2012 8:23 pm

Seconded, given that they are supplying the capital and infrastructure, how much do you think is fair for you? What if you were in their position?

rabidMonkey · Post by **rabidMonkey** » Sun Jun 03, 2012 1:19 am

Just to be clear. I don't feel nor did I say the offer is "unfair". However, in reality, the payout was the lowest of the offers I've had (there are other factors involved as well). In comparison, it felt skimpy.

However, I wanted to hear and value others opinions. Perhaps my feelings are unjustified. Thanks for the replies.

djfostner · Post by **djfostner** » Sun Jun 03, 2012 2:50 am

Just remember not all high frequency firms are created equally. Be careful to consider what you deem fast enough. Also be sure that if your strategy is dependent upon speed that the firm in question has every intention of continuing to finance its HFT infrastructure. In my opinion what is 'fair' will be very specific to your strategy and its return profile. I've seen well respected firms make offers both better and worse than 35%, but the reasoning always seemed justified. My knowledge is unfortunately specific to Chicago firms, but if you have any specific questions I might be able to add a little color for you. Either way, best of luck to you.

briant57 · Post by **briant57** » Sun Jun 03, 2012 3:10 am

Do you have an actual audited (or similiar) track record or are these proposed strategies? That will make a huge difference.

djfostner makes v important points.

If you are confident in your strategy why don't you propose a scaling payout in your favor as dollar returns increase?

redandtheblue · Post by **redandtheblue** » Sun Jun 03, 2012 4:26 am

Or you could backstop a level of losses and take home >75%.

sasquatch · Post by **sasquatch** » Mon Jun 04, 2012 6:17 pm

Contact me off-phorum to discuss.

Sas

(faheysheffieldhaworthcom)

Pike · Post by **Pike** » Tue Jun 05, 2012 12:01 pm

Hello Phorum,

Given what I have seem, 35% is not that bad if they provide the fund, whole infra, market connections etc - in London at least.

But would they own the intellectual property of your code?

If your strats are working nicely, there is a risk they replace you at some point by someone less expensive...

filthy · Post by **filthy** » Tue Jun 05, 2012 1:38 pm

without addressing the actual 35% number i'd like to further emphasize that the split is just one factor and it shouldn't even be the most important factor.

"quality of management" matters far more. eg good management won't fire you and replace you (even if they own the code) because when things begin to deteriorate (inevitably) they know you will be the best person to evolve the strategy. also, good management will not panic or get over-enthusiastic and chop and change your trading sizing on you in stupid ways.

i've always been a fan of escalating payouts. better for all parties.