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Total Posts: 11
Joined: Aug 2004
Posted: 2020-12-12 12:13
I have a couple of questions for the experienced community.

Let's assume we are given average parameters and conditions of trading shop with a universe of developed market equities and global futures.

1. Do you think there are strategies with Sharpe ratio of at least 2.0 and which are scalable for at least 20mln?
Extra considerations: intraday trading possible but not too frequent: say 5 minutes latency at minimum, the overnight inventory is allowed.

2. If such strategies exist, what is expected life period of such strategies before they need to be updated to live up to the profit target?

3. If a someone wants to feed a PM with such a strategy as in 1. , what are the average profit sharing conditions?



Total Posts: 116
Joined: Apr 2018
Posted: 2020-12-12 13:53
Virtu has way higher than sharpe 2 and way higher than $20mln. Other HFTs/market makers do to, but Virtu's numbers are public


Total Posts: 11
Joined: Aug 2004
Posted: 2020-12-12 14:01
Thanks, gaj.

How is about strategies other than HFT and market-making, say with latency of at least 5 minutes?

Also I am talking about a single PM strategy without diversification from other strategies. For a portfolio of diversified strategies with less than 2 Sharpe, the aggregate Sharpe is expected to be higher on a shop level.


Total Posts: 31
Joined: May 2016
Posted: 2020-12-12 15:47
1. Yes. Many successful MM pods reach sharpe 2 with 20mm+ pnl
2. Personally I recalibrate every few months
3. 15-25% is the standard range from what I hear. Could be more/less depending on negotiation ability and market demand for specific strategy type.


Total Posts: 70
Joined: Feb 2018
Posted: 2020-12-12 17:00
[US Equities]

1. Yes.

2. Updating parameters could be done even daily. W.r.t. updating trading logic/prediction it depends on a strategy: I think there are strategies which could work years without any major update, and there are strategies which could require an update after couple of months trading.

3. 15% of (PnL minus costs) if realized Sharpe is actually 2. Circa 20% if 3 and 10% if 1.

Diversification also plays a role on a pod level. I think it is hard to survive having only one or two signals. Finding many orthogonal signals in one niche is hard though.
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