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Takeaways from the Jane Street bond prospectus

357 points| henrik_w | 1 year ago |ft.com

330 comments

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andrew_eu|1 year ago

I often discuss Jane Street as a great model of employee branding. They do well placed adverts/sponsorships (e.g. Standup Maths[0]), they produce a quite decent quality podcast (Signals and Threads [1]), and they have consistent monthly puzzles [2]. That level of investment in branding only makes sense, I think, at a large size. I'm kind of surprised they only have ~2500 people.

[0] https://www.youtube.com/user/standupmaths [1] https://signalsandthreads.com/ [2] https://www.janestreet.com/puzzles/current-puzzle/

tikhonj|1 year ago

Jane Street has been doing this since they were much smaller. I interned there when they had like 300 people, and they were actively cultivating a great brand as an employer back then too—and looks like they've really made it work over the last decade!

My impression with them in general was that they were willing to do lots of things that did not "conventionally" make sense at their size, and those things paid off. The internship program, for example, was relatively large in comparison to the size of the company at the time (≈50 interns?) and had lots of structure (events/talks/classes/group projects/etc) like you would expect from a big tech company, not from a 300-person firm.

They were also willing to build a lot of tools in-house like their own build system[1], their own code reviews system[2], etc. Most people would see this as wasteful NIH but I'm convinced it was a net benefit for them—they managed to be so productive in an absolute sense and especially on a per-engineer basis because they were willing to build so much themselves, not despite it. I'm sure the same thing applied to their recruiting efforts.

The biggest thing I took away from my internship was how much conventional wisdom in the software world was not necessary or true.

[1]: First Jenga, now Dune

[2]: Here's a neat talk on how they do code review at Jane Street: https://www.janestreet.com/tech-talks/janestreet-code-review...

ethagnawl|1 year ago

They used to be very active in the NYC Meetup scene, too. ~~I think I visited at least two of their offices and the second was was stunning. It was far south enough and high enough that there was a nearly unobstructed 200° view of the southern end of Manhattan, both rivers, etc. It was also beautifully designed and had an obligatorily huge, open, stocked kitchen.~~ (This was actually Two Sigma.) They were also using exotic tech back then, too, like OCaml, which is itself a form of marketing and helps with recruitment.

Moral qualms aside, it must be a fascinating place to work.

LudwigNagasena|1 year ago

Their revenue per employee is probably similar to revenue of a single mid size company.

neilv|1 year ago

I highlighted Jane Street's recruiting outreaches specifically, when talking with an R&D unit at a big financial institution. (I also mentioned the tactic of fringe-tech-that-some-heavy-hitters-love. OCaml, Lisp, Rust, Erlang, etc.)

When I first heard of Jane Street, it sounded like Yaron Minsky was going around to MIT and such, high-touch, trying to hire just a few people. And later, things like this blog: https://blog.janestreet.com/author/yminsky/

The only negative thing I recall hearing is Jane Street alumni responsible for the infamous FTX and Alameda Research. I don't know whether the individuals were already fully into hopped-up sociopathic/narcissistic thinking in college, or whether their internship and employment experience contributed.

brightball|1 year ago

I’d love to get in touch with somebody from their marketing department.

jddj|1 year ago

Some idle trivia, in the London office the d in the illuminated "Food Bar" sign above the cafeteria has been switched off.

collegeburner|1 year ago

the higher the stock, the downer the foo

the bigger the vol, the more imma do

drgiggles|1 year ago

I work in quantitative finance and have wanted to to start using OCaml at work for years. I just find that unless you are at a shop like Jane Street with a well developed proprietary code base, internally developed tooling, etc, there just isn't the ecosystem available for me to be nearly as productive as I can be in other well accepted languages in the quant dev space...which is a bummer. It's been a little while since the last time I investigated this though.

unstruktured|1 year ago

If you use Jane street's base, core, and async libraries, you already have most of the tooling you need.

gosub100|1 year ago

It's brilliant if you think about it as an employer that wants to limit employee turnover. Great, you're an ace algo dev in OCaml, where you gonna jump ship to?

lysecret|1 year ago

Also in quant finance. Have you given F# a shot? We use it and are very happy.

999900000999|1 year ago

Any tips for getting a first quant job ?

Is learning C++ a must?

Smaug123|1 year ago

> At the end of 2023, Jane Street employed 2631 people

> About 80 per cent of the company's capital comes from employee equity, which has swelled to $21.3bn at the end of 2023

o.O

llm_trw|1 year ago

That works out to 8 million per person on average.

I'd be interested to see if the Pareto distribution holds here as well, namely that 1% of employees (26) hold half the wealth ($10b).

paxys|1 year ago

A little further down:

> The real money is at the top. The bond prospectus reveals that Jane Street has 40 “equity unit holders on a full-time basis and in good standing”, with an average tenure of 16 years. Among those there will be at least a handful of billionaires, even if no Jane Streeter appears on any rich lists.

Sounds like any other partnership. A few people at the top are providing the equity and getting a profit share, and the thousands under them are getting salaries.

bogtog|1 year ago

Are you telling me that one of American capitalism's peaks is basically a worker collective?

klelatti|1 year ago

Great comment from the FT's comments section on this piece.

> A good mate who runs and wrecks expensive cars for hobby once reminded me that course plotting (i.e. research) and braking (i.e. risk management) are the two sine qua non contributors to a successful race.

Along with a reminder that disasters happen when businesses forget this (Boeing!)

keyle|1 year ago

I love them because they keep the OCaml dream alive, but any company shouldn't have this kind of reach, especially in the realm of automation. This probably won't end well...

Meanwhile I'd love to know what their edge is... It's probably more than OCaml, although... ;)

bko|1 year ago

What kind of reach? Just making a lot of money?From the article, it looks like they make a lot from market making in ETFs and similar. Thats an extremely competitive market that is necessarily a race to the bottom in terms of pricing

UK-Al05|1 year ago

I think OCaml is more of symptom of the people who they hire. Most companies don't want to hire OCaml and Haskellers. They fear they would be too expensive, and requires clear thinking so you can't hire bottom of the bucket devs.

If you want to hire the best and willing to pay that is no longer a concern

sgt|1 year ago

Whenever OCaml stories popped up about Jane Street, I always figured they were about 30-40 employees by now. 2613 people?!

geodel|1 year ago

Well 30-40 or more would be just needed to maintain OCaml codebase. Unless basic unit of bonus, salary, buying, selling, vendor payments, building maintenance and so on is OCaml lines of code, I would have guessed ~1000 people for sure.

cess11|1 year ago

I imagine most of those use the tools built by their developers, and do a lot of paper shuffling and analytical work supported by the software.

anonyfox|1 year ago

If I remember correctly they are also by far the biggest poster child for OCaml, right? Blub Paradox at play here?

mrweasel|1 year ago

Might also be that Jane Street is to OCaml what WhatsApp was to Erlang. Many ascribed the success of the small team at WhatsApp to their tech-stack, Erlang and FreeBSD. The reality probably was that they had hired really smart people, and those people choose to use Erlang (because eJabberd), but they could have been just as successful using another language.

Yes, Jane Street uses OCaml, they have no reason to stop using OCaml, but may very well have been just as successful using another language. It's hard to tell, when we don't know the full circumstances of why they went with OCaml initially.

yodsanklai|1 year ago

They're more than a poster child, they made a lot of contributions to the ecosystem. OCaml would be different without them.

coldtea|1 year ago

In what way would the Blub paradox be at play?

The paradox being: developer familiar with programming languages of level of power N doesn't recognize that languages of level N+ are better (more powerful expressively), only that N- are lesser.

DrBazza|1 year ago

Back in the 90s/00s the CSFB quant team went with F#. Immutable and functional is reasonable choice. Just not popular.

These days, starting or running a financial business with less popular languages is, well, less popular.

yen223|1 year ago

I've only ever heard of Jane Street because they're one of the few companies that did OCaml.

jedberg|1 year ago

Interesting, yesterday there was a thread on reddit in /r/ExperiencedDevs asking "What place is known as the ones with the best engineers now? One where if you saw that place on their resume you'd automatically assume they were good?"

And one of the answers was Jane St. Apparently they produce great engineers.

charlie0|1 year ago

It could also be that are really good at hiring people who would have become great engineers no matter where they worked.

carlsborg|1 year ago

This company extracted ~$22 Billion in gross trading revenue from markets with quantitative trading strategies last year.

padjo|1 year ago

SBF got his start there right?

sporeray|1 year ago

Yes, paid quite a lot of money to flip coins lol. There is a pretty big section about his time there in Michael Lewis's new book "Going Infinite".

roland35|1 year ago

Sure did! The rest is history...

pityJuke|1 year ago

(It's briefly mentioned in the article, in the risk section)

EMM_386|1 year ago

> Jane Street is stupidly profitable — net trading revenues of $4.4bn in the first quarter, after a $10.5bn haul in 2023, and a profit margin north of 70 per cent — but it bears repeating. That is the fourth straight year of net trading revenues exceeding $10bn. Gross revenues came at a record $21.9bn in 2023, up 34 per cent from 2022.

Yes, I suppose this is all something to get all starry-eyed over, Jane Street encroaching on Citadel Securities, the two of whom control 30% of the US equity market volume.

I see it another way. I see people's hard earned money being siphoned by enormous financially-engineered vacuums, never to be seen again. And not just in the US, globally. This won't stop at 30% of the US equity market. It won't stop until the music stops and the last chair breaks. Which may or may not be soon. It will certainly be coming at some point.

Five times the London Stock Exchange’s entire trading volumes in 2023 in just your ETF arm? Sure ... this sounds like reasonable growth ...

> This is why some people argue that APs like Jane Street have become systemically important.

Oh, you don't say!

> About 80 per cent of the company’s capital comes from employee equity

That's adorable. They're like a little mom-and-pop shop ... except not anything like that.

pas|1 year ago

> I see people's hard earned money being siphoned by enormous financially-engineered vacuums, never to be seen again.

can you expand on this? I have zero idea of what Jane street actually does and how they actually make money. (someone wrote that they have ~450 traders. trading what? equity? stocks? dark pools? PE? are they market makers? are they offering services to institution types?)

also what does "people's hard earned money" mean? you mean that Jane Street takes away their 401k or ... ?

zie|1 year ago

They provide market liquidity. The chances that a seller and buyer come together at the exact same time across the 7.5 hours of open market operations is fairly low, so they buy from sellers and sell to buyers and hold in between to keep the markets liquid. This liquidity costs(often advertised as the bid/ask spread).

We could essentially close them down if we moved all trading to say 1 hour a day.

Though most retail traders are upset they can only trade 7.5hrs a day, they want to trade 24/7 instead. They seem to WANT the liquidity and are apparently willing to pay for it.

Me, I'm fine with trading for only an hour a day, but I get not everyone is as lackadaisical as me.

Unless you have a better mouse trap to solve the liquidity problem, this is the best we have for now.

andrepd|1 year ago

I do agree with you. It's neither sustainable not really desirable, the amount of effort and resources and smart people dedicated to the financial sector.

hackerlight|1 year ago

Ignorance leads to the assumption a piece of economic activity is zero sum. You see it everywhere

clusterhacks|1 year ago

That sounds interesting. Are there easy sources for seeing what companies drive US equity market volume? My google-fu failed me but maybe I am missing something specific in the fintech industry that tracks that kind of thing . . .

alchemist1e9|1 year ago

> I see it another way. I see people's hard earned money being siphoned by enormous financially-engineered vacuums, never to be seen again. And not just in the US, globally. This won't stop at 30% of the US equity market. It won't stop until the music stops and the last chair breaks. Which may or may not be soon. It will certainly be coming at some point.

Envious bullshit! The reason they are so profitable is that believe it or not they are replacing earlier operators who were less efficient and taking more transactions costs out of the system before. To be anti-Jane Street is the same as being pro-Big Bank of the past, that was taking more money out of the economy doing a worse job!

Unless you know the history of global financial markets and lived it then you don’t understand. For example in the late 80s the CBOT treasury bond bit had over 1000 traders in that pit. They were all making money and quite a few a huge amount. And there was many more people supporting those traders of the floor. That was just a single futures bond contract! With Jane Street we have 2,631 employees doing the equivalent job globally and for less total cost of at least 80,000 employees in late 80s.

The profits per employee are higher obviously but that’s the effect of technology and productivity but the total price being charged to the economy as a whole is much lower. This trend will continue and I would not be surprised in 10 years that a company of 200 people will provide the entire function of those 2600 today, and probably the profits per employee will be $10M per person. But that’s what we want, is a good thing not bad, portraying otherwise is just Envy.

ur-whale|1 year ago

> it accounted for 10.4 per cent of all North American equity trading in 2023

Which means they're rapidly coming to a position which will easily allow them to game the system (what used to be known as "cornering the market").

I even wonder if their system has already learned cornering by itself via stochastic gradient descent.

Galanwe|1 year ago

> Which means they're rapidly coming to a position which will easily allow them to game the system (what used to be known as "cornering the market").

These are flows, not ownership.

Also, taking Citadel as an example, a vast portion of these flows are not their own, but rather thirs parties offloading their flows to them, so they have the underlying best execution guarantee to provide.

An other way to look at it is that investors are moving away from traditional brokers to execute their flows, because these HFT firms have become so good. So instead, investors offload their flows to HFTs acting as DMM instead.

djaouen|1 year ago

I have to give it to them, choosing OCaml was excellent bait. Gives them an aura of intelligence while they milk Wall Street dry ;)

taneq|1 year ago

Whatever Jane Street is, it’s not big enough to justify that abomination of a popover-riddled mobile site.

belinder|1 year ago

Why do they say 179,000 million instead of 179 billion? Is that common in their industry?

spatulon|1 year ago

Until a few decades ago, the term 'billion' actually meant one million million (1e12) in the UK, rather than the now commonly-accepted meaning of one thousand million (1e9). As a British paper, the FT may simply be trying to avoid the ambiguity.

infecto|1 year ago

Pretty common in finance across the board to use consistent units and to not use decimals. So in this case the following sentences mention $10 million, you would not want to say $0.10 billion. It depends on whats being presented of course but in large numbers like these, decimals make it harder to read.

llm_trw|1 year ago

Why do we say 17,000 kilometers instead of 17 megameters?

John23832|1 year ago

FT does finance speak. Tranches are in millions more regularly than billions.

kqr|1 year ago

Because 179,000 million is a 179 milliard, not 179 billion, which would be 179,000 milliard!

dangoodmanUT|1 year ago

Just got 86 popups trying to look at this page

wuj|1 year ago

Yeah, quants firms are great at PR and marketing. They give out free merch, sponsor hackathons, and organize in-person events with all expenses paid. I study at Berkeley and so many students here rock their merch, which gave them even more exposure on campus.

Their effort definitely paid off though. Quants like JS, Citadel, or Jump hire some of the brightest students from Berkeley and other top CS schools.

peterhadlaw|1 year ago

They discriminate employment based on what school you go to, or at least they did circa 2013

strikelaserclaw|1 year ago

A) usually if you're fresh out of school they filter on your school name because the average MIT cs grad is most likely better than the average cs grad from university of kentucky.

B) if you have work experience, they filter on where you worked because the average google engineer / HFT engineer is probably better than your average engineer who works at missouri national bank.

C) if you've done something great that everyone knows about (like being the author of popular libraries, inventing tools that people use), then you can most likely bypass filters A and B if you can get in touch with a human recruiter (shouldn't be too hard).

For prestigious smaller companies which gets a lot of applicants, there is no easy way to reduce the pool without doing A and B. It is unfair and what college you go to might depend on circumstances beyond your control but if you have high ability regardless of what school you went to, you would eventually do B or C and get into the prestigious company.

If you don't have high ability and will never do either B or C, then they did the right thing filtering out your resume.

In the real world, it doesn't make sense for a company to discriminate against a candidate with higher ability just because they went to the wrong school (unless the company makes money from appearances like law firms, consulting firms or is corrupt and entrenched).

SkipperCat|1 year ago

Its mostly done as a way to filter job applications into a smaller set. When Google was the 'hottest' job prospect (many years ago) they needed a way to reduce the set of applicants down to a number where hiring managers could handle the load. Setting criteria such as having an Ivy League degree or a CS degrees with GPA over 3.8 was a logical way to achieve this goal.

That being said, if you went to a community college but also had 10+ years experience at one of their competitors (eg: DE Shaw, 2Sig, Citadel, etc), you'd almost be guaranteed an interview. But once again, thats another very small set of applicants.

pasc1878|1 year ago

So do most popular companies.

they get many applicants for a job. So you have to filter those applications. One way is to recruit from known places where they have already got people from as they know it worked. Typically those universities also filtered on how good you were and so the average quality is higher from those.

Obviously there will be exceptions but not work spending time to find them. Recruitment costs a lot in time and money.

55555|1 year ago

Don't all companies do this? That's why the name of the school you went to is on your resume.

kettleballroll|1 year ago

I come from a very small provincial university, but they still reached out to me 2018, so I don't think so. (I bombed their interview and didn't get an offer, though).

gadders|1 year ago

They might as well say "middle class and above applicants only".

You can't claim to have diversity if everyone did the same courses in the same schools.

ecshafer|1 year ago

I don't think so. I had interviews there graduating from a SUNY school, and I got a fair shake at it I think, just did pass the interview.

justsocrateasin|1 year ago

Not true anymore. I went to a shitty state school with no FAANg on my resume, and had a Jane Street recruiter slide into my DMs last year.

tourist2d|1 year ago

I imagine they also "discriminate" on skills and previous jobs you have too..

pquki4|1 year ago

Even so, probably not nearly as much as McKinsey

mschuster91|1 year ago

> net trading revenues of $4.4bn in the first quarter

That's a lot of money for someone who is essentially a middle-man. What a grift, about 13 dollars for each average American lost out to them a quarter.

Majromax|1 year ago

First, their trading's global, so "for each average American" isn't the right denominator, nor is it obvious to divide things on a per capita basis rather than a wealth-weighted one.

Second, it's not at all obvious that market-making is a zero-sum game, where profits to the market maker are "lost out" to someone else. Market-making profits from the bid/ask spread, but a new market maker tends to reduce that spread. Ordinary people tend to invest as price-takers, and thus they benefit from a reduced bid/ask spread.

paxys|1 year ago

> The only founder still at the firm is Rob Granieri, but insiders say it is functionally run by roughly 30-40 senior executives in what kinda resembles an incredibly profitable anarchist commune. Or as Jane Street itself puts it:

> We operate as a functionally-organized structure consisting of various management and risk committees. Each committee is responsible for directing the overall strategy of the firm and for emphasizing the importance of risk management to our operations. Each of our trading desks and business units is run by equity unit holders who take an active role in managing our day-to-day operations [...]. Our management structure allows for effective cross-departmental communication [...].

Yes, that org structure full of hierarchical business units with distinct responsibilities and committees and subcommittees and overseers and risk management totally screams "anarchy"...

CharlieDigital|1 year ago

The second definition of "anarchy" according to Google:

    > the organization of society on the basis of voluntary cooperation, without political institutions or hierarchical government; anarchism.
Sounds like a perfect fit.

JackFr|1 year ago

Honestly 40-50 years ago all of the big investment banks were partnerships and operated in much the same way. Partners owned equity and by today's standards they were relatively risk averse because it was their money to lose, with no stock price to pump up.

chronic830021|1 year ago

> Double the profit per employee than Google

> Average TC of 900K

> Several unranked billionaires

it makes even OpenAI / Meta ML SWEs look underpaid

SkipperCat|1 year ago

SWE will probably make between 250-500k. Quants who can come up with profitable trading strategies can make a lot more. Managers of trading teams can make over 1MM and sometime a lot over 1MM depending on how profitable their teams perform.

SWE who have deep subject matter experience are super valuable to these firms. Folks who understand how to write low latency code, FPGA work and other stuff like that. But the real money is in figuring how "how and what" to trade. Once that's done, the SWEs can bang out the code.

yodsanklai|1 year ago

This is the average, it'd be interesting to know what's the median for a SWE is. Also, some high-level SWE do make 900K at Google and others. Maybe for a similar set of skills, JS doesn't pay (much) more than Meta or Google?

paxys|1 year ago

"Average" is a meaningless number here considering the equity partners are getting ~100% of the profits. It is very different from the shareholder model of large tech companies, so a direct comparison is pointless.

hendzen|1 year ago

Jane Street made 4.4bn net income in Q1 2024 w/ 2600 employees.

Tether made 4.5bn net income in Q1 2024 w/ probably <50 employees.

actionfromafar|1 year ago

There's a non-zero chance one of the companies is mostly legal.

blackhawkC17|1 year ago

Well, Tether only needs to hold treasuries and collect quarterly interest payments. They don't need much staff, at least if they haven't looted the treasuries SBF style.