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In a game as competitive as high frequency trading, the smallest advantages separate top firms from competitors. ETF behemoth Jane Street focuses on one unique advantage in particular - its programming language. Here's why Jane Street's use of OCaml is the key to its success:pic.twitter.com/hcOdA67K1d
Most HFT firms code in languages that optimize for speed, mainly C and C++. These languages sacrifice ease of use for efficiency & performance. Said differently, HFT racecars may not have the comfiest seats, but they're certainly the fastest.
Instead of opting for the popular languages, Jane Street went all-in on OCaml around 2005-06. OCaml is similar to C/C++ in speed but has unique syntactical differences that make it a very niche language. Why did Jane Street decide to use it?
#1: Attracting Top Talent
Jane Street focuses on OCaml because of a paradox @paulg coined in 2004: esoteric languages attract the best programmers.
OCaml acts as a natural filter for the best JS hires.pic.twitter.com/hJaIhcqOqb
#2: Keeping Top Talent Paul's paradox works both ways - if good coders join a firm for the language, they're likely to stay for a long time as long as other firms don't adopt the same language.
#3: Trader/Developer integration Every Jane Street hire undergoes a rigorous OCaml bootcamp when they join the firm. And I mean *every* hire - from developers to traders to compliance & risk teams. When everyone knows the same language, error catching becomes MUCH easier.
#4: Flexibility Since most of Jane Street's infrastructure is written in OCaml & most employees understand the language, everyone can learn each other's job & maximize productivity across the firm.
Adopting an obscure language may seem like a minor advantage, but it's rewarding Jane Street in massive ways. JS trades 10% of the *entire* US ETF market and made more money than Ken Griffin's Citadel last year, all w/ next to zero media coverage.https://www.ft.com/content/81811f27-4a8f-4941-99b3-2762cae76542?shareType=nongift …
Jane Street's birth & rise to power is an incredible story worth telling. I'll be diving into their history in this week's newsletter - sign up below so you don't miss it:https://frontmonth.substack.com/
the idea that a faster language provides an edge in HFT makes me think most folks in HFT world don't have a real understanding of how execution works in the exchanges.
This is an interesting thing you say. What about execution in exchanges makes it unimportant to have faster languages?
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