On Wednesday the 6th of June, I had a chance to meet Wouter Griffioen, a trader at IMC. The purpose of this meeting is mainly to answer the questions collected from AE students. Wouter did two bachelor’s degrees, one in economics and finance and the other one in econometrics. He also did a master’s degree in econometrics at the UvA. Wouter presented thoughtful and inspiring answers combined with his personal experience and technical knowledge. This article contains useful information for students who are interested in trading or who want to work for IMC. Wouter also asked a graduate recruiter at IMC for some input in the recruitment related questions, which is good to know before you submit your job application to IMC.
Q: What is algorithmic trading and how is it implemented?
A: I would like to explain algorithmic trading as a process in which you let the machines or programs make decisions based on your predefined set of rules. In the old days, a trader would decide for himself/herself which products to buy in the marketplace. Now, a trader thinks how he/she can ask algorithms to act for him/her by specifying certain rules and conditions. The way I like to see algorithmic trading is that, instead of you thinking about when to buy some financial products, you find a way to let algorithms make those decisions.
Q: What financial products does IMC use to trade?
A: We trade a wide range of products, but the main products we focus on are options. This is also what IMC is good at and we tried to focus most of our strategies on trading options. We do trade other products like stocks, futures and warrants for hedging purposes or other strategies.
Q: What will the first few days look like for a new trader at IMC?
A: When I started 4 years ago. I spent a couple of days meeting the new traders who started at the same time. We did some kinds of team building activities to get to know each other better. After this, we flew to Chicago to start our internal training program, which lasted for two months. In the program, you sit with the group that starts on the same day, it’s kind of like a class. After you are done, you will be released to the desk. For the first days there, you will be working closely with one or two traders who are more experienced. They are assigned to teach and monitor you. You will get your responsibilities soon, but basically you will still talk to each other during the whole day before you become an independent trader. It takes about a year for someone to become a trader who is independently adding value to the company.
Q: What internship opportunities does IMC provide?
A: IMC has summer internship programs where we start with a lot of students at the same time. The senior traders really take time to work with the interns. We don’t have internships throughout the year, but we do have a role of trader assistant. It’s more like you work for two or three days a week at IMC to help with a certain desk or certain project. You can already get a feel of what it is like to be a trader and decide whether this is what you want to do. When you finish your internship or leave as a trader assistant and you performed well, you can convert to a full-time trader.
Q: What does IMC do as a market maker?
A: The core concept is that we aim to always be in the market to show ask and bid prices to the market participants. You can draw an analogy with a currency exchange office you might find at the airport when going on holiday. They will always show two prices, a bid and an ask price, for travelers to sell or buy the currency. We will always be in the financial market to show prices to investors who might have an interest in trading financial products.
Q: What are the key factors considered by IMC’s trading algorithms? (Eg. Are trading algorithms programmed such that they perform the best when backtested with historical data?)
A: Definitely in some cases we will try to optimize on historical data, but this is not always the case. The opinions of the traders are an input, there might be some news or stories that come up which will influence how you adjust the models. Backtesting is a big element of the strategies but it is not all that’s in there. It also depends on how much you want to rely on historical data, which is not the best input for trading tomorrow.
Q: Does high frequency trading only rely on speed? Or are there any other factors that determine the profitability of high frequency trading?
A: Speed is not the only thing in general. A way you can look at it is that the more “dumb” your strategy is, the faster you what to be. If your strategy becomes more and more complex, it also becomes less relevant how fast you need to be. If something is obvious, then everyone wants to get it. For example, if everyone knows that if A goes up by 1, B also goes up by 1. The moment A goes up, everyone wants to buy B. In this situation you are very dependent on your speed, but with more complex strategies, this relationship might become less clear for other market participants which makes it less critical to be the fastest out there.
High frequency trading is the core strategy of IMC, but we definitely have many more angles and horizons to look at.
Q: How do IMC traders control risks when designing trading algorithms?
A: We have an extensive testing environment where we can test strategies or algorithms before we actually put them into production. This environment is designed to catch as many corner cases as we can find. We consider the algorithms ok once they pass the testing environment, but we still implement a step by step rollout strategy. This means that they will be first used on a small project, so that we can still go back if something unexpected happens. There is a systematic way in controlling risks when designing or rolling out our strategies.
Q: For IMC’s trading models, do they all base on certain trading principles and
mathematical/statistical models. Or are they more flexible for each team to
program their own algorithm?
A: It depends. In general, there is a lot of flexibility for each trader to think of ideas or angles to tackle a problem. On the other end, a lot of work has already been done in the past. We want to avoid reinventing what we already have. This means that usually when a trader has an idea, he/she needs to check what IMC already has and what is already in the setup. A trader needs to think about how he/she can utilize the principles/models developed in the past and to see whether something new needs to be added. We have a huge framework already and with which we can do a lot, but it is still possible for a trader to have an idea that is completely new. If this is the case, the trader is flexible to build it if he/she can show the business case for his/her idea
Q: Does IMC backtest their algorithms each day using historical data over a
short period (1 day/1 week) or longer period (1 month/1year)
A: It depends on the strategy which one is more useful. Sometimes we only need a short period to see something or adjust something. For strategies that are more robust over a longer period, it might be useful to look further back.
Recruitment Related Questions:
Q: For an econometrics bachelor student, what do you recommend doing as the preparation for a possible career in trading? What kind of (for example) extracurriculars or experiences should he/she seek for?
A: The recruiters at IMC will look at your skills and not necessarily your resume. It’s about what you can show to us and how good you are, but not only what you did in the past. There are of course some extracurricular activities you can enroll in that can be interesting to us. For example, some financial trading related activities can be a plus, because this means that you already have some knowledge and this also shows your interest in the financial market. Other things can be for example tutoring or mentoring activities. This is actually what you will do a lot in your job. When you become more experienced, there are always new traders joining the company and it is very important to teach them what you know. However, the most important is that you are truly passionate about the extracurricular activities you do, even though they can be completely useless for trading. There is no need to do something related to trading when you don’t like it. We want to see some enthusiasm when we ask about what you like to do and what you will be doing.
Q: What advice would you give to students who are looking to pursue a career in trading?
A: I think it is important to figure out what you truly like. Things that could help are for example joining career events, including those events held by our competitors. These events give you a better picture of what the company does and what it is like to be a trader. If you want to take it one step further, you can try to apply for the internships or the trader assistant role. These opportunities will give you more experience in trading and also an opportunity to convert your internship to a full-time position afterwards (when performing well).
Q: What is highly valued when hiring a person in IMC?
A: Of course we need you to have the right technical skills but aside from these, characteristics such as competitiveness, humbleness and a proactive attitude match our culture well.
Q: How to stand out among the pool of applicants in the interview?
A: We are really diverse as a group here in IMC in terms of culture and interests. People here have different interests, such as sport, creative activities, traveling (hopefully soon again after covid-19) and many other things. In the interview, you can talk about something you are passionate about, even though it is unrelated to trading. There is no need to say things that you think you should say but you don’t actually like. Your keen and authentic motivation for wanting to become a trader is way more important. For more information about recruitment process at IMC, please go to: https://careers.imc.com/eu/en/hiring-process
Q: Does IMC also consider applicants with non-EEA nationalities? Is the
chance of getting into the company smaller for applicants with non-EEA nationalities compared to those with EEA nationalities?
A: Not at all. There is no consideration in the recruitment process regarding origins or nationalities. If we like you, it really doesn’t matter where you are from or where you live.
We appreciate the time that Wouter spent on this meeting. Let’s wish him all the best for the future and good luck for those who are applying or are about to apply to IMC!