Tell us a bit more about yourself and the work you currently do. 

My name is Marija Puljić. I’m a Croatian currently living in Amsterdam. I work as a research intern at Webb Traders, carrying out research as part of my Master’s in Computational Science. My focus is on a comparative analysis of two stochastic volatility models. These are models used in finance to evaluate derivative securities such as options. My goal is to investigate these models, see how well they perform, and see how well they can replicate market option prices and actual stock price and volatility that we find in the stock market. Ultimately, the objective is to determine which model can best be used in the real world to mitigate risk. 

You are already in the deep end with financial modelling. But let’s take it back a little, what initially brought you to finance? What sparked your interest? 

I’ve always been fascinated by numbers and equations. I knew growing up that I wanted to harness their power, I just didn’t know to what end. In high school I started participating in math competitions. This led to me to enrol in an undergraduate degree in mathematics. As I progressed throughout my studies, I started wondering what type of career a math degree would lead me to. I kind of stumbled upon finance, driven by the stereotypical image of the trader crunching numbers on a big screen. It seemed like an exciting and fast paced environment. The idea of dealing with the unknown and using mathematics to turn the unknown into probability was particularly interesting to me.  

Throughout my undergraduate degree, I also developed a passion for programming. Seeking to ally both programming and finance,  I then applied to the Masters in Computational Science at the University of Amsterdam. So far, it has been pretty much what I was hoping for. I now have the opportunity to intern with Webb Traders as I finish my dissertation work.  

It seems you really found the intersection between markets and technology. Tell me a bit more about the tech side. What have you been learning in your degree in computational science?  

Indeed, my goal was to find a way to connect both my interests in finance and tech. This is what computational science offers me. As for the tech itself, my interest lies within algorithms. I love the fact you can make the computer do basically anything you want by creating the right algorithm. Add to that the knowledge that a computer can crunch numbers with a speed and accuracy that no human can match, and you’ve got a pretty potent tool at your disposal. I believe it’s possible to utilize programming to make something great out of it.  

Could you detail what kind of career this will eventually lead you to?  

 In my case, I am quite interested in option pricing. I hope to keep working on models that are specifically related to that. In other words, I would be working on creating programs that attempt to model and to some extent predict the movement of the stock market. The idea is to get an as close as possible rendition of a real-life stock market volatility through modelling.  

 Specifically, the role my kind of research leads to is the ‘’Quantitative Analyst’’ role. As a quant analyst, I would also be working closely with quantitative traders. My mandate would be to carry out research, analyse the results, and give insights to the traders so they in turn can use these findings for use in the market.  

Let’s zoom in on your current internship at Webb Traders. Tell us more about the organization, its internal culture, and what led you to work for them.  

 In truth, I came to Webb Traders by chance. As I was advancing through my masters, I asked a professor who I respect and is very accomplished in my field of interest if he could guide me towards an organization that did the kind of research I focus on. He pointed me in the direction of Webb Traders, a firm that is encourages the rise of a new generation of researchers. Webb Traders provides a great environment for carrying out the kind of research you are interested in. The culture is very focused on cooperation and teamwork. Everyone is very friendly, and our common competitive spirit is channelled in finding solutions to problems together.  

 I feel lucky to have an environment like this to start my career in.  

With your interest in both technology and finance, you decided to work in two fields that have traditionally been heavily staffed by men. How does it feel to be a woman studying and working in financial modelling? 

 There’s been a lot of progress over the years. Firms are more open to hiring women. It’s still a male dominated field, but big barriers to women participation, I feel, are much less present today. Coming here, I never felt judged or looked down upon because of the fact I’m a woman.  

 Nevertheless, I think there still aren’t enough women in the field. If the community was more gender balanced, I believe it would be more inviting for everyone. So, for anyone interested in this field, I would encourage you to try and join. It’s an interesting and challenging field that many can benefit from.

What advice would you give to someone starting their studies and looking up to someone like you. Would you have done anything differently?  

 That’s a tall order for someone just starting their career! I still need some advice myself. But the bottom line is that if you have a passion and focus, if you are willing to give it enough time, anything is possible.  

 On a more practical level, look for internships. In my case, this internship at Webb Traders has been quite beneficial in letting me see the actual applicability of my research. In university, the theory can quickly become rather abstract. Internships help you see the way things really operate, and also remind you that what you learn in school is in fact quite useful!  

What are three skills you think are particularly useful to have when working in the industry? 

 I would say focus is particularly important. We deal with numbers and equations. It’s important not to make mistakes. If you can hone in on the task at hand without letting the rest of the world distract you, you will have a leg up on others.  

 Another important trait is determination. You will likely get stuck on difficult problems at work. Perseverance will be key to getting through them. There’s always a solution, but sometimes, you just need to give it more time.  

 Finally, an eagerness to learn, and to always be ready to volunteer. This is an ever-changing field, where you need to stay informed of new ideas and findings. You always need to keep progressing in order not to fall behind.  

To find out more about Webb Traders visit Webbtraders.com

We genuinely cater to the needs of end-investors (or buy-side), by making sure they can always trade at a fair price, in liquid markets. That benefits retail investors, but also institutional investors, as well as banks. We are simply the oil in the machine, always showing prices. Banks have tended to withdraw from market making over the last decade, although they still represent a lot of transaction volume from their clients.  

How has liquidity traditionally flowed and how has electronic trading and market making changed that liquidity flow? 

The other difference we make in modern markets is to make sure that we are there at the moment where there is no liquidity. So, during the Coronavirus crisis for example, market makers kept quoting prices so that crashes are avoided: investors (retail and institutional) could still rely on accurate price formation, which dampens sell-offs and reduces uncertainty. There’s always someone who buys when someone wants to sell. So I think we prevent market crashes and help markets be more stable, even in turbulent circumstances.

Markets, and market makers, are incredibly competitive. There are always multiple market makers, not just a couple of big ones, but a wide variety of them each with different strategies. So we really compete on price and we really make sure that there’s a liquid market at all times. Diversity of market participants is extremely important. That is steadily improving, and we welcome initiatives like speed bumps which allows as many market makers as possible in the market. This helps a lot with less liquid products that are harder to quote. There’s a wider variety of participants in the market, and this increases market quality for retail and institutional investors alike. Market structure is much more diverse and resilient than ever before.

You want diversity and competition in financial markets, and market makers that have different strategies. Most participants in modern markets use algorithmic technologies – from your household broker to pension funds, and we do too. Because we have a natural incentive to price better, we keep innovating. That benefits the end-investor because their pricing gets better, because we, and other institutions, are competing fiercely.

Market makers are in the business of providing pricing on the exchange, but they do so together with other sources of liquidity, like banks, brokers and asset managers. Exactly because there are more and more innovative market participants, markets become more and more competitive. Combined with circuit breakers (halting the market when price formation is no longer accurate), markets have become much more resilient and liquid than in the past, even under the most difficult circumstances. The recent Covid turbulence has shown that markets are operating as they should and that price formation is continuous and correct.   

So how do we influence the future development? What we try to do, and our competitors as well, is to try and make sure that the market becomes tighter and tighter, that everything goes through the electronic book. We are fierce proponents of trading everything on lit markets, i.e. on open and competitive exchanges, where supply and demand meet. What we see as problematic is that increasing trading volume, particularly retail trades, are siphoned off liquid markets into ‘aggregators’, affiliated platforms and SIs, away from exchanges.  

This simply means that increasing trade volume is no longer contributing to price formation, deteriorating market quality. We are committed to keep exchanges the central market place for all end-investors, because it ensures them a central market place where they achieve the most competitive and transparent prices imaginable: because of fierce competition among all market participants, including market makers. 

Ideally, everything is traded on one single market as that would actually be on just one central exchange for all supply and demand. But this is not an easy thing to achieve because there are a lot of forces who’d rather want to execute trades through their own affiliates, or investment banks and SIs. We see payment for order flow and executing retail orders at reference prices, without genuine supply and demand interaction, as a threat to market quality. That’s why we really believe that full transparency and competition will be there if everything is traded on one key exchange, for each product. 

I also think the whole speed game is not something that we should continue to do. Ultimately it only benefits one or two hyper fast participants while stifling competition for all the other participants. Speed bumps and other incentives to end this highly expensive arms race genuinely benefit end-investors. A pointless speed race ultimately costs end-investors real money because competition decreases and trading costs increase to recover the investments in speed. This is something for our industry, as well as exchanges, to reflect about next. 

So we focus just on that, and keep stressing this with regulators. You don’t want an oligopoly like in the past or an even more fragmented market structure. Eventually, the end-investor pays for increased fragmentation and trade volumes leaking away from central market places. Low-cost or no-cost brokerage sounds nice, but end-investors pay the price in wider spreads and less competition (albeit this is much less visible to retail investors than paying a couple of euros in trading fees on-exchange).

To find out more about All Options, visit alloptions.nl

Interview with Ian Firla, Co-Founder and Director, OSTC Group

Market making was, is and always will be about providing liquidity to the exchanges. About helping to reduce risk, and making markets more efficient. But from OSTC’s perspective, what makes market making ‘modern’ is who is doing that. It’s the shift from market making being a very generic and predominantly white male occupation, to one that is much more diverse and inclusive.

These diverse new individuals will come with a multitude of views on the world and the industry, and a multitude of experiences. And with these views and experiences, we’ll see a further investment of creativity and diversity of thought that is going to make the markets become even more robust and stable. They will help us to innovate in order to achieve the Sustainable Development Goals that the UN is asking our industry to achieve in order to create a more sustainable world.

OTSC is a global derivatives trading firm and educator providing liquidity globally on most of the major exchanges. It prides itself in its inclusivity and diversity programmes.

For more information on OTSC visit: www.ostc.com

Our members are already putting their commitment to our sustainable finance principles into action, taking active roles in ESG products. With market makers committed to trading these products, it gives investors the confidence that they need to include ESG products into their portfolios and investment strategies. I believe that ESG products are just scratching the surface in terms of how finance will help accelerate the green transition. Interest and confidence in these products will only continue to grow in the months and years to come, and I hope that this will lead to even more innovation in terms of new products in the future.

Tell me a bit about your role and what it involves.

I look after the direct counterparty trading at SIG. I work closely with our sales traders who manage the relationships with our direct trading partners.

At SIG we facilitate off order book trading with various types of institution where we aim to deliver competitive prices that fit the needs of these trading partners. I am responsible for the pricing of these trades with a focus on the equity derivative space

A large reason that counterparties come to trade with us directly is our ability to minimise the impact of their large sized trades, we absorb the risks into our own trading book and look to limit the need to offload risk immediately into the market.

Outside of the pricing of these trades a large part of my role is to manage the risk we take on associated with this trading. I work within a group that is active in the inter-dealer broker market and liaise with our electronic market makers to remain plugged in to the trading and potentially avail of any opportunities that present themselves to recycle legacy risk positions that exist from our previous trading.

What does a typical day look like?

I like to get into work around 7:15. I’ll spend some time pre-open getting set up complete and ready for the trading day. I try to get a feel for where the markets are, what’s driving them and to get my thoughts together for what to expect of the day, what needs work, what could happen that might change my thoughts.

Then we’ll, we’ll have a series of different meetings in the morning to share thoughts within the team. So we speak with some of our corporate researchers in the morning, we talk amongst the traders as well. I have a meeting with my sales traders to get the expectations of the day, get everybody on the same wavelength as to what’s important for the day. We are then ready to go once the market opens at eight o’clock.

Typically, I am quite busy for the first three hours making prices for direct counterparties. It’s rare that there is much free time during this period each day. Up until 11 o’clock is usually spent working on those core responsibilities of market making for our direct counterparty trading.

The 11 o’clock to two o’clock period is often a lot calmer, we take some time to figure out what’s going on, a little bit of reflection on how the trading has gone early in the morning.

We can use this time to schedule meetings, take some time on any projects that we are working on.

Trading often gets busy again in the afternoon. From two o’clock to 4.30 I’ll often be spending much of my time on the direct counterparty pricing again.

At the end of the day there’ll be a lot of discussion on the desk and with different people about what has gone on and what we think could be important for tomorrow. Preparation for the next day is already beginning. We also take that time to reflect on what has happened and what are the key takeaways. 

What is it that you like about working about Susquehanna?

I’m interested in the financial markets in general, so like the sector that I’m working in. In terms of working for Susquehanna, I like working for a firm that operates in a high-performance manner with a process driven and best practices approach to what we do.  We have a reasonably casual office environment but have a large work force that are all very engaged in the work. I like my colleagues, I think a lot of firms can talk of teamwork being important to them, but in Susquehanna, we certainly do live that. I find the team emphasis rewarding and do think it crucial to our success.

What is it that makes you proud about what you do?

I am proud that we are an important part of the markets that we participate. If we’re trading a product, we aim to properly trade the product, and have a positive influence on those markets.

I’m very happy that we have good relationships with the exchanges and with our trading partners and that my role allows me to have some influence in this regard. We don’t just focus on our own activities-we care about and pay attention to the overall market structure and want to see the market benefit all market users and grow.

So how did you get into market making like why did you choose it?

I came to it somewhat late, at university I took a pathway where I studied mathematics and statistics and pure mathematics was probably the largest chunk of my degree.

I was looking at roles that mathematics might be a good gateway into, and I knew of Susquehanna from being in Ireland and they were beginning to build a presence at our college.

I was increasingly intrigued as I learned more about the company, I was very drawn to the real interest in decision making and game theory. It gelled very well with my own interests and background.

What do you think it takes to be a market maker?

In our office there’s definitely different ways to go about things, I certainly don’t trade in the same way as everybody else and there’s no one size fits all. Having said that there are some key skills you’ll need. Most important is being a clear thinker. Being able to manage a lot of information, make accurate inferences from that information and be comfortable in an environment where you don’t have full information, but still be able to make decisions.

Enthusiasm is incredibly important. I’ve been doing this for 14 years and I’m still learning things, I don’t think anybody ever fully masters market making so you do have that drive towards self-improvement. Self-awareness and critical self-analysis are important tools to have or to develop.

The #WeAreMarketMakers campaign is about highlighting what market making adds to the markets and society. What is your perspective on this?

 The key function of market making is, is to be able to provide a tradable price when it’s needed. The immediacy here is a crucial part of the service we provide. This ultimately reduces costs for investors and promotes liquidity which has the added benefit of reducing the cost of capital for companies. This in turn is a benefit to society.

Increasingly a further value add is for us to help in holding our share of the risk in our markets. The risk ultimately must be taken on, we play our part in this, pricing it correctly and holding and managing the positions through time. This helps absorb price shocks in volatile market conditions and I think this is an important function to provide to help facilitate a healthy, stable market.

To find out more about Susquehanna International Group (SIG) visit www.sig.com