The Risk and Transparency Tango

It's easy to love a job that hands you a one-way ticket to the One Percent. But for the men and women on the buy-side trading desk, it is about much more than money. Buy-side traders at hedge funds, prop shops and even the large asset management firms all love their work. It's a challenge for them, and they embrace the risk.

Me? I break out in a sweat when I ask for an extra straw at Wendy's. But traders eat bowls of risk for breakfast. Look no further than the Euro Zone, where many hedge fund managers are still betting on the hobbled euro.

True to form, despite the market volatility and the sputtering economic recovery, the traders we profile in our annual Quant Gold Book are bullish about the future. They are not plagued with worries about flash crashes, macroeconomics or monthly jobs reports; instead, they are focused on riding the ups and downs of the trading day to maximize their portfolios and best serve their clients. And while they all understand technology's vital role in managing risk and finding alpha, each already seems to have the tools to execute his or her vision.

[Regulatory and Technological Changes: How to Create Competitive Advantages in the Derivatives Markets.]

And perhaps most notable, no one is railing against Dodd-Frank, blaming excessive regulation for the market's troubles. For this year's Gold Book honorees, the most aggressive and comprehensive regulatory law since Glass-Steagall is simply a fact of work life. (Sadly, our interviews were completed before former Citigroup CEO Sandy Weill opined that the big banks should be broken up. As one pundit put it, coming from the man who created the modern megabank, "This is like Johnny Appleseed waking up one morning and saying, 'Where did all these [expletive] apple trees come from?'")

Meanwhile, as editor-at-large Ivy Schmerken reports, the SEC may finally be getting the technology it needs to police the markets. To keep up with ever-accelerating traders, the regulator is buying its own real-time market data platform. Elsewhere, in light of the recent Knight-mare on Wall Street, senior editor Justin Grant recounts FIX Protocol's quest to reduce trade errors. He also traces Liquidnet's search for liquidity all the way to the PDQ ATS. Finally, this issue's tech directory features dark pools. Even (especially?) in this age of greater transparency, there still are some things that traders prefer to do in the dark.

Risk and transparency. Traders want more of the former, and regulators want more of the latter. But whatever tomorrow's markets bring, the opening bell is music to our Gold Book honorees' ears.