High-frequency trading, billions of turnover on exchanges and memes as an instrument for sourcing employees. The Onederx foundation story.

A fund turned me down, so I decided to make my own

In 2014, by the end of the last year at Moscow Institute of Physics and Technology, I already knew that science (at my homeland or abroad) was not something I would dedicate my life to. Having thought about the areas where my knowledge could be of use, I tried to get an internship at two hedge funds, but they denied me; I had to scramble on my own.

My MSU friend and I wrote a simple connector to Moscow Stock Exchange and using its historical data, we developed a tiny ML model and signed an agreement with a broker, this is how we became algotraders. Soon our venture started to yield fruit — we no longer wanted to live in a dorm.

At first, we had no name, but soon we realized that it was hard to hire people in a no-name company. Thus, in 2014 Wunder Fund emerged. However, employing people was still a challenging task.

How we’ve been learning to hire people

Algorithmic trading requires two types of people: developers and so-called quants. The latter ones analyze data, do machine learning. Their models serve as a foundation for trading algorithms, which make dozens of thousands of trades a day (that’s quite a lot).

We’ve learned how to find and hire good developers pretty quickly. There are very few tasks in development that people can’t do: most likely, sooner or later you will find a way to solve your engineering problem.

Quants are very hard to hire

Everything is much harder with the quants. We found out that to create a trading strategy, a person should have some secret sauce. You can be a winner of all mathematical olympiads in the world, an expert in machine learning and finance (although the latter is not necessary at all) and still not be a good quant.

On top of that, research work is “a road leading from failure to failure accompanied by growing enthusiasm.” 99% of attempts to make an effective strategy end up in failure: most of the time you spend losing. It is tough and discouraging for many people.

At first, our primary method of hiring quants was paid internships, which we offered to students in their final years, graduates and postgraduates. But the efficiency was low: as a rule, after two months we said good-bye to the intern.

Meanwhile, the number of candidates willing to try their skill was growing fast. To save time and energy, we started to make additional filters e.g. people had to solve a problem to apply for the internship, it helped us filter out those who were coming by mistake. Then we added other, more difficult problems. But the flow of candidates was still too big: once we had to do 30 interviews with applicants in one week, and they were only the ones who made it to a face-to-face interview.

All the people that we hired were very strong at solving logical problems, were good at integrals and were overall very bright people, but 9 out 10 did not create a single working strategy. But that remaining one sometimes did everyone else’s work.

It appeared that it required some unique mindset, readiness to delve into the smallest technical details, and intuition. And luck too.

How we made a playground exchange for interns

At first, it seems that applicants should try to create their first strategy during the internship. But developing a strategy is a big challenge, and we wanted to understand early on whether the intern would prove useful or not.

For this reason, we decided to create a playground exchange with simple mechanics. We created a toy instrument — a futures contract for a meme index. It is a futures contract similar to the Dow Jones and S&P500 indices. The difference was that it had memes from the top of r/memes and Reddit instead of equities of top companies in it and instead of money a special currency — loys.

Rules of trading on a playground memes exchange

Already at this point, we could see whether an intern has potential or not. If he/she was not ready to understand how Reddit’s top works, when publications get in and out, then he/she would not pay attention to important details on a real exchange and would not create an effective strategy.

The results exceeded our expectations. It was funny, during two weeks fifteen interns with passion tried to beat a friend for a millisecond, trading meme futures contracts and earning loys. We have paid bonus cash to the most successful interns after the competition. As a result, our team expanded to two dozen people. It was 2017.

A recording of trading from an internship of quants.

Cryptohype

At the beginning of 2018, we were already trading on many classical exchanges around the world.

Algotraders make very many small trades, therefore, they need large trading volumes on an exchange. When the cryptohype went to its peak and the trading volumes on cryptocurrency exchanges became noteworthy we started trading there, too.

Crypto exchanges were astounding with their technological primitivity and slow performance. The execution of orders was taking from 100 to 1000 milliseconds whereas the execution of orders on classical exchanges took from 1 to 5 milliseconds.

In algotrading the developers try to make the latency so small as it can be, therefore, the slowness of crypto exchanges seemed disastrous to us.

Our own memes exchange. Wait, what?

The exchanges made by crypto enthusiasts in 2014–2016 rose very rapidly on the back of the hype. And after counting the profits of those exchanges despite all of their technological drawbacks we understood that it was a good moment to build one of our own.

Wunder Fund partially financed the project and we raised the rest in the seed round with angels. Wunder Fund shared their developers, we hired some more people, dawdle over licensing and the legal part and in January 2019 we launched starting futures contract trading for the Bitcoin price. It is the most popular instrument on the cryptocurrency market by trading volumes.

The idea of meme trading was still fresh in our memories, so in a few months after the launch of the exchange we launched a futures contract for a meme index but now not a toy one. Like the previous time things went well — we made some hype, we even featured on Product Hunt and his founder even tweeted joyously about our landing page:

In one month after the launch of the exchange, the users’ trading volume constituted approximately $370,000.

There are futures contracts for oil prices, the dollar exchange rate, the temperature, for meme index — any parameter that can be calculated can be the base for a futures contract. Now we are thinking whether we should launch a Pornhub index futures contract or something of that ilk.

Learn more about Onederx

We will be glad to receive your questions, suggestions, and feedback. Please don’t hesitate to contact us via email (george@onederx.com) or our official Telegram channel.