Into the Business - Deep Blue Capital

Not sure what you can do with your econometric knowledge in practice? Curious where other econometricians end up after their studies? No worries! In the series of articles ‘Into the Business’, the Estimator shows you around the broad range of companies that you, as an econometrician, could start your career after your studies. In this edition, we enter the world of trading and take a closer look at the business of Deep Blue Capital.

Paul François (Head of Trading at Deep Blue Capital)

My name is Paul, I am 29 years old and I studied econometrics at the Vrije Universiteit (VU) in Amsterdam. After my bachelor in econometrics, I continued with the master Quantitative Finance. This is a special honours programme at the VU that offers a nice combination of econometrics on one hand and finance on the other. I also decided to do a second master in econometrics. Because of this combination, I gathered a broad theoretical knowledge of econometrics and also some more practical knowledge focused on finance.

As a student, I was active at our study association Kraket. I was responsible for organising the National Econometricians Day (Dutch: LED) and our international study trip. Outside of the association I participated in a summer school programme at the London School of Economics in 2012, because I was interested in seeing what it was like to study at LSE. At the time, the Olympic Games were held in London, which made the whole experience even more special!

During my Quantitative Finance master, I did a graduate internship at the risk department of ING Insurance to write my thesis. The project was nice to do, and I gained a lot of real-world experience. However, I knew from the start that I didn’t want to end up working in a risk-position. Eventually, I started working at Deep Blue Capital.

How does an intern at a risk department end up at a company like Deep Blue Capital?

Good question, because both jobs are completely different. Even though I enjoyed my internship, I also experienced some things that I knew I wouldn’t like to do in my future career. For example, when you work in a risk department, estimating the VaR of the company is the holy grail. The VaR tells you how much money the company will lose when everything goes wrong. Everything going wrong is usually defined as the worst year over a period of 200 years (the Solvency II protocol for insurers uses a 99.5%-VaR as benchmark). This means that the chance of actually reaching the number is almost non-existing. Therefore, you never know for sure that what you are doing is correct. You don’t get real-life feedback on your work. You work with a lot of assumptions and hope that they are close to how it works in reality.

I eventually ended up at Deep Blue Capital because I always had the ambition to work at a trading company like Optiver or Flow Traders. Back then I had never even heard of Deep Blue Capital. The main issue I had with working as a trader was my concern of a flat learning curve. Don’t get me wrong, I think I would have enjoyed the job a lot during the first few years. However, I think I wouldn’t have enjoyed it anymore after doing it for ten years straight. Then I heard about Deep Blue Capital. Working there seemed to have all the benefits of being a trader, without the downsides. This, plus the fact that it was quite a small company, convinced me that it was the right place for me. We’re still a small company by the way, we have around 25 employees.

Something else I really liked about working at Deep Blue Capital, is that we trade at markets around the globe. We don’t assign certain segments or markets to someone. You can trade almost everything, which means you will learn a lot. I never attended a lot of lectures during my study, because I found it more challenging to grab the books and learn it by myself. I loved to learn new things all the time, so I’m glad I can still do that here every day.

At most trading companies, you have actual traders. At Deep Blue however, we don’t have people who really trade. Our algorithms do the trading, and some people take care of monitoring their actions. This is an important difference between Deep Blue Capital and other trading companies.

Another thing is that we do not focus on being quicker than the rest of the market. We want to outsmart the market and look at the medium- to long-term. If I buy something now, it means I made a forecast about how the stock will develop in a few seconds, an hour, a day or a week. This makes the trading ‘game’ very interesting and challenging in my opinion.

At what position did you start at Deep Blue Capital?

I started at Deep Blue as an algorithmic developer. During my study, I did a lot of programming and noticed that I was quite good at it. I found out when I started at Deep Blue that my programming experience was still very basic though. Writing algorithms that buy and sell stocks automatically is a whole different ballgame than the programming assignments during your study.

After a year or two, I realised that although I really liked programming, I wanted to experience more of the excitement and adrenaline of the markets. That is how I finally ended up at my current role at Deep Blue: Head of Trading.

As Head of Trading, I am in charge of keeping an eye on our existing position. I also make sure that the execution of all algorithms is as optimal as possible. Most exciting moments for me are when I have to intervene in the few situations that the algorithms cannot be used anymore. These situations usually occur when there is news about certain stocks or sectors. Next to the responsibilities on the execution side, I still develop strategies and program algorithms.

On our trading floor, you basically have two groups. You have the developers and programmers on one hand, who develop new strategies and algorithms that we use to trade. On the other hand, we have an economics desk with people who do more fundamental research about companies. They make sure that they know what is going on in the markets. With this knowledge, they decide for example which markets or companies to avoid with our algorithms. I try to be a bridge between the economics desk and the developers in my current role.

Have there been any trade projects that you did not really enjoy?

There have been projects that were nicer than others, but that’s how it works in every job. Some projects take a long time to complete, which can make them a bit tiresome. But to find successful strategies, you have to be creative, perseverant and patient. You won’t find and develop a successful strategy overnight. For example, I just finished a project I had been working on for more than a year. Luckily it did trade during that period, but you have to improve it continuously.

What is it like to work on the trading floor?

People are usually very focused on what they are doing. Being able to stay focused and work in an organised manner are very important skills at our company. However, I think that when you like the trading game, the focus will be there automatically. The people on the trading floor actually look relaxed. You have to be quite stress-resistant to work there, because you’re working on something very serious with really high stakes. You won’t often see someone cursing or ranting on the trading floor. Also, you won’t see a lot of cheers or high-fives. People usually keep their cool and continue with what they are doing.

While working at Deep Blue, you will learn a lot from your colleagues. We have some very smart people that work here. Some of these people also teach at universities in Amsterdam, England or France. Working together with these people feels like a big challenge in the beginning, but it keeps you on your toes every day. I actually find it one of the biggest rewards of working here.

Do you have any vacancies or internships open for people that are interested in Deep Blue Capital?

Yes, we now have a Graduate Internship position and a position as Junior Quantitative Trading Developer out on the vacancy section of our website.

About this article

Written by:
  • Estimator
| Published on: Oct 17, 2017