Quantitative trading models/strategies are now widely used by hedge funds, investment banks and some prop trading firms. I want to know if there are any fundamental differences between the methods used in different places. I ask this because I heard that things at prop trading firms are somehow different from the other two. Is this true? If yes, why is it so?
A big position trading firm may choose to use quantitative trading tools purely for large order execution. Say they have a huge block of XYZ futures to buy, they could use algorithms to work the order for them, IE: work 10 lots at a time with scaled down bids, to get the best price without moving the market. But behind the scenes there still may be a portfolio manager making qualitative decisions. But others may use the algo tools for high-frequency short term trading, for things like arb opportunities that only last a few seconds, where the only way to pull it off is an automated system. I'm sure there are lots more but those are two extremes.
Thanks, Vorpal! If the job is high-freq trading, is there any significant difference between different places? Also, does hi-freq trading strategy share any similarity with other quantitative trading strategies, e.g. statistical arbitrage ... Or, can we say hi-freq trading is also a type of stat arb strategies?