How Hudson River Trading Actually Uses AI

SPEAKER_2 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:22)

And I'm Tracy Alloway.

Joe Weisenthal (0:23)

Tracy, I've always had this idea for the podcast, or a thing that I wanted to do.

Tracy Alloway (0:28)

Okay.

Joe Weisenthal (0:29)

Conceptually, with podcasts, is schedule every guest for two interviews. So you have the opening interview, and you ask a bunch of questions, and then it's, oh, god, I really wish I had followed up on that, I had more. I was just starting to sort of get my header on this thing. Now I could have asked the good questions, and then have the person come back next week. Also, the audience complaints, I wish you had asked that, and then fill in all those gaps that had been inspired by the previous conversation.

Tracy Alloway (0:54)

I don't think it's a bad idea. I think it would double the number of episodes that we put out. But sure, there are topics that come up, usually things that we're just kind of new to, and we're trying to learn about, specifically technical things, and one of those has to be AI, right?

Joe Weisenthal (1:10)

AI, and also, you know, I really had a great time, I guess, last month. We were in Chicago. We talked to a bunch of different, it was like a trading-related trip. We interviewed Don Wilson, we interviewed the head of the CME, we had some other chats, they're all about the world of trading. When it comes to trading, it's like, you know, we talked to long-term investors, portfolio managers, endowments. We talked to some people on the hedge fund space, who like maybe have a holding period of several weeks or whatever. I actually really want to learn more about the trading, like these people who have like a holding time of one second or something like that, because that's where a lot of the tech and a lot of the actual like action is, and how that world makes money and how they actually deploy technology is very interesting, but still something I don't have my hand on.

Tracy Alloway (1:52)

Well, the practical application, right? And also the culture of AI on Wall Street. I find that really interesting because I remember, I guess it was like more than a decade ago, but remember Lloyd Blankfein saying that Goldman Sachs is a technology company.

Joe Weisenthal (2:04)

Oh yeah, yeah, Jayphree Morgan.

Tracy Alloway (2:05)

Yeah, and all these bank CEOs saying, we're going to install ping pong tables to get all the coders. And now I see ads at trading firms and it's like, we have a data center full of B200s or we have a data center full of G300s. Come work for us.

Joe Weisenthal (2:19)

The only thing besides all their tech that I know is like, every time you read a profile of any trading company, they're like, and they love to play backgammon there. They love to play like all the article, the chess boards are out. They could be seen playing chess over lunch, et cetera. I get it. OK, they like odds, they like games, they like whatever. Let's move the ball forward.

Tracy Alloway (2:38)

Well, there's also the underlying theme of, is this all hype? Right, because you do get the sense sometimes that companies are putting out press releases where they just mention AI to tick a box, to be seen to be doing something, and hope that their stock actually goes up. And because so much of this is proprietary, and people kind of have an excuse not to go into detail about it, sometimes you do get the feeling that people are just talking about it and not actually using it.

Joe Weisenthal (3:06)

Cynics, and I'm not saying this myself.

Tracy Alloway (3:10)

I know you're not a cynic, Jeff.

Joe Weisenthal (3:11)

Speaking of trading and technology, cynics would say that CMEs deal with Google to build a cloud, to put trading on the cloud was hyped. That was a press release. People have said that. People have made that charge, and they don't understand why. You don't have to comment. You don't have to say anything further on that.

Tracy Alloway (3:27)

I do have a comment, but I'll hold it for our guests.

Joe Weisenthal (3:30)

I'm just saying, there is this world where people do press releases, and cynics go, I don't really understand the point. Anyway, there's a very long wind up. Let's learn more about the world of trading. Let's learn more about AI and tech specifically. What does it even mean to apply AI within the realm of trading? We are going to be speaking with Iain Dunning. He is the head of AI at Hudson River Trading. He was previously at DeepMind. So his trading and AI bona fides are about as good as it gets.