Jane Street, the electronic market making firm, has a reputation for paying very well. We have written about its generosity a lot (here, here and here). But not everyone there is happy with their rewards.
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Douglas Schadewald and Daniel Spottiswood, the 26- and 30-year-old ex-Jane Street traders now at hedge fund Millennium and embroiled in a court case about their trading strategy, said last week that they were “disappointed” with their 2023 compensation at Jane Street and left the firm as a result.
Jane Street itself says the two men made $150m in profits in a three-month period. Why, then, were they were (allegedly) paid poorly? Jane Street didn’t respond to a request to comment on its compensation strategy, but in court last week, Schadewald and Spottiswood claimed they were “disappointed with Jane Street’s compensation decisions” and “felt that their contributions to the firm were being undervalued.”
This seems unusual. One senior trader (not at Jane Street), says it isn’t. “Jane Street is a bit communist in the way it pays traders,” he says, speaking off the record. “They pay everyone well, but with limited variance between medium and high performers.”
Another senior trader, also speaking on condition of anonymity, says traders at Jane Street don’t even know the level of their individual PnL. This is allegedly part of a strategy to disconnect individual traders’ performance from bonuses: instead, Jane Street bonuses are said to be paid based on the performance of the firm. “It can be infuriating for traders who are in charge of desks that make hundreds of millions, and they just take a single digit million home,” the senior trader informs us.
Most people would contest that a single digit million dollar bonus is either poor pay or evidence of communism. However, hedge funds like Millennium typically pay around 20% of PnL in bonuses, and Schadewald and Spottiswood would presumably have shared $120m in bonuses if they maintained their profitability there. (In fact, though, Millennium says they’ve only generated $4m in PnL in four months).
Most people at Jane Street don’t seem to mind the egalitarianism: the staff turnover rate there is only 6% a year. If Schadewald and Spottiswood didn’t like the approach, they could also have joined arch rival Citadel Securities. Like Jane Street, Citadel Securities emphasizes collaboration. Unlike Jane Street, Citadel Securities also emphasizes meritocracy and claims that people who deliver results are “empowered and rewarded.” This makes Citadel Securities more corporate and less like an “anarchist commune” than Jane Street. It may also make it easier to get paid and promoted there.
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