Fairness of compensation in algo-trading can be quantifiable.

Algorithmic trading can be an enjoyable experience because the machine is performing the execution tasks for us. However, this also presents a challenge when it comes to accurately quantifying the work done in terms of hours. This is because some high performing ATSR may have a stroke of genius that results in an extraordinary Excess Gain, making it unfair to judge their performance based solely on hours worked. In other words, their exceptional results cannot be fully captured by a standard metric like hours worked. As such, it is important to consider alternative methods to evaluate and compensate these high performers, in order to ensure fairness in the workplace.

If a prop firm is profiting off of a ATSR’s trading strategy immensely but compensating the ATSR relatively poorly, one would know that the firm is not being fair to the employees.

For ATSR who choose to be paid in Base & Bonus Pay, the projected compensation in total and in the long-run will be less than those who would have chosen the Partnership model.

Having said that, Eon Labs Ltd. is anticipating that the balance will tilt towards the advantage of the ATSR employees in the short-term, particularly during the KHA Probationary Period. During this time, the company is using a limited amount of funds, i.e., a small AUM, to test their trading strategy or system against its historical performance. Consequently, it's unlikely that the company will generate enough Excess Gain to even cover the base pay of the employees.

The Employment or Partnership page will tell you more on the pros and cons.

If a trading system by a ATSR employee demonstrates robustness in live trading and its signals (i.e. timing & direction) synchronous with backtesting ones during Probationary Period, Eon Labs Ltd. will make every effort to retain the ATSR as an exclusive employee by raising his or her ibAUM. The risk of losing his or her expertise to another rival prop firm is unbearable because when a trading system is faced with a substantial increase in AUM, it can be subjected to increased market impact pressure, which can result in alpha bleed.

Prop Fund vs Hedge Fund

We can gain more insights into the fairness of employee compensation plan of a prop firm, such as Eon Labs Ltd. by comparing it to the fee structure of hedge funds as follows:

Paid in advance | | Bonus Pay: Pay-for-Performance (‣) | Performance Fee: 10-50% of Excess Gain |

Intellectual Property (IP)