The New Masters of Wall Street

http://www.forbes.com/forbes/2009/0921/revolutionaries-stocks-getco-new-masters-of-wall-street.html

by iamelgringo • 17 years ago

30 12 17 years ago

msie• 17 years ago

What surprises me is that it seems that this is a "new" thing. I thought computer trading has been happening for years.

quant18• 17 years ago

Hedge funds, proprietary trading desks in i-banks, etc. have been using automated trading strategies for decades. But on the the agency equity trading side (the guys who move institutional investors in/out of larger long-term stock positions --- and the guys who are the driving force behind all the dark pools), it's still at least somewhat new.

Institutional clients were reluctant let a computer trade their big order. They wanted a human to be deciding how much to quote, when to trade a little fast/slow in response to market conditions, etc. And up to the early 2000s, agency "trading strategies" were still shockingly primitive. Marketing literature claimed they "intelligently managed market impact risk vs. volatility risk". Fancy way to describe a glorified time slicer. Human traders (not to mention prop algo strategies) earned easy money gaming these dumb things.

Eventually, the "human advantage" faded away because the humans in question were being expected to handle more and more volume (to earn more and more commissions) --- they just didn't have enough time to pay lots of attention to each client order and the prices being quoted all over the place on all the new alternative venues. And so the banks finally had an incentive to pour money into making their algorithmic trading systems less primitive.

ilkhd2• 17 years ago

What surprises me is that it seems that this is a "new" thing. I thought front-running has been known for years.

sireat• 17 years ago

If it(hf trading and associated phenomena) lowers the spread for the retail investor at the expense of NYSE, NASDAQ and regular brokerages that would be a good thing. It remains to be seen if it really does.

Dark pools sound more worrisome though, one loses transparency through them.

shrikant2• 17 years ago

Better link: http://www.forbes.com/forbes/2009/0921/revolutionaries-stock...

Choice titbits from the article where algo-trading will "help the little guy":

- [...]high-frequency trading has morphed into a technology arms race.

- Making it in high-frequency trading these days requires the latest technology. Lots of it.

- [..]a big chunk of high-frequency profits derive from jumping into markets before small investors can.

Good luck, retail investor.

dhyasama• 17 years ago

Front-running is when a firm places a trade ahead of its client's trade. High-frequency trading isn't front-running. Usually the firms are trading with their own capital and don't have clients to front-run.

musclman• 17 years ago

Lots of people who are trading in this way seem to congregate at http://www.elitetrader.com/vb/forumdisplay.php?s=&forumi...

loltrader• 17 years ago

I can assure you that there are only a handful of people on ET who are successfully doing HFT and 10 at most who are profitably automated. The rest are either discretionary traders, retail pikers, trolls, or troll aliases. There's definitely no congregation, nor is there really anything of substance regarding automation or strategy trading, short of a few older threads.

The New Masters of Wall Street

Related Stories