Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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September 30, 1999

At Deadline

By John A. Byrne

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  • At Deadline

OptiMark

The OptiMark Trading System had a difficult introduction on the Pacific Exchange. As the super "black box" for institutional traders went live, its performance was troubled by limited access to listed order flow. At the early stages, OptiMark was handling roughly one million shares daily. During the summer, that climbed up to three million shares, according to OptiMark's PR firm.

The PR firm credited the recent access to SuperDot for part of the improvement. Some trading pros think OptiMark may shelve plans to go live on Nasdaq this year, given the laundry list of projects on Nasdaq's calendar. The PR firm said OptiMark still hoped to go live this year. Approval for the OptiMark connection is still pending from the Securities and Exchange Commission. A spokesman for Nasdaq said the exchange is still committed to introducing OptiMark before yearend.

Closed Doors

Primex Trading NA, the electronic auction market set to debut next year, has closed its doors to new partners, having signed heavyweights Salomon Smith Barney and Morgan Stanley Dean Witter. "Never say never, but it is not our intention to seek out more investors," said Glen Shipway, Primex' president. "In fact, we had sufficient funds before they came aboard. What they offer is order flow, credibility and resources beyond money."

Formed in June by Bernard L. Madoff Investment Securities, Merrill Lynch, Goldman Sachs, and others, the partnership now includes four of the top five traders on the New York Stock Exchange. They also rank among the top ten Nasdaq market makers.

Primex plans to trade both listed and Nasdaq stocks. But the four NYSE members will be restricted to trading 19c-3 stocks, or those listed after April 26, 1979. That's unless Primex is able to work out a deal with a stock exchange or becomes one itself. It is pursuing both options. For Morgan Stanley, the Primex deal is its fourth investment in an electronic trading system. It has stakes in Archipelago, MarketXT and Britain's Tradepoint Financial Networks. Salomon owns a piece of MarketXT and STRIKE Technologies.

Super Regulator

Arthur Levitt, the chairman of the Securities and Exchange Commission, is floating the idea of a plan to amalgamate the self-regulatory operations of each stock exchange into a single super-regulatory body. Some significant changes could be ahead. The SEC itself is studying the possibility of combining some basic regulatory functions at each exchange. The proposal would be designed to eliminate overlap among regulatory bodies. Levitt is touting his ideas as the U.S. stock markets fragment and change at an unprecedented rate.

The SEC is concerned about a suitable regulatory model for the emerging new structures. Levitt says he favors linking all markets electronically. That could conceivably create the national market system envisaged by Congress in 1975.

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