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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April 30, 2000

Lifestyle: Adventures in Paradise

By Sanford Wexler

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  • Lifestyle: Adventures in Paradise

David Whitcomb was sailing last year 600 miles off the coast of Ecuador, around the enchanting Galapagos archipelago, when he learned how his firm in Charleston, S.C. had smashed a one-day trading record.

Automated Trading Desk (ATD), a high-tech, day trading-style firm specializing in Nasdaq limit orders for wealthy individuals, pension funds and two institutions, had executed 20 million shares.

Whitcomb was excited but he did not loose his self-control. He just kept on sailing. No sweat. No panic.

"I can be in the jungle, sailing the seas, or on safari while our computers are setting a new record," Whitcomb said in an interview at Cafe Dante, near his apartment in Manhattan's fashionable Greenwich Village neighborhood. "That's one of the great things about Automated Trading Desk," Whitcomb added, quietly sipping his cappuccino. "I like to remind people that automated is our first name." (ATD's trades are actually executed by Mount Pleasant Brokerage Services, a subsidiary in Charleston.)

For David Whitcomb, college professor turned Wall Street whiz, his office is mobile and virtual. It moves at the speed of a jet, or at the more leisurely pace of a sail boat. And that gives Whitcomb a lifestyle that is envied by some pros who never leave their desks.

With a cellular phone in his hip pocket and a laptop computer under his arm, Whitcomb, the traveling trader, is rarely out of range of his 30-person firm.

"I'm a long-distance telecommuter," Whitcomb said. His favorite medium: e-mail. "It doesn't interfere with the trading activity," he suggested.

Whitcomb, who's 57, co-founded ATD in 1988, while he was a professor of finance at the Graduate School of Management at Rutgers University in New Jersey. He was teaching courses in security analysis and market microstructure to bright, young business students.

That's when he conceived the idea of trading limit orders electronically based on mathematical models. Whitcomb called one of his former students, Dr. James Hawkes. He had founded Charleston's Quant Systems, a developer of computer software for statistics instruction.

Horse Races

This was not the first time that Whitcomb had worked with Hawkes on a computer software-related project. In the early 1970s, when Whitcomb was teaching at New York University, Hawkes, then one of his finance students, suggested a novel money making plan: using a computer model to predict and bet on horse races. "I thought that was a cool idea," Whitcomb recalled.

For the next few weeks the duo bought the daily racing form. They created a hypothesis for predicting the racing speed of a horse.

Whitcomb and Hawkes entered the data into the old IBM 360 punch cards and ran it through NYU's computer system. "We came up with a horse race prediction model," Whitcomb said.

In fact, Whitcomb claimed the machine predicted a winner, Secretariat, in the Triple Crown in 1972. "We didn't make much money," he said.

Good Luck

Although their winning streak may owe as much to good luck and common sense, Whitcomb, many years later, took the concept one step further.