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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August 31, 2000

CooperNeff's Beard

By Peter Chapman

In early 1997, a little-known electronic communication network called Archipelago approached CooperNeff Group asking for its Nasdaq business. The basket trader, frustrated in its dealings with market makers, was all ears.

Dealers shunned CooperNeff's savvy order flow, preferring the "uninformed" orders of long-term retail investors, according to Cavallaro. Archipelago offered CooperNeff anonymous access to those same dealers over SelectNet as well as a pool of liquidity of its own. CooperNeff became one of Archipelago's first big institutional customers.

"It was very difficult to have a relationship with a dealer," said Robert Cavallaro, senior managing director at CooperNeff. "Our order flow didn't fit them. It was fast-moving. They tended to like slower-moving order flow." The result was a relationship that culminated last November when CooperNeff bought a small, undisclosed stake in the ECN.

Archipelago recently merged with the Pacific Stock Exchange. "We think they are one of the leading candidates to become the exchange of the future," Cavallaro explained. "You'll find Nasdaq and listed stocks trading harmoniously on one platform."