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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July 31, 2001

A Bull Blazing a Trail

By Peter Chapman

Ever the pioneer, Merrill Lynch has been trading a small portion of its Nasdaq orders on an agency basis for over a year. Its modus operandi does not always involve bringing two naturals together, though.

"There is no reason why you cannot act as agent for a client in a principal market," said Merrill's Nasdaq head, Leo Ressa. "It's how you approach each trade."

Ressa explains his traders can work the order in the inter-dealer market and on ECNs as long as the executions occur in a "client facilitation" - and not a principal--account. The customer is then charged a commission, but not a spread.

Ressa adds that Merrill is putting systems into place that allow it to offer clients the option of trading in any of four ways: pure agency, riskless principal with a commission--equivalent; risk principal with a commission--equivalent; and net.