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, 2001

ECN Orders Frustrate Nasdaq Traders

By Peter Chapman

Orders placed on ECNs are gum ming up SuperSOES, Nasdaq traders say, often forcing them to execute away from the inside. Scott Littman, head of Nasdaq trading at Knight Trading Group, says his traders' orders often get stuck in a SuperSOES queue whenever an ECN is on the inside. Rather than wait for their orders to reach the front of the line, Littman's traders are executing at the next best prices.

"To find liquidity we must execute through the NBBO," Littman told the audience at the Security Traders Association's Fifth Annual Technology Conference in Irving, Texas. ECN quotes slow the SuperSOES matching process because they are only accessible through SelectNet. ECNs have refused to allow automatic SuperSOES executions against their quotes.

Sanjiv Gupta, head of research at Bloomberg Tradebook, notes that the phenomena has made sweeping the Street much more complex. Because it takes about one second per price level to sweep several levels via SuperSOES, an ECN quote could suddenly appear at a given level in the middle of an execution. That, he told the Texas crowd, could "cause a shutdown in the middle of your execution."