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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December 1, 2001

Day Traders Reach the Pros

By Editorial Staff

Also in this article

  • Day Traders Reach the Pros

Greg Ballard and Key Ramsey, former daytraders, have seen the error of their ways. Instead of trading volatile over-the-counter stocks (with little information to guide them), they are marketing technology to the pros, technology designed to help them keep tabs on those often obscure OTC companies.

Their firm, Knobias.com, of Ridgeland, Miss., has two offerings. A database holds financial, legal and operational information on about 6,500 mostly Bulletin Board and Pink Sheets stocks. It has management bios, regulatory actions, stock trading statistics, financial ratios, news, and other market intelligence. An alert system, called RAiDAR, keeps traders up to the minute on news, SEC filings, stock price and volume changes, critical corporate actions and promotional activity.

The database starts at $200 per user per month, while RAiDAR is similarly priced at $250. Combined, the cost is $400. Over 30 market makers are now testing the technology, according to the executives. Three have signed on as customers, including Wm. V. Frankel. However, there is similar technology available from other suppliers. Neovest and Vhayu Technologies, for example, sell alert systems. GlobeNet, an ECN originally for OTC stocks, also maintains an information repository. Traders Magazine Technology Editor Peter Chapman caught up with Knobias.com's founders, Ballard and Ramsey, CEO and COO, respectively.

Traders: How does RAiDAR work and how does it help traders?

Ballard: Imagine a trader responsible for 400 stocks. It is impossible for him to keep up with 400 while he's trying to trade. The tool allows him to enter a portfolio of symbols and it will passively provide surveillance of those symbols. The trader gets information as it happens. A little application will pop up that says: "new bankruptcy filing for XYZ" or "volume surge in ABC."

Traders: Any success stories?

Ballard: Two. A trader at Wm. V. Frankel had a $1 ask for a company. We put out a critical alert, pre-market, that described a tender offer for the same company for $3.75. The trader moved his ask from $1 to $3. It was immediately taken out when the market opened.

Traders: Lucky trader. What's the other?

Ballard: Another stock had plummeted down to 14 cents. One of our customers thought the downfall was over and started going long. We put out an early morning critical alert about a bankruptcy. He got out. Two days later the stock was trading at one cent.

Traders: Another happy ending. Critical alerts are written by your staff?

Ballard: That's correct. We have a writing staff of eight. The alerts come from conference calls with the companies, new SEC filings, proxy statements and other sources.

Traders: And the trading alerts are actually written by a computer?

Ballard: Many are automated. The software fills in the blanks. Every 30 minutes, software compares a stock's current trading status with its historical performance. The software writes an alert that looks handwritten. It can generate 1,000 alerts per day.

Traders: What are coverage alerts?'

Ballard: We anonymously subscribe to 400 stock pickers' or promoters' newsletters. If those promoters blast out an e-mail to investors, we capture it. We then write three paragraphs. One summarizes the content. Another discusses the stock's trading patterns. The third details the promoter's compensation or interest in the company.

Traders: How does the coverage alert help?