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 1, 2003

Banc of America's Secret Formula?

By Peter Chapman

Banc of America Securities, in the midst of relocating its equity trading platform to New York, is betting proprietary algorithms will put it on top.

The move from San Francisco is expected to be completed by next month. That's when its 40-person trading staff will be installed on BofA's newly-built Manhattan trading floor.

Most of the 60 or so traders and assistants in San Francisco will be pink slipped although some are moving east to take jobs.

Algorithms

At the heart of the rebuilt trading operation are proprietary algorithms, trading analytics and quantitative strategies. These were obtained by BofA when its parent, Bank of America, bought Vector Partners last December.

Vector was a quantitatively-driven broker dealer that specialized in the creation and execution of portfolio trading strategies.

The plan at BofA is to merge the trading strategies and systems of Vector with an elite group of traders culled from the top bulge-bracket firms. This, BofA officials hope, will provide institutions with sophisticated cost-effective trades.

Running the operation, as global head of cash equities, is Pete Forlenza, a one-time program trading chief at Salomon Smith Barney. "Our goal is to combine the best of the traditional cash businesses with the next generation of quantitative trading products," he said.

There is no listed desk and no Nasdaq desk. Instead, there is one U.S. cash trading desk. Traders are grouped into industry sectors but each still largely functions as a Nasdaq or listed trader. Trading is headed up by Ciaran O'Kelly, formerly head trader at Salomon Smith Barney. Sales trading is run by Dennis McAllister, another Smith Barney vet.