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Tim Quast
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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 21, 2005

A Record Volume Day For a Large Block ATS

By Gregory Bresiger

Pipeline Trading Systems, an ATS for block trades, which began last fall, reached a milestone on one trading day in March when transaction volume exceeded nine million shares. The average executed trade size was 45,972 shares. The ATS, which has some 100 buyside and sellside clients, is an electronic platform that permits block traders to enter priced orders for extremely large blocks of stock. The system aims to offset the predatory practices that Pipeline says can occur on traditional exchanges and ECNs. Studies contend that these practices have added as much as $40 billion a year to institutional transaction costs.

"We have designed a system to minimize the effects of market impact, which decimals exacerbated," says Al Berkeley, chairman and CEO of Pipeline. He says that traditional exchanges require clients to give trading venues an option - orders have to be executed "face up" through firm limit orders.

"They say what stocks, what price and whether they're a buyer and seller and the whole world can see that," according to Berkeley. He says Pipeline strips the option value out of the display limit order. "We won't tell you whether the guy is a buyer or seller. You have to put your own order in to discover if he is a buyer or seller," he says. That, besides a relatively large minimum-trading requirement, will destroy the economic incentive of predatory pricing, Berkeley hopes.