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 27, 2005

Veteran News Coverage

By Michael Scotti Editorial Director

(Traders Magazine, July 2005) -- Wall St. can be an insular place. So every now and then, a reality check is necessary. I recently sought out my own reality check and called on Wilson Barto, a former editor of mine. As experienced as they come, the retired Barto was a member of the Washington press corp. during the Kennedy Administration.

Wilson used to stress that award-winning newspapers not only covered the breaking news well, but also stayed on top of the continuing story. That was extremely important in a gritty, competitive two-newspaper town like Trenton, N.J.

I'm proud to say that Traders Magazine hit paydirt on both counts concerning our in-depth coverage of Reg NMS this month. Thanks to the reporting of Managing Editor Gregory Bresiger, our coverage comes close to the definitive work on the controversial trade-through rule.

No sooner than Reg NMS hit the Federal Register, Bresiger, a 27-year news veteran, already had lined up an interview with Congressman Richard Baker. Baker said he was already exploring ways to overturn the controversial trade-through rule. We immediately sent out an email news blast.

On short deadline, besides the Baker interview, Bresiger wrote two other stories on this complex issue. That type of enterprise reporting would have made Wilson Barto proud.

As you know, there will be limit-order protection across all equity markets with Reg NMS. The SEC staff pointed out that allowing trade throughs would have benefited professional traders at the expense of the retail investor. That's the SEC's charge, to protect the little guy, so a trade-through protection rule should come as no surprise. Interestingly, it should be noted that each major change in market structure over the last decade has come on the heels of a major scandal. Coincidental? Not likely.

Over the last 10 years, a major discussion has been that the NYSE and the Nasdaq were converging, becoming more like each other. The Nasdaq or dealer market remember that? was forced to become order driven as a result of the order-handling rules in 96. Reg NMS is forcing the NYSE to become more electronic, but the SEC is defending the sanctity of investor protection.

The next step, in this convergence of the NYSE and the Nasdaq models, will be how the NYSE's proposed hybrid model shakes out. The questions surrounding this proposal far outnumber the answers right now.

As a publication, we don't have these answers, either. But stick around. We'll have plenty of interesting questions. Traders Magazine will be at the forefront of this important debate and discussion. We will deliver the type of cutting-edge news and analysis that would make any retired editor proud.

Michael Scotti
Editorial Director