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 28, 2006

At Deadline

By Editorial Staff

CSAM Reorganizes

*Credit Suisse Asset Management is retrenching in the U.S. The money management unit of the big Swiss bank will change its investment focus to areas of growth such as enhanced index products, quantitative strategies and structured products, the firm reported. It will also continue to focus on such core strengths as alternative investments and short-term fixed income paper. It will cut back on the active management of debt and equities portfolios. These operations have been incurring losses, Credit Suisse executives note. In the first six months of this year, the entire asset management division recorded operating profits of 261 million Swiss francs, down 54 percent from 565 million Swiss francs in the same period in the prior year. The restructuring at the firm, which manages $52 billion in total assets at its U.S. arm, with about one-third of that in equities, will result in the loss of 300 of 750 jobs in the U.S. by the end of the year. The trading department will experience substantial cuts as well, sources say.

-Peter Chapman

Liquid & Tight Markets

*Firms that pay market makers directly to support their stocks experience improved liquidity in those securities. That's the conclusion of researchers associated with the Whitcomb Center for Research in Financial Services at Rutgers University. The academics studied the liquidity characteristics of stocks traded at the Stockholm Stock Exchange that were supported by dealers under contract to the issuers. They found that quoted spreads declined both in absolute and relative terms after the issuers signed contracts with the market makers. Quoted size at the inside and four ticks away increased, the researchers also discovered. The resultant improved liquidity led to higher trading volumes in the names, according to the study currently under review by the Whitcomb Center. The researchers studied the stocks of 50 companies that had contracted with dealers between late 2002 and early 2004. The all-electronic Swedish bourse, owned by OM Group, started its market maker program in 2002, to improve liquidity in small- and mid-cap names. As part of the program, the exchange establishes maximum spread widths and minimum depths for the securities. Until the program began, there was no official market making on the exchange. All inside quotes were set by public limit orders. The exchange's approach differs from that of markets in the U.S., where issuers pay the exchanges to list their securities but do not pay specialists or market makers for trading support.

-Peter Chapman

BATS Goes National

*BATS, which along with other ECNs was battling with Nasdaq over fees and capacity, has found happiness with its move to the National Stock Exchange, where it has record volume. A BATS executive says NSX's lower fees and the rollout of its new platform, Blade, are why the ECN is reaching daily volume of 30 million shares. "BATS' volume has been rising since July first," Dave Cummings, president and CEO of BATS, told Traders Magazine. "There is now more liquidity than ever in the BATS book," he said. BATS had been working informally with the Association of Independent ECNs over disagreements with Nasdaq. The battle began when Nasdaq stopped levying fees on the order sender. Instead, it started dunning ECNs for a fee. ECN officials said Nasdaq was trying to kill their business. However, trading industry sources say BATS sees little need to continue with the association because it doesn't have the problems of a bigger ECN.

-Gregory Bresiger