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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 15, 2007

Reinventing the Status Quo

By Michael Scotti

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  • Reinventing the Status Quo

Top traders today must be perpetual learners. They need to learn more about other asset classes. In short, they need to keep reinventing themselves.

Chris Hynes, former head trader at State Street Global Advisors, has spent his Wall Street career doing that.

And now, after 30 years on Wall Street, Hynes will be relocating to Vail, Colo. from Boston. His career has at times put him at the center of change, often with him leading the charge.

"I've always tried to keep reinventing myself," Hynes says, "and maybe that's because I'm never satisfied with the status quo." Interestingly, Jim Leman, an industry consultant who sat on the original FIX Committee with Hynes in the mid-'90s, described Hynes with almost the exact same words.

FIX was a major communications breakthrough for Wall Street. It established a common messaging language that ushered in the electronic trading era.

Hynes' trading career began in the early days of options, in 1975. "I went into derivatives because I needed to go into a young man's business that the older guys with the fat Rolodexes didn't want to learn-or understand," he says.

In retrospect, his options training paved the way for his career, Hynes says. It not only exposed him to management at a young age, but it also forced him to analyze the trade-offs between risk and reward. His ability to weigh risk became invaluable in later years when he headed lines of business.

"Your career is the biggest investment you'll ever make," Hynes says. "People said to me, You're going into the options business? That's so risky.' And I thought it was risky to stay in the bank, where raises didn't even cover inflation."

Hynes wrote a market letter, traded options and covered accounts at various times before moving on to launch the institutional options business at Morgan Stanley in 1980. Opportunity then called at Jefferies & Co., where he went to run the options unit in New York in '83.

All of the options investors then had a quantitative bent, Hynes explains. It was his group at Jefferies that devised the idea to create a matching system that would lessen market impact and make trading more efficient.

So the creation of Posit, the matching engine that's now the cornerstone of ITG, started in the options group at Jefferies. Posit was the brainchild of Hynes, Josh Rose and Don Luskin, with Michael Rosen handling operations.

But it took some doing to get buy-in from Jefferies management.

Indeed, Jefferies was then wrestling with some major issues. Long considered a maverick third-market firm, Jefferies had forged close relationships with many of the takeover specialists during the 1980s' leveraged buyout frenzy, including the infamous Ivan F. Boesky. Several months before Posit's first trade, Jefferies chairman, Boyd L. Jefferies, resigned from the firm after settling government charges that he had participated in illegal stock parking for Boesky. It's safe to say there were bigger things on management's plate than launching an untried matching engine.

Enter Ray Killian, who became the management sponsor that Posit needed to gain acceptance internally, Hynes says. Killian, of course, would later become ITG's president and chairman. Jefferies & Co. would later spin off Posit via ITG. "Ray was the godfather of Posit," Hynes says. "We couldn't have done it without his support."