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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November 13, 2007

Men At Work

New Leadership Looks to Build NYSE Euronext's U.S. Market Share

By Peter Chapman

No one said it would be easy.

Duncan Niederauer and Larry Leibowitz, electronic trading professionals hired this year to manage NYSE Euronext's U.S. trading operation, have taken the helm at perhaps the most difficult time in the storied franchise's history. A combination of regulatory change, stiff competition, and the expansion of automatic executions at the New York Stock Exchange has driven the company's U.S. market share to an all-time low.

The Securities and Exchange Commission's Regulation NMS effectively ended the organization's 200-year-old monopoly, forcing it to adapt to an unfamiliar world of automatic executions.

With the Big Board functioning more like a small-order ECN than the block-trading powerhouse it once was and NYSE Arca's stature in Nasdaq trading under assault, the veteran electronic trading professionals have their work cut out for them.

"For us to be competitive going forward," Niederauer told Traders Magazine, "we will have to leverage the brand and think like a technology company. We have to evolve our culture to one that insists on innovation and, most importantly, is very customer-focused."

Two Decades

Both execs are newcomers to NYSE management. Niederauer joined the company in April as co-president, sharing the duties with a Paris-based Catherine Kinney. The Goldman Sachs alumnus is sometimes mentioned as the heir apparent to NYSE Euronext chief executive John Thain, who could step down in the next year. Leibowitz joined in July as an executive vice president and chief operating officer for U.S. products, replacing Jerry Putnam, who remains an adviser.

The two new executives each have two decades of Wall Street experience under their belts, having made their marks as electronic trading whizes at prominent bulge-bracket firms. Both are also steeped in market structure and have played leading roles in charting strategy at their previous firms. Niederauer spent 22 years at Goldman, ending his days there as co-head of the firm's equities execution services business. He was also head of portfolio trading at one time.

Leibowitz has worked at a number of firms during his career, lastly as the COO of UBS's U.S. equities group. He was co-head of Schwab Capital Markets when the trading division of Charles Schwab & Co. was acquired by UBS. Earlier in his career he was a block trader.

Within NYSE Euronext, Niederauer and Leibowitz are responsible for the trading businesses of NYSE Group, the U.S. subsidiary of the trans-Atlantic exchange operator. That includes both the New York Stock Exchange and NYSE Arca, which the NYSE bought in April 2006. With 85 percent of NYSE orders now filled electronically, the profiles of the two markets havebecome similar. Some observers believe NYSE Arca will become the sole trading platform, but that is not yet the case. Despite the closure of three of its five trading rooms, the NYSE is still doing about one-and-a-half billion shares per day. Niederauer, Leibowitz, and Thain continue to voice their support for the specialist model.

Room for Both