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.

Traders Poll

Are you in favor of a pilot program and examination of the rebate system by the SEC?




Free Site Registration

April 21, 2010

From the Ground Up

By John D'Antona Jr.

Jeff Nordstrom joined Minneapolis-based Riverbridge Partners last summer, and he's in the midst of a makeover of large proportion. A 15-year equity trading veteran, Nordstrom's task is to convert his two-man desk into a more electronically driven organization--one less dependent upon high-touch trading and paper tickets.

Jeff Nordstrom

He got his first taste of electronic trading at Investment Advisors Inc. There, he worked for head trader Rick Holway, an early adopter of electronic trading. "Rick was a big proponent of the electronics, and I learned a lot from him," Nordstrom said.

From there, he moved across town to Peregrine Capital Management, where he spent 11 years and played a key role in the firm's migration to electronic trading.

"We put in the Eze Castle OMS to move us into the electronic trading age with interfaces to crossing networks algorithms, dark pools," explained Nordstrom. "I was the point man to figure out what was the latest and greatest."

At Riverbridge, the client mix is both institutional and retail. At other places he's worked, the clients were primarily institutional. The trick for Nordstrom will be figuring out the right mix of technology to serve each group. "I've found the institutional world has by far invested more in technology and efficiencies over the retail world," Nordstrom said.

His first challenge at Riverbridge is to get used to trading at a firm that is behind the curve technology-wise. But he hopes that won't last for long.

Right now he's shopping for an order management system and an execution management system, and reviewing algorithms. Firms and systems he's successfully used in the past will have a leg up, Nordstrom said. But he won't discount new vendors or approaches that could improve the desk.

#Caption#

The process will begin with a complete review of the trading desk and back-office systems. Once the evaluation is complete, Nordstrom will then put the new systems in place. A revamped desk will offer not only greater efficiencies, but also allow the firm to manage--and trade--more assets.

He will start by looking into Riverbridge's compliance systems, which will lead to a full review of the firm's current order management system. "We're going to tighten up and get more automation in the compliance process," Nordstrom said.

Once Riverbridge's order management and compliance systems are in place, Nordstrom will add the supporting systems--the crossing networks and algorithmic trading tools that will serve the trading desk. He described the selection process for these supplementary systems as "wide open" to new vendors with fresh ideas.

"You have to be like a jack-of-all-trades," Nordstrom said, describing his task. "You don't have to be great at everything, but to be able to understand how they all work together and understand the efficiencies involved."

 

(c) 2010 Traders Magazine and SourceMedia, Inc. All Rights Reserved.

http://www.tradersmagazine.com http://www.sourcemedia.com/