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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April 1, 2013

Lessons from The Super Traders

1992-2012 The Differences Two Decades Make

By Alan Rubenfeld & Tom Steinert-Threlkeld

Also in this article

They call him "Trader Vic."

No, he doesn't run a chain of Polynesian restaurants. But in the same way that chain moved away from its roots in '60s tiki culture and is now found in once-faraway places such as Dubai or Bangkok, Victor Sperandeo has moved away from trading in equities toward more exotic fare such as commodity futures and the creation of trend indices.

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He made his name by appearing to predict a huge market downturn in a Sept. 21, 1987, feature in Barron's, where he said: "There is a very good chance that this market has topped."

When the stock market does slip, he said, "program trading will exaggerate the move to such a degree that the sell-off may be the steepest on record."

Black Monday arrived one month later, with the Dow Jones Industrial Average dropping a record 22.6 percent, or 508 points, on Oct. 19. "Program trading" became the bête noire of the event and a common household villain.

That, and Sperandeo's track record of being able to spot market trends and gauge risks, made him one of "The Super Traders" profiled in a 1992 book of that name that tried to set out in clear language and human examples the "secrets and successes of Wall Street's best and brightest" minds. The areas of expertise and perspectives of these minds range from floor trading to institutional trading to market making to program trading and electronic trading.

When the book was published, there were three national markets: the New York Stock Exchange, the Nasdaq Stock Market and the American Stock Exchange. Together, they handled 407.3 million shares of equity trading a day, on average.

On the 20th anniversary of its publication, there were 13 national exchanges where trading occurs in the open, roughly 50 dark pools where firms trade anonymously and scores of internal pools of orders where brokers match trades before they go anywhere else. Average daily volume is 6.6 billion shares a day-and brokers, trading firms and exchanges are cutting back staff, because it's a down market.

To get a variety of perspectives on the changes that have taken place in the past two decades, Traders Magazine caught up with Trader Vic, former Bear Stearns & Co. chairman Alan C. "Ace" Greenberg and seven of the other eight traders considered the top practitioners on Wall Street back then.

The purpose: To hear, in their own words, how equities trading has changed, how their careers have changed because of it and what lessons they have to offer from the 20 years that have gone by.

The updates on the careers of these nine "Super Traders" and former Bear chairman Greenberg have been compiled by Alan Rubenfeld, author of the original 1992 book issued by Irwin Professional Publishing, and Traders Magazine editor-in-chief Tom Steinert-Threlkeld.

Here's the story of Victor Sperandeo, who made his name by being able to assess risk-and figure out market trends, as times change.

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