HFT Firm Allston Withdraws From U.S. Stock Market

(Bloomberg) — High-frequency trading firm Allston Trading LLC has stopped operating in the U.S. stock market.

Allston, founded more than a decade ago by futures traders Bob Jordan, Elrick Williams and John Harada, exited the business after deciding to focus on more profitable trading in derivatives markets, according to Dave Lundy, a spokesman for the Chicago-based company.

As markets have grown more accustomed to high-frequency strategies, the profit opportunity for such firms has by some accounts shrunk. Companies employing the strategies earn about $1.3 billion annually in U.S. equities, according to a March report from research firm Tabb Group, down from more than $7 billion in 2009.

Allston just lost its chief executive officer, Raj Mahajan, who decided to join Goldman Sachs Group Inc. as a partner overseeing the banks dark pool and algorithmic-trading businesses. Carlton Jones, chairman and president of Allston, will take over as CEO, a post he previously held from 2011 to 2012, according to an internal memo.

Allston trades futures, currencies, commodities and fixed- income assets, according to records maintained by the Financial Industry Regulatory Authority. The trading firm in October terminated its broker-dealer registrations at four U.S. stock exchanges owned by Bats Global Markets Inc., according to data compiled by Finra.

More Scrutiny

High-frequency traders are dealing with greater regulatory scrutiny, with the Securities and Exchange Commission, Department of Justice and New York attorney generals office said to be examining the industry. Last week, New York Attorney General Eric Schneiderman named several high-frequency trading firms, including Allston, in his updated complaint about how Barclays Plc operated its dark pool. None of the firms has been accused of any wrongdoing.

In a complaint filed with CME Group Inc. last year, a Chicago trading firm called HTG Capital Partners LLC said it had been harmed by a pattern of canceled bids and offers allegedly meant to mislead traders in Treasury futures, people familiar with the matter said at the time. Allston was subsequently identified by CME, which runs markets including the Chicago Mercantile Exchange, in that arbitration as a counterparty to the HTG transactions, the people said. Allston has denied any wrongdoing and the arbitration is ongoing.

An Allston spokeswoman said at the time the HTG allegations are based on incomplete and inaccurate information, and the firm believes that the matter will ultimately be resolved in its favor.