7ticks: at ground zero of Wall Street's new arms race
Posted on 09/02/2009 5:57:33 PM PDT by bruinbirdman
A brash new generation of traders is making a fortune by remaking financial markets. Political furor aside, that's good for the little guy.
Daniel Tierney and Stephen Schuler share a lot of traits with many other enigmatic traders populating the financial world. Their firm, Global Electronic Trading Co., is tucked behind a nondescript door on the second floor of the Chicago Board of Trade's art deco building. Until this summer, when it added some company specifics, its Web site contained little more than a reading list with recommendations like Reminiscences of a Stock Operator. Not a single photo is publicly available of either of its principals.
7ticks: at ground zero of Wall Street's new arms race
What distinguishes Tierney and Schuler is that Getco, as their firm is known, currently buys and sells 15% of all the stocks traded in the U.S., ranking it among the likes of Goldman Sachs and Fidelity Investments. Getco was reportedly valued at $1 billion two years ago and is rumored to have earned roughly half as much as that in net profit last year alone. Tierney, 39, and Schuler, 47, are among Wall Street's super-nouveau-riche.
"We translate technology innovation into making financial markets more efficient," Tierney says in a carefully worded interview.
Getco earns its outsize profits buying and selling securities up to thousands of times a second. This frenetic profession has come to be known as high-frequency trading, and in recent months it has emerged as the hottest ticket on Wall Street. Even as financial markets collapsed last year, high-frequency traders collectively enjoyed $21 billion in gross profit, according to Tabb Group. On the NYSE, daily volume surged 43% through June from a year earlier to 6.2 billion shares; high-frequency traders are believed to account for 50% to 70% of
(Excerpt) Read more at forbes.com ...
Where have I heard that before? More liquidity in credit default insurance, faster execution, narrower spreads on insurance premiums. Works great until it doesn't.
And what does an improperly calculated risk have to do with liquidity?
It's like repairing a car engine and blaming that repair after the car is disabled by a tire failure. If a car is broken, you don't blame all of its components, do you? And yet you apply the same "logic" to finance.
Here’s another name for high-speed trading.
Fraud.
Defrauds every other trader by front running trades -— Gee, just like Hillary’s friends did for her and she made money off it too.
So, must be OK!
Ask yourself how these guys can make so much money so quickly.
Ask yourself why G.S. had an FBI agent waiting at the airport for ...
Check out Karl Denniger ...
What was improperly calculated was systemic risk. Trading by wire adds systemic risk. It also adds liquidity, until it fails. Then it reverses, extracts liquidity and exacerbates the downturn. Read up on black swans and such.
Just my take on their OPs from the picture.
"What was improperly calculated was systemic risk."
No, the fact that it was miscalculated by all --- consumers, investors, rating agencies, investment banks --- made it systemic.
" Trading by wire adds systemic risk. "
Yeh, and eating in the morning increases tides in the ocean.
"It also adds liquidity, until it fails."
What fails? What is that mysterious IT?
"Then it reverses,[???] extracts liquidity [???? from whom?] and exacerbates the downturn.
You've heard something about business cycles but don't understand what you are taking about.
"Read up on black swans and such."
I've read that book, and it has nothing to do with anything you've said above.
Stop reading sensationalism like those black swans and get some education on the topic. These matters are too complex to be grasped from the Web.
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