
A brash new generation of traders is making a fortune by remaking financial markets. An outgrowth of Chicago’s derivatives markets, they go by wonky names like Global Electronic Trading Co., Tradebot and Infinium. Personnel include mathematicians, engineers and gamers. They bet their own capital on sophisticated software algorithms that spit out thousands of orders a second. Big Wall Street brokerages and hedge funds pursue similar strategies.
E.g. from the get-go the strategy was to trade fast, furiously and electronically. Getco’s first point of attack was futures, which went electronic early. Tierney and Schuler programmed their computers, and the people manning them, to offer quotes and execute trades more quickly than rivals. Then, when the market moves, to do it again. By posting bids and offers for the same securities simultaneously, they are able to scoop up a spread of a tenth or a hundredth of a penny per share thousands of times a day while limiting the capital at risk. What Getco gives up by capping its risk it makes up for in volume. The company currently trades an estimated 1.5 billion shares a day with 220 employees and offices in Chicago, New York, London and Singapore.
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