Chris Concannon, Virtu’s president and chief operating officer, declined to comment before the “60 Minutes” broadcast, citing rules that prevent companies from speaking while planning IPOs.
Share volume totals show the transformation that high- frequency firms have wrought in American equity markets. While combined trading on the NYSE and Nasdaq rarely exceeded 2 billion shares in the 1990s, today it is regularly three times that in the U.S. About 6.05 billion shares changed hands on all U.S. exchanges in the last session, data compiled by Bloomberg show.
‘Not Rigged’
Not everyone says speed trading is unfair.
“While there are bad actors in every industry, the game is not rigged in the favor of professional traders who employ HFT to execute their strategies,” Peter Nabicht, senior adviser to the Modern Markets Initiative trade group and former chief technology officer at high-frequency-trading firm Allston Trading, wrote in an e-mail.
“Rather, they work hard to compete with each other to bring liquidity to the markets, benefiting average investors,” he added. “Continued debate about the next evolution of market structure is needed and welcome, provided the debate is based on fact and resulting actions are reasoned, ensuring average investors continue to benefit from the transparency and efficiency enabled by inevitable technological advances.”
Encouraging Trades
The practice of selling enhanced access to brokers accelerated as American exchanges evolved from member-owned firms amid a flurry of regulation and computer advances in the 1990s. Among other changes, the government-mandated compression of stock price increments to pennies from eighths and sixteenths of a dollar, a process known as decimalization, squeezed profits for market makers and specialists that had overseen stock trades.
Faced with the need to maintain liquidity on electronic platforms where profits were too fleeting for humans to capture, exchanges encouraged computerized firms to post orders for investors to trade against. Co-location and customized data feeds developed alongside the hodgepodge of fees and rebates that market operators use to keep speed traders coming back.
“Part of what you’re seeing here is people not understanding it, because they either haven’t taken the time or haven’t dug in,” Larry Leibowitz, the former chief operating officer of NYSE Euronext, said in a March 25 conference call with analysts arranged by Sandler O’Neill & Partners LP. “It’s the responsibility of regulators to show leadership to show, ‘We looked at these issues, and we think these are fair. These are areas we want to improve and fine tune.’”