Speed shakes up trading, Goldman tops JPMorgan as best broker
The near darkness behind the bulletproof doors of a windowless Secaucus, New Jersey, warehouse is humming with tens of thousands of computers as US exchanges open on a December Friday.
By Bloomberg |
NEW YORK: The near darkness behind the bulletproof doors of a windowless Secaucus, New Jersey, warehouse is humming with tens of thousands of computers as US exchanges open on a December Friday.
Brokerages and trading firms, battling for the fastest access to capital markets, buy or lease space at this Equinix centre and others to place their machines as close as possible to stock exchange computers. The practice, known as co- location, is one way firms are vying to win fractions of a second — the difference between getting a trade and missing it.
Speed is shaking up the brokerage industry — and drawing scrutiny from the US Securities and Exchange Commission, Bloomberg Markets magazine reported in its March issue, in which it ranked brokers worldwide.
On January 13, the SEC took a first step toward reviewing the effect of trading strategies in which computers may buy or sell shares as many as 1,000 times a second. The commission asked traders, exchanges and the public to weigh in on high-speed trading, which has soared since 2005 to account for as much as 61% of US stock market activity and 70% of individual trades, financial services consultant Tabb Group says.
Against this frenetic backdrop, brokerages are adding technology and services to help them execute large orders for customers. “What you needed this past year versus 2007 and early 2008 was lots of tools, technology and the use of gray matter,” says Peter Weiler, executive vice-president of global sales at Abel/Noser Corp, a New York-based broker that also analyses trading costs. “Brokers needed to bring their A game.”
Goldman Sachs Group ousted JPMorgan Chase & Co as the firm that got the best prices for its institutional clients during Bloomberg’s 12-month ranking period from July 1, 2008, to June 30, 2009, according to data compiled by Ancerno. During that time, stock volatility quadrupled from its 20- year average and the Dow Jones Industrial Average swung by more than 40%.
Goldman was the worldwide winner among brokers that handled at least $25 billion in trades in getting an average price closest to the stock level when the order was received, according to Ancerno, a spinoff of Abel/Noser that audits costs for $7.5 trillion of trades by 500 money managers in more than 70 countries every year. JPMorgan, the top broker during the 12-month ranking period that ended on March 31, 2008, fell to No 4 worldwide in the recent ranking.
New York-based Goldman also swept the competition in the three regional categories: Asia, Europe and North America. Last time, Goldman placed sixth worldwide and second in Europe; it was a no-show in the top five in North America.
Brokerages and trading firms, battling for the fastest access to capital markets, buy or lease space at this Equinix centre and others to place their machines as close as possible to stock exchange computers. The practice, known as co- location, is one way firms are vying to win fractions of a second — the difference between getting a trade and missing it.
Speed is shaking up the brokerage industry — and drawing scrutiny from the US Securities and Exchange Commission, Bloomberg Markets magazine reported in its March issue, in which it ranked brokers worldwide.
On January 13, the SEC took a first step toward reviewing the effect of trading strategies in which computers may buy or sell shares as many as 1,000 times a second. The commission asked traders, exchanges and the public to weigh in on high-speed trading, which has soared since 2005 to account for as much as 61% of US stock market activity and 70% of individual trades, financial services consultant Tabb Group says.
Against this frenetic backdrop, brokerages are adding technology and services to help them execute large orders for customers. “What you needed this past year versus 2007 and early 2008 was lots of tools, technology and the use of gray matter,” says Peter Weiler, executive vice-president of global sales at Abel/Noser Corp, a New York-based broker that also analyses trading costs. “Brokers needed to bring their A game.”
Goldman Sachs Group ousted JPMorgan Chase & Co as the firm that got the best prices for its institutional clients during Bloomberg’s 12-month ranking period from July 1, 2008, to June 30, 2009, according to data compiled by Ancerno. During that time, stock volatility quadrupled from its 20- year average and the Dow Jones Industrial Average swung by more than 40%.
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Goldman was the worldwide winner among brokers that handled at least $25 billion in trades in getting an average price closest to the stock level when the order was received, according to Ancerno, a spinoff of Abel/Noser that audits costs for $7.5 trillion of trades by 500 money managers in more than 70 countries every year. JPMorgan, the top broker during the 12-month ranking period that ended on March 31, 2008, fell to No 4 worldwide in the recent ranking.
New York-based Goldman also swept the competition in the three regional categories: Asia, Europe and North America. Last time, Goldman placed sixth worldwide and second in Europe; it was a no-show in the top five in North America.
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