The owners of Getco, the Chicago-based high-frequency trading firm, long have been tight lipped–preferring to say little despite the firm’s outsized role in computer-driven, lightening fast trading. So I was looking forward to reading yesterday’s Getco profile in The Wall Street Journal. But after reading the story, I came away disappointed.
Sure, as a general profile of Getco and its founders, the story is fine. And the article gives a good illustration of how high-frequency trading works. But the story fell short on so many levels.
First, where were the critics of high-frequency trading? The story briefly summarizes one of the criticisms–that it enables superfast traders to frontrun the market. (The WSJ never actually uses the phrase frontrun; instead it says “trade ahead”). But couldn’t we hear from an actual live critic?
Second, the criticism of high-frequency trading goes well beyond the issue of frontrunning. There’s the real concern about a rogue algorithm or a misfiring computer code, sparking an unintentional sell-off in a stock, or the broader market. But that issue wasn’t even mentioned.
Instead, we get Getco co-founder Dan Tierney telling us that without high-frequency trading, last October’s market plunge would have been much worse. But where’s the support for Tierney’s claim and why is it permitted to go unchallenged in the story.
Third, we’re told that Getco earned $400 million in 2008. That’s a nice sum for a 10-year-old firm with 250 employees. But what about the bonuses and salaries commanded by its traders and computer programmers? Presumably, the $400 million figure is earnings after paying out compensation. That’s the figure we all want to know.
Look, getting information on salaries and bonuses is difficult when dealing with a private company. But there’s no indication the WSJ even asked the question.
We need more profiles of big HFT traders like Getco. But a story really doesn’t add much clarity to the debate over this controversial trading strategy if its ignores the tough questions.