High-Frequency Trading Firm Getco: We Kept Trading Thursday
Electronic market-making firm Getco LLC continued to trade
throughout Thursday's rampant market volatility, at a time when
other high-frequency trading shops pulled out of the market.
"Just as we did in the 2008 financial crisis, Getco continued to
provide liquidity and make two-sided markets both as a designated
market maker on the NYSE floor and as a registered market maker on
the electronic markets," said a spokeswoman for the Chicago-based
Technology-focused liquidity providers such as Getco have taken
on a key role in U.S. markets in recent years, accounting for an
estimated two-thirds of trading activity in U.S. stock markets and
around 40% of futures trade.
Reliant upon complex trading algorithms, the firms stand ready
to take the other side of trades in stock, options, futures and
foreign-exchange transactions. Advocates tout the firms' services
as lowering trading costs for investors, while critics allege that
the sheer speed of the firms' systems allows them to take advantage
of slower-moving participants.
While Getco, among the largest high-frequency trading shops,
remained in the market Thursday, other big shops pulled out.
Kansas City, Mo.-based Tradebot Systems Inc. told The Wall
Street Journal Thursday that it shut down its trading operations
when the Dow Jones Industrial Average dropped by 500 points, as the
firm sought not to contribute to the volatility.
Critics have alleged that key participants stepping back from
trading during Thursday's market plunge exacerbated the problem, by
making it harder for investors to get into or out of positions.
Dennis Dick, a proprietary trader with Bright Trading LLC, said
that as algorithmic trading shops seek to avoid the effects of a
massively erroneous trade--said to be the root cause of Thursday's
chaos--there are "less liquidity providers to cushion the
"If these predatory market-making practices are allowed to
continue, eventually there will be no real liquidity in the depths
of the market and, when there is a market impact event, we're in
big trouble," he said.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;