High-frequency trading firm cutting jobs amid volume crunch

Getco LLC was once Nasdaq's largest liquidity provider

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June 13 (Bloomberg) -- Getco LLC, a Chicago-based automated trading firm, eliminated about 40 jobs last week amid an industry slowdown in transactions, according to a person with direct knowledge of the situation.

Sophie Sohn, a Getco spokeswoman, confirmed in a phone interview that the company cut positions on June 7. Edward Boyle, hired a year-and-a-half ago from NYSE Euronext to manage the firm’s relationships with exchanges and work on business strategy, was among the people let go, she said.

Daniel Coleman, who became Getco’s chief executive officer in February, is confronting a third straight annual slowdown in American equities trading. More than half the cuts, which followed the company’s first strategic review of its businesses, were in the U.S., according to the person with knowledge of the matter, who declined to be identified because the issue is private. The company had about 450 employees before the layoffs.

“It’s not a huge surprise,” Sang Lee, managing partner at Aite Group LLC in Boston, said in a phone interview. “It doesn’t take a genius to see that volume trends in the last few years haven’t been favorable for the marketplace, especially for those firms that rely on volume for revenue. Most brokers have gone through downsizing and firms like Getco certainly do thrive under higher-volume environments.”

Minimizing Impact

While the review examined business units across the company, job cuts weren’t made in all groups, according to the person. Some units continue to expand including client services, the person said. Coleman, who joined Getco in 2010 after serving as global head of equities at Zurich-based UBS AG, has sought to extend the company’s trading services to mutual funds and other asset managers. The company offers strategies, or a set of algorithms, called GETAlpha designed to help institutions save money and minimize their impact on prices as they trade.

Getco, a high-frequency-trading specialist founded in 1999, is a market maker on more than 50 exchanges and platforms globally in equities and options, fixed income, commodities and currencies. Founders Stephen Schuler and Dan Tierney remained on the board after Coleman’s promotion.

The growth of Getco’s business servicing asset managers followed its decision in 2010 to become a so-called designated market maker, or DMM, on the New York Stock Exchange. The company agreed to buy Bank of America Corp.’s NYSE market-making business last year, making it the exchange’s second-largest DMM.

Dark Pool

It created the Getco Execution Services dark pool, now called GETMatched, in 2008. GETMatched traded a daily average of almost 80 million shares in the first quarter, according to the company. Dark pools are private venues that match orders without displaying bids and offers in advance.

Stock volume has shrunk this year, dropping to an average 6.81 billion shares a day in the U.S. versus 7.80 billion in 2011, 8.52 billion in 2010 and 9.77 billion in 2009, according to data compiled by Bloomberg on exchange-listed securities.

Changes at the firm come after U.S. regulators increased their scrutiny of high-frequency trading firms and the strategies they employ. Regulators fined the market-making unit of Getco $450,000 for failing to maintain proper supervision over its stock buying and selling, Nasdaq OMX Group Inc. said in a March notice. The Financial Industry Regulatory Authority conducted the examination. Getco settled without admitting or denying it did anything wrong.

Biggest Traders

Getco’s ranking among the biggest providers of liquidity, or bids and offers, on Nasdaq has fallen since May 2010, data compiled by the exchange show. While it was the largest supplier that month for shares listed on Nasdaq and NYSE, Getco hasn’t been among the 10 biggest brokers since June 2010.

The Securities and Exchange Commission asked market operator Bats Global Markets Inc. for information about types of orders used by some of the fastest automated trading firms that try to be first in line when supplying quotations, a person with knowledge of the matter said in April. The agency requested data about Getco and Tradebot Systems Inc., the person said at the time.

Last week’s job cuts followed the departures of several Getco executives over the last year and a half. Dave Babulak, a managing director who oversaw new projects, retired from the firm in May and Michael Rauchman, chief technology officer, left the month before, according to Sohn. Mark Spanbroek, who helped set up and develop Getco’s European business, left in March 2011 after nine years. Brian Nigito, who ran Getco’s New York office and helped build the firm’s options market-making business, departed earlier that month after five years.

Getco Hires

Getco hired Elizabeth King, a former lawyer at the SEC and the agency’s primary regulator for U.S. options, as an associate general counsel in 2010. Since then it’s hired Isaac Chang from Goldman Sachs Group Inc. to manage the company’s global fixed- income group; Jack Cowden from Chicago Trading Co. as a senior technologist; Jerry Dark from Cisco Systems Inc. as chief human resources officer; Investment Technology Group Inc.’s Chris Amorello to run institutional sales; and Brook Teeter from Credit Suisse Group AG to run the Hong Kong office, Sohn said.

Getco has invested in at least five electronic markets including Bats Global Markets, Chi-X Europe Ltd., Eris Exchange LLC, NYSE Liffe U.S. and ELX Futures LP.

Bloomberg News

--Editors: Michael P. Regan, Nick Baker

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