When it comes to markets it seems that trading grows more complex by the day—one could say even by the minute—but we no longer measure markets in minutes or even seconds; it’s now microseconds. But the essence of trading is making trades and our 2015 Market Makers and Shakers have developed innovations that have helped facilitate trading rather than simply exploiting an edge from the market.
Virtu Financial created quite a stir when it revealed a six-year track record with only one losing day. To most traders this is unfathomable and proof that they are part of a group of high frequency traders that have an unfair advantage in the markets. But while Virtu is an extremely sophisticated technology-focused firm, it claims a strategy that is as simple and as old as the market themselves: making markets. Virtu CEO Douglas Cifu describes in detail Virtu’s approach to the markets, which basically boils down to making two-sided markets in as many markets and assets classes as possible and in consistently being just a little better than square.
We also talk to Brad Katsuyama, founder of IEX, as the company prepares to launch as an exchange. IEX is the upstart alternate trading system looking to serve broader market users rather than high frequency traders.
Katsuyama says that by attracting traders who have a need to fill orders and attempting to slow down certain market players who have a speed advantage, IEX will offer a more efficient market.
As a result, he says, “We have a lot of people come into our market that have a real intent to trade.”
At first blush you may suspect Cifu and Katsuyama are at opposite sides of the trading world but they are closer to being on the same page. Virtu was one of the first participants of IEX and Katsuyama appreciates the market-making role it plays on the soon-to-be exchange. It’s about simple process participating in a robust liquid market.
Finally, we revisit our 2014 Person of the Year, Intercontinental Chairman and CEO Jeff Sprecher. Coincidently enough, Sprecher struck on many of the same themes as Katsuyama. Sprecher is concerned that the bifurcated equity market structure could spread to other markets. ICE’s recent acquisition of Interactive Data is in measure a reaction to this trend.
What these three people have in common is the ability to be ahead of the curve on market structure issues.