Flash Boys by BusinessNews Publishing

Author:BusinessNews Publishing
Language: fra
Format: epub
Publisher: FichesdeLecture.com
Published: 2015-03-15T00:00:00+00:00

5. The face of high-frequency trading

While Brad Katsuyama and his team were chewing over the idea of starting their ownexchange which would offer a level playing field for all investors, an interesting drama was playing out over at Goldman Sachs. Sergey Aleynikov, a Russian immigrant computer programmer, had been hired by Goldman Sachs in mid-2007 to help Goldman's equities department adjust to the radical changes happening in the U.S. stock market.

“The fragmentation of the American stock market was fueled, in part, by Reg NMS, which had also stimulated a huge amount of stock market trading. Much of the new volume was generated not by old-fashioned investors but by the extremely fast computers controlled by the high-frequency trading firms. Essentially, the more places there were to trade stocks, the greater the opportunity there was for high-frequency traders to interpose themselves between buyers on one exchange and sellers on another. This was perverse. The initial promise of computer technology was to remove the intermediary from the financial market, or at least reduce the amount he could scalp from that market. The reality turned out to be a windfall for financial intermediaries—of somewhere between $10 billion and $22 billion a year, depending on whose estimates you wanted to believe. For Goldman Sachs, a financial intermediary, that was only good news. The bad news was that Goldman Sachs wasn’t yet making much of the new money.”

- Michael Lewis

Aleynikov, and others, were hired to beef up the speed of Goldman's computer systems so they could compete in what was becoming something of an arms race. He worked at making the software faster, at finding quicker routes for market information to travel and to optimize Goldman's systems. That was quite a tall order because he was patching up an existing system rather than building something newand better from the ground up. It turned out doing this was right up his alley and Aleynikov rapidly became known as the go-to guy on the Goldman Sachs programming team.

A few months into his new job at Goldman Sachs, headhunters started calling offering Aleynikov better money. UBS offered him $400,000 a year which Goldman Sachs matched so he stayed. The headhunters kept calling though and in early 2009, a new hedge fund called and offered him more than a million dollars to come create a new trading platform from scratch. The money was impressive and the idea of building something new rather than patching up an existing system appealed even more. Aleynikov handed in his notice at Goldman Sachs.

Aleynikov agreed to hang around for another six weeks bringing other programmers up to speed before he left. During that time, Sergey emailed to himself some source code he was working on. It was a mix of open source software he had downloaded from the Internet plus some proprietary code he had developed while working for Goldman Sachs. He kept the software to remind himself how he had done things rather than to use it for his new employer but regardless when Goldman Sachs found about this, they called the FBI.

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