2012: Year of the Busted Broker and Buy Side Trader

Another day, another piece of bad news for the buy side. Since the beginning of 2012, each week another trader is arrested for insider trading, a broker-dealer shuts down or a hedge fund closes. Sure, the Dow and the Nasdaq are chugging along, but with low volumes and big corporations sitting on large piles of cash, traders are being tested like never before.

• The Buy Side Wrestles with the OMS-EMS Dilemma
• OMS-EMS Retool as Clients Face New Regs
• Why Didn't Microsoft Add OMS Functionality to Excel?

This year is far from over, but there's little doubt that the buy side will be happy to see it go. History will remember 2012 as the Year of the Busted Broker and Buy Side Trader. Brokers, if they didn't go belly up, wallowed in bad headlines, faced accusations of using client money to cover bad bets and defended themselves against insider trading probes. The former CEO of Goldman Sachs and former governor of New Jersey Jon Corzine may not go to jail after a spectacularly embarrassing meltdown at MF Global. Surprisingly, it has been reported that Corzine may start a hedge fund.

[As HFT Profits Slump, the Hot Trend Loses Some Luster]

Meanwhile a software glitch ran wild inside the normally reliable Knight Capital, nearly collapsing the firm in less than an hour. The London Whale barreled through JPMorgan's risk controls and racked up billions in bad bets. As all of this was unfolding, financial firms have been quietly pouring money into K Street lobbyists in an effort to roll back the new regulations that would stop them from making the same mistakes as four years ago. The entire industry is fully aware of the dangers of high-frequency trading, but it's doing everything it can to make it easier for the trading engines to execute deals at even faster speeds. If this continues, the Flash Crash of 2010 will look like a minor dust-up compared to the future implosions experts are already predicting.

Editor at large Ivy Schmerken looks at the recession's impact on the buy side when it comes to purchasing a new order management system. Senior editor Justin Grant examines why it's no longer enough for Invesco to rely on third-party transaction cost analysis in a marketplace that's becoming increasingly complex amid a sea of data, rapid-fire trades and fragmented liquidity. Meanwhile, I take us on a tour of the trading floor of Getco, the execution service provider and direct market maker.

This is my final issue as editor of Advanced Trading. For nearly two years I've had the pleasure of working with a wonderful and talented staff while reporting, blogging and analyzing this fascinating marketplace. It was a bad year for brokers and the buy side but it was a wonderful time to be a cold-eyed observer. Let's hope things improve for the capital markets and that lessons are learned from this recession and orgy of reckless behavior. May it be a better, safer and much saner market rather than what we have today.