High-Frequency Shops Poach Talent From Exchanges and Bulge-Bracket Firms

Lured by the promise of bigger paydays, many high-profile bulge-bracket traders and exchange executives are making the jump to high-frequency trading shops.

As automated trading continues to dominate the markets, a number of top Wall Street executives are shrugging off the high-frequency trading controversy, leaving their jobs to take senior roles at HFT firms, which are scooping up talent from exchanges as well as the bulge-bracket sell-side firms.

The recent high-profile defections include Chris Concannon, previously EVP of Nasdaq OMX Transaction Services, and Adam Nunes, the former VP of U.S. options at Nasdaq OMX with responsibility for both the Nasdaq Options Market and Nasdaq OMX PHLX. In late April Concannon joined Virtu Financial, a newly formed proprietary trading firm. Nunes left Nasdaq and in May joined Hudson River Trading Group, a multi-asset-class quantitative trading and technology firm based in lower Manhattan. A call to Nunes was not returned by press time.

The trend reflects the meteoric rise of high-frequency trading and offers a sign that even the most entrenched Wall Street executives -- not just the traders, developers and quant researchers who are sought after as the innovators of HFT strategies -- see black-box trading as the future of the markets.

One of the bigger moves this year was the May departure of Will Sterling from UBS, where he was global head of direct execution services. According to a UBS spokesperson, Sterling left to join a high-frequency trading firm. Sources say Sterling joined Teza Technologies, a Chicago-based high-frequency startup founded by two former Citadel traders. Sterling could not be reached for comment at press time.

Teza made headlines in early July when it suspended Sergey Aleynikov, the former Goldman Sachs programmer charged with taking code illegally from the bank's trading software platform. Aleynikov, who was earning $400,000 annually at Goldman, reportedly tripled his salary to $1.4 million when he joined Teza.

Insatiable Demand

"The supply of labor, brainpower and manpower to the high-frequency trading side of the market certainly has not met the demand," observes Jeromee Johnson, VP of market development at BATS Exchange, which caters to high-frequency traders. According to Johnson, after an initial wave of top executives left the traditional bulge-bracket sell-side firms in response to the credit crisis and bonus flaps, the high-frequency shops now are increasingly targeting executive talent from the exchanges. "For experienced professionals, whether it's on the strategy side or the technology side, there has been a move from folks on the exchange side," he relates.

According to insiders, former exchange executives such as Concannon and Nunes offer valuable experience in equity and options market structure. They also have insight into which exchanges HFT firms should connect to and in formulating make-or-take rebate strategies.

On the other hand, former UBS executive Sterling brings a much sought-after technology background in algorithmic trading and was one of the founders of the Island ECN. In fact, sources point out, several of the executives who have jumped to high-frequency trading boutiques either are ex-employees of Island ECN or worked on Nasdaq's INET matching engine.

For example, in 2007 Hudson River Trading hired Jim Hurley, who previously was SVP and head of sales at Instinet and before that served as head of sales at INET ATS, which Instinet sold to the Nasdaq Stock Market and now serves as the exchange's core matching engine. According to Hurley's profile on LinkedIn, he currently is in a "strategy" role at HRT.

Another former Island alum who made the move to a high-frequency shop is Cameron Smith, who currently is general counsel at Quantlab Financial, a quantitative hedge fund manager based in Houston. He previously was the general counsel at Island.

Most of the candidates coveted by the high-frequency trading firms have backgrounds in technology and quantitative trading. Many have experience building electronic trading systems for the equity markets. "They can build the system, understand how to make it fast and how to develop models and strategies," notes Joe Long, quantitative trading executive recruiter at I-NET Technologies, a New York-based recruiting firm. But hedge funds and proprietary trading firms also are hiring to expand into European equities or to trade high-frequency strategies in Asian equities, he adds. "It's cross-asset -- equities, FX and futures, and I've heard of people doing high-frequency in different interest rates," Long says. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio