By Jacob Bunge and Matt Jarzemsky
Getco LLC, the electronic market-making firm known for its
cutting-edge technology, is targeting a new group of potential
customers: brokers working the 109-year old New York Stock Exchange
floor.
Chicago-based Getco, which already serves as the second-biggest
market-maker at the Big Board, said Tuesday it secured a
partnership with brokerage firm Mismi Inc. that will put Getco's
trading algorithms onto the handheld devices that floor brokers use
to manage customers' stock trading.
The move potentially extends the role of Getco, regarded as one
of the busiest among a new breed of high-speed trading outfits, on
the storied NYSE floor, operated by NYSE Euronext (NYX). The firm
set up shop as a so-called designated market-maker at the NYSE in
2010 and expanded last year when it acquired the former specialist
unit of Bank of America Merrill Lynch (BAC).
Now, Getco will become one of a handful of providers of
electronic trading tools to brokers on the NYSE floor, alongside
Mismi, Pragma Securities LLC, Deep Value Inc. and Knight Capital
Group Inc. (KCG).
"When the Getco stuff gets in there, I'm sure we'll take a look
at it," said Keith Bliss, director of sales and marketing at
Cuttone Co., a New York brokerage with operations on the exchange
floor.
Mr. Bliss said traders routinely test various providers'
algorithms to see which ones work the best in trading various types
of stocks and situations. While the offerings tend to be similar,
differences in performance can add up over time, he said.
The handhelds used by brokers, which resemble thick, black
keyboards, debuted on the NYSE floor in 1995. Four years ago, these
devices were given the ability to use algorithms to manage large
orders sent in by customers, aiming to cut down the cost of
carrying out the trade by parceling out pieces of an order.
Professional investors and trading firms use similar electronic
tools to execute large orders, but their algorithms suffer at least
one disadvantage. The NYSE divvies up trades at a given price
equally among floor brokers, designated market makers, and all
other participants. That system can put floor brokers ahead of
outside investors if the majority of the bids or offers are coming
from outside the NYSE's walls.
Getco on Tuesday expanded the line of trading algorithms it
hopes to sell to institutional investors such as mutual funds, part
of a broader effort to parlay the firm's proprietary trading
knowhow into new areas. Drew Krichman, managing director for
Getco's execution services division, said that Getco's trading on
behalf of customers--through algorithms and its private trading
venue--now accounts for roughly one in every 50 shares traded each
day.
Write to Jacob Bunge at jacob.bunge@dowjones.com and Matt
Jarzemsky at matthew.jarzemsky@dowjones.com
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