The Wall Street Journal’s Neil Shah reported about a little-known firm called Timber Hill LLC trying to grab a bigger share of the world’s foreign-exchange trading business.
Timber Hill’s head of foreign-exchange trading, 28-year-old Matt Lauria, hopes to challenge Wall Street’s banks by using high-speed technology to pump out currency prices at extreme speeds, thus quickening transactions for hedge funds and other computer-driven investors looking for cheaper, more discreet trading.
The firm is one of many electronic upstarts bringing rapid-fire automated trades to the global currency markets, where such high-frequency trading has been slow to catch on. Burned by bad bets on mortgages and risky derivatives during the financial crisis, some Wall Street banks and investors are looking at the relatively stable foreign-exchange market to generate income. That has fueled a three-way race to build faster systems, a race between such Wall Street giants as Deutsche Bank AG, the biggest currency-trading venues like brokerage ICAP PLC’s EBS, and smaller market participants like Chicago’s Allston Trading LLC; Currenex, owned by State Street Corp.; and Timber Hill, a unit of Interactive Brokers Group.
In seeking to offer easier ways to make money from currency trading to more investors, including individual players too small for Wall Street, these players are tussling for greater clout over the $4 trillion-a-day global foreign-exchange industry.
“There’s been a seminal change in how investors are allocating cash to high-frequency trading,” says John Netto, founder of New York-based M3 Capital LLC, a high-frequency trading firm. “Investors’ desire for liquidity and transparency is now driving how investments are structured. It’s now investors who are controlling the terms.”
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