Lightspeed Financial’s tag line, “Here’s To Unfair Advantages,” encompasses the edgy mentality the firm has adopted concerning controversial high-frequency trading operations. Recognizing the growing trend of electronic trading, the company admits to having a candid and entrepreneurial approach to meeting electronic trader’s needs. The brokerage house, which services small hedge funds, proprietary trading groups, and professional retail traders, also offers a suite of technology products for the futures, options and equity markets. JLN’s Jessica Titlebaum sat down with Lightspeed Financial’s chief strategy officer, Andrew Actman, at the Security Traders Association of Chicago’s mid-winter meeting, to talk about the controversies brewing in Washington, the race to the speed of light in technology and the Philadelphia Phillies.
Q: Naked access, the practice of brokers giving high frequency traders unrestricted access to the markets, has gotten Washington’s attention. What is your take on naked access?
A: Technological innovation and increased automation, particularly in the U.S. equity markets, have dramatically changed the trading landscape – driving down the cost of trading, increasing operational efficiencies, and, importantly, lowering the barriers of entry so that more individuals than ever before can access the markets.
To that end, because we have come so far, so fast, it is important that regulation evolves as well. With regard to unfiltered access, we believe regulators want to ensure that adequate pre-trade risk controls are in place and proper parameters are established before an order is sent to the market for execution – key elements in risk management and maintaining a fair and orderly market.
While we can’t speculate as to what possible future regulation may look like, it is important that it apply to all market participants and everyone be held to the same risk management standards.
Q: What is your opinion of the high frequency trading controversy going on in Washington?
A: It is important for the Securities and Exchange Commission (SEC) to take a holistic approach and understand how all [market participants] are impacted. High frequency trading helps maintain stability in the marketplace. In fact, when times were tough, high frequency traders getting in and out of positions kept the spreads thin. They act as market makers.
Everyone is talking about Wall Street, but a lot of these folks working in the back offices are from Main Street. Some regulatory initiatives and reforms being discussed could eliminate their jobs too, not just the [traders], so it is important that any changes be well thought out.
Many high frequency proprietary trading firms are going to D.C. and talking with the SEC. Lightspeed has reached out to a few of these groups. We have also had discussions with the New York Stock Exchange, which has written to senators regarding the matter.
Q: As technology providers, what do you think the next frontier is? How fast is fast enough?
A: Well, it’s the race to zero, the speed of light – it is always going to be about minimizing latency. We want to minimize latency at every level, every market data point, and every order entry point. I think that exchanges and technology providers will continue to look at how to minimize latency and what the most effective solutions are.
Also, Lightspeed will continue to look closely at our technology infrastructure and how we can optimize its performance, which includes minimizing latency and maximizing throughput. We will take these initiatives to other asset classes in the future, not just U.S. equities.
Q: Lightspeed Financial is getting into the FX markets. How are you dealing with the transparency in that market?
We chose to use FX technology developed by GAIN Capital, a global provider of online foreign exchange services. This will enable Lightspeed clients to quickly identify and capitalize on emerging trends across 37 currency pairs. Additionally, GAIN aggregates prices from a dozen top tier liquidity sources including UBS, Barclays and Goldman Sachs, which helps provide greater transparency.
Q: Lightspeed is involved in the social media space. What are some of your new media initiatives?
A: We have a Facebook page and a Twitter account; we post two to three things a day. We created forums, write blogs and post videos about the most popular stocks. In early 2009, we launched our online social community, Lightspeed Spotlight, which is exclusive to Lightspeed clients and offers access to a host of trading tools and third party educational resources to help ensure that they have everything they need right at their fingertips.
Social media also allows for questions and serves as a great customer service resource. It also enables us to reach a lot more people. We can communicate with others aside from online banners and advertisements.
Q: Have you had a role model throughout your career?
A: My father, who passed away in August 2006, was my biggest role model. His entrepreneurial spirit helped me get to where I am now.
I was working at Arthur Anderson as an auditor on the track to getting my CPA. A friend called me about a job opportunity at a firm where he was day trading. They needed help in the accounting department and, so, I went in to meet with everyone. The office had metal chairs and lawn furniture purchased from the Salvation Army. This wasn’t the direction I had planned on going with my career, but my father was very supportive and told me to take the leap. He said I was young and could afford to take the risk.
Q: What is your favorite sports team? Who is your favorite player?
A: Chase Utley of the Philadelphia Phillies. He is gritty and not too flashy. He is not out there like some other stars are. He performs his job day in and day out, but he is quiet about it, which is key.