Rise Of The Machines

Equity Trades Defy Economy as Wall Street Transformers Abound

Citadel Investment Group LLC -- Kenneth Griffin's Chicago- based hedge fund named to suggest a stronghold in volatile markets -- uses mathematical models and advanced computer systems to make investments that translate into about 5 percent of U.S. equity trading. D.E. Shaw & Co., which oversees $35 billion, relies on automated, 24-hour-a-day strategies that exploit shifts in asset prices around the world. The New York- based fund accounts for between 1 percent and 2 percent of trading at the NYSE.
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Citigroup Inc.'s Automated Trading Desk tries to predict prices for 8,000 stocks 30 seconds into the future to give the largest U.S. bank an edge on rivals.
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Credit Suisse Group, Switzerland's second-biggest bank, expanded its rapid-fire algorithmic trading programs to more than 30 countries and almost doubled its equity revenue over two years to 7.75 billion Swiss francs ($7.03 billion).

Lehman Brothers, the fourth-biggest U.S. securities firm by market value, climbed the ranks of brokers on exchanges in Frankfurt, Stockholm and Toronto after retooling its order- processing systems to reduce costs. The New York-based company was the top broker in Europe last year, up from third in 2005, and climbed 18 spots to No. 6 in Canada, according to Thomson Corp.'s Autex.

NYSE Program Trading

2006-06-29
Program Trading Averaged 67.4 Percent of NYSE Volume

Credit Suisse Securities (USA ) LLC. split its activity between its own accounts and those of its customers.

2006-03-06
Program Trading Averaged 57.0 Percent of NYSE Volume

Of the five member firms reporting the most program trading activity on the NYSE, UBS Securities, LLC. executed most of its program trading as principal for its own account.

2003-02-10
Program Trading Averaged 36.2 Percent of NYSE Volume

Of the five member firms reporting the most program trading activity on the NYSE, Morgan Stanley, UBS Warburg and Credit Suisse First Boston executed most of their program trading as principal for their own accounts.

So the only big banks doing proprietary (with their own money, in contrast to on the clients behalf) program trading at the NYSE seem to be UBS and Credit Suisse, and UBS seems to have pulled the switch as well.

Taking into account my experience from playing against bots in first person shooter games I can imagine that in short term trading it is next to impossible to compete with these programs. And that was 6-7 years ago. Just like in chess, the computer has lightning fast reaction times and makes no simple mistakes, so 99.99 % of humans loose against him. Same in Quake, if you could win against the computer, you were very good. You'd have to stay away from direct fight outs and exploit the predictability of the bot behavior and its limited learning ability.