NYSSA’s Alternative Investments Committee presents

Alternative Analysts’ Forum: Rise of the Machines—The Evolution of Equity Trading

Over the past decade, equity trading has seen a seismic structural shift propelled by technological innovation, as market participants battle in an arms race for electronic efficiency. The wave of Reg NMS broke the omnipotence of the New York Stock Exchange, and has left in its wake powerful electronic liquidity providers and a fragmented and competitive market of newly empowered venues, ranging from new exchanges to ECNs, ATSs and dark pools.

This speaker series will trace the transition of equity trading from a highly exclusive and opaque “boys club” to an ultra-efficient network of a variety of anonymous electronic participants. We will discuss the innovations that allowed for the market to mature, and how the olden screams of the trading floor were replaced by the hum of server farms, as algorithms written by the best and brightest of academia came for the throne of equity trading. We will also discuss how the market has become fragmented, reducing block trading, and creating a need to intelligently find liquidity via Smart Order Routing.

Faced with the reality of dwindling profit margins, we will explore how top sell-side firms have turned to proprietary electronic market making, dark pool offerings, and algorithmic trading for a new competitive advantage. As these topics heat up in the media, we will demystify and discuss the impact of dark pools, high frequency trading, sponsored access, and the infamous flash order on the average market participants.

The speakers will also analyze trends and explain the direction that the markets are going and what we can expect from the coming generation.

Some of the topics/questions to be covered include:

• What is Reg NMS, and how did it change the face of trading?
• What were the inefficiencies of the old guard such as the NYSE?
• What are ECNs and ATSs and why did they take market share from the NYSE and Nasdaq market makers?
• What is smart order routing, how does it work, and why is it necessary?
• What is high frequency trading/electronic market marking and does it hurt the market?
• What is an algorithm, and can a machine really trade as well as a human?
• What are dark pools, crossing networks, and what role do they serve?
• Why are hedge funds worried about gaming and how is it detected?
• What is sponsored access and flash trading and why are they such a big deal?
• What legislative/regulatory action is on the horizon and how does it affect business?
• What is the next evolution of trading, and what types of players are gaining market share?

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Chairs Dmitry Koltunov, Highbridge Capital Management Phil Taylor, Managing Director, Global Arbitrage and Trading, RBC Capital Markets

Biography

Joe Gawronski is the president and COO of Rosenblatt Securities. Gawronski is formerly a securities lawyer with Sullivan & Cromwell, a vice president in the equities division with Salomon Smith Barney and COO of Linx LLC, a block crossing network start-up. He received his BA in public and international affairs at Princeton’s Woodrow Wilson School and his JD from Harvard Law School. He is an allied member of the NYSE, a member of the NYSE Hearing Board, a member of the advisory boards of both The Journal of Trading and Wall Street & Technology, a term member of the Council on Foreign Relations, the author or co-author of several published papers on equity market structure and a leading lecturer, moderator and panelist on the topic.

Andrew Silverman is a Wall Street veteran with over 25 years of experience in algorithmic and electronic trading. Currently, he is managing director and co-head of Morgan Stanley Electronic Trading (MSET). In this role, Silverman oversees sales and distribution globally for MSET, as well as domestically for Morgan Stanley Program Trading. Prior to joining Morgan Stanley, Silverman spent 14 years at Goldman Sachs where he was head of algorithmic trading and responsible for developing advanced trading algorithms and analytics. He began his career at Lehman Brothers and held various positions during his 10 years with the firm.