At the start of this century, after more than a decade as a floor trader at the Chicago Board Options Exchange and 20 years of trading for himself, D. Keith Ross Jr. decided it was time for a change. He went to work for algorithmic trading pioneer Getco, serving as CEO from 2002 to 2005. By then convinced of how thoroughly low-latency technology was transforming the business, Ross took the CEO job at alternative trading systems firm PDQ Enterprises in 2006. Technology visionary Christopher Keith, a former New York Stock Exchange CTO, had founded Glenview, Illinoisbased PDQ in 2003. A liquidity-aggregation patent he obtained in 2008 is at the heart of the PDQ ATS, which launched in 2009 and, through both internally generated volume and PDQs routing business, is executing about 1.5 percent of all stock trades. PDQs contribution to trading innovation, Ross explains, is a pause feature that allows for a better read on the market: It halts an order for 20 milliseconds to build a minibook where responses to a proposed trade can be listed in a price-time ranking. Before electronic trading you could go to the specialist post, says Ross, 61. Hed give some color on where the buyers and sellers were, and a broker could gather information and find out the state of the market. Modern trading makes getting that read and color more complicated, and technology has introduced new problems, such as layering and spoofing. If you reverse the flow, so to speak, and start with the What is the market? question, it re-creates what I would call floor competition and puts the person whos initiating the order back in the drivers seat, Ross says. PDQs generic offering is a 20-millisecond pause, but it also offers a five-millisecond pause and expects to roll out a 30-second pause later this year.
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