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The New Breed of Hyperactive Traders

Last week, I visited Lightspeed Trading, a direct access brokerage firm that caters to the hyperactive retail trader with institutional caliber technology and trading tools.

Last week, I visited Lightspeed Trading, a direct access brokerage firm that caters to the hyperactive retail trader with institutional caliber technology and trading tools. On that day, many of the traders were focusing on the financials and anything to do with Lehman, Fannie Mae and Freddie Mac, and as well as the price of oil, such as transportation stocks.Randy Guttenberg trades any of the equities that are moving on news or if there's volatility. "I don't want to be the only one trading it," says Guttenberg who previously traded at Broadway Trading, one of Lightspeed's predecessor firms that it acquired.

These guys are essentially high-frequency day traders - they don't hold any overnight risk. I used to think this was the non-professional end of the trading market, given all the bad publicity in the 90s that day traders received. But I totally respect them now. It's amazing to see how quickly these retail-professional traders process information and how focused and knowledgeable they are about while buying and selling through the Lightspeed Trading Platform. Lightspeed provides the technology, support and brokerage services, explains Andrew Actman, chief strategy officer at Lightspeed, which has evolved through a series of acquisitions and buyouts.

I spoke to three different traders who were willing to talk to me, as they coped with the volatile stock market and frenetically shifted their eyes from charts to multiple execution screens. They all utilize the Lightspeed's trading platform with direct access to Level II data with a customizable charting and scanning package.

Sitting in front of six screens, Serge Milman had his eye peeled to the financial stocks Goldman Sachs, JP Morgan, Lehman, Merrill, Morgan Stanley and Citi. An intense but soft-spoken equities trader, Milman uses the XLF, the financial SPDR (spider) to go long the market and SKF, the ultra short financial ETF. SKF is based on a basket of all the major financial stocks). Milman said he was long the derivative and using SKF to short the financial stocks. Trading the SKF was cheaper than paying the short interest rate to short the underlying stocks and it also provides diversification, said Milman. At one point, Fannie and Freddie were "crashing" as he put it. And he explained what he was doing even as the volatile prices flickered faster than my brain could register it.

During the day, Fannie's price fell 20 percent and in nine minutes there was a 12 percent move in Freddie Mac's share price, so Milman bought the SKF, shorting the market. He also sold Wachovia because the stock wasn't moving. Instead of using traditional order entry tickets, Serge is using the keyboard hot keys. "That allows you to map over an order type and to get in and out of stocks quickly," explained Scott Ignall, CTO of Lightspeed who joined Lightspeed from E*Trade Capital Markets where he ran DMA trading. "With one keystroke, I'm able to sell 300 shares or 300,000 shares," says Milman.

One of Lightspeed's selling points is the institutional caliber of its trading platform. "We try to make sure the speed and stability of the system are always there," said Scott Ignall, chief technology officer who used to work at E*Trade Capital Markets. "We don't use third parties," says Actman, who notes that the firm connects directly to BATS, Direct Edge, Island (Nasdaq) and other venues. On Tuesday, Lightspeed added access to Flow ECN, Citi's new ECN, notes Ignall. In Q2 of 2008, Lightspeed launched an options trading platform and added a suite of currency and commodities futures out of the CME in e-mini format.

Traders praised the firm's technology and support. Peter Milman, whose brother is Serge, has been trading for seven years. "What's good about the system is it's super fast," says Milman. "The trading fees are very competitive. We're in a group with great traders,'" he says. Milman uses Briefing.com's trader news to filter the news for what stocks are in play. "The key is to trade stocks that are in play and have volume," says Peter Milman.

Every screen is linked to a chart, so if the filter pulls up Google, the technical charts on another screen immediately switch to Google. The floor itself was populated with 20-to 30-traders. Though all the traders use their own capital, some trade in groups and use a chat screen to share ideas with other traders sitting in different parts of the room or in different offices. They also had a chat screen up to shares ideas with other retail/professional traders in Lightspeed's other offices- located in Edison, New Jersey, Jericho, New York and Boca Raton, Florida.

Stay tuned for more on my visit to Lightspeed Trading.Last week, I visited Lightspeed Trading, a direct access brokerage firm that caters to the hyperactive retail trader with institutional caliber technology and trading tools. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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