High Frequency Trading Review


    An Interview with Mark Spanbroek

    In this interview for the High Frequency Trading Review, Mike O’Hara talks to Mark Spanbroek, Vice-Chairman of the FIA European Principal Traders Association (EPTA) and a former partner at Getco.

    HFT Review:  Mark, welcome to the High Frequency Trading Review. Can we start with you telling us about your own background?

    Mark Spanbroek: Yes of course. I have been active in the business since 1986. Most of my career I traded derivatives on the floor of various European exchanges with Van Der Moolen, where volatility was my thing. In 2002 I joined Getco as a partner to help the company expand.  At the end of March 2011 I decided that I wanted to spend more time at home so I resigned from Getco, but I’ve stayed in the business so to speak through my participation in FIA EPTA.

    HFTR: How did the FIA European Principal Traders Association (EPTA) come about?

    MS: Around October 2010, I got involved in a discussion with some other principal trading companies to try to form a strategy on how to better explain what we do. To cut a long story short, four or five people were at the helm of this conversation and we finally decided that we should form an association to present a consensus view, give us a stronger foothold in Brussels and let the European Parliament know what it is that we are actually doing.

    So we checked around and quite a few firms were interested to join the group, particularly smaller companies with maybe just twenty or so people on the payroll, but who add an enormous amount of liquidity to the market.

    So we sat down, we drafted the principles, we reached a consensus and we launched in June 2011 during the London IDX conference. We started right off the bat with 20 companies, and we now have a very widespread member list across Europe, which we want to continue to expand.

    We have established a small office in Brussels to create a presence there but that’s not our only focus. As EPTA we can join with one of our member firms to visit the regulator and the Ministry of Finance in their home country. In this way EPTA serves as both a local and a widespread European organization. And that’s going well. We’ve had many meetings with regulators across Europe and the reception has been really good.

    HFTR: And you’re affiliated with the FIA (Futures Industry Association)?

    MS: Yes. Although we originally intended to be independent, it made a lot of sense for us to join forces with the FIA’s PTG (Principal Traders Group) because most members know how successful that group has been in the US. So we made a cold call to the FIA and asked if they had thought about having something similar in Europe. It was the right decision; the whole relationship has been absolutely wonderful from day one. We discuss a lot, we have a very open line of communication, we’re extremely positive about the whole relationship and we could never have achieved so much as an independent group.

    Just to be clear, our interests are not limited to the futures markets. Our members are active in a wide range of asset classes, including cash equities, exchange-traded funds, fixed income and foreign exchange as well as futures and options. Basically are active in just about any market that is traded on a platform that is open to our type of firm.

    HFTR: One of the issues you must face is the fact that public perception of proprietary and speculative trading — particularly high frequency trading — seems predominantly negative. How can the media and the general public be better educated on some of the positive benefits that principal traders bring to the markets?

    MS: That’s a very good question. First of all I think we, as EPTA, and as individual member organizations, have to do a better job. Every time we speak to a member of the press or a regulator, we need to make sure they understand what we stand for and what we do.

    As proprietary traders, traditionally we’ve never had to go any further than an exchange (and maybe sometimes a regulator) to tell them what we do because we don’t have customers. And we don’t actually want to serve customers, that’s not our business model; our business model is to provide liquidity to the market. So one of the reasons why we have been so slow in getting our message out is because we’re not selling anything to a customer.

    Generally it’s the exchange who is interested in us, not the regulator. We’re a customer of the exchange and that’s where it basically ends. Prop traders often don’t see the outside world, it’s not important for them, they’re dealing with numbers and data and that’s what their life is about. But once you have a significant percentage of the market going through either your company or through your association, you need to be more pro-active. That’s what we’re trying to do through the EPTA group, spelling out what our members are actually doing and communicating that to the bigger world beyond the exchanges.

    Not all regulators are the same however. In Holland for example, we’ve always had lots of prop traders in the stock options market, so the Dutch regulators know what prop trading is all about. But elsewhere, you have regulators who may not have such a significant market, so you can’t blame them for not being as well educated on the topic.

    HFTR: How would you define high frequency trading?

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