The Father of High Frequency Trading

Fortune tracked down a man, now retired from finance, that it believes is the father of high-frequency trading. HFT is the subject of Michael Lewis’s latest book, Flash Boys, that portrays HFT as being a major negative for most investors. In interviews, he says because of HFT the market is rigged. Many others have disagreed. David Whitcomb, who in some ways began HFT, is among those who believe HFT doesn’t harm other investors. Read the article here.

Whitcomb says the origins of HFT date back to the Black Monday stock market crash of 1987. Watching the sell off, he says he was surprised at how useless human market makers were during a panic. No one knew where the bottom was. Whitcomb was convinced that computers could do a better job of figuring out how low the market needed to go before people would start buying again.

So he set out along with some computer engineers to develop the first programs that would allow computers to trade on their own. And that’s what led him to HFT. By the fall of 1990, he had developed the first computer system that could continuously trade stocks on its own at a rate faster than any human. He tried to peddle the technology to big banks and trading firms. But when no one was interested, he launched ATD.