Last week, we noted that JPMorgan seems to be pushing into high-frequency market making. It’s not alone.
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Job listings at Goldman Sachs show the bank is building a “new business line” in its electronic market making group as part of a “major, multi-phase ETF initiative.” It’s currently hiring engineers to build the infrastructure for that business line in New York; Goldman declined to comment, but listings have a significant focus on low-latency infrastructure. Candidates need experience building “high-performance research infrastructure for very large data inputs.” The bank wants C++ experts for this and will flat out reject you if most of your experience is in Java. Ouch.
The project seems to be focused on US ETFs; “international ETF expansion” is described as a future phase. This is enemy territory dominated by the growing algorithmic trading firms like Jane Street and Citadel Securities. Bloomberg reported last December that Jane Street accounts for 21% of market share for ETF market making while Susquehanna and Citadel Securities account for 14.4% and 11.2% respectively.
Goldman largely exited the ETF market making space in 2017 but made an official return last summer by becoming lead market maker on a new ETF from Capital Group. Bloomberg reported at the time that Jane Street is lead market maker on over 800 ETFs. The bank clearly has ambition to close the gap.
The focus on low-latency infrastructure also comes at an interesting time; Hudson River Trading’s head of AI Iain Dunning told Bloomberg last October that “all the latency has been arbitraged for the most part,” suggesting that HFT strategies aren’t the gold mine they once were. JPMorgan’s burgeoning ‘AI Markets Lab’ is focused on both high-frequency (seconds or less) and mid-frequency (minutes to days) trading strategies. The assets it will be trading aren’t as clear, but it will focus on “risk-taking strategies” in addition to market making.
It’s not just the banks pushing into this space either; hedge funds want a piece too. In April, Millennium hired Alexandre Fournier, former CTO of Tower Research Capital, to run its low-latency tech team: SPEED. Today that division is hiring multiple high frequency trading engineers in Singapore and New York.
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