The Hungarian Hacker who Automated and Hacked the Market

Thomas Peterffy the Hungarian immigrant who practically invents the moden high speed automated trading. A draftsman turned option trader, he is responsible for a number of firsts. As an option trader he was one of the first to use mathemstics to trade option ranges. These were calculations were cumbersome printed tables at first in 3 ring binders. When he was banned from bringing binders they tables were stuffed into pockets of jackets he had to wear year round.

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Peterffy's calculations were computerised but the data entry and trading was still manual. To tackle the laborious process his team hacked a early Quotron machine as a primstive market data feed, used to calculate option prices. which were still printed on paper.

The next breakthrough was when the NASDAQ went electronic. Again Peterffy's team got to work and hacked a NASDAQ terminal to allow them to trade automatically. When the NASDAQ got wind of their volume of trading they were banned from trading without 'entering the orders through a keyboard'. Undaunted the Peterffy created a primitive robot to “manually” enter the orders via a keyboard. The NASDAQ were unable to prevent this kind of trading and the era of real autoamated trading was ushered in

Today, Peterffy company Interactive Brokers, does high frequency and low latency trading ranging in the mili-seconds.

Peterffy says automated trading has provided value for the market and people where it has made buying and selling stocks much much cheaper for everyone.

But in recent interviews he has questioned the stability of the market and whether automated trading is going too far without providing value to all the players.

via Planet Money