High-Frequency Programmers Revolt Over Pay
Computer jockeys setting up own shops in bids to make millions. — Pity the programmers toiling away at Wall Street's secretive high-frequency trading shops—places like Goldman Sachs ( GS - news - people ), Citadel and Getco.
Context & Ripple Effects
High-frequency trading had already made execution speed economically valuable, as the 2009 account of millisecond-sensitive trading documented. Against that backdrop, programmers at firms including Goldman Sachs, Citadel and Getco are no longer only technical employees: their ability to build trading systems gives them a credible route to independent shops.
First-order effects
- Goldman Sachs, Citadel and Getco face the immediate loss of programmers who are leaving to form independent trading operations in pursuit of a larger share of returns.
- The departing programmers gain direct control over the trading systems and businesses they build, rather than remaining compensated as employees inside established firms.
Second-order effects
- Established high-frequency firms must contend with former employees becoming potential rivals for speed-based trading opportunities, increasing the value of retaining technical talent.
- Independent shops make the market for high-frequency programming more entrepreneur-led, putting pressure on the employment bargain at firms whose trading capability depends on small technical teams.
Third-order effects
- If technical talent continues to spin out, high-frequency trading may become less concentrated in incumbent financial institutions and more organized around specialist firms built by the programmers themselves.
- The episode points to a broader shift in which proprietary trading infrastructure becomes a source of bargaining power for its builders, not solely for the firms that employ them.
The trend: High-frequency trading is turning elite programming skill into entrepreneurial leverage as the value of speed-based systems shifts bargaining power toward their creators.