Getco

Getco
Name	Getco
Industry	Financial services
Founded	1999
Fate	Acquired by Knight Capital Group (2013)
Headquarters	Chicago, Illinois
Key people	Stephen Schuler, Thomas S. Peterffy
Products	Electronic market making, high-frequency trading

Getco

Getco was a Chicago-based electronic market maker and high-frequency trading firm founded in 1999. The firm became prominent in equities, options, and futures markets across venues such as the New York Stock Exchange, NASDAQ, and Chicago Mercantile Exchange. Getco's rise intersected with developments at firms and institutions including Renaissance Technologies, Citadel LLC, and Knight Capital Group and influenced debates involving regulators like the Securities and Exchange Commission and policy forums such as the Federal Reserve System.

History

Getco was founded during the dot-com era alongside contemporaries such as Getco's peers; early market structure changes following legislation like the Gramm–Leach–Bliley Act and technology advances at exchanges including the London Stock Exchange shaped its trajectory. The firm expanded through the 2000s amid competition with firms like Jane Street Capital, Optiver, and Tower Research Capital. High-profile episodes in market history—such as the Flash Crash of 2010 and litigation involving market participants like Goldman Sachs and Morgan Stanley—highlighted the role of electronic market makers. In 2013 Getco combined with Knight Capital Group to form KCG Holdings, a consolidation that echoed earlier mergers among financial firms like Lehman Brothers (pre-collapse) and restructurings after crises involving AIG.

Business model and operations

Getco operated as a proprietary trading firm and automated market maker, providing liquidity on trading venues such as the NYSE Arca, BATS Global Markets, and IEX Exchange. Its business model resembled those of Two Sigma Investments and DRW Trading in deploying capital in market-making and arbitrage across instruments listed on the Chicago Board Options Exchange and Intercontinental Exchange. Revenue sources included bid–ask spreads, rebates from market makers programs at exchanges like NASDAQ OMX Group, and statistical arbitrage tied to underlying securities connected to firms such as Apple Inc., Microsoft, and JPMorgan Chase. Operations were influenced by clearing relationships with institutions like The Depository Trust & Clearing Corporation and prime brokerage services offered by entities including Bank of America and Credit Suisse.

Technology and trading strategies

Getco invested heavily in low-latency infrastructure, colocating servers near matching engines of venues like the CME Group and optimizing network paths similar to techniques employed by Spread Networks and Hibernia Networks. Trading strategies included market making, latency arbitrage, and flow prediction using statistical models akin to those in academic work from Massachusetts Institute of Technology and Stanford University. Hardware and software stacks incorporated technologies from vendors and platform projects associated with Intel Corporation, NVIDIA, and open-source systems inspired by research from Bell Labs and DARPA-funded initiatives. The firm competed with algorithmic units at investment banks such as Deutsche Bank and proprietary desks like Susquehanna International Group.

Regulation and legal issues

Getco’s activities intersected with regulatory regimes overseen by the Securities and Exchange Commission, the Commodity Futures Trading Commission, and self-regulatory organizations like the Financial Industry Regulatory Authority. Post-2010 regulatory responses to events such as the Flash Crash of 2010 and rulemakings under acts involving exchanges prompted scrutiny of high-frequency trading practices employed by market makers including Citigroup's trading arms. Legal and compliance matters involved monitoring under frameworks similar to investigations of firms such as Barclays and enforcement actions that paralleled litigation witnessed by UBS and Deutsche Bank. Policy debates included testimony before bodies like the United States Congress and standards set by global institutions such as the International Organization of Securities Commissions.

Corporate structure and acquisitions

Getco’s corporate evolution culminated in a merger with Knight Capital Group to form KCG Holdings in 2013, a transaction that reflected consolidation trends among electronic trading firms following episodes involving Knight Capital’s 2012 trading disruption. The combined firm faced integration challenges similar to those seen in mergers like E*TRADE's deals and drew interest from potential acquirers such as Virtu Financial and Goldman Sachs. Leadership included executives who had backgrounds at trading houses and technology companies akin to careers at IBM and Microsoft Corporation. Post-merger, assets and personnel transitioned into entities involved with market making and execution services across venues including the New York Stock Exchange and Chicago Board of Trade.

Philanthropy and corporate culture

Getco’s corporate culture emphasized quantitative research, engineering, and competitive recruiting from institutions such as University of Chicago, Massachusetts Institute of Technology, Princeton University, and Stanford University. The firm participated in philanthropic and community activities similar to contributions by finance firms to institutions like The University of Chicago and arts organizations including the Chicago Symphony Orchestra. Its human capital practices paralleled programs at technology-led firms such as Google and Facebook in attracting talent through technical challenges, internships, and partnerships with academic research groups at labs like Argonne National Laboratory.

Category:Financial services companies