Hull Trading Company: Difference between revisions
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{{Short description|Stock trading company}} |
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foundation = 1985 | |
foundation = 1985 | |
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location = [[Chicago, IL]] | |
location = [[Chicago, IL]] | |
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industry = [[Financial |
industry = [[Financial services]] | |
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fate = Acquired by [[Goldman Sachs]] in 1999 | |
fate = Acquired by [[Goldman Sachs]] in 1999 | |
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'''Hull Trading Company''' |
'''Hull Trading Company''' was an independent [[algorithmic trading]] firm and electronic [[market maker]] headquartered in [[Chicago]]. Known for its quantitative and technology-based trading strategy, it was acquired by [[Goldman Sachs]] in 1999. |
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== History == |
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In the late 1970s, [[Blair Hull]] developed an empirical [[Option (finance)|options]] pricing model independent of [[Black–Scholes]]. Realizing that computers would lead to automated exchanges and mathematical securities pricing, he founded Hull Trading Company. The company became a global leader in the application of computer technology to listed [[Derivative (finance)|derivatives]] trading. Hull developed a proprietary and large scale reliable distributed system architecture, providing automatic real-time pricing, risk management, market making and interconnection with automated options, futures and stock exchanges as they became available. Hull Trading Company's massively scalable [[software technology]] was deployed to cover both domestic and international markets as electronic, on-line exchanges became available, while innovative hand-held computer technology was employed at exchanges still requiring execution by floor traders. |
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In the late 1970s, [[Blair Hull]] developed an empirical [[Option (finance)|options]] pricing model independent of [[Black–Scholes]]. Realizing that computers would lead to automated exchanges and mathematical securities pricing, he founded Hull Trading Company in 1985. The firm grew to over 180 employees including financial engineers, physicists (many from [[Fermilab]]<ref name="darkpools">{{cite book |title = Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System |last = Patterson |first = Scott |publisher = Crown Publishing |year = 2012 |isbn = 978-0-307-88717-7}}</ref>{{rp|28}}), almost 100 software engineers and computer support staff. At its peak, Hull executed over 7% of the index options traded in the United States and 1% of the shares traded on the [[New York Stock Exchange]]. |
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In 1999, Blair Hull sold the Hull Trading Company to [[Goldman Sachs]] for $531 million. [[Henry M. Paulson]], then chairman and chief executive officer of Goldman Sachs, said Hull Trading Group is "the world's largest electronic options market maker, very active outside the U.S. We just looked at this as something that's going to position us well. We want to stay ahead of the electronic curve and take advantage of the migration to electronic platforms world-wide."<ref name="Goldman Sachs to Buy Trading Firm Hull Group of Chicago for $531 Million" /> The acquisition signalled a shift in Goldman Sachs towards [[electronic trading]].<ref name="darkpools" />{{rp|29}} |
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:::''"The trading room at Hull headquarters looks like NASA mission control. Powerful workstations process streams of financial data, flashing advice to the handhelds carried by Hull traders at the CBOE and the [[Chicago Board of Trade]] (CBOT). Different workstations track the firm's risk profile, sending handheld-equipped traders at the Chicago Mercantile Exchange instructions about how to use futures contracts to hedge trades being made at the CBOE and the CBOT. |
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:::'''The goal of this remarkable technological firepower is simple: not to take big risks but to find sure things. Hull's computers search the markets for temporary price imperfections, devise transactions to profit from the imperfections, and hedge those bets to protect against other risks. It's a lot like blackjack. "All you need is a mathematical advantage and the controls to ensure that you stay in the game," Hull argues. "Everything else takes care of itself."'' -[http://www.fastcompany.com/magazine/08/hullbenchmark.html '''''Fast Company'''''] |
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The firm grew to over 250 employees including financial engineers, [[physicists]], almost 100 software engineers and computer support staff. At its peak, Hull Trading Company moved nearly a quarter of the entire daily market volume on some markets, executed over 7% of the index options traded in the United States, 3% of the equity options, and 1% of all shares traded daily on the [[New York Stock Exchange]]. |
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:::'' "His computers trade stocks faster than the human eye can see them scroll on a screen. The system is designed to predict patterns that will unfold in the market over periods as short as two minutes. In a business that isn't normally modest about its technological savvy, Hull and his automated trading shop are the envy of Wall Street's top firms." '' - '''[http://www.Worth.com Worth Magazine]''' |
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In 1999, Blair Hull sold the Hull Trading Company to ''[[Goldman Sachs]]'' for $531 million. |
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Hull Trading was primarily an [[equity options]] [[market maker]]. The firm employed complex mathematical models to analyze short-term options and equity pricing discrepancies while [[Hedge (finance)|hedging]] against overall risk exposure. It employed mathematicians and physicists to design algorithms and a large number of software engineers to implement systems based on these algorithms. |
Hull Trading was primarily an [[equity options]] [[market maker]]. The firm employed complex mathematical models to analyze short-term options and equity pricing discrepancies while [[Hedge (finance)|hedging]] against overall risk exposure. It employed mathematicians and physicists to design algorithms and a large number of software engineers to implement systems based on these algorithms. |
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==Technology== |
== Technology == |
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The company was a leader in the application of computer technology to listed derivatives trading. A proprietary and large scale reliable distributed system architecture was developed by company programmers, providing automatic real-time pricing, risk management, market making and interconnection with automated options, futures and stock exchanges as they became available. Hull's massively scalable software technology was deployed to cover both domestic and international markets as electronic, on-line exchanges became available, while innovative hand-held computer technology was employed at exchanges still requiring execution by floor traders. |
The company was a leader in the application of computer technology to listed derivatives trading. A proprietary and large scale reliable distributed system architecture was developed by company programmers, providing automatic real-time pricing, risk management, market making and interconnection with automated options, futures and stock exchanges as they became available. Hull's massively scalable software technology was deployed to cover both domestic and international markets as electronic, on-line exchanges became available, while innovative hand-held computer technology was employed at exchanges still requiring execution by floor traders. |
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The company's proprietary technology allowed it to execute tens of thousands of transactions daily.<ref name=" |
The company's proprietary technology allowed it to execute tens of thousands of transactions daily.<ref name="Risky Business, Sound Thinking" /> |
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==Pay structure== |
== Pay structure == |
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The company was also known for its emphasis on teamwork and democratic pay structure, in which employees awarded each other bonuses. Since pay was based on nominations received, the system has been described as highly [[meritocratic]].<ref name=" |
The company was also known for its emphasis on teamwork and democratic pay structure, in which employees awarded each other bonuses. Since pay was based on nominations received, the system has been described as highly [[meritocratic]].<ref name="Risky Business, Sound Thinking" /> |
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Equity partnership interest was widely distributed among employees. At the time of the merger into Goldman Sachs there were over 20 employee partners holding about 25% of equity interest, with the remaining interest held by members of the Hull family. |
Equity partnership interest was widely distributed among employees. At the time of the merger into Goldman Sachs there were over 20 employee partners holding about 25% of equity interest, with the remaining interest held by members of the Hull family. |
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== Notable people == |
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* [[Blair Hull]] |
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==Alumni== |
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* [[R. Scott Morris]] |
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*Sandy Adams |
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* [[Haim Bodek]] |
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*Tim Hunter |
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*John Rizner |
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*Jim Lodas |
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*Lester Loops |
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== References == |
== References == |
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<ref name="Goldman Sachs to Buy Trading Firm Hull Group of Chicago for $531 Million" >{{cite web | title = The Wall Street Journal | url = https://www.wsj.com/articles/SB931794389217202242}}</ref> |
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== Footnotes == |
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<ref name="Risky Business, Sound Thinking" >{{cite web | title = Risky Business, Sound Thinking | url = http://www.fastcompany.com/magazine/08/hullbenchmark.html}}</ref> |
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[[Category: |
[[Category:Companies established in 1985]] |
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[[Category:Privately held companies based in Illinois]] |
[[Category:Privately held companies based in Illinois]] |
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Latest revision as of 19:26, 2 July 2023
| Company type | Limited Partnership |
|---|---|
| Industry | Financial services |
| Founded | 1985 |
| Fate | Acquired by Goldman Sachs in 1999 |
| Headquarters | Chicago, IL |
Hull Trading Company was an independent algorithmic trading firm and electronic market maker headquartered in Chicago. Known for its quantitative and technology-based trading strategy, it was acquired by Goldman Sachs in 1999.
History
[edit]In the late 1970s, Blair Hull developed an empirical options pricing model independent of Black–Scholes. Realizing that computers would lead to automated exchanges and mathematical securities pricing, he founded Hull Trading Company in 1985. The firm grew to over 180 employees including financial engineers, physicists (many from Fermilab[1]: 28 ), almost 100 software engineers and computer support staff. At its peak, Hull executed over 7% of the index options traded in the United States and 1% of the shares traded on the New York Stock Exchange.
In 1999, Blair Hull sold the Hull Trading Company to Goldman Sachs for $531 million. Henry M. Paulson, then chairman and chief executive officer of Goldman Sachs, said Hull Trading Group is "the world's largest electronic options market maker, very active outside the U.S. We just looked at this as something that's going to position us well. We want to stay ahead of the electronic curve and take advantage of the migration to electronic platforms world-wide."[2] The acquisition signalled a shift in Goldman Sachs towards electronic trading.[1]: 29
Investment strategy
[edit]Hull Trading was primarily an equity options market maker. The firm employed complex mathematical models to analyze short-term options and equity pricing discrepancies while hedging against overall risk exposure. It employed mathematicians and physicists to design algorithms and a large number of software engineers to implement systems based on these algorithms.
Technology
[edit]The company was a leader in the application of computer technology to listed derivatives trading. A proprietary and large scale reliable distributed system architecture was developed by company programmers, providing automatic real-time pricing, risk management, market making and interconnection with automated options, futures and stock exchanges as they became available. Hull's massively scalable software technology was deployed to cover both domestic and international markets as electronic, on-line exchanges became available, while innovative hand-held computer technology was employed at exchanges still requiring execution by floor traders.
The company's proprietary technology allowed it to execute tens of thousands of transactions daily.[3]
Pay structure
[edit]The company was also known for its emphasis on teamwork and democratic pay structure, in which employees awarded each other bonuses. Since pay was based on nominations received, the system has been described as highly meritocratic.[3]
Equity partnership interest was widely distributed among employees. At the time of the merger into Goldman Sachs there were over 20 employee partners holding about 25% of equity interest, with the remaining interest held by members of the Hull family.
Notable people
[edit]References
[edit]- ^ a b Patterson, Scott (2012). Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System. Crown Publishing. ISBN 978-0-307-88717-7.
- ^ "The Wall Street Journal".
- ^ a b "Risky Business, Sound Thinking".
- Trader Monthly (2005). "The 40 Greatest Trades of All Time". [Trader Monthly Magazine].
- Kane, Kate A. (April 1997). "Risky Business, Sound Thinking". Fast company. p. 85. Retrieved 2006-08-19.
- Fishman, Ted (2009). "Wall Street's 25 Smartest Players". [Worth Magazine].