Infinium's Full Court Press
Chuck Whitman and Brian Johnson used basketball to help forge one of the largest market makers and liquidity providers in the industry.
Teams build winners with a unique blend of talent, vision, drive and philosophy.
Such can be said about Infinium Capital Management, a Chicago-based proprietary trading and market making firm that has become a key electronic market maker and liquidity provider at CME Group and other exchanges. The firm actively participates in CME Group’s energy options, grain options and E-mini S&P 500 options markets, and is a major player in Eurodollar futures and options, reflecting the growing prominence that proprietary trading firms have taken in derivatives markets.
“The effect has been profound,” says David Easthope, an analyst with Celent Group. “The small shops have brought tremendous liquidity to the futures markets. Their expanding list of trading requirements has pushed the boundaries of the industry.”
Infinium is not so small anymore. Since 2001, the firm has grown from a staff of 20 to about 225 today.
Building a Winner
The nucleus of the firm began in 2001, but its roots run back to the basketball courts of a Chicago suburb where Chuck Whitman, Infinium co-founder and chief executive officer was coaching junior high school basketball in the mid-1990s. Through a player on his team, Whitman got to know Brian Johnson, who would go on to play for the University of Illinois’ basketball team and later earn a master’s degree inelectrical engineering there.
Whitman meanwhile, who had worked at the Chicago exchanges since he was a teen and traded as a member on both Chicago futures exchanges, saw the shift from floor-based to electronic trading coming in 1999. He recruited Johnson for help with a trading program and both later worked with a start-up firm called Blink Trading.
“I was just very impressed by Brian’s level of integrity,” Whitman says of Johnson.
In August 2001, Whitman got a call from George Hanley, president of the Hanley Group with whom he worked since 1988, asking for help on a struggling electronic index options on futures and equity options operation. Whitman and Johnson restructured the firm with a focus on electronic market making and proprietary trading and ran it as a separate company, which evolved into Infinium.
“The first day we had everyone in the office ready was on September 11, 2001,” Whitman says. “It was like building a house in the middle of a hurricane.”
Whitman and his team hung on, trading and making markets in stock index options, and added grain options in August 2002. Infinium also was the first to offer electronic quotes on E-mini S&P 500 options in 2003 and yield curve options in 2004 employing staff on the exchange floors and on the screen.
“My strategy at the time was to use the floor as a lever to push volume onto the screen,” Whitman says. “So I wanted to quote in many options and keep them liquid and tight.”
Infinium’s pioneering did not go unnoticed by CME Group, which launched its electronic market making program a year later, allowing the firm to join five of the biggest institutions in the financial markets.
“I really appreciated the fact that CME Group respected that we went out and made markets early,” Whitman says. “So after that I said, ‘I want go and help the exchanges roll out new products.’ ”
Infinium did just that, supporting new products such as euro and Japanese yen options, Treasury options and Dow Index options. Today, Infinium is active in every asset class.
Another Gear
The firm is built with a combination of traders, programmers and financial engineers, which include a number of former college basketball players, who Whitman says “understand the meaning of sacrifice for the team.” New ideas are encouraged and collaboration is paramount.
Aaron Lebovitz, director of algorithmic and event-driven trading at Infinium, says the firm’s approach involves taking an idea and then building an algorithm around it.
“We start with things we notice about markets or things we observe, and then find or develop appropriate models to capture that,” Lebovitz says. “We apply the scientific method to our modeling as opposed to taking a data mining approach or physical approach.”
Infinium was among the early beneficiaries of high-speed execution through technology, but the speed game has leveled, says Nathan Laurell, managing director of market making.
“Three or four years ago, firms that had better speed of execution had a very clear advantage,” Laurell says. “From a market making perspective, everyone now has a low-latency solution. So now the focus is more on how you manage risk, what business logic goes into your algorithms, how do you aggregate something you trade electronically with markets that are still traded over the phone or on the floor. That’s where our strategic advantage comes from – putting that all together and not just focusing on speed of execution.”
A concept that requires a good team.
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