Credit Suisse Says High-Speed Trading Revenue Share Low

Credit Suisse Group (CSGN) AG Chief Executive Officer Brady Dougan said high-frequency trading makes a “relatively immaterial” contribution to the bank’s equities revenue.

Switzerland’s second-biggest bank is among firms criticized by author Michael Lewis in his book “Flash Boys” for giving high-speed traders an advantage on its trading platform.

High-frequency traders’ share of Credit Suisse’s 4.75 billion Swiss francs ($5.4 billion) in annual equity revenue is estimated in the market to be 5 percent to 8 percent, Jernej Omahen, an analyst at Goldman Sachs Group Inc., said on a Credit Suisse earnings conference call today.

“I don’t even know if we’d know how to answer the question of what proportion of our revenues is actually high-frequency traders,” Dougan, 54, said in response to a question from Omahen. “I think the HFT portion would be, I would say, de minimis.”

All electronic trading in equities the bank executes contributes about 15 percent to 18 percent of total revenue in that business, Dougan said today. The vast bulk of the volume is generated by “normal users,” Dougan said.

As for high-speed trading, “I would think it was relatively immaterial,” Dougan said.

‘Responsible Approach’

The book sparked a debate on whether the presence of high-frequency traders in the market places some investors at an unfair disadvantage because their orders can sometimes be seen by the high-speed traders before they are fully executed. Some brokerages sold access to the dark pools they operate to high-frequency traders, according to Lewis.

Photographer: Gianluca Colla/Bloomberg

“I don’t even know if we’d know how to answer the question of what proportion of our revenues is actually high-frequency traders,” Credit Suisse Group AG Chief Executive Officer Brady Dougan said in an interview. Close

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Photographer: Gianluca Colla/Bloomberg

“I don’t even know if we’d know how to answer the question of what proportion of our revenues is actually high-frequency traders,” Credit Suisse Group AG Chief Executive Officer Brady Dougan said in an interview.

Lewis, who is also a columnist for Bloomberg View, describes in his book how Brad Katsuyama, now CEO of IEX Group Inc., built an exchange to specifically prevent high-frequency traders from beating other investors on speed.

Dougan said the bank has taken “a very responsible approach” to its automated execution business, adding that Credit Suisse didn’t see any impact on it from the recent debate. Possible longer-term changes to the market structure “shouldn’t be material” to Credit Suisse’s revenue, he said.

To contact the reporters on this story: Jeffrey Vögeli in Zurich at jvogeli@bloomberg.net; Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Cindy Roberts

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