Getco Reported Earnings For The First Time, And It Was A Massacre
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Earnings - from 134mm to 24mm over 9 months.
Revenue - 425 mm and earnings of 24 mm. So that is like 6% earnings/revenue. What happened to other 400mm? They paid them to their employees???? OR they invested 100mm in new technology etc. and they paid other 300mm to their employees?
Their website says they have 400+ employees. Does it mean every employee on average took home a million a year (on average)?
Does anyone has an inside scoop on them? I know a guy who works for them in Chicago office - haven't spoken to him for sometime. But as far as I know, he makes close to 200k or so. Been with them for 2 yrs. So, where is all the money going.
I am happy to see that a trading firm can make 400mm from their proprietary trading. Good to know the scope in this field.
Revenue - 425 mm and earnings of 24 mm. So that is like 6% earnings/revenue. What happened to other 400mm? They paid them to their employees???? OR they invested 100mm in new technology etc. and they paid other 300mm to their employees?
Their website says they have 400+ employees. Does it mean every employee on average took home a million a year (on average)?
Does anyone has an inside scoop on them? I know a guy who works for them in Chicago office - haven't spoken to him for sometime. But as far as I know, he makes close to 200k or so. Been with them for 2 yrs. So, where is all the money going.
I am happy to see that a trading firm can make 400mm from their proprietary trading. Good to know the scope in this field.
For answers to your questions, I'd suggest that you select the S-4 filing from this Web page, which contains the answers to your questions, along with hundreds of pages of other stuff:
http://www.knight.com/investorRelations/secFiling.asp
In particular, note that GETCO had the following top 3 expenses for the 9 months ended Sept 2012, which dominate:
Regulatory, exchange and execution fees $144.7 million
Employee compensation and related benefits $113.9 million
Colocation and data line expenses $63 million
(page 42 of this 583 page document). The document has these types of numbers going back to 2007.
One comment on your comments, gmst: most individual traders would probably consider $207 million of these expenses (the exchange and colo fees) as items that count against "trading profit", as it's somewhat analogous to commissions and trading platform fees. So really the "trading profit" is more like $212 million over nine months, which is excellent in and of itself, although the trend isn't pretty.
http://www.knight.com/investorRelations/secFiling.asp
In particular, note that GETCO had the following top 3 expenses for the 9 months ended Sept 2012, which dominate:
Regulatory, exchange and execution fees $144.7 million
Employee compensation and related benefits $113.9 million
Colocation and data line expenses $63 million
(page 42 of this 583 page document). The document has these types of numbers going back to 2007.
One comment on your comments, gmst: most individual traders would probably consider $207 million of these expenses (the exchange and colo fees) as items that count against "trading profit", as it's somewhat analogous to commissions and trading platform fees. So really the "trading profit" is more like $212 million over nine months, which is excellent in and of itself, although the trend isn't pretty.
Occam,
Thanks for posting the link. It is informative. You have already mentioned the big ones. Interestingly, their data and co-location costs have gone up 3x from 2008 to 2012. Their office expenses have gone up 5x from 2008 to 2012.
Also, they spend roughly 8-10 million per year on travel and entertainment. With 400 employees, it works out to 20k per employee per year on office parties and for their trips to stripclubs in Illinois. LOL. But in 2008, they spent 8 million with only 200 employees. That was like 40k per employee on parties.
In the PDF file, I found the statements on page 31.
Yes, we do consider this 207mm as trading cost. So, net profit would be 212 mm only over 9 months. With 400 employees, it works out to 500k per employee net profit.
Well the trend is not too bad if you consider the relationship of VIX with their PL. In pages 32-33 of PDF, they have mentioned VIX levels from 2007 to 2012. And it pretty closely corresponds to their PL. So, I don't think they are doing bad at all. Also, the % of their participation on NYSE, options markets, CME is holding well year on year. (this information is also on page 32-33).
What I found interesting was that they are spending way too much on office renovation (probably hiring new offices), and infrastructure costs (read colo etc.). This points out that the competition in HFT space is getting tougher and they are spending more to just be at the spot they were 4 years ago.
It seems, as an individual trader if you can make 500k per year or a million a year, then you are better off as an individual rather than working for a firm like Getco. Unless and until, you turn out to be one of the founders - who will make 100s of millions. Check the partners equity (again page 32-33). It is growing steadily over the years. I don't know how many original partners Getco had - but my guess is each one of them is north of 200million at least.