Ramon Gonzalez '09 is the systems reliability engineer for IEX, the Wall Street firm that has taken on predatory high-frequency trading practices.
NJIT Grad Ramon Gonzalez Helps Engineer High-Frequency Trading Reform
Ramon Gonzalez, a systems reliability engineer for NASDAQ since his graduation from NJIT in 2009, was on the verge of a career change last spring when he got a recruitment call from an enigmatic Wall Street start-up firm forming what is known as an alternative trading system, a stock exchange that functions similarly to NYSE or NASDAQ.
Gonzalez recalls his puzzlement when Internet searches turned up virtually nothing about the founders or the firm, called IEX, which proceeded to make him an odd and unlikely pitch.
“The guys I met with told me that what they were doing might sound strange at first, even difficult to understand. They had observed some predatory high-frequency trading practices in the equities exchange markets, and had decided to do something about it by setting up their own exchange to circumvent them,” he recounts.
Gonzalez, who had just returned from an interview on the West Coast with Netflix and was planning to leave the financial-services sector, said his first instinct was to politely decline. “Maybe I was a bit jaded, but it sounded like insider baseball to me – who would even understand it? If someone had said should this happen, I’d have said yes. But would it? I’d have said no.”
But a former mentor at NASDAQ, who had signed on with IEX before the firm had even closed on its initial round of funding or received approval from financial regulators, made an enthusiastic plea, convincing him to take the plunge. A year later, he calls the move a brilliant risk – life-changing even.
Since then, IEX has emerged as a market reformer as it seeks to neutralize what the firm describes as technology-enabled predatory practices that allow trading mechanisms to detect the stock order signals placed by large institutional investors and beat them to their purchases – thus forcing them to buy the same stock later at a higher price or sell it at a lower price.
The company just announced it had raised $75 million from prominent investment firms and entrepreneurs, including Bain Capital Ventures and Spark Capital, an early backer of Twitter, Jim Clark of Netscape and Steve Wynn of Wynn Resorts, among others. IEX will use the funding to pursue registration as a U.S. stock exchange, among other market opportunities.
A few months after he joined, he learned that Michael Lewis, the author of such blockbuster Wall Street exposes as “Liar’s Poker” and “The Big Short,” was avidly following the firm’s progress and preparing to write a book about it. The publication earlier this year of Lewis’s book “Flash Boys (A Wall Street Revolt)” has helped put the firm at the center of a growing public debate over these poorly understood market practices, which undercut the value of a variety of investment funds, including retirement plans.
“For pension plans – and regular people with 401Ks – this was death by a thousand cuts,” Gonzalez notes. “We explained to people that there was a problem in the market and if they didn’t want to be gamed, they should come to us. By connecting to our exchange, we would offer a safe harbor for investors who hold huge positions, trading stocks for mutual funds, for example.”
As a systems engineer, his brief tenure as a “flash boy” has been a fascinating ride as well, because technology is central to the firm’s reforms.
When he arrived at IEX last June, the firm had only six computers. He spent the first several months helping build the system, including the infrastructure that delays stock order signals long enough – a fraction of a second – so that high-frequency trading mechanisms are unable to detect and get out ahead of them. The critical lag was engineered by coiling 38 miles of fiber-optic cable at the site of the firm’s trading platform.
“IEX sends all customer traffic through the same coiled fiber and thus the same queue to the matching engine so that no customer will have an unfair advantage,” explains Gonzalez, who as an engineer for NASDAQ maintained the stock exchange’s computers and fine-tuned its networks to optimize reliability and speed.
“I like the fact that what we’re doing depends on innovative technology. No one else is doing this – there was no precedent for it. It’s exciting to be in finance and to work with people who know technology and math at this level.”
Brad Katsuyama, the firm’s CEO, calls Gonzalez “a key part of IEX's Technical Operations team” who brought with him “invaluable experience that he gained while working for NASDAQ.”
“We appreciate that Ramon took personal risk when he decided to leave an established firm to join an up-start like IEX, but he believed in our mission to create a fair marketplace -- which speaks volumes about his character,”Katsuyama said in a recent e-mail.
For his part, Gonzalez calls the firm’s stance “both refreshing and sobering.”
“The chance to be part of it – to be able to do something that makes a difference – is the reason I decided to stay in finance. And when would I have this sort of chance again? If an effort like this doesn’t succeed, the industry will move quickly to protect itself even better,” he notes, adding, however, “It’s still kind of surreal for us to see our CEO in the media spotlight. I thought that this might be able to make some waves among the people in finance, but I had no idea it would get to the general public like this. I was taken aback when friends of mine that were not in the industry started to ask me questions about it.”
Gonzalez said he also relishes the start-up culture.
“Everybody is on board with the mission and also really knows and cares about what everyone else is doing,” he says. “If you’re not doing your job, everyone will feel it and you could lose the company.”
Ramon Gonzalez and his CCS Capstone team.
Thanks to his NJIT training, Gonzalez says he was “uniquely prepared for a technology role in any field.”
“Lucky for me, NJIT was at an ideal distance from the finance center of the world where there is always a need for top talent,” he says. “The classes I took, along with guidance from instructors like Professors Stanley Senesy and Osama Eljabiri, coupled with peers I met along the way, helped me secure a great entry-level position at a large financial institution like NASDAQ and start my career off right.”
Eljabiri, a senior university lecturer in the College of Computing Sciences who supervised Gonzalez's senior capstone project, called him a "dynamic and dedicated" student whose commitment to his school and the teaching of IT persisted even after graduation.
"Ramon joined the CCS Capstone Program Industry and Alumni Advisory Board and came back for years to mentor and coach our students on their capstone projects, to build new industry bridges and to help us take our capstone program vision to the next level," he recounts. "He's both modest and passionate about what he does, which is everything you'd want in an effective leader."