TRADING AT THE SPEED OF LIGHT
By Andre Carter
Chicago Defender Contributing Writer
Financier Shawn Baldwin, a Chicago Defender Man of Excellence (Class of 2014), is at the forefront of a venture involving cutting edge technology that changes science fiction into science fact.
It’s called “algorithmic trading,” and in the world of high investment, it is a process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader.
Baldwin’s venture is called the AIA Group and it operates out of his LaSalle Street office located next to the venerable Federal Reserve Bank.
AIA stands for acquisitions, investments and arbitrage, which is buying something at a lower price and selling it at a higher price. AIA is an alternative investment firm that focuses on trading commodities, currencies and derivatives in the global capital markets.
The firm trades using programs developed by industry professionals, PhDs and MBAs from The Wharton School, Northwestern and the University of Chicago. Simply put, AIA uses computers to rapidly buy securities and then sell them at a higher price for a profit.
Baldwin, one of only a few African Americans involved in algorithmic trading and the second African-American member of the Chicago Stock Exchange, explains that “the computers find price differences and trade on them hyperfast in nanoseconds.”
High speed and algorithmic trading have been making eadlines as lawmakers and regulatory officials try to determine if that ability of the computers gives additional privileges to professional traders and hedge fund managers over other investors.
Baldwin simply defers“algorithmic trading is legal, and the fact of the matter is that it requires a significant investment that you aren’t guaranteed will work out. Anyone is able to make these types of investments if they like, however very few people are willing to the hundreds of thousands of dollars in programming and hardware it takes to even try. Believe me, it is a significant risk.”
But apparently the risky business is working out for AIA. Since the firm was created in 2012, an independent accounting company pegged AIA’s value at $17.8 million in 2014, just two years after it opened. The firm is currently in the midst of another independent valuation, which Baldwin believes will be “significantly above” the 2014 numbers.
The 49-year-old married, father of four, Oxford University graduate is no stranger to trading. He has spent the better part of his career in research, trading and investment banking.
Before AIA, Baldwin had success with two companies he previously founded – an investment management firm and an investment bank. In addition, he was the chief operating officer of a publicly traded investment advisory in New York that at one point was worth over $490 million – and all of this happened before he was 40 years old.
Baldwin’s first company, the investment management firm, grew to $1.8 billion in assets. His second business was an investment bank that underwrote over $68 billion in IPO’s (Initial Public Offerings) in a three-year period called the Capital Management Group. Some of the notable companies Baldwin’s investment bank served were the Chicago Mercantile Exchange, Google and the New York Stock Exchange.
Slings And Arrows
But working with Capital Management produced its share of white-knuckle moments for Baldwin.
His initially successful tour with the company ended during a bitter regulatory fight with the Financial Industry Regulatory Authority (FINRA), a private non-governmental organization that regulates member brokerage firms and exchange markets. (The public governmental agency that acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission.)
Of the dispute with FINRA, Baldwin says, “Certain members of the elite and old guard weren’t quite ready for me and they targeted spoiling my reputation. A number of times they wanted me to agree to settle against phantom charges and I steadfastly refused.”
The culmination of the dispute was that his firm was revoked and he was expelled. Baldwin calls the key trigger an event in which he ordered regulators out of his offices over what he perceived to be alleged mistreatment.
“My parents raised me to fight for what I believe in and at some point the attacks became personal in an attempt to discredit and stop me,” Baldwin says. “In retrospect, I probably should have devised another way to display my anger at the mistreatment. However, it was very important for me to stand my ground and fight. I wanted everyone to be clear that my integrity was not for sale or lease at any price.”
To his point, none of the $68 billion in IPO transactions by Capital Management were ever singled out for any violations and Baldwin, his firm and his staff all had spotless records during the investment bank’s dealings.
The alleged mistreatment even attracted the attention of the Reverend Jesse Jackson, who wrote several letters to the Chairman of FINRA on Baldwin’s behalf. Baldwin has posted those letters on his website and says, “I have nothing to hide.”
Baldwin engaged FINRA in a multi-year battle to be brought back, but the fight devastated his firm. “So, I decided to just move forward and focus on opportunities in the future. I didn’t believe continued fighting would be the best use of my time and energy when I knew I could make another high-impact positive contribution.”
A Successful Recovery
He has. Baldwin’s perseverance is paying off with his new firm powered with cutting edge technology, and a new team in a hot market.
“Algorithmic trading is very hot and similar firms such as VIRTU have gone public with IPOs at very high valuations based upon their use of the technology to make high returns in trading profits,” Baldwin says.
And AIA has increased its presence abroad with senior partners based in both London and Monaco to increase asset gathering and the AIA Group’s prospects of success going forward with an international focus and clientele base.
Baldwin himself seems to always be globetrotting. He has been placed at some of the most influential, exclusive international finance forums worldwide and conferences all over the globe. He recently returned from the International Monetary Fund meetings in Lima, Peru.
He’s met with central bankers in Tokyo and been invited to speak and attend upper-tier finance meetings such as the Bloomberg Most Influential Conference and Forbes and Milken conferences.
Magazines including Forbes and Fast Company have published his discussions and analysis with billionaires such as Carlos Slim, Federal Reserve Chairman Janet Yellen, and European Central Bank President Mario Draghi on crucial monetary policy issues.
So Baldwin says that he is well positioned and exactly where he wants to be. And though he literally seems to be everywhere, because of the experience he went through as a Black businessman in the world of high finance, Baldwin has some final words for would-be entrepreneurs of color: “Be aggressive, courageous and determined,” he says, “and in the words of my business idol Reginald F. Lewis – ‘Keep going…no matter what!’”