FRONTLINE | The Madoff Affair | Sandra Manzke Exclusive
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Bernard Madoff Begins Implementing Automated Stock Trading with the Advent of Computers

Over these decades Madoff's trading business skyrockets. Through a controversial but legal practice known as "pay for order flow," he is able to profit on the large spread -- 12.5 cents -- between the buy and sell price on each trade. Madoff would pay brokerage firms, such as Charles Schwab, a penny or two per share for sending orders through his firm, but he more than made up in volume for the few cents he was paying out.

The practice earns the wrath of the stock exchanges -- but Madoff isn't done. "In about 1971, computers showed up and were being used," he recalled in 2007. "So we saw -- meaning my brother and myself -- that there was an opportunity to bring automation into the over-the-counter marketplace and create some visibility and transparency in the marketplace."

Josh Stampfli is the head of the automated market-making group at Bernard L. Madoff Investment Securities LLC. He designed the trading logic to manage position risk and handle the order flow inherent to the firm's business of providing liquidity to its customers and has also developed independent automated proprietary strategies. He has over 15 years of market experience, ranging from computerized equity trading to statistical fixed income arbitrage, and has experience trading stocks, bonds, swaps, and various derivative products.