Citadel Securities isn’t a household name, but If you buy or sell stock or options through an online retail account, chances are the firm sometimes brokers your trade.
“We were one of the pioneers that automated options and equities market making, and in 2014 we continued to innovate and improve our automated market-making platform,” said Jamil Nazarali, head of Citadel Execution Services, a unit of Citadel Securities. “2014 was a strong year for Citadel Securities. We widened our lead as the number one market maker in the retail equities and equities options markets.”
“We also expanded into FX market making, and we launched our interest-rate swap market-making business,” Nazarali told Markets Media.
Chicago-based CES executes approximately 28% percent of all U.S.-listed shares traded on behalf of retail investors. The company aims to deliver greater reliability, innovation and service to retail investors, through both calm and turbulent markets. CES’s trading capacity includes co-located computers at all major exchanges plus connections to all major dark pools.
On the institutional side, CES deploys algorithms to intelligently execute trades for large institutions, with minimal information risk and low impact on markets. Designed with a buy-side mentality, the firms also works on behalf of hedge funds, proprietary trading groups and other large-scale investors.
Electronic liquidity providers’ business depends on the amount of order flow that comes into the market, which is directly correlated with underlying investor confidence. To that end, it’s in market makers’ best interests to advocate for the best possible market structure.
“We are committed to playing a role in the efforts across the industry to make markets fairer and more stable for all investors,” Nazarali said. “We’ve been fortunate to have a voice on many market structure issues. I am pleased to serve on the SEC’s newly formed market structure committee and represent retail investors and our clients, and the market making community overall.”
For 2015 and beyond, Citadel is pressing to expand its business outside of stocks and options.
“One big initiative is to grow our share of the interest-rate swap market,” Nazarali said. “We already rank as top ten provider of client liquidity in U.S. dollar rate swaps on Bloomberg’s SEF, the first time a nonbank has ever ranked so highly.”
“A second priority is to grow our FX market making platform, and a third is our ongoing commitment to driving market structure changes that benefit retail investors and the industry as a whole,” Nazarali added.
Citadel Securities entered the equity market-making business in 2005 with its launch of Retail Execution Services. The firm attracted order flow rapidly and reached 15% market share within 10 months. On one day in 2009, more than 1 billion shares executed via Citadel.
In 2011, Citadel added algos and alternative trading systems to its capabilities, and the firm expanded its market making to over-the-counter securities in 2012. Citadel’s total equity market share is approximately 13%, and its options share is about 20%.