By John D'Antona Editor, Traders Magazine

Citadel Kicks Off New Role on NYSE Floor With Promptness Push

06.20.2016 By John D'Antona Editor, Traders Magazine

(This article originally appeared on Bloomberg)

Citadel Securities only recently set up shop on the floor of the New York Stock Exchange, but it’s already pushing for changes.

Unlike its two main rivals in stock trading, Nasdaq Inc. and Bats Global Markets Inc., getting shares open for the day at the NYSE is a partly manual process. The perils of that approach were underscored on Aug. 24, when hundreds of NYSE-listed securities didn’t immediately open at 9:30 a.m. amid a surge in volume, causing confusion and spurringwild price swings.

Citadel Securities, one of a handful of firms that manages trading at the floor, told brokers in a town hall-style meeting Thursday afternoon that it wants to get more shares going right at 9:30 a.m. To do that, it will significantly reduce its use of an NYSE floor convention that lets brokers request a delay in a stock’s opening. Although U.S. stocks trade on 12 exchanges and dozens of private platforms, the opening auction at NYSE remains a key moment of the day where a huge chunk of shares change hands.

“Opening all stocks on time is a big priority for us because it ensures price discovery for NYSE-listed issues happens on the exchange, and results in the entire market working more efficiently,” Jamil Nazarali, head of execution services at Citadel Securities, said in a phone interview. Citadel Securities is part of billionaire Ken Griffin’s hedge-fund operator, Citadel LLC.

Citadel Securities is responsible for about 1,500 stocks at the floor, a role it took on in May by purchasing a KCG Holdings Inc. division. In its new crusade, Citadel Securities will limit its use of “broker holds,” which let brokers delay the opening of a NYSE stock if they’re trying to place a large order for a customer — in theory to stabilize prices.

Stacey Cunningham, chief operating officer of NYSE Group Inc., said the exchange is working with all of its floor trading businesses, known as designated market makers, to balance timely opens with ensuring stocks are correctly priced. NYSE Group is a division of Intercontinental Exchange Inc.

“Our model is strictly focused on automating where appropriate and leveraging the experience and expertise of our designated market-makers where appropriate,” Cunningham said.

Broker holds accounted for about 25 percent of the times Citadel Securities couldn’t get a stock trading immediately at 9:30 a.m., according to data it analyzed from May. The firm also, 89 percent of the time, got stocks going within 3 seconds of 9:30 a.m. in May, an improvement from KCG’s 80 percent rate in April, NYSE data showed.

Citadel Securities’ change may set a model for peers. It’s one of four automated trading firms that dominate the business of overseeing shares at the NYSE floor, a group that includes Virtu Financial Inc., Global Trading Systems LLC and IMC Financial Markets.

Related articles

  1. Ownership gives Cboe entry to digital asset spot and derivatives, clearing and settlement.

  2. Outlook 2016: Alexander Lehmann, LSEG

    The revenue impact of Ukraine and Russia s anticipated to be c.£60m in 2022.

  3. Firms on the Swiss tokenization platform can issue equities seamlessly in SDX's regulated CSD.

  4. From The Markets

    BitMEX Fined $100m by FinCEN

    This is the Financial Crimes Enforcement Network’s first enforcement action against an FCM. 

  5. The SIX exchange group acquired Spain's Bolsas y Mercados Españoles last year.