Securities to buy NYSE market-making unit of smaller rival IMC

The companies said electronic trading giant Securities Securities will have an already large presence on the New York Stock Exchange by purchasing the NYSE market-making business of smaller rival IMC Financial Markets.

The deal will strengthen Citadel Securities’ position as the largest designated market maker on the exchange. DMM firms are tasked with ensuring the orderly trading of listed shares in the NYSE. They in turn gain some trading privileges, and their blue-jacket merchants occupy a prominent position in the center of the exchange’s historic trading floor.

The deal is subject to approval by the NYSE. If it is completed, Citadel will oversee trading for more than half of the securities listed on the Securities Exchange. This will reduce the number of DMM firms in the Big Board from four to three, potentially raising concerns that the DMM business is becoming overly focused.

The Wall Street Journal first reported the deal, which was later announced by the two companies in a press release.

IMC, a global trading firm based in Amsterdam, operates the third largest DMM business in the NYSE. Earlier this year, it was oversaw trading 18% of NYSE-listed shares, while Citid Securities had a 44% share, according to the NYSE spreadsheet. The spreadsheet listed DMM assignments for more than 3,000 securities, including close-end funds and preferred shares as well as common stock of NYSE-listed companies.

New York-based GTS, which is seen as the main competitor to Citadel Securities in the DMM business, oversaw trading 37% of the shares on the list. GTS is currently the largest DMM based on the total combined market capitalization of its companies. But after the IMC deal, if approved, Citadel Securities will be bigger than that measure.

DMM is for stocks like Citadel Securities Naik. Inc.

Uber Technologies Inc.

And walmart Inc.

It was selected as the market maker for Pallantir Technologies last month Of inc

Direct listing on NYSE. With IMC deal, Citadel Securities will add such shares as Boeing Co.

And Verizon Communications Inc.

For its collection.

Under NYSE rules, exchange officials must consider how a proposed combination of two DMM firms will affect competition, and they may reject a deal if they cause a damaging level of concentration. But the rule does not matter as much concentration.

“We will review any proposed combination according to the exchange rules,” NYSE Chief Operating Officer Michael Blegrand said in a statement.

Over the years, the NYSE has tried to diversify the DMM business. When Barclays PLC agreed to take over the Labrache company’s market-making operations in 2010, exchange regulators stepped in to transfer part of its portfolio to another DMM, the bank said former NYSE executives. Barclays later transferred about 350 securities to high-speed merchant gateco.

Terms of the Citadel Securities-IMC transaction were not disclosed, but a person familiar with the matter said the price was in the millions of dollars. When IMC acquired its DMM unit from Goldman Sachs Group Inc.

In 2014, the deal was valued at $ 30 million, the Journal reported at the time.

DMM is often called by its old name “experts”, even though the NYSE dropped the term more than a decade ago. In the 1980s there were dozens of specialist firms, many of which were small, family-run businesses. As trading volumes grew and markets became electronic, such companies were forced to grow stronger. Today, most DMMs are large, high-speed trading firms.

NYSE specialist firms commanded a much higher price tag two decades ago, but their values ​​were erased by regulatory changes and technological developments that dropped market makers’ profit margins. Such firms make money by citing day-to-day stock prices and collecting a small spread between the purchase and sale price of the stock.

Located in Chicago, Siadal Securities trades more than one in five changing hands on the US stock market each day. It has a huge trading execution order for small investors using trading apps and online brokerages run by Charles Schwab. Corp.

And Robinhood Markets Inc. Citadel Securities is majority-owned by billionaire Ken Griffin and affiliated with its hedge-fund firm, Citadel.

In the press release, the IMC stated that the DMM unit was a small part of its US operations, and that the sale would help focus its options and exchange-traded fund business. Last year, IMC decided to close its European equity and exchange-traded fund businesses.

The deal is expected to close in the fourth quarter of 2020, according to the press release.

Write [email protected] on Alexander Osipovich

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