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Billionaire Ken Griffin's Citadel Securities plans to start making markets in euro zone government bonds next year, challenging investment banks' dominance of the 10 trillion euro market.
The Miami-based high-frequency market-making firm hopes to take advantage of Europe's steady shift to electronic trading and the most active continental government bond trading market in nearly a decade.
Citadel Securities, which has strong positions in U.S. stocks, Treasuries and swaps, is at the vanguard of a group of super-fast companies that have entered the sovereign debt market at a time when tighter leverage rules are forcing banks to curb their market-making efforts. ing.
“We have built a world-leading franchise in U.S. interest rate products, and we have Interest rates are the logical next step.”
“Customer feedback has been overwhelmingly positive and we plan to enter the market next year,” he added.
The move comes as trading volumes have increased following a rapid rise in euro zone interest rates over the past year. The average daily trading volume of European government bonds in the second quarter reached its highest quarterly level since 2014, according to industry group AFME.
European bond markets have historically been dominated by investment banks, which also help governments raise money from investors by setting the price and selling new bonds.
Since its founding in 2002, Citadel Securities has emerged as the biggest winner in the electronic trading that has reshaped global markets over the past 15 years. The company says it processes approximately $390 billion in trades every day, including one in five U.S. stock trades.
“We are always listening to our clients' needs and determining how to best address them,” Zhao added.
Market makers are moving into new markets because they see an opportunity to compete with banks and other powerful players. The firm already offers market making in U.S. Treasuries for clients in Europe, and in June began trading in U.S. investment-grade corporate bonds.
In October, Citadel Securities took the top spot in Bloomberg's U.S. Treasury trading rankings, beating out the largest U.S. banks for the first time. This shows how Mr. Griffin's firm has gained a large share of bond trading and become a formidable rival to the likes of JPMorgan Chase & Co. and Goldman Sachs & Co.
Since Britain voted to leave the European Union in 2016, many banks and exchanges have moved their European government bond trading operations from London to Paris, which has become the euro zone's main hub.
Citadel Securities is a market-making business started by Griffin, the founder of hedge fund Citadel. With $62 billion in assets, the firm delivered record returns to investors before fees in 2022, making it the most successful hedge fund firm in history.
Last year, Citadel Securities sold a 5% stake to venture capitalists Sequoia and Paradigm for $1.2 billion, valuing the company at about $22 billion and raising hopes for an eventual public listing.
The market maker's second-quarter net trading revenue was down 29% from a year ago, but it still paid out $500 million in dividends to shareholders, including Griffin. The company has exceeded his $1 billion in quarterly trading revenue for the past 14 quarters.
Additional reporting by Ortenka Aliazi in New York
