More than 30 banks are engaged in talks — some more advanced than others — with billionaire Ken Griffin’s market-maker, hashing out an arrangement that would let them submit orders to the firm without revealing their clients’ identities. Citadel Securities is marketing the concept as a way for small- and mid-tier banks to provide better pricing on fixed-income trades. But it also would give it more insight and clout in markets.
“We’re creating an ecosystem,” Citadel Securities President Jim Esposito said in an interview, describing the project’s development in recent months. “If and when successful, you can envision a broader suite of products fitting into this ecosystem.”
The nascent concept to partner with banks — first reported by Bloomberg in July — has vast implications for Wall Street’s underlying mechanics and staffing. For banks struggling to keep up with industry leaders such as JPMorgan Chase & Co. and Goldman Sachs Group Inc., which plow billions of dollars into recruiting talent and honing systems to compete on pricing, Citadel Securities is offering a way to continue serving clients and stay in the game.
Under the current proposal, banks could still process trades themselves or choose Citadel Securities, which expects pricing to continue improving as it scores a better view of market data and trends. That may help banks go toe-to-toe with larger competitors when vying for business. Firms could also mark up the price to make a profit.