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April 21, 2005

Citi Broker Dealer Unit Eyes Retail Order Flow

By Peter Chapman

Citigroup Global Markets is entering the wholesale business.

The big investment bank, a unit of Citigroup, is building a broker dealer sales operation to capture order flow from retail brokerages. The move is part of a plan to grow its market making of Nasdaq, listed and over-the-counter securities. "We have great stats," said Tom Richardson, a Citigroup managing director, referring to Citigroup's Reg 11Ac1-5 execution statistics. "So we are in a good position to increase incoming flow seeking high quality executions."

Richardson recently hired industry vet John Procopion to run the new operation. Procopion spent eight-and-a-half years at INET. He currently manages a staff of two people and is looking to hire a third.

The addition of broker dealer flow will complement Citigroup's already prodigious inflow of retail and institutional orders captured by its Smith Barney division and network of sales traders, respectively.

Citigroup's decision to market its dealer services to retail brokers puts the newcomer up against wholesalers such as Knight Trading Group, Bernard L. Madoff Investment Securities, UBS Capital Markets, Bear Stearns, and Automated Trading Desk. Citigroup will also compete against exchanges and ECNs.

The campaign to attract business is happening as Citi pushes to internalize more flow, Procopion notes. Citigroup plans to trade all Nasdaq names by this summer and to expand its listed trading effort.

The broker has redirected much of its small listed flow away from the New York Stock Exchange to its own desk and the Boston Stock Exchange. It also launched an OTC desk last year that needs broker dealer flow.