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In a recent newsletter, DataTrek's co-founder Nicolas Colas examined US corporate stock buybacks. He digs deep to see what happens to them during the next recession.

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August 1, 2010

Broker Focus: Bigger is Better for Citi

By Peter Chapman

To win an increased share of the American pie, Keegan is relying on all three of the divisions within electronic trading to pull their weight. That's algorithms, Lava Trading and ATD.

Shane Swanson, Steve's brother and ATD's former general counsel, is responsible for the Lava unit. Lava's main business is routing orders to market centers on behalf of broker-dealers.

Young Kang, formerly a trader with the giant hedge fund SAC Capital Advisors, runs algorithmic trading. Kang joined Citi in 2007 and subsequently orchestrated a revamp of its algo product line, bringing in an entirely new crew of analysts and developers.

Jeff Martin, now president of ATD, took over the reins of the wholesaler when Steve Swanson became Citi's co-head of global electronic trading in June 2009.

Jeff Martin, ATD/Citi

It's no coincidence that former ATD executives dominate Citi's electronic trading group. About two years ago, former ATD chief executive Steve Swanson was charged with integrating the various departments within the group. Previously, Lava and ATD had been allowed to exist as separate businesses. But Citi management believed that needed to change.

In June of 2009, when the integration was largely complete, Citi announced the group's new management lineup. Steve Swanson was made co-head of the department along with Shakil Ahmed, who is also responsible for quantitative strategies.

Shake-up

Keegan became global head of institutional sales, with particular responsibility for Citi Match. Shane Swanson got Lava and Martin took over ATD. Other former ATD executives assigned to top roles include Jack Vensel, responsible for electronic trading in Europe, and Myrick Crampton, in charge of predictive technologies, an increasingly important activity across equity trading.

With the shakeup, some longtime employees departed. Notably, Richard Evans, Citi's London-based head of global electronic trading, left in November 2008. He has since joined Morgan Stanley. Dave Weisberger, a veteran of Salomon Smith Barney who once ran Lava, also left in 2008 and now works at a hedge fund.

All three of Keegan's lieutenants--Kang, Swanson and Martin--face the same dilemma as they try to build up their businesses: trying to satisfy ever-changing customer expectations while dealing with an ever-changing market structure.

And if there is a common denominator among the challenges each faces, it is that of dealing with the onslaught of high-frequency trading. With HFT strategies accounting for around half of all shares traded, it is having a major impact on all brokers. In Citi's case, the impact has been generally negative for ATD, positive for Lava, and a challenge for the algo desk.

New System

Kang's algorithmic trading platform was built as a response to a stock market shattered into dozens of fragments in recent years, as well as the tremendous increase in proprietary (read: high-frequency) trading.