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November 1, 2012

Citadel Grows OTC and Listed Desks

By John D'Antona Jr.

Citadel Execution Services is in free-agency heaven.

The firm has hired a slew of new market makers and a new head of strategy and product development. The hires will help the wholesaler build a new over-the-counter desk, which will trade domestic and international equities, and fill out its listed securities desk.

The goal is simple: Bring in bigger orders, more orders overall, and expand its retail and institutional client base.

A total of eight market makers have joined the firm, Traders Magazine has confirmed. Four come from E*Trade Capital Markets, while three come from Knight Capital.

"Investing in top talent has always been a priority, and we see tremendous opportunity to further expand our platform and better serve our clients around the globe," said Jamil Nazarali, head of Citadel Execution Services.

Earlier this year, Traders Magazine learned the market-making firm was making a push into the over-the-counter market. These hires are part of the plan to grow that business and broaden the firm's highly automated trading approach, said newly hired head trader Chris Amato.

"We're adding more team members as we build out a hybrid model that includes both automated and high-touch, person-to-person offerings," Amato said. "This positions us well to serve clients across the spectrum, from listed securities and OTC to less-liquid stocks and orders that require special care."

Amato, a 19-year professional, came on board this summer as head trader. He has spent his entire career in stock trading, holding head trader positions at four other firms: E*Trade, GMST World Markets, International Assets Advisory and Raymond James. Besides running the OTC desk, he is building out a National Market System equities trading desk. He reports to Nazarali.

The new market makers joining Amato are: Steve Carolus, Patrick Burns and Justin Prouty, all from E*Trade; and Mark Stehli, John Kane, Michael Donofrio, Bill Orsini and Niki McNeil, from Knight Capital. All report to Amato. (See page 16 for full details)

The firm isn't done adding bodies, Amato added.

Citadel also added Noel Dalzell as a vice president and head of strategy and new product development. Dalzell, a 15-year pro, was most recently at Knight Capital, where he was director in broker-dealer electronic sales. Prior to Knight, he spent 12-years at E*Trade as vice president of trading. He will focus on inbound and outbound off-exchange trading and liquidity. He reports to Marty Mannion.

However, the market maker could have a tough time out there getting business. Traders Magazine talked to two buysiders, and both said they would not do business with the firm despite the increased staff and focus.

"I would not send them an indication or anything, as they are out there looking to get information and trade against it," one East Coast-based buysider said. "I don't like their business model, and on top of that they operate a hedge fund."

One large retail-oriented firm said that while it wasn't its policy to comment on individual companies, the growth in Citadel's desk didn't hurt its chances of being a destination for order flow.

Despite the opinions, Citadel, a wholesaler of execution services, started operations last October and has quietly become one of the Top 25 market makers in OTC securities, ranked by the number of shares traded per day.

The dealer makes markets in around 6,300 OTC names, according to data from OTC Markets. The number puts Citadel in the upper echelons of OTC market makers, along with Knight Equity Markets, Citi/ATD, UBS Securities and E*Trade Capital Markets.

Citadel's move into OTC stocks follows a long history as a wholesaler and market maker in NMS securities and listed options.


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