Bigger Is Better at Citi
Citi Vows to Be Top Player in Three Years
Traders Magazine Online News, August 6, 2010
Size matters.
Dan Keegan, Citi
That's the mantra over at Citigroup Global Markets these days, where Dan Keegan, the recently promoted co-head of the electronic trading division, is steering his group to become bigger and bigger.
"Owning volume--and then optimizing that liquidity to provide customized solutions for those customers that matter to us--will separate the wheat from the chaff," Keegan said.
Formerly head of sales for the electronic execution group, Keegan moved into his current position in May, following the departure of Steve Swanson. Keegan tells Traders Magazine his "personal goal" is for Citi to expand its share of the domestic market from 13 to 20 percent and rank among the top five trading firms.
Being big gives Citi two advantages, Keegan explained. First, size means Citi's brokerage division is able to give its customers better service. Second, size gives Citi's investment banking division an advantage when it competes for a deal.
"This isn't just about aggregating liquidity on behalf of our institutional customers," he said. "It's for the broader enterprise and all the customers we are trying to service."
On the brokerage side, controlling a lot of volume means Citi can guarantee its institutional customers they will have a good chance of finding a match within Citi. It also allows Citi to tailor solutions to clients with different needs--some may focus on price while others focus on size, for instance.
Much of Citi's inflow meets in Citi Match, the big broker's dark pool. Not coincidentally, it was Keegan who developed the crossing system from a platform he built at ATD. Keegan joined ATD, a pioneer in the use of technology and sophisticated analytics in wholesaling, in 2006 to build up the company's institutional business. He joined Citi when Citi bought ATD in 2007.
The Citi Match pitch to the buyside trader goes something like this: Imagine a product where, on average, you can be 20 percent of the volume in a stock over the life of the order without ever hitting a bid or lifting an offer. Plus, you can capture 70 percent of the spread at the same time.
Citi Match captures flow from the broker's institutional customers, various Citi trading desks, ATD as well as its Lava Trading unit. The dark pool executed 37.3 million shares, single-counted, in April, placing it among the 10 largest dark pools tracked by Rosenblatt Securities.
Market Maker
On the investment banking side, size could give Citi the upper hand when vying for an underwriting mandate. If Citi consistently trades a good chunk of the issuer's stock, it will be able to assure the company it will make a market in the stock regularly, Keegan explained.
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