Two newcomers to the wholesaling game are moving up in the rankings.
Two Sigma Securities, an affiliate of money manager Two Sigma Investments, and Goldman Sachs have boosted their shares of the retail order flow pie among brokers’ brokers in the past year, according to data aggregated by Thomson Transaction Analytics.
Two Sigma, for instance, saw shares traded during the month of January more than double to 490 million from January 2012. Goldman saw its share volume triple to 288 million in the period.
While the marketplace is still dominated by the five largest wholesalers—Knight Capital, Citadel, UBS, G1, and Citi/ATD—the increases push Two Sigma into the No. 7 position. Goldman remains in ninth place.
Executives at Two Sigma, which bills itself first and foremost as a technology shop, say it is their technology that gives them an edge. “Clients see that markets are changing,” Simon Spenser, a principal of Two Sigma Securities, told Traders Magazine, “and technology is in our DNA. We built our technology from the ground up around the client experience.”
During the year, shares traded by the 10 largest wholesalers rose by about 4 percent to 16 billion shares, according to the aggregated volume data. Knight saw its volume increase by 800 million shares. Players such as Citadel, UBS and GETCO experienced declines.
The data come from reports prepared by the wholesalers in compliance with the Securities and Exchange Commission’s Rule 605. The wholesaling business involves the execution of retail orders by market makers, or brokers’ brokers.
In addition to the volume data, the SEC requires market makers to report certain execution metrics such as speed of execution and the amount of price improvement given.
Thomson Transaction Analytics, a unit of Thomson Reuters, aggregates the data and makes it available for purchase.
