Ballista Securities has shuttered its trading operation.
Rank-and-file employees at the specialty options brokerage were let go the week before Christmas as the firm dealt with a cash crunch. Senior management is said to be trying to raise funds to restart the operation.
Ballista, which began full-scale operations in August 2008, originally built its offering around an electronic crossing system that handles so-called “delta neutral” trades, or those marrying stocks with options. The goal was to compete with the interdealer brokers that facilitate trades between institutional broker-dealers.
The firm is owned by individuals, at least one private equity fund, three brokers and one options exchange. It received its first round of funding in 2008 from New York-based private equity player Metropolitan Equity Partners. Paul Lisiak, a principal at Metropolitan and a Ballista board member, would not comment on Ballista or its current status.
Ballista executives did not return phone calls seeking comment, although a receptionist says the firm is still operating. Calls to the firm’s order desk are routed to an answering machine.
Ballista originally tried to elbow aside such interdealer brokers as GFI and Icap. It derided their methods as outdated and promised technology would usher in a more efficient trading process. Users were hedge funds trading volatility and institutional brokers hedging their risks.
That strategy failed and was abandoned in late 2009 after the firm successfully completed a second round of funding that raised $12 million, according to a Form D filing. Four new investors included heavyweights Morgan Stanley, Susquehanna Growth Equity, Knight Capital Group and the International Securities Exchange. They joined employees, patent holders and others, according to the filing.
In December 2009, Ballista’s co-founder, Rob Newhouse, was replaced as chief executive by Mark Monahan, a former executive with Icap. The plan was to remake Ballista along the lines of a traditional interdealer broker, albeit one with an anonymous crossing mechanism. The firm staffed up with sales traders, but to no avail.
Electronic block crossing systems, or dark pools, are common enough in the cash equities business, but rare in options. Pipeline Trading also offers one on the options side, but it has not gained much traction.
The demise of Ballista, however, has not discouraged others from considering launching their own electronic crossing platform. “Just because Ballista and others haven’t taken off, doesn’t mean a dark pool won’t take off in options,” Bob Fitzsimmons, head of options trading at Investment Technology Group, said. “The timing wasn’t right, nor was the vehicle. But we pay very close attention to this at ITG and see it as a natural complement to our Posit offering.”
