Filings reveal DRW’s climb into top rank of trading firms

Discussion in 'Wall St. News' started by ajacobson, Jan 16, 2018.

  1. A subsidiary of Don Wilson’s firm pulled in nearly $1bn in revenue in two years Don Wilson's DRW took over Lehman Brothers' forex, interest rate and agricultural futures when the investment bank collapsed in 2008 © Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Share on Whatsapp (opens new window) Save Save to myFT Gregory Meyer in New York YESTERDAY 4 A unit of DRW pulled in almost $1bn in revenue in the space of two years, underlining the Chicago-based firm’s ascent to the upper rank of global proprietary trading companies. The firm, founded by Don Wilson, reported $454.8m in revenue at its DRW Investments LLC subsidiary in 2016, according to accounts made public this month by UK Companies House, a business registry. The figure came on top of $470.2m in 2015, and provides an indication of the size achieved by DRW at a time when trading firms are finding it hard to make money in financial markets experiencing historically low levels of volatility. Proprietary trading firms bet their own capital on the world’s exchanges, often using ultrafast computers to execute deals in fractions of a second. Like most firms, DRW is privately owned and does not announce financial results. Yet the company has discreetly filed years of accounts for DRW Investments at Companies House, going unnoticed by the industry. The accounts put the subsidiary in the same league as top traders whose finances are known. Virtu Financial, one of the few publicly listed proprietary trading firms, in 2016 had adjusted net trading income of $414.1m, a figure that subtracts brokerage commissions and exchange fees from revenue. DRW Investments’ trading expenses totalled $76m in 2016. Share this graphic John Lothian, a markets newsletter publisher, described Mr Wilson and his colleagues as “absolute leaders” in the trading community. “Don not only has tremendous personal influence within the community, but he also has tremendous business influence,” said Mr Lothian, a Chicago-based former futures trader and broker. DRW has become an important source of volume on the world’s largest futures exchanges, and Mr Wilson has pushed the traditionally low-profile industry to advocate for its interests. DRW Investments’ trading activity includes fixed-income derivatives and other futures, according to a company legal filing, and it runs three types of strategies — making markets as a liquidity provider, taking risks on the direction of prices, and high-frequency trading — people familiar with the company said. In 2008, DRW took over Lehman Brothers’ book of foreign exchange, interest rate and agriculture futures when the investment bank collapsed. It was the only non-bank to participate in the fire sale. The same year DRW Investments generated $656.5m in revenue, the most in at least the past decade, according to its accounts. Recommended The Big Read: How high-frequency trading hit a speed bump DRW leads high frequency trading charge into cryptocurrencies Letter to the Editor: The HFT industry will never admit the truth The statements filed at Companies House offer an incomplete picture of the overall business of the DRW parent company, which includes several other subsidiaries. They do not reflect gains or losses at those businesses. A DRW spokeswoman declined to comment. As well as financial figures, the accounts also provide information on DRW Investments’ battle against allegations it manipulated interest-rate contracts. A civil case brought by the US Commodity Futures Trading Commission went to trial in 2016 but has not been adjudicated. The regulator is seeking steep penalties, including a possible trading ban, but DRW Investments’ accounts said management believed the case was without merit and “the ultimate resolution of the matter will not have a material impact on the ongoing operations of the company”.