new article on proprietary trading firms restructuring in 2013

Discussion in 'Prop Firms' started by EvOTraderV2, Jun 17, 2013.

  1. this article just popped up in my google news feed:

    Chicago's formerly most independent proprietary trading firms (Getco, Hard Eight Holdings, Peak6 Investments and Archelon Group) are scrambling to diversify their business models and product offering in attempts to boost revenue by selling trading services to clients or seeking outside investments from hedge-fund managers. Reports indicate the changes have come about due to pressure from an unusually overbearing regulatory environment combined with lower market volumes and reduced volatility. The ongoing changes to the HFT environment have rattled the boots of many Proprietary Trading giants forcing changes such as increased need for compliance officers and now newly-developed sales and marketing departments.

    Stephen Lee, Chief Operaring Officer of Hard Eight and Forty4 Asset Management LLC commented on the matter: "Proprietary firms are now looking to diversify their businesses creating new divisions using the same trading strategies will "allow outside investors to invest in those strategies." Mr. Lee expanded, "It was much easier to make money when volume was skyrocketing and volatility was through the roof," says Paul Daley, senior managing director and head of product development at Geneva-based Fox River Execution Solutions, a unit of SunGard Data Systems Inc. that sells trading services instead of trading for its own account. "Everyone has accepted that the world changed and they need to change with it." Smaller firms have sought refuge from business-crushing regulations by relocating their businesses outside of the U.S.. One example is Swiss America Securities, a Nassau, Bahamas based broker-dealer now refrains from dealing with U.S.-based persons completely in attempts to level the playing field by attracting traders from foreign countries, requiring more affordable regulatory-oversight while provide smaller firms a chance to survive current conditions.

    One of the prime examples of the shift in underlying industry product fundamentals is Getco which has transformed into a service-oriented organization providing trading-sales brokering and asset management services.

    A few additional names have surfaced seeking investors in their newly formed hedge-funds:

    Archelon, which has about 50 employees, is seeking up to $200 million for a new hedge fund.

    Hard Eight plans to launch a $100 million dollar hedge-fund later this year.

    Peak6 Investments has already reached their goal of raising $1 billion for a new hedge-fund after hiring Joe Scoby of O'Connor & Associates. Peak6 has an additional fund which formed around 2006 which has raised less than $500 million since it's inception.

    Some firms, however, are planning to ride out the storm. DRW Holdings LLC and Geneva Trading USA LLC are betting their strategies can be adjusted to meet tough new industry demands. A few mergers have progressed this year including WTS Proprietary Trading Group's acquisition of Capital Traders Group LLC. Despite the gloomy outlook; however, A few industry executives remain hopeful for the future - "We believe in the industry, in the growth of the industry and the long-term outlook," says Geneva Trading CEO Robert Creamer whom seems to be taking a position contrary to his competitors.

    Part of the shift in mentality is to reduce capital at risk in the market according to John Koltes III, COO and partner at Archelon LLC: "When you trade for your own account, if you can get used to the idea of risking your money every day and sleep at night, you can probably get used to trading other people's money. The big thing is going to be communicating with customers."

    links back to a post from yesterday, here: