Citi has confirmed that it is buying Automated Trading Desk (ATD), a South Carolina-based electronic market making and proprietary trading firm, for about $680 million in cash and stock.
The purchase price consists of $102.6 million in cash and about 11.17 million shares of Citi stock.
ATD was established in 1988 by computer programmers Steve Swanson and Jonathan Butler along with David Whitcomb who was a finance professor at Rutgers University. From its headquarters in South Carolina, the company uses its proprietary agorithmic trading technology to buy and sell stock for itself and on behalf of clients.
The company has around 120 broker-dealer customers and trades, on average, more than 200 million shares a day. Last year the company handled around six per cent of trading volume on Nasdaq and Nyse.
Following the acquisition Swanson will retain his role as CEO and lead the global expansion and development of Citi's electronic market making capabilities.
Citi says the acquisition of ATD will make it a top-tier aggregator of equity order flow and will provide institutional, broker/dealer and retail clients with access to deeper pools of liquidity.
ATD will operate as a unit of the bank's global equities business. Citi says it will export ATD's technology and trading expertise to markets around the world which are experiencing similar growth in trading volume and electronic execution.
"ATD's strong management team and the company's market-leading technology will help us provide best execution to all of our clients by enhancing liquidity through the aggregation of greater flow," says James Forese, head of global equities at Citi. "The combination of Citi's global equities business and ATD will create a leading US stock trading platform."
Citi expects the transaction to close in the third quarter, pending regulatory approval.
The ATD deal is the latest in a series of acquisitions and investments Citi has made in recent years to strengthen its electronic and alternative execution business. These include Lava Trading, Knight's options market making business, TD Waterhouse Capital Markets and the OnTrade ECN.
ATD was advised on the sale to Citi by Financial Technology (FT) Partners, an investment banking firm focused exclusively on the financial technology sector that was set up in 2002 by Steve McLaughlin, a former senior investment banker at Goldman Sachs.