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Citadel Securities doubled profit as dominance grew in wild 2020
[NEW YORK] In the last week of March, with the Covid-19 pandemic upending lives and markets, Ken Griffin started building a temporary trading floor in Florida.
Citadel Securities mostly abandoned its Chicago and New York offices and set up shop at the Four Seasons Palm Beach, moving dozens of employees and their families. Others went to an emergency facility in Connecticut, moves designed to keep his market-making firm operating seamlessly as the rest of the financial world dealt with wild swings and extraordinary trading volumes from makeshift home offices.
The efforts paid off, with Citadel Securities handling more than a quarter of all US equity volume in the first half of the year. The trading operation, which is separate from Mr Griffin's hedge fund business, generated US$3.84 billion of revenue in just six months, more than the US$3.26 billion for all of 2019, according to a presentation to investors. Net income was US$2.36 billion in the first six months of 2020, compared with US$982 million for the same period a year earlier.
A spokesperson declined to comment on the numbers for closely held Citadel, which were disclosed to investors this month as the Chicago-based company seeks a US$300 million loan.
Trading desks across Wall Street have benefited from a roller-coaster first half. After the pandemic drove stocks into the fastest bear market ever in March, the S&P 500 mounted one of the biggest rallies in nine decades, boosted by stimulus measures and optimism over a swift economic rebound.
The results underscore the remarkable rise of Citadel Securities and its relative insulation from the pandemic. While investment banks have grappled with loan write-offs, that's not an issue for a pure trading operation like Mr Griffin's, which grew out of his hedge fund business and started muscling banks out of markets they once dominated.
Citadel Securities, led by chief executive officer Peng Zhao, also increased its market share. In the US options market, it climbed to 32 per cent from 27 per cent. In the three months through August, 28 per cent of US equity volume went through Citadel, up from 22 per cent in 2019.
And in the retail market, which has surged this year thanks to commission-free trading and apps such as Robinhood, Citadel dominates, with 41 per cent of the market.
Citadel's growth is helping turbo-charge one of the industry's biggest fortunes. Mr Griffin owns 85 per cent of the securities business and has a US$15.3 billion fortune, according to estimates by the Bloomberg Billionaires Index.
Mr Griffin, 51, is also having a pretty good year with his hedge fund business. Its main hedge fund, Wellington, gained 18.3 per cent this year through August.