'One-stop HFT shop' in European foray

Wedbush Securities, a US investment bank and a major supplier of services to the high-frequency trading community, has made its first major push into Europe by joining the London Stock Exchange, in a sign that the battle to win order flow among HFTs is intensifying.

 

    The bank's London subsidiary, Wedbush Europe, joined the LSE earlier this week, according to exchange filings. It has authority to trade on the LSE's main SETS equities market, and has appointed Dutch firm, Kas Bank, to act as its settlement agent.

 

   The firm joined the Warsaw Stock Exchange earlier this year, but its membership of the LSE, one of the largest European bourses, signals its intent in the region. Commenting in company filings in August, Wedbush's European directors, led by Charles McSwiggan, said the firm was putting "the necessary tools in place in order to commence trading as soon as the conditions are right."

   They added the firm would offer Wedbush's existing clients "the opportunity to utilise the company when they purchase and sell European securities." In addition, they would "engage in finding European institutions to access their trading, execution and clearance facilities for US securities."

Wedbush was founded in Los Angeles in 1955, offering traditional research and banking functions to institutional clients. But, more recently, it has also carved out a niche among the high-frequency trading community and is one of the biggest providers of US equity clearing for HFT groups.

 

   Wedbush deepened its appeal to the community last July, with the $15m acquisition of Lime Brokerage, a provider of direct market access services for HFT firms. Lime Brokerage was co-founded in 2001 by Alistair Brown and Mark Gorton, the same entrepreneur who founded peer-to-peer file-sharing service LimeWire and major HFT firms, Tower Research Capital and Spire Europe.

As a result of its influence with HFTs, Wedbush is regularly among the most-active participants on US exchanges and it also holds a 2.6% stake in alternative exchange operator, Bats Global Markets. Separately, Lime Brokerage holds a 6.8% stake in Bats, according to the operator's IPO filings.

 

   At the time of the Lime acquisition, Jeff Bell, a Wedbush executive who took on the position of Lime's chief executive, told Bloomberg: "With this expansion in direct market access, we’re a one-stop shop that includes market data, clearing, stock loan, infrastructure and execution services."

 

   Earlier this year, Wedbush established a new unit, called the Execution Services Group, to deliver its high-speed trading services to asset managers. At the time, Bell said: "We’re taking a high-frequency trading infrastructure used by automatic, systematic traders and opening that up to institutions."

 

   Wedbush will enter a competitive environment in Europe. Bank of America Merrill Lynch, Morgan Stanley, Deutsche Bank, Nomura and Credit Suisse all have strong HFT franchises in the region.