PE backer pulls the plug on Eladian Partners

A fledgling high frequency trading firm, started by two former Citigroup executives, was forced to wind down operations this week after its funding from a major private equity backer was withdrawn, Financial News has learned.

  Eladian Partners, a multi asset electronic trading firm launched by Steve Swanson and Peter Kent - former directors in Citi's US equities business - said yesterday it had decided to close "due to market conditions." Sources have since told Financial News the firm's hand was forced after its funding from the California-based venture backer, Technology Crossover Ventures, was withdrawn. TCV, a prominent backer in the financial services sector, has invested over $8bn to date in various ventures. It took a majority stake in Eladian last year, the people said. It had reviewed the investment in recent weeks after Eladian incurred heavy trading losses.

   The losses occurred across the firm's strategies, which included equities, fixed income and exchange traded funds, prompting Eladian to propose a cost-cutting plan to its backers, which was subsequently rejected in favour of winding down the business, the people said.

 

   Two sources said Eladian was in the process of upgrading its technology infrastructure but was behind in its implementation target – which had been expected to be completed within 12 months – and this was a factor in the decision.

 

   Eladian Partners and TCV declined to comment.

 

   Swanson and Kent, who set up Eladian in 2010, are now focused on an "orderly wind down and closure of the firm's positions and other business", a source close to the business said. The pair had brought together what one person described as a "stellar workforce" at Eladian, of "above 50 and less than 80", the source said, with offices in New York, Charleston and London.

 

   The firm's European arm joined the London Stock Exchange less than two weeks ago, on October 4, and had been due to begin trading on LSE markets directly this week, sources said. The firm had been trading on European markets, via brokers, since the turn of the year and its London staff, which totalled around 20, had a "real sense of optimism" about the business, according to sources.

 

   Eladian's London office was led by Kent, and other key people in the region included a former Citadel director, Angela Cappuccino, who was head of European operations; Ben White, a former developer at rival firm Hudson River Trading, who was director of technology; Anthony Vince, formerly at Nomura who was director of trading; and Paul Bermingham, a former trader at Credit Suisse and Susquehanna, who was an ETF trader.

 

   Swanson and Kent were the original founders of US computer-driven trading firm, Automated Trading Desk, which was bought by Citi in 2007 for around $680m, and helped to shape the structure of its US electronic trading business.

 

   Eladian's decision to close highlights that weak trading activity is forcing every firm in the trading chain – including brokers, proprietary firms, infrastructure providers and technology vendors – to cut costs, through business closures, redundancy programmes and consolidations.

 

   According to data from Thomson Reuters, the value of European equities trading was down 20% during the first nine months of this year, compared with 2010, to €6.7 trillion.