Ken Griffin Has Big Banks Right Where He Wants Them

If he must, he will take them a piece at a time.
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By Paul Elledge [CC BY-SA 4.0], via Wikimedia Commons

By Paul Elledge [CC BY-SA 4.0], via Wikimedia Commons

Ken Griffin’s campaign to get the government to smash Wall Street’s banking behemoths into individually systemically unimportant little pieces is going nowhere. But that doesn’t mean the Citadel Investment Group chief doesn’t still have them in his sights. For the biggest trick Ken Griffin ever pulled was convincing them that he was inept at banking and would never pose a threat.

Remember Citadel Securities? Little I-banking biz Kenny G. launched almost a decade ago, right around the time he was also trying to start a functioning CDS clearinghouse, which effort went nowhere because the big banks didn’t want it to? Place that looked like a total clusterfuck because no one met K.G.’s exacting standards for a banking executive and which underwent several rounds of swingeing cuts amidst rumors that the jig was up?

Well that was all part of Ken’s plan to soften up the competition. Three years ago, Griffin revived Citadel Securities as part of a long, slow plan to beat the banks at their own game. And things remain very much on track.

The electronic market-maker has been a presence in inter-dealer Treasuries trading for more than a decade. Now it's deepening its reach into the client-to-dealer arena—a longtime bastion of Wall Street banks that's proven tough for newcomers to crack and makes up almost half of daily turnover….

“You can't hope to be fully relevant in Treasuries to a global client base—whether it is Japanese mega-banks, sovereign wealth funds, domestic asset managers or hedge funds, without being involved in the entire complex of securities,'' said Paul Hamill, global head of fixed income, currencies and commodities at Chicago-based Citadel Securities. “We're logically building this business up in layers and always knew we'd have to add all the off-the-runs….”

In the first quarter of last year, the firm entered the client-to-dealer market when it started trading with investors in benchmark Treasuries—the most recently issued, and most frequently traded, debt for a given maturity. In February of this year, it also began acting as a middleman for investors in older securities, known as off-the-runs. It focused on non-benchmark Treasuries through the sixth most recently issued offering. Now it will deal in all seasoned Treasuries, which change hands less frequently as most traders prefer using the newest maturities for directional bets….

Citadel Securities has another ambition in Treasuries—to eventually join the ranks of the Fed's primary dealers, and it anticipates that will take several years to achieve.

Citadel Securities ratchets up fight against big banks [Crain’s Chicago Business]

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