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GTS, NYSE Top DMM Now Joins Forces With Boutique Investment Bank

Trifecta Month for GTS; NYSE DMM, Quant-Trading Powerhouse and Fin-Tech Think-Tank Now Aligned With Investment Bank Specializing in Primary Debt & Equity Capital Markets

GTS, the NYSE’s Top DMM, and one of the global trading market’s leading multi-asset electronic market-makers, is on a strategic deal-making binge. On the heels of GTS co-founder and CEO Ari Rubenstein’s November 2 announcement that his firm acquired Cantor Fitzgerald’s 35-member ETF market-making and institutional broking crew, last Thursday while in London, Rubenstein announced that GTS is expanding its collaboration with BNP Paribas to now include live-streaming US equities pricing, on top of already delivering GTS’s UST price feed through BNP’s platform. Making November a hat-trick month for GTS, Rubenstein today announced that his firm is joining forces with boutique investment bank Mischler Financial Group (“Mischler”), a specialist in primary debt and equity capital markets and institutional brokerage providing secondary market execution for equities and fixed income.

Founded in 1994, Mischler Financial is also the industry’s oldest diversity firm owned and operated by service-disabled veterans; a designation that enables GTS to advance a Diversity & Inclusion (D&I) value-add to its armory of new solutions and client experience that GTS will bring to investment managers and issuers of debt and equity across the listed-company landscape.

At one time characterized as high-frequency trading ‘flash boys’, GTS’s Rubenstein and partner David Lieberman are on a fast path to establishing the next generation “capital markets concierge,” as the 12-year old firm vyes to displace the likes of Citadel Securities and Virtu Financial, the number two and three NYSE DMM firms that also maintain multi-asset, electronic market-making pods.  Below is the opening extract of the press release.

New York, NY – November 19, 2018 – GTS, the New York Stock Exchange’s largest Designated Market-Maker (“DMM”) and a leading electronic trading firm, and Mischler Financial Group, Inc. (“Mischler”), the financial services industry’s oldest minority broker-dealer owned and operated by service-disabled veterans, today announced a strategic alliance that will establish a best-in-class offering for primary debt and equity market underwriting as well as secondary market best execution across the capital markets.

The partnership, which is anchored by a technology-powered offering for public companies and a broad universe of capital markets participants, will yield a low-cost, more efficient and more effective trade execution experience. Mischler will become a “forward operating base” for the growing GTS capital markets franchise, affording clients access to technology and sources of liquidity that are generally only available to the world’s most sophisticated investors.

Founded in 2006 as a proprietary, quantitative trading firm, GTS is now a recognized thought-leader in market structure and proudly oversees trading for more than one-third of NYSE-listed companies. The firm has an extensive track record developing and deploying proprietary, industry-best technology to bring better price discovery, trade execution and transparency to the markets.

“This is a high-tech, high-touch partnership designed to meet the needs of a new generation of issuers, asset managers, and trading and investment professionals seeking low-impact market liquidity and best-in-class execution,” said Ari Rubenstein, Co-Founder and Chief Executive Officer of GTS. “Clients are rightfully demanding innovation in the marketplace, and this alliance is uniquely designed to provide that and much more.”

Mischler, established in 1994, is an active underwriter across global equities, corporate and municipal debt, government securities and structured products. In the last three years alone, Mischler has played a role in almost 700 primary debt and equity market transactions. The firm also provides conflict-free share repurchase services for corporate treasurers as well as secondary market trade execution in equities and fixed income for a discrete universe of public plan sponsors and institutional investment managers.

Continue to the entire news announcement here

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virtu says no to corporate bond etf market-making

Virtu Says NO to Corporate Bond ETF Market-Making

Virtu Says NO to Corporate Bond ETF risk-taking; Top Market-Maker Opines “Unable to Hedge ETF Constituents Due To Limited Liqudity”

During the better part of three years, MarketsMuse Fixed Income curators have often pointed to concerns expressed by market professionals who argue that the unfettered growth of corporate bond ETFs are masking the inevitable likelihood that once interest rates begin to rise, buy side fund managers fearful of mark-downs in their corporate bond positions will push the ‘sell button’ en masse to limit the P&L hit. Those in the camp expressing such concerns, which includes Virtu Financial, one of the most successful electronic market-makers in the industry, believe that such a mass exodus will wreak havoc on the now $8.4 trillion US corporate bond ecosystem* (*data according to Sifma), where new issuance for 2016 has just surpassed 1 Trillion dollars, and is a marketplace that since 2011 alone, has grown nearly 50% in terms of notional value and number of outstanding issues.

Per one senior market risk expert familiar with the thinking at Virtu, “Their’s isn’t simply a view typically attributed to academics, who have increasingly warned and have been equally derided by ETF lobbyists for suggesting a secondary market meltdown in corporate bond ETF products is inevitable when rates rise. Instead, Virtu has concluded that for those who make a business of ‘taking the other side’ of corporate bond exchange-traded funds, whether investment grade (e.g $LQD) or high yield themed (e.g $HYG), will find themselves playing a game of musical chairs, but there will be no chairs available for anyone when the music stops and traders will find themselves unable to find any liquidity in the respective ETF underlying constituents.”

Below opening excerpt from mainstream media outlet Bloomberg LP and reported by Bloomberg reporter Annie Massa:

One of the world’s largest electronic market makers won’t touch increasingly popular corporate bond ETF products because the underlying securities are too hard to trade.

Although New York-based Virtu Financial Inc. buys and sells everything from stocks to government bonds and futures on more than 235 exchanges around the world, it shuns products linked to corporate bonds like the $15 billion iShares iBoxx $ High Yield Corporate Bond ETF. The reason, according to Chief Executive Officer Doug Cifu, is that it’s too hard for Virtu to precisely hedge the trades.

“It’s definitely concerning you don’t have full and unfettered access to the underlying,” Cifu said, speaking at a Security Traders Association conference in Washington on Thursday. “That’s troubling.”

During the fourth quarter of 2015, TABB Group interviewed key US corporate bond market participants across buy-side, sell-side and specialized trade service providers.Across all segments covered within the survey, participants’ responses reflected dim expectations for liquidity available in the US corporate bond market for 2016. Apart from the threat of a “large scale macro crisis,” the most serious threat that participants identified was the ongoing decline in immediacy (balance sheet) provided by dealers.

Worldwide assets in bond ETFs have surged in recent years, jumping fivefold since January 2010 to about $600 billion, according to data compiled by Bloomberg. About 88 million shares of fixed-income ETFs have traded daily in the U.S. during the past 30 days, according to data compiled by Bloomberg.

Other market makers including Citadel Securities and Susquehanna do trade the ETFs, but Virtu’s absence is notable given how dominant the company is in other areas. Cifu said Virtu does trade ETFs containing U.S. Treasuries, including the ProShares UltraShort 20+ Year Treasury.

To read a Bloomberg Markets profile of Virtu, click here.

Virtu’s strategy involves arbitraging price difference in related assets, quickly entering and exiting the positions. With fixed-income ETFs, the company is concerned it can’t get access to the related bonds fast enough. Market makers with longer trading time frames may be less reluctant. Virtu’s line of thinking echoes worries elsewhere in the industry. Shares of the funds are often easier to trade than their underlying bonds, potentially posing a risk if there’s a sudden rush for the exit.

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