Selway and his three sales traders -- William D’Arbanville, Jamie Petraglia and Tim Love -- will join New York-based ITG on Aug. 2, according to an e-mailed statement. Selway will advise ITG Chief Executive Officer Robert Gasser on business strategy and provide market structure analysis to customers, said J.T. Farley, an ITG spokesman. D’Arbanville and Petraglia will work in ITG’s New York office and Love will stay in Boston.
The Securities and Exchange Commission is examining whether to change market-structure regulations given that trading speeds are now measured in millionths of a second and more orders are handled off exchanges on private venues such as dark pools. More than 50 exchanges and alternative systems compete for orders, compared with less than half that a decade ago.
“There’s a lot of regulatory change to write about and there are interesting ways for a firm like ITG to grow,” Selway said in an interview yesterday. He said White Cap’s profitability fell in 2009 and this year. “We took a long look in the mirror after seven years as a small firm and asked ourselves whether we could grow our way out of flatness or should partner with another firm. We decided on the latter and ITG had the right philosophy and knowledge base.”
Selway founded White Cap in 2003 and previously served as chief economist at Archipelago Holdings LLC, which operated ArcaEx Exchange, and as an equity derivatives researcher at Goldman Sachs Group Inc. White Cap, which has 50 to 60 clients, will continue trading until July 30, he said.
ITG is an agency broker, meaning it executes customer orders and provides related services, but doesn’t earn money from proprietary trading or committing capital to facilitate clients’ buying and selling. The firm provides algorithms, or computer programs that asset managers such as mutual funds use to execute their buy and sell orders instead of using human traders. ITG also provides platforms used to track and execute orders in individual stocks and baskets of securities.
While ITG’s primary focus is helping asset managers execute orders electronically, Selway said his team has expertise in human-driven trading that’s aided by computers. They will also use ITG’s data on trading costs and the efficiency of different strategies to help customers use multiple venues to execute orders, he said.
“ITG produces a lot of great content and we can enhance that and help make it more actionable,” Selway said.
The 39-year-old added that he will help ITG consider new businesses around derivatives given that the financial reform bill waiting for President Barack Obama’s approval will require standardized over-the-counter swaps traded by broker-dealers to be cleared by exchanges. Some swaps contracts are also expected to be traded on electronic platforms or exchanges.
ITG operates Posit, introduced in 1987 as the first dark pool to match stock requests from customers during the day. The system allows mutual funds and other institutions to transact orders with peers without revealing their trading interest to anyone. Instinet LLC in New York, owned by Tokyo-based Nomura Holdings Inc., opened the industry’s first dark pool in 1986, which operated after the market closed and traded orders at stocks’ closing prices.
ITG traded average daily volume of 164 million shares in June, compared with 182 million a year earlier, according to the firm. The broker earned $122 million in commissions and fees in the first three months of this year, down from $131 million during the January-through-March period in 2009. Its total revenue was $147 million in the first quarter, compared with $156 million last year.