Citadel Securities Cuts Almost 10% of Employees After Review

Citadel Securities, a unit of Citadel LLC in Chicago, has fired about 10 percent of its staff.

Matt Cushman, a senior managing director who joined the firm in 2011 from Knight Capital Group Inc., was among more than two dozen people who lost their jobs, including five last week, according to a person with direct knowledge of the cuts who asked not to be named because the matter is private. The reductions affected between 25 and 30 people, Katie Spring, a spokeswoman for the company, said by phone. The unit now has about 275 employees, she said.

“We significantly expanded our product offerings over the last year and will continue to do so through innovation, efficiency and strong operating capabilities,” Spring said.

Automated trading firms including Getco LLC in Chicago and Jersey City, New Jersey-based Knight have cut staff in the last year as U.S. equity volume declined for the third year in a row. A daily average of about 6.4 billion shares changed hands in the U.S. in 2012 compared with almost 9.8 billion in 2009, according to data compiled by Bloomberg. Eladian Partners LLC, an automated trading company in New York that started in 2011, closed its operations in October because of market conditions.

Quantitative Trading

Cushman was hired by Citadel, the $14 billion hedge fund run by Ken Griffin, to lead a new effort in quantitative trading with Jamil Nazarali, who is head of Citadel Execution Services. Both left Knight (KCG) in February 2011 and joined Citadel in September that year. Nazarali remains head of the unit.

The reductions were primarily in technology and support staff and occurred in offices in New York, Chicago and Palo Alto, California, according to the person. The cuts were made to consolidate geographic and business teams, Spring said.

Citadel Securities trades about 14 percent of U.S. equities volume and 19 percent of options, according to data on its website. The group services retail brokerages and institutional investors. It executes orders for individuals sent by securities firms including TD Ameritrade Holding Corp., a private wealth management group in JPMorgan Chase & Co., and Prudential Investment Management Services LLC and offers algorithms or trading strategies to asset managers and other clients.

The unit also conducts options market making and automated proprietary trading.

Getco Staff

Getco, which negotiated a takeover of Knight in December, cut about 40 jobs, or almost 10 percent of its employees, last June. It agreed to buy Knight in a $1.4 billion deal after the Jersey City, New Jersey-based market maker lost more than $450 million when computers generated a flood of erroneous orders in about 150 stocks in August.

Knight said last month that it would cut 5 percent of its workforce as it combines sales teams and discontinues its clearing business. The company reported an 84 percent decline in fourth-quarter earnings after trading slowed and stock-price swings narrowed. It had 1,524 employees at the end of 2012.

High-frequency stock trading revenue declined to $1.8 billion in 2012 from $7.2 billion at its peak in 2009, according to a January report from research firm Tabb Group LLC. Revenue may increase by about 22 percent to $2.2 billion this year as volume in U.S. equity markets rebounds, the report said. Trading may increase by 6 percent this year, Adam Sussman, director of research, predicted in the report.

Getco said last month that profit plunged in 2012 as stock- market volume dropped and volatility evaporated. Net income fell 82 percent to $24.6 million in the nine months ended Sept. 30, compared with $134.8 million a year ago, according to a regulatory filing. Revenue decreased 41 percent to $425.3 million, it said.

To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

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