- Market-maker IMC, Convergex, in pact to boost options business
- Firms to compete against companies that pay for order flow
Global trading firm IMC Financial Markets and Wall Street broker Convergex Group LLC agreed to join forces in a venture to boost their businesses by expanding into handling options orders for U.S. retail investors.
Market making firms like IMC rely on volume to make money. As U.S. options market makers face rising costs to comply with regulations and the expenses of being connected to multiple exchanges, trading volumes are even more important.
The firms will work to gain order flow from retail brokerages that accept payment for their orders as well as those that don’t. Large retail brokerages such as Charles Schwab Corp. and TD Ameritrade Holding Corp. receive payments from trading firms in return for sending their customers’ options orders their way. The IMC and Convergex venture will compete with firms such as Citadel Execution Services and Susquehanna International Group LLP that have substantial businesses in handling retail options orders.
“IMC is an established leader in the options market right now,” said Scott Knudsen, a Chicago-based managing director at IMC. “This gives us an opportunity to leverage those strengths and give the end client a better experience and something they don’t get now.”
Convergex, based in New York, will receive and then execute orders under the deal and try to get improved prices on the orders from IMC. Brokerage Convergex also provides options order routing and other trading services.
“It is a unique, novel entrant into the marketplace,” said Ben Londergan, head of the options trading and technology group at Convergex.
Equity and index option volume in September fell 3 percent from a year earlier, according to data from Options Clearing Corp.
The deal with Convergex comes about a month after TD Ameritrade’s Paul Jiganti joined IMC to help the mostly automated trading firm bolster its U.S. options market-making business. Jiganti joined TD Ameritrade in 2012 and worked as a managing director for market structure and client advocacy. He also used to work at Susquehanna.
IMC, founded in 1989 in Amsterdam, trades on more than 100 markets around the world.