China’s Citic Buys Stake in U.S. Brokerage BTIG

Citic Securities Co., China’s largest brokerage by market value, acquired a stake in U.S. firm BTIG LLC as it seeks a bigger foothold in offering equities trading for overseas institutional investors.

The Chinese investment bank is making the investment through its Hong Kong-based CLSA unit, BTIG said yesterday in a statement. New York-based BTIG, which has more than 450 employees, will continue operating independently. The financial terms and stake size weren’t disclosed.

The investment in BTIG, which offers equity, options and foreign-exchange trading, is the latest step in Beijing-based Citic’s international expansion as it seeks to compete with rivals such as Goldman Sachs Group Inc. The transaction builds on the CLSA acquisition, which cost about $1 billion and gave Citic a brokerage with more than 1,500 employees located in 21 cities across Asia, Europe and the U.S.

“The deal demonstrates Citic’s determination to expand overseas,” Fanny Chen, a Hong Kong-based analyst at Haitong International Securities Group, said by phone. “It will further cement Citic Securities’ leading position in China’s brokerage industry. A large overseas operation is a great advantage” as China opens up its capital markets, she said.

Since Steve Starker, a former Goldman Sachs partner, and ex-Bank of America Corp. equities chief Scott Kovalik founded BTIG a decade ago, the stock-trading firm has opened offices across the U.S. and in Europe and Australia. BTIG plans to use the funds to add to its research and banking businesses, Starker said in a phone interview.

Main Business

“Many have concluded that electronic trading is more profitable, and the reality is there is still a need for high-touch service,” said Starker, 48. “Our model is all about relationship, trust, service and liquidity.”

BTIG’s main business is trading big blocks of stock for hedge funds and other institutional clients. The firm has been expanding as rivals shrink or close. The pool of stock-trading fees on Wall Street has dwindled by 33 percent since 2009 to $9.3 billion a year, Greenwich Associates said last year.

BTIG has gained market share in equities and is looking to repeat that in other asset classes, Starker said.

The BTIG stake purchase won’t affect CLSA’s business in the Americas, Jonathan Slone, CLSA’s Hong Kong-based chief executive officer, wrote in an e-mailed response to questions.

The transaction “is consistent with our growth strategy for the U.S. market,” Slone said. CLSA, whose traders are primarily based in Asia, has had a representative office in New York to serve U.S.-based fund managers for the past 25 years.

Goldman Ties

BTIG’s Starker joined New York-based Goldman Sachs in 2000 when it bought brokerage Spear, Leeds & Kellogg, where he helped run the capital markets business. Kovalik, 49, rose to head of equity trading at Montgomery Securities, which was acquired by a Bank of America predecessor in 1997. The two left to found their own firms, then merged them.

BTIG started an interest-rates trading business last year and has been hiring analysts to provide research to clients. The firm last year helped manage the initial public offering of dance-music company SFX Entertainment Inc.

Citic, founded in 1995, says on its website that its largest shareholder is government-owned Citic Group Corp. The parent company was established in 1979 by Rong Yiren -- who went on to become a vice president of China -- to support former leader Deng Xiaoping’s experiment with open markets. Its businesses span banking to real estate and oil exploration, and the group reports directly to China’s cabinet.

Goldman Sachs bought part of BTIG in 2008. The investment bank still owns a minority interest, Starker said. BTIG is a closely held company and doesn’t disclose its financial results.

After taking a 19.9 percent stake in CLSA in 2012 for $310.3 million, Citic paid $841.7 million for the rest, not including Taiwan operations.

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