Citadel Quadruples Currency Trading as Brexit Spurs Volume Surge

  • FX volatility seen sticking around in aftermath of U.K. vote
  • FastMatch volume surged to record; Hotspot turnover climbed

Citadel Securities LLC says it traded record currency volume last week after the U.K.’s Brexit vote sent shock waves through financial markets. The company expects more volatility to come.

The market-making arm of money manager and securities firm Citadel LLC said its foreign-exchange activity on June 24 surged to more than four and a half times the firm’s daily average this year. The Chicago-based company declined to provide a dollar figure. The U.K. vote to leave the European Union also led to a surge in volume across trading venues run by Thomson Reuters Corp., Bats Global Markets Inc. and FastMatch Inc. as the pound tumbled to a three-decade low.

“The next few weeks are going to be volatile as the situation continues to unfold,” said Jamil Nazarali, head of Citadel Execution Services in New York. “There is a mis-perception that nonbank liquidity providers pull out in times of stress and extreme volatility and June 24 proved that this was definitely not the case. We did what we do all of the time and people noticed it.”

As banks adapt to stricter regulation by stepping back from foreign-exchange market making, firms including hedge funds and proprietary traders are moving in to provide more liquidity, according to a survey by Greenwich Associates published in May.

FastMatch Inc., a foreign-exchange-trading platform, said volume rose to a record $39.8 billion on June 24, more than double the previous day’s activity.

“I was very, very surprised by big participation by nonbanks -- they were there, and they were there in size, providing markets continuously,” said Dmitri Galinov, FastMatch’s chief executive officer in New York. That contrasts with January 2015, when the Swiss National Bank roiled currency markets by abandoning its currency cap against the euro and liquidity seized up, said Galinov, a former director at Credit Suisse Group AG. He expects trading and volatility to remain elevated.

For more on the outlook for the pound after Brexit, click here.

Other foreign-exchange venues also reported an uptick in trading on June 24:

  • Volume on Thomson Reuters currency platforms reached $482 billion, spokeswoman Kate Reid said by e-mail. That exceeds average daily volumes going back to at least January 2013.
  • Trading on Bats Hotspot FX reached $59.5 billion, which was one of the top-five most active days since the platform was founded in 2000.
  • An all-time high of 522,872 futures and options contracts for the British pound changed hands on CME Group Inc.’s exchange, surpassing the previous record from 2014.

"We’re prepared for much more volatility, especially in currencies," said Ari Rubenstein, chief executive officer of automated trading firm Global Trading Systems LLC in New York. "This isn’t going to be a one-and-done day of volatility."

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