LONDON • A tiny London firm with no human traders made its name last year, beating banks to climb up the currency trading ranks. Now, it wants a bite of something new: the US$27 trillion (S$37.4 trillion) United States stock market.
XTX Markets is only two years old, but its executives say it has what it takes to compete with more established American trading giants in the world's largest, most complex and most saturated equity market.
It has a new Manhattan office and a big-name hire: Mr Eric Swanson, who helped Bats Global Markets become the second-biggest stock exchange operator in the US.
With Mr Swanson, XTX can "go from having a toehold, to being a more significant player in the US", says XTX's co-CEO Zar Amrolia who formerly ran digital technology at Deutsche Bank.
"We are just rolling out what we think is a successful quantitative research-driven approach to market making," he says.
It will not be easy. Dutch speed trader Flow Traders kicked off a similar US expansion last year and is having trouble.
The market is choppy, scattered nature has few parallels.
Firms that want to compete will have to connect to 12 national securities exchanges, scour constantly for trading risk, suck in proprietary data feeds and ward off any behaviour that could run afoul of regulators, all at once.
For the fastest firms, trading strategies can be made or broken by millionths of a second.
Mr Amrolia is not fazed - he says his goal is to be "smart, not fast". XTX uses technology to forecast where prices for securities will be in a matter of minutes or hours. He contrasts this strategy to some North American firms that rely on the speediest networks for getting information, and trading based on that. Virtu Financial and Citadel Securities will soon be among XTX's biggest rivals.
XTX's focus on machine learning puts the firm "at the forefront" of trading technology, Mr Swanson says. Their strategies will be put to the test in the US, which hosts more than one-third of global equity trading value, and holds a complex web of big-name exchanges and dozens of smaller private dark-pool venues.
"That is a challenge for everyone," says Mr Swanson, Americas CEO at XTX and former general counsel at Bats, which is now owned by CBOE Holdings.
"We're up to managing that challenge."
XTX made its name last year after managing to leapfrog big banks to place fourth in spot currency trading. It repeated the spot-trading feat in the 2017 Euro money Institutional Investor survey, despite slipping to 12th in this year's rankings for overall trading.