Barclays PLC (BCS - Free Report) has entered into an agreement to sell its U.S. automated options trading division to New York-based GTS, a global electronic market maker. The terms of the deal, expected to close in the first quarter of 2020, have not been disclosed. Earlier in August, Bloomberg had reported the company’s plan to divest the unit.
As part of the transaction, Barclays’ 40 employees will join GTS along with Kirill Gelman, who will continue to run the concerned business. The unit, which quotes prices for more than 735,000 securities, manages nearly 2% of exchange-listed U.S. equity options volume. Barclays’ equities trading business accounted for £1.48 billion ($1.95 billion) of revenues in the first nine months of 2019, down 11% on a year-over-year basis.
With the increase in trading firms like GTS, Citadel Securities and Virtu Financial Inc. (VIRT - Free Report) , banks like Barclays, which were the market makers on exchanges earlier, have lost footing. This is because the speed and efficiency of such high-frequency trading firms gives them an edge over the banks.
Ari Rubenstein, co-founder and CEO of GTS said, “The options trading acquisition is another step in GTS’s mission to build out its global capital markets business and to put superior trading technology to use for all who may benefit.” Also, the firm accounts for 3-5% of daily cash equities volume in the United States and trades more than 30,000 different instruments globally.
Earlier, in 2016, GTS through its subsidiary, had acquired designated market maker business of Barclays, which currently manages New York Stock Exchange floor trading for several companies.
Barclays has been making efforts to simplify operations and focus on core businesses. Its recent move is in line with such initiatives. This is likely to improve its operating efficiency and drive profitability over time.
Shares of this Zacks Rank #2 (Buy) company have rallied 19% so far this year, outperforming the industry’s growth of 4%.
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