Leveraging the technology infrastructure and trading expertise of its buyside parent, Two Sigma Securities is making inroads into the business of filling orders for retail brokerages with firm capital.
“We view ourselves as a technology company,” Simon Spenser, a Two Sigma Securities’ senior vice president, told Traders Magazine. “We have the ability to apply a technology focus to wholesale market making. That will give us a distinct advantage, as well as confer benefits on our broker-dealer clients.”
The offspring of the highly successful quantitative money manager, Two Sigma Investments, Two Sigma Securities entered the wholesaling business in earnest just 18 months ago. Since then, it has racked up impressive gains, partly due to its relationship with two of the larger order flow providers, Fidelity Brokerage Services and its affiliate National Financial Services.
In the first four months of the year, Two Sigma Securities traded 2.1 billion shares on behalf of retail brokerages, placing it seventh among the top 10 wholesaling outfits, according to data from Thomson Transaction Analytics. That was up 40 percent from the same period in 2012, when the broker-dealer processed 1.5 billion shares. (The data comes from Two Sigma’s Rule 605 reports, mandated by the Securities and Exchange Commission.)
Making markets in nearly 7,000 securities, the wholesaler is gunning for a place in the top five. To get there, it has adopted the data-driven systematic approach to investing and trading used by its parent.
To read the entire article, please access the current issue of Traders Magazine.
