DRW to acquire rival in latest HFT tie-up

Terms of the deal were not disclosed but it is expected to close by the end of September.

One of the world’s largest proprietary trading firms confirmed this week it will acquire RGM Advisors in the latest tie-up between high-frequency trading (HFT) firms.

DRW Holdings has agreed in principle to buy the Texas-based principal trading firm in a deal expected to be completed by the end of September this year.

Don Wilson, founder and CEO of DRW, described RGM as a well-respected market participant with a talented team and trading strategies.

“Bringing our companies together creates significant opportunity in equities trading, research and technology infrastructure, which will bolster liquidity and innovation in those markets,” he said.

Richard Gorelick, CEO at RGM Advisors, added the combination of both firms is a ‘natural fit’ that will benefit both companies and the markets more broadly.

Declines in profits alongside low volatility have forced HFT firms to reconsider business models in recent years, leading to several high-profile mergers and acquisitions.

HFT companies have struggled to remain profitable on speed alone so many have adopted new technologies and investment approaches to differentiate them from competitors.

The most recent, high profile acquisition was finalised in July this year when Virtu Financial acquired KCG in a deal estimated to be worth $1.4 billion. 

Both firms saw revenues drop across trading and market making business units prior to the deal due to low volatility and decreased trading volumes.

Similarly, in March Quantlab Financial revealed plans to buy a high-speed trading business from Teza Technologies in a deal worth around $30 million.

While Two Sigma Securities, the market making arm of quantitative hedge fund Two Sigma, said it will purchase the options trading business of Interactive Brokers in May this year.