RGM Advisors LLC and Allston Trading LLC are in early merger talks, people familiar with the matter told Jacob Bunge of the Wall Street Journal. A slowdown in trading opportunities has prompted the high-frequency trading giants to cut expenses and tie up with rivals. Allston Trading LLC CEO Raj Mahajan said that his firm is open to consider partnerships that will help it improve sales and profits.

RGM

Declining High-Speed Trading Volume

The technology revolution has catalyzed the increase in rapid-fire, computer-driven trading over the past decade. That has boosted the number of individual traders, and prompted big banks to adopt high frequency techniques. Though high frequency traders enjoyed the benefits of market volatility in 2008 and 2009, recent slowdown in trade volumes has squeezed profits and fueled industry consolidation. Moreover, regulators have increasingly tightened restrictions on automated trading practices.

HIgh Frequency trading

High frequency traders have been cutting costs and jobs to remain competitive. Infinium Capital Management LLC, Getco LLC and Sun Holdings LLC have recently laid off employees and appointed new CEOs who are open to grow through mergers and acquisitions. In December, Getco LLC acquired Knight Capital Group Inc. (NYSE:KCG).

RGM and Allston Merger Syngeries

The potential merger between RGM Advisors LLC and Allston Trading LLC will create a diversified trading group that will have relatively lower expenses. Sources told the Wall Street Journal that discussions are still in early stages. Lime Brokerage LLC CEO Jeff Bell says that private firms closely protect their trading methods, even during discussions with potential partners. It has been a big challenge to deal making in the industry.

Stock trading volumes in the United States have been declining consistently for the past three years. They have fallen 35 percent from the 2009 peak when about 9.8 billion shares were traded every day. The slowdown has already forced many high-frequency traders, including Eladian Partners LLC, to leave the business

Founded in 2001, RGM Advisors LLC has 130 employees in Austin and London. RGM Advisors LLC places its trades mostly in the U.S. and European markets. Allston Trading LLC currently has 150 employees in Chicago and London.