Maven Securities, a London-based high frequency trading firm, is looking to “spin out a number of strategies into a hedge fund given the right seed investor,” according to a report in Financial News.
While many HFT firms keep their profits a closely guarded secret, Maven reported a pre-tax profit of £7.8 million in its first year of operation, according to the report. Maven primarily trades in European stock and derivatives markets.
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Market maker or HFT firm?
Maven walks a fine line, as they categorize themselves as both a market maker and an HFT firm. Traditionally market making has been defined as continually making a simultaneous equal market on both the buy and sell side, profiting from the spread differential between the buy and sell price as well as receiving exchange rebates. HFT, on the other hand, is known to make orders in one direction and profits by being correct on their trade’s directional prediction. Both market making and HFT are done using super-fast computers and exchange connections.
Uncertain compliance landscape going forward
HFT firms have traditionally not received significant institutional allocations due to the uncertainty of a changing regulatory landscape. Not only might regulators impose additional restrictions on the activity, but the algorithmic traders who tend to receive institutional allocations tend to utilize a longer term time horizon for their trading strategies and have their results independently audited.
“As with all proprietary trading firms facing such a dynamic regulatory landscape we are looking to further complement our compliance and risk functions with key hires,” Ben Hunda, the firm’s founder, said in the report. The report noted that Maven was founded in February 2011 by former cash and Delta One trader at Tibra and Macquarie Capital Huda, as well as former trader at Optive ; Ivan Koedjikov and Ian Toon, who has traded for both Optiver and Tibra Capital. Optiver is a Dutch high-frequency trading firm while Tibra is part of an Australian group founded by Danny Bhandari.