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Date Posted: 02:36:45 01/18/10 Mon
Author: statement today.July 2==2007 (Bloomberg) -- Citigroup Inc.,
Subject: Automated Trading Desk

Citigroup Buys Automated Trading Desk Brokerage (Update4)
Share Business ExchangeTwitterFacebook| Email | Print | A A A By Edgar Ortega

July 2 (Bloomberg) -- Citigroup Inc., the world's biggest financial services company, agreed to buy closely held Automated Trading Desk LLC for about $680 million to capitalize on the growth of electronic equity transactions outside the U.S.

Citigroup will pay $102.6 million in cash and 11.17 million shares for Automated Trading Desk, the New York-based bank said in a statement today. Citigroup plans to extend to Europe and Japan Automated Trading Desk's technology, which now handles 6 percent of the stocks bought and sold in the U.S.

``The ATD electronic market-making technology is something that we can deploy around the world,'' James O'Donnell, Citigroup's head of equities for the Americas, said in an interview. ``The game is on to make sure that we're globally very, very competitive. This just gives us a huge leg up in the U.S. market and accelerates our international expansion.''

With the acquisition, Citigroup will become one of the five biggest traders on the New York Stock Exchange and the Nasdaq Stock Market, competing with UBS AG, Merrill Lynch & Co., Lehman Brothers Holdings Inc., and Goldman Sachs Group Inc., according to data from the exchanges' Web sites. Citigroup said Automated Trading Desk handles more than 200 million shares a day, drawing orders from retail brokerages that want transactions completed in a fraction of a second.

In the U.S., the portion of shares handled through computer- driven strategies that rely on mathematical algorithms will increase to more than half by 2010, up from about a third today, according to Aite Group LLC, a Boston-based financial services consulting company.

European Expansion

Citigroup also plans to extend Automated Trading Desk's technology for internally matching buy and sell orders to Europe. Securities firms will have more freedom to complete transactions away from national stock exchanges when new rules go into effect later this year. European investors will rely on computerized algorithmic trading programs to handle 10 percent of their orders by 2009, up from about 2 percent this year, according to the Westborough, Massachusetts-based consultant Tabb Group.

``Our intention was to begin looking at foreign marketplaces in 2008, but the reality is that it would have taken 10 years to really start traversing overseas markets,'' Automated Trading Desk Chief Executive Officer Steve Swanson said in an interview. ``This acquisition escalates those plans aggressively.''

Citigroup expects the acquisition to be completed this quarter subject to regulatory approvals. David Whitcomb, a finance professor from Rutgers University of New Jersey, founded Automated Trading Desk in 1988.

Prior Acquisitions

Citigroup shares rose 35 cents to $51.64 in composite trading on the New York Stock Exchange. The stock has declined 7.3 percent this year, compared with a 2.7 percent drop in the 24-member KBW Bank Index.

The bank has moved into electronic equities and options trading through a series of acquisitions over the past three years. In 2004, Citigroup bought Lava Trading Inc., a closely held New York-based maker of trading and order-routing software. This year, the company launched the LavaFlow electronic equity market using technology it got through the purchase of OnTrade Inc. Citigroup also bought a minority stake in Bats Trading Inc., the third largest U.S. stock market by shares traded.

Options Market

The Automated Trading Desk acquisition will give Citigroup technology it can integrate with its options market-making unit acquired in 2004 from Knight Capital Group Inc., said Pete Santoro, Citigroup's head of global equity trading. Automated Trading Desk in January sold a minority stake to Palo Alto, California-based Technology Crossover Ventures for $60 million to help expand into options.

``None of the work Steve's team has done will go unused,'' said Santoro, the former head of Knight's options unit, who joined Citigroup after that acquisition. ``It will make us a better competitor.''

Automated Trading Desk was advised on the transaction by Financial Technology Partners LP and FTP Securities LLC, and the law-firm of Blank Rome LLP. Citigroup used its own bankers and lawyers from Skadden, Arps, Slate, Meagher & Flom LLP, the bank said.

To contact the reporter on this story: Edgar Ortega in New York at ebarrales@bloomberg.net

Last Updated: July 2, 2007 16:53 EDT

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