CHICAGO — Getco LLC on Wednesday said it plans to expand its New York Stock Exchange floor-trading business as part of a long-range plan by the Chicago-based trading firm to build a client base of issuers and financial institutions.
Closely-held Getco, best known as an electronic market-maker, will handle about one-third of daily stock trade at the Big Board after agreeing to acquire Bank of America Corp.'s NYSE floor business, supervising some of the most widely followed U.S. stocks.
"We're moving onto a bigger canvas," Getco co-founder Stephen Schuler said in an interview.
Schuler said that he and co-founder Dan Tierney envision Getco as a "100-year company," with plans to develop a roster of institutional customers and expand its slate of stock-trading services into new markets like bonds and currencies.
The firm formulated the strategy two years ago, and has added to its management team and pursued deal making as part of a long-term growth plan that could one day see Getco float shares in an initial public offering, though such a move is not currently under consideration, Schuler said.
Getco is expanding its domestic and international profile to deal more directly with share-issuing companies and mutual funds at a time when better-known Chicago rival Citadel has struggled to diversify from its roots as a hedge fund and trading giant with an abortive move into investment banking.
Twelve-year-old Getco is one of the world's most highly regarded practitioners of high-frequency trading, using computer models to eke out profits from minute fluctuations in the price of stocks, futures and options. Executives said Getco's main business has been in making markets — maintaining both a bid and an offer for a security with the aim of later turning over the position at a gain.
The company operates on more than 50 exchanges and trading venues around the world and typically ranks among the top five participants on electronic stock and options markets run by NYSE Euronext, as well as futures platforms like CME Group Inc. and Deutsche Boerse AG's Eurex unit.
The latest acquisition would swell Getco's growing ranks of traders, who work alongside its technicians and programmers as well as at the NYSE, where Getco already maintains a presence following a similar deal in early 2010.
Buying Bank of America Merrill Lynch's designated market-maker business will give Getco jurisdiction over a book of 650 companies that includes the shares of General Electric Co., Wal-Mart Stores Inc. and McDonald's Corp. Previously known as specialists, designated market makers bear responsibility to buy and sell in their assigned securities, smoothing trading imbalances and explaining market movements to share issuers.
Getco will become the second-largest designated market-maker by number of assignments at the NYSE upon completion of the transaction, which will see BAML-supervised stocks and securities transferred to Getco over the next four weeks. Terms of the deal were not disclosed. Barclays Plc maintains the largest NYSE floor presence.
The number of specialist firms working the NYSE floor has dwindled to four from 35 at the beginning of the past decade as share dealing migrated toward screens. Getco is able to profit from the business because its floor personnel use the same technology that powers Getco's automated trading, scanning dozens of trading platforms to help assess supply and demand for a given stock, according to Dave Babulak, Getco's head of strategic initiatives.