(Bloomberg) — Ken Griffin’s Citadel Securities has opted to establish its own brokerage operation in China after failing in its bid for Credit Suisse’s onshore business and seeing no viable alternative takeover targets, people familiar with the matter said.
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The US firm, part of Griffin’s sprawling hedge fund and trading empire, is preparing an application to the China Securities Regulatory Commission for brokerage, asset management and proprietary trading licenses, the people said, asking not to be named as plans have not been made public.
After failing to buy the Credit Suisse unit, Citadel Securities views building an operation from the ground up as the best option since most brokerages in China are fully licensed, which is less compatible with its own approach. The firm regarded Credit Suisse’s China platform — primarily focused on brokerage services and investment banking — as a better fit for its expansion, one of the people said.
Citadel Securities is going against the grain as most foreign banks have scaled back in China as business has cratered along with a sluggish economy, rising geopolitical risks and a crackdown on bankers and private enterprise. Still, the move comes at an opportune time, just a week after China unveiled a bundle of stimulus measures, causing stock markets to soar.
A media representative at Citadel Securities declined to comment.
The decision to build a business from scratch will take significantly longer than through an acquisition given infrastructure needs and hiring challenges. Gaining a license approval in China is also a protracted endeavor, typically taking at least 12 to 18 months.
Though setting up its own shop will give Citadel Securities the flexibility to tailor its business for the Chinese markets instead of inheriting a business built by another firm, the people said.
In China, it’s seeking to add brokerage, trading and asset management under the new securities platform, one of the people said.
The firm is bolstering its footprint globally, recently adding to its presence in Europe to take on Wall Street firms. It’s also broadly expanding Asia, opening a Tokyo office in 2022 and expanding across regional offices.
Tony Tang, BlackRock Inc.’s former China head, was hired in September last year to navigate the increasingly complex regulatory landscape.
Citadel Securities has been participating in the China so-called A-share market from Hong Kong where it handles cash equities, futures, options trading and exchange-traded funds. It has an office in Shanghai with a small team supporting the firm’s offshore China business.
Earlier this year, Griffin and Peng Zhao, the CEO of Citadel Securities, were among the lead donors to help the San Diego Zoo prepare for the arrival of two giant pandas that were loaned from China.
Closely-held Citadel Securities generated $2.3 billion of net trading revenue in the first three months of 2024, setting the market-making firm up for a potentially record year as it expands in new assets classes and geographies.
–With assistance from Lulu Yilun Chen.
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