BTIG, which opened a trading floor for 200 professionals last week, plans to expand further in its specialty areas — equity, equity derivatives and fixed-income — but the New York brokerage’s co-founder said he does not plan to expand into traditional investment banking anytime soon.
The eight-year-old BTIG has more than 400 specialists spread across five countries. Two years ago the broker-dealer specializing in equity trading and brokerage services received an investment from Goldman Sachs. At the time of the investment, the firm said it would use proceeds from it to fund its growth plans.
In addition to equity trading, fixed income and equity derivatives, it offers prime brokerage services and helps investors trade futures and convertible debt.
This year, it has hired professionals in the high yield, convertible and special situation markets. The new sixth-floor trading floor at its midtown Manhattan headquarters increased BTIG’s ability make markets by 60%.
Now the firm plans to revamp its seventh-floor trading facility. That floor is expected to be ready for prime brokerage and capital-introduction specialists early next year.
When asked if BTIG would consider branching out into traditional investment banking, co-founder Steven Starker said: “We are open-minded about the future, but that’s not something we are focused on right now. On a much more limited scale, our new capital markets group is looking for opportunities to help smaller companies source funding to grow their businesses.”
The next steps “are to continue to build our core trading platform, which is fixed income, equity and equity derivatives, and to continue to build our global execution services in Europe and Asia,” Starker said.
Being a primary dealer is “not on our immediate radar screen,” he said, and the 2011 blueprint calls mainly for the firm to “stick to our knitting.”
For now, he said, BTIG is perfectly fine with helping institutional investors shift in and out of different investments, as opposed to underwriting debt and equity securities for issuers.
“We are not doing underwriting right now,” Starker said. “When it comes to underwriting of debt and equity deals, that’s a little further down the road. I don’t think it’s in our short or intermediate time horizon.”
In the last two years, BTIG has stepped up its hiring of specialists in a wide range of sectors.
The buildout has been abetted by the upwelling created by the credit crisis at many Wall Street firms.
“We are extremely opportunistic. If you look back to 2008, when Bear Stearns and Lehman Brothers [failed], there was an enormous amount of supply that came into the market, and we were extremely opportunistic about picking up talent,” Starker said.
Though domestic operations generate 75% of BTIG’s revenue today, the firm has rapidly expanded its international operations over the last two years.
It has hired Gary Hayes, formerly chief operating officer at Collins Stewart, to run its European business, and Jesse Lentchner from Goldman Sachs to run its Asian-Pacific business. At Goldman, Lentchner was co-head of execution services for Asia.
Starker said all dealmakers bring their own following of clients. Many of the new specialists at BTIG bring “a deep book of business and a deep book of relationships,” he said. “Marrying it with the resources we provide and our global distribution platform presents a strong case to institutions.”
His firm likens itself to a one-stop supermarket, because investors can trade options or any type of fixed-income product or equity product with a single trader, Starker said. “It could be the same sales trader for all different products. That’s somewhat unique.”
This year, BTIG started a research team. It has five professionals providing equity research and six covering fixed-income.
In March, BTIG announced the launch of its fundamental equity-research group with the hire of Richard Greenfield and Walter Piecyk.
When asked if it plans to add to the nascent research effort, Starker said: “We do, but it is a very slow, methodical process. We are looking for best of breed. If we think someone can move the needle and be incremental to our business, we certainly would be open-minded about it.”
This fall, BTIG added futures and commodities products to its menu—it helps investors make markets in all of the CRB index products—but it still has no foreign exchange business. “It is something that is on the white board,” Starker said. “Foreign exchange is not right at the top of the list right now.”
When it comes to its prime brokerage business, “we are adding a lot of resources to our technology budget and really are trying to provide different and more detailed reports for clients,” he said.
His firm sees itself as a player in the mini-prime space, where it competes with Jefferies & Co. However, “we have got the global trading platform that complements the mini-prime brokerage that others don’t have,” Starker said.
