The firm is currently in the process of gaining a financial services license from Hong Kong’s Securities and Futures Commission (SFC) and exploring exchange membership options with Hong Kong Exchanges and Clearing (HKEX) to begin market making in index futures and options and cash equities towards the end of this year.

Newly appointed managing director of the Hong Kong business at DRW, Stuart Knowling, will be responsible for the expansion plans.

Trading desk wise, the team will start off fairly small, as some trading strategies can take up to three to six months to develop. The team will also initially add quants, analysts and technology developers alongside traders.

“DRW’s plans to open an office in Hong Kong builds on the strength of our existing business in Singapore and expands our global footprint,” said Knowling. “We see Hong Kong as a gateway to China in terms of market access, but it also provides a deep pool of trading, quant, and tech hires.”

After a year of setting up its initial business, the market maker then intends to expand into other asset classes within the region. It is not so prevalent in equities in Asia and so this is one potential area for expansion. DRW has had a crypto business since 2014 and this could also be another area that it chooses to expand into further within Hong Kong.

Gateway to China

The move will further diversify DRW’s existing offering in Asia and expand its global footprint. The market maker has roughly 1700 members of staff globally, however, just 60 people on the ground in Singapore.

Hong Kong and Mainland China have launched several collaborative initiatives in recent years including the Stock Connect service aimed at expanding southbound and northbound ETF trading between the two.

Read more – More than two thirds of traders are looking to diversify through Asia and South America expansion

Swap Connect also launched in May of this year and will offer the first derivatives trading connection between Mainland China and Hong Kong. The initiatives mean those active in Hong Kong will also now have greater exposure to the Mainland.

Institutional investors are increasingly looking to Asia as a means for expansion, according to a recent report by Acuiti. Over half of respondents in Acuiti’s report confirmed definite plans to expand to new regions within the next three years, with 76% looking to expand to Asia – with Taiwan specifically top of the priority list, and 67% looking to expand into South America.

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One of the world’s largest proprietary trading firms confirmed this week it will acquire RGM Advisors in the latest tie-up between high-frequency trading (HFT) firms.

DRW Holdings has agreed in principle to buy the Texas-based principal trading firm in a deal expected to be completed by the end of September this year.

Don Wilson, founder and CEO of DRW, described RGM as a well-respected market participant with a talented team and trading strategies.

“Bringing our companies together creates significant opportunity in equities trading, research and technology infrastructure, which will bolster liquidity and innovation in those markets,” he said.

Richard Gorelick, CEO at RGM Advisors, added the combination of both firms is a ‘natural fit’ that will benefit both companies and the markets more broadly.

Declines in profits alongside low volatility have forced HFT firms to reconsider business models in recent years, leading to several high-profile mergers and acquisitions.

HFT companies have struggled to remain profitable on speed alone so many have adopted new technologies and investment approaches to differentiate them from competitors.

The most recent, high profile acquisition was finalised in July this year when Virtu Financial acquired KCG in a deal estimated to be worth $1.4 billion. 

Both firms saw revenues drop across trading and market making business units prior to the deal due to low volatility and decreased trading volumes.

Similarly, in March Quantlab Financial revealed plans to buy a high-speed trading business from Teza Technologies in a deal worth around $30 million.

While Two Sigma Securities, the market making arm of quantitative hedge fund Two Sigma, said it will purchase the options trading business of Interactive Brokers in May this year. 

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