Two Sigma Securities, the market-making affiliate of the $US30 billion hedge fund firm, is growing its brokerage business.
The New York-based firm is acquiring the US options-market-making business of Timber Hill, a subsidiary of Interactive Brokers Group.
The deal, which is expected to close in September, will expand TSS’s offering, spanning 7,000 US stocks and options on 1,300 underlying securities, Two Sigma said.
Two Sigma Investments is one of the world’s largest hedge fund firms, managing $US30.4 billion in hedge fund assets as of the start of the year, according to the Hedge Fund Intelligence Billion Dollar Club ranking.
Two Sigma and Chicago-based Citadel are some of the few hedge funds running separate securities arms.
Here’s the full statement announcing the deal:
Two Sigma Securities to Acquire the U.S. Options-Market-Making Business of Interactive Brokers
GREENWICH, Conn. and NEW YORK, May 9, 2017 — Two Sigma Securities, LLC (TSS), the market-making affiliate of Two Sigma Investments, LP has reached an agreement to acquire the U.S. options-market-making business of Timber Hill, a subsidiary of Interactive Brokers Group, Inc. (NASDAQ GS: IBKR), the companies announced today. This transaction positions TSS to become a top-tier market-maker across both options and equities. By adding Timber Hill’s options business, TSS’s market-making offering will span over 7,000 U.S. equity securities and options on 1,300 underlying securities, executing over 300 million shares and one million options contracts per day.
TSS expects to integrate Timber Hill’s system into its platform over the coming months, and the transaction is expected to close in September upon receiving required regulatory approvals.
Through combining Two Sigma’s technology and quantitative capabilities and Timber Hill’s options expertise, TSS clients will now have access to a unified, best-in-class provider. Additionally, the broader options-trading community will continue to benefit from a strong competitive landscape as Timber Hill maintains and extends its ability to provide liquidity across the U.S. exchanges.
Simon Yates, CEO of TSS, said, “Through this transaction, TSS will integrate Timber Hill’s highly complementary platform to form a full-service, large-scale market-maker across equities and options on exchanges and for wholesale retail clients. We look forward to welcoming Timber Hill’s employees into our organisation. We will also be actively engaging with the exchanges, other market participants and regulators to be part of the dialogue around growing a healthy options industry.”
Thomas Peterffy, founder of Timber Hill said, “Interactive Brokers’ brokerage business has grown at a very rapid pace. This success is substantially due to our expertise in building first-rate execution technology, which we acquired over our forty years as market makers, leading the way from open outcry floor trading to today’s electronic markets. As we are turning our entire attention to our brokerage business, we are gratified that under able management by Two Sigma our software modules will continue to provide liquidity in the U.S. options markets.”
TSS plans to open an office in Connecticut to accommodate Timber Hill’s current team. This team will operate alongside TSS’s existing operations in SoHo.
Sandler O’Neill + Partners, L.P. is acting as financial advisor and Sidley Austin LLP is providing legal advice to Two Sigma. Interactive Brokers was advised by Dechert LLP.