Citadel Securities has handled 4 IPOs without setting foot on the NYSE floor. Here's an inside look at how the firm went remote.
Citadel Securitieshas handled nine of the 10 initial public offerings held at the New York Stock Exchange since the temporary closure of the floor on March 23.
- The group that handled the process, known as designated market makers, completely revamped its framework in order to do it entirely remotely.
- Communication was key. Citadel Securities sent more than 70,000 emails to listed companies in March. And bridge calls were set up between all the parties involved in public debuts.
- As a result, Citadel Securities was able to execute two remote IPOs on the same day, in addition to a secondary listing, raising just shy of $1 billion via the public
- While all previous IPOs Citadel Securities handled during the closure were special purpose acquisition vehicles, Friday will be the first remote IPO of an operating company — ADC Therapeutics.
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Citadel Securities' designated market makers, a group that typically operates out of the New York Stock Exchange's trading floor, has managed to keep business up despite the temporary closure of the iconic trading floor for the past two months.
The electronic market maker has handled nine of the 10 initial public offerings held at NYSE since the temporary closure of the floor on March 23, including four of which were managed entirely remote. In addition to bringing those companies to the public market, Citadel Securities also handled two secondary listings during that time.
In total, the firm has raised more than $3.7 billion via the public markets, including nearly $1 billion in a single day.
All of it was done via a framework that was essentially set up on the fly.
"We're building up processes around a capability that didn't exist eight weeks ago." Peter Giacchi, head of DMM floor trading for Citadel Securities, told Business Insider. "We had to be willing to think outside the box."
During a typical IPO at NYSE, DMMs run an auction to set the opening price for the stock, gauging interest from traders on the floor while communicating with the investment banks backing the listing. The closure of NYSE's trading floor forced Citadel Securities' DMMs to reconsider how it would operate.
While trading firms weren't allowed on the floor, DMMs could work out of the trading floor for IPOs and secondary listings. However, with uncertainty around the potential for lawmakers to enact even stricter rules that would limit DMMs access, and in a push to reduce travel required by employees, Giacchi said the decision was made to create a framework for conducting an IPO entirely remote.
Giacchi said it was important to make sure public investors, underwriters and the companies being listed were all represented properly under the new policy.
Transparency was a key consideration, he added. Without the benefit of having everyone on the floor together, Citadel Securities had to ensure information was streamlined, with data continuing to go out to the Street in real-time to keep everyone abreast of the situation.
That point remained a top priority for the entire business, not just during IPOs. In March, when volatility was at its highest, Citadel Securities sent more than 70,000 emails to listed companies to provide market updates.
When it came to IPOs, communication between the various parties was also important with bridge calls set up between Citadel Securities and NYSE, and the underwriters and the exchange.
"The [business continuity plan] environment has created a need for new and innovative ways to communicate without a significant human presence on the trading floor," Giacchi said. "A big part of this has involved using technology to facilitate the efficient flow of information between the NYSE, the DMMs and the underwriters."
After testing from multiple locations, Giacchi said the firm was ready for its first remote IPO on May 1 (Fortress Value Acquisition Corp.). In addition to the lead DMM, who was connected to NYSE's system via a VPN from his home, a second, back-up DMM was also ready. Giacchi, who was positioned on NYSE's trading floor, represented the final backstop.
With the successful execution of the IPO, Citadel Securities upped the ante, handling two remote listings — Sustainable Opportunities Acquisition Corp. and Live Oak Acquisition Corp. — on the same day, May 6. That was in addition to a secondary listing done on the trading floor for Norwegian Cruise Line Holdings.
Together, the trio raised just shy of a billion dollars via the public markets.
Thursday marked another successful remote IPO with the listing of GigCapital3. And while all previous IPOs Citadel Securities has handled during the floor closure were special purpose acquisition vehicles, Friday will be the first remote IPO of an operating company — ADC Therapeutics SA — which will also be done by Citadel Securities, according to a source familiar with the situation.
On Thursday, NYSE president Stacey Cunningham announced the exchange would slowly begin to open its trading floor starting on May 26. In an op-ed in The
"During our floor closure, we demonstrated that these larger companies can operate effectively with remote connectivity," Cunningham wrote.
Joe Mecane, Citadel Securities head of execution services at Citadel Securities, said the entire experience served as a lesson in the power of using tech to evolve how business is done.
"In the environment we're in, when many companies need to raise cash, it's especially important for us to have a flawless execution," he added. "All of that points to how we're continuing to leverage technology in new ways to help investors and Main Street."
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