Citadel Securities Explores Entry into China’s Growing Market-Making Sector

In recent years, Chinese authorities have been actively promoting the growth of market makers in the country.

Citadel Securities, a leading global market-making firm, is actively exploring the possibility of establishing a licensed onshore business in China, according to its CEO, Peng Zhao.

If successful in obtaining a license, Citadel Securities would become the first foreign firm to officially enter the market-making space in China, beyond interbank and foreign exchange market making.

In recent years, Chinese authorities have been actively promoting the growth of market makers in the country.

They have approved more licenses and have expressed their commitment to introducing various types of derivatives to enhance liquidity and attract long-term capital.

Currently, at least 16 domestic securities brokerage firms have received approval to act as market makers in China A shares as of mid-September, as per official records.

Peng Zhao expressed his satisfaction with the introduction of the market-making program in China, emphasizing the need for market making as the Chinese capital market evolves into more complex products beyond simple stock trading.

Citadel Securities, led by billionaire Ken Griffin, handles approximately $390 billion in daily trades, making it one of the top market makers in the United States.

Market makers like Citadel Securities provide buy and sell quotes for assets, participating actively in trading and earning profits from the spread between bid and offer prices.

The potential growth of China’s market-making sector is substantial, with estimates suggesting it could reach 250 billion yuan ($34 billion) in revenues by 2032, compared to an estimated 40 billion yuan in the previous year, according to Chinese brokerage Haitong.

Market-making was initially introduced in China in 2014, and recent developments have expanded its scope. Citadel Securities appointed Tony Tang, formerly the head of BlackRock’s China business, to lead its China operations.

The firm became a “qualified foreign institutional investor” in China in February, gaining broader access to trade in domestic futures, options, bonds, and stocks.

This year, Citadel Securities also ventured into the investment-grade corporate bond market-making business in the United States and is now exploring opportunities to expand this business into Asia.

Despite challenges in the financial industry, Citadel Securities has significantly increased its Asia Pacific headcount since 2020, now employing nearly 300 people, bucking the trend of Wall Street layoffs, primarily due to high-interest rates and geopolitical uncertainties affecting deal activity.