Celent Commentary: Citi's Potential Acquisition of ATD

As reports have surfaced that Citi is in discussions to purchase Automated Trading Desk (ATD) for somewhere in the neighborhood of $700 million, it's a sure sign that Citi is continuing to invest in order to build out it electronic trading capabilities.Although Citi wouldn't comment on the potential deal and nothing has officially been announced yet, the combination of the two companies could prove an interesting move for the banking giant, according to David Easthope, senior analyst at Celent.

"Citi has been looking at the market and looking to make more investments in their electronic trading capabilities," says Easthope. "They've revived an ECN and built out LavaFlow and they're investing in regional exchanges and dark pool liquidity matching systems, so they are pushing on all fronts."

Easthope says that while he was surprised at first to hear of the potential deal being that the ATD is based in South Carolina and the cultures are very different, ATD was definitely an attractive company for acquisition. "They have built a very sophisticated electronic automated market making system that consistently ranks high in our Execution Quality Reports," adds Easthope.

He says ATD could also benefit from leveraging Citi's global presence for their platform. Ultimately, Easthope says this type of deal might help Citi grow more organically as well. "Citi seems to be having some issues with internal growth and can't continue to buy companies," Easthope explains. "But with the addition of more electronic platforms, it could help rapidly grow organically."