Flash Boys at Jump Trading Set Their Sights on the Credit Market

(Bloomberg) -- Chicago-based Jump Trading has quietly become one of the giants in modern finance, a dominant presence in derivatives trading and a major reason why markets operate close to the speed of light. It’s now got the credit market in its sights.

The company is considering an expansion into corporate bond trading and is expected to hire Frederic Boyer, who most recently worked for Ken Griffin’s Citadel LLC as a managing director and head of quantitative research for global credit, to help its effort, according to people familiar with the matter, who asked not to be identified discussing a private project.

Jump declined to comment. Boyer, whose LinkedIn page says he’s been on leave from Citadel since January, didn’t respond to a request for comment.

The corporate bond market has for years lagged behind other asset classes like futures and stocks in terms of automation. But that’s changing, with markets upgrading their platforms to accommodate the world’s fastest traders. Those technology advances are why Jump is considering corporate bonds, according to one of the people familiar with the matter.

As recently as two weeks ago, Jump executives reached out to an electronic bond-trading system to ask for data on average trade size and liquidity as it evaluates its move to become a market-maker, according to two of the people. Jump has been considering its move into bonds for several months, one person said.

Boyer is expected to join Jump in early 2020, the person said.

Advances in machine learning, data management and the continued adoption of electronic trading in the corporate bond market are making it easier to sift huge amounts of information that in some cases is allowing firms to derive prices using software instead of traders. That means firms like Jump, which has invested heavily to become one of the fastest traders on the planet, can now envision entering a market that for decades was ruled by banks and conducted by telephone.

The changing environment is part of a broader trend that’s threatening the dominance of Wall Street banks in the corporate-bond market as more investors skip intermediaries and trade among themselves. It’s bringing long-awaited changes like standardized pricing, automated trading and billion-dollar portfolio deals with it. And it’s threatening the livelihood of the traders and salespeople who have been the lifeblood of the market for decades.

To contact the reporters on this story: Matthew Leising in Los Angeles at mleising@bloomberg.net;Nick Baker in Chicago at nbaker7@bloomberg.net;Cecile Gutscher in London at cgutscher@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Christopher DeReza

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