Big fish: A file photo of traders in the the New York Stock Exchange. Jane Street accounted for 10.4% of equities market activity in North America last year. — AFP
NEW YORK: Jane Street Group LLC generated US$10.6bil in net trading revenue last year – one of many big numbers demonstrating its presence as a major market maker eyeing ever-more growth.
The firm’s trading haul – roughly flat on the prior year – was among the litany of financial markers Jane Street disclosed to investors as part of a debt deal it’s seeking to fuel further expansion.
Adjusted earnings last year were US$7.4bil, the documents seen by Bloomberg showed. The business is backed by US$21.3bil of members’ equity – which represents the majority of the firm’s trading capital. It had 2,631 employees at the end of last year, and turnover was 6% over the last two years.
It’s a rare glimpse into the mechanics of the notoriously secretive firm, which has steadily expanded to make markets in areas including exchange traded funds (ETFs), stocks, currencies, derivatives and bonds.
Cue more of its growth indicators: Jane Street accounted for 10.4% of equities market activity in North America last year, up from 7.7% the year before, according to the documents.
When it comes to ETFs – where the firm has long been dominant – it averaged US$527bil of monthly trading volumes, or some 24% of primary market activity in US-listed vehicles. In options, the firm was responsible for 7.6% of Options Clearing Corp volume last year.
A representative for the firm declined to comment.
Some of the numbers may be smaller than those of Wall Street’s largest banks, but Jane Street has plans for “further organic business expansion”, it said. The debt sale – it’s offering US$1.4bil in high-yield bonds in an upsized deal – will help fuel that growth, according to the documents.
“These business expansions have historically proved fruitful and have enabled us to scale our business, reach a wider client base, and expand into new markets, all while finding new cost efficiencies,” the company said in the documents.
The bond deal – currently being marketed at about a 7.125% yield – would expand cash on its balance sheet to about US$5.6bil from US$4.3bil and is expected to be completed in one day, by the end of Wednesday. It adds to debt the firm has borrowed from institutional investors in recent years including US$3bil of leveraged loans.
Jane Street is also focused on growing its wholesale business, with plans to expand into options wholesaling in the second quarter of 2024, according to the documents.
Founded in 2000, New York-based Jane Street got its start trading American depository receipts, expanding then to ETFs on the floor of the American Stock Exchange. It now counts firms including Citadel Securities, Susquehanna International Group, and Virtu Financial Inc among its rivals.
Such firms are notoriously secretive – and their financial results often trickle through as they seek debt to fund their operations.
Among other figures disclosed to investors were Jane Street’s expected first-quarter net trading revenues of about US$4.4bil, and preliminary adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of US$3.2bil for the first quarter.
Jane Street said that net income would be between US$2.6bil and US$2.7bil for the period.
In 2023, the company saw a 70% Ebitda margin, according to the documents.
Trading firms saw their revenue slide in early 2023 as volatility eased, but then market swings picked up steam.
Citadel Securities – the market-making arm of billionaire Ken Griffin’s empire – generated a record US$7.5bil of revenue in 2022, and also experienced a slowdown in the first half of 2023.
Jane Street operates in the lucrative universe that combines technology and risk-management skills. Unlike banks that are under tight budgets and regulatory requirements, firms like Jane Street have their own capital to manage and put to work.
It’s also benefited from the digitisation of asset classes like corporate bonds, which it can more rapidly buy and sell to help facilitate trading in the marketplace.
In fixed income, Jane Street executed about US$179bil of portfolio trading globally, with basket sizes ranging from US$10mil to US$1bil, according to the documents.
Of the company’s 2,631 employees, technology roles represent 40% of the firm, the majority of which are based in New York, according to the documents. — Bloomberg
