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Investing.com -- Nonbank financial institutions (NBFIs) like Jane Street and Citadel Securities now control approximately 20% of global trading revenue, according to a new report from Boston Consulting Group.
These market makers are projected to increase their share to 30% by the end of the decade as they continue to expand into traditional banking territory. This represents dramatic growth from just 1.6% market share in 2010.
"In these past years, we’ve seen those nonbank liquidity providers really move from the margins to the mainstream," said Julian Hein, a managing director and partner at Boston Consulting Group, in an interview. He added that this shift doesn’t threaten overall revenue growth but rather changes the composition of revenue pools.
Jane Street recently posted record quarterly results, generating $10.1 billion in net trading revenue for the second quarter. This performance surpassed all major Wall Street banks and contributed to the firm’s all-time high first-half trading revenue of $17.3 billion. The company benefited significantly from volatility related to trade wars.
These nonbank firms, which also include Hudson River Trading, have gained market share through substantial investments in technology and talent. They offer alternatives to large banks that face stricter regulations following the 2008 global financial crisis.
As privately held companies, these trading firms operate with less regulatory oversight and maintain secrecy around their trading strategies.
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