NEW YORK, Aug 3 (Reuters) - Automated trading firm Virtu Financial said on Wednesday it had reached a deal to provide JPMorgan Chase and Co with electronic fixed income trading in the dealer-to-dealer market for U.S. Treasuries for at least three years.
The agreement, in which JPMorgan will use Virtu’s technology and market access, came at a time when many banks have been looking to cut costs to help counter the revenue-sapping low-interest rate environment.
“Working with outside firms is complementary to our internal investments and ensures that we are evaluating innovative technologies as the markets evolve,” JPMorgan spokesman Brian Marchiony said in a statement.
Financial terms of the deal were not disclosed.
Dealer-to-dealer U.S. Treasury trading is a relatively small part of JPMorgan’s fixed income business.
An expansion of the partnership to other asset classes at some point in the future, as well as similar deals with other financial firms, are definite possibilities, Virtu Chief Executive Officer Douglas Cifu said in an interview.
He added that Virtu provides technology and market access to a handful of financial institutions in the equities markets and that it is in talks with several more potential partners.
“Large institutions are looking at ways to access markets in a more effective manner and reduce their costs and be more efficient,” he said.
With a staff of 150 people, Virtu makes markets in 36 countries and 12,000 financial instruments, continuously quoting buy and sell prices for others to trade against, profiting off the bid-offer spread, using high-frequency trading (HFT) strategies.
HFTs use sophisticated technology and algorithms to trade stocks and other assets at near-light speed and are responsible for around half of the volume in U.S. equities and Treasuries, and nearly that in spot foreign exchange.
JPMorgan is Virtu’s prime broker and clearing partner in a variety of asset classes, and the bank was a lead underwriter in the trading firm’s initial public offering.
Virtu is also the designated market maker for JPMorgan’s stock on the New York Stock Exchange, tasked with making sure the stock trades smoothly. (Reporting by John McCrank; Editing by Jonathan Oatis)