One of the biggest growth stories in ETFs is a firm that has been a behind-the-scenes player in ETFs from the start, but that has only in the last year or so stepped into the view of the mainstream.
Jane Street is a relatively small firm but it's also a big deal. On any given day, it can trade more than $8 billion in equities and can execute more than 1 million trades. That's in one day.
But the real heart of the story these days is its ETF trading business, where Todd Hollander is a senior member of the ETF sales & trading team. Jane Street was founded in 1999, and from the start engaged in providing ETF liquidity and other arbitrage-related businesses. Hollander worked as one of its traders operating on the exchange floor, joining the firm in 2001.
But Hollander's involvement with ETFs actually began long before he came to Jane Street—he's been trading ETFs since 1993. "The first day that SPY traded in 1993 on the floor of the AMEX, I was there in the trading crowd," he noted.
Jane Street soon saw there was a particular demand for liquidity in the harder-to-trade ETFs. Today the firm has 60 traders at its three offices trading ETFs.
"Over time, as Jane Street realized this was a niche for us, we started to concentrate on it and build it out," Hollander said. Jane Street is a registered market maker for every one of the 1,600-plus U.S.-listed ETFs, and has additional offices in London and Hong Kong.
"We turned trading ETFs into a global business, which is something that we feel differentiates us in the sense that we offer ETF trading across the globe," Hollander added.
For roughly 15 years, Jane Street has traditionally offered liquidity on-exchange as well as provided block pricing to banks and brokers. In early 2014 it added a client-facing business that delivers liquidity directly to institutional clients, Hollander says.
"Up until last year, we never faced clients directly. It was always done through third parties, including banks and brokers. Clients can benefit from accessing our liquidity directly now, which is something that has changed our business dramatically," Hollander said.
Perhaps most importantly, Jane Street provides capital commitment for block trades from its own balance sheet. The firm's traders understand risk, Hollander notes. That's something that no doubt helps them do their jobs effectively.