A Bay Street sign in Toronto’s financial district is seen in this file photo.MARK BLINCH/Reuters
An old-school Toronto trading firm is getting a new-school owner.
This week, the Investment Industry Regulatory Organization of Canada approved a change in control of Independent Trading Group (ITG) Inc. to a numbered company owned by Dino Verbrugge, 42, and Jared Vegosen, 35. The pair also run DV Trading LLC, a proprietary trading shop based in Chicago that uses its own money and cutting-edge technology to trade derivatives and other asset classes around the world.
Not to be confused with U.S. financial tech provider and broker Investment Technology Group (ITG) Inc., Independent Trading Group was founded in 1992 by several traders who worked on the now-shuttered trading floor of the Toronto Stock Exchange. DV Trading is much younger – it was established earlier this year – and the company says its trading style relies a lot more on automation to execute certain strategies at faster speeds.
In acquiring ITG, Mr. Vegosen and Mr. Verbrugge are also partnering with Thomas Kalafatis, who had been the head of execution and prime services at CIBC World Markets until he left the bank in June.
Mr. Kalafatis, 40, is best known on Bay Street for being one of the architects behind a strategy that saw CIBC embrace nascent high-speed trading firms that were emerging in the United States at a time when other Canadian banks were dismissing their potential. The fresh outlook propelled CIBC's equity trading business from fifth in market share to first over several years.
Asked why he decided to venture out, Mr. Kalafatis said the timing was right: Mr. Vegosen and Mr. Verbrugge had expressed an interest in partnering with him and the three of them seized the opportunity to acquire a platform like ITG. "There are only so many independents. It's not every day you get to buy one," he said Friday in an interview. "There are moments in your career when you have to take a risk."
Before joining CIBC in 2008, Mr. Kalafatis spent six years as a vice-president at the operator of the Toronto Stock Exchange where he led a reform of the exchange's market-making system.
This experience will come in handy.
ITG is one of 17 market makers that service the stocks of companies listed on the TSX, according to its operator, TMX Group Ltd. The job of a market maker is to provide liquidity for both buyers and sellers within a range of prices. As an incentive to provide such a service, market makers receive preferential trading fees, among other benefits.
Today, ITG has 15 pro traders and 130 market-making assignments serving more than 90 issuers, including Rogers Communications Inc., Suncor Energy Inc. and Bank of Nova Scotia, Mr. Kalafatis said. Like DV Trading, ITG is also a proprietary trading shop that puts its own capital to work.
The vision, Mr. Kalafatis said, is to build on ITG's roots by incorporating more automation into the market-making process, with a plan to integrate new superfast technology some time down the road.
At ITG, Dave Houlding will continue to be president and Rob Russell will keep his post as chief compliance officer. The pair have been traders for decades, which has given them front-row seats for a transformation that has seen fast, nimble and automated participants disrupt the old ways of trading and quickly gain an edge.
Mr. Vegosen, Mr. Verbrugge and Mr. Kalafatis are hanging out their shingle at a time when many Canadian dealers have gone out of business and a lot of the remaining ones are struggling to cope with sizable regulatory and technology costs.
"We're buyers when others are sellers," Mr. Kalafatis said. "The time to buy into an industry is when the prevailing view is negative, not when it's positive. There is money to be made."