HSBC Eyes Outsourcing Some Trading Operations

HSBC is considering outsourcing part of its sprawling trading business as executives struggle to justify making technology investments needed to keep up with larger rivals. Europe’s largest lender is said to have held preliminary discussions about directing parts of its fixed income trading order flow to an outside market maker, a move that would allow HSBC to save millions of dollars in IT costs associated with running trading desks around the globe. HSBC is said to be open to a deal with firms including Citadel Securities and Jane Street Group.

The bank’s willingness to consider such a deal shows that even systemically important banks with huge Wall Street operations—the lender operates one of the world’s largest debt capital markets teams—are struggling to make the necessary technology investments to properly compete in trading. Citadel Securities, the market maker founded by billionaire Ken Griffin, has been developing the idea for such a trading service, Bloomberg first reported in July. Under those nascent plans, the market maker would manage the guts of the trading desks—including technology, analytics and order execution—while banks would continue dealing with the customers.