Ex-Citadel Market-Makers Found Trading Firm

Jun 9 2010 | 10:35am ET

A trio of former Citadel Investment Group veterans has founded a quantitative-trading business.

The three—Matthew Andresen, Jason Lehman and Neil Fitzpatrick—all worked Citadel Execution Services, the Chicago-based hedge fund giant’s profitable market-making business. Now, they’ll put their expertise in stock and options trading to work at Headlands Technologies.

It is unclear when Headlands will begin trading. The firm currently employs 10 people, according to The Wall Street Journal, and plans to pursue exchange memberships and a broker-dealer license.

Andresen and Lehman serve as co-CEOs of the new firm, named for the Marin Headlands across the Golden Gate Bridge from San Francisco. Andresen and Fitzpatrick will work out of Chicago, while Lehman is based in the city by the bay.

It is the second time in a year that a team of former Citadel employees have set up a technology-heavy trading operation, but this one will not attract the acrimony that has troubled the last one. Last year, three former executives at the hedge fund’s high-frequency trading group, including its head, Mikhail Mayshev, founded Teza Technologies. Citadel quickly sued, alleging that the firm, which briefly employed a programmer accused of stealing proprietary software from Goldman Sachs, was a violation of its former employees’ non-compete agreement. Citadel also expressed concerns that Teza might have stolen its own proprietary software.

For one, Andresen, Lehman and Fitzpatrick have all been on the sidelines for more than a year, waiting for their non-competes to expire. Andresen, who served as co-head of Citadel Execution and led its equities market-making group, said, “I needed to recharge my batteries,” while Fitzpatrick, who headed global equities trading and options order routing, had nothing but kind words for his former employer.

“My time at Citadel was positive from beginning to end,” he told the Journal.

But unlike in many cases of hedge fund veterans starting their own firm, Citadel is not investing with Headlands. The firm did, however, raise outside money to get started.

Andresen said the Headlands team was still figuring out its investment strategy, but that it might include equities, options and futures, as well as geographic diversity.

Andresen spent five years at Citadel, joining from Island ECN, the largest electronic stock market in the U.S., where he orchestrated the merger of Island and Instinet to create ECN. Fitzpatrick also worked at Citadel for five years, while Lehman, who ran Citadel Executions’ global options unit, spent some 13 years at the firm, joining it straight out of college.

But it all may not have come to pass: Andresen told the Journal he almost ran for governor of Illinois last year, and promises that he will run for political office as soon as five years from now. Andresen and his wife have given thousands of dollars to a Republican political action committee, although they also donated to the presidential campaign of their former hometown senator, Barack Obama.


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