Amid increased regulatory scrutiny of electronic trading and
potential conflict of interests,
Bank of America Corporation
) has decided to close its electronic market making unit. The news
was first reported by Bloomberg.
The company had initiated the unit last year with an aim to serve
the retail client orders related to its Merrill Lynch business.
According to close sources, the electronic trading unit - a small
part of BofA's overall operations - was on an advanced trail phase.
In order to earn more profit, BofA was planning to match trades for
its customers internally rather than sending them to big electronic
market makers like
KCG Holdings, Inc.
), Citadel LCC and Virtu Financial, among others. Notably, BofA's
automated market making unit will continue to operate and serve
The tightening probes associated with high frequency trading were
one of the reasons for closure of the unit. Several law enforcement
agencies including the Securities and Exchange Commission, New York
Attorney General, Eric Schneiderman as well as Federal Bureau of
Investigation are investigating high frequency trades for possible
violations of the law.
Further following the release of the book, Flash Boys: A Wall
Street Revolt by Michael Lewis in April, the recent inspections
gained momentum. The book deals with the issue of prevalence of
high frequency trading and its impact on the overall financial
While BofA decided to close its electronic market making business,
) sold its market-making unit - G1 Execution Services LLC - to
Susquehanna International Group LLP for $75 million, last year.
The company, at present, is going through a bad phase. A number of
investigations connected to its business conduct, litigation
overburden and the historic accounting error that led to suspension
of its 2014 capital plan, have tagged BofA as 'too complex to
handle' . Hence, discontinuation of the electronic market making
business seems a correct step toward reviving its lost reputation.
Currently, BofA carries a Zacks Rank# 5 (Strong Sell). A
better-ranked major bank worth considering is
), with a Zacks Rank #3(Hold).
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