Citadel Securities, a top trading firm, sells a stake to Silicon Valley investors.

view original post

Citadel Securities, the powerful trading firm that serves brokerage firms like Robinhood, said on Tuesday that it had sold a stake to the venture capital firms Sequoia Capital and Paradigm for $1.15 billion, uniting an established financial giant with two top Silicon Valley investors.

The deal, which values Citadel Securities at about $22 billion, is the first outside investment in the firm, which was founded two decades ago by the billionaire Kenneth C. Griffin, who runs the multibillion-dollar hedge fund Citadel.

It’s a bet on disrupting Wall Street. Citadel Securities has become a trading giant, dominating market making for stocks and options. Its institutional business now has more than 1,600 clients, while it also works with consumer-facing brokerage firms like Robinhood.

“Citadel Securities has carved out a unique place in the financial markets through its ability to absorb and price risk using techniques and capabilities from far outside the traditional world of Wall Street,” Alfred Lin, a Sequoia partner who will take a seat on Citadel Securities’ board, said in a statement.

Sequoia is one of Silicon Valley’s top venture firms, having backed the likes of Apple, DoorDash and WhatsApp. Paradigm was founded by Fred Ehrsam, a co-founder of the cryptocurrency exchange Coinbase, and Matt Huang, who led crypto investments at Sequoia.

Citadel Securities has been criticized for its relationship with Robinhood, where it pays the firm for the right to process users’ trades, which some say could create conflicts of interest. Sequoia is also an investor in Robinhood.

Mr. Huang of Paradigm said that Citadel Securities would move into more markets and asset classes, “including crypto.” Mr. Griffin has mixed feelings about crypto, so this is a noteworthy aside.

Mr. Griffin, whose net worth was most recently estimated at $21 billion, is believed to own about 85 percent of the securities unit, according to Bloomberg. If that’s the case, his stake in Citadel Securities alone would be valued at some $18 billion.