Hudson River Trading to buy rival HFT firm Sun Trading: Reuters

Hudson River Trading LLC has agreed to buy Sun Trading parent Sun Holdings LLC, it said on Tuesday, the latest takeover in a shrinking high frequency trading industry beset by low market volatility and rising costs.

The deal between the two closely held firms is expected to close in the first quarter, subject to regulatory approval. The terms were withheld.

“This acquisition combines HRT’s expertise in on-exchange trading with Sun’s expertise in off-exchange trading creating a stronger, more diverse firm,” HRT co-founder and director, Jason Carroll, said in a statement.

High frequency trading firms use automated trading algorithms to trade stocks and other assets at near-light speed and are responsible for around half of the volume in U.S. equities and Treasuries, and nearly that in spot foreign exchange.

A dearth of volatility in recent years has made it harder to profit from rapid fire trades, especially as fixed costs, such as exchange fees, market data subscriptions, and regulatory fees and fines, have been rising. This has resulted in mergers to gain scale and spread out costs.

Recent deals include DRW Holdings’ purchase of RGM Advisors, Virtu Financial Inc’s (VIRT.O) $1.4 billion acquisition of KCG Holdings, and DRW’s takeover of Chopper Trading.

New York City-based HRT trades equities, futures, options, currencies and fixed income on over 100 markets worldwide, while Chicago-based Sun Trading makes markets in multiple asset classes on over 115 exchanges and other trading venues.