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Dan Izzo, GHCO

GHCO set to challenge and disrupt ETF market making


Former UK and European proprietary trading business Goldenberg Hehmeyer is having a revitalising face lift under the care of new management team CEO, Dan Izzo (pictured) and Stefan Kaba-Ferreiro, head of trading. The pair are remodelling the entire firm and have created GHCO, a brand new challenger ETF market making business with heaps of ambition. 

Izzo explains that they have been remodelling the old firm since November 2019. “ETF market making was not a focus in any way for the original firm. They had been trading ETFs on a proprietary basis and had relationships with issuers and tried to do some market making and realised they were out of their depth. 

“For Stefan and myself, market making is very much in our depth, so our vision for the firm was to make the entire focus market making, primarily in ETFs, although we also work with derivatives of ETFs such as futures, foreign exchange and crypto currencies.” 

It’s been the area of expertise for both of them. “We see the market and have seen the market for a long time as a huge opportunity from a business standpoint but also a relevant sector for the future of finance as a whole,” Izzo says. 

“We share the opinion that ETF market making shouldn’t be dominated by a few firms. I love the ETF product as a whole because it’s the first time in financial history that the lay person has the ability to invest in asset classes with any efficiency at all. 

“The democratisation of the capital markets, and to the extent that it is part of what we do, is the gratification of my work. It’s the part that makes me feel good about going to work every day,” he says. 

Currently GHCO is registered as sponsored market makers for more than 2000 ETFs, from 20 issuers across six European exchanges (SIX, DB Xetra, Euronext, CBOE, LSE and Borsa Italiana). Market making off exchange is in the pipeline as well, but Izzo comments: “As an American, off exchange trading in Europe bothers me. About 95 per cent of volume goes over the counter and we represent less than 1 per cent of the traded volumes at the moment because the volume doesn’t trade on screen.” 

Izzo believes that the competition that they bring to the market can drive more volume to the exchanges. “It’s good for everybody and I am proud to be part of that,” he says. 

He says that the firm’s arrival has been supported by ETF issuers who are seeking better spreads on their underlying. “It has made the process easier that everyone is routing for us, other than our competitors, and in six to 12 months’ time, we hope to be a material portion of the trading volume,” he says. 

The firm has invested millions to build their technology platform designed to enable them to participate in those volumes and to scale up. Currently, they are only operating in Europe but they have a broker dealer application in with the US regulator and are planning an expansion in to the US in the coming quarter. 

Izzo observes that a number of US issuers are coming to the European market with their thematic products and the firm has been involved in creating a solution for issuers examining that most fashionable of assets, crypto. 

“We have captured that clientele recently because the US market is significantly more mature and a very competitive space,” Izzo says. “Even for issuers, the ability to aggregate assets is competitive. Europe is equally competitive but, as yet, not nearly as evolved as the US so there is a ton of opportunity for US issuers to get involved.” 

He observes that crypto can be boom or bust like any trendy product. “A lot of it is to do with timing but we are here to service the issuer so if they make a crypto product, we will price it for them – it’s difficult but not the most exotic thing from a pricing standpoint,” he says. “If an instrument is approved there is a way to do it.” 

The firm is not going after servicing high volume products. “We pride ourselves on being able to price anything that is very difficult to come up with a price,” he says, citing illiquid ETF strategies such as emerging market fixed income. 

“We see a lot of demand from issuers in other untapped markets to market make: South Africa, Latin America or Asian ETFs are a great instrument and product and they should expand around the world but the challenge is are there necessary institutions in the food chain to support the creation and redemption process? Is there an economical way to make that price meaningful on screen?” 

The ambition of this new arrival on the ETF market making scene is undeniable. “People will ask how we have the nerve to compete,” Izzo says. “We have made a significant investment in technology and have an incredible team of talented technologists and traders and specific vision and goal for the business. 

“We feel the issuers are rooting for us as they feel they are getting the opposite from their current service. There is no mystique in this business. Once you crack the math, the math is the same for other firms but transparency is what we offer. 

“A lot of that hedge fund super quant mystery is a bit unnecessary. When we interact with our clients, we tell them all the numbers and that transparency is about fair and accessible markets.” 

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