[ by Howard Haykin ]

By the end of Tuesday, the company's Web site had been taken down.  The high-frequency trading firm founded less than 2 years ago by former Citigroup executives is ending operations as the industry confronts a slowdown.

Eladian Partners was launched in early 2011 by two pioneers in high-speed trading - Steve Swanson and Peter Kent. In that time, it had grown to over 50 employees, with offices in New York, London and South Carolina - each was focused on buying and selling stocks and ETFs.  A spokesperson for Eladian Partners confirmed the firm had shut down "due to market conditions." 

High-speed trading firms had come to dominate trading in American stocks since the turn of the century, with sophisticated computer programs enabling them to hop in and out of positions, profiting on small changes in prices.  They recently had been under scrutiny from regulators and politicians, as part of the growing general concern over perceived advantages that HFT traders hold over over traditional traders and investors.

Signs of Shrinking Business. Over the last 4 years, there have been growing signs that the business of high-speed trading (HFT), or electronic market-making, as it is sometimes called, is shrinking because of the steadily declining volume on the world's stock exchanges. At the same time, the HFT firms have been forced to keep up with quickly evolving technology - which can quickly burn cash reserves and eat away at the bottom line. 

Rosenblatt Securities, another brokerage firm, estimated that these types of firms would see their trading profits decline by 35% from one year earlier, and 74% from 3 years earlier, or 2009.  This would be based on trading in American stocks, that peaked in 2009.

Doug Cifu, president of Virtu Financial, another high-speed firm, said Tuesday that "Eladian's failure demonstrates how difficult it is for market-making firms to prosper in current market conditions."   However, neither of Eladian's founders were available for comment.

Pioneers. Mr. Swanson and Mr. Kent had helped build one of the 1st first major players in the high-speed industry - Automated Trading Desk. That business was sold to Citigroup in 2007 for $680 million, where it became a central part of that bank's trading operations.

Mr. Swanson and Mr. Kent stayed on at Citi for 3 years, until 2010, when they left to form Eladian.  On the Eladian Web site, the company posted the following statement:  "Trading in today's market requires exceptional talent and experience coupling superior technology with a unique and innovative approach to trading. Eladian Partners is a global multi-asset class trading firm built on cutting edge technology combined with sophisticated quantitative trading strategies."         [Dealbook, 10/16/12]