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Wall Street's most sophisticated, high-speed traders are growing hot on fintech investing. Execs from 5 firms explain how they find their best investments.

Business Insider | Jul 8, 2019, 07.48PM IST

Kim Trautmann, DRW

DRW

Kim Trautmann, head of DRW Venture Capital

  • Electronic trading firms, known for their ability to quickly move between positions, have shown an increasing interest towards fintech investing.
  • Some firms have gone as far as setting up completely separate funds to make deals.
  • Business Insider spoke to executives from five electronic trading firms about their strategies towards fintech investing.
  • Click here for more BI Prime stories.

They made a name for themselves early on for their ability to move in and out of positions in fractions of a second. However, Wall Street's most sophisticated traders have taken a much longer view on some of their investments in recent years.

Electronic trading firms that have grown in prominence over the past few decades with the electronification of the financial markets have set their sights on a new target: Fintech investing.

Venture capital firms have long viewed fintechs as great investment opportunity. VCs poured $11 billion into fintechs in 2018, the most in eight years.

Read more: Citadel Securities and Jump Capital just backed an exchange looking to open the futures market up to Main Street

However, electronic trading firms bring a unique skill set to investing that venture capitalists can't compete with. As some of the most active traders on Wall Street, market makers can prove to be a powerful strategic partner for young companies looking to make their mark.

The motivation behind the high-speed firms making investments varies. Some view it as an opportunity to get in on the ground floor of growing trends, such as cryptocurrency or blockchain technology. Others want a seat at the table of companies they feel could play a critical role in the markets they operate in.

For some, it's as simple as an alternative way to invest money earned from the core business. The investing arms can, in some ways, serve as a quasi family office for the founders of the successful trading firms.

Business Insider spoke to five trading firms to get a sense of how they approach fintech investment.

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