Sequoia Capital and Paradigm, an investment firm focused on the cryptocurrency ecosystem, have bought a $1.15 billion stake in electronic trading company Citadel Securities LLC.

The New York Times and Wall Street Journal reported the investment today. Citadel Securities LLC is now said to be valued at about $22 billion.

Chicago-based Citadel Securities provides electronic trading infrastructure used to process transactions involving equities, options, futures and other types of assets. The company processes about 27% of the shares that change hands in the U.S. stock market each day. 

Citadel Securities generated $6.7 billion in net trading revenue during 2020, the Wall Street Journal reported today, nearly double its previous sales record. The company’s 2021 revenue is said to have been even higher. 

The $1.15 billion investment from Sequoia Capital and Paradigm will enable Citadel Securities to further boost its growth. The company reportedly plans to use a part of the new funding to expand internationally. In the longer term, Citadel Securities is said to be considering an initial public offering.

The company reportedly has no plans to go public in the near future. Moreover, there is the possibility that it will eventually decide not to launch an IPO.

The investment in Citadel Securities is unusual for Sequoia, which is best known as a startup investor. However, the move aligns with the broader industry trend of venture capital firms investing in fast-growing financial services companies. The financial services sector drew more venture funding than any other industry in 2021, according to research published recently by Crunchbase.

Last year, Sequoia was among the contributors to a $600 million Series H funding round for Stripe Inc. that valued the payment processing giant at $95 billion. The venture capital firm has also backed many other financial technology, or fintech, companies. 

The move by cryptocurrency-focused investment firm Paradigm to buy a stake in Citadel Securities is also notable. Citadel Securities has reportedly not been active in the cryptocurrency market. The announcement of Paradigm’s investment in the electronic trading firm has led to speculation that Citadel Securities could adopt a different approach to digital assets going forward.

Sequoia, Citadel Securities’ other major investor, made cryptocurrency a bigger focus in 2021. Last October, Sequoia said it would become a registered investment adviser in a move designed to enable the firm, among other things, to “increase our investments in emerging asset classes such as cryptocurrencies.” 

Separately, Google LLC last year announced a $1 billion investment in CME Group Inc., the operator of several exchanges that are used to trade various types of financial instruments such as futures. In conjunction with the investment, Google said that CME Group will move its information technology systems to its cloud platform as part of a 10-year agreement.

Photo: Citadel Securities