Ken Griffin’s market-making powerhouse is challenging Wall Street banks on their own turf as it enters the multi-trillion-dollar world of corporate debt.

Citadel Securities LLC started offering investment-grade trading to clients this month with plans to make markets in high-yield bonds by the end of the year, according to executives.

Already responsible for more than a third of all US retail stock trades in the era of online apps like Robinhood, the firm is ramping up its presence across fixed income, beyond interest-rate swaps and Treasuries. It also plans to offer portfolio trades — a novel tech-powered approach to buy and sell hundreds of debt securities in one fell swoop — as the ETF boom helps shake up the once-sleepy world of bond market-making.

After routing recent orders via MarketAxess Holdings Inc., Citadel Securities plans to go live on other platforms including TradeWeb Markets LLC and Bloomberg as soon as possible. Its investment-grade offering has been rolled out to 100 clients in the last two weeks.

“It’s a natural area for us to be involved in and the barriers to entry weren’t that high given our existing franchise,” said Jordan Cila, the firm’s global head of fixed-income distribution.

The market-making firm run by Chief Executive Officer Peng Zhao matches buyers and sellers in roughly one out of every five US stock trades and generated about $7.5 billion in revenue last year, using algorithms to capture and profit from tiny differences in prices.

But while electronic trading has long transformed the equity landscape, corporate bond investors have historically transacted over the phone and retail access has lagged equities.

Things are changing. The rise of sophisticated algorithms and exchange-traded funds are helping to boost liquidity across debt markets, providing some relief to investors weathering aggressive Federal Reserve tightening.

Now around 40% of investment-grade bond trading is done electronically compared to only 8% in 2013, according to consultancy Coalition Greenwich. About 31% of high-yield bonds traded this way in 2022, from just 2% in 2013.

Jane Street, a quantitative trading firm that competes with Citadel in other asset classes, is already trading corporate bonds. Bloomberg LP, the parent company of Bloomberg News, competes with electronic platforms to offer fixed-income trading, data and information to the financial services industry.

The trading houses are encroaching on the turf of Wall Street dealers that still dominate trading with their originate-to-distribute model. Yet the opportunities to transact across the credit market are vast and Citadel’s ability to ride tech-fueled trends has made it one of the biggest power brokers on Wall Street.

The firm says it now provides clients liquidity in 10,000 investment-grade securities. It expects to quote high-yield debt and to enter the portfolio trading space — where dealers package up a series of bonds often via an ETF — later this year.

“For a liquidity provider who has a history of disrupting and improving markets that they have entered, this should be a net positive in the long run,” said Kevin McPartland, head of market structure and technology research at Coalition.

With electronic trading helping to curb transaction costs and boost market efficiency, Citadel is betting its market-making capabilities will be met with demand from fixed-income clients.

“Firms that invest in credit are now relying on best price rather than who issues them new-issue bonds,” said Bob Cariste, head of fixed income ETF and credit trading. “As credit becomes more electronic, there is an opportunity for us to be a provider of liquidity.”

--With assistance from Olivia Raimonde.