Virtu Financial

Virtu Financial, Inc.
Company typePublic
IndustryFinancial services
Founded2008; 16 years ago (2008)
FounderVincent Viola
HeadquartersNew York City, U.S.
Key people
ProductsHigh-frequency trading,[1][2] market making
RevenueDecrease US$2.29 billion (2023)
Decrease US$325 million (2023)
Decrease US$142 million (2023)
Total assetsIncrease US$14.5 billion (2023)
Total equityDecrease US$1.20 billion (2023)
Number of employees
975 (2024)
Subsidiaries
Websitewww.virtu.com
Footnotes / references
[3]

Virtu Financial is an American company that provides financial services, trading products and market making services. Virtu provides product suite including offerings in execution, liquidity sourcing, analytics, broker-neutral, multi-dealer platforms in workflow technology and two-sided quotations and trades in equities, commodities, currencies, options, fixed income, and other securities on over 230 exchanges, markets, and dark pools.[4] Virtu uses proprietary technology to trade large volumes of securities. The company went public on the Nasdaq in 2015.

Organization

Based in New York City, Virtu was founded by Vincent Viola, a former chairman of the New York Mercantile Exchange and current owner of the Florida Panthers.[5] Douglas Cifu, Virtu's CEO since October 2013, co-founded Virtu with Viola in 2008. Cifu is also a co-owner of the Florida Panthers with Viola and serves as the Panthers’ alternate governor. Prior to co-founding Virtu, Cifu was a partner at the international law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP, where he practiced corporate law from 1990 to 2008.

The company suggested standards for electronic firms that call themselves market maker. Virtu believes market makers should be obligated to quote at or near the inside of the national best bid and offer throughout the day and quote at various price points in a number of different securities.[6][7] Virtu was ranked as one of the five largest high-frequency traders of equities in Europe in 2011.[8]

In November 2014, Reuters reported that Chris Concannon, president and chief operating officer at Virtu Financial, will succeed William O'Brien as president of BATS Global Markets, a trading venue that was founded by high-frequency traders.[9]

Virtu has offices in New York City (headquarters), Austin, Los Angeles, Boston, Chicago, London, Sydney, Dublin, Hong Kong, and Singapore.[10] It expanded its European headquarters to Dublin in September, 2013.[11] Virtu Financial Ireland Limited is regulated by the Central Bank of Ireland.

Company history: mergers and acquisitions, partnerships, and other company moves

In May 2011, Virtu merged with proprietary trading firm Madison Tyler, based in Santa Monica, California[12][13] with the backing of Silver Lake Partners, a technology-focused private equity firm.[14] Vincent Viola co-founded Madison Tyler with David Salomon, a former arbitrage trader at Goldman Sachs.

Virtu acquired a market-making unit that handles NYSE Amex stocks from Cohen Capital Group LLC in December 2011. The purchase made Virtu the largest overseer of trading in shares listed on Amex, known as the American Stock Exchange, before NYSE Euronext bought it for $260 million in 2008. The deal gave Virtu a designated market-maker license for New York Stock Exchange companies. With the acquisition, some of the companies Virtu was able to trade and support included New Gold Inc., Northern Oil & Gas Inc., and the American depositary receipts of British American Tobacco Plc.[15]

In September 2012, Virtu acquired the exchange-traded fund (ETF) market maker assets of Nyenburgh Holding B.V., a high-frequency trader in European ETFs.[10]

In April 2017, Virtu agreed to pay US$1.4 billion in cash to purchase rival market-making firm KCG Holdings.[16] This acquisition was completed on July 20, 2017.[17]

In November 2018, Virtu announced an approximately US$1 billion deal to acquire agency brokerage and financial markets technology firm Investment Technology Group.[18] This acquisition was completed on March 1, 2019.[19]

In November 2021, Virtu launched a new electronic swaptions workflow on its RFQ hub.[5]

In May 2022, Virtu ITG Europe joined the SIX Swiss Exchange.[4]

IPO

Virtu Financial initially planned to go public in the first week of April 2014, then postponed its initial public offering by at least a week. At the time, prospective investors advised to wait and "let the storm pass", a reference to recent scrutiny concerning HFT practices. Later in April 2014, the company decided to ultimately postpone the IPO without specifying a new date.[20] In its IPO plans, Virtu sought a valuation of about $3 billion. The IPO had been reported to make Vincent Viola the first high-frequency trading billionaire.[21] While Virtu declined to comment, Reuters reported in November 2014 that sources say Virtu Financial hopes to go public in the spring of 2015.[22] On April 15, 2015 Virtu Financial successfully priced its IPO[23] which began trading on NASDAQ on April 16, 2015.

On November 12, 2015, Virtu Financial Inc priced a secondary public offering of its Class A common stock by Virtu and certain selling stockholders affiliated with Silver Lake Partners.

Trading activity

Virtu operates on more than 235 exchanges, markets and dark pools in 36 countries.[24] Some of these exchanges include NYSE Euronext, NASDAQ and the Chicago Mercantile Exchange. The company is a designated market maker on the NYSE and NYSE Amex. Virtu makes markets by providing passive quotations to buyers and sellers in more than 12,000 securities and other financial instruments.[24]

On August 28, 2014, Virtu Financial, along with London-based GSA Capital, executed the first trades on ParFX Prime, a foreign exchange trading platform. Unlike most exchanges and trading venues, ParFX's matching engine does not adhere to the principle of price-time priority. Instead, ParFX subjects all orders to random pauses of about 20 to 80 milliseconds, trying to provide a more level playing field.[25]

When filing for its IPO in March 2014, it was disclosed that during five years Virtu Financial made a profit 1,277 out of 1,278 days, losing money just one day.[26]

Gregory Laughlin, astrophysicist and department chairman at the University of California, Santa Cruz, researched Virtu's trading activity.[27] In the debate about its near-perfect trading record,[26] Virtu said that it wins 51 percent or 52 percent of its trades, leading most people to figure the remainder are losses.[27] In his research, Laughlin showed that "the number of its trades that break even are about the same as its losses", indicating Virtu assumes little market risk.[27]

Investigations

In April 2014, New York Attorney General Eric Schneiderman sent Virtu a letter seeking information on its HFT practices, asking about special arrangements with dark pools and exchanges, the company's trading strategies and whether Virtu practices latency arbitrage, a high-frequency activity.[28]

In July 2014, the Securities and Exchange Commission (SEC) sought information on ten HFT firms with broker-dealer licenses, including Virtu Financial, as part of an ongoing investigation into predatory trading strategies.[29] The SEC's probe focuses on abuse of order types and abusive trading like layering or spoofing, a tactic intended to trick investors into buying or selling a stock at unfavorable prices.[29] A settlement was announced in 2017.[30]

John McCrank of Reuters noted that scrutiny around high-frequency trading intensified after the release of Michael Lewis's best-selling book Flash Boys: A Wall Street Revolt in March 2014.[29]

References

  1. ^ Underhill, Justine (April 16, 2015). "Virtu's IPO: First high-frequency trading firm to go public". Yahoo Finance.
  2. ^ de la Merced, Michael J. (April 6, 2015). "Virtu, a High-Frequency Trader, Resumes Its I.P.O." New York Times.
  3. ^ "Virtu Financial, Inc. 2023 Annual Report (Form 10-K)". U.S. Securities and Exchange Commission. February 16, 2024.
  4. ^ a b "Company Overview of Virtu Financial, Inc". investing.businessweek.com. Business Week. Archived from the original on July 6, 2014. Retrieved 1 July 2014.
  5. ^ a b Man Vs. Machine: Seven Major Players in High-Frequency Trading. CNBC, September 13, 2010
  6. ^ McCrank, John (4 June 2014). "Virtu CEO urges strict standards for electronic firms that are market makers". Reuters. Retrieved 1 July 2014.
  7. ^ "Proposed National Market System Plan To Implement a Tick Size Pilot Program on a One-Year Pilot Basis" (PDF). Retrieved 2023-12-23.
  8. ^ Europe's top 10 high-frequency kingmakers. Dow Jones Financial News, October 3, 2011
  9. ^ McCrank, John (November 4, 2014). "BATS appoints Chris Concannon as its new president". Reuters. Retrieved November 28, 2014.
  10. ^ a b "Virtu Financial Acquires Amsterdam ETF Market Maker, Nyenburgh Holding B.V." PR Newswire. 14 September 2012. Retrieved 1 July 2014.
  11. ^ "Virtu Financial, LLC press release". IDA Ireland, Virtu Financial. 19 September 2013. Retrieved 1 July 2014.
  12. ^ Two large US proprietary trading firms to merge. Financial Times, May 28, 2011
  13. ^ Alliance Healthcare, Virtu Financial Offer New Deals. Wall Street Journal, June 11, 2011
  14. ^ Silver Lake Backs Virtu/Madison Tyler Merger. Mergers and Acquisitions, June 1, 2011
  15. ^ Mehta, Nina (13 December 2011). "High-Frequency Firm Virtu Buys Cohen Capital's Amex Unit". Business Week. Archived from the original on December 15, 2011. Retrieved 1 July 2014.
  16. ^ "Virtu Financial, Inc. Agrees to Acquire KCG Holdings, Inc. to Create a Premier Market Maker and Agency Execution Firm" (PDF).
  17. ^ "Virtu Financial, Inc. Completes Acquisition of KCG Holdings, Inc". ir.virtu.com. Retrieved 2018-03-19.
  18. ^ Agini, Samuel. "Virtu Financial Moves Further Into Trading for Institutional Investors With $1 Billion Deal for ITG". www.fnlondon.com.
  19. ^ "Virtu Financial, Inc. Completes Acquisition of ITG to Create Premier Agency and Broker Neutral Franchise". ir.virtu.com. Retrieved 2019-03-16.
  20. ^ Alden, William (April 17, 2014). "Virtu Financial Said to Shelve I.P.O. Plans". DealBook, published by The New York Times. Retrieved October 30, 2014.
  21. ^ Hope, Bradley; Demos, Telis (March 11, 2014). "Virtu IPO Poised to Make a (Multi-) Billionaire of Vinnie Viola". MoneyBeat, published by The Wall Street Journal. Retrieved November 13, 2014.
  22. ^ "Virtu aiming for spring 2015 IPO, say sources". Reuters Pe Hub. 14 November 2014.
  23. ^ "Virtu Financial Announces Pricing of Initial Public Offering (NASDAQ:VIRT)". Archived from the original on 2015-04-19. Retrieved 2015-04-21.
  24. ^ a b "Virtu Financial, Inc. S-1". www.sec.gov. SEC.
  25. ^ "Leading buy-side firms complete first trades on ParFX as Prime Service Goes Live" (PDF). www.parfx.com. ParFX.
  26. ^ a b Mamudi, Sam (4 June 2014). "Virtu Touting Near-Perfect Record of Profits Backfired, CEO Says". Bloomberg. Retrieved 1 July 2014.
  27. ^ a b c Lash, Herbert (13 November 2014). "Astrophysicist sheds light on Virtu's high win–loss trading ratio". Reuters.
  28. ^ Celarier, Michelle (April 18, 2014). "Schneiderman to probe Virtu's HFT practices". New York Post. Retrieved November 1, 2014.
  29. ^ a b c McCrank, John (July 17, 2014). "Exclusive: SEC targets 10 firms in high frequency trading probe - SEC document". Reuters. Retrieved November 13, 2014.
  30. ^ McGrath Goodman, Leah (January 5, 2017). "Wall Street firm founded by Trump's Army secretary nominee violated trading rules for years". Newsweek.
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