Virtu’s Currency Profit Doubles in HFT Firm’s First Results

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Virtu Financial Inc. said its income from trading currencies has doubled as the Swiss National Bank shocked markets by abandoning its price cap on the franc. Some of the world’s biggest banks lost money from that event.

Profit from currency trading rose 103 percent to $42.2 million in the first quarter from a year earlier, the high-frequency trading firm said in its maiden results after becoming a public company last month. Its income from American stocks rose 15 percent to $29.1 million, while commodities increased 16 percent to $34.7 million.

Currency volatility spiked on Jan. 15 when the SNB removed its cap of 1.20 francs per euro, a level it had defended for three years. That decision provoked convulsions in European equity markets as investors sought to buy and sell positions in Swiss companies, Douglas Cifu, Virtu’s chief executive officer, said in a conference call.

“That’s a great thing for our business because we’re there to act as the agent of the risk transference of those positions,” Cifu said. “It’s going to be difficult to replicate that type of environment. Those types of exogenous events that can be very, very beneficial to our business.”

Virtu’s average daily net trading income rose 40 percent to $2.4 million in the three-month period. Total trading profit in the quarter climbed 40 percent to $148 million.

Banks have traditionally dominated foreign-exchange trading, yet major dealers, including Deutsche Bank AG and Barclays Plc, all suffered losses in the fallout from the SNB’s action.

“We were able to make markets through the volatile events without incident,” Cifu said.

Currency Earnings

The $5.3-trillion-a-day foreign-exchange market is becoming an increasingly important arena for the HFT firm. Earnings from currencies surged 66 percent between 2011 and 2013, while profit from equities grew just 6.4 percent, the company said in a filing in March last year.

The firm, which uses automated strategies to buy and sell everything from stocks to currencies and bonds, shelved its original plan to list a year ago after Michael Lewis’s “Flash Boys” prompted widespread public criticism of high-frequency traders. The book alleged that HFT firms, in alliance with Wall Street brokerages and exchanges, profit at the expense of slower-moving asset managers.

Virtu’s financial statements have provided a rare insight into how high-speed traders make their money. The firm completed 5.3 million trades a day last year. It makes markets in more than 11,000 securities and other financial products, trading on more than 225 exchanges in 34 countries.

The company’s former president, Chris Concannon, made the currency market a top priority when he joined Bats Global Markets Inc. late last year. The securities-market operator expanded into foreign exchange when it agreed to purchase the Hotspot FX platform in January.

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