Virtu Said to Delay IPO Amid Furor Spurred by Michael Lewis BookLeslie Picker and Sam Mamudi
Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares, will start marketing the offering weeks later than bankers anticipated, two people with knowledge of the matter said.
Virtu won’t start marketing the initial public offering until after April 20, a process its bankers had expected to begin this week, according to the people, who asked not to be named because the decision is private.
The delay comes amid unprecedented scrutiny of high-frequency traders. “Flash Boys,” the Michael Lewis book released March 31, says high-speed traders, Wall Street brokerages and exchanges have rigged the $23 trillion U.S. stock market. New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.
Chris Concannon, the president of New York-based Virtu, declined to comment on the IPO. The trading firm provides quotes in more than 10,000 securities and contracts on more than 210 venues in 30 countries, according to its IPO filing. It earned money from trading on every day but one in the last five years, according to the document.
In its IPO filing released in March, Virtu said U.S. derivatives regulators are looking into its trading practices.
The U.S. Commodity Futures Trading Commission has asked about Virtu’s “participation in certain incentive programs offered by exchanges or venues” from July 2011 to November 2013, Virtu said in its IPO document. Virtu said it doesn’t believe it broke the law, “but we cannot predict the outcome of the inquiry.”
The trading firm’s total revenue last year was $664.5 million, according to the filing, an 8 percent rise over the previous year. Net income was $182.2 million, more than double 2012’s earnings, when it recorded a charge for an acquisition.
KCG Holdings Inc., the company formed by the merger of Knight Capital Group and Getco LLC, earned about $120 million on revenue of about $1 billion in 2013, according to a Jan. 31 press release. The stock is down 3.5 percent in 2014, including a decline of 3.3 percent to $11.54 yesterday.
Virtu has thrived as two decades of market reform and computer advances helped automated traders largely supplant humans on the floors of exchanges around the world. The company’s main business is market making, using software to provide standing offers to buy and sell stocks and other securities.
The company started in 2008 by trading U.S. stocks and has since expanded worldwide and into assets including government bonds, currencies and futures. It only had one losing trading day since the start of 2008, the filing said.
Electronic market-making firms such as Virtu use automated systems to earn money off the prices that buyers are willing to pay and sellers are willing to offer. They depend on scale to make money given the compression between bids and offers during the past decade.