High-frequency trader halts $3bn float as FBI probes ‘flash boys’
Virtu Financial delays share sale as spotlight falls on controversial practice
Saturday 19 April 2014
One of the world’s biggest high-frequency traders has shelved plans for a $3bn (£1.8bn) float amid an FBI probe and a furore whipped up by bestselling financial author Michael Lewis’s exposé of the controversial practice.
Virtu Financial had planned to raise about $200m by listing shares in New York, valuing it at around $3bn. But the planned offering, due next week, has now been postponed following a welter of unfavourable publicity.
Mr Lewis’s Flash Boys: A Wall Street Revolt paints a damning picture of high-frequency trading. The book sold 130,000 copies in its first week in the US this month.
The reaction to Flash Boys and various investigations into high-frequency trading in the US by the FBI and New York attorney general, Eric Schneiderman, coincided with Virtu’s planned float. It had planned to market the float earlier this month but this is now reported to have been delayed indefinitely; Virtu was unavailable for comment. It is understood that the trader has not withdrawn the paperwork for the float, so it could be restarted when market conditions are more favourable.
Mr Schneiderman has subpoenaed six high-frequency trading firms including Chopper Trading and Tower Research Capital, and sent a letter to Virtu requesting information.
Concerns have been raised over HFT – when dealers trade in extremely high volumes and buy and sell shares in a millisecond using complex algorithms to profit from minute price discrepancies across markets. Mr Lewis, and opponents of the practice, claim the stock market has been “rigged” by tech-savvy insiders using supercomputers and high-speed networks, which allow them to buy stocks milliseconds in advance of investors who had made the original order, pushing up the price.
But supporters of high-speed dealing defend it as a way to introduce more liquidity into a stock market. Madison Avenue-based Virtu said it has “humble beginnings” in the New York Mercantile Exchange, where its founder Vincent “Vinnie” Viola began his career. Mr Viola was chairman of the Nymex between 2001 and 2004; he set up Virtu in 2008.
Virtu’s move comes after the European Union set out plans for stricter regulation of high-frequency trading earlier this week. Financial services commissioner Michel Barnier said the practice had benefits but “we need to make sure that it doesn’t cause instability”.
The new EU rules will force traders to have their algorithms tested and be subject to regulation, and the minimum increments in prices at which shares trade from becoming too small to prevent a race to the bottom, where trading platforms offer the smallest tick sizes to attract high-speed traders. Marketmakers who quote buy and sell prices for shares will also be obliged to remain in the market for a minimum period to ensure liquidity and prevent volatility.
However, proposals for a “minimum resting period” originally demanded by the EU – which would have required a share order to stay on an order book for 500 milliseconds and effectively kill off HFT – were dropped last year.
- 1 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 2 Google April Fools': company unveils backwards search engine and huggable digital assistant
- 3 I might be an MP, but that doesn't stop me fighting sexism with my breasts
- 4 April Fools' Day 2015: The best hoax news stories from around the internet
- 5 Gamers confess the worst things they've done in The Sims
Holborn fire: Chaos as 2,000 people evacuated to escape toxic smoke filling central London
University of Cambridge: Remains of 1,300 scholars are found under building
April Fools' Day 2015: The best hoax news stories from around the internet
April Fools' Day 2015 live: The best pranks and fake stories from around the world
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
Revealed: Putin's army of pro-Kremlin bloggers
Katie Hopkins reported to the police for race hatred by Labour MP Simon Danczuk after tweet about Pakistani men
iJobs Money & Business
£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...
£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...