• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

The Holy Grail Of Trading Has Been Found: HFT Firm Reveals 1 Losing Trading Day In 1238 Days Of Trading

Tyler Durden's picture


Think JPM's zero trading day losses in 2013 was impressive? Prepare to have your mind blown. The chart below shows the chart of daily net trading income by High Frequency Trading titan Virtu, taken from its just filed IPO prospectus. The punchline: in 4 years of trading Virtu has had one, one, day in which it lost money.

From the S-1: "The chart below illustrates our daily Adjusted Net Trading Income from January 1, 2009 through December 31, 2013. As a result of our real-time risk management strategy and technology, we had only one losing trading day during the period depicted, a total of 1,238 trading days. "

Let that sink in: one trading loss day and 1237 days of profits. And that, ladies and gentlemen, is the Holy Grail of the New Normal broken, manipulated markets.

How is this statistical anomaly possible? For those who have been following our narrative on the market-manipulating, endless crime that is HFT will know all too well. When you have a "strategy" whose only mission is to frontrun order flow, and scalp pennies from every market order - that would be billions of market orders in a period of four years - there is no risk, as confirmed by the chart above. Furthermore, since all HFT really does is accentuate momentum but making the bid chase NBBO ever higher, in a market that is manipulated top down by the Fed itself, all HFTs really do is simply enable the Fed's policy at the micro level, and thus such crimes are not only ignored, but welcomed by the New Normal overlords.

It also explains why fundamentals haven't mattered in years - the only thing that does matter is to quickly open one's own HFT stop, frontrun as much order flow as possible, and scalp pennies ahead of the bid and ask... billions and billions of times, leading to the statistically improbable chart pictured above.

This, ladies and gentlemen, is why retail has given up - when companies want to go public and no longer even hide the "secret sauce" which confirms beyond a reasonable doubt that there is a two-tier market: one in which the HFTs just never lose, and one for everyone else, well: who would want to play in a casino so explicitly rigged?

And while there are countless losers, there are also few winners: such as the billionaire founder of Virtu Vincent Viola, who was recently selling his NYC mansion for $114 million, who just made $270 million in 2013 adjusted EBITDA courtesy of the Virtu "can't lose" money machine.

* * *

There is one last thing to note - in 2013 Virtu made the least amount of trading days in its most successful bucket over the past 4 years, the $1.3-$1.5 million daily net income range, when "only" 57 days made that amount of money, compared to 85 in 2012 and 168 in 2009-2011. What stands out is that Virtu is increasingly making more money in the higher net income buckets. HFT by definition makes the most money on the low end of the distribution - the fact that it made increasingly more profits in the higher bucket indicates that the traditional strategy is no longer working, and instead Virtu has been making greater profits not thanks to its organic business model but because it has been taking market share away from other, less profitable firms. This works in the short-term but always fails over the longer run, especially if market volumes continue to collapse as they have for the past five years.

This also explains why the gigaHFT firm has finally stepped out of the shadows and its founder and equity owners are finally willing to cash out - the music is slowly ending. Even for those who have discovered the Holy Grail of the New Normal market.

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Mon, 03/10/2014 - 18:07 | 4532292 Charles Nelson ...
Charles Nelson Reilly's picture

Gartman could keep up with it


Mon, 03/10/2014 - 18:11 | 4532308 BaBaBouy
BaBaBouy's picture

AND It's FUCKING LEGAL !!!!!!!!!!!!!!!!!!!!!!!!!!!! ?

Mon, 03/10/2014 - 18:27 | 4532384 DaddyO
DaddyO's picture

Ding, Ding Ding, we have a winner!!!


Mon, 03/10/2014 - 18:29 | 4532389 fonestar
fonestar's picture

Money for nothin' and your bits for free...

Mon, 03/10/2014 - 18:42 | 4532443 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Are sure you did not mean bitscoin?

Mon, 03/10/2014 - 18:48 | 4532455 johngaltfla
johngaltfla's picture

The real identity of the HFT firm has been revealed with the following symbol:


Mon, 03/10/2014 - 19:03 | 4532463 Soul Glow
Soul Glow's picture

FED played by HAL

Open the pod bay door, HAL!

- Obama

Mon, 03/10/2014 - 19:21 | 4532555 SafelyGraze
SafelyGraze's picture

I think I speak for all market participants when I say that I want all my trading to be conducted in a market where a proven winner like Virtu is operating

a market filled with hft's like that can only be a good thing for the human participants


Mon, 03/10/2014 - 19:32 | 4532584 johnQpublic
johnQpublic's picture

this is an ipo i will buy....like their business model


do i really need the tag?

Mon, 03/10/2014 - 19:47 | 4532628 National Blessing
National Blessing's picture

What we really need is negative interest rates.  Then the DOW would surpass 30,000.  Yipeee.  Bitches.

Mon, 03/10/2014 - 19:57 | 4532669 gmrpeabody
gmrpeabody's picture

Fuck the bastards, and anybody else who says they earned it...

(plz excuse my language..., they're starting to piss me off)

Mon, 03/10/2014 - 20:06 | 4532716 The Big Ching-aso
The Big Ching-aso's picture

I don't think even crime pays this well.

Mon, 03/10/2014 - 20:15 | 4532742 The Alarmist
The Alarmist's picture

One losing trading day ... Oh Boy! You mean I actually have a chance to win against these guys?  Sandbaggers!

Mon, 03/10/2014 - 23:42 | 4533460 James_Cole
James_Cole's picture

Vinnies house is a bit over the top, but you gotta admit the man works hard for his money. 

And talk about essential services, where would the world be without HFT? 

Tue, 03/11/2014 - 06:48 | 4533770 Harlequin001
Harlequin001's picture

Surely this can't be true. Didn't they have all the trades reversed on their 'one loss' trading day?

I reckon that when the investigation is over the SEC will fine Vincent at least $10,000 for this, and then he'll NEVER do it again will he?

Mon, 03/10/2014 - 19:35 | 4532595 rfaze
rfaze's picture

It's like someone taking $1 out of the pot on every hand in a poker game. If you play all night by morning they will have all the money.......

Mon, 03/10/2014 - 19:45 | 4532616 philipat
philipat's picture

When the crash comes, let's see how the immediate drying up of liquidity gets explained away?

Mon, 03/10/2014 - 20:25 | 4532772 The Alarmist
The Alarmist's picture

It's why the house makes you check your guns at the door.

Tue, 03/11/2014 - 08:31 | 4533894 J S Bach
J S Bach's picture

"It's like someone taking $1 out of the pot on every hand in a poker game. If you play all night by morning they will have all the money......."


Yeah, but you'd also end up with two broken thumbs by the end of the night.  When will these bastards get theirs broken - or better yet - their asses fried in the chair?

Mon, 03/10/2014 - 18:36 | 4532419 seek
seek's picture

For them. It's legal for them.

Trust me, if some day trader with a PC figured out a similar scheme, he'd be in jail. After a thorough debriefing, of course, one that was built into the plea bargain after the prosecution moved his sentence from multiple lifes down to 10 years -- no trial needed.

Mon, 03/10/2014 - 18:55 | 4532477 max2205
max2205's picture

Here's the model....

Call Benyellen at 6:30am....buy...then sell at 4:00pm

Mon, 03/10/2014 - 19:59 | 4532683 gmrpeabody
gmrpeabody's picture

"After a thorough debriefing, of course, one that was built into the plea bargain after the prosecution moved his sentence from multiple lifes down to 10 years -- no trial needed."

Martin Armstrong comes to mind...

Mon, 03/10/2014 - 21:44 | 4533095 Sterling Rod
Sterling Rod's picture

"Guys, we need to have one losing trading day so the regulators don't get suspicious".

I guess it worked.

Mon, 03/17/2014 - 11:19 | 4558645 ftsetrader
ftsetrader's picture

They're not alone with their resuts.  See here www.ftse100livetrading.com their results are outstanding and all witnessed everyday.

Mon, 03/10/2014 - 18:42 | 4532441 Catflappo
Catflappo's picture

Man - they really fucked up that day in 2012!   I imagine someone lost their job over that debacle.

Tue, 03/11/2014 - 09:47 | 4534046 Grinder74
Grinder74's picture

And why am I still paying penalties to the SEC for alleged and never proven "violations".

Mon, 03/10/2014 - 18:07 | 4532295 bania
bania's picture

Well, if they did 1238 days of profit, then i'd really be impressed.

Mon, 03/10/2014 - 18:40 | 4532426 Kirk2NCC1701
Kirk2NCC1701's picture

Screw "impressed".  If this is true, then never mind Gold or Bitcoin, or JPM, or...

The ONLY question you/I should have is: How do you get on board!?

Remember:  Clarity, Focus, Discipline.  Very difficuly in the US of ADD.

Mon, 03/10/2014 - 18:47 | 4532451 Hughmon
Hughmon's picture

Whose to say a similiar technique isn't being used on bitcoin exchanges.

Mon, 03/10/2014 - 18:07 | 4532296 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I don't even blame them for not even trying to hide it anymore.  No one seems to care among the public or the regulators.


Might as well making is a selling point if you are the one selling the service.

Mon, 03/10/2014 - 18:15 | 4532325 Jayda1850
Jayda1850's picture

The more blatant the corruption becomes, the more it is accepted by the masses as normal status quo.

Mon, 03/10/2014 - 18:28 | 4532382 s-logic
s-logic's picture

Missing the point. The article says two things:

1. The onwer just sold his mansion for $113million.

2. The owner is selling his no-lose money machine.

Now, WHY would he do THAT? NOW?

Mon, 03/10/2014 - 18:38 | 4532427 seek
seek's picture

Present value is higher than future value. B-school 101.

Which tells you what we already know, that the future value of all this shit is heading into negatives any day/year/decade now.

Mon, 03/10/2014 - 22:02 | 4533155 bilbert
bilbert's picture


Everyone's talking about how the markets are rigged, but the big question is:

You've got a goose that lays golden fucking eggs.

You would take this goose public, WHY??

Are we possibly reaching escape velocity in the algo-chasing game?



Mon, 03/10/2014 - 22:15 | 4533207 BLOTTO
BLOTTO's picture

Its worse then the that...our whole life is rigged.

Tue, 03/11/2014 - 04:23 | 4533703 The Merovingian
The Merovingian's picture

Spot on.  +10,000

Further verification of your truth telling comes from exactly how many times this information has been 'put out there' by the MSM ... Zero.

Mon, 03/10/2014 - 18:30 | 4532393 walküre
walküre's picture

Consumers waste money on all kinds of shit that doesn't last. So why not let them spend on "investments" that don't give anything in return?

Rumor has it that Wall Street is applying to have charitable status. At least the losses could be written off as donations.

Mon, 03/10/2014 - 18:09 | 4532300 NFisher
NFisher's picture

Mention the sums for christs sake!

Mon, 03/10/2014 - 18:09 | 4532301 Seasmoke
Seasmoke's picture

If any day traders are still alive , they need to print this chart and tape it on their flat screen. 

Mon, 03/10/2014 - 18:19 | 4532350 NOTaREALmerican
NOTaREALmerican's picture

Re: If any day traders are still alive

There are, I'm working with some.   If they did tape it to their screens it would just prove to them that "there are lots of opportunites to make money in this market".

Mon, 03/10/2014 - 18:37 | 4532422 mrdenis
mrdenis's picture

It's different this time 

Mon, 03/10/2014 - 18:09 | 4532302 unplugged
unplugged's picture

we are now living in the matrix - the machines are in control

Mon, 03/10/2014 - 18:16 | 4532333 balolalo
balolalo's picture

The PEOPLE who build and fund the machines are in control.  The markets have become an elaborate Wizard of Oz. 

Follow the yellow brick road and meet the wizard on wall street.  The real power is in who pushes the levers, not the lever. 

Mon, 03/10/2014 - 21:39 | 4533079 pavman
pavman's picture

Until the lever breaks.  Then its with the guy who can repair the lever. EnGiNe3rS BiTcH3Z!!!

Mon, 03/10/2014 - 18:10 | 4532305 RhoneGSM
RhoneGSM's picture

And they are going public, why?

Mon, 03/10/2014 - 18:11 | 4532309 A Lunatic
A Lunatic's picture

They ran out of gullible clients......

Mon, 03/10/2014 - 18:13 | 4532314 I am a Man I am...
I am a Man I am Forty's picture

Seriously, let's let someone else own this cash cow???

Mon, 03/10/2014 - 18:16 | 4532334 bonin006
bonin006's picture

Probably have competitors closing in on them, so close to end of the big profits, time to dump it on main street and move on to another scam.

Mon, 03/10/2014 - 18:41 | 4532437 walküre
walküre's picture

QE reduced, markets are harder and harder to scalp.

Mon, 03/10/2014 - 18:12 | 4532311 BurningFuld
BurningFuld's picture

This is just ONE BIG co-incidence.

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