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"Holy Grail" HFT Firm Virtu Questioned By NY AG

Tyler Durden's picture




 

Having the trade record of Bernie Madoff and the braggadocio of a WWF wrestler was just too much for New York Attorney General Eric Schneiderman to ignore. Rigged Market HFT Poster-child, and recent-delayed IPO, Virtu Financial has received a letter of inquiry from the AG's office requesting information about its business. As Bloomberg reports, a person with knowledge of the matter said this week that six high-frequency trading firms have received subpoenas as part of Schneiderman’s investigation and Virtu was asked for similar information in a letter of inquiry which could be escalated to a subpoena if the company doesn’t comply voluntarily.

 

As Bloomberg reports,

Virtu Financial Inc., the high-frequency trader trying to sell shares in an initial public offering, has grabbed the attention of New York’s attorney general as he investigates the industry.

 

The New York-based trading firm has received a letter of inquiry from Eric Schneiderman’s office requesting information about its business, according to a person familiar with the matter, who asked to not be identified because the process hasn’t been made public.

 

The request comes as Virtu attempts to go public, a process delayed after the March 31 publication of Michael Lewis’s latest book sparked unprecedented scrutiny of high-frequency traders. Schneiderman announced last month that he’s investigating services and technologies used by high-frequency traders, including faster data feeds that may give certain firms a split-second edge over others. The Federal Bureau of Investigation has begun its own industry examination.

 

A person with knowledge of the matter said this week that six high-frequency trading firms have received subpoenas as part of Schneiderman’s investigation, including Jump Trading LLC, Chopper Trading LLC and Tower Research Capital LLC. Virtu was asked for similar information in a letter of inquiry, according to the person with knowledge of the matter. This could be escalated to a subpoena if the company doesn’t comply voluntarily.

 

...

 

Following a decision two weeks ago to postpone the IPO, Virtu has now delayed the deal indefinitely because of market conditions, a person familiar with the matter said yesterday. The IPO filing hasn’t been withdrawn, the person said. Shares of Virtu’s rival KCG Holdings have tumbled 13 percent since the Lewis book, “Flash Boys,” was published.

What gave it away?

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.

 

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Fri, 04/18/2014 - 11:11 | 4673040 FieldingMellish
FieldingMellish's picture

Given that these firms now are the market, have they and their management not yet acheived TBTF status?

Fri, 04/18/2014 - 11:26 | 4673081 NotApplicable
NotApplicable's picture

Vinnie might merely be the next "Useful Idiot." Remember, Goldman is backing IEX.

Fri, 04/18/2014 - 11:28 | 4673086 Pladizow
Pladizow's picture

NY's AG only question = "What's my Cut?"

Fri, 04/18/2014 - 11:48 | 4673135 maskone909
maskone909's picture

the message the SEC says is clear as day;

Its ok to skim the markets if you are rich enough to pay the fee's.

the SEC has access to trade data that would implicate every primary dealer in illegal practices but chooses not to.

 

Fri, 04/18/2014 - 12:12 | 4673195 Manthong
Manthong's picture

What is it about the NY AG’s?

Has anybody heard anything lately from the DOJ?

Fri, 04/18/2014 - 12:15 | 4673198 Soul Glow
Soul Glow's picture

The SEC is busy watching midget porn and the DOJ is busy watching the SEC watch midget porn.  The NSA is busy watching the DOJ watch the SEC watch midget porn and the CIA is pissed off the gave spy technology to everyone else because they want to be the only one's watching people watch midget porn.

Fri, 04/18/2014 - 12:08 | 4673187 Soul Glow
Soul Glow's picture

Other question from AG, "When is the next stock market crash going to happen?  Just want to sell before."

Fri, 04/18/2014 - 12:40 | 4673241 Remington IV
Remington IV's picture

CNBC's talking heads will tell us that HFT is "good" for us ,

that front-running and skimming is "OK"  ,

 that  1-c / share is nothing in the larger scheme of things  - - -

even though that 1-c / share is done 8 billion times / day across all exchanges .... beacuse they "add" liquidity

Fri, 04/18/2014 - 11:28 | 4673087 vote_libertaria...
vote_libertarian_party's picture

That is the 2 immovable objects confrontation.

 

On one side there is the belief that they are a major component of what has walked the market up for 5 years day after day thru front running, spoofing, etc..

 

On the other side is that these HFT shops have taken away profits from the entrenched\politically connected power of the mutual funds, pension funds and WS banks.

 

Do the regulators crack down and risk crashing the market?

Fri, 04/18/2014 - 12:25 | 4673221 NotApplicable
NotApplicable's picture

I don't see it that way. I prefer Tyler's take that HFT is yesterday's scam, and since it is no longer profitable it's time to move on to the next scam, all while appearing tough against the old one. With the upcoming mid-term elections, HFT serves as the perfect vehicle to serve as the infrastructure for the "new & improved" facade.

It's a classical "closing the barn door after the horses escaped" maneuver.

What I find fascinating is that Goldman has set itself up to have a monopoly on the next version of "fair" markets as everyone moves to IEX.

Fri, 04/18/2014 - 16:27 | 4673824 lotsoffun
lotsoffun's picture

might be that all goldman wants to do - shut down the htf and look like doing god's work again - and be short.  doesn't take hft to be short a crash and clean up.

and goldmine also knows - that once this crash hits - there's no bailouts and no qe and runs up on the market.  so hft isn't needed anymore - because mom and pops 401k's aren't going to be worth anything.  they won't have anything to front run left.

and then - goldman can blame the crash on hft and hopefully not take the blaim.

lloyd is smart.

 

Fri, 04/18/2014 - 23:58 | 4674897 UselessEater
UselessEater's picture

meanwhile??? financial advisors and fund managers can claim to average Joe, the markets are being appropriately regulated?

However they are set up for receiving bail-ins; the docs I've read from CEC Aust and Gold Core show clear documented evidence that an array of financial institutions (clearinghouses, insurance co's, etc) not just banks are getting bail in protection legislation.

This is not my area of expertise but I am trying to get a handle on it.

Fri, 04/18/2014 - 12:30 | 4673216 Jumbotron
Jumbotron's picture

A bit off topic......Tyler(s) you may want to highlight this paper that's being touted on CNBC.  It's by a couple of economists from Brown University and they tout that the U.S. could face a permanent stagnation.

"Using complex models, the paper goes on to show why a "deleveraging shock," a "drop in population growth," or "an increase in income inequality" could all increase savings. And with a short-term nominal interest rate permanently at zero, the central bank will be "unable to generate a sufficient monetary stimulus because the nominal interest rate cannot be negative." Instead, the result is a "permanent drop in output."

Here is the link to the pdf of the actual paper.  Pretty compelling stuff indeed.

http://www.econ.brown.edu/fac/Gauti_Eggertsson/papers/Eggertsson_Mehrotr...

Unfortunately they seem to be Keyneseians and call for higher inflation targets and a permanent shock and awe increase in government spending.

So....they're like doctors who correctly diagnose and describe the malady.....then prescribe a speedball to heal what ails you.

Fri, 04/18/2014 - 12:42 | 4673248 fonzannoon
fonzannoon's picture

This is already happening. Inflation is creeping up and wages are declining. Interest rates have to remain permanently at 0%. The fed has pushed up asset prices in an attempt to combat this but the end result is that only those who had substantial assets to begin with have benefitted. The more the central banks do the more they will be seen as aiding the wealthy at the expense of everyone else. The markets may continue to propel higher for a while but the deflationary shock of 90% of society taking the step down to the free shit army will eventually overwhelm even the almighty S&P 500.

Monetary policy has hit the wall. It's time for fiscal policy to start throwing some scraps out in the form of moar entitlemnents. Once that happens we just hang out until they lose control of money velocity.

Fri, 04/18/2014 - 14:35 | 4673550 A Nanny Moose
A Nanny Moose's picture

They missed a payment to the elected criminal gang.

Fri, 04/18/2014 - 11:13 | 4673044 indygo55
indygo55's picture

Well since the FBI is part of the goverment and the goverment is run by Wall street, then this must all be for show, right?

Fri, 04/18/2014 - 11:22 | 4673070 NotApplicable
NotApplicable's picture

Club members jockeying for position?

Fri, 04/18/2014 - 11:32 | 4673092 scraping_by
scraping_by's picture

Civil war among the elites or law enforcement kubuki.

Their last good blow against the empire was back in the 90's when they had an airtight case against the Koch brothers. But Big Dog was caught with a Chinese moneyman holding his dick and that went away.

Fri, 04/18/2014 - 11:13 | 4673045 Rainman
Rainman's picture

A couple hundred grand to Schumer should fix this. 

Fri, 04/18/2014 - 11:17 | 4673054 RacerX
RacerX's picture

Right. Let's see if this actually gets traction beyond the "investigation" phase. Otherwise it's just the same kabuki.

Fri, 04/18/2014 - 11:30 | 4673091 ParkAveFlasher
ParkAveFlasher's picture

NYC must have a gaping municipal budget hole.  Time to find penalty pinatas to whack around.

Fri, 04/18/2014 - 14:20 | 4673509 RaceToTheBottom
RaceToTheBottom's picture

Finding criminals on WS?  Easier to have the authorities throw the few non criminals in Jail.

Fri, 04/18/2014 - 14:37 | 4673567 A Nanny Moose
A Nanny Moose's picture

It's always Kabuki. Just keep an eye on what that shifty other hand is doing.

Fri, 04/18/2014 - 11:20 | 4673062 AccreditedEYE
AccreditedEYE's picture

On what date did that loss actually happen? Serious question.

Fri, 04/18/2014 - 11:23 | 4673074 ebworthen
ebworthen's picture

Not sure but I'd guess April 1st.

Fri, 04/18/2014 - 11:55 | 4673066 ebworthen
ebworthen's picture

Nothing of substance has been done about the skullduggery of the planned 2008 collapse and bailouts.

It has been taxpayer funded QE and funds to the IMF and foreign banks since.

A lot of talk in CONgress but the only tangible thing they have done is pass Obamacare (ouch).

Nothing will come of this.

Ponzi forward.

p.s. - Where is Jon Corzine?

Fri, 04/18/2014 - 11:22 | 4673068 Two-bits
Two-bits's picture

OT: but not by much

 

Step aside Western Union and move over Moneygram...April 24th is Walmart-Walmart day.

 

That's right folks, the company store will take care of you.

"The world's largest retailer introduced a new money transfer service Thursday that it says will cut fees for its low-income customers by up to 50 percent compared with similar services elsewhere. The Walmart-2-Walmart service is being rolled out in partnership with Ria Money Transfer, a subsidiary of Euronet Worldwide Inc."

and here is a fun little bit inside this article-

"Wal-Mart's announcement is the latest way it's acting more like a bank. About a decade ago, Wal-Mart applied unsuccessfully for an industrial bank charter. Those efforts were blocked even though the retailer vowed it would not open retail branches but wanted to use its bank to process card transactions. In 2007, it abandoned those plans, but it has been creating an expanding menu of financial offerings for customers, aimed particularly at those with limited access to banks. Wal-Mart already offers prepaid cards, check cashing services and tax preparation services."

http://seattletimes.com/html/businesstechnology/2023402115_apxwalmartmon...

Bank of Walmart.  FML

Fri, 04/18/2014 - 11:24 | 4673076 NotApplicable
NotApplicable's picture

So they finally got the right palms greased.

I'm surprised it took this long. Then again, WalMart money is still relatively "new money."

Fri, 04/18/2014 - 14:24 | 4673522 RaceToTheBottom
RaceToTheBottom's picture

Well, Wal-Mart already has the Too Big To Fail crap down pat.

It has doubled or trippled profits due to the welfare (both low income individual and corporate)

Fri, 04/18/2014 - 11:25 | 4673079 intric8
intric8's picture

Virtu got too greedy and threw just one fucking trading day to make their trading look random. Not convincing enough. No one wants to take a loss when they know they can make money, its contrary to human nature

Fri, 04/18/2014 - 11:50 | 4673138 insanelysane
insanelysane's picture

But couldn't you just report that you were losing money on more days.

Queue the South Park episode where the media is reporting that millions have died.  The anchor asks, "so millions have died."  On scene reporter answers,"No we are just reporting that millions have died."

Fri, 04/18/2014 - 11:29 | 4673084 bankonzhongguo
bankonzhongguo's picture

You think the NY AG will stop anything?

This has been the open secret of raping markets for years and not only have the SEC, FBI, the Fed and ALL the politicians known about this - they PROFIT from it with the banks.

The new race is changing the electoral college and thereby allowing popular votes contained in a few key city-state markets controlled by democrats and their funders to keep control of the white house/country and the rest of the executive - that's ALL "regulators" in your fascist future.

There is a real revolution of technology and mass surveillance taking place and it empowers the top only.

Watch what happens to those Bundy Ranch supporters out in the desert in the next months.  Might as well be rag-headed scrub fighters wandering around under a starry night sky while Darth Vader orbits above.

Your family's purchasing power is dropping like a rock. 

The magnitude of their raping has not even entered Act 2.

 

Fri, 04/18/2014 - 11:39 | 4673104 Atomizer
Atomizer's picture

Fuck the HFT skimming process in stealing productive wealth earners income . Wall Street was once a form of investment, today it’s just like going to play a lottery ticket. Many people are not aware that the Roman Empire had a Stock Market. The fuckers repeating the same wealth extraction scam need to be placed on a firing line. The example would send echoes of fear to anyone committing a crime.

 

How do you think the banker and lamp post era began? Old Roman teachings….

You can read that bit of fact on [-1] Chapter of common core educational text book. Negative zero chapter talks about how their family members were killed during the last attempt to pull off the same agenda existing today.

Fri, 04/18/2014 - 11:37 | 4673108 The Abstraction...
The Abstraction of Justice's picture

The puppet masters organize a puppet fight. Think they care which puppet wins?

Fri, 04/18/2014 - 11:37 | 4673109 semperfi
semperfi's picture

Schneiderman suicide in 3-2-1....

Fri, 04/18/2014 - 11:44 | 4673120 Colonel Klink
Colonel Klink's picture

Prosecute all the HFT firms, then shut them down and change the rules that require a 2 second tradeable window without cancellation.  And capital requirements for any trade listed.

Fri, 04/18/2014 - 11:46 | 4673129 scraping_by
scraping_by's picture

Economically, HFT extractions are friction costs. The brokerage industry is built on friction costs, but never mind. HFT doesn't have a good story for their friction.

Their big mistake was letting Indian guys in casual clothes go on CNBC and the rest of the outlets. Should have created a vice president for consumer relations position and hired some middle aged white guy who wore suits well. Member of the Yankee elite, or looked like one. Maybe, because they're new, could have been a hottie with knockers. Anything to distract from the message. They're suffering from too close attention on what's actually being said.

 

Fri, 04/18/2014 - 11:56 | 4673157 i_call_you_my_base
i_call_you_my_base's picture

Interesting comment, but you make it seem as if it's natural. It seems contrived to me. It's been going on for so long and anyone who cared to look knew about the things in Lewis's book.

Fri, 04/18/2014 - 12:14 | 4673201 scraping_by
scraping_by's picture

By definition friction costs could go away and the system would be better for it. However, we all have horror stories about a supposed useless function reengineered away and the whole place collapsed. Mysterious indeed.

HFT looks like a no-brainer for removal. And sometimes appearances do correspond to reality.

Fri, 04/18/2014 - 12:19 | 4673210 i_call_you_my_base
i_call_you_my_base's picture

"And sometimes appearances do correspond to reality."

Agreed.

But what is the impact of the loss of "liquidity"? I've though about it but haven't formed an opinion.

Fri, 04/18/2014 - 13:14 | 4673331 scraping_by
scraping_by's picture

As to liquidity, think of it as a market maker, but not really. The market makers will buy and sell with real money while the HFT make a transaction that's evaporated before any real transaction takes place. They don't provide resources, just the promise. Appearances that don't correspons to reality.

Fri, 04/18/2014 - 12:19 | 4673206 NOTaREALmerican
NOTaREALmerican's picture

Re:  anyone who cared to look

True,  but the people who are in a position of power are generally looking for easy targets to screw in order to enhance their power.    Taking on the top 1% doesn't generally benefit a member of the top 10 or 20% bracket, especially in a "Banana Republic" society.  

Fri, 04/18/2014 - 12:00 | 4673166 Kaiser Sousa
Kaiser Sousa's picture

RIGGED.

Fri, 04/18/2014 - 12:06 | 4673175 Tinky
Tinky's picture

LOL! WTF? STFU about HTF already.

Tinky, PHD, MS, BA, ADHD, (and obviously) BS 

Fri, 04/18/2014 - 12:12 | 4673194 NOTaREALmerican
NOTaREALmerican's picture

I think they've suffered enough.   We've simply got to move on, and understand that mistakes were made and serious lessons were learned and, really, we've simply got to move past these unfortunate events which have made us a stronger nation as a result.    We, really, must learn to - just - forgive, and most importantly, forget.

Fri, 04/18/2014 - 12:25 | 4673215 SheepDog-One
SheepDog-One's picture

What good will all this questioning do for the millions of dead bodies and their bankrupt families? Its all ancient history cant we just move on.org?

Fri, 04/18/2014 - 12:13 | 4673196 Canoe in the Desert
Canoe in the Desert's picture

 "You can't handle the truth!"

- A Few Good Men

Fri, 04/18/2014 - 12:18 | 4673208 SheepDog-One
SheepDog-One's picture

Fan dance.

Fri, 04/18/2014 - 12:20 | 4673213 Waterfallsparkles
Waterfallsparkles's picture

Can you even imagine what it would be like if they wanted all of their trading records?

Fri, 04/18/2014 - 12:42 | 4673247 Atomizer
Atomizer's picture

Shifty eyed economist named Paul Krugman. His hallmark relies on an Alien invasion or WWIII. Leveling major cities to create growth is the 2.5- 3.0 % bench mark. I know you read my post asshole. Obama already create a new terrorist fear factor regarding Manhattan NY. You must think we are stupid in seeing the message sent. GITO is your new housing, time is working against your favor. Keep that thought active.

False Flag - Coming Soon!

 

Krugman, your future educational career is over, before it has begun! You’re fucked seven days to Sunday.

Fri, 04/18/2014 - 12:44 | 4673249 NEOSERF
NEOSERF's picture

Looks like my trading bell curve...except it is upside down...

Fri, 04/18/2014 - 12:49 | 4673253 kchrisc
kchrisc's picture

"Hello, we're here from Goldman's, I mean the government..."

Like Sandy Hoax, the criminals had all of this waiting in the wings. All they had to do to kick it off was get "Flash Boys" published and pushed in the propaganda media. Goldman's will not allow theft to me made outside their realm.

 

"The government is dead, long live Goldman Sachs."

Fri, 04/18/2014 - 13:08 | 4673315 buzzsaw99
buzzsaw99's picture

racketeering, conspiracy to defraud, insider trading, nothing serious

Fri, 04/18/2014 - 14:10 | 4673485 CharliePrince
CharliePrince's picture

a little money given to the right  elected officials   could make this go away

Fri, 04/18/2014 - 15:58 | 4673769 fzrkid
fzrkid's picture

lets support and promote HFT, eventually the algos will loose control, 'they' will use stuxnet to help 'normalize' the system at which point the entire system will self destruct as Algo's have no friends only foes

Fri, 04/18/2014 - 15:59 | 4673772 toomuchtom
toomuchtom's picture

Where is Roger Mcnamee? 

Fri, 04/18/2014 - 18:37 | 4674203 Atomizer
Atomizer's picture

Not a word of RICO charges. Why? Because the US GOV and Federal Reserve are behind the scandal. Which leads us to the LIBOR clusterfuck. Connect the dots. I predict that these people involved will not reach their pension goals.

NSA.. Are you on the case or sleeping at the keyboard? Let us know or we can find creative ways in defunding taxpaper expenses based on your lack of services.

blows a kiss

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