"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.

 

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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 The IPO filing hasn’t been withdrawn, the person said.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.