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As The Market Crashed, The Biggest HFT Firm Made Out Like A Bandit

Tyler Durden's picture




 

Back in May, when we first got our glimpse at Virtu's financial results we found something unexpected: instead of equities, the biggest source of revenue growth for the HFT titan was one very different asset class: "global currencies" or FX, which as of Q1 was not only Virtu's largest source of revenue (surpassing America equities) at $42.2 million, but had grown at a stunning 103% Y/Y.

 

And while FX volatility, and frontrunning mammoth central bank orders was clearly profitable to Virtu, many were wondering how would the recently public company return to its roots of making the most money in equities.

To be sure we got a hint of the answer on August 25, the dat after the ETFlash crash, when Virtu's CEO said he "was on track to have one of its biggest and most profitable days in history Monday amid a tumultuous 24 hours for world markets."

Earlier today, when Virtu released its earnings we got confirmation of precisely that. As the chart below shows, while the market was plunging in the third quarter, Virtu was making off like a bandit, with revenue from American Equities soaring by 68% to $46 million in the quarter - the highest quarterly revenue in that category Virtu has generated in history.

 

Another chart showing just the dramatic Y/Y jump in US equities "trading" revenue:

 

How did this happen? This is what Virtu's CEO said three months ago: "we don't cause volatility, as a market maker we're absorbing volatility and we think we soften it."

It remains to be seen if Virtu does not cause it, although one thing is now clear - every time there is a market crash, whether caused by HFTs or not, one company will make a huge profit. And if, as some suspect, Virtu does indeed "cause volatility" expect many more such episodes in the months to come.

 

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Wed, 11/04/2015 - 10:53 | 6748518 firstdivision
firstdivision's picture

Guess what, we found where most American politicans have their money invested.  There is no doubt in my mind that this firm is violating securities laws on a hourly basis to generate the profits it has.  I also think they have the blessing of the Fed (ala Citadel).

Wed, 11/04/2015 - 11:56 | 6748772 Surviver22
Surviver22's picture

Obama will not finish his second term!

http://motivationdose.com/is-america-babylon/

Wed, 11/04/2015 - 11:01 | 6748560 LawsofPhysics
LawsofPhysics's picture

yes, this is skimming...

So what?  fuck you, pay me.

moral hazard can be a real motherfucker.

Wed, 11/04/2015 - 11:05 | 6748570 SharkBit
SharkBit's picture

"we don't cause volatility, as a market maker we're absorbing volatility and we think we soften it."

Fuck you.  You should be in jail you financial terrorist.

Wed, 11/04/2015 - 11:08 | 6748577 orangegeek
orangegeek's picture

Virtu would need the support of ICE and the CME to operate like this.

 

Therefore, ICE and CME must own, in a separate outside firm that doesn't hit their books, a large part of virtu.

 

Getting fucked on a daily basis - feels wonderful.

Wed, 11/04/2015 - 11:17 | 6748622 MrBoompi
MrBoompi's picture

This is parasitic, destructive behavior.  And I don't think they care if they kill the host.  Since politicians and regulators are paid off to allow this fucking nonsense, they are parasites as well.  They used to have to use armored cars to carry off our wealth, now they simply use fiber optic cables.  

Wed, 11/04/2015 - 11:20 | 6748635 Ouagadoudou
Ouagadoudou's picture

Saw the stocks today ?

Wed, 11/04/2015 - 11:27 | 6748664 riot-police
riot-police's picture

I wonder if they let the HFT algo bots trade their own company stock?

Wed, 11/04/2015 - 11:32 | 6748681 Plutus Avarice
Plutus Avarice's picture

The stock is down 7% as I am writing this. May be Mr. Market understands that such windfalls are a one-off thing and VIRT can't rely on the unexpected for future growth.

Wed, 11/04/2015 - 11:37 | 6748702 Glass Seagull
Glass Seagull's picture

 

 

Because we can...that's why.

Wed, 11/04/2015 - 11:47 | 6748737 SillyWabbits
SillyWabbits's picture

 

Virtù is a concept theorized by Niccolò Machiavelli, centered on the martial spirit and ability of a population or leader,[1] but also encompassing a broader collection of traits necessary for maintenance of the state and "the achievement of great things.

 

What could be wrong with that?

Wed, 11/04/2015 - 17:02 | 6750154 Hope Copy
Hope Copy's picture

This is gambling, pure and simple..  As I have read Dodd - Frank and know the gaming industry is required to pay after with-holding, so the same should be put to these HFTs..  As for the losses, they shouldn't be considered..  Dodd - Frank says that the practice in Commodities (, thus it can be applied to stocks in the same light is illegal if one dose not have an interest in the activity, production, with the IRS defined requirements [500 hours and in state]).  DOES ANYONE REALLY WANT TO MAKE MONEY FOR THE GOVERNMENT,  or is lining one's pockets and those of one's friends really that much more important (, they, then by definition, become a bunch of financial anarchists).  Chaos is ruling...

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