Virtu delays IPO launch as high-speed trading under scrutiny

NEW YORK, April 2 Wed Apr 2, 2014 12:55pm EDT

NEW YORK, April 2 (Reuters) - High-speed trading firm Virtu Financial Inc delayed the launch of its initial public offering this week as it awaits regulatory approval, which is expected within days rather than weeks, a person familiar with the matter said.

The IPO will seek to raise $200 million to $250 million, for a valuation of around $3 billion, the person said on Wednesday.

High-frequency trading has been under intense scrutiny in recent days, following the release of author Michael Lewis' book "Flash Boys: A Wall Street Revolt" on Monday.

Lewis alleges that the U.S. stock market is rigged, with exchanges and alternative trading platforms favoring HFT firms, which use their speed advantage to extract billions from the financial market.

The protagonist of "Flash Boys" is Brad Katsuyama, who led the creation of a new exchange in November called IEX - for Investors' Exchange - aimed in part at ensuring that HFT firms have no special advantages over other brokers on the platform.

Virtu, one of the biggest U.S. HFT firms, is active in making markets on IEX, taking the other side of trades to ensure the market stays liquid.

Regulators, politicians, and other authorities have all weighed in recently on HFT.

Federal U.S. investigators and the U.S. Securities and Exchange Commission said this week they were investigating possible wrongdoing by HFT firms. Two weeks ago, New York state's Attorney General Eric Schneiderman said he believed U.S. stock exchanges and other platforms provided HFT firms with unfair advantages.

HFT is carried out by many banks and proprietary trading firms using sophisticated computer programs to send high volumes of orders into the market, executing a small portion of them when opportunities arise to capitalize on price imbalances, or to make markets.

HFT makes up more than half of all U.S. trading volume. The firms are regulated, as are the exchanges they trade on.

(Reporting by John McCrank; Editing by Bernadette Baum)

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