By Tom Polansek
CHICAGO, March 6 High-speed trader Infinium
Capital Management has stopped trading and is working to wind
down the company after struggling with financial problems,
President Mark Palchak told Reuters on Thursday.
The closure of Infinium, which was founded in 2003, reflects
pressures on high-speed trading firms stemming from increased
competition and regulatory oversight, low interest rates that
have hurt volume and volatility, and the uncertain global
Currency broker FXCM Inc and a subsidiary have
acquired five trading desks, physical assets and 48 employees
from Infinium to start a new joint venture, V3 Markets, Palchak
and FXCM said. Palchak is chief executive of the new company.
V3 Markets will operate with a "streamlined cost structure"
compared to Infinium, FXCM's chief executive, Drew Niv, said on
a conference call after the company reported quarterly earnings.
"We are in the early stages of clearly rebuilding a business
that is in need of a greater degree of risk supervision than it
had in its prior life," he said.
Infinium had been among the higher-profile electronic
trading groups and was a household name among Chicago traders.
The firm traded in commodities, energy and other markets.
A favored tool of hedge funds and other institutional
traders, high-speed trading uses algorithmic software programs
to post orders in the blink of an eye.
By acquiring assets from Infinium, FXCM and subsidiary Lucid
Markets Trading are able to expand into commodities and other
markets, diversifying their exposure to volatility, Niv said.
"With the crazy weather we're having and Russian tanks
roiling agriculture and energy markets, sparking massive
volatility in those products, financial instruments like G10
currencies are completely unmoved and remain near record-low
volatility," he said.
"As Lucid implements its risk controls and other trading
smarts into the V3 infrastructure, we will be dialing up trading
to take advantage of these uncorrelated volatilities."
The total price for Infinium's assets was not disclosed. It
included approximately $11.9 million owed by Infinium to FXCM,
according to the brokerage.
Financial problems at Infinium date back years, according to
a lawsuit filed against the firm in January in U.S. District
Court in Chicago. The firm lost $6.6 million in 2012 and $6.1
million from Jan. 1 to July 31, 2013, court documents say.
Infinium last year shed a number of employees, including its
chief operating officer, and one of its co-founders came out of
retirement to lead the firm.