By: Keri Geiger and Sam Mamudi
April 18, 2014
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.
Virtu has capitalized on two decades of regulatory reform and technology advances to become one of the industry’s biggest players. The firm provides quotes in more than 10,000 securities and contracts on more than 210 venues in 30 countries, according to regulatory filings. The company competes with firms such as KCG Holdings Inc. (KCG) as well as New York Stock Exchange market makers including Barclays Plc and Goldman Sachs Group Inc.
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 The IPO filing hasn’t been withdrawn, the person said.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.
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