As debate rages, high-speed trader delays IPO

The building controversy surrounding a new book about the industry causes Virtu Financial to postpone its roadshow.

By MSN Money Partner Apr 2, 2014 4:50PM
Trader Jarret Johnson of Virtu Finalcial works on the floor of the New York Stock Exchange
© Chip East/ReutersBy Telis Demos and Bradley Hope, The Wall Street Journal

Amid a growing clamor over the role of high-frequency traders in the markets, Virtu Financial has delayed the start of its pitch to investors on its initial public offering, according to people familiar with the matter.


The high-speed trading firm decided late Tuesday to move back the launch of the deal by at least a week, the people said. The New York company, which had initially expected to begin marketing the IPO by Friday, still intends to move forward with the offering.


The delay comes amid negative attention focused on the high-frequency trading industry following the release of journalist Michael Lewis's book "Flash Boys." Lewis said in the book and in multiple interviews promoting it this week that he believes the stock market is rigged in favor of superfast traders who are able to "front run" ordinary investors using computers located inside the exchanges.


The building controversy surrounding the book and its market impact were part of the decision made by the company and its advisers to delay the deal, some of the people said. For example, shares of trading firm KCG Holdings (KCG) were off 3.3 percent Tuesday.


A number of regulators and investigators, including the Securities and Exchange Commission and the Federal Bureau of Investigation, are also examining high-frequency trading and its role in the markets.


Virtu is one of the biggest such firms, and in its filing for an IPO said it had just one losing trading day during the 1,238-trading-day period concluding at the end of December. In its planned roadshow, which is now delayed, the company is aiming to emphasize the positive role it plays in the markets and say that it doesn't engage in the kind of predatory behavior that has drawn attention from regulators and critics, according to people familiar with the matter.


However, the company said in its IPO filing last month that the Commodity Futures Trading Commission was investigating its participation in incentive plans offered to traders by exchanges.


A person familiar with the matter said the company was still awaiting regulatory approval from the SEC, which must bless all IPO filings before the deals are pitched to the public. This person added no schedule for the IPO had been decided.


The news of a delay was reported Tuesday by Bloomberg News.


An IPO launches when a company sets a price range and begins a weeklong roadshow to pitch the company to investors before it sells the shares and begins trading.


Virtu is seeking to raise between $200 million and $250 million in the offering, which would give it a valuation of roughly $3 billion, according to people familiar with the plans. Virtu was founded by Vincent Viola, a graduate of West Point who rose from a gasoline trader in the pits of the New York Mercantile Exchange to its chairman.


More from The Wall Street Journal


Tags: KCG
1Comment
Apr 3, 2014 4:36AM
avatar
The Markets are rigged and have been for quite some time. The Mainstream Media is terrified to admit this very simple FACT. They are terrified that somehow admitting the truth about something that everybody already knows, will destroy the Markets. Well everyone already knows and we still have gone through the Mother of all Bull Markets. Admitting to it won't change a thing.
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