ZeroHedge is calling it the “holy grail” of trading.
In its IPO prospectus, High Frequency Trading firm Virtu reveals it had one losing trading day in 1,238 days of trading.
HFT has become increasingly controversial in recent years, and this new IPO shines light on an otherwise secretive (and computerized) industry. Virtu is what’s called a market maker. It doesn’t hold onto securities for very long, but instead derives profit from bid/ask spreads.
High frequency trading is called “high frequency” for exactly that reason. This is all happening in a matter of milliseconds. Virtu and other HFT firms basically argue they are providing a public service by ensuring liquidity in the market “by consistently buying securities from sellers and selling securities to buyers,” according to the prospectus.
Critics of HFT like ZeroHedge say that when your business model is to “scalp pennies from every market order — that would be billions of market orders in a period of four years — there is no risk.”
Virtu is a New-York based firm famous for trying (and failing) to buy Knight Capital Group in 2012. But things are definitely going well for the HFT firm. Its founder and chief executive officer recently purchased the Florida Panthers hockey team.
“The chart below illustrates our daily Adjusted Net Trading Income from January 1, 2009 through December 31, 2013,” Virtu writes in the filing. “As a result of our real-time risk management strategy and technology, we had only one losing trading day during the period depicted, a total of 1,238 trading days.”
Here’s the chart of Virtu’s near-perfect record:
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