Virtu Financials Postpones IPO Over HFT Scrutiny

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Virtu Financials has postponed its planned US initial public offering (IPO) after its bankers suggested that the company wait until the focus shifts away from the recent scrutiny over the business of high frequency trading. A report from the Financial Times, citing sources familiar with the matter, said that the high-frequency trading company is also waiting for clearance from the US security regulators, on its IPO filing, to start investor meetings, which could be started this week.

Potential risks delaying the Virtu IPO

Advisors of the firm believe that there were some risks regarding the IPO that the firm might struggle to achieve a valuation that it was expecting, according to a source. Another source suggested that Virtu is expected to start its road show sometime later in April.

There was no comment from Goldman Sachs, which is leading the IPO, or from Virtu itself about the IPO. The company is hoping to raise $250 million at a $3 billion valuation from a listing, says the report citing sources close to the company.

Virtu, in its IPO filing, accepted that there are some significant weak points in its accounting. The company also said that the US regulators at the Commodity Futures Trading Commission are examining its role in the incentive programs offered by exchanges from July 2011 to November 2013.

HFT a hot topic of discussion

There have been a series of discussions over the role of high frequency trading (HFT) in the modern market in recent days, and Michael Lewis took up this discussion in his book Flash Boys. A few weeks before the release of the book, Eric Schneiderman, the New York Attorney General, spoke against HFT questioning the relationship between stock exchanges and trading firms.

Mr. Lewis has raised his concerns many a times in televised interviews beginning with CBS 60 Minutes appearance where he opined that the US stock market is favoring ultra-fast trading firms, and Virtu is the most prominent among them.

The discussion reached new height son Tuesday, when one of the heroes of Mr Lewis’ book Brad Katsuyama, the co-founder of IEX, appeared on CNBC. Mr. Lewis and William O’Brien, the president of Bats Global Market, entered into a debate over the contents of the book and on the US market structure.

“Shame on both of you for falsely accusing literally thousands of people and possibly scaring millions of investors in an effort to promote a business model,” Mr. O’Brien said during the discussion.

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