Commenting to Reuters on the news that Singapore state investor, Temasek Holding, was buying a minority stake in Virtu Financial, Virtu CEO Doug Cifu stated, “Temasek is an ideal partner for Virtu. Their extensive knowledge and relationships in Singapore, Asia and the Far East will be particularly beneficial as we look to expand into new asset classes and geographies.”
A private firm, whose core business includes electronic trading of equities, Virtu Financial has been expanding to other asset classes, including the FX markets. The additional trading divisions can be understood as Virtu leverageing their electronic trading know-how and technology to other assets, as well as moving away from strictly being known as an equity shop. As a result of numerous flash crashes in the industry and claims of price manipulation, the high-frequency trading sector in which Virtu participates, received negative light during 2014.
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Also believed to be driving their cross-asset plans are Virtu’s plans of eventually floating its shares in a public offering, which were planned earlier in the year but scrapped following unfavorable market conditions in April. The lack of publicly traded shares proved a detrimental factor in its failed bid for Knight Capital Group, which the firm eventually lost out to rival Getco, creating a hybrid offering including cash and shares of the merged businesses.
According to filings made earlier in the year, during their planned IPO preparation, FX trading accounted for 20% of Virtu’s revenues. According to the filing, the firm stated that it deals with a number of high-end institutions, including CME, ICE, Currenex, EBS, HotSpot, Reuters, FXall and LMAX. Since that time, FX revenues are believed to have increased as the firm has been cited as one of the more active buy side players involved with distributing liquidity into the market.
Financial terms of the deal weren’t disclosed, but Temasek was reported to have purchased a portion of Silver Lake Partners ownership in Virtu. With the new shareholder, and following comments from their CEO, Virtu is expected to be better positioned to compete in Asian markets. Specifically in Singapore, Virtu may find its electronic services welcome, as the country has become a growing financial hub for the Asian region, with FX counterparty volumes surpassing those of Japan in the most recent Bank of International Settlements Triennial FX Survey.