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High-speed trader Virtu Financial eyes $2.6 billion valuation in IPO

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A trader works on the floor of the New York Stock Exchange Photograph by Andrew Burton — Getty Images

Electronic trading firm Virtu Financial is expecting a valuation of up to $2.6 billion in its initial public offering, a year after the company postponed its first attempt to go public amid a furor over high-frequency trading.

Virtu Financial said on Monday its offering of 16.5 million Class A shares is expected to be priced at between $17 and $19 per share, raising up to $314 million.
The company is a market-maker in equities, fixed income, currencies and commodities. It earns money through “spreads” – the difference between what buyers and sellers are willing to pay or accept in a trade.

Virtu Financial’s decision to postpone the IPO last year followed the release of Michael Lewis’ book “Flash Boys: A Wall Street Revolt”, which questioned whether markets were rigged in favor of high-frequency traders.

The company also caused a stir when it revealed last year that it had only one day of trading losses in five years. The detail was meant to show the firm’s profitability but critics of high-frequency trading pointed to it as a sign that high-speed traders have unfair advantages.

Founder Vincent Viola, a former chairman of the New York Mercantile Exchange, will control the company after the offering though his ownership of Class D shares, which have more voting power than ordinary shares.

The company’s revenue rose 8.8 percent to $723 million in 2014, while net income rose 4.3 percent to $190 million, the company said in a filing.

Virtu Financial’s competitors include large broker-dealers such as Bank of America Merrill Lynch (BAC) and Citigroup (C), as well as niche players such as Citadel, KCG Holdings, Timber Hill and Wolverine Trading.

The U.S. Securities and Exchange Commission proposed last month that high-speed stock trading firms that execute transactions away from exchanges should be subject to greater regulatory oversight.

Apart from Virtu Financial, the plan is expected to affect firms such as Jump Trading and Tradebot.

The SEC intensified its review of high frequency traders following the “flash crash” in 2010, in which the Dow Jones Industrial Average plunged 700 points before rebounding sharply.

Goldman Sachs Group Inc, JPMorgan Chase (JPM) and Sandler O’Neill + Partners are among the underwriters for Virtu Financial’s offering.