It's not just banks that are having a difficult 2019. Virtu Financial, the high speed trading firm, isn't having a good year either. Ever since acquiring ITG in March 2019, it has been running at a loss.
Virtu released its results for the third quarter of 2019 today. They reveal a cumulative loss of $74.3m in the first three quarters of 2019, down from a profit of over $200m in the comparable period before ITG was acquired. Virtu chief executive Douglas A. Cifu described the environment as "challenging" and said that the cost synergies derived from the ITG acquisition might take longer than expected to come through - but should certainly be visible in 2020.
Until then, Virtu is jettisoning staff. Headcount is now 20% below its peak of 1,390 in the newly merged firms, with 149 people let go in the first quarter, 84 people let go in the second quarter and 39 people let go in the third. Being dumped by Virtu does at least seem fairly lucrative, with the average severance payment coming in around $340k in Q3.
Like banks, Virtu has an issue with the revenues it earns from equities market making, which were down 30% year-on-year in the first nine months, even when the integration of ITG is taken into account. The firm's fixed income market making revenues were down 28% in the same period. However, Virtu also has a small but fast-growing business in the form of execution services, which sells its execution capabilities to third parties like institutions, banks and broker dealers. Here, revenues were up 270% year-on-year in the first nine months of 2019.
Based on spending on compensation and payroll taxes in the first half of this year, Virtu pays its average employee around $326k in salary and another $150k in stock-based bonuses. Not everyone gets this amount. As we reported yesterday, publicly available salaries for Virtu employees hired on H1B visas in New York City are rarely over $150k...
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