The bloom is about to come off the High Frequency Trading bloom, but only after billions and billions of dollars were skimmed off trades.

With everyone now looking the same direction and seeing the same thing, HFT trading firm Virtu Will Delay IPO, amid furor spurred by Michael Lewis Book “Flash Boys“.

Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares, has delayed the deal, two people with knowledge of the matter said.

Virtu’s bankers won’t start marketing the initial public offering until after April 20, delaying the process from this week, according to the people, who asked not to be named because the decision is private.

The delay comes amid unprecedented scrutiny of high-frequency traders. “Flash Boys,” the Michael Lewis book released yesterday, argues that high-speed traders, Wall Street brokerages and exchanges have rigged the $23 trillion U.S. stock market. New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.

Virtu said it doesn’t believe it broke the law, “but we cannot predict the outcome of the inquiry.”

Reader Anecdotes

In response to High Frequency Trading Hits 60-Minutes Scrutiny; Trading or Skimming? Reader Sam writes …

Hey Mish,

We don’t have regular TV anymore but enjoy many other types of programming for much less than the cost of cable TV etc. So I appreciate the link to 60 Minutes as it was fantastic. High Frequency Trading is something I watch and experience daily. 

On Friday I was selling a sizable quantity of shares in a small company and from the seller side I watch a million shares trade above my sell price.  My shares were being picked off bit by bit and only a partial fill by the end of the day. It was unreal and very obviously being manipulated. The exchanges were ignoring my order to sell and matching orders at higher prices. I’ve also had the same buy side happen as in the 60 Minutes video with my buy price ignored as well.

This is most frustrating. I didn’t get my buy price even though it was in the money and with lots of shares trading. I also see data on the screen that’s in conflict with other similar data which seems to be hang-ups in the threads of information.


Something Stinks

Reader PTB with whom I shared the above email responded …

I have experienced the same thing your correspondent mentions. For example, I put in a limit sell order for a thinly traded micro-cap, and saw 100ds of thousands of shares trade ABOVE my limit sell price, and still got no execution. The broker explained that since my price was above the official bid, I had no right to an execution, which is of course technically correct.

But why were those trades ABOVE my limit about? Shouldn’t the buyers have been interested in buying my lower priced shares? Something clearly stinks.

Looks Like Fraud, Smells Like Fraud

If it smells like fraud, it’s because it is fraud. Trades should go to the best execution price. It’s clear they don’t and HFT firms are in the middle of it, skimming billions of dollars in the process. That is the only way these companies can go for years with no trading losses.

Mike “Mish” Shedlock