Big traders Virtu and Citadel Securities hit by market slowdown

Receive free High frequency trading updates

We’ll send you a myFT Daily Digest email rounding up the latest High frequency trading news every morning.

A recent market slowdown has inflicted financial pain on two of the biggest trading firms on Wall Street, Virtu Financial and its rival Citadel Securities.

Virtu on Wednesday reported a 23 per cent drop year-on-year in net trading income for the three months to June. The New York-listed market maker earned 37 cents a share in the quarter, down from 73 cents in the same period last year when tumbling markets boosted trading volumes. 

At Citadel Securities, a private company majority owned by billionaire Ken Griffin, net trading revenues dropped 29 per cent in the second quarter from the same period last year, according to figures confirmed by the Financial Times.

Virtu chief executive Doug Cifu said the second quarter began badly as investors worried about a wave of turmoil in the banking sector, but subsequently improved. 

“April was one of the slowest months we’ve seen in a decade,” Cifu told an earnings call. “Performance then progressed throughout the quarter and picked up through and including June . . . It’s only 17, 18 trading days in July, and that trend has continued.”

Both Virtu and Citadel Securities are developing their presence in several markets including options and corporate bond trading, but are best known for their profitable US equities businesses where they “wholesale” orders, including from retail investors trading via online brokers such as Robinhood. 

Retail activity has slowed from the record levels recorded in January when it accounted for up to 25 per cent of trading by some measures. It has improved more recently along with a rising stock market, however, led by big tech names such as Nvidia and Google parent Alphabet. 

Virtu’s shares have fallen almost 10 per cent so far this year even as benchmarks such as the S&P 500 have rallied. The blue-chip index has gained almost 19 per cent and on Tuesday hit its highest level in more than a year. Virtu’s shares were up 3 per cent at $19.07 early on Wednesday.

Citadel Securities generated $2.7bn in net trading revenue in the first half of this year, a 36 per cent decline from last year, according to sources. However, it still paid out second-quarter dividends of $500mn to shareholders, including Griffin. The company has generated at least $1bn in net trading revenue in each of the past 14 quarters, according to people familiar with the matter.

In a review two weeks ago confirming Citadel Securities’ Baa3 investment-grade credit rating, Moody’s said the lower levels of volatility this year would weigh on market trading volumes, but added: “Nevertheless, Moody’s expects [Citadel Securities’] profitability to remain robust due to its healthy market share across various asset classes and regions.”