Even After Recent Surge This High-Frequency Trader Still Shows Value

Virtu Financial has rallied immensely since the start of the coronavirus bear market as volatility has soared through the roof not just on a regular basis but daily and even intraday. This historic volatility is precisely what fuels Virtu, even years after its 2015 IPO still relatively unique as a public high-frequency trading company. While volatility likely will eventually settle down and Virtu's immediate trading income similarly nonetheless this pandemic-spurred volatility has provided Virtu both likely ample new assets from trading income and greater market knowledge of how it can operate in extreme volatility environments.

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Trading Cowboys Eventually Fall Apart But Virtu Seems To Play It Cautious

Virtu Financial is, in some ways, what happens when you say you take a few scattered trading desks across the Wall Street banks and merge them into a large, nimble, concerted institution devoted purely to trading, market making, and the furtherance of its trading technique. Virtu, self-described in a recent 10-K filed with the SEC as a company that "leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients," occupies, therefore, an unusual space in-between the market-making exchanges and the trading desks of major banks.

It is worth noting that Virtu Financial is still a fraction of the trading revenue of the major bulge brackets. In 2019, for example, Virtu Financial made $912.316 million in net trading income as compared to Goldman Sachs' $10.157 billion in market making. In Q4 2019 Virtu Financial pulled in $228.705 million in net trading income as compared to Goldman's $3.480 billion in net revenue in its marketing making and trading global markets segment.

Virtu reported that as of the end of 2019 it had $773 million in cash and equivalents and $1.957 billion in long-term debt. For a company, even after its recent rallying with a market capitalization of about $4.57 billion these are extremely liquid, green numbers. Then again it needs to keep such good numbers as since it primarily is in the business of trading and market-making for it to suddenly find itself in the red or significantly stressed means there is an issue with its very business model.

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Disclaimer: These are only my opinions and do not constitute investment advice.

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