Electronic trading company Virtu Financial Inc on Wednesday announced an agreement with a major Chinese brokerage firm that has allowed it to begin making markets, providing two-sided quotes to help ease trading, in that country. Virtu, a global market maker in equities, fixed income, currencies and commodities markets, did not name the new partner. It did say the introduction came from Singapore state investment firm Temasek, which took a stake of around 10 percent in Virtu in December.
New York-based Virtu has been providing liquidity in China only to commodity futures through data centers in Shanghai, but will eventually move to other asset classes, Chief Executive Officer Doug Cifu said in an interview. "We've really just dipped our toe in the water," he said.
China's stock markets have fallen about 30 percent since mid-June, prompting the country's ruling Communist Party to enlist the central bank, the state margin-lender, commercial banks, brokers, fund managers, insurers and pension funds to buy up shares, or help fund their purchase, to keep the Shanghai and Shenzhen markets afloat. Chinese regulators have also been investigating the effects of automated trading on stock markets in a crackdown on speculation. Citadel Securities, a unit of the US company that also owns hedge fund Citadel LLC, confirmed that one of its Shenzhen-based trading accounts had been frozen.
"I'm concerned whenever any market participant has a disruption like that," Cifu said. The Shanghai and Shenzhen exchanges have so far frozen 38 trading accounts for trading irregularities. Virtu is taking a long-term view of China. As the situation evolves there and volumes in the country's capital markets grow, the regulatory environment will likely stabilize, Cifu said. "We like nice, stable, open, transparent markets where the rules of the road are very clear and we can be open and regulated," he said. "We are confident that will end up being the situation in China."
Virtu said earlier on Wednesday that it earned $474,000, or 1 cent a share, in the second quarter. It was not publicly traded in the year-earlier period, so there were no comparable figures. The results included $44.2 million in one-time charges from stock-based compensation awards from before the company went public in April. Stripping out one-time charges, Virtu earned 27 cents per share. Revenue increased 11.7 percent to $182 million.
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