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FINRA Fines Virtu for Abuse Since 2013

Virtu Americas LLC just received several fines for several violations and failures from way back in 2013. In addition, FINRA found stop orders and certain orders executed prior to the market opening.

Allegations are centered around executions and priorities on pending orders from May 2013 to September 2019. During that period, the broker executed 35% of its OTC orders outside its Manning system with no written methodology.

Said failure created a “substantial risk,” or so the watchdog described, given the firm’s impact in the OTC market.

Handling orders before market open provide benefitting trading prices to the market maker, but FINRA considered them a market disruption.

Virtu was described as one of the largest OTC market makers in the dollar trade, and share volume.

Using high-frequency strategies, Virtu buys and sells prices while profiting off bid-offer spreads. The company makes markets over 25,000 financial instruments in 235 branches throughout 36 countries worldwide.

The broker paid a total of $125,000 for settlement.

Virtu’s 2017 Acquisition

Virtu Financial acquired then-rival KCG Holdings, Inc, now Virtual Americas LLC, for $1.4 billion in cash in 2017.

Commenting on the acquisition, the company’s CEO, Douglas A. Cifu, described KCG as the perfect fit with Virtu’s strategic priorities. KCG’s “superior algorithm and propriety analytical tools” helped them expand technological expertise to customer wholesale order flow.

Both companies use technology for market efficiency, and professionals within both companies could allow them to achieve more together.

The acquisitor funded the cash transaction, and debt refinances with gross borrowings of $1.65 billion.

Before the acquisition, KCG Holdings, Inc, was a provider of retail and institutional securities trading services.

Total shares reached $9 billion in June 2017 after a 3.6% month-on-month growth, doubling the previous year’s figure at $4 billion.

Their US equity shares reached $28.7 billion, another increase month-on-month and year-on-year.

However, on their last year as KCG, their US equity shares dropped 11.6% at $221.4 million.

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