Virtu Financial and Citadel Securities are facing big losses this year as both market makers report significant drop in revenue.
Bloomberg reports that Ken Griffin’s Citadel Securities revenue has plunged 35% from last year’s gains as the market maker sets to compete with big banks.
“Citadel Securities generated $2.73 billion in revenue in the first six months of this year after a record $4.2 billion haul in the first half of 2022, according to people with knowledge of the matter.
The figure has exceeded $1 billion for 14 straight quarters, the people said, asking not to be identified disclosing private information.”
Trading revenue in both equities and fixed income is down compared to last year, says Katherine Doherty.
“We’re talking about the first half results, so it still remains to be seen if the second half will see a pickup in volatility.
These kinds of firms, these trading firms, these market makers they’re going to generate more profit when there’s more uncertainty.
And so last year we saw a lot of reaction from market participants based on fears of recession, we had some questions around inflation and in the war in Ukraine.
All of that was really boosting Citadel Securities profit.
Virtu on Wednesday reported a 23% drop year-on-year in net trading income for the three months to June.
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, per FT.
“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.”
Latest Wall Street News
The SEC has approved a new plan to root out conflicts of interest on Wall Street related to financial firms and the adoption of technology.
Retail investors have argued for years now that technology on Wall Street, such as high frequency trading, or HFT, plays a big role in manipulating the markets as it becomes a gateway for spoofing orders.
Spoofing is a market abuse behavior where a trader moves the price of a security up or down by placing a large buy or sell order with no intention of executing it which creates the impression of market interest in that security.
The US Securities and Exchange Commission approved a plan on Wednesday to root out what Chair Gary Gensler has said are conflicts of interest that can arise when financial firms adopt the technologies, per Bloomberg.
The agency also adopted final rules requiring companies to disclose serious cybersecurity incidents within four business days after they’re deemed significant.
While the SEC is not primarily focused on the controversial practice of high frequency trading and its technology, it is looking at AI as another possible threat to the average investor.
Companies would need to assess whether their use of predictive data analytics or AI poses conflicts of interest, and then eliminate those conflicts, according to an SEC release.
“These rules would help protect investors from conflicts of interest and require that regardless of the technology used, firms meet their obligations” to put clients first, Gensler said during the meeting.
“This is more than just disclosure. It’s about whether there’s built into these predictive data analytics something that’s optimizing in our interest or something that’s optimizing” to benefit financial firms, he said.
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