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When Michael Lewis released Flash Boys: A Wall Street Revolt, he exposed a scam that most investors had never heard about: high frequency trading. It’s a fraud that costs investors more than $20 billion per year.
Every investor loses money due to high-frequency trading. Whether you’re an active trader, long-term investor, or simply own mutual funds through your 401(k), high frequency traders are hurting your returns.
Most people think of high-frequency trading as being nameless, faceless computers…silently skimming millions from average investors.
Nothing could be further from the truth. High frequency trading has a face. His name is Vincent Viola. And you’ve probably never heard of him.
Viola is “one of the nation’s foremost leaders in electronic trading.” And prior to launching his own trading firms, he served as the chairman of the New York Mercantile Exchange or NYMEX.
You may be wondering, “How much money do high-frequency traders make?” The short answer is that they make TONS of money.
When Viola’s high-frequency trading firm named Virtu filed for an IPO back in March, we got a glimpse into the vast profits.
The company describes itself simply as “a leading technology-enabled market maker and liquidity provider to the global financial markets.” In more simple terms, we can simply describe the company as a high frequency trader.
Virtu’s S1 filing with the Securities and Exchange Commission showed just how profitable the business is. Last year, the company had $664 million in revenues. And 94% of those revenues were from “trading income.”
After accounting for all expenses, Virtu turned a profit of $182 million last year. And that translates into an extremely healthy profit margin of 27%. For comparison’s sake, that’s about double the profit margin of most big Wall Street banks.
No man stood to profit more from the Virtu IPO than founder Vincent Viola.
As you can see, owning a high-frequency trading firm is a great way to get rich. Prior to the release of Flash Boys, The Financial Times estimated that Virtu’s IPO would be valued at $3 billion. And that would value Viola’s 65% stake at more than $2 billion.
For decades, Viola has been building wealth through a variety of trading enterprises. His trading profits provided him with the cash to buy the NHL’s Florida Panthers last year for $240 million.
We also got a glimpse into Viola’s home life last year when he put his New York City mansion on the market. The 40-foot wide house with seven bedrooms and nine bathrooms is located at 12 E. 69th Street, and was built in 1884.
Viola bought the 16,000 square foot home in 2005 for $20 million. He immediately invested in massive improvements including an expansion of the basement to accommodate an indoor pool, and a movie theater modeled after a movie house in Queens.
In addition to his attempt to cash out of Virtu with its IPO, Viola is also trying to unload his Manhattan mansion. With a price tag of $114 million, he would turn a handsome profit. At that price, the mansion would be the most expensive home to ever sell in New York City.
Immediately following the release of Michael Lewis’ Flash Boys, Virtu canceled its plans for an initial public offering. Technically, the company could attempt an IPO again.
However, New York Attorney General Eric Schneiderman has his sights on Virtu. Last month, he said, “Some high-frequency traders appear to trade with virtually no risk. Last week, a large high-frequency trading shop disclosed that it made money on every trading day over the course of four years.”
This ongoing investigation is likely to put a cloud over any Virtu IPO plans.
Virtu shows us that if you turn a trading profit every day, you’ll make a ton of money. However, it’s clear to everyone that the game is rigged if a HFT firm like this can turn a profit every single trading day.
The predatory trading practices of HFT firms like Virtu are the focus of the latest bestseller from Michael Lewis. To help you better understand Wall Street’s latest scam, I want to send you a hardcover copy of Flash Boys: A Wall Street Revolt (retail price $27.95). Through a special deal with the book publisher, I’ve secured 500 copies of Flash Boys for my Daily Profit readers.
Learn how to claim your free copy of Flash Boys right now. I’m inviting all 450,000 of our e-letters subscribers and paying customers to claim a copy of Flash Boys. I want to make sure you have an opportunity to get a free copy of this amazing book that exposes Wall Street’s latest fraud. Just click here now to get your copy.