Market slowdown hits big traders Virtu and Citadel Securities

The recent market downturn has caused financial hardship for two of the largest trading firms in Wall Street: Citadel Securities and Virtu Financial.

Virtu reported on Wednesday a drop of 23 per cent in its net trading income year-on-year for the three-month period ending June. The New York-listed firm earned 37 cents per share during the third quarter. This is down from 73cents per share for the same period in 2013, when the markets were in a slump and trading volumes increased.

Citadel Securities is a private company owned by Ken Griffin. According to confirmed figures, the net trading revenue at Citadel Securities dropped 29 percent in the second quarter compared to the same period the previous year.

Virtuchief Executive Doug Cifu stated that the second quarter started badly, as investors were worried about a wave in turmoil within the banking sector. However, the situation improved.

Cifu said in an earnings call that April was the slowest month they’d seen in 10 years. Cifu said in an earnings call that the performance improved throughout the quarter, and continued to improve through June. . . “It’s only 17/18 trading days left in July and this trend has continued.”

Citadel Securities and Virtu Securities both trade in options and corporate bonds, but they are most well-known for their US equities business, where they “wholesale”, including orders from retail investors who use online brokers like Robinhood.

The retail activity has decreased from January’s record highs, when it represented to as much as 25 per cent by some measures. The situation has improved in recent months, largely due to a rising stock exchange, led by major tech companies such as Nvidia, Alphabet, and Google parent company Alphabet.

Virtu’s shares are down almost 10% this year, despite benchmarks like the S&P 500 gaining ground. The blue-chip index is up almost 19% and reached its highest level in more than a decade on Tuesday. Virtu’s shares rose 3 percent to $19.07 in the early hours of Wednesday.

Citadel Securities reported $2.7 billion in net trading revenues in the first six months of this year. This is a 36% decline compared to last year. Despite this, Citadel Securities paid $500mn in dividends to its shareholders including Griffin. According to sources familiar with the situation, the company generated at least $1bn of net trading revenue each quarter for the past 14 years.

Moody’s confirmed Citadel Securities’ investment-grade Baa3 credit rating in a review published two weeks ago. The lower volatility levels this year will weigh on trading volumes. However, Moody’s added that it expects Citadel Securities’ profitability to be robust, due to the company’s healthy market share across different asset classes and geographical regions.

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