Just a little more than a year after Virtu Financial acquired KCG Holdings, sources say the firm has been in talks since April with ITG about acquiring the tech provider.
Virtu, like some of its nonbank rivals, has recently focussed on building its own client-centred business. Virtu’s acquisition of KCG last year brought with it established direct to client market making relationships, and ITG is expected to broaden the client type.
Virtu declines to comment on the rumoured acquisition, but as some sources point out, Virtu’s top executives – CEO Doug Cifu and CFO Joseph Molluso – each have deep backgrounds in M&A.
ITG’s equity-focussed dark pool, which has traction amongst the real money sector, is an attractive asset. This client segment is one the nonbanks have eyed, but have yet to make serious inroads with, sources say. To date, some of the nonbanks have established direct streaming to banks, retail brokers, aggregators, platforms and hedge funds, but forming direct relationships with asset managers has been more elusive.
The attraction for clients in trading direct with nonbanks stems from banks’ relative unwillingness to take risk in recent years, while the nonbanks have not been encumbered the same way by rules and regulations.
Jump Liquidity (which launched last week as the direct trading focused brand of Jump Trading), XTX Markets (which was amongst the first nonbanks to market direct to clients in early 2015), Citadel Securities and HC Technology are among those that have made inroads in the direct market. Some of these are multi-asset, such as Jump, while some have primarily been within the FX realm, such as XTX.