Virtu Financial Inc. has pulled the plug on its initial-public-offering plans for now, due to market turbulence and controversy around the release of a book criticizing its industry, high-frequency trading, according to people familiar with the deal.
The indefinite postponement of the IPO comes amid public and regulatory concern about high-speed trading—the computer-driven, rapid-fire trading of stocks and other assets—after the release a few weeks ago of writer Michael Lewis's book "Flash Boys," which argues that the practice distorts markets and cheats investors.
The decision also amid an intensifying investigation into high-frequency trading by New York Attorney General Eric Schneiderman, who has described some of the strategies of these firms as "Insider Trading 2.0." His office sent a wave of subpoenas to more than half a dozen firms in the past week. High-frequency trading firms say they help make the market more efficient and make it easier for investors to trade.
Virtu didn't get a subpoena from the New York Attorney General's office, but it received a letter requesting that the company volunteer information about its trading operations, according to people familiar with the letter. Mr. Schneiderman is seeking information about the strategies high-speed trading firms use and any arrangements they have with exchanges and private trading venues, known as dark pools, some people have said.
Virtu, one of the world's largest high-speed trading firms, had planned to raise more than $200 million in its IPO, at a valuation of about $3 billion, people familiar with the deal have said. It hoped shares would begin trading by mid-April, the people said.
But the release of the book on March 31 coincided with the start of the IPO process, and the negative market and public reaction to the book caught Virtu by surprise, leading it to hold off on launching the deal, they said.
Over the course of the past two weeks, New York-based Virtu held several meetings with investors to gauge interest in the offering, some of the people familiar with the deal said. These investors expressed concern about investing in the trading and exchanges sector, they said.
In the end, Virtu executives earlier this week decided to indefinitely delay the IPO, people familiar with the decision said.
There are no plans to withdraw the paperwork for the IPO, some of the people said. Virtu hopes it can quickly restart the process if the market rebounds and controversy surrounding the book and the investigations subsides, they said.
Since the release of "Flash Boys," shares of some comparable companies are down sharply. That includes a 13% drop in KCG Holdings Inc. KCG +1.53%
The IPO market also has been choppy. Of the 10 IPOs that were launched in the U.S. this week, eight priced below their expected range, according to Dealogic. That is the highest number in a single week since 2004, Dealogic said.

What about Citadel ?

High-frequency trading has been good to billionaireKen Griffin.
His Citadel LLC returned more than 300 percent in a fund started as a high-frequency strategy in late 2007, according to two people familiar with the Chicago-based money manager. The $830 million pool, which added other strategies in recent years, beat the 44 percent gain of the U.S. stock market in the six years through 2013 as well as Griffin’s two main hedge funds, which together have $8.8 billion in assets and rose 45 percent in the period.
The returns of Citadel’s Tactical Trading fund give a glimpse of the fortunes made in high-frequency trading -- the rapid buying and selling of securities that relies on ultrafast computers to exploit market inefficiencies -- following the financial crisis, and before profits shrank with increasing competition. The practice is facing unprecedented scrutiny following Michael Lewis’s latest book, “Flash Boys,” which argues that it has helped rig the U.S. stock market.
“High-frequency trading hit its high in 2008 through 2010,” said Larry Tabb, founder of market-research firm Tabb Group LLC. “Then the trades started getting crowded in U.S. equity markets and it got harder to generate revenues.”
Photographer: Tim Boyle/Bloomberg
Signage for Citadel LLC hangs outside their office in Chicago.
Citadel’s Tactical Trading fund jumped about 31 percent in 2008, when the S&P 500 Index of U.S. equities slumped 37 percent and hedge funds broadly lost 19 percent. The fund has returned an annualized 26 percent since the beginning of 2008, with just five losing months, said the people, who asked not to be identified because the fund is private. The worst drop was a loss of 1 percent.

Return Profile

Mike Geller, a spokesman for Citadel at Edelman, declined to comment on the fund performance.
The return profile is very different from Citadel’s Kensington and Wellington funds, which plummeted 55 percent in 2008, a $9 billion loss that the firm didn’t recoup until 2012. The funds, which invest in everything from corporate debt to global stocks, lost much of the money on credit-market wagers in 2008. The funds returned 62 percent the following year as fixed-income markets rebounded.

Griffin, 45, has since seen improvement in his main hedge funds, which have returned an annualized 26 percent since their 2008 losses. His plan to build an investment bank following the financial crisis failed less than three years later amid departures of top executives.
Citadel Securities, its business of filling buy and sell orders for clients, pays retail brokers like TD Ameritrade Holding Corp. hundreds of millions of dollars to send orders its way, Lewis reported in his book, which also describes the unit as using high-frequency trading. Citadel Securities says it executes about 14 percent of U.S. consolidated volume in equities and 20 percent in U.S.-listed equity options volume.