Both Virtu and Flow Traders had their IPO in the last year. On May 4th both of them released disappointing first quarter earnings. Turbulent markets are good for traders. One could expect these stocks to be stable. When markets plunge, they should be fine. When markets soar, a rising tide lifting all boats. But it doesn’t work like that in the real world.

Flow Traders cut the microwave

Nothing beats the speed of light. But not all light is equal. Fiber optics is the slowest, laser networks the fastest (but hard to make economical). Connection with microwave dishes gives the fastest connections in practice.

Flow Traders had their own microwave network. If you read Alexander Laumonier’s sniper in mahwah, you know it can be a pain to build and maintain such networks. All those towers in the countryside, angry farmers and evil competitors.

Unfortunately, the propietary microwave network became a nightmare for Flow Traders. Spending millions in building the network, but the path between the dishes was too long. Making it a slow and worthless network. Buying off-the-shelf connections from Custom Connect or McKay Brothers gives a faster connection against lower prices.

They put up efforts to sell their towers and dishes. Alas, no buyers here. Though there have been talks of a sale to American buyers. Anyway, the value is written off (€2 million). Saving €1.2 million a year. Both numbers sound too high.

Trading revenue stable

The trading revenue income at Flow was almost the same as last quarter, €64,6 million. Stability is good, but not when you’re selling the story of a growth company. See the trading income graph in the presentation. Management see upward pointing lines in every chart. Other technical analysts see alternative lines.


The results from the Singapore office was much lower than last quarter. The margins came back to earth. No turmoil in China this quarter. Still, reinforcements are sent to Singapore. After a decade, Fieke Korporaal left Optiver to join Flow Traders in the far east.

Margins up in the West

The margins Flow Traders capture increased in Europe and the Americas. That’s a good thing. But it also marks the fact Flow doesn’t compete in the SPY’s of the market. They have no choice but to leave the speed contest to others. The firm had performed good – the stock suffered under sky high expectations and multiples.

Virtu in the same boat

Virtu didn’t fare much better. The stock dropped suspiciously before the figures. And after the earnings release it dropped again. The firm has half headcount of Flow Traders. Still, Virtu earns about twice the profit. Virtu is doing a lot more than straight ETF market making.  For instance, it used to earn millions in FX trading.

Currency trading slump

But the days of easy money for HFT’s in currency trading are gone. And they won’t come back. The landscape in currency trading is changing. Banks are limited in their “last look” possibilities. Last look means a bank has a short moment to contemplate execution of a trade (or say  “nah, on second thought, we’re out” – when market moves the wrong way).

To avoid using last look too often, banks don’t want to trade with smart and fast HFT’s like Virtu anymore. The volumes traded in FX markets are decreasing. And special situations like the CHF don’t occur every year. You could say everybody is earning less in the professional currency trading.