Virtu Financial Buys Dutch Market-Maker in Push to Provide European ETF Liquidity

Courtesy of WSJ with reporting by Jenny Strasburg

Virtu Financial LLC said it bought a Dutch market-making business, bolstering the U.S. trading firm’s presence in a European exchange-traded-funds market that has emerged as a profitable battleground for high-speed traders.

Virtu, one of the most-active traders of stocks, commodities and other securities in the U.S. and Europe, acquired the market-making division from Amsterdam-based Nyenburgh Holding BV, the companies said. They declined to disclose the value of the transaction.

Market makers stand ready to buy and sell securities at quoted prices, helping ensure that trades are executed smoothly. Market makers take a sliver of profit from each transaction, and the flow of data can help them profit in their own trades.

With the Nyenburgh deal, New York-based Virtu gains relationships with ETF issuers as well as buyers and sellers of the instruments, which include pensions and hedge funds, said Chris Concannon, a Virtu partner and chief compliance officer of its broker-dealer operation. Virtu has traded European ETFs since 2009.

Virtu expects growth in the ETF market will help fuel trading in the assets that underlie them, from gold and palladium to agricultural-commodity futures. The firm, through its Dublin-based office, became a registered market maker on the London Stock Exchange in August, and is registering on major European exchanges, said Douglas Cifu, Virtu’s president and chief operating officer.

The deal comes amid mounting competition and regulation in the European market for ETFs, or investment funds that track the performance of indexes and other baskets of individual securities. Unlike in the U.S., the majority of ETF trading in Europe occurs in over-the-counter transactions. But new rules are pushing more ETF trading onto exchanges, providing opportunities for  trading firms like Virtu to grab a bigger share of the market.

Noted James Ryan of London-based ETF broker WallachBeth International, “Virtu’s expanded role as a liquidity provider in European-based ETFs will necessarily enhance the playing field as the ETF market in Europe continues to evolve and otherwise catch up to the US market in terms of both institutional investor transparency and overall liquidity.”

Virtu, which was founded in 2008 by former New York Mercantile Exchange Chairman Vincent Viola, explored other potential deals this year involving European ETF-trading firms. Virtu executives met with Nyenburgh in April, around the time the Dutch firm was exploring other possible partnerships, according to a person familiar with the matter.

Bart Lijnse, who runs Nyenburgh’s ETF-trading business, said he is one of about 10 people with the firm moving to London to join Virtu.