The State of Speed: A Virtu-KCG Post-Mortem

When the deal between Virtu Financial and KCG Holdings was announced in March 2017, we offered the following read of the motivations behind the announcement: Average daily adjusted net trading revenue for Q4-2016 has returned to levels not seen since late 2013 / early 2014. Chances are quite high that persistent low volatility during Q1-2017 has caused these figure to fall back to pre-2013 levels. A situation like that needs a good distraction; something that can change the narrative and allow for lots of financial restructuring and restatements.  Voila! Try to take out one of your nearest competitors… Now, with the deal completed as of July 2017, and Virtu now reporting full year 2017 highlights, we took some time to update and combine our Virtu and KCG models. Here's what's notable about this latest update: The combined financials show some signs of improvement (or, at least, stabilization), however, the market landscape has continued to deteriorate: Over the 28-year life of CBOE's volatility index (VIX) - aka the "fear gauge" - 2017 [...]