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Temasek and automatic trading

Temasek, an investment company managing Singapore's surplus revenues, has bought a significant stake in a high-tech trading company: that is, 10% of Virtu.

Here's what Reuters said about the deal on Sunday.

Virtu's CEO is happy about this. "Temasek is an ideal partner for Virtu," etc. Why? Because Virtu is expanding "into new asset classes and geographies."

But what comes to my mind is that Virtu is the kind of operation that serves as the missing 'bad guy' in Michael Lewis' book, Flash Boys.

Lewis' book plays up the market distortions, the "rigging" of markets in his term, that can be accomplished through contemporary electronic/algorithmic wizardry. When the emphasis is on the speed for the wizardly machinations, this is called "high-frequency trading," though speed itself may not be quite as 'of the essence' as that term suggests.

One feature of Lewis' book that many readers found odd was that while he highlights and profiles the activities of some individuals who are seeking to create an 'antidote' to the poison of HFT, and he describes the poison itself in technical terms, he doesn't describe the poisoners in human terms. Who are they?

The most we get is that Goldman Sachs is involved, and hired Sergey Aleynikov to help it get into the act. But we also get the idea that Goldman was a big lumbering dinosaur in this area, and that the actual troublemakers of HFT were working within smaller institutions, like nimble mammals slipping in and out of the Dino's ken.

At any rate, Lewis left them in the shadows. One of the nimble mammals, though, that he would have named had he sought to illuminate that side of his story, would have been Virtu.


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