Temasek buys stake in US electronic trading firm Virtu

Temasek Holdings logo at the office at The Atrium@Orchard.

HONG KONG/SINGAPORE - Singapore state investor Temasek Holdings has agreed to buy a stake in New York-based electronic dealing firm Virtu Financial Inc IPO-VIRT.O , said a person familiar with the talks, betting on the growth of automated trading globally.

Temasek will purchase just less than 10 per cent of Virtu Financial, said the person.

The Wall Street Journal reported the deal earlier on Monday, putting the valuation of the stake at around US$200 million (S$264 million).

The newspaper said Temasek was buying the stake from US private equity giant Silver Lake Partners.

Virtu Financial and Silver Lake Partners could not immediately be reached for comment. A spokeswoman for Temasek declined to comment.

Virtu is one of a number of privately-held and capitalised automated trading firms that make money by trading stocks, futures, and options, using computer-driven strategies that exploit discrepancies in the price of securities as opposed to betting on long-term fundamentals.

The rise of these firms, often known as high-frequency traders (HFT) because they execute hundreds of thousands of orders a second, has long-stirred intense controversy in the US and Europe where critics claim they have an unfair advantage over retail and traditional institutional investors.

Virtu postponed a long-trailed IPO in April amid increased market turbulence and an international row over HFT sparked anew by the publication of Flash Boys, the lastest book from best-selling author Michael Lewis which claims the practice distorts the markets.

Advocates of high-frequency trading say these firms provide a vital source of liquidity to the markets and help to reduce pricing volatility.

The deal marks the latest foray by Temasek into the US and European markets, after the state investor purchased a 10 per cent stake in London-based information services company Markit last year and invested US$500 million in US lab equipment provider Thermo Fisher Scientific earlier this year.