(Adds Virtu’s confirmation of stake purchase)
HONG KONG/SINGAPORE, Dec 8 (Reuters) - Singapore state investor Temasek Holdings has agreed to buy a minority stake in Virtu Financial Inc IPO-VIRT.O, the New York-based electronic dealing firm said on Monday, in a bet on the growth of automated trading globally.
Temasek is buying a portion of U.S. private equity giant Silver Lake Partners’ stake in the company, Virtu said in a statement.
Virtu did not disclose the terms of the deal. A spokesman for Temasek confirmed the investment, but declined to comment on the size of the deal.
A person familiar with the discussions said the Singapore state investor will purchase just less than 10 percent of Virtu Financial in a deal worth slightly less than $200 million.
“Temasek is an ideal partner for Virtu,” said Virtu Chief Executive Doug Cifu in the statement. “Their extensive knowledge and relationships in Singapore, Asia and the Far East will be particularly beneficial as we look to expand into new asset classes and geographies.”
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 U.S. 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 U.S. and European markets, after the state investor purchased a 10 percent stake in London-based information services company Markit last year and invested $500 million in U.S. lab equipment provider Thermo Fisher Scientific earlier this year. (Reporting Michelle Price and Saeed Azhar; Editing by Ryan Woo)