Exclusive: High-speed trader Infinium Capital winds down -president

Posted Mar 6, 2014 by Tom Polansek (Reuters)
High-speed trader Infinium Capital Management, which has struggled financially, has stopped trading and is working to wind down the company, President Mark Palchak told Reuters on Thursday.
Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange
With the permission by Reuters / Brendan McDermid

By Tom Polansek

CHICAGO (Reuters) - High-speed trader Infinium Capital Management has stopped trading and is working to wind down the company after struggling with financial problems, President Mark Palchak told Reuters on Thursday.

The closure of Infinium, which was founded in 2003, reflects pressures on high-speed trading firms stemming from increased competition and regulatory oversight, low interest rates that have hurt volume and volatility, and the uncertain global economic recovery.

Currency broker FXCM Inc and a subsidiary have acquired five trading desks, physical assets and 48 employees from Infinium to start a new joint venture, V3 Markets, Palchak and FXCM said. Palchak is chief executive of the new company.

V3 Markets will operate with a "streamlined cost structure" compared to Infinium, FXCM's chief executive, Drew Niv, said on a conference call after the company reported quarterly earnings.

"We are in the early stages of clearly rebuilding a business that is in need of a greater degree of risk supervision than it had in its prior life," he said.

Infinium had been among the higher-profile electronic trading groups and was a household name among Chicago traders. The firm traded in commodities, energy and other markets.

A favored tool of hedge funds and other institutional traders, high-speed trading uses algorithmic software programs to post orders in the blink of an eye.

By acquiring assets from Infinium, FXCM and subsidiary Lucid Markets Trading are able to expand into commodities and other markets, diversifying their exposure to volatility, Niv said.

"With the crazy weather we're having and Russian tanks roiling agriculture and energy markets, sparking massive volatility in those products, financial instruments like G10 currencies are completely unmoved and remain near record-low volatility," he said.

"As Lucid implements its risk controls and other trading smarts into the V3 infrastructure, we will be dialing up trading to take advantage of these uncorrelated volatilities."

The total price for Infinium's assets was not disclosed. It included approximately $11.9 million owed by Infinium to FXCM, according to the brokerage.

Financial problems at Infinium date back years, according to a lawsuit filed against the firm in January in U.S. District Court in Chicago. The firm lost $6.6 million in 2012 and $6.1 million from January 1 to July 31, 2013, court documents say.

Infinium last year shed a number of employees, including its chief operating officer, and one of its co-founders came out of retirement to lead the firm.

(Additional reporting by John McCrank; Editing by David Gregorio and Leslie Adler)