S&P: VFH Parent LLC Assigned 'B' Ratings; Outlook Stable
"The ratings on VFH reflect the firm's focused franchise in electronic market making, strong track record of consistent daily profitability, and diversification in traded products and markets, which is more than offset by its negative tangible equity, reliance on short-term secured funding, and elevated operational risk," said S&P Global Ratings credit analyst Robert Hoban.
VFH is an interim holding company affiliate of Virtu Financial Inc., whose subsidiaries conduct electronic, high-frequency trading using computer-driven trading strategies and execution to make markets in the U. S. and international equities, fixed income, currencies, futures, options, and commodities on more than 225 unique venues in over 36 countries globally. As a market maker, it aims to rapidly buy and sell securities to capture the usually narrow spread between the market's "bid" and "ask" price.
Our view of VFH's business position balances a concentration in the highly competitive and potentially volatile securities market-making, with the firm's geographic diversification and very strong track record of performance. We believe the firm's financial management and governance are still evolving as a relatively new public company.
We view VFH's capitalization as the main rating weakness given its negative tangible equity, substantial operational risk, and not immaterial credit and market risk.
The stable outlook reflects our expectation that operating performance will remain solid, with stable earnings and no increase in risk or material operational risk event losses.
We could raise our ratings over the next 12 months if the firm strengthens its liquidity sources or builds tangible equity. Conversely, we could lower the ratings if the firm faces a material operational risk event or loss, or depletes its liquidity.
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