Profiting from the Panic
Then you have the market makers, the high-frequency traders like Virtu Financial. Their job is to be on both sides of a trade, buying and selling securities constantly. In calm, orderly markets, the profit on each trade is wafer thin. But when volatility strikes, the gap between the buying and selling price, what’s known as the spread, widens dramatically.
It’s like running the only currency exchange in an airport during a national crisis. Suddenly, you can charge a much wider margin, and people will pay it because they’re desperate. Virtu’s algorithms are designed to do this thousands of times a second across countless markets. While others see chaos, they see a goldmine of widening spreads. It’s a brutal, but highly effective, way to skim the froth off a panicked market.