Market-making firm Virtu Financial Inc. sued to block its former head of client technology from accepting a senior role at prime broker Clear Street LLC, saying he would inevitably share its “most valuable trade secrets” with a budding competitor.
(Bloomberg) — Market-making firm Virtu Financial Inc. sued to block its former head of client technology from accepting a senior role at prime broker Clear Street LLC, saying he would inevitably share its “most valuable trade secrets” with a budding competitor.
Virtu said in a suit filed Thursday in New York state court that Nathan Clark, who resigned on Aug. 10, would be violating an 18-month non-competition agreement by accepting a position as Clear Street’s chief technology officer. The company asked for a court order preventing Clark from breaching the agreement.
“Technology is at the core of Virtu’s business,” the firm said in its suit, describing a proprietary platform developed over years that allows it to process millions of trades a day. Virtu said Clark “either helped develop or was intimately familiar with the development of the most important elements of Virtu’s trading technology.”
Clark didn’t respond to requests for comment. Clear Street declined to comment.
The lawsuit illustrates the technological arms race on Wall Street. Virtu and Citadel Securities are the largest firms in the electronic wholesale trading market, handling more than half of all volume. In addition to its market-making business, Virtu also offers execution services for institutional investors and said Clear Street is seeking to expand in that sector.
According to the suit, Clear Street hired away three veteran Virtu employees in the past year and is “seeking to hire Clark as part of its efforts to use Virtu talent and knowledge of Virtu’s proprietary technology to further build out its business.” Virtu said that Clear Street’s ambitions were also evidenced by a October 2022 “partnership” proposal in which it offered to “asset purchase” Virtu’s institutional sales team and license its software.
Virtu also noted that Clear Street in April 2023 secured $435 million in funding, mainly from venture capital firms.
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“Flush with venture capital raised to super charge its growth, and with the attendant expectations from its venture investors, and having tried unsuccessfully to buy or license technology and assets from Virtu to grow its execution and trading capabilities, Clear Street is now seeking to hire as its chief technology officer Clark,” Virtu said.
The lawsuit comes at a challenging time for Virtu, which warned investors in July that it expected to be sued by the US Securities and Exchange Commission over the firm’s safeguards for trading data.
The case is Virtu Financial Operating LLC v. Clark, New York State Supreme Court, New York County (Manhattan).
(Updates with Clear Street declining to comment.)
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