The mysterious man behind the bid for Knight CapitalDecember 12, 2012: 8:41 AM ET
Vincent Viola, CEO of Virtu Financial, wants to take Knight Capital private in a deal that would remove transparency from one of the market's largest trading hubs.
By Leah McGrath Goodman
FORTUNE -- Vincent Viola, the chairman and CEO of Virtu Financial, the closely held New York firm reportedly making an all-cash offer of up to $1.6 billion for Knight Capital Group, is a man who strongly prefers to stay out of the limelight.
Yet if Virtu wins the deal, this former gasoline trader may soon be steering a colossus that will serve as one of the main pillars of the U.S. stock market – not to mention foreign exchange, derivatives and even a smattering of dark pools. However, unlike Chicago-based Getco LLC – Viola's chief competitor in the bidding war for Knight – he reportedly hopes to take the merged company private, which would put a substantial portion of the nation's key markets behind closed doors where they will be much harder to monitor. Knight alone handles roughly $20 billion of shares a day through the New York Stock Exchange, while Virtu is one of the top five global high-frequency trading firms.
Given the transparency issues already dogging U.S. markets – which have increasingly channeled orders into high-frequency algorithms and private trading pools – the stakes are high.
But just who is Vincent Viola? Despite quietly becoming a Wall Street mover and shaker, he is not one to affix his name to projects or avail himself of the press. He works below the radar.
A brief glance at Viola's resume reveals a string of businesses and executive posts swiftly taken up and swiftly abandoned. Indeed, while Knight is 17 years old and Getco was founded in 1999, Virtu, in its current incarnation, was formed in 2008. "Vinnie is for Vinnie," says a former colleague intimately familiar with Viola's career. "He a master at leveraging people; he's very smart and he's very charismatic. It is very difficult to not want to be on Team Vinnie. But if you think you're going to be the one person who he'll need past your utility for him, shame on you."
At the same time, Viola is described as a phenomenal businessman, a trailblazer able to identify market trends well in advance and capitalize on them before anyone else. "Vinnie is not a details guy," says a fellow trader who watched Viola execute his first trade at the New York Mercantile Exchange, the world's dominant energy and metals market. (It was for five platinum futures contracts). "He is a macro thinker. He finds the best people in the business to carry out his vision and he pays them well."
Though counted as one of the most fearsome traders in the history of Nymex (Viola, a kung-fu fighter, cloaked himself in a Mafia-esque mystique, according to a number of Nymex traders) he is also a devout Roman Catholic and committed philanthropist. Working his way up the chain of command at Nymex, he eventually became the market's chairman, serving from 2001 to 2004. His biggest accomplishment: reopening the market just days after the September 11 attacks.
Those who know Viola describe him as chameleonic and temperamental, a master of both masquerade and reinvention. The son of a truck driver, Viola rose from a rough patch of Brooklynto attend the military academy at West Point in 1972, serving as an infantry officer in the 101st Airborne Division before ascending to the rank of major. He returned to civilian life in 1993, after some of his neighborhood friends from Brooklyn introduced him to the world of trading.
Viola was brought down to the hardscrabble commodities-trading pits of Nymex in the 1980s and there cut his teeth as a trader. "He started out nervous, like all the other guys risking their own capital," says the fellow trader. "I mean, it is not monopoly money you're working with – it's the real thing and you could lose everything." But Viola's friends looked out for him and he soon learned, the trader says, that "if you know the order flows, you can make a lot of money."
This early revelation, according to the trader, has been the cornerstone of Viola's financial success. Virtu, which risks its own money as a proprietary trading firm, in addition to making markets for others, will stand at the helm of a wellspring of billions of order flows if it acquires Knight (KCG). "If Vinnie gets Knight, he'll literally be the largest trader in the world," the former colleague says. "And he's very, very aware of that. He is not a technology guy and he's not into this as a technology play. He will be focused on the trading and the intelligence it will give him."
The fellow trader who worked alongside Viola in the pits agrees. "The true underlying value of Knight isn't its platform. It's the macro view of the market it will give to anyone who owns it. Whoever gets it will be able to see huge sections of the market and trade on it. If Knight goes private and loses all transparency, that's not going to be a good thing for the nation's investors."
While a recent filing indicates Getco's cash-and-stock offer for Knight would not lead to shareholders owning more than 20% of the merged company and few owning more than 10%, that failsafe is not assured by Virtu, which enjoys financial backing from part owner Silver Lake Management, a Menlo Park, Calif., private-equity firm. Virtu is reportedly talking to Credit Suisse (CS), Barclays (BCS) and Citigroup (C) about providing financing for the deal. Buyout firm Cerberus is also reportedly interested in joining the bid.
Both Viola and Silver Lake declined to comment.
Leah McGrath Goodman is the author of The Asylum: The Renegades Who Hijacked The World's Oil Market.