Many traders' eyeborws were raised one month ago when Donald Trump announced that the billionaire founder of HFT-market maker Virtu, former chairman of the NY Mercantile Exchange and West Point graduate Vincent Viola would be appointed Secretary of the Army. Even more eyebrows went up overnight when Military.com first reported that Viola had become the first Trump nominee to withdraw his nomination to be Secretary of the Army after distancing himself from his business ties proved too difficult, according to two Trump administration officials quoted by Bloomberg. Or, as some aptly put it, Viola nomination was "spoofed".
The Military Times reported that Viola said in a statement he was "deeply honored" to be nominated but cited his inability to successfully navigate the confirmation process and Defense Department rules concerning family businesses. Defense Secretary Jim Mattis was disappointed but understood and respected Viola's decision, a Pentagon statement said. Mattis will recommend to Trump another candidate soon, the statement said.
Bloomberg adds that Viola informed President Donald Trump Friday that he will be unable to accept the nomination because separating from the organizations that he has built over the last 35 years have proven insurmountable. While it is unclear if the withdrawal was prompted by the need for Viola to detail his full financial holdings and ownership stakes in other companies in ethics disclosure, without their filing it is difficult to know what business arrangements tripped him up.
For those familiar with HFT, and market structure, the background of Vicent Viola is well know. For everyone else, here is a quick reminder.
Viola, the son of a truck driver and a homemaker, is a West Point graduate and former Army infantry officer who served in the 101st Airborne Division. In 2003, he founded and helped fund the Combating Terrorism Center at West Point.
Viola’s net worth is estimated at $2.5 billion, according to the Bloomberg Billionaires Index. He founded Virtu Financial in 2008 and took the electronic market-making firm public in 2015. An earlier attempt at an IPO was shelved in 2014 after Michael Lewis’s “Flash Boys” brought the high-frequency trading firm under attack.
Viola served as chairman of the New York Mercantile Exchange from 2001 to 2004, after starting his career on the Nymex trading floor and working his way up through the organization. He’s also the owner of the National Hockey League’s Florida Panthers, which updated their jerseys last year with a crest inspired by armed forces insignia in a nod to Florida’s military community and Viola’s Army heritage.
While it is unclear how and why Trump and Viola got close in the first place, according to Bloomberg the two may have forged a connection last year when the plane used by the Florida Panthers was repurposed to fly Trump’s vice-presidential nominee Mike Pence around the country during the campaign, according to a story in the Miami Herald. Viola has an ownership interest in Eastern Airlines, an air charter company based in Miami, that is linked to the old airline of that same name that went broke in 1991, the newspaper reported.
As part of his need to divest of assets that could pose conflict of interest issues, Viola was trying to exchange his stake in Eastern Airlines for a smaller stake in Swift Air, the New York Times reported earlier this week. Swift Air is a charter company with millions of dollars in government subcontracts, the newspaper said, citing people with knowledge of the negotiations who it didn’t name.
Whatever the real reason behind Viola's unexpected withdrawal, at least it allows us to close one open thread, namely whether the arrival of such a prominent pro-HFT lobby member in Trump's administration would lead to an even greater proliferation in high frequency trading parasitism in the market, in line with what JPM hinted earlier.
Even without Viola, the answer is unclear: after all with both Goldman and JPM advising Trump on Wall Street deregulation, it seems inevitable that all the bad habits and reflexes from the last market bubble are about to be carried over, which however is a good thing. As Kyle Bass pointed out last week, if nothing else Trump is an "accelerant", and his mere presence - whether working on Wall Street's behalf or otherwise - will assure that whatever outcome awaits the US will come that much faster, at least sparing the public the pain of having to wait too long to see what happens next.