US Markets

Selloff not due to high-frequency trades: HFT CEO

Virtu Financial's secret sauce

As investors across the world watched the Dow Jones industrial average plummet more than 1,000 points early Monday, one high-frequency market maker was racking up the trades at a rate four times its average.

But that doesn't mean the high-frequency trading firm had any exorbitant role in the market selloff, according to Virtu co-founder Doug Cifu.

"We don't cause volatility, as a market maker we're absorbing volatility and we think we soften it," he told CNBC's "Squawk on the Street" in an interview Tuesday. "We're really just in the role of transferring risk from natural buyers to natural sellers."

And with Virtu's size and scale there is a lot of risk transferring to manage. The market maker trades about 11,000 financial instruments in 225 markets across 35 countries, according to Cifu. In total, that amounted to 16 million trades Monday, about four times the action seen on a normal day. But that doesn't always necessarily mean dollar signs.

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"Some types of volatility can be very painful and very difficult for us," he said. "Generally we make a little more money than we lose on our trades, about 50 to 51 percent of our trades were profitable yesterday. But we traded millions of times yesterday and lost money—that's part of our role as a market maker."

The great debate: Combating HFTs image

Its other role as a market maker, especially as one dealing with high-frequency trades, is to take a lot of heat from investors and critics who share the opinion that they overly contribute to selling pressure that can cause even more panicked selling. To that point, Cifu complemented and even mentioned tightening the volatility bands that kicked in to halt trading on over 1,200 stocks to shore up panicked moves, adding that critics often only focus on half the equation.

"As an investor I'm not happy about what happened yesterday," he said. "We're obviously much happier today and we probably won't get credit because we're making a lot of markets on the way up."