Q1 2024 Virtu Financial Inc Earnings Call

Yeah.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Virtue Earnings Call. At this time, all participants are in a listen-only mode.

Speaker Change: Ladies and gentlemen, thank you for standing by welcome to virtual earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: You wouldn't hear an automated message advising your hands, it's right to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Andrew Smith, Head of Investor Relations. Please go ahead.

Like now to turn the conference over to Andrew Smith head of Investor Relations. Please go ahead.

Andrew Smith: Thank you, Michelle, and good morning, everyone. Thank you for joining us. Our first quarter results were released this morning and are available on our website. With us today on this morning's call are Mr. Douglas Cifu, our Chief Executive Officer; Mr. Joseph Molluso, our Co-President and Co-Chief Operating Officer; and Mr. Sean Galvin, our Chief Financial Officer. We will begin with prepared remarks and then take your questions.

Andrew Smith: Thank you Michelle and good morning, everyone. Thank you for joining us.

Andrew Smith: Our first quarter results were released this morning and are available on our website.

Andrew Smith: With us today on this morning's call we have Mr. Douglas seafood, our Chief Executive Officer, Mr. Joseph <unk>.

Andrew Smith: Our co President and co Chief operating Officer, and Mr. Sean Sean Galvin, our Chief Financial Officer, who.

Speaker Change: We will begin with prepared remarks, and then take your questions.

Speaker Change: First a few reminders today's call may include forward looking statements, which represent Virtus current belief regarding future events and are therefore subject to risks assumptions and uncertainties, which may be outside the company's control.

Douglas A. Cifu: Today's call may include forward-looking statements that represent Virtu's current beliefs regarding future events and are therefore subject to risks, assumptions, and uncertainties which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available.

Speaker Change: Please note that our actual results and financial conditions may differ materially from what is indicated in these forward looking statements.

Speaker Change: It is important to note that any forward looking statements made on this call are based on information presently available to the company and we do not undertake to update or revise any forward looking statements as new information becomes available.

Douglas A. Cifu: We refer you to the disclaimers in our press release and encourage you to review the description of risk factors contained in our annual reports, Form 10-K, and other public filings. During today's call, in addition to gap measures, we may refer to certain non-gap measures, including adjusted net trading income, adjusted net income, adjusted EBITDA, and adjusted EBITDA margins. These non-GAAP measures should be considered supplemental to and not superior to financial measures as reported in accordance with GAAP.

Speaker Change: We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual reports Form 10-K, and other public filings.

Speaker Change: During today's call. In addition to GAAP measures, we may refer to certain non-GAAP measures, including adjusted net trading income adjusted net income adjusted EBITDA and adjusted EBITDA margin.

Speaker Change: These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP.

Douglas A. Cifu: We direct listeners to consult the investor portion of our website, where you'll find additional supplemental information referred to on this call, as well as reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings material, with an explanation of why we deem this information to be meaningful, as well as how management, And with that, I'd like to turn the call over to Andrew. Good morning and thank you, Andrew. This morning, we reported our first quarter results for the quarter ended March 31st. Virtu earned 76 cents in adjusted EPS.

Speaker Change: We direct listeners to consult the investor portion of our website, where you will find additional supplemental information referred to on this call as well as reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful as well as how management uses these measures.

Speaker Change: I'd like to turn the call over to Doug Good morning, and Thank you. Andrew. This morning, we reported our first quarter results for the quarter ended March 31 virtue earned 76 of adjusted EPS on 6 million per day of adjusted net trading income.

Douglas A. Cifu: $6,000,000 per day of adjusted net training, generated a 55% EBITDA margin and $203 million of EBITDA, both on an adjusted basis. We outperformed headlined volume and volatility statistics in the quarter as a result of our organic growth initiatives, as well as the solid performance in both our customer and non-customer market-making business. In particular, we had record performance in both our crypto and ETF block market making operations, which I will discuss further in a moment. Overall, the environment was mixed compared to the prior quarter.

Doug: We generated a 55% EBITDA margin and $203 million of EBITDA, both on an adjusted basis.

Doug: We outperformed headlines volume and volatility statistics in the quarter as a result of our organic growth initiatives as well as the solid performance in both our customer and non customer market, making businesses in particular, we had record performance in both our ETF block market, making operations.

Doug: Which I will discuss further in a moment.

Doug: Overall, the environment was mix compared to the prior quarter realized volatility was down about 10%, but volumes were elevated across global equities and commodities, while option volumes were flat and retail volumes were up modestly.

Douglas A. Cifu: Realized volatility was down about 10%, but volumes were elevated across global equities and commodities, while options volumes were flat, and retail volumes were up modestly. Our core business generally performed well against this backdrop. Our customer market making operations saw a modest uptick in retail volume and an increase in the attractiveness of the flow we received, offset by reduced volatility. Our market share of Rule 605 volumes remained within historical ranges, and we saw increases in executed shares and quoted spread values compared to the fourth quarter of 2023. Growth initiatives generated $1 million per day in adjusted net trading income, contributing 17% of our ante.

Doug: Our core business generally performed well against this backdrop, our customer market, making operations saw a modest uptick in retail volumes and an increase in the attractiveness of the floor, we received offset by reduced volatility.

Doug: Our market share of rule 605 volumes remain within historical ranges and we saw increases in executed shares and quoted spread values compared to the fourth quarter of 2023.

Doug: Growth initiatives generated $1 million per day, and adjusted net trading income contributing 17% of R&D.

Douglas A. Cifu: I will highlight our performance in digital assets. In crypto, as I just mentioned, we had a record quarter. The principal catalyst was the launch of 11 spot Bitcoin ETFs in the United States, which were approved by the SEC on January 10th. If you recall, for several years, we've discussed how our disciplined approach to counterparty risk management and commitment to capital efficiency have intentionally limited our presence in crypto. In fact, it was only a year ago when we announced that we had resumed limited market making crypto, which we had paused around the collapse of FTX.

Doug: I will highlight our performance in digital assets as well as ETF block, which were the standout performer this quarter.

Doug: Crypto as I've just mentioned, we had a record quarter the principal catalyst with the launch of 11 spot Bitcoin Etfs in the United States, which were approved by the SEC on January 10, if you recall for several years, we've discussed how our disciplined approach to counterparty risk management, our commitment to capital efficiency.

Doug: <unk> has intentionally limited our presence in crypto in fact, it was only a year ago. When we announced that we had resumed limited market, making any crypto, which we had pause around the collapse of fts.

Douglas A. Cifu: Since then and until January, our crypto initiatives were focused on market making and top cryptocurrencies on a limited basis. The introduction of Spot Crypto ETFs has transformed Virtu's role in the crypto ecosystem. The introduction of the ETF has played to Virtu's strengths and enabled us to leverage our scaled capabilities to service clients and the market. In advance of the ETF launch, Virtu was approved as an ETF authorized participant, and we were there on day one of trading, making markets, and facilitating flows.

Doug: Since then until January or crypto initiatives, we're focused on in market, making and talk critical currencies unlimited basis.

Doug: The introduction of spot crypto Etfs transformed virtues roll into crypto ecosystem. The introduction of the ETF has played to <unk> strengths and enabled us to leverage our scale capabilities to service clients in the market.

Doug: In advance of the ETF launch virtue was approved as an ETF authorized participant and we were there on day, one of trading making market at facilitating flows.

Doug: After normalizing for the appreciation of bitcoin this year.

Doug: Flows into these securities have been meaningful over $14 billion of net new inflows into spot Bitcoin Etfs and the gross flows have been over $56 billion.

Our ability to create type prices and like instruments in this case, the ETF for a specific spot bitcoin bitcoin.

Douglas A. Cifu: After normalizing for the appreciation of Bitcoin this year, the flows into these securities have been meaningful. Over 14 billion of net new inflows into spot Bitcoin ETFs have been, and the gross flows have been over $56 billion. Our ability to create tight prices in like instruments, in this case the ETF versus spot Bitcoin, is very similar to how we make markets in a plethora of equity and multi-asset class ETF products across the globe.

Doug: It's very similar to how we make markets in a plethora of equity and multi asset class ETF products across the globe. We are very encouraged by the persistent opportunities in these products, which has continued into the second quarter.

Doug: Further we remain confident that the inherent underlying volatility of crypto as an asset class will drive sustained elevated opportunities in crypto etfs and contribute to the heightened levels of broader investor engagement and awareness across equities and options.

Douglas A. Cifu: We are very encouraged by the persistent opportunities in these products, which have continued into the second quarter. Further, we remain confident that the inherent underlying volatility of crypto as an asset class will drive sustained elevated opportunities in crypto ETFs and contribute to heightened levels of broader investor engagement and awareness across equities and options. The market is anticipating the launch of new crypto products across ETFs, options, and futures, both in the U.S. and abroad, which will further expand the addressable market for Virtu.

Doug: The market is anticipating the launch of new crypto products across Etfs options and futures both in the U S and abroad, which will further expand the addressable market for Virtu.

Doug: We look forward to more products coming online and for the market's continued evolution, bringing a greater transparency and the efficiency that comes with centralized clearing and settlement.

Doug: Turning now to ETF block, our global ETF block initiatives also contributed meaningfully to our results and had one of its best quarter since 2020.

Global ETF volumes were up across the board our robust performance with further enabled by our efforts to broaden our distribution and our increased competitive capabilities in both equity Etfs and fixed income Etfs.

Douglas A. Cifu: We look forward to more products coming online and for the market's continued evolution to bring greater transparency in the efficiency that comes with centralized clearing and settlement. Turning now to ETF Block, our global ETF Block initiatives also contributed meaningfully to our results and had one of its best quarters since 2020. While global ETF volumes were up across the board, our robust performance was further enabled by our efforts to broaden our distribution and our increased competitive capabilities in both equity ETFs and fixed income ETFs, combined with the depth and breadth of our global client franchise. Finally, our options market-making expansion continues apace. Despite total OCC volumes being up only 2% compared to the prior quarter and muted volatility, our performance was solid, improving quarter over quarter.

Doug: <unk> was the depth and breadth of our global client franchises.

Doug: Finally, our options market, making expansion continues the pace. Despite total OCC volumes up only 2% compared to the prior quarter and muted volatility our performance was solid improving quarter over quarter.

Doug: Over the last year, our market share in index options has more than doubled and our share of ETF options remained strong despite fluctuations in market volumes.

Doug: We expect our options business to continue to grow as we incrementally expand our simple universe and look forward to another record year building on what we have achieved since the beginning of this business from scratch in 2019.

Doug: To summarize our market, making performance, we believe that our established businesses executed well against our internal benchmarks, yet we remain focused on our efforts to improve our yield on every opportunity and to address more of the significant opportunities available in both new and existing markets, including the ones I just mentioned.

Douglas A. Cifu: Over the last year, our market share in index options has more than doubled, and our share of ETF options remains strong despite fluctuations in market volume. We expect our options business to continue to grow as we incrementally expand our Symbol universe and look forward to another record year building on what we have achieved since beginning this business from scratch in 2019. To summarize our market-making performance, we believe that our established businesses have performed well against our internal benchmarks, yet we remain focused on our efforts to improve our yields on every opportunity and to address more of the significant opportunities available in both new and existing markets, including the ones I just mentioned.

Doug: We are very excited about the continued real progress in these areas, which we had no presence in only a few years ago.

Doug: Execution services was up 3% over the fourth quarter, delivering $93 million of A&P or $153 million per day.

Doug: While institutional activity remains muted there were pockets of increased activity as clients adjusted their portfolios in light of evolving global monetary policy expectations.

Doug: Our ongoing efforts globally and across the Bds products have continued to bear fruit, we saw our stock trading volumes in Japan and in Asia. Overall this quarter as we invested resources in those regions and we reached a high watermark.

Doug: EMEA equity market share and uptick in adoption of our EMS Triton has led to further cross selling opportunities in our brokerage and analytics businesses as well.

Douglas A. Cifu: We are very excited about the continued real progress in these areas which we had no presence in only a few years ago. Execution services were up 3% over the fourth quarter, delivering $93 million of ante, or $1.53 million per day.

Doug: We are nearing the end of a multiyear technological transformation to create a platform focused on providing clients seamless automation of their multi asset workflows through the likes of lifecycle of a trade in all regions globally, making us a one stop shop for all clients market activity.

Douglas A. Cifu: While institutional activity remained muted, there were pockets of increased activity as clients adjusted their portfolios in light of evolving global monetary policy expectations. Our ongoing efforts globally and across the BES products have continued to bear fruit. We saw outside trading volumes in Japan and in Asia overall this quarter as we invested resources in those regions, and we reached a high watermark in EMEA equity market share. An uptick in adoption of our EMS trading platform has led to further cross-selling opportunities in our brokerage and analytics businesses as well.

Doug: We believe these investments focused on technology and infrastructure are producing a uniquely valuable platform, which reduces many other frictions traders' accounts are on a daily basis, our client in search of efficiencies have asked for multi asset class.

Doug: Lifecycle capabilities because of our extensive technology re platform, we will be able to deliver new products quickly and.

Doug: In addition, we continue to enhance our existing flagship equity products are new algo of Algo is provides smart automation.

Doug: There were based on current market conditions for a given stock we helped the client choose the best algorithm to execute its objectives, our new alert block crossing client interface streamlines clients' ability to cross blocks of stock saving time and money our data analytics platform API provide clients more choices.

Douglas A. Cifu: We are nearing the end of a multi-year technological transformation to create a platform focused on providing clients with seamless automation of their multi-asset workflows through the life cycle of a trade in all regions globally, making us a one-stop shop for all clients' market activities. We believe these investments in technology and infrastructure are producing a uniquely valuable platform which reduces many of the frictions traders encounter on a daily basis. Our clients, in search of efficiencies, have asked for multi-asset class, full life cycle capabilities, and because of our extensive technology re-platform, we will be able to deliver new products quickly.

Doug: With pre trade decision, making and post trade review of those decisions. In addition to adding multi asset class capabilities to existing products, we're expanding our potential client base by offering our products to new client segments through redistribution partnerships or what we call Virtu technology services.

Doug: Offering our technology via new additional strategic challenges channels allows us to accelerate the distribution of our global multi asset class offerings and a scalable manner to.

To help us realize these important opportunities in DDS, we have made a number of senior hires who are attracted to her to buy a broad suite of cutting edge projects. We are excited about the future of this business has ever as always our offerings are based on client demand and built around long term partnerships.

Douglas A. Cifu: In addition, we continue to enhance our existing flagship equity products. Our new Algo of Algos provides smart automation, where based on current market conditions for a given stock, we help the client choose the best algorithm to execute its objectives.

Doug: Overall, our business has continued to grow and demonstrated an impressive yield this quarter in a market environment that was mixed in terms of the opportunity.

Doug: Afforded the opportunity set afforded by the market. Finally, you will note in our press release that effective August one Cindy Lee a long term long time Virtu, Ian will become the Chief financial Officer of Virtu, succeeding my friend, Sean Galvin in that position Cindy joined Virtu in 2011.

Douglas A. Cifu: Our new alert block crossing client interface streamlines clients' ability to cross blocks of stock, saving time and money. Our data analytics platform API provides clients more choices with pre-trade decision making and post-trade review of those decisions. In addition to adding multi-asset class capabilities, we're expanding our potential client base by offering our products to new client segments through redistribution partnerships or what we call Virtu Technology Services. Offering our technology via new additional strategic channels allows us to accelerate the distribution of our global multi-asset class offerings in a scalable manner. To help us realize these important opportunities in VES, we have made a number of senior hires who are attracted to Virtu by our broad suite of cutting-edge projects.

Doug: She will be an extraordinary CFO given her knowledge of Virtu and has been instrumental in our success over the years I am very happy and pleased to report that Sean is remaining with Virtu and our senior capacity John's contributions to Virtu and nice KCG over his 22 years here have been very meaningful.

Doug: And we expect to continue to benefit from Sean's professionalism and experience. Thank you, Sean and Cindy now I will turn the call over to Joe Maluso.

Joseph A. Molluso: Good morning, I'll speak a bit about our growth levers from our new initiatives as well as our buyback program at March 31, total trading capital on slide nine in the supplement.

Douglas A. Cifu: We are excited about the future of this business as ever. As always, our offerings are based on client demand and built around long-term partnerships. Overall, our businesses continued to grow and demonstrated an impressive yield this quarter in a market environment that was mixed in terms of the opportunity set afforded by the market. Finally, you will note in our press release that, effective August 1st, Cindy Lee, a long-time Virtuian, will become the Chief Financial Officer of Virtu, succeeding my friend Sean Galvin in that position.

Joseph A. Molluso: Was $1 7 billion, our scaled business is not limited by our capital base as evidenced by the impressive results generated in the first quarter without the need for material incremental trading capital.

Joseph A. Molluso: Our capital base remains more than adequate to support our ongoing and growing businesses. In Q1, we used a portion of our free cash flow to repurchase 2 million shares at an average price of $18 31 per share.

Joseph A. Molluso: To date, we have repurchased $45 9 million shares at an average price of $25 10 per share quarter end share count was 163 million shares outstanding, bringing our buybacks on target to fit the range as we have set forth publicly since we initiated our share repurchase program.

Douglas A. Cifu: Cindy joined Virtu in 2011, and she will be an extraordinary CFO, given her knowledge of Virtu and has been instrumental in our success over the years. I am very happy and pleased to report that Sean is remaining with Virtu in a senior capacity.

Joseph A. Molluso: We have repurchased over 17% of the fully diluted shares of virtue.

Net after new issuances.

Joseph A. Molluso: Consistent with our continued commitment to returning capital to shareholders. Our board of directors has authorized an additional $500 million in share repurchases.

Douglas A. Cifu: Sean's contributions to Virtu and Knight KTG over his 22 years here have been very meaningful, and we expect to continue to benefit from Sean's professionalism and experience. Thank you, Sean and Cindy. Now, we'll turn the call over to Joe Molluso.

Joseph A. Molluso: We are often asked about future nonorganic growth opportunities, including acquisitions. The answer to this is that we evaluate any opportunity presented versus the relative attractiveness of buying back our shares and investing in our businesses, including our growth initiatives. So it is a high bar in our opinion you can see the dermis.

Joseph A. Molluso: Straightened earnings leverage in our business from both capital management and our growth initiatives, while we understand our business is volatile we believe slide six and seven illustrate our long term earnings power as a result of both organic growth initiatives and the cumulative impact of share repurchases.

Joseph A. Molluso: Good morning. I'll speak a bit about our growth levers from our new initiatives, as well as our buyback program. At March 31st, total trading capital on slide 9 in the supplement was $1.7 billion. Our scaled business is not limited by our capital base, as evidenced by the impressive results generated in the first quarter without the need for material incremental trading capital. Our capital base remains more than adequate to support our ongoing and growing business. In Q1, we used a portion of our free cash flow to repurchase 2 million shares at an average price of $18.31 per share.

The expense side adjusted cash operating expenses were $164 million in the first quarter, our quarterly cash opex for the last five quarters has remained essentially flat. Despite the external environment of the past few years, which has placed significant pressure on costs.

Joseph A. Molluso: Our cash compensation ratio was 23% and our total compensation ratio was 27% for the quarter compared to 26% and 32% respectively for the full year 2023.

Joseph A. Molluso: To date, we have repurchased 45.9 million shares at an average price of $25.10 per share. At quarter end, our share count was 163 million shares outstanding, bringing our buybacks on target to fit the ranges we have set forth publicly. Since we initiated our share repurchase program, we have repurchased over 17% of the fully diluted shares of Virtu next afternoon. Consistent with our continued commitment to returning capital to shareholders, our Board of Directors has authorized an additional $500 million in share repurchases.

Joseph A. Molluso: We expect cash operating expenses to remain within the recent historical range and we'll provide more clarity on compensation ratios as the year unfolds. Although we also expect the ratio to remain within historical norms.

Joseph A. Molluso: If you look at the five year period from 2019, ending in 2023, our total cash operating expenses grew only three 4% on a compound annual basis, which we consider a strong performance going forward. We will assume this type of low single digit overall increases in non compensation.

Expenses now I will turn it over to our CFO Shaun.

Joseph A. Molluso: We are often asked about future non-organic growth opportunities, including acquisitions. The answer to this is that we evaluate any opportunity presented versus the relative attractiveness of buying back our shares and investing in our businesses, including our growth initiatives. So it is a high bar in our, You can see the demonstrated earnings leverage in our business from both capital management and our growth initiatives. While we understand our business is volatile, we believe slides 6 and 7 illustrate our long-term earnings power as a result of both organic growth initiatives and the cumulative impact of share repurchase. On the expense side, adjusted cash operating expenses were $164 million in the first quarter.

Shaun: Thank you Joe Good morning, everyone on slide three of our supplemental materials, we provided a summary of our quarterly performance.

First quarter of 2024, our adjusted net trading income or antique, which represents our trading gains net of direct trading expenses totaled $367 million or $6 million per day.

Shaun: Market, making adjusted net trading income was $274 million or $4 5 billion per day.

Shaun: Execution services.

Shaun: Adjusted net trading income was $93 million or $1 $5 billion per day.

Shaun: Our first quarter 2020 for normalized adjusted EPS was <unk> 76.

Shaun: Adjusted EBITDA was $203 million for the first quarter of 2024, and our adjusted EBITDA margin was 55%.

Shaun: On slide 11, we provide a summary of our operating expense results for the first quarter 2024, we recorded a $180 million of adjusted operating expenses.

Joseph A. Molluso: Our quarterly cash opex for the last five quarters has remained essentially flat, despite the external environment of the past few years placing significant pressure on costs. Our cash compensation ratio was 23%, and our total compensation ratio was 27% for the quarter compared to 26% and 32%, respectively, for the full year 2023. We expect cash operating expenses to remain within the recent historical range, and we'll provide more clarity on compensation ratios as the year unfolds.

Shaun: Continued to maintain an efficient cost structure and disciplined expense management.

Shaun: Helped us to control our operating expenses during the inflationary environment.

Financing interest expense was $23 million for the first quarter of 2024.

Shaun: Benefit of the interest rate swap contract entered into.

Shaun: In prior years, our blended interest rate was around seven 6% for our long term debt in aggregate.

Shaun: We remain committed to our 24 cents per share quarterly dividend and combined with our share repurchase program. This demonstrates our continued commitment to return capital to our shareholders.

Joseph A. Molluso: Although we also expect the ratio to remain within historical norms. If you look at the five-year period from 2019 ending in 2023, our total cash operating expenses grew only 3.4% on a compound annual basis, which we consider strong. Going forward, we will assume this type of low single-digit overall increase and non-compensation expenses. Now I'll turn it over to our CFO, Sean. Thank you, Joe. Good morning, everyone.

Speaker Change: Now I would like to return the call over to our operator for the Q&A.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: We ask each of you to please limit to one question and one follow up please standby, while we compile the Q&A roster.

Speaker Change: The first question comes from Patrick <unk> with Piper Sandler Your line is open.

Patrick: Yes. Good morning, Thanks for taking the question Doug.

Sean Patrick Galvin: On slide three of our supplemental materials, we provided a summary of our quarterly performance. The first quarter of 2024, or Adjusted Net Trading Income, or ANTI, which represents our trading gains net of direct trading expenses totaled $367 million, or $6 million per day. Market Making Adjusted Trading Income was $274 million, or $4.5 million per day. Execution Services.

So I was hoping we could just dig a little deeper into the impact crypto market, making had in the quarter.

Patrick: Doug is there any chance you could quantify like what the overall contribution was to A&P.

Patrick: Judging by the organic growth initiatives and it seems like maybe it was a couple hundred thousand dollars a day.

Any color you can give us there would be great and then second could you speak to just kind of the distribution of revenues youre seeing in that business as a fairly steady day to day or were there any outlier days, where youre seeing that.

Patrick: Bulk of the revenues.

Speaker Change: Yes. Thank you good question.

Speaker Change: Yes, I think you are in the ZIP code it has been a.

Sean Patrick Galvin: Adjusted net trading income was $93 million, or $1.5 million per day. For our first quarter of 2024, normalized adjusted EPS was 76 cents. Adjusted EBITDA was $203 million for the first quarter of 2024, and our adjusted EBITDA margin was 55%.

Speaker Change: A couple of hundred thousand dollars a day contribution in fact.

Speaker Change: I can say that the block ETF contribution in the quarter was <unk> was greater than the crypto contribution in the quarter, which is kind of interesting right.

Speaker Change: Aiming at so it wasn't like we had like a day or two of extraordinary results.

Speaker Change: Certainly on January 11th or <unk>, when the when the Etfs were launched there was a huge reshuffling between the closed end fund into the Etfs and so you had.

Sean Patrick Galvin: On slide 11, we provide a summary of our operating expense results. In the first quarter of 2024, we recorded $180 million of adjusted operating expenses. We continue to maintain an efficient cost structure and disciplined expense management, which helped us to control our operating expenses during the inflationary environment. Financing interest expenses $23 million for the first quarter of 2024. The benefit of the interest rate swap contract; in prior years, our blended interest rate was around 7.6% for our long-term debt in aggregate.

Speaker Change: An uptick in performance those couple of days, but that was maybe like 10% of the overall crypto P&L for.

Speaker Change: For the quarter if that so it wasn't like we made.

Speaker Change: Millions of millions of dollars in a day or two so it has been a nice steady.

Speaker Change: <unk> the way I would look at it is if you look at.

Speaker Change: The <unk> business, our non customer market, making business. It's now like a new asset class within <unk>. It really has established itself as a consistent asset class in the same way that we look at like FX and we look at commodities, we know at all of our internal reports and we've had this for a while but that was meaningful we have a separate.

Speaker Change: Line for digital assets or crypto, and we think that like the success that the marketplace has seen with massive inflows and massive Etfs created will just to encourage any additional.

Operator: We remain committed to our $0.24 per share quarterly dividend, and combined with our share repurchase program, this demonstrates our continued commitment to return capital to our shareholders. Now, I would like to return the call to our operator for the Q&A. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Instruments to be afraid as you've already seen that the United Kingdom, and Hong Kong have announced.

Speaker Change: That they have approved versions of spot for 2000, Etfs youre going to see leverage products, while the CFCC in the SEC can get their act together youre going to see options on those ETF products and when the SEC hopefully can get its act together in the next month on the CRA and products Youll see a suite of those launch it's not.

Speaker Change: All of the similar from what you see in the World of FX, where you have major pairs and then youll see options on FX Etfs you see.

Operator: We ask each of you to please limit your questions to one and one follow-up. Please stand by while we compile the Q&A roster. The first question comes from Patrick Moley with Piper Sandler.

Smaller payers and whatnot. So we're very excited that this is a.

A new asset class within our non customer market, making business. The other thing I'll point out is that it's a perfect virtu style business because it incorporates.

Patrick Malcolm Moley: Your line is open. Yes, good morning. Thanks for taking the question. So, I was hoping we could just dig a little deeper into the impact crypto market making had in the quarter. Doug, is there any chance you could quantify, like, what the overall contribution was to ANTI, judging by the organic growth initiatives of ANTI? It seems like maybe it was a couple hundred thousand dollars a day. So, any color you could give us there would be great.

Speaker Change: Bitcoin and these other digital assets in the form of spot in Etfs and futures. It's cross border. So it's kind of <unk> 101 in terms of market, making and our operational discipline and the we're very good at partnering with the issuers and becoming an authorized participant all the things that we have talked about Phil.

Speaker Change: 16 years around the virtue non non customer market, making business this asset class fit quite well into.

Douglas A. Cifu: And then, second, could you speak to just kind of the distribution of revenues you're seeing in that business? Was it fairly steady day-to-day, or were there any outlier days where you're seeing, you know, the bulk of the revenues? Thanks. Yeah, no, thank you. Good question. Um, yeah, I think you are in the right zip code.

Speaker Change: I am happy that we got engaged in this asset class three or four years ago. Obviously, it took longer than we had thought in terms of regulation and approval of the spotty Bitcoin Etfs, that's water under the bridge.

Speaker Change: But we're very excited that this asset class will continue to grow and we will continue to be in the middle of helping.

Speaker Change: And I think the important thing is that it's not an issue product $14 billion of inflows didn't just come from retail investors that are interested in trading in and out of Big point. There has to have been real I don't want to say institutional but high net worth.

Douglas A. Cifu: It has been a, you know, a couple hundred thousand dollars a day contribution. In fact, I can say that, like, the block ETF contribution in the quarter was actually greater than the crypto contribution in the quarter, which is kind of interesting, right? Kind of framing it.

Speaker Change: Other money and I think a number of <unk> are now looking at the asset class and saying, Okay should there be a sliver allocated to that and I think the answer in some at some for some advisors is certainly yes, and so you've seen the result of that in terms of the inflows into the product and again this is kind of hurt.

Douglas A. Cifu: So it wasn't like we had, like, a day or two of extraordinary results. I mean, certainly on January 11th or 12th, when the ETFs were launched, there was a huge reshuffling between the closed-end fund into the ETFs. And so you had, you know, an uptick in performance those couple of days, but that was maybe like, you know, 10% of the overall crypto P&L for the quarter. So it wasn't like, you know, we made millions and millions of dollars in a day or two.

Speaker Change: 101, we want to be in the middle of that ecosystem, providing really really tight prices and efficiency to a market maker to the markets excuse me because efficiency then just to get some more liquidity, which begets more interest and to get more growth of the asset class and we want to be part of that.

Speaker Change: Okay, Great and then just as a follow up as we think about that few hundred thousand.

Speaker Change: TNT day can you help us understand like what amount of that is coming from trading and Etfs versus.

Douglas A. Cifu: So it has been a nice steady contributor. The way I would look at it is if you look at, you know, the VPMM business, or the non-customer market making business, it's now like a new asset class within VPMM. It really has established itself as a consistent asset class in the same way that we look at, like, FX, and we look at commodities.

Speaker Change: The money that youre, making trading the spot bitcoin and kind of like selling that back to the ETF issuers.

Speaker Change: Yes.

Speaker Change: It's all we look at it as all one big integrated part I mean, obviously, the the strategies that we run market, making in the Etfs work in concert with what we do in the futures in the spot market and it's like like what we do in gold. We look at <unk>, we look at spot coal, we look at gold futures on Comex and all of those.

Douglas A. Cifu: We now have a separate line for digital assets or crypto in all of our internal reports, and we've had this for a while, but it was meaningful. We have a separate line for digital assets or crypto, and we think that, like, the success that the marketplace has seen with, you know, massive inflows and massive ETFs created will just encourage, you know, additional instruments to be created. It's not at all dissimilar from what you see in the world of FX, where you have, you know, major pairs, and then you see options on FX ETFs; you see, you know, smaller pairs and whatnot.

Speaker Change: Strategies sort of integrated Patrick so I'm not trying to be a pocket not answer your question, but it's certainly it's a universe. If you will of products that all integrate and work together and frankly, we don't break it down in that regard.

Speaker Change: So as I said in answer to your first part of your question is that universe continues to grow and expand we're very confident that we'll be at the middle of it and the market maker.

Speaker Change: We will continue to provide competitive prices, whether its in an ETF of spot or future and frankly, whether it's cross border. I mean, you can throw currency products on top of that right there's going to be.

Douglas A. Cifu: So we're very excited that this is a new asset class within our non-customer market making business. The other thing I'll point out is that it's a perfect Virtu-style business because it incorporates Bitcoin and these other digital assets in the form of spot and ETFs and futures, and it's cross-border. So it's kind of Virtu 101 in terms of market making and our operational discipline. Some of them were very good at partnering with the issuers and becoming an authorized participant. All the things that we have talked about for the last 16 years around the Virtu non-customer market making business, this asset class fits quite well into it.

Speaker Change: Products that will be youll have a yen denominated bitcoin ETF at some point that people will be interested into it and that's right in our wheelhouse.

Speaker Change: Okay.

Speaker Change: Okay, great. That's it for me thanks.

Speaker Change: Thank you please standby for the next question.

The next question comes from Kenneth Worthington with Jpmorgan Securities. Your line is open hi.

Kenneth Brooks Worthington: Good morning, Thanks for taking the questions.

Kenneth Brooks Worthington: Maybe first for Joe in terms of capital management, you purchased I think $36 million of stock this quarter that was lower than the level of repurchases. We've seen over the last year and if you look at <unk> 23, you spent roughly double on buybacks last year. Despite <unk> 24.

Douglas A. Cifu: I'm happy that we got engaged in this asset class three or four years ago. Obviously, it took longer than we had thought in terms of regulation and approval of the spot Bitcoin ETFs, that's water under the bridge, but we're very excited that this asset class will continue to grow, and we will continue to be, you know, in the middle of helping it grow. And I think the important thing is that it's not an issue product. You know, $14 billion of inflows didn't just come from, you know, retail investors that are interested in trading in and out of Bitcoin. There has to have been real, I don't want to say institutional, but high net worth RIA, other money.

Kenneth Brooks Worthington: We are having a lower stock price and a lower average stock price.

Kenneth Brooks Worthington: Any reasons for the more modest buybacks. This quarter was it just sort of truing up relative to anti or something else philosophical.

Joseph A. Molluso: No it's nothing philosophical.

Joseph A. Molluso: We have these ranges that we posted that at different levels of net trading income. This is what you should expect in terms of the ranges.

Joseph A. Molluso: The amount of kind of free cash flow we have doesn't.

Speaker Change: <unk> why not precisely.

Speaker Change: With those ranges every quarter, so theres ebbs and flows.

Speaker Change: When we embarked on our share repurchase program, we made a decision that.

Speaker Change: We're just going to use the proceeds.

Speaker Change: And apply them to the stock price as it is.

Speaker Change: And I think looking back over three plus years that we've done. This I think we're we're satisfied with where with where it came out and you should expect fully.

Douglas A. Cifu: And I think a number of RIAs are now looking at the asset class and saying, okay, should there be a sliver allocated to that? And I think the answer for some, for some advisors, is certainly yes.

Speaker Change: That we would we're going to be within those ranges that we've published in.

Speaker Change: In the first quarter, if you even if you just annualize it.

Douglas A. Cifu: And so that's, you've seen the result of that in terms of the inflows into the product. And again, this is kind of Virtu 101; we want to be in the middle of that ecosystem, providing really, really tight prices and efficiency to a market, to the markets. Because efficiency then just begets more liquidity, which begets more interest, and begets more growth of the asset class.

Speaker Change: It's right there in the range that we have.

Speaker Change: That we posted for six a day, so I wouldn't read anything into that.

Speaker Change: Thanks, and then just as a follow up on the Bitcoin Etfs equity Etfs have moved from strong inflows in <unk> 24 to closer to breakeven so far in <unk> 24.

Speaker Change: Bitcoin ETF flows were to persist.

Speaker Change: Does that impact the revenue opportunity.

Douglas A. Cifu: And we want to be part of that. Okay, great. And then just as a follow-up, as we think about that, you know, a few hundred thousand ante a day, can you help us understand what amount of that is coming from trading in the ETFs versus the money that you're making trading the spot Bitcoin and kind of like selling that back to the ETF issuers? Yeah, I mean, it's all we look at as well, you know, one big integrated pot. I mean, obviously, the strategies that we run for market making in the ETFs work in concert with what we do in the futures in the spot market. And it's, like, what we do in gold.

Speaker Change: For you in <unk>.

Speaker Change: Bitcoin or crypto broadly.

Speaker Change: It's a good question I think we really more look at kind of like gross flows as opposed to net because that means there is portfolio reallocations and opportunities.

Speaker Change: I mean, certainly luxury I mean, when when the spot Bitcoin Etfs were approved as I said earlier, there was massive and you follow it and I track your.

Speaker Change: Your metrics that you put out every day there was massive.

Speaker Change: Rejiggering from the closed end fund.

Speaker Change: Fund to the.

Speaker Change: There are a handful of Etfs and certainly that was episodic and thats not going to happen again, but there has been a consistent nice pattern and again I think the best analogy is really looking at like.

Speaker Change: Another commodities market.

Douglas A. Cifu: You know, we look at GLD, we look at spot gold, we look at gold futures on the COMEX. And all of those strategies are sort of integrated, Patrick. So I'm not trying to be a punk and not answer your question.

Speaker Change: Most analogous level goals and so in.

Speaker Change: In that marketplace every day there are people that are.

Of getting in and out of ETF positions and getting in and out of spot of reallocating from a different asset class. So if you look at digital assets and Big point, specifically as just a slice of pie.

Speaker Change: Hi, there.

Douglas A. Cifu: But it's certainly, it's a universe, if you will, of products that all integrate and work together. And frankly, we don't break it down in that regard. And so, as I said, in answer to the first part of your question, you know, as that universe continues to grow and expand, we're very confident that we'll be at the middle of it. And the market maker will continue to, you know, provide competitive prices, whether it's in, you know, as an ETF, a spot, or the future.

Wealth managers are now looking at and institutions that are looking at as an investable asset over some time period.

Speaker Change: That's the thing that is compelling it is no longer in my view like a novelty asset that people are sort of trading it had like this.

Speaker Change: Somewhat nefarious tinge to it is now an investable asset that is on a meaningful number of platforms and is certainly being.

Speaker Change: Advocated for lack of a better word or allocated.

Speaker Change: Bye.

Speaker Change: Gatekeepers and so that means that there's going to be volume.

Speaker Change: Youll have spikes when if hearing was approved and went options come on in when the U K and Hong Kong and Blah Blah blah, but the theme here is that you now have a large investable.

Douglas A. Cifu: And frankly, whether it's cross-border, I mean, you can throw currency products on top of that, right? There's going to be products that will be, you know, you'll have a yen denominated Bitcoin ETF at some point that people will be interested in. And that's right in our wheelhouse. Okay, great. That's it for me.

Speaker Change: Asset class there'll be volatility opportunities in the underlying asset class for better or worse has a certain amount of volatility to it and the other interesting thing is it's a 24 by seven market in the form of spot. So I think there's a lot of attributes to it that are compelling.

Operator: Thanks. Thank you. Please stand by for the next question. The next question comes from Kenneth Worthington with J.P. Morgan Securities. Your line is open. Hi, good morning.

Speaker Change: From a market, making standpoint, and provide a lot of opportunity for a firm like ours that has scaled global and can.

Speaker Change: Manage.

Speaker Change: The intricacies if you will from the various forms that bitcoin and these other points will take spot ETF for future.

Kenneth Brooks Worthington: Thanks for taking the questions. Maybe first for Joe, in terms of capital management, you purchased, I think, $36 million of stock this quarter. That was lower than the level of repurchases we've seen over the last year. And if you look at 1Q23, you spent roughly double on buybacks last year, despite 1Q24 having a lower stock price and a lower average stock price. Any reasons for the more modest buybacks this quarter? Was it just sort of chewing up relative to ante or something else philosophical?

Speaker Change: Great. Thank you and go Panthers.

Speaker Change: Thanks, Ken.

Please standby for the next question.

Speaker Change: Yeah.

Speaker Change: The next question comes from Chris Allen with Citi. Your line is now open.

Good morning, everyone.

Christopher John Allen: Nice quarter and again, a nice win by the Panthers last night.

Christopher John Allen: Maybe just on a block Etfs you noted the greater greater contribution that crypto. This quarter can you help us think about how that business breaks down between equities and fixed.

Christopher John Allen: Drivers have been.

Christopher John Allen: You talked about efforts to broad distribution, maybe give us some color on that front.

Joseph A. Molluso: No, nothing philosophical. You know, we have these ranges that we posted that, you know, at different levels of net trading income, this is what you should expect in terms of the ranges. But the amount of free cash flow we have doesn't necessarily line up precisely with those ranges every quarter. So there's ebbs and flows. You know, when we embarked on our share repurchase program, we made a decision that, you know, we're just going to use the proceeds and apply them to the stock price as it is.

Christopher John Allen: Because that to me it seems like a more sustainable business from a longer term relative to maybe a crypto where we're seeing a little bit lower flows in the near term so any color there would be great.

Christopher John Allen: Yes.

Speaker Change: Right I mean, I think I mean.

Speaker Change: From a metric standpoint, what we saw in the quarter was roughly double what we saw in 2021 in terms of antique performance. So that's a significant.

Speaker Change:

Speaker Change: Result.

Speaker Change: In terms of like what the breakdown is what we have ascertained in what we've built over the last couple of years is that you have to kind of be in everything Chris and you have to be global.

Speaker Change: So certainly we're very proficient obviously in equities, that's kind of the Anemology. If you will of the firm and so that's very good but there you have to be competitive in fixed income and commodity products and certainly there's more margin and theres more risk and there's more challenges associated with being in fixed income and in India.

Joseph A. Molluso: And, you know, looking back over, you know, the three plus years that we've done this, I think we're satisfied with where it came out. And you should fully expect that we would, you know, we're going to be at, you know, within those ranges that we publish. And the first quarter, you know, even if you just annualize it, it's right there in the range that we've posted for six a day. So I wouldn't read anything.

Speaker Change: And crypto as we've indicated so the fact that we are a full service firm that provides two sided prices in all of those products. The fact that we now have a global offering with incredible desk in Europe for the first time.

Speaker Change: As important the fact that we have the same thing in Asia is important we're not nearly as scale to some of our competitors, we don't have dozens and dozens of the salespeople on.

Kenneth Brooks Worthington: And then, just as a follow-up on the Bitcoin ETFs, Bitcoin ETFs have moved from strong inflows in 1Q24 to closer to break-even so far in 2Q24. If flat Bitcoin ETF flows were to persist, does that impact the revenue opportunity for you? Bitcoin or crypto problems.

Speaker Change: On the Street, we don't have 20 years of relationships in Europe, but we do have thanks to the ITG and the old legacy Knight franchises, we do have a significant amount of customer relationships. We are obviously leveraging the old ITG infrastructure in terms of the customer relationships in Europe and in Asia in particular.

Speaker Change: <unk> had been incredibly helpful. So we do have a built in sales force and we do have great partners.

Douglas A. Cifu: It's a good question. I think we really look at kind of like gross flows as opposed to net, because that means there are, you know, portfolio reallocations and opportunities. I mean, certainly, look, I mean, when the spot Bitcoin ETFs were approved, as I said earlier, there was, you know, massive rejiggering from the closed end fund to the, you know, a handful of ETFs. And certainly, that was episodic, and that's not going to happen again.

Speaker Change: And Bloomberg and.

Speaker Change: Market access and others that provide our acute capability. So that we can be competitive and just about every counterparty will enable virtue and give us a shot.

Speaker Change: Because we have a pretty good brand name in terms of customer service and whatnot. So if you add up April Steve, Let's see we have a scaled credible global offering.

Speaker Change: It allows us to be competitive.

Speaker Change: Certainly in the quarter, there was more portfolio shifting.

Speaker Change: And they were you know people were moving out of from fixed income to hear some people were wanting to get to a prices and large.

Speaker Change: Bitcoin Etfs, so there were definitely some episodic.

Speaker Change: Transitions. If you will that were very household to the result, but that's kind of what the business is four and hopefully you got a couple of three of those are 10 of those a quarter and that repeats itself. So.

Douglas A. Cifu: But there has been a consistent, nice pattern. And again, I think the best analogy is really looking at another commodities market, and the most analogous one would be gold. And so in that marketplace every day, there are people that are getting in and out of ETF positions and getting in and out of spot or reallocating from a different asset class. So if you look at digital assets, and Bitcoin specifically, as just a slice of the pie that wealth managers are now looking at in institutions that are looking at it as an investable asset over some time period. That's the thing that is compelling.

Speaker Change: Again, it's one of these businesses and in our growth initiatives.

Speaker Change: We have spent a lot of time, a lot of money and a lot of resources to build a technological infrastructure to be responsive we understand the products very well, we're a fully integrated firm. So we're able to provide tight prices because you know the ETF desk, if not an island unto itself, it's working with the entire firm we're internalizing.

Speaker Change: The flows that we get with the <unk>.

Speaker Change: Non customer market, making desk around the firm there's one P&L in this firm so were very very efficient in doing that.

Speaker Change: And we made a conscious decision three years or four years ago to dip our toes and now we've got both feet in the fixed income waters, which gives us that's got true scale and global capabilities and then as I said, we've made significant investments and hires in Europe and in Asia can you give us a global presence. So we're a long ways away.

Douglas A. Cifu: It's no longer, in my view, like a novelty asset that people are sort of trading and has this, know, somewhat nefarious tinge to it. It is now an investable asset that is on a meaningful number of platforms and is certainly being advocated, for lack of a better word, or allocated by gatekeepers. And so that means that there's going to be volume. You'll have spikes when Ethereum is approved and when options come on and when the UK and Hong Kong and, blah, blah, blah.

Speaker Change: From.

Speaker Change: Being one of the one of the larger named players like flow traders or citadel. Some of these other firms that have a much.

Speaker Change: A much larger infrastructure, they're great firms into great competitors. We think there is a value that we can add we think we have attracted to weak prices. We think we have operational excellence and most importantly, thanks to.

Speaker Change: The legacy ITG and the nice businesses, we have a very very credible brand name and a very incredible global network of clients that will do business with us. So all of those but coucher months lead to our ability to have a truly scaled global box block business in a virtu style, which means.

Douglas A. Cifu: But the theme here is that you now have a large, investable asset class; there will be, you know, volatility opportunities. And the underlying asset class, for better or worse, has a certain amount of volatility to it. And the other interesting thing is it's a 24 by 7 market in the form of spots. So I think there are a lot of attributes to it that are compelling from a market making standpoint and provide a lot of opportunity for a firm like ours that is scaled, global, and can, you know, manage the intricacies, if you will, from the various forms that Bitcoin and these other coins will take via spot ETF in the Great, thank you, and go Panthers!

Speaker Change: Our head count is going to be a fraction.

Speaker Change: What the competitors are going to be our.

Speaker Change: Our capital base is going to be smaller than some of our competitors were going to take less risk that some of our competitors, but at the end of the day. There is a role for us in that marketplace and I'm very very happy with the results. We had this quarter and indeed I've been very happy with the results. We've had over the last three years. This quarter. In particular was was it was a standout one for that group.

Speaker Change: I appreciate all the color there.

Speaker Change: Just a follow up on that the business is there a good indicator for us to look at here is it.

Speaker Change: ETF flows.

Speaker Change: From a fixed income.

Speaker Change: Equity perspective, ETF trading activity or is it because of the bloc nature or is that something that was just tough to attempt to kind of triangulate off of different different things.

Kenneth Brooks Worthington: Thanks, Jen. Please stand by for the next question. The next question comes from Chris Allen with Citi. Your line is now open. Morning, everyone. Nice quarter. And again, a nice one by the Panthers last night.

Speaker Change: Yes, I mean, obviously overall ETF volumes are a good thing to look at it globally. I mean, it is a little bit lumpy right because within that youll see there'll be huge blocks that come through periodically and obviously theres risks associated with those but theres more reward associated with them. So.

Christopher John Allen: Maybe it's on block ETFs, you know; there's a greater, greater contribution than crypto this quarter. Can you help us think about how that business breaks down between equities and FIC? What are the drivers?

Speaker Change: Certainly we have clients that are sending in smaller clips and that'll be done through the <unk>. If it's a larger block of a transition of an aura.

Speaker Change: We may be putting competition with two or three other market makers and we try to price that as tightly as we possibly can.

Speaker Change:

Speaker Change: A lot of folks will do that once a year, sometimes they will do that four times a year and the key is to provide really great customer service. So that you are in the wheel and you could be competitive I mean, no one's coming to us because you know.

Douglas A. Cifu: I think you talked about efforts to broaden distribution; maybe give us some color on that front. Because that, to me, seems like a more sustainable business over the longer term relative to maybe a crypto where we are seeing a little bit lower flows in the near term. So any call on that would be great.

Speaker Change: Where virtu and they happen to think we're good guys are coming to us because we provide really really good tight pricing.

Speaker Change: With immediacy of need big and good customer service and not only that we can provide because of our analytics business are real.

Douglas A. Cifu: Yeah, great. I mean, I think, just from a metric standpoint, what we saw in the quarter was roughly double what we saw in 2021 in terms of anti-performance. So that's a significant result, in terms of like what the breakdown is, what we have, you know, established, and what we've built over the last couple years is you have to kind of be in everything, Chris, and you have to be global. And so certainly, you know, we're very proficient, obviously, in equities. That's kind of the etymology, if you will, of the firm, and so that's very good.

Speaker Change: Pre and post trade analysis, so that they can satisfy themselves in their own best execution committees that they've done the right thing by their investors in terms of allocating assets from.

Speaker Change: Asset class a asset class B, both expressed as Etfs if that makes sense.

Speaker Change: Yes, Thanks, Chris.

Speaker Change: Thank you.

Speaker Change: Please standby for the next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Craig.

Craig: Seeking taller with Bank of America. Your line is same thing.

Craig: Hey, good morning, Doug.

Craig: It's hard for me to congratulate you on the Panthers win last night, because I'm Sadly a flyer soon.

Speaker Change: Well, we all have our cross to bear.

Douglas A. Cifu: But there, you know, you have to be competitive in fixed income and commodity products, and certainly, there's more margin, and there's more risk, and there's more challenges associated with being in fixed income, and indeed in crypto, as we've indicated. So the fact that we are a full-service firm that, you know, provides two-sided prices for all of those products, and the fact that we now have a global offering with a credible desk in Europe for the first time, is important. The fact that we have the same thing in Asia is important.

Craig: Well back to business here, we're hoping you could spend a little more time on the effective spreads. So you could see this developing in the 605 data and Janet's tab and I was hoping you could walk us through the underlying factors that drove the especially the realized volatility levels.

Speaker Change: Yes, it's actually it's a great question because you know.

Speaker Change: For years people have looked at realized volatility overall at Virtu and the strong.

Speaker Change: Correlations between what our P&L Shouldnt shouldnt be and I think those are still true and so as I said in my prepared remarks, I'm very pleased with the overall performance, particularly in <unk> given the fact that the fact excuse me that we had a mixed environment and volumes slightly up in realized volatility.

Douglas A. Cifu: You know, we're not nearly as big as some of our competitors. We don't have dozens and dozens of salespeople on the street. We don't have 20 years of experience in Europe.

Speaker Change: Materially down.

Speaker Change: As a side note. It is surprising to me and I'm not an expert in this.

Speaker Change: Look at the VIX and say, okay, well, we got some global conflicts going on in Central Bank scratching their head trying to figure out we got inflation and we've got a presidential election on the horizon in the VIX is Phil.

Douglas A. Cifu: But we do have, thanks to ITG and the old legacy Knight franchises, a significant number of customer relationships. We are obviously leveraging the old ITG infrastructure in terms of customer relationships in Europe and in Asia, in particular, which have been incredibly helpful. So we do have a built-in sales force, and we have great partners in Bloomberg and Market Access and others that provide RFQ capability so that we can be competitive.

Speaker Change: Well $13 $14 15, and hasn't really shot up but that's neither here nor there I think with regard to our <unk> business. We have always tried to indicate and I do think that.

Speaker Change: Some of the information as you indicated in the 605 reports are important and that you have to look at that and we certainly look at that internally here at virtu as sort of a.

Speaker Change: Our sub business, if you will within our customer market, making business because we are the <unk>.

Speaker Change: Pendant, if you will one on the flows that we get from our retail clients and there's hundreds of them. So certainly retail volumes are important because if you're not getting the widgets you can't make money on each of the wages and then secondly within that what's the spread at time of arrival, if you will within within the worst time.

Douglas A. Cifu: And just about every counterparty will enable Virtu and give us a shot because we have a pretty good brand name in terms of customer service and whatnot. So if you add up A plus B plus C, we have a scaled, credible, global offering that allows us to be competitive. Certainly, in the quarter, there was more portfolio shifting, and people were moving out of fixed income to here. Some people wanted to get two-way prices in large blocks.

Speaker Change: We received some of that Craig is the best explanation I can give you some of that is the mix of the flows that we get I mean, if youre getting higher price names as opposed to some of these smaller penny names, if you will or low price names that trade an awful lot.

Douglas A. Cifu: Bitcoin ETF, so there were definitely some episodic transitions, if you will, that were very helpful to the result. But that's kind of what the business is for. And hopefully, you get a couple or three of those or 10 of those a quarter, and that repeats itself.

Speaker Change: Youre going to have a greater opportunity. So some of it is mix of business and some of it frankly is the environment, where again retail is a slight misnomer because a lot of it is also high net worth and some of that comes through the pipe. So it's not just.

Speaker Change: Day traders, if you will and we sort that by each of our clients I mean, some of the flows will be more high net worth.

Speaker Change: That type of flows and Theyre similar.

Douglas A. Cifu: So again, it's one of these businesses in our growth initiatives where we have spent a lot of time, a lot of money, and a lot of resources to build the technological infrastructure to be responsive. We understand the products very well. We're a fully integrated firm, so we're able to provide tight prices because the ETF desk is not an island by itself. It works with the entire firm. We're internalizing the flows that we get with the non-customer market-making debts around the firm. There's only one P&L in this firm, so we're very, very efficient at doing that.

Speaker Change: Similar to the answer I gave Chris around the ETF block desk.

Speaker Change: You know you have clients that are doing their own portfolio rebalancing or they're coming off the sideline from fixed income and then deciding they want to go buy a bunch of Tesla and Amazon and a bunch of technology problems or whatever it may be and that flow.

Speaker Change: We will tend to be a little less correlated to the market and maybe.

Speaker Change: We'll present, a better opportunity to virtu, so more engagements and more allocation to equities and the mix of the business is probably the best explanation I can give you as to why.

Douglas A. Cifu: And we made a conscious decision three to four years ago to dip our toes, and now we've got both feet in the fixed income waters, which gives us true scale and global capabilities. And then, as I said, we've made significant investments and hires in Europe and in Asia to give us a global presence. So we're a long ways away from being one of the larger name players like Flow Traders or Citadel and some of these other firms that have much larger infrastructures, and they're great firms, and they're great competitors.

Speaker Change: Spread at time of arrival, if you will as measured by our 6% five reports.

Speaker Change: <unk> was significantly higher in the first quarter as compared to the fourth quarter, obviously that does help drive results and that's offset I guess.

Speaker Change: I indicated earlier by the significant decrease quarter over quarter in realized volatility I hope that gives you some explanation and again.

Speaker Change: At the Panthers were always open to new fans. So you are welcome.

Speaker Change: After our 18, losing streak at the end of the season and that switch, but Doug one follow up here.

Speaker Change: So Howard spreads trending in March or April just given we haven't seen the 605 data yet for those two months and in April volatility actually spiked up.

Douglas A. Cifu: We think there's value that we can add. We think we have attractive two-way prices. We think we have operational excellence. And, most importantly, thanks to the legacy ITG and the Knight businesses, we have a very, very credible brand name and a very credible global network of clients that will do business. So, all of those accoutrements lead to our ability to have a truly scaled global block business in a Virtu style, which means, you know, our headcount is going to be a fraction of what the competitors are going to be. And our capital base is going to be smaller than some of our competitors.

Yes, I am always hesitant to like every time I do. This then you know one of your guys jumps on it.

Speaker Change: I would say that they've made they've been consistent.

Speaker Change: I mean, our March report is due out on May 1st I think Andrew as I thought about right yet so you'll see it on.

Speaker Change: First it is consistent with what we saw.

Speaker Change: In January and February so again, I'm not smart enough to give you all of the macro reasons that giving you. The best explanation that I can in terms of what we're seeing obviously, it's a positive for the customer market, making business.

Douglas A. Cifu: We're going to take less risks than some of our competitors, but at the end of the day, there is a role for us in that marketplace. And I'm very, very happy with the results we had this quarter. Indeed, I've been very happy with the results we've had over the last three years. This quarter, in particular, was a standout one for that company. Appreciate all the color there.

Speaker Change: We've seen ebbs and flows over the last since we bought <unk> in 2017 in terms of that and so we try not to get too high not too low because every time that the spread numbers come in we know that theyre going to revert back and so these are.

Christopher John Allen: And just to follow up on that business, is there a good indicator for us to look at here? Is it ETF flows from a fixed income equity perspective or ETF trading activity? Or is it because of the block nature? Is it something that we'll just have to attempt to kind of triangulate off of different different, Yeah, I mean, obviously, overall ETF volumes are a good thing to look at globally. I mean, it is a little bit lumpy, right?

Speaker Change: We just do our best to try to monetize the flowers that kind of stuff.

Speaker Change: Thank you for taking my questions.

Speaker Change: Thank you very much.

Speaker Change: Please standby for the next question.

Speaker Change: The next question comes from Dan Fannon with Jefferies. Your line is open.

Daniel Thomas Fannon: Thanks, Good morning, I was hoping to get an update on options market, making and where you are in terms of number of single names as well as kind of index trying to get a sense of what percentage of the market you are interacting with at this point.

Douglas A. Cifu: Because, you know, within that, you'll see, there'll be huge blocks that come through periodically. And obviously, there's risk associated with those, but there's more reward associated with those. So, you know, certainly, we have clients that are sending in smaller clips, and that'll be done through the RFQ. If it's a larger block of a transition of an RAA, you know, we may be in competition with two or three other market makers, and we try to price that as tightly as we possibly can.

Speaker Change: Yes, it's a great question.

Speaker Change: I guess I get it every quarter so.

As I show that we continue to chug, along we have expanded the single names that we are trading if there again.

We are not directly taking flow from clients and that is a strategic decision that we have made I'm not saying that we won't at some point, but that yeah.

Yeah Theres a thousand names if you if you will that you need to be active in and.

Speaker Change: Today, not every day, but we are up in and capable of quoting and 10% to 20% of the overall universe and so we pick and choose our spots. Obviously when there is excitement Dan around a particular name like a Tesla earnings are missing that and that's a name that will always be up and active in.

Douglas A. Cifu: You know, a lot of folks will do that once a year; sometimes they'll do that four times a year. And the key is to provide really good customer service so that you're in the wheel, and you can be competitive. I mean, no one's coming to us because, you know, we're Virtu, and they happen to think we're good guys.

Speaker Change: We will.

Speaker Change: We will be market, making there we had a really good quarter and options we have launched in.

Douglas A. Cifu: They're coming to us because we provide really, really good tight pricing with immediacy, if need be, and good customer service. And not only that, we can provide, because we're an analytics business, real pre- and post-trade analysis so that they can satisfy themselves and their own best execution committees that they've done the right thing by their investors in terms of allocating assets from asset class A to asset class B, both expressed as ETFs, if that makes sense. Yep, thanks guys. Thank you.

Our profitable in India already which is exciting and it's a small business and it's growing I don't want to get into them. The options because there's been a lot of news around.

Speaker Change: And that does not involve virtually thats not our style, but certainly we think that there's a significant opportunity there and in Japan, where we're up and running so again I'm very pleased with the progress our market share in the index family has continued to grow and it's meaningful.

Speaker Change: And we have we're active on all of the 17 or 18 options.

Operator: Please stand by for the next question. Our next question comes from Craig. Steven Tauler with Bank of America. Your line is open. Hey, Doug. So it's hard for me to congratulate you on the Panthers win last night because I'm sadly a Flyer Sam. Well, we all have our crosses to bear.

Speaker Change: Venues that are out there and we're focused on capturing.

Speaker Change: The significant opportunity that like at our feet and in our wheelhouse and if you look at like the mix of business again, I don't want to Pat ourselves on the back and say I told you so but a lot of the.

Craig William Siegenthaler: Well, back to business here. We're hoping you could spend a little more time on the effective spreads. So you could see this developing in the 605 data in Jan and Feb. But I was hoping you could walk us through the underlying factors that drove this, especially with realized volatility lower. Yeah, it's actually a great question because, you know, for years, people have looked at realized volatility overall at Virtu, and they've drawn, you know, appropriate correlations between what our P&L should and shouldn't be. And I think those are still true.

Speaker Change: The I would say that theres been a shift more towards these index products as opposed to the single names.

Speaker Change: So I think there's plenty of opportunity there, there's plenty of opportunity overseas and we will continue to grow I'm not saying, we're not going to ultimately take direct slow we are competitive there we do take some of it through other through other means theres other ats.

Routers that send us retail flow you can be competitive in the auctions.

Speaker Change: So we're in the business, we're just not fully scaled and competing with citadel Susquehanna get in that business, but we will at some point.

Speaker Change: Understood and then.

Speaker Change: Just thinking about the regulatory calendar over the next couple of months can you.

Speaker Change: Help us.

Speaker Change: What you're focused on in terms of rulings.

Douglas A. Cifu: And so, as I said in my prepared remarks, I'm very pleased with the overall performance, particularly in BPMM, given the fact that we had a mixed environment in volume slightly up, but realized volatility, you know, materially down. I mean, on a side note, it is surprising to me, and I'm not an expert in this, to look at the VIX and say, okay, well, we have some global conflicts going on and central banks scratching their heads trying to figure out, we have inflation and we have a presidential election on the horizon, and the VIX is still at, you know, 12, 13, 14, 15 and hasn't really shot up.

Speaker Change: Kind of where your processes that are kind of working down, but youre still waiting to hear back from as we think about I don't know not the full year, but maybe in the more shorter time period.

Speaker Change: Yes, Great question I was really trying to get through an earnings call without disparaging, Gary Gensler, and I guess, you're not going to let me.

Speaker Change: I'm joking, but not really.

As you have seen there has been a yeah I think we're up to 10 or 12 litigation now against the FCC by you know business groups industry participants everything from the proxy adviser rule to the climate rule, which they are state, which they have stayed.

Speaker Change: It's really become I don't know say chemical I would say actually kind of sad.

Speaker Change: Sad if you will that there's been such a lack of engagement with.

Speaker Change: American participants if you will and the FCC has just gone full steam ahead with a lot of these rules and frankly, they're going to just continue to rack up losses.

Douglas A. Cifu: But that's either here nor there. I think with regard to our BCMM business, we have always tried to indicate, and I do think that some of the information, as you indicated in the 605 reports, are important, that you have to look at that, and we certainly look at that internally here at Virtu as sort of a, you know, a sub-business, if you will, within our customer market-making business, because we are, you know, dependent, if you will, one on the flows that we get from our retail clients, and there's hundreds of them.

Speaker Change: Based on the briefs and some of the analysis that I have read in terms of the proposals that are more directly impactful to them. After the climate thing impacts us because we're a public company and I don't think that's really what we're talking about because I think that will see the light of the day because it was so broad and overreaching and economic analysis with some future at that I think the court.

Speaker Change: Rejected.

Speaker Change: But in terms of the proposals that impact hurt to the 605 rule was adopted in that favorable it's something that we had advocated for.

Douglas A. Cifu: So certainly, retail volumes are important, because if you're not getting the widgets, you can't make money on each of the widgets. And then secondly, within that, you know, what's the spread at time of arrival, if you will, within the orders that we receive? You know, some of that, Craig, is the best explanation I can give you.

Speaker Change: I think the other three proposals I hear will come out of the SEC at some point this year I think there's going to be significant changes too.

Speaker Change: The auction proposal I think that'll I think.

Speaker Change: It's been a avalanche of comments from just about anybody who's credible in the industry that says this is just silly and not workable and it's a solution chasing a problem that doesn't exist. So its got agencies in the light of the day I think it will be very different than the proposal that came out and it will have no doubt.

Douglas A. Cifu: Some of that is the mix of the flows that we get. I mean, if you're getting higher-priced names as opposed to some of these smaller penny names, if you will, or low-priced names that trade an awful lot, you're going to have a greater opportunity. So some of it is a mix of business, and some of it, frankly, is the environment where, again, retail is a slight misnomer because a lot of it is also high net worth and RIA flow that comes through the pipes.

Speaker Change: A real impact on her two or the marketplace at all I think the best execution rule will come out it'll be vague overreaching I will not have a significant economic analysis underlying it so there'll be litigation that somebody will bring in one of the nice fits for a circuits in the FCC will lose that one as well because the economic enel.

Douglas A. Cifu: So it's not just, you know, day traders, if you will. And we sort that, you know, by each of our clients. I mean, some of the flows will be more high net worth RIA type of flows. And there, similar to the answer I gave Chris on the ETF block desk, you have clients that are doing their own portfolio rebalancing, or they're, you know, coming off the sideline from fixed income, and they decide they want to go buy a bunch of Tesla and Amazon and a bunch of technology from whatever it may be.

Speaker Change: This will again.

Speaker Change: Satisfy the standard and the administrative procedures Act and then finally, the Reg NMS in terms of like what Theyre going to do with.

Speaker Change: Quoted your ability to quote it at mid point or some smaller increments.

That's kind of a TBD, if it's not two overreaching and kind of make sense I think the industry will say, okay. We're happy to.

Speaker Change: It allows us one to come through without litigation maybe.

Maybe the exchanges will sue on that because I think it's not.

Speaker Change: It is.

Speaker Change: It doesn't allow them to be as competitive I don't know I mean that one.

Speaker Change: We will see but I think youll see final rule, making on all this stuff in the next three to six months and obviously you know in November 5th Theres an election.

Douglas A. Cifu: And that flow will tend to be a little less correlated with the market and maybe, you know, will present a better opportunity to purchase. So more engagement and more allocation to equities, and the mix of the business, is probably the best explanation I can give you as to why the spread of time of arrival, if you will, as measured by our 605 reports, was significantly higher in the first quarter as compared to the fourth quarter. Obviously, that does help, you know, drive results.

Speaker Change: A change of administration.

Speaker Change: Traditionally the chairman would resign and so I think our long national Nightmare will be over and we can get back to doing business.

Speaker Change: Great. That's helpful. Thank you.

Speaker Change: That was a general quote by the way for everybody Who's got the rest of the difference.

Speaker Change: 1975.

Speaker Change: Please standby for our next question.

Speaker Change: Our next question comes from Michael <unk> with Morgan Stanley. Your line is open.

Michael: Great. Thank you good morning, I wanted to come back to options market, making Doug I think you mentioned that you're quoting in 10% to 20% of the universe. Today, just curious what takes you to 50% or higher over time, and what that time frame.

Douglas A. Cifu: And that's offset, I guess, as I indicated earlier, by the significant decrease quarter over quarter in realized volatility. I hope that gives you some explanation. And again, at the Panthers, we're always open to new fans. So you are welcome. After our aching losing streak at the end of the season, I might have to switch.

Speaker Change: Look like.

Doug: Yeah, It's a great question again, its balancing the opportunities Michael and I think.

Speaker Change: If you had asked me. This question three years ago I might have given you a different answer I think I don't know, which one of you guys put that all this great data.

Craig William Siegenthaler: But Doug, one follow-up here. So how are spreads trending in March or April, just given we haven't seen the 605 data yet for those two months, and in April, volatility's actually spiked? Yeah, I'm always hesitant.

Speaker Change: But in terms of in someone's got a really good analysis of like opportunities I mean, there's been like a seismic shift towards U.

Speaker Change: SPX Phi and like the broader index families in terms of volume. So we kind of you know we go where the opportunities are.

Douglas A. Cifu: So, like, every time I do this, then you know, one of you guys jumps on it. I would say that they've made it. I mean, our March report is due out on May 1st. I think, Andrew. Is that about right? Yes. So you'll see it on May 1st. And it is consistent with what we saw in January and February. So, again, I'm not smart enough to give you all of the macro reasons.

The guys in the desk are obviously.

Speaker Change: Very keenly aware of kind of where.

Speaker Change: Were they should focus their energies and so I'm really letting them lead as opposed to me.

Speaker Change: I'm, saying from on top of it we need to be in 120, <unk> symbols black state because that would be foolish really all I care about is the bottom line how much money, we're making and we're doing very well there. So it's really the index family and then obviously as I've said, we've pushed internationally in Asia, because I think that's the.

Douglas A. Cifu: I've given you the best explanation that I can in terms of what we're seeing. Obviously, it's positive for the customer market making business. You know, we've seen ebbs and flows. Over the last, since we bought Knight in 2017, in terms of that, and so we try not to get too high and not too low because every time that the spread numbers come in, we know that they're going to revert back. And so we just do our best to try to monetize the flow as it comes in. Thank you for taking my question. Thank you very much.

Speaker Change: The next significant growth area in terms of prioritization, that's not to say that there aren't a a significant number of individual names you know and that will vary day by day week by week, where there where there is activity whether it's earnings whether it's just it's the flavor of the month or whether it's this or that.

Speaker Change: And were very capable of passing on those opportunities and being two sided in those names. So whether it's a name that happens to be in the news or whether it's a name that has earnings or whether it's like.

Speaker Change: A large tech the large cap Tech company that has significant options activities and it will go with those opportunities and so there is a benefit to that which is to say when you're not in a customer relationship with.

Operator: Please stand by for the next question. The next question comes from Dan Fannon with Jeffries. Your line is open.

Speaker Change: Retail brokers, where you have to take all the various names you can move in group and you can kind of say all right I'm going to go.

Daniel Thomas Fannon: Thanks, good morning. I was hoping to get an update on options market making, where you are in terms of the number of single names, as well as, you know, some kind of index, trying to get a sense of what percentage of the market you are interacting with at this point. Yeah, that's a great question. And I guess I get it every quarter.

Speaker Change: Focus my energy on X Y Z large cabin on the index. This week, because that's where the money is that as opposed to the overhead of technology risk.

Speaker Change: And people frankly of having to be two sided in 800 names that may trade by appointment.

Speaker Change: That have strikes that go a year or two out.

Douglas A. Cifu: So, as I should, we continue to chug along; we have expanded the single names that we are trading if there are, you know, again, we are not directly taking flow from clients. And that is a, you know, strategic decision that we have made. I'm not saying that we won't at some point, but that there are a thousand names, if you will, that you need to be active in, and today, not every day, but we are up and capable of quoting in 10 to 20% of the overall universe.

Speaker Change: And pose significant risk on the firms so it gives us real operational flexibility.

Speaker Change: And.

Speaker Change: Very comfortable with where we are at right now.

Speaker Change: Okay, Great and just a follow up question I wanted to circle back on slide seven where you show your pro forma EPS viewpoint of $3 50.

Speaker Change: The $4 a share just curious what how youre thinking about the timeframe to hit that any sort of steps you may need to take in order to get there and then what sort of market backdrop.

Douglas A. Cifu: And so we pick and choose our spots. Obviously, when there is excitement, Dan, around a particular name like Tesla Earnings or this and that, and that's a name that we'll always be up for and active in, we will be market making there. We had a really good quarter in options. We have launched and are profitable in India already, which is exciting. I mean, it's a small business, and it's growing. I want to get into the options because there's been a lot of news around that, and that does not involve Virtu, and that's not our style.

Do you need to be at in order to kind of get within that range and grow from there.

Joseph A. Molluso: Yeah, Mike It's Joe.

Joseph A. Molluso: Make two points one is that.

Joseph A. Molluso: And in some respects, we've already achieved this and that.

Joseph A. Molluso: We looked at this as taking.

Joseph A. Molluso: All of the growth initiatives away from a <unk>.

Joseph A. Molluso: Five year look back on ITG, KCG and Virtu together.

Joseph A. Molluso: What's kind of a an average through the cycle.

Douglas A. Cifu: But certainly, we think that there's a significant opportunity there in Japan where we're up and running. So again, I'm very pleased with the progress. Our market share in the index family has continued to grow and is meaningful.

Joseph A. Molluso: Earning space because the feedback we've gotten from you all and shareholders is that what is.

Joseph A. Molluso: What do you think it is so we looked at the data.

Joseph A. Molluso: Drift out to growth initiatives.

Joseph A. Molluso: I'm up with with a number.

Douglas A. Cifu: And we're active in all of the 17 or 18 venues that are out there. And we're focused on capturing the significant opportunity that's at our feet and in our wheelhouse. And if you look at the mix of business, again, I don't want to pat ourselves on the back and say, "I told you so," but a lot of the... I would say there's been a shift more towards these index products as opposed to individual names.

Joseph A. Molluso: And then when you look at those two slides together slide six and seven.

At each level at each level of net trading income, we generate significant buybacks each year.

Joseph A. Molluso: And I think part of the.

Joseph A. Molluso: When we originally put this information together.

Joseph A. Molluso: The point, we're trying to make was look we're emerging from multiple acquisitions and long term integrations and our cost base kind of fluctuating.

Douglas A. Cifu: So I think there's plenty of opportunity there. There's plenty of opportunity overseas, and we will continue to grow. I'm not saying we're not going to ultimately take direct flow. We are competitive there. We do take some of it through other means. There are routers that send us retail flow.

Joseph A. Molluso: And in our debt levels fluctuating and now that we're in a steady state.

Joseph A. Molluso: How do you look at our company over multi year period, I think the direct answer to your question is we build most of its analysis around three year timeframe.

Joseph A. Molluso: But you know three to five years is fair.

Douglas A. Cifu: You can be competitive in the auctions. And so we're in the business. We're just not fully scaled and competing with Citadel and Susquehanna to get in that business, but we will at some point. And then just thinking about the regulatory calendar over the next couple months, can you, you know, help us know what you're focused on in terms of rulings, you know, kind of where your processes that are kind of working down that you're still waiting to hear back from, as we think about I don't know, not the whole year, but maybe in a shorter time period. Yeah, great question. I was really trying to get through an earnings call without disparaging Gary Gensler, and I guess you're not going to let me. I'm joking, but not really.

Joseph A. Molluso: And I think.

Joseph A. Molluso: It's both corporate finance and it's real growth rates of the corporate finances.

Joseph A. Molluso: Look at that net trading income per day chart on slide six.

Joseph A. Molluso: And I would.

Joseph A. Molluso: Venture that in the next five years, we're going to be towards the top end, one or two years towards the lower end, one or two years.

Maybe one year in the middle.

Joseph A. Molluso: But when you look at the impact.

Joseph A. Molluso: We generate.

Joseph A. Molluso: A lot of cash flow.

Joseph A. Molluso: Keep our expenses low and recruited managing capital. So when you put all those three things together.

Speaker Change: Yeah, just the earnings impact in the reduction of the share count each year, you know you add up whatever percentages there on the right you think we're going to we're going to achieve.

Speaker Change: Those members of our three year period.

Speaker Change: So you kind of start with that as a baseline growth.

Speaker Change: And then.

Speaker Change: We range the growth initiatives from.

Douglas A. Cifu: As you have seen, there has been, yeah, I think we're up to 10 or 12 lawsuits now against the SEC by, you know, business groups, industry participants, everything from the proxy advisor rule to the climate rule, which they have stayed with. It's really become, I don't say comical; I would say actually kind of, it's sad, if you will, that there's been such a lack of engagement with, you know, American participants, if you will, and the SEC has just gone full steam ahead with a lot of these rules.

Speaker Change: The low to the high <unk>.

Speaker Change:

Speaker Change: And the history, that's on that chart. So obviously the high bid in this recent quarter.

Speaker Change: And that's on average so I think.

Speaker Change: You know what what we you know.

Speaker Change: The point here is is the three points I made right, we generate a lot of cash we keep expenses well, we're good at managing capital and we think we've got some built in growth if you're willing to kind of look at it on a you know in at least a three year time frame.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Speaker Change: I think that was the last question. So I wanted to just thank everybody for participating in this call and for all the great questions and we look forward to speaking with you all in July Thank you.

Douglas A. Cifu: And frankly, based on the briefs and some of the analysis that I have read, they're going to just continue to rack up losses. In terms of the proposals that more directly impact Virtu, and I'll say the climate thing impacts us because we're a public company, and I don't think that's really even worth talking about because I don't think that'll see the light of day because it was so broad and overreaching. And the economic analysis was so pitiable that I think the court will reject it.

Speaker Change: This does conclude the conference call for today.

Speaker Change: We would like to thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Douglas A. Cifu: But in terms of the proposals that impact Virtu, the 605 rule was adopted, and that's favorable. It's something that we had advocated for. I think the other three proposals I've heard will come out of the SEC at some point this year. I think there's going to be significant changes to the auction proposal. I think there's been an avalanche of comments from just about anybody who's credible in the industry that say this is just silly and not workable, and it's a solution chasing a problem that doesn't exist.

Speaker Change: [music].

Speaker Change: Yes.

[music].

Speaker Change: Yes.

Speaker Change: [music].

Douglas A. Cifu: So, if that even sees the light of the day, I think it'll be very different than the proposal that came out, and it will have no real impact on Virtu or the marketplace at all. I think the best execution rule will come out. It'll be vague, overreaching, and it will not have a significant economic analysis underlying it. So there'll be litigation that somebody will bring in one of the nice fifth or eighth circuits, and the SEC will lose that one as well because the economic analysis will, again, not satisfy the standard in the Administrative Procedures Act.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Great.

Speaker Change: Okay.

Douglas A. Cifu: And then finally, the regulatory NMS in terms of what they're going to do with your ability to quote it at midpoint or some smaller increment, that's kind of a TBD. If it's not too overreaching and kind of makes sense, I think the industry will say, okay, we're happy to allow this one to come through without litigation. Maybe the exchanges will sue over that because they think it's not fair, it doesn't allow them to be as competitive. I don't know. I mean, that one we'll see.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Douglas A. Cifu: But I think you'll see final rulemaking on all this stuff in the next three to six months. And obviously, you know, November 4th and 5th, there's an election; if there's a change of administration, you know, traditionally, the chairman would resign. And so I think our long national nightmare will be over, and we can get back to doing business. Great, that's very helpful. Thank you. That was a Gerald Ford quote, by the way, for everybody who's interested. 1975

Operator: Please stand by for our next question. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Michael J. Cyprys: Great, thank you. Good morning. I wanted to come back to options market making. Doug, I think you mentioned that you're quoting in 10 to 20 percent of the universe today. Just curious what takes you to 50 percent or higher over time and what that time frame could look like. Yeah, it's a great question.

Douglas A. Cifu: Again, it's balancing the opportunities, Michael. And I think, you know, if you had asked me this question three years ago, I might have given you a different answer. I think – I don't know which one of you guys puts out all this great data, but in terms of opportunities, there's been, like, a seismic shift towards, you know, SPX, PHY, and, like, the broader index families in terms of volume. So, we kind of, you know, we go where the opportunities are. The guys on the desk are obviously very keenly aware of kind of where they should focus their energies.

Douglas A. Cifu: And so, I'm really letting them lead as opposed to me saying from on high, oh, we need to be in 122 symbols by X date, because that would be foolish. Really, all I care about is the bottom line, how much money we make, and we're doing very well there. So, it's really the index family.

Douglas A. Cifu: And then, obviously, as I've said, we've pushed internationally in Asia because I think that's the next significant growth area in terms of prioritization. That's not to say that there aren't a significant number of individual names, you know, and that'll vary day by day, week by week, where there is activity, whether it's earnings, whether it's just – it's the flavor of the month, And we're very capable of pouncing on those opportunities and being two-sided in those names.

Douglas A. Cifu: So, whether it's a, you know, name that happens to be in the news or whether it's a name that has earnings or whether it's, like, a large tech – a large cap tech company that has significant options activities in it, we'll go with those opportunities. And so, there's a benefit to that, which is to say, when you're not in a customer relationship with retail brokers where you have to take all the various names, you can move en route, and you can kind of say, all right, I'm going to, you know, I'm going to focus my energy on XYZ, large cap, and on the index this week because that's where the money's at, as opposed to the overhead of technology risk, and people, frankly, of having to be two-sided in 800 names that may trade by appointment and have strikes that go a year or two out and impose significant risk on the firm.

Douglas A. Cifu: So it gives us real operational flexibility, and I'm kind of very comfortable where we are at right now. Okay, great. And just a follow-up question.

Michael J. Cyprys: I want to circle back on slide seven, where you show your pro forma EPS viewpoint of $3.50 to $4 a share. Just curious how you're thinking about the timeframe to hit that, and any sort of steps you may need to take in order to get there. And then what sort of market backdrop do you need to be in in order to kind of get within that range and grow from there? Yeah, Michael. Hey, it's Joe.

Joseph A. Molluso: I mean, I make two points. One is that, in some respects, we've already achieved this in that we looked at this as taking all the growth initiatives away from a five-year look back at ITG, KCG, and Virtu together and what's kind of an average through the cycle earnings base because, you know, the feedback we've gotten from you all and shareholders is that what is, you know, what do you think it is?

Joseph A. Molluso: So we looked at the data, stripped out the growth initiatives, and came up with a number. And then, you know, when you look at those two slides together, slides six and seven, you know, at each level, each level of net trading income, we generate significant buybacks each year. And, you know, I think part of the point we were trying to make when we originally put this information together was, look, we're emerging from, you know, multiple acquisitions and long-term integration.

Joseph A. Molluso: And our cost base is kind of fluctuating, and our debt levels are fluctuating, and now that we're in a steady state, how do you look at our company over a multi-year period? I think the direct answer to your question is that we build most of this analysis around a three-year time frame. But, you know, three to five years is fair, and I think it's both corporate finance and real growth, right, so the corporate finances. You know, look at that net trading income per day chart on slide six.

Speaker Change: [music].

Joseph A. Molluso: And I would, you know, venture that in the next five years, we're going to be at, you know, towards the top end, one or two years, towards, you know, the lower end, one or two years, and, you know, maybe one year in the middle. But when you look at the impact on, you know, we generate a lot of cash flow, we keep our expenses low, and we're prudent in managing capital. So when you put all those three things together... You know, just the earnings impact and the reduction in the share count each year, you know, you add up whatever percentages on the right you think we're going to achieve over a three-year period.

Joseph A. Molluso: So you kind of start with that as a baseline growth rate, and then, you know, we range the growth initiatives from, you know, the low to the high in the history that's on that chart. So obviously, the high is this recent quarter and, you know, and then some average. So I think, you know, what we're really talking about here are the three points I made, right? We generate a lot of cash, we keep expenses low, we're good at managing capital, and, you know, we think we've got some built-in growth if you're willing to kind of look at it on a, you know, at least a three-year time frame.

Michael J. Cyprys: Great. Thank you. I think that was the last question, so I want to just thank everybody for participating in this call and for all the great questions, and we look forward to speaking with you all in July. Thank you. This does conclude the conference call for today. We would like to thank you for your participation. You may now disconnect.

Operator: ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??. .. .. ?? ?? ?? ?? ?? ?? ?? ??