Q2 2024 Virtu Financial Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the Virtu Financial 2024 Second Quarter Results Conference call. At this time, all participants are in a listen-only mode.

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

Operator: To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Smith, Head of Investor Relations. Thank you, Kevin. Good morning, everyone.

Andrew Smith: Thank you for joining us. Our second quarter results were released this morning and are available on our website. With us today and 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. First, a few reminders.

Speaker Change: With us today and on this mornings call we have Mr. Douglas <unk>, our Chief Executive Officer, Mr. Joseph Maluso, our co President and co Chief operating Officer and Mr. Sean Galvin, Our Chief Financial Officer, who will begin with prepared remarks, and then take your questions.

Andrew Smith: Today's call may include forward-looking statements that represent Virtu's current belief regarding future events that 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 vary 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: First a few reminders today's call may include forward looking statements, which represent <unk> current belief regarding future events that are therefore subject to risks assumptions and uncertainties, which may be outside the company's control.

Speaker Change: Note that our actual results and financial conditions may vary 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.

Andrew Smith: We refer you to the disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report, 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 report 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.

Andrew Smith: 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 a 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. And with that, I'd like to turn the call over to Doug. Thank you, and good morning everybody.

Speaker Change: 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 a 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: And with that I'd like to turn the call over to Doug.

Douglas A. Cifu: This morning, we reported our second quarter results. For the quarter ended June 30th, Virtu earned 83 cents of adjusted EPS on 6.1 million dollars of adjusted net trading income. We generated a 56.5 percent EBITDA margin and $218 million of EBITDA, both on an adjusted basis. We performed well this quarter compared to headline volume and volatility statistics. Thanks to strong performances from our market-making businesses, our growing Virtu Execution Services franchise, and meaningful contributions from our Organic Growth Initiative.

Doug: Thank you and good morning, everybody.

Doug: We reported our second quarter results for the quarter ended June 30th.

Doug: Earned 83 of adjusted EPS.

Speaker Change: $6 1 million per day of adjusted net trading income.

Speaker Change: We generated 56, 5% EBITDA margin and $218 million of EBITDA, both on an adjusted basis.

Speaker Change: We performed well this quarter compared to headline volume and volatility statistics, thanks to strong performances from our market making businesses.

Speaker Change: Our growing virtu execution services franchise and meaningful contributions from our organic growth initiatives.

Douglas A. Cifu: Beginning this quarter with Virtu Execution Services, our business performed very well. Adjusted net trading income was up 3% over the first quarter, delivering $100 million of adjusted net trading income, or $1.6 million per day, the highest since the second quarter of 2022, when volumes were 5% higher and volatility was 63% higher. These results are especially impressive considering that U.S. notional turnover was down almost 6%, pan-European notional turnover was down about 2% per day, and in Asia, the Tokyo Stock Exchange notional turnover was down about 10%.

Speaker Change: Beginning this quarter with Virtu execution services, our business performed very well adjusted net trading income was up 3% over the first quarter delivering $100 million of adjusted net trading income or $1 $6 million per day, the highest since the second quarter of 2022 when vol.

Speaker Change: <unk> were 5% higher and volatility was 63% higher.

Speaker Change: These results are especially impressive considering that U S. Notional turnover was down almost 6% Pan European notional turnover was down about 2% per day and in Asia, Tokyo Stock exchange notional turnover was down about 10% virtues scaled operations afford us a unique.

Douglas A. Cifu: Virtu's scaled operations afford us the unique ability to continually invest in our global multi-asset class platform to meet clients' needs and maintain our position as a valuable partner. We believe these investments in technology and infrastructure are essential for providing the efficiencies clients need to thrive in a fast-paced and competitive landscape. And it's clear that our multi-year investments are paying off, as evidenced by third-party validation and increased client adoption. Major contributors to this are our multi-asset class capability, which makes us eligible to win more RFPs, and our white label offerings, or what we call Virtu Technology Services, which allows us to distribute our scalable technology efficiently and strategically to other self-side institutions, helping them better serve their local clients.

Speaker Change: <unk> ability to continually invest in our global multi asset class platform.

Meet clients' needs and maintain our position as a valuable partner.

Speaker Change: We believe these investments in technology and infrastructure are essential for providing the efficiencies clients need to thrive in a fast paced and competitive landscape and it's clear that our multiyear investments are paying off as evidenced by third party validation and increased client adoption.

Speaker Change: Major contributors to this are our multi asset class capability, which makes us eligible to win more rfps and our white label offerings or what we call a virtu technology services.

Speaker Change: Which allows us to distribute our scale scalable technologic technology efficiently and strategically to other sell side institutions, helping them better serve their local clients.

Douglas A. Cifu: These non-exclusive strategic partnerships create recurring and recurring revenue opportunities for us and allow regional and boutique brokers to benefit from Virtu's global access to markets, Advanced Trading Automation, Risk Management, and Rich Data Analytics Platform. Partnerships like these allow us to accelerate the efficient distribution of our offerings and to expand our market by serving new clients and additional verticals. To help us realize this important opportunity, we've made several senior hires in the U.S. and abroad, industry veterans with impressive track records of building successful B2B franchises in Tier 1 global banks and exchanges.

These nonexclusive strategic partnerships create recurring and reoccurring revenue opportunities for us and allow regional and boutique brokers to benefit from <unk> global access to market advanced trading automation risk management and rich data analytics platform.

Speaker Change: Ships like these allow us to accelerate the efficient distribution of our offerings and to expand our addressable market by serving new clients and additional verticals to.

Speaker Change: To help us realize this important opportunity we've made several senior hires in the U S and abroad industry veterans with impressive track record of building successful VW franchises in tier one global banks and exchanges.

Douglas A. Cifu: Recruiting and retaining human capital has been crucial to making enhancements to our product suite and creating the Right Distribution Network. Our disciplined approach to staffing means we've kept a constant level while adding key talent to support important initiatives.

Speaker Change: Scrutiny and retaining human capital has been crucial to making enhancements to our product suite and creating the right distribution network. Our disciplined approach to staffing means we've kept a constant level, while adding key talent to support important initiatives.

Douglas A. Cifu: We've also seen interest in our new IRS CDS Analytics Office, as well as our Fixed Income Pre- and Post-Trade Analytics and Cost Curve Office. These are examples of how, as a result of the scaled global platform we've built, we can collaborate with clients, understand their needs, and rapidly develop practical solutions to their problems. We are as excited about the future of this business as ever. As always, our offerings are driven by client demand and built around long-term sustainable partnerships. Turning to MarketMaker,

Speaker Change: We've also seen interest in our new IRS Cts analytics offering as well as our fixed income pre and post trade analytics and cost current offerings.

Speaker Change: These are examples of how as a result of our scale global platform. We built we can collaborate with clients understand their needs and rapidly develop practical solutions to their problems.

Speaker Change: We are as excited about the future of this business has ever as always our offerings are driven by client demand and built around long term sustainable partnerships turning to market, making.

Douglas A. Cifu: Despite this muted background, our business performed very well, including in the United States, where both our customer and non-customer market-making businesses delivered an exceptional quarter, thanks in part to the continuous cross-desk internalization improvements made by the team and an increase in the attractiveness of the flow we received offset by reduced volatility across many drivers. While we saw softer results in certain commodity segments in the second quarter, we recognized meaningful benefits from enhancements to our global equity market-making operations that drove outstanding results in single stock and ETFs across the United States, Canada, Europe, and Asia. These enhancements, combined with our focus on optimizing internalization opportunities, helped us achieve greater results this quarter despite the reduced opportunity compared to last quarter.

Speaker Change: Despite the muted background, our business performed very well, including in the United States, where both our customer and non customer market, making businesses delivered an exceptional quarter. Thanks in part to the continuous cross desk internalization improvements made by the team and an increase in the attractiveness of the flow we receive.

Speaker Change: Offset by reduced volatility across many drivers.

Speaker Change: While we saw softer results in certain commodity segments in the second quarter, we recognized meaningful benefit from enhancements to our global equity market, making operations that drove outstanding results in single stock and Etfs across the United States, Canada, Europe and Asia.

Speaker Change: Enhancements combined with our focus on optimizing internalization opportunities helped us achieve greater results this quarter, despite the reduced opportunity compared to last quarter.

Douglas A. Cifu: This is a great example of how we're focused on investing to enhance our yield from every opportunity in any market condition. We are proud of the continued real progress in our core market-making businesses, as well as our success in new areas which we had no presence in only a few short years ago. Growth initiatives generated $670,000 per day in adjusted net trading income, contributing 11% of our overall adjusted net trading income. I will highlight results from the standout performers this quarter.

This is a great example of how we how we're focused on investing to enhance our yield from every opportunity in any market condition.

Speaker Change: We are proud of the continued real progress in our core market, making business.

Speaker Change: As well as our success in the new areas, which we had no presence in only a few short years ago growth initiatives generated $670000 per day, and adjusted net trading income contributing 11% of our overall adjusted net trading income.

I will highlight results from the sustained outperformance this quarter and ETF block. Our continued growth is the result of the team's efforts to onboard new clients broadening our distribution develop new pricing models to win RF queues and build streamline processes to create operational leverage as we expand our services to more clients.

Douglas A. Cifu: In ETF Block, our continued growth is the result of the team's efforts to onboard new clients, broaden our distribution, develop new pricing models to win RFQs, and build streamlined processes to create operational leverage as we expand our services to more clients in more asset classes and geographies. In addition, our growing symbol and underwire coverage capabilities have opened the door for broader relationships. ETF issuers and fund managers, including facilitating their regular rebalance execution needs.

Speaker Change: And more asset classes and geographies in addition.

Speaker Change: Our growing symbol in under wire coverage capabilities as open the door for broader relationships with ETF issuers and fund managers, including facilitating their regular rebalanced execution needs are growing options business delivered stronger performance than the prior quarter, Despite lower addressable.

Douglas A. Cifu: Our growing options business delivered stronger performance than the prior quarter, despite lower addressable opportunities. Building our global options capabilities continues to be a top priority of the firm, and we expect this to be a significant part of Virtu's future as our global footprint grows. Similarly, we remain optimistic about the growth potential for us in the fixed income market, given the rapid growth rate of the accessible market opportunity moving in our direction and the pace at which we are developing technology and deploying talent to increase our footprint in the space. The opportunity in fixed income is especially exciting when combined with the synergistic benefits from our growing ETF blockbusters. Touching briefly on cryptography.

Speaker Change: Opportunities.

Speaker Change: Building, our global options capabilities continues to be a top priority of the firm and we expect this to be a significant part of <unk> future as our global footprint grows.

Speaker Change: Similarly, we remain optimistic about the growth potential for us in the fixed income markets given the rapid growth rate of the accessible market opportunity moving in our direction and the pace at which we are developing technology and deploying the talent to increase our footprint in this space the opportunity in fixed income.

Speaker Change: <unk> is especially exciting when combined with the synergistic benefits from our growing ETF block desk.

Douglas A. Cifu: Our crypto market making business was also a meaningful contributor, albeit the opportunity this quarter was muted as spot Bitcoin ETF volumes were down over 30% compared to Q1. We are strategically expanding our crypto venue footprint in a Virtu fashion that is consistent with our historical appetite for risk. Our expansion in the SPOT crypto market enhances our liquidity distribution and access to desirable diverse order flow. As part of this development, we are building out cross-product internalization capabilities, which allow us to keep more of the spread we earn and reduce trading fees, similar to what we have developed in other asset classes across the firm. Looking forward, we are working with ETF issuers to prepare to support SPOT Ethereum ETFs, and with exchanges and regulators to be ready to make markets and options on SPOT crypto ETFs when they are approved.

Speaker Change: Briefly on crypto or crypto market, making business was also a meaningful contributor, albeit the opportunity. This quarter was muted as spot bitcoin Etfs <unk> were down over 30% compared to Q1.

Speaker Change: We are strategically expanding our crypto venue footprint in a virtu manner that is consistent with our historical appetite for risk.

Speaker Change: Our expansion in the spot crypto markets enhances our liquidity distribution and access to desirable diverse order flow as part of this development. We are building. We are building out cross product internalization capabilities, which allow us to keep more of the spread we earn and reduced trading fees similar to what we have developed in other asset class.

Speaker Change: Across the firm looking forward, we are working with ETP ETF issuers to prepare to support spot as CRM, Etfs and with exchanges and regulators to be ready to make markets in options.

Speaker Change: Spot crypto Etfs when they are approved as we mentioned last quarter. The introduction of spot Crypto ETF products has transport has transformed <unk> role in the crypto ecosystem in place to virtu strengths by enabling us to leverage our scale capabilities to service clients and the markets the <unk>.

Douglas A. Cifu: The introduction of SpotCrypto ETF products has transformed Virtu's role in the crypto ecosystem and plays to Virtu's strengths by enabling us to leverage our scale capabilities to service clients and the market. The recent success of the crypto ecosystem has rapidly accelerated since the launch of Spot ETS, and we are seeing more adoption from traditional investors than ever. We continue to see client demand for our unique abilities, as well as demand for our liquidity from new platforms and products coming to market. Suffice to say, we are still in the early innings of tapping the growth opportunity in crypto. Now I'll turn it over to Joe for more commentary.

Speaker Change: <unk> success of the crypto ecosystem has rapidly accelerated since the launch of spot Etfs and we are seeing more adoption from traditional investors than ever we continue to see client demand for our unique abilities as well as demand for our liquidity from new platforms and products coming to market suffice to say.

Speaker Change: We are still in the early innings of tapping the growth opportunity in crypto now I'll turn it over to Joe for more commentary, Jeff Alright.

Joseph A. Molluso: Thank you, Doug. Overall, the market environment was mixed to down compared to the prior quarter. Realized volatility of the S&P 500 was down about 6%. U.S. equity volumes, excluding sub-dollar shares, were down 4%.

Joe: Alright. Thank you Doug overall, the market environment was mixed to down compared to the prior quarter realized volatility of the S&P 500 was down about 6% U S equity volumes, excluding sub dollar shares were down 4%.

Joseph A. Molluso: The U.S. auction volumes were up about 1%. However, indicators of retail activity in the U.S. were also mixed. Well, 605 volumes through May were down 5%, but IBKR's equity share volume was up 17. In thick markets, FX volumes were up about 5 to 10%, energy volumes were up 1%, while high-grade credit volumes were down over 11% versus the prior quarter. I'll speak briefly about the debt refinance we did as well as our buyback program before turning it over to Sean to review the financial results.

Joe: U S auction volumes were up about 1% indicators of retail activity in the U S were also mixed.

Speaker Change: 605 volumes through May were down, 5%, but I BK, our us equity share volume was up 17% for the quarter.

Joe: In FIC markets FX volumes were up.

5% to 10% energy volumes were up 1%.

Joe: While high grade credit volumes were down over 11% versus the prior quarter.

Speaker Change: I'll speak briefly about the debt refinance we did as well as our buyback program before turning it over to Sean to review the financial results at June 32024, our total invested capital stood at over $1 8 billion, our incremental returns on capital remain superior on a long term basis.

Joseph A. Molluso: At June 30 of 2024, our total invested capital stood at over $1.8 billion. Our incremental returns on capital remain superior on a long-term basis. Our ability to generate significant returns is evidence of our broad and diverse service offerings. And, as Doug explained, our growth initiatives have begun to pay dividends. Our ability to generate superior returns would be even greater as our new initiatives, particularly fixed income, are the more capital-intensive businesses on a relative basis. In quarter two, we used a portion of our free cash flow to repurchase 1.4 million shares at an average price of $22.34.

Sean: Our ability to generate significant returns as evidence of our broad and diverse service offerings.

Sean: And as Doug explained our growth initiatives have begun to pay dividends and our ability to generate superior returns would be even greater as our new initiatives, particularly fixed income or the more capital intensive businesses on a relative basis.

In quarter, two we used a portion of our free cash flow to repurchase one 4 million shares at an average price of $22 34 to date, we have repurchased 47 3 million shares at an average price of $25 quarter end share count was $161 4 million outstanding bringing our buybacks.

Joseph A. Molluso: To date, we have repurchased 47.3 million shares at an average price of $25. The quarter-end share count was $161.4 million, outstanding, bringing our buybacks on target to fit within the ranges we have announced publicly. Since we initiated our share repurchase program, we have repurchased over 18%. The fully diluted shares of Virtu Net after new issuance. Our share repurchase program year-to-date is within the guidelines we have published. This quarter, we saw an opportunity to refinance and diversify our long-term debt outstanding.

Sean: On target to fit within the ranges, we have announced publicly.

Sean: Since we initiated our share repurchase program, we have repurchased over 18% of the fully diluted shares of virtue net after new issuances.

Sean: Our share repurchase program and year to date is within the guidelines. We have published this quarter, we saw an opportunity to refinance and diversify our long term debt outstanding we refinanced our $1 $7 billion of existing debt.

Joseph A. Molluso: We refinanced our $1.7 billion of existing debt with a $1.25 billion term loan priced at SOFR plus $275 and a $500 million bond at seven and a half. All but $170 million of the floating portion of the loan is hedged through the end of 2025.

Sean: With a one and a quarter billion term loan priced at sofa, plus $2 75, which was tighter down from the 3% spread we had prior to this.

Sean: And a $500 million bond at seven 5%.

Sean: All but $170 million of alone.

The floating portion of the loan is hedged through the end of 2025 together with this refinancing we renewed our holding company liquidity facilities and extended the maturities on our long term debt.

Joseph A. Molluso: Together with this refinancing, we renewed our holding company liquidity facilities and extended the maturities on our long-term debt by nearly three years, so we were very happy with this outcome. However, results from market-related businesses like ours will always vary with volumes, volatility, and the market environment. Slides 5 and 6 in the supplemental materials illustrate the positive leverage we enjoy from capital management as well as our growth initiatives and the cumulative impact of our share repurchase. On the expense side, adjusted cash operating expenses were $168 million in the second quarter.

Sean: Nearly three years, so we're very happy with this outcome.

Sean: While results from market related businesses like ours will always vary with volumes and volatility and market environment.

Sean: <unk> five and six in the supplemental materials illustrate the sustained earnings power of our business and the positive leverage we enjoy from capital management as well as our growth initiatives and the cumulative impact of our share repurchases.

Sean: On the expense side adjusted cash operating expenses were $168 million in the second quarter.

Joseph A. Molluso: Our run rate cash operating expense is up about 3% year over year, also consistent with prior guidance. Our cash compensation ratio was 22%, 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 as we have done in the past, we'll provide more clarity on compensation and other expense numbers as the year unfolds, although we also expect the ratio to remain... [inaudible] regarding our total cash... Operating expenses going forward, we will continue to assume low single-digit overall increases in Operating Expenses. So we're going to turn it over to Sean to just go through the financials. Thank you, Joe. Good morning.

Sean: Our run rate cash operating expenses up about 3% year over year.

Sean: Also consistent with prior guidance, our cash compensation ratio was 22% of our total compensation ratio was 27% for the quarter compared to 26% and 32% respectively for the full year 2023.

Sean: We expect cash operating expenses to remain within the recent historical range and as we have done in the past, we will provide more clarity on compensation and other expense numbers as the year unfolds. Although we also expect the ratio to remain.

Sean: Within historical norms.

Sean: Regarding our total cash.

Sean: Operating expenses going forward, we will continue to assume low single digit overall increases in operating expenses. So we're going to turn it over to Sean to just go through the financials.

Sean Patrick Galvin: For slide three of our supplemental materials, we provided a summary of our quarterly performance; the second quarter of 2024 is just about trading, which represents our trading gain, net of direct trading expenses totaled $385 million or $6.1 million per day. Market Making Adjusted Net Trading Income was $286 million or $4.5 million per day, and Execution Services Adjusted Net Trading Income was $100 million or $1.6 million per day. Our second quarter of 2024 normalized adjusted EPS was 83 cents.

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

Sean: Second quarter of 2024, our adjusted net trading income, which represents our trading gains net of direct trading expenses totaled $385 million or.

Or $6 1 million per day.

Sean: Market, making adjusted net trading income was $286 million or $4 5 million per day and execution services. Adjusted net trading income was $100 million or $1 6 million per day.

Sean: Our second quarter 2020 for normalized adjusted EPS was <unk> 83.

Sean Patrick Galvin: Adjusted EBITDA was $218 million for the second quarter of 2024, and our adjusted EBITDA margin was 56.5%. On slide nine, we provided a summary of our operating expense results. In the second quarter of 2024, we recorded $184 million of adjusted operating expenses, and we continue to maintain an efficient cost structure and disciplined expense management, which just helped us to control our operating expenses during the inflationary environment. Financing interest expenses $23 million for the second quarter of 2024.

Sean: Adjusted EBITDA was $218 million for the second quarter 2024, and our adjusted EBITDA margin was 56, 5%.

Sean: On slide nine we provided a summary of our operating expense results.

Sean: Second quarter 2024, we recorded a $184 million of adjusted operating expenses, we continue to maintain an efficient cost structure and disciplined expense management, just helped us to control our operating expenses during the inflationary environment.

Sean: Financing interest expense was $23 million for second quarter of 2024 with the benefit of our recent refinance and the interest rate swap contracts that we entered in the prior years, our blended interest rate was approximately seven 3% for our long term debt in aggregate.

Sean Patrick Galvin: With the benefit of our recent refinance and the interest rate swap contracts that we entered into in the prior years, our blended interest rate was approximately 7.3% for our long-term debt in aggregate. We remain committed to our $0.24 per quarter dividend, and combined with our share repurchase program, this demonstrates our continued commitment to return capital to our shareholders. Now, I would like to turn the call over to the operator for the Q&A.

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

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

Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again and we also ask that you limit yourself to one question and one follow up we will pause for a moment, while we compile our Q&A roster.

Sean Patrick Galvin: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 11 again.

Operator: And we also ask that you limit yourself to one question and one follow-up. We will pause for a moment while we compile our Q&A list. Our first question comes from Patrick Moley with Piper Stanley. Your line is open. Yeah, good morning, and thanks for taking the question. Congratulations on a strong quarter, and Doug, congrats on the Panthers' victory. It was pretty cool to see you and Vinny get your names immortalized on the Stanley Cup.

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

Patrick Malcolm Moley: Yes, good morning, and thanks for taking the question.

Congrats on the strong quarter, Doug Congrats on the Panthers victory pretty cool to see you had many get your names immortalized on the Stanley Cup I'm just going to watch.

Patrick Malcolm Moley: It's fun to watch. So, you know, if we back out organic initiatives, ante was up 9% sequentially this quarter. I know we only have two months of 6.05 data, but those reports implied that the opportunity or quoted spreads had contracted 11% quarter-to-date. So could you just help us understand and maybe elaborate on, you know, what drove that disconnect this quarter? And then maybe, looking at first quarter versus second quarter, what were some of the notable changes in the overall environment that drove a sequential strengthening? Thanks.

Patrick Malcolm Moley: No.

Speaker Change: We back out organic initiatives.

Speaker Change: <unk> was up 9% sequentially. This quarter I know, we only have two months of 600 by data, but those reports implied that the opportunity or quoted spreads contracted 11% quarter to date. So can you just help us understand maybe elaborate on what drove that disconnect. This quarter.

Speaker Change: And then just maybe looking at first quarter versus second quarter, what were some of the notable changes in the overall environment that drove that sequential strengthening.

Speaker Change: Thanks.

Douglas A. Cifu: Yeah, and thank you very much for the kind words. It's greatly appreciated. Yeah, we, as I said, in my prepared remarks, I was very, very pleased with our performance during the quarter. As you know, a lot of the metrics that we look at and, frankly, that we point you guys to around quoted spread and realized volatility were down quarter over quarter. I think, you know, there was some increase in the S&P intraday volatility, which definitely helps when there are price level changes in the S&P during the day as opposed to realizing volatility, measuring volatility at the end of the day, but put that to the side.

Speaker Change: Yes.

Speaker Change: Thank you very much for the kind words I would greatly appreciate it yes.

Speaker Change: Yes, we as I said in my in my prepared remarks, I was very very pleased with our performance during the quarter as you note a lot of the metrics that we.

Speaker Change: Look at and frankly that we point you guys to around a quoted spread in.

And realized volatility.

Quarter over quarter.

Speaker Change: I think there was some increase in the S&P intraday volatility, which definitely helps when there is price level changes in the S&P during the day as opposed to realized volatility measuring volatility at the end of the day, but put that to the side.

Douglas A. Cifu: I do think, look, I mean, as I've indicated on calls before, you know, we are very much always investing and working on our models on the customer market making side to make sure that we are providing the best service, the best execution quality to our clients while at the same time monetizing the flow as best that we possibly can. Model adjustments, for lack of a better word, and enhancements that contributed during the quarter. And, as I indicated in my prepared marks, one of the things that I'm most proud about this firm is that it really is a single unitary firm.

Speaker Change: I do think look I mean as I've indicated on these calls before.

Speaker Change: We are very much always investing and working on our models on the customer market, making side to make sure that we are providing the best service.

Speaker Change: First execution quality to our clients while at the same time.

Speaker Change: Monetizing the flow.

Speaker Change: Best that we possibly can so we've made a number of.

Speaker Change: Model adjustments for lack of a better word and enhancements.

Speaker Change: That were meaning that contributed during the quarter as I indicated in my prepared remarks, one of the things that I'm most proud about this firm.

Speaker Change: Is that it really is a single unitary firm we.

Douglas A. Cifu: We don't have trading pods, and we don't have trading desks, which means there are opportunities to internalize within our market making businesses, certainly easily on the non-customer side, but even within the customer and the non-customer market making business are tremendous, and so that does a couple things. Obviously, it minimizes external costs, both exchange costs, SEC fees, and et cetera. But it also enables you to be more confident about your market making and to tighten your spread, which, therefore, thereby attracts more flow.

Speaker Change: We don't have trading part, we don't trading desk, which means that our opportunities to internalize.

Speaker Change: Within our market, making businesses certainly easily on the non customer side, but even within the customer and the non customer market, making business.

Speaker Change: Our tremendous and so that does a couple of things obviously it minimises.

Speaker Change: External costs, both exchange costs, FCC fees et cetera, but it also enables you to be more confident about your market, making it to tighten your spread which therefore, thereby attracts more flow. So.

Douglas A. Cifu: So better pricing begets more flow; more flow begets more opportunity, and this firm has historically been very good at that. I should also point out, and there's a reason I started our remarks, my remarks rather, Virtu Execution Services. It had a really, really good quarter.

Speaker Change: Better pricing to get more flow more flow begets more opportunity and this firm has historically been very good at that I should also point out and there's a reason I started my remarks, my remarks, rather with Virtu execution services. It had a really really good quarter.

Speaker Change: We have.

Speaker Change: And I give Steve <unk>.

Douglas A. Cifu: We have, and I give Steve Cavoli and the folks in the Virtu Execution Services, part of our business, a great deal of credit. They have spent the last four plus years since the amalgamation, I'll call it, of Knight and ITG into the Virtu world, essentially changing the tires on a car as it was going down the highway at 70 miles an hour, we don't stop here at Virtu, and replatforming and reconstituting a broad suite of financial products and then rolling that out to clients, you know, an embedded client base that was comfortable with a lot of ITG and Knight products, but now looks at what we've accomplished and says, man, this is really, really impressive.

Speaker Change: And the folks in the Virtu execution services part of our business a great deal of credit. They have spent the last four plus years since the amalgamation I'll call it of Knight and ITG into the virtual world essentially changing the tires on a car that was going down the highway at 70 miles an hour we don't stop here at Virtu.

Speaker Change: And re platforming.

Speaker Change: And reconstituting, a broad suite of financial products, and then rolling that out to clients and embedded client base that was comfortable with a lot of ITG in Knight products.

Douglas A. Cifu: And so we've always competed on execution quality and customer service. The execution quality has demonstrably improved, you know, and we have a product that we rolled out using machine learning techniques called Switcher, which essentially is the guys internally. And I'm a golfer. I love this analogy. It's kind of like the Uber caddy that you wish you had when you played golf. You get to, you know, a shot, and it tells you this is exactly the club you should hit, and here's what it's going to do, and this is what we strongly suggest that you do.

Speaker Change: But now looks at what we've accomplished and says man. This is really really impressive and so we've always competed on execution quality and customer service.

Speaker Change: Execution quality is demonstrably improved.

Speaker Change: And.

Speaker Change: We have a product that we rolled out using machine learning techniques called switcher, which essentially is the guys internally and I'm a golfer I love. This analogy, it's kind of like the Uber.

Speaker Change: <unk> that you wish you had when you play golf.

Speaker Change: Two a shot and it tells you. This is exactly the club you should have here's what it's going to do and this is what we strongly suggest that you do and so our switch a product does that for our buy side sell side clients in India that it says.

Douglas A. Cifu: And so our switcher product does that for our buy side and our sell side clients, and in that, it says, you know, here's the current market condition, here's what we think the right set of tools you should use in order to have superior execution quality and clients that resonates with clients, and that's really the value proposition of Virtu. The last piece on Virtu Execution Services, which I mentioned in my repair of my box, it's just, you know, Virtu Technology Services; think of it as kind of a broker-in-a-box.

Speaker Change: Here's the current market condition, here's what we think the right.

Speaker Change: Set of tools you should use in order to have a superior execution quality and clients that resonates with clients and thats really the value proposition of or to the last piece on Virtu execution services, which I mentioned in my prepared remarks.

Speaker Change: Two technology services or think of it as kind of broker in a box as the world has gotten a lot more competitive and as commission rates have skinny and how commission dollars are more scarce.

Douglas A. Cifu: As the world has gotten a lot more competitive and as commission rates have skinned and commission dollars are more scarce, smaller scale players, and even large scale players, are taking advantage of our ability to produce superior technology and execution, and we are more than happy, more than happy to white label that for firms that otherwise people would view as competitors. They're not. There is a great symbiosis on the sell side, and where they are to provide technology services, and that really has resonated with folks on the sell side. So I think, Patrick, to answer your question, it really is a combination of all of the aforementioned, a lot of singles, and you can score runs.

Speaker Change: Smaller scale players and even scale players are taking advantage of our ability to.

Speaker Change: Produce superior technology and execution and we are more than happy more than happy to white label that two firms that otherwise people would view as competitors, they're not there is a great symbiosis on the sell side and we're there to provide technology services and that really has resonated with folks on the sell side. So I think Patrick to answer your question.

Patrick: It really is a combination of all of the aforementioned a lot a lot a lot of singles and you can score runs.

Douglas A. Cifu: Okay, great. And as a follow-up on the organics, how do you expect to drive revenues there in the absence of new ETF approvals, which it appears can drive outside results in the quarter in which they're issued and launched, given the kind of the contraction that it appears to have occurred in that industry this quarter? Yeah, great question. And as we've said on prior calls, the organic growth initiatives are not immune to market forces.

Patrick: Okay great.

Patrick: As a follow up.

Speaker Change: On the organic growth E&P, it was up almost 70% year over year, So I don't want to.

Throw any any shade on it but it did contract 33% sequentially can you help us just parse out how much of that was driven by.

Speaker Change: The contraction in the crypto environment versus something like ETF block, which you called out.

Speaker Change: And then.

Speaker Change: As we think about the crypto business going forward, how do you expect to drive revenues there in the absence of new ETF approvals, which it appears can drive outsized results in the quarter in which there.

Speaker Change: Issued and launched given kind of the contraction.

Speaker Change: It appears like incurred net in that.

Speaker Change: Industry this quarter, yes.

Douglas A. Cifu: And so, for example, SPY option volumes were down 9% quarter over quarter. You know, obviously, the crypto I mentioned in my prepared remarks, SPOT, Bitcoin ETF volumes were down roughly 30% quarter over quarter after the exuberance of the launch. Same thing with opportunities in global block ETFs as volumes were down compared to quarters over quarter over quarter. So look, you know, I'm very, very pleased with our continued efforts in those areas.

Speaker Change: Yes, great question and as we've said on prior calls.

Speaker Change: Organic growth initiatives are not immune to market forces and so like for example, spy option volumes were down 9%.

Speaker Change: Quarter over quarter.

Speaker Change: Obviously, the crypto I mentioned in my prepared remarks as spot.

Speaker Change: ETF volumes were down roughly 30% quarter over quarter after the exuberance in the launch.

Speaker Change: Same thing with opportunities in global block ETF as volumes were down compared to quarters over quarter over quarter. So look you know I'm very very pleased with our continued efforts in those in those areas.

Douglas A. Cifu: You know, we continue to expand and to grow and to get better, but we're obviously subject, for lack of a better word, to the marketplace and what the overall macro volumes are. So we're sitting here today; if you had said to me three years ago, like, hey, you're gonna have $600,000 plus of adjusted net trading and nearly $700,000 from these three categories, which effectively provided zero P&L three years ago, I would have been ecstatic and accepted right away.

Speaker Change: No.

Speaker Change: We continue to expand and to grow and to get better, but we're obviously subject for lack of a better word to what the marketplace and what the overall macro volumes are so we're sitting here today. If you had said to me three years ago, like Hey, Youre going to have $600000 plus of adjusted net trading income.

Speaker Change: $700000 from these three categories, which effectively provided zero P&L three years ago, I would've been like ecstatic and accepted right away.

Douglas A. Cifu: In crypto, in particular, look, we're onboarding new venues and creating a liquidity distribution network similar to what we have in FX. I think there's going to be a growing demand from counterparties. You haven't yet seen full institutional adoption, obviously.

Speaker Change: And crypto in particular look we're onboarding, new venues and creating a liquidity distribution network similar to what we have in FX I think theres going to be a growing demand from counterparties you havent, yet seen full institutional adoption, obviously theres been some very notable firms that have not embraced crypto or.

Douglas A. Cifu: You know, there are some very notable firms that have not embraced crypto or digital assets, but there are a ton of RIAs and other institutions that are now allocating a portion of their investable assets, if you will, to digital assets and to crypto. So we will continue to do that. There are, you know, a plethora of new venues that want our liquidity provisioning services, including, obviously, as I always do, and my public service announcement for EDX Markets, which we own a piece of with our friends at Citadel and Fidelity and Schwab and others.

Speaker Change: Digital assets, but there's been a.

Speaker Change: A ton of <unk> and other institutions that are now allocating a portion of their investable assets. If you will to digital assets of the crypto. So we will continue.

To do that there is.

Speaker Change: Plethora of new venues.

Speaker Change: That what our liquidity provisioning services, including obviously as I always do.

Speaker Change: And my public service announcement for <unk> markets, which we own a piece of it with our friends at Citadel, and fidelity and Schwab and others and so we think theres going to continue to be an evolution of both the distribution channels in.

Douglas A. Cifu: And so we think there's going to continue to be an evolution of both the distribution channels in digital but also the products. And as you alluded to, it appears like there will be a puff of white smoke from the SEC on July 23rd, and Ethereum products, Gensler will open up the pearly gates and allow them to be traded on July 23rd, which we're very excited about because it's a whole new class of products.

Speaker Change: In digital but also the products and as you alluded to it appears like there will be a tough of white smoke from the SEC on July 20, <unk> and our CRM products.

Speaker Change: Guests, who will open up the pearly gates that allow them to be traded on July 23rd, which we're very excited about because it's a whole new class of products and then as I mentioned in my prepared remarks, there will be options and leveraged products.

Douglas A. Cifu: And then, as I mentioned in my prepared remarks, there'll be options and leverage products and this, that, and the other thing as market participants generate new ideas, and market investors want new ideas. And we'll be there in the midst of that ecosystem, providing the market-making services. You know, Patrick, the other way to look at it as well is, As Doug said, the growth initiatives are not immune to market forces. We're in the second quarter, $670,000 a day. If you look at that slide in the supplement...

Speaker Change: This that and the other thing as market participants.

Speaker Change: Generate new ideas and end market investors want new ideas and we will be there in the midst of that ecosystem, providing the market making services.

Speaker Change: Patrick the other way to look at it as well as.

Speaker Change: Doug said the growth initiatives are not immune to market forces.

Speaker Change: The second quarter 670000, a day, if you look at that slide in the supplement in.

Joseph A. Molluso: In 2020 and 2021, we were $641,000 a day and $540,000 a day in a much more robust market. Right, so there's real growth there on an apples-to-apples basis, and, you know, Fixed Income hasn't even really taken off yet, so we're really happy. Sorry, not very helpful.

Speaker Change: In 2000, 22021 were 641000, a day and 540000, a day and much more robust markets right. So there is real growth there.

Speaker Change: On an apples to apples basis.

Speaker Change: And fixed income hasnt, even really taken off yet so we're really happy with that.

Speaker Change: Alright very helpful. Thanks, guys.

Operator: Thanks, guys. One moment for our next question. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Craig William Siegenthaler: Thanks, good morning, everyone. So we know it's early days, but how should we size up the tailwind from Ether ETF approvals? Because I think you mentioned last quarter that you were seeing a couple $100,000 a day around the Bitcoin ETF approvals. So if Ether ETFs gather about half the assets that Bitcoin did, does this mean about $100,000 a day?

Craig William Siegenthaler: Thanks, Good morning, everyone. So we know it's early days, but how should we size up the tailwind from Easter ETF approvals because I think you mentioned last quarter you were seeing a couple of hundred thousand dollars a day around the bitcoin ETF approvals, so if either etfs gather about half the assets.

Speaker Change: That the Queen did does this mean about $101000 a day.

Douglas A. Cifu: Just curious about how we should size up this opportunity. Yeah, it's a great question. I'm, you know, always somewhat reluctant to prognosticate like, you know, what the take-up is going to be.

Speaker Change: Just curious and how we should size up this opportunity.

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

Speaker Change: There are always somewhat reluctant to prognosticate like what the take up is going to be.

Douglas A. Cifu: You know, from these new products. I mean, I think there have been, I think the key takeaways have been that there have been significant ETF inflows as a result of the spot Bitcoin ETF approval. So I would imagine that there will be a similar circumstance here.

Speaker Change: From from these new products I mean, I think there have been I think the key takeaways have been.

Speaker Change: There have been significant ETF inflows as a result of the spot bitcoin ETF approval, so I would imagine.

Speaker Change: That there will be a similar circumstance here.

Douglas A. Cifu: There's going to be folks that are obviously transitioning from Ethereum to Bitcoin. I don't know how many issuers ultimately will get approved on July 23rd, and subsequently, you know, there's 11-ish or so, I think, spot bitcoin ETFs. So I think the ETF, I'm sorry, the spot Ethereum market has been growing. So whether it's half in size, or you know, a third in size, you know, I think it's probably closer to a third than a half. That's how I would kind of scope it out.

Speaker Change: There's going to be folks that are obviously transitioning from a CRM to bitcoin. So I think there'll be the initial.

Speaker Change: Surge of activity for lack of a better word I don't know how many issuers ultimately we will get approved on July 23rd and subsequently, there's 11 ish or so I think <unk>.

Speaker Change: Bitcoin Etfs, so I think the ETF I'm, sorry, the spot CRA market has been growing.

Speaker Change: So whether it's half in size or.

Speaker Change: Third in size.

Speaker Change: It's probably closer to a third that are half as well as how I would kind of scope. It out so look as you know.

Douglas A. Cifu: So look, it's, you know, and the marginal dollars on that effectively flowing to the bottom line of Virtu after we pay, you know, exchange fees and the SEC fees and all that other kind of stuff are essentially 100% because it's not like we're adding, you know, new servers and personnel to monetize that opportunity. And again, I'm excited that as more products are sort of standardized as ETFs; I think you'll continue to see more. Certainly, there's been a significant amount of retail interest, but I think you'll have more institutional adoption. And that's really the exciting part for us, right, because that's where we can play a key role as a liquidity provider. Thanks, Doug.

And the marginal dollars on that effectively flowing to the bottom line of Virtu after we pay.

Speaker Change: Change fees and the SEC fees and all that other kind of stuff is essentially 100% because it's not like we're adding.

Speaker Change: New.

Speaker Change: Servers and personnel to two.

Speaker Change: Monetize that opportunity.

And again I'm excited as more products are.

Speaker Change: Sort of regularized as Etfs I think Youll continue to see more certainly has been a significant amount of retail interest, but I think you'll have more institutional adoption and that's really the exciting part for us right, because that's where we.

Can play a key role as a liquidity provider.

Douglas A. Cifu: And then our follow-up question is on the fixed income build out. So based on your organic growth revenue, it looks like ETF box revenues were probably down overall, but how did the fixed income ETF component perform relative to the rest of that number? And then on the VF side, what are you seeing in fixed income? Yeah, it's a great question.

Doug: Thanks, Doug.

Speaker Change: And then.

Speaker Change: Our follow up is on the fixed income build out so based on your organic growth revenue it looks like ETF blocks revs.

Speaker Change: Our revenues were probably down overall, but how did this fixed income etfs.

Speaker Change: <unk> of that trend relative to the rest of that number and then on the <unk> side. What are you seeing in fixed income.

Douglas A. Cifu: So let me handle the second part first, because it's very exciting. I mean, one of the key thoughts we had when we decided that ITG would be a good partner for us to amalgamate with was we saw their global distribution, and we saw the standing that they frankly had with global asset matters and pension funds, which was really... outstanding, 30 years of goodwill. But what they really lacked, because they didn't have the DNA of a Virtu as a multi-asset class market maker, was that they were fabulous at global equities.

Speaker Change: Yes, it's a great question. So let me handle the second part first because its very exciting I mean I think.

Speaker Change: One of the key thoughts we had.

Speaker Change: One we.

Speaker Change: Sided that ITG would be a good partner for us to amalgamate with was we saw their global distribution, we saw that the the standing that frankly had with.

Speaker Change: Global asset managers and pension funds, which was really.

Speaker Change: Outstanding 30 years of goodwill, but what they really lack because they didn't have the DNA of a virtue as a multi asset class market maker was they were fabulous in global equities and I would say they were struggling in other asset classes and as the world and the functionality that is required by certainly by the buy side.

Douglas A. Cifu: And I would say they were struggling in other asset classes. And as the world and the functionality that is required by certainly by the buy side, and also by the SELSA, but really by the buy side, have screamed out for multi-asset class capability, that's where the combination of Virtu and ITG has been incredibly powerful.

Speaker Change: And also by the sell so but really by the buy side has screamed out for multi asset class capability, that's where the combination of Virtu and ITG has been incredibly powerful so give me a specific example.

Douglas A. Cifu: So let me give you a specific example, like our EMS product, Triton, which has a great brand in global equities and has struggled candidly in FX and other asset classes. Now, sitting here today, we are a legitimate multi-asset class EMS solution for the global buy side. We can credibly respond to requests for proposals from significant global asset managers, pension plans, and cell side firms, and so we're a real competitor to be reckoned with. We have an ability to harmonize the fire hoses of information, i.e.

Speaker Change: Our EMS product Triton, which has had a great brand in global equities and had struggled candidly in FX and other asset classes now today sitting here today, we are a legitimate multi asset class EMS solution for the global buy side, we can credibly respond to <unk>.

Speaker Change: Requests for proposals.

Speaker Change: From significant global asset managers pension plans sell side firms and so we are a real competitor to be record with we have an ability to harmonize the fire hoses of information I E market data that I believe is superior to our competitors because thats, what we do on the market, making side, we have robust and scaled.

Douglas A. Cifu: market data that I believe is superior to our competitors because that's what we do on the market-making side. We have robust and scalable technology that we can offer to clients because, candidly, that's what we do on the market-making side. So that value proposition... as a fully scaled multi-asset class technology broker neutral provider. I mentioned also some of the new analytics products that the folks in our analytics group have rolled out, have for the first time really given this firm credibility as a multi-asset class technology provider. And that's what I'm most excited about on the execution side.

Speaker Change: <unk> technology that we can offer to clients because candidly that's what we do on the market, making side so that value proposition.

Speaker Change: As a fully scaled multi asset class technology broker neutral provider I mentioned also some of the new analytics products that the folks in our analytics group have rolled out has for the first time really given this firm credibility as a multi asset class.

Speaker Change: Adam.

Speaker Change: Technology provider and that's what I'm most excited about on the execution side to answer your question on the market, making side certainly as I've indicated.

Douglas A. Cifu: To answer your question on the market making side, certainly, as I've indicated, we're a broad ETF market maker. We obviously do all the equities products, we're great at commodities, but in order to be credible, as I've said on prior calls, we needed to be in fixed income.

Speaker Change: We're abroad ETF market maker, we obviously do all the equities products were great in commodities, but in order to be incredible.

Speaker Change: As I've said on prior calls we needed to be in the fixed income.

Speaker Change: Space as well and because that's more opaque and more bespoke the baskets rns precise as they would be in equities. There is both an art and science to being an ETF market maker and certainly our competitors at the great firms that you know Jane Street sit it out et cetera.

Douglas A. Cifu: Now we are as well, and there's certainly more opportunity with those instruments than there are with more kind of plain vanilla global ETFs. That's not to say that there aren't P&L opportunities there, and there's not a lot of risk you take, and there aren't large transitions. The adoption of TCA tools, both from Virtu and from other firms, will allow buy side traders to trade with more alacrity around and to make better decisions around how they transition. And then, obviously, mandated clearing of US treasuries is another tailwind. So all of these tailwinds are sort of circling around us.

Speaker Change: Our expert in that now we are as well and there's certainly more opportunity with those instruments than there are with more kind of plain vanilla.

<unk>.

Speaker Change: Our global ETF, that's not to say that theres, not P&L opportunities, there and does not risky taken there arent large transitions.

Speaker Change: Where clients need services, but certainly in the fixed income sub part of block ETF Theres more opportunity and your intuition is correct that Quebec continued to be a meaningful contributor I think the growth drivers there in terms of and you. All know this very well the continued electronic vacation.

Speaker Change: Of credit and obviously rates is going to be very very important the adoption of TCA tools, both from virtue and from other firms will allow buy side traders to trade with more alacrity around and to make better decisions around how they transition and then obviously mandated clearing of you.

Speaker Change: Treasuries is another tailwind so all of these <unk> are sort of circling around us and I think ultimately.

Joseph A. Molluso: And I think ultimately, you know, we're patient business builders and we're excited about building those. Just to add, specifically on the quarter, we don't break out the growth initiatives, as you know, let alone... subcomponents of the ETF block, but fixed income volumes, high-grade fixed income volumes in the first quarter. We're down 11%. Trace volumes were down that much.

Speaker Change: We're patient business builders and we're excited about building those businesses.

Speaker Change: Just to add specifically on the quarter and we don't break out the growth initiatives as you know let alone the sub components.

Speaker Change: <unk> block.

Speaker Change: But fixed income volumes high grade fixed income volumes in the first quarter.

Speaker Change: We're down 11%.

Speaker Change: Trace volumes were down that much.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Operator: Thank you. One moment for our next question. Our next question comes from Ken Worthington of J.P. Morgan. Your line is open. Hi, good morning.

Speaker Change: Our next question comes from Ken Worthington with Jpmorgan. Your line is open.

Kenneth Brooks Worthington: Thanks for taking the question. To really follow up on fixed income, FMX is expected to launch in the not-so-distant future. You're not a partner, but is there still an opportunity to grow with them and rates, and are you planning on participating on that new platform? And then as we think about sizing the rates opportunity, so clearly, the Fixed income markets are, you know, big and amongst the biggest, but volatility is generally much lower.

Kenneth Brooks Worthington: Hi, good morning, Thanks for taking the question.

Kenneth Brooks Worthington: Really to follow up on fixed income SMS is expected to launch in the not so distant future youre not a partner, but is there still an opportunity to grow with them and rates and are you planning on participating on that new platform and then as we think about sizing the rates opportunity. So clearly.

Kenneth Brooks Worthington: <unk>.

Kenneth Brooks Worthington: <unk>.

Speaker Change: Fixed income markets are.

Speaker Change: And amongst the biggest but volatility is generally much lower.

Kenneth Brooks Worthington: How does that opportunity set look over time for Virtu in the fixed income asset classes versus something like ETF block or even options, which are much smaller markets but much more volatile? Yeah, thanks, Ken. Those are great questions.

Speaker Change: Does that opportunity set look over time for <unk> two.

Speaker Change: In the fixed income asset classes versus something like ETF block or even options, which are much smaller markets, but much more volatile markets.

Douglas A. Cifu: Look, on FMX, I would be very, very careful what I say. I think the world of Cantor and I think they have really done some amazing things. We partner with them, and we're trading on FedEx today, and we're going to be incredibly supportive of FMX as a market maker. We're the Switzerland, as I've always said, of liquidity provisioning. We don't pick winners and losers.

Kenneth Brooks Worthington: Yes, Thanks, Ken that's a great question, so look on <unk> I.

Speaker Change: That would be very very careful what I say.

Speaker Change: The world of of cancer, and I think they have really done some amazing things, we partner with them and we're <unk>.

Speaker Change: Trading on Fedex today, and we're going to be incredibly supportive of <unk> as a market maker, where the Switzerland as I've always said of liquidity provisioning, we don't pick winners and losers.

Douglas A. Cifu: Certainly, we've made key strategic investments and various platforms where it felt like, hey, having Virtu in the mix. The members' exchange, certainly, we were the driving force behind that, EDX, as I mentioned. And there are unbelievably credible partners behind FMX, and I wish them nothing but success. And it's a great thing for Virtu, right?

Speaker Change: We've made key strategic investments in various platforms, where it felt like hey, having virtue in the mix.

Speaker Change: It might move the dial.

Speaker Change: The members exchange certainly we were driving force behind that <unk> as I mentioned and there are unbelievably credible partners behind <unk>.

Speaker Change: And I wish them, nothing but success and it's a great thing for Virtu right, we encourage competition.

Douglas A. Cifu: We encourage competition. It tends to drive down prices and make..., you know, exchanges, you know, better. Certainly, if there was one exchange in the U.S., I think costs would be significantly higher and spreads would be larger and all that kind of stuff, and we know the history of the last 30 years.

Speaker Change: It tends to drive down prices and make.

Speaker Change: Changes.

Speaker Change: Better.

Speaker Change: Certainly if there was one exchange in the U S.

Speaker Change: I think cost would be significantly higher and spreads would be larger than all of that kind of stuff and we know the history of the last 30 years. So we wish them, we wish them, well and we're going to be a.

Douglas A. Cifu: So we wish them well, and we're going to be a, you know, a day one liquidity provider and excited about the opportunities there. You know, fixed income is, as we've said, largely a greenfield space for us, and as markets continue to move in our direction and there tends to be, and there's more efficiency and centralized clearing, that's just more opportunity for us. What we have done, as I've said on previous calls, is partner with our great friends at TradeWeb and Market Access. Again, we're Switzerland. I love Billy. I love Chris.

Speaker Change: At day, one liquidity provider and excited about the opportunities there.

Speaker Change: Fixed income is as we've said largely a greenfield space for us.

Speaker Change: And as markets continue to move in our direction and there tends to be in there.

Billy: There is more efficiency and centralized clearing thats just more opportunity for us what we have done as I've said on previous calls is partner with our great friends at trade web and market access again, we're Switzerland, I Love, Billy I Love, Chris that both terrific World class CEO and wish him nothing but success and they are.

Douglas A. Cifu: They're both terrific, world-class CEOs. I wish them nothing but success, and they are great distribution partners for us. I mean, candidly, to use the auspices of TradeWeb and Market Access to reach rates and credit end users can be seminal for Virtu, right? We don't have the distribution network.

Billy: Great distribution partners for Us I mean candidly to use the auspices of trade web and market access to reach rates and credit and users can is seminal for virtu right. We don't have the distribution network. We don't have 20 to 30 years of credibility with a lot of firms and.

Douglas A. Cifu: We don't have 20 to 30 years of credibility with a lot of firms, and so having them effectively stamp the good housekeeping seal of market-making approval on top of Virtu means the world to us. We are lit up now with hundreds of counterparties, hundreds of counterparties in both credit and rates. As I've said in prior calls, we've cracked the top 10 in Market Access for investment-grade bonds, which is exciting. On TradeWeb, I would screw it up, and you should probably ask Billy, but we're like top five in small tickets for treasuries and things that are kind of more Virtuian in the rates world.

Billy: So having them effectively stamps the good housekeeping seal of market, making approval on top of Virtu means the world to us and so we are lit up now with hundreds of counterparties hundreds of Counterparties in both credit and rates.

I've said in prior calls we've cracked the top 10 in market access for investment grade.

Billy: Bonds, which is exciting on trade web I would screw it up and you should probably ask Billy but we're like top five and like.

Billy: In small tickets for treasuries and things that are kind of more virtually in the rates world. So we're getting there we're getting there it's very very.

Douglas A. Cifu: So we're getting there. We're getting there. It's the very, very early innings for us, and we see it as a huge opportunity, much like global options, where heretofore it has not been. Forget about it. Strength has essentially been non-existent in the firm.

Billy: Early innings for us.

Billy: And we see it as a huge opportunity.

Speaker Change: Much like global options, where here too for it has not been forget about our key virtues strength has essentially been nonexistent in the FERC. So as you know in that asset class is very different in equities and it's very different for options and whatnot. So we've learned a great deal we've partnered with great firms.

Douglas A. Cifu: So, you know, that asset class is very different than equities, and it's very different from options, and whatnot. So we've learned a great deal. We've partnered with great firms, including now TruMid and some of these other firms as well. I don't want to leave anybody out. We're Switzerland. We love everybody.

Speaker Change: <unk> not true mid in some of these other firms as well I don't want to leave anybody at where Switzerland, We love everybody.

Douglas A. Cifu: Sometimes not the regulators but all the market participants we try to get along with. And so, you know, I'm excited about that as a, you know, medium to long-term growth initiative for the firm. Great, thank you.

Speaker Change: Sometimes not the regulators, but all the market participants we try to get along with.

Speaker Change: And so I'm excited about that as as a medium to long term growth initiative for the firm.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Number four our next question.

Operator: Thank you. Our next question comes from Chris Allen with Citi. Your line is open.

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

Christopher John Allen: Yeah, morning, everyone. Thanks for taking the question. I want to dig in a little bit more on execution services.

Christopher John Allen: Yes. Good morning, everyone. Thanks for taking the question I wanted to dig in a little bit more on execution services, Doug you mentioned.

Christopher John Allen: What you are seeing growth in kind of recurring or reoccurring revenues I wonder if you could give any framework in terms of what level of revenues are generally recurring as a percentage of the overall base.

Douglas A. Cifu: Doug, you mentioned that you're seeing growth in kind of recurring or reoccurring revenues. I wonder if you could give any framework in terms of what level of revenues are generally reoccurring as a percentage of the overall base. And then on the sell side opportunity, how penetrated are you there? What's the opportunity set moving forward? Yeah, it's a great, great, two great questions. I'm going to be a little, a little snarky on the first one and say not enough that you guys would increase our multiple in terms of recurring revenue. And that was one of the pieces. I'm joking a little bit, Chris.

Speaker Change: And then on the sell side opportunity how penetrated are you there what's the opportunity set moving forward.

Speaker Change: Yeah, It's a great great two great questions are going to be a little bit little snarky on the first one and say not enough that you guys would increase our multiple in terms of recurring revenue.

Speaker Change: One of the thesis.

Speaker Change: I'm joking, a little bit Chris that was one of the thesis behind buying ITG, which was like it was more of a stable revenue.

Douglas A. Cifu: That was one of the pieces behind buying ITG, which was more of a stable sort of revenue base, and a significant portion of the old ITG revenues was subscription-like, and we certainly have encouraged clients to move more to that model with regard to our Triton products and our analytics products. So we don't separately break it out. You know, not material in the overall Virtu world, but it's certainly within the VES segment.

Speaker Change: Revenue base and a significant portion of the ice cold ITG revenues were subscription life and we certainly have incur.

Speaker Change: Encourage clients to move more to that model with regard to our trading products and our analytic product. So we don't separately break it out.

Speaker Change: It's not material in the overall Virtu world, but it's certainly within the <unk> segment, it's not an insignificant amount and we are making every effort.

Douglas A. Cifu: It's not an insignificant amount, and we are making every effort with our existing and new clients to move them to more subscription models with an upside for more transactional revenue. So that's an exciting part of what we're doing there.

Speaker Change: With our new with our existing and new clients to move them to more subscription models with an upside for more transactional revenue. So thats an exciting part of what we're doing there and what was the second question I'm blanking, because I guess so into the subscription question.

Douglas A. Cifu: I'm blanking because I get so into the subscription questions. VES overall in terms of like, I don't want to say the United States is overbroke, but there's 3,000 or so broker dealers in this country that are really chasing, you know, if you exclude the big boys that have Prime and Research and Calendar, all the large money center banks, I guess we used to call them, you know, the Cities, the JP Morgans, the Barclays, the UBSs, the Goldman Sachses, the Morgan Stanley's of the world, fabulous institutions, very different value proposition.

Oh Ves overall in terms of like.

Speaker Change: The sell side.

Seth I think some virtue technology services look there are.

Speaker Change: I don't want to say the United States is over broke but there's 3000 or so broker dealers in this country that are really chasing.

Speaker Change: If you exclude the big boys that have prime and researching calendar all the large money center banks I guess, we used to call them. The cities the Jpmorgan Barclays. The UBS as the Goldman Sachs is the Morgan Stanleys of the world Fabulous institutions very different value proposition.

Douglas A. Cifu: If you carve out all of their commission dollars, you know, there's a pool of commission dollars left that has certainly shrunk in the last... ten years and five years, and it, you know, it goes up and down and fluctuates. So there are a lot of people chasing those dollars, including the Virtu firm. And there are firms that are just, frankly, subscale and don't have the resources to invest in technology. And so what we offer them is what I loosely refer to as, you know, a broker in a box.

Speaker Change: Carve out all of their commission dollars, there's a pool of commission dollars left that has certainly shrunk in the last.

Speaker Change: 10 years in five years, and it goes up and down and fluctuate.

Speaker Change: So theres a lot of people chasing those dollars, including the virtu firm and.

Speaker Change: There is a firms that are just frankly subscale and don't have the resources to invest in technology and so what we offer them is what I loosely referred to as a broker in a box.

Douglas A. Cifu: You know, Cavoli is a better marketer than me; I guess he calls it Virtu Technology Services. And essentially, what we're saying to broker-dealer firms is, listen, we don't need market share. We're agnostic as to using our own pit.

Speaker Change: <unk> is a better marketer than me I guess he calls at Virtu technology services, and essentially what we're saying to broker dealer firms is listen we don't need the market share we're agnostic as to using our own pit you face the client.

Douglas A. Cifu: You face the client, and you have the full interaction with them. What we want to provide to you is we're going to give you our full algo suite. We're going to give you Switcher, which is like this machine learning protocol.

Speaker Change: And do you have the full interaction with them what we want to provide you as we're going to give you our full algo suite. We're gonna give you switch which is like this machine learning.

Speaker Change: Protocol, we're going to give you if you want.

Douglas A. Cifu: We're going to give you, if you want, an EMS system that can even have your name on it. We're going to give you ITG net connections to the world, and we're going to give you a price for that. So that enables you to focus on what you think you're good at, which is research, relationship management, and all the other things that these 2,998 other brokers are specialized in and are really good at.

Speaker Change: EMS system that can even have your name on it we're going to give you the ITG net connections to the world.

And we're going to give you a price for that so that enables you to focus on what you think youre good at which is research relationship management.

Speaker Change: And all the other things that these you know 2998 other brokers are specializing in a really good lead us.

Speaker Change: Deal with the.

Douglas A. Cifu: The hassle, if you will, of interconnecting the U.S. equities market and doing it with such clarity and with such precision that you can proudly say to your clients, Listen, here's the bills you got. This is great execution quality.

Speaker Change: The hassle, if you will of of interconnect in the U S equities market and doing it with such clarity and with such a precision that you can proudly say to your clients listen here's the fills you got this is great execution quality you more than satisfied your best execution.

Douglas A. Cifu: You more than satisfied your best execution, and not cheaper, and the cost of human capital certainly has increased because of inflationary trends in this country and around the world. I think more sell-side firms will recognize the value proposition that we provide. Thanks, guys. Look at my other camera.

Speaker Change: Capabilities, and we're going to charge you a very very fair commercial rate for that because frankly, we have the scale and we've already invested in and that in that suite of products. So essentially every one of those sales that the guys are doing.

Speaker Change: Is 100% margin dollars right because we've already invested in that we have the personnel here. So that's a key initiative and driver for us and I think as the world continues to get more competitive technology is getting more expensive and not cheaper and the cost of human capital is certainly has increased.

<unk> got some inflationary trends in this country and around the world I think more.

Speaker Change: Sell side firms will recognize the value proposition that we provide.

Speaker Change: Thanks, guys I'll get back in queue.

Operator: One moment for our next question. Our next question comes from Alex Kramm with UBS. Your line is open. Yes, good morning, everyone.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Alex Kramm with UBS. Your line is open.

Alexander Blostein: First off, maybe just a little bit of a follow-up in terms of the second quarter and what drove the strength. A lot has been said, and I know there's always a lot of micro stories every quarter. But two things I think that stood out, too, were I think there was a short period of, you know, the mean stock phenomenon coming back. And then I think the other thing we noticed was there was a higher percentage of sub-dollar trading in the quarter. So, can you just remind us, as specific as you want to, how these things impacted you in the quarter and how we should be thinking about them in general? Thanks.

Alexander Blostein: Yes, good morning, everyone.

First off maybe just a little bit of a follow up in terms of the second quarter and what drove the strength.

Speaker Change: A lot has been said and I know, there's always a lot of micro stories every quarter, but two things I think that stood out to.

I think there was a short period of the mean stock phenomenon coming back and then I think the other the other thing we noticed was there was a high.

Speaker Change: A higher percentage of sub dollar trading in the quarter. So can you just remind us as specific as you want to how these things impact during the quarter and how should we be thinking about them in general yes, very good questions.

Douglas A. Cifu: Yeah, no, a very good question. Look, I mean, the meme stock thing was, I think, overblown and sort of, I don't want to say like, over reported. But at the end of the day, it was fairly ephemeral and didn't have any material effect on what we do. In fact, You know, if I could live my life without Hello Kitty, whatever his name is, and the meme stock explosion again, I'd be a very happy guy, because all it does is create more questions about how the market works and chatter, and it's, you know, it's a risk management issue for us. And at the end of the day, if that kind of went the way of the dodo bird, I wouldn't be an unhappy guy.

Speaker Change: I mean, the Bienstock thing was I think overblown and sort of I don't want to say like over reported but at the end of the day. It was fairly a femoral and didn't have any material effect on what we do in fact, it's.

Speaker Change: Yes.

Speaker Change: I could live my life without any without Hello, Kitty and whatever his name is and I mean stock explosion again I'd be a very happy guy because all it does is it creates more.

Speaker Change: Questions about how the market works and chatter and it's.

Speaker Change: It's a risk management issue for us and at the end of the day, if that kind of went the way of the Dodo bird I wouldn't be unhappy guy. So no. It was short lived and narrow it didn't have any material impact.

Speaker Change: Same thing with the sub dollar symbols in fact, we submitted.

Douglas A. Cifu: So no, it was short-lived and narrow and didn't have any material impact. You know, same thing with the sub-dollar symbols. In fact, we submitted today, Thursday, and on Tuesday, a rulemaking proposal to the SEC where we asked the exchanges, NASDAQ, in particular, to tighten their listing standards to eliminate some of these, sub-dollar names that just kind of, I'll be nice and say, do securities offerings go below a dollar and then do reverse splits, wash, rinse, repeat, and do it over and over again.

Speaker Change: Today's Thursday on Tuesday, a rulemaking proposal to the FCC, where we've asked the exchanges now.

Speaker Change: <unk> in particular to tighten up their listing standards to eliminate some of these sub dollar names that just kind of.

Speaker Change: I'll be nice and say do securities offerings go below one dollar and then do reverse splits wash rinse repeat and do it over and over again frankly, they shouldnt be public companies and it's really a distraction distraction and frankly, its an operational risk to the ecosystem not just us but to our retail broker dealer partners and so.

Douglas A. Cifu: Frankly, they shouldn't be public companies, and it's really a distraction, and frankly, it's an operational risk to the ecosystem, not just us, but to our retail broker-dealer partners. And so that's why we think we can make the markets better, and we, you know, affirmatively ask the SEC to take action in this regard to kind of push the exchanges, more NASDAQ than New York. New York does a really good job of policing, but more NASDAQ would make the markets better.

Speaker Change: That's why we think we can make the markets better than we are.

Speaker Change: Affirmatively asked the SEC to take action in this regard to kind of push the exchanges more NASDAQ and New York, New York does a really good job.

Speaker Change: Policing, but more NASDAQ to make the markets better. So you can tell I wouldn't have done that if it was a significant.

Douglas A. Cifu: So you can tell, I wouldn't have done that if it was a significant opportunity for us. If anything, it's a risk management challenge for us. Okay, and then secondarily, this may be a minor thing, but I just want to get an update on this.

Speaker Change: Opportunity for us if anything it's the risk management challenge for us.

Speaker Change: Okay, and then secondarily this may be a minor thing, but just wanted to get an update on this.

Alexander Blostein: Section 31 fees went up a ton in the quarter, I think May 22nd, I think three and a half times x or something like that. Can you just remind us how that impacts your business and profitability? I mean, obviously, it happens in the quarter, it doesn't look like it had a bad impact, but just wondering, given the big increase, how that actually impacts different businesses and profitability. Yeah.

Speaker Change: Section 31 fees went up a ton in the quarter I think may 22nd I think <unk> X or something like that is that can you just remind us how that impacts your business and profitability I mean, obviously it happened during the quarter and does it look like it.

Speaker Change: How does that impact, but just wondering given the big increase how.

Speaker Change: How that actually impacts the different businesses and profitability yeah, no. It's actually a great question and I'm glad you brought it up we don't talk about it because the ebbs and flows of section 31 fees and it's very dramatic swings. It's statutory it's kind of idiocy away that and I'm not blaming the FCC because its statutory but it's kind of idiotic you think they could smooth it out.

Alexander Blostein: No, it's actually a great question, and I'm glad you brought it up. We don't talk about it because, you know, the ebbs and flows of Section 31 fees have very dramatic swings. It's statutory. It's kind of idiotic the way that, and I'm not blaming the SEC because it's statutory, but it's kind of idiotic. Do you think they could smooth it out a little more?

Speaker Change: Little more and you are right.

Douglas A. Cifu: And you're right. We're a very significant payer of Section 31 fees because we sell a lot of securities, and that's how it's calculated. So it certainly had an impact from May 23rd when it changed from May 23rd through June 30th, and so we had a, you know, effectively, it's a transaction tax.

Speaker Change: A very significant payer of section 31 fees, because we sell a lot of securities and that's how it's calculated so it had it certainly had an impact from May I think it was 23rd when it changed from May 20, <unk> through June 30.

Speaker Change: And so we had a.

Speaker Change: Effectively its a transaction tax so when the.

Douglas A. Cifu: So when the, you know, left-wing crazies talk about the markets and we need more, you know, we need an FTT, I'd nicely try to remind people that we have a very meaningful FTT of about a billion dollars. And so it affects everybody that gets passed along as best as we can pass it along. It widens, spreads, and gets passed along to institutional investors. And so, yeah, it's an unfortunate part of the marketplace.

Speaker Change: Left wing Crazy as talk about the markets and we need more we need an FTP I had nicely try to remind people that we have a very meaningful FTC of about $1 billion and so it affects everybody that gets passed along as best as we can pass it along it widens spreads.

Speaker Change: It gets passed along to institutional investors and so yeah.

Speaker Change: Yes, it's an unfortunate part of the marketplace I wish the SEC ran their business more efficiently like we did and didn't have to Jack it up as high.

Douglas A. Cifu: I wish the SEC ran their business more efficiently like we did and didn't have to jack it up as high. You know, we've, I've been in conversations with the SEC to see how it affects spreads in some of the very popular instruments, like SPI, for example, right? It has an impact on bid-offer spreads, and investors end up paying for it with wider bid-offer spreads.

We've.

Speaker Change: <unk> been in conversations with the SEC to see how it affects spreads in some of the very.

Alexander Blostein: Popular instruments like spy for example, but it has an impact on bid offer spreads and investors end up paying it from wider bid offer spreads we do the best we can Alex to absorb it.

Joseph A. Molluso: We do the best we can, Alex, to absorb it but then, where appropriate, to pass it along. I mean, we've had some startling conversations with regulators about how Section 31 fees impact very popular instruments, like the SPI family. And so, at the end of the day, I'll very intellectually say it sucks, there's nothing we can do. It's statutory, and it's kind of part of the table stakes of being a market maker.

Alexander Blostein: But then where appropriate.

Alexander Blostein: To pass it along I mean, we've had some startling conversation with regulators about how section 31 fees impact.

Alexander Blostein: Popular instruments like the spire family and so at the end of the day.

Alexander Blostein: All very intellectually say it sucks.

Alexander Blostein: Nothing we can do at statutory and it's kind of part of the table stakes of being a market maker.

Joseph A. Molluso: Fair enough. So nothing we should be thinking about as we think about profitability going forward and the recent change. It shows up in Gross to Net, but just to take your question back to the original point, these are good detailed questions, and they all have some impact. None of them this quarter would explain outperformance, but as we said earlier, it is a lot of little things. We have a diversified market-making business that we are getting better at.

Speaker Change: Fair enough. So nothing we should be thinking about as we think about profitability going forward.

Speaker Change: It shows up in gross to net.

Speaker Change: But just to take your question back to the original point that these are good detailed questions and they all have some impact none of them.

Alexander Blostein: This quarter.

Alexander Blostein: Would explain sort of outperformance, but yes, as we said earlier it is a lot of little things right. We have a diversified market, making business that we get better at.

Joseph A. Molluso: We are better at monetizing the flow. We have an execution services business poised to grow with a revamped product set. And we have growth metrics that, you know, have kicked in, and you've done measurably better. So it is just a lot of little things kind of coming together.

Alexander Blostein: We get better at monetizing the slow we have an execution services business poised to grow with.

Alexander Blostein: Our revamped product set and we have growth metrics.

Alexander Blostein: Yes.

Kicked in and done measurably better. So it is just a lot of little things kind of coming together.

Alexander Blostein: Very good. Thanks, guys. One moment for our next question. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open. Hi, good morning. This is actually Aditya filling in for Alex.

Speaker Change: Very good thanks, guys.

Speaker Change: One moment for our next question.

Speaker Change: Yes.

Speaker Change: Our next question comes from Alex <unk> with Goldman Sachs. Your line is open.

Speaker Change: Hi, Good morning. This is actually <unk> filling in for Alex. Thank you for taking our question. So a question on capital management.

Operator: Thank you for taking our question. So the question is on capital return and management. The pace of buybacks was a little lower than what's implied by the strong EPS this quarter.

Speaker Change: Pace of buybacks was a little lower than what's implied by the strong EPS. This quarter. So how are you thinking about it for the rest of the yellow and lastly, where does M&A fit in your capital management thought process.

Aditya: So how are you thinking about it for the rest of the year? And lastly, where does M&A fit in your capital management thought process, and what's the outlook from here? So, look, we actually changed the presentation of the slide because..., www.virtualinternet.com. We thought we were being a little hard on ourselves in terms of slide seven, where we just showed kind of an EBITDA return. So this is a cash-on-cash return. And you can see it's sort of, even in a more muted environment, we're earning. 65% plus this quarter, 71% on average.

Neal: What's the outlook from Neal Thank you betcha.

Speaker Change: Sure look we.

Speaker Change: <unk>.

Speaker Change: We actually changed the presentation of the slides because we thought based on some feedback we got.

Speaker Change: Thought we were being a little hard on ourselves in terms of slide seven.

Speaker Change: Where are we just showed kind of an EBITDA return.

Speaker Change: So this is a cash on cash return and you can see it sort of evenly.

Speaker Change: More muted environment.

Speaker Change: Earning.

Speaker Change: 65% plus this quarter, 71% on average.

Speaker Change: On our invested capital.

Speaker Change: Do generate a lot of cash.

Speaker Change: The buybacks will ebb and flow depending on market opportunity capital deployment.

Speaker Change: And just some other things that are difficult to predict we did have.

Joseph A. Molluso: [inaudible] We published and I think we republished this quarter on slide six. Here's the target for buybacks at different levels of Net Trading Income. So, you know, in the first two quarters, we're at $67 million, which would, if you annualized that, would be right in the middle of the range that we put for $6 million a day. I'll give you the number through July 17th.

Speaker Change: We published and I think we republished this quarter on <unk>.

Speaker Change: <unk> six here's the target for buybacks at different levels of.

Speaker Change: Of net trading income.

Speaker Change: So in the first two quarters, we were at $67 million, which if you annualize that would be right in the middle of the range that we put for 6 million a day.

Speaker Change #101: I'll give you the number through through July 17, Theres been another $6 8 million, So where we've continued and maybe picked up the pace a little bit.

Joseph A. Molluso: There have been another 6.8 million. So we're, you know, we've continued and maybe picked up the pace a little bit. So I don't read anything into that. It's just the ebbs and flows.

Speaker Change #101: So I don't read anything into that it's just the ebbs and flows and we are going to be squarely squarely within the range that we indicated.

Joseph A. Molluso: And we are going to be squarely, squarely within the range that we. You know, just in terms of M&A, you know, we look at ourselves as shareholders, we look at value creation, and we look at the incremental dollar and where we can best deploy it. And, you know, we see everything, you know, we're presented with a lot of opportunities.

Joseph A. Molluso: But I think, as we said, there's nothing that competes with buying back our own stock. And that's how we, We like our leverage; we like our capitalization right now. You know, we just refinanced our debt stack. You know, hopefully that's kind of set it and forget it. But we do look at everything in terms of value creation. If there were an opportunity out there that created more value in our minds than buying back stock, we would do it. But right now, we've been able to get a lot of these growth initiatives off the ground, all of them, in fact, without a third-party transaction.

Speaker Change #102: Just in terms of M&A.

Speaker Change #102: We look at ourselves as we our shareholders, we look at value creation, and we look at the incremental dollar and where we can best deploy it and.

Speaker Change #102: We see everything we're presented with a lot of opportunities, but I think as we've said.

Speaker Change #102: Theres nothing that competes with buying back our own stock and that's how we look at things and we like our leverage we like our capitalization right now.

Speaker Change #102: Refinanced our debt stack.

Speaker Change #102: Hopefully that's kind of set it and forget it.

Speaker Change #102: But we do look at everything in terms of value creation. If there were an opportunity out there that create more value in our minds and buying back stock we would do it but right now.

Speaker Change #103: We've been able to get a lot of these growth initiatives off the ground all of them in fact without.

Speaker Change #103: Without.

Speaker Change #103: A third party transaction so that's.

Douglas A. Cifu: That's kind of how we work. Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Doug for any closing remarks. I'd like to thank everybody for their attention and for their participation today. We look forward to speaking with you again in November when we announce our third quarter results. Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker Change #103: And that's kind of how we look at it.

Speaker Change #103: Yes.

Speaker Change #103: Thank you I'm not showing any further questions at this time I'd like to turn the call back over to Doug for any closing remarks, I'd like to thank everybody for their attention and for their participation. Today. We look forward to speaking you speaking with you in November when we announce our third quarter results.

Speaker Change #104: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

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Speaker Change #104: Okay.

Speaker Change #104: No.

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Speaker Change #104: Yes.

Speaker Change #104: Sure.

Speaker Change #104: Thank you.

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Speaker Change #104: Sure.

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Speaker Change #104: Yes.

Speaker Change #104: Thanks.

Speaker Change #104: Yes.

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Speaker Change #104: Yes.

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Speaker Change #104: Okay.

Speaker Change #104: Yes.

Speaker Change #104: Yes.

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Speaker Change #104: Sure.

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Speaker Change #104: Yes.

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Speaker Change #104: Yes.

Speaker Change #104: Sure.

Speaker Change #104: Yes.

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Speaker Change #104: Yes.

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Speaker Change #104: Yes.

Speaker Change #104: Right.

Speaker Change #104: Yes.

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Speaker Change #104: Yes.

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Speaker Change #104: Yes.

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Speaker Change #104: Sure.

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Speaker Change #104: Yes.

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Speaker Change #104: Sure.

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Speaker Change #104: Yes.

Speaker Change #104: Great.

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Speaker Change #104: Sure.

Speaker Change #104: Yes.

Speaker Change #104: Thank you.

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Speaker Change #104: Yes.

Speaker Change #104: Sure.

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Speaker Change #104: Yes.

Speaker Change #104: Great.

Speaker Change #104: Thank you.

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Speaker Change #104: Sure.

Speaker Change #104: Okay.

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Speaker Change #104: Sure.

Speaker Change #104: Please.

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Speaker Change #104: Yes.

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Speaker Change #104: Sure.

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Speaker Change #104: Yes.

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Speaker Change #104: Yes.

Speaker Change #104: Okay.

Speaker Change #104: Thank you.

Speaker Change #104: Sure.

Speaker Change #104: Yes.

Speaker Change #104: Yes.

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Speaker Change #104: Yes.

Speaker Change #104: [music].