Q2 2025 Virtu Financial Inc Earnings Call

Andrew Smith: First, a few reminders. Today's call may include forward-looking statements, which represent Virtu Financial's current belief regarding future events and are therefore subject to risks, assumptions, and uncertainties, which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description and risk factors contained in our annual report, Form 10-K, and other public filings.

First a few reminders today, it's called may include forward-looking statements, which represent verdicts current belief regarding future events and are therefore subject to risk assumptions and uncertainties, which may be outside the company's control.

Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available.

Andrew Smith: 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. These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the investor portion of our website, where you will find additional supplemental information referred to on this call, as well as 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. With all that, I would like to turn the call over to our CEO, Douglas Cifu.

We refer you to the disclaimers in our press release and encourage you to review the description and risk factors contained in our annual report form 10-K and other public filings.

During today's call, in addition to GAAP measures, we may refer to certain non-GAAP measures, including adjusted net income, trading income, adjusted net income, and adjusted income without margin. These non-GAAP measures could be considered as supplemental too, and not as superior to financial measures as reported in accordance with GAAP.

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 Gap 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 all that, I'd like to send a call over to our CEO Doug Stephan.

Douglas Cifu: Thank you very much, Andrew, and good morning, everyone. Thank you for joining us this morning. In my remarks today, I will focus on Virtu Financial's Q2 2025 performance and strategic initiatives. Following my remarks, Joe and Cindy will provide additional details on results. We realized outstanding results across our businesses in Q2, fueled by market turmoil around tariffs, economic policy, and general volatility. We recorded $568 million in adjusted net trading income, which is $9.2 million per day, and $1.53 in adjusted EPS. Both numbers are recent highs and are reflective of our ongoing investments, growth initiatives across the firm, and the macro environment. Market making contributed $451 million, and execution services contributed $116 million. While we believe significant opportunities remain in both cases, we believe that our core business and growth initiatives performed well against the opportunity set that we addressed.

Thank you very much. Andrew and good morning everyone. Thank you for joining us this morning. In my remarks. Today, I will

for 2, second quarter, 2025 performance and strategic initiatives, following my remarks

Joe and Cindy will provide additional details on a result.

We realized outstanding results across our businesses in the second quarter, fueled by market turmoil around tariffs, economic policy and general volatility, we recorded 568 million dollars in adjusting the trading income, which is 9.2 million dollars per day and a dollar 53 and adjusted EPS, both numbers recent highs. And our reflective of our ongoing Investments growth initiatives across the firm and the macro environment Market making contributed 451 million and execution Services, contributed 116 million dollars,

Douglas Cifu: It was our sixth straight quarter of increasing adjusted net trading income overall. Our growth initiatives were particularly strong in this quarter, reaching an all-time high of $1.3 million per day, or 15% of our total adjusted net trading income per day of $9.2 million. Our growing ETF block franchise and global digital assets led the group with strong performances from our options market making as well. In ETF block, the volumes and volatility surrounding Liberation Day and the ongoing tariff news drove elevated client demand for our ETFs. We continue to grow our market share and client list globally for ETFs, and we remain focused on the build-out of our Europe ETF block offering. In digital assets, our expanding capabilities continue to yield attractive results as we extended our market making to additional tokens and asset classes.

While we believe significant opportunities remain in both cases, we believe that our core business and growth in issues performed well against the opportunity set that we addressed. It was our sixth straight quarter of increasing adjusted net trading income overall.

Our growth initiative is, we're particularly strong in this quarter, reaching an all-time high of 1.3 million dollars per day or a, 15% of our total adjusted trading income per day of 9.2 million, our growing ETF block franchise.

And Global digital asset death led the group with strong performances from our options Market making as well.

In the ETF block, the volumes and volatility surrounding Liberation Day and the ongoing tariff news drove elevated client demand for our ETF desk. We continue to grow our market share and client list globally for ETFs, and we remain focused on the buildout of our Europe ETF block offering.

Douglas Cifu: We remain excited about this space for many reasons, including ones we will discuss further in a moment. Our customer market making business was strong, given the market conditions, especially at the start of the quarter. Retail engagement remains strong, at or above the elevated post-pandemic baseline, and our 605 executed shares and dollar value of quoted spreads reflect recent highs. As you know, mean realized volatility was 30 and the VIX averaged 24. However, median daily realized volatility and intraday volatility were up low single digits quarter over quarter, illustrating a favorable environment that was closer to Q1. Equity TCV was up 17% against the already healthy Q1 levels, or about 12% if you exclude sub-dollar share volumes. Notional U.S. equity volumes were up 9% quarter to quarter. Our non-customer market making business continued to deliver growth and a strong performance against the growing dynamic opportunity in the quarter.

In digital assets, our expanding capabilities, continue to yield attractive results as we extended our Market making to additional tokens and asset classes.

We remain excited about this space, for many reasons, including ones. We will discuss further in a moment. Our customer Market making business was strong. Given the market conditions, especially at the start of the quarter, retail engagement remains strong at or above the elevated, post-pandemic Baseline, and our 605 executed shares and dollar value of coded spreads reflect recent highs,

As, you know, mean, realized volatility was 30 and the vix average 24. However, median daily realized volatility in intraday volatility were up low. Single digits quarter over quarter illustrating, a favorable environment that was closer to the first quarter.

Equity tcv was up 17% against the already healthy first quarter levels or about 12%. If you exclude sub dollar share volumes and notional us Equity buyers were up 9% quarter to quarter.

Douglas Cifu: Our global equities franchise and non-customer market making delivered excellent performance, as did our ETF block business, which had another record quarter. Crypto and options also performed exceedingly well, thanks to both enhancements and extensions of our capabilities and the elevated opportunity set in the quarter. In crypto in particular, our capabilities have grown to cover more markets and more symbols than ever across futures, spot, perpetual futures, and ETFs globally. Our institutional business, Virtu Execution Services, or VES, recorded $116 million in adjusted net trading income, a recent high. As we have mentioned on prior calls, we believe that the VES business could grow to a consistent $2 million per day through the cycle, and we are well on our way to achieving this goal. We have recorded two straight quarters of around $1.9 million per day, and we believe this has room to grow.

Our non-custom marketing continues to deliver growth and strong performance against the growing dynamic opportunity. In the quarter, our global equities franchise and non-custom market making delivered excellent performance. As did our ETF block business, which had another record quarter. Crypto and options also performed exceedingly well, thanks to both enhancements and extensions of our capabilities and the elevated opportunity seen in the quarter.

And more symbols than ever across future spot.

Perfect per Perpetual Futures and ETFs globally. Our institutional business virtue execution, services or Vees recorded. 116 million dollars in adjusted net, trade income, a recent High.

As we have mentioned on prior calls, we believe that the vests business could grow to a consistent 2 million dollars per day through the cycle and we are well on our way to achieving this goal.

Douglas Cifu: Since taking on the execution service business as a strategic imperative, before we made any acquisitions, we relied on our ability to develop best-in-class technology and products. Today, we are proud to serve approximately 2,000 global buy-side and sell-side clients. A key avenue of growth within VES comes from converting our products like Triton, our market leading EMS, into multi-asset class products that serve our clients' fixed income, FX, and option needs. Virtu Capital Markets, which has been a pioneer in implementing at-the-market offerings for corporate issuers, produced an outstanding quarter in the second quarter of 2025, its best on record. We believe more growth will come from cross-selling within our broad network of VES clients and strategic partners, penetrating new and growing client categories, rolling out offerings like VTS, Virtu Technology Services, and continued enhancements to monetizing our flow with technology.

We've recorded 2 Straight quarters of around 1.9 million per day and we believe this has Room to Grow since taking on the execution service business as a strategic imperative, before we made any Acquisitions, we relied on our ability to develop best-in-class technology and products. Today, we are proud to serve approximately 2,000 Global, buy side, and sell side clients.

A key avenue of growth within bees comes from converting our products, like Triton or Market, league-leading EMS, into multi-asset class products to serve our clients' fixed income, FX, and option needs.

Virtue Capital markets, which has been a Pioneer in implementing at the market offerings for corporate issuers.

Produced an outstanding quarter in the second quarter of 2025, it's best on record.

We believe more growth will come from cross-selling within our broad network of clients as strategic partners.

Credit training, new, and growing client categories rolling out offerings like VTS, virtue technology services and continued enhancements.

Douglas Cifu: Since growing this business substantially by acquiring ITG, Virtu has solidified the revenue base, cut costs dramatically, and made strategic hires to expand our adjustable market across multiple dimensions. We continue to see strong tailwinds for Virtu. Sustained retail engagement post-pandemic remains a positive backdrop, and several structural trends should help compound our growth in the coming quarters. First, we're encouraged by the emerging interest in overnight equity trading. While still early, we're working with clients, regulators, and market participants to help shape a robust framework that gives global investors easier access to U.S. capital markets. Second, digital assets are becoming a meaningful growth opportunity. Institutional demand continues to build, and we're expanding our capabilities, adding more coins, tokens, and protocols across a growing network of venues and brokers.

To monetize our flow in technology.

Since growing this business substantially by acquiring itg virtue has solidified. The revenue base cut costs dramatically and made strategic hires to expand our adjustable market across multiple dimensions.

We continue to see strong Tailwind for virtue sustained. Retail engagement posted, post-pandemic remains a positive backdrop, and several structural Trends should help compound our growth in the coming quarters. First, we're encouraged by the emerging interests in overnight Equity, trading while still early. We're working with clients regulators and Market participants to help shape. A robust framework that give Global Investors easier access to US capital markets. Second

Douglas Cifu: We see broader crypto adoption as a significant driver of future volume and activity for Virtu Financial as we scale our capabilities and offerings. Third, the regulatory landscape is moving in a constructive direction. The Genius stablecoin legislation and the pending Clarity Crypto Market Structure Act and innovations in tokenization are all positive developments for Virtu Financial. Tokenization, in particular, creates new products that need liquidity and order routing, playing directly to our 24 by 7 market making strengths. As participation in crypto markets grows, so does the need for liquidity and price discovery. Virtu Financial is well positioned to meet that demand, and we expect to remain a key partner to banks, venues, brokers, and institutional clients as this ecosystem develops. I want to end on a personal note and share some news about our leadership transition.

Digital assets are becoming a meaningful growth opportunity. Institutional demand continues to build, and we're expanding our capabilities, adding more coins, tokens, and protocols across the growing network of venues and brokers. We see broader crypto adoption as a significant driver of future volume and activity for Virtu as we scale our capabilities and offerings. Third, the regulatory landscape is moving in a constructive direction.

The genius, stable, coin legislation, and the pending Clarity, crypto Market structure, act. And in in Innovations, in tokenization are all positive developments for virtue. Tokenization, in particular, creates new products that need liquidity and Order routing playing directly to our 24 by 7 Market making strengths.

Douglas Cifu: After 18 wonderful years, I've decided to retire at the end of this year to spend more time with my family. It has been a tremendous privilege to work for so long with an enormously talented group of individuals. This has been the defining chapter of my career, and I couldn't be more proud and grateful for what we've accomplished together. When we started Virtu Financial in 2008, we had a bold vision to transform electronic market making by building a technologically enabled, scaled global firm that could consistently deliver the best bid and best offer. We set out to revolutionize how markets operate through cutting-edge technology and relentless innovation. We have built one of the industry's leading trading platforms, serving clients across multiple asset classes and geographies.

As participation in crypto markets grows, so does the need for liquidity and price discovery. Virtu is well positioned to meet that demand, and we expect to remain a key partner to banks, venues, brokers, and institutional clients as this ecosystem develops. I want to end on a personal note and share some news about our leadership transition. After 18 wonderful years, I've decided to retire at the end of the year to spend more time with my family. It has been a tremendous privilege to work for so long with an enormously talented group of individuals.

This has been the defining chapter of my career, and I couldn't be more proud and grateful for what we've accomplished together.

When we started virtue in 2008, we had a bold Vision to transform electronic Market. Making by building a technologically enabled, scaled Global firm that could consistently deliver the best bid and best offer.

Douglas Cifu: Along the way, we strategically acquired KCG and ITG, which strengthened our technology foundation and expanded our market reach, and most importantly, created tremendous value for our shareholders and clients. What I am the most proud of is the incredible team we've built. The innovation, dedication, and client focus I see every day from our employees gives me complete confidence in the future. I can't thank my life partner and friend, Vinnie Viola, enough for allowing me this opportunity. Virtu's businesses are stronger than ever, and our scope, reach, and scale leaves us poised to continue to thrive and prosper, and has been left in extremely competent hands. I am thrilled to announce that my friend and protege, if you will, Aaron Simons, our Chief Technology Officer, who has been with Virtu basically from the beginning for two decades, will be stepping into the CEO role.

We set out to revolutionize how markets operate through Cutting Edge technology and Relentless Innovation. We have built 1 of the industry's leading trading platforms serving clients across multiple asset classes and geographies.

Along the way, we strategically acquired KCG and ITG, which strengthened our technology foundation and expanded our market reach. Most importantly, this created tremendous value for our shareholders and clients.

Biola I know for allowing me this opportunity. Berto's businesses are stronger than ever and our scope reach and scale leaves us poised to continue to thrive and prosper and has been left in extremely competent hands.

I am thrilled.

To announce that my friend and protégé, if you will, Aaron Simons, our Chief Technology Officer, who has been with Virtu,

Douglas Cifu: Aaron has been instrumental in building our technology backbone and has a strategic vision to take us to the next level. This transition represents continuity of our core values and culture, combined with a fresh perspective on our growth opportunities. I'll be staying on as an advisor to ensure seamless handover, and we'll remain deeply invested in our success. I couldn't be more optimistic about our future, and I'm excited to watch it continue and thrive under Aaron's great leadership. With that, I will turn it over to my friend, Joseph Molluso. Joe.

Basically from the beginning for 2 decades, will be stepping into the CEO role. Aaron has been instrumental in building, our techn technology backbone, and has the Strategic Vision to take us to the next level.

This transition represents continuity of our core values and culture combined with a fresh perspective. On our growth opportunities, I'll be staying on as an advisor to ensure seamless handover and will remain deeply invested in our success. I couldn't be more optimistic about our future, and I'm excited to watch it continue and thrive under Aaron's great leadership.

Joseph Molluso: Thank you, Doug. I will just underline a few points that you went through and add some additional color. Our adjusted EBITDA margin of 65% was the highest since the first quarter of 2022. We achieved this margin by holding expenses as high as we have done over the long term. Adjusted cash operating expenses were $198 million in the quarter, and our compensation ratio was 19% including cash and 23% including stock. Notably, we have grown and built out significant new businesses and continue to attract top-notch talent while holding headcount relatively steady and our compensation ratio within historical norms. As I mentioned in my remarks last quarter, despite significant volatility in our quarter-to-quarter results, which we expect to continue over time, there is a long term up and to the right skew to our results and our growth.

With that, I will turn it over to my friend Joe Musa. Joe, thank you Doug. I'll just underline a few points that you went through and add some additional color. Look our adjusted Eva do margin of 65% was the highest

Since the uh, first quarter of 22, we achieved this margin by holding expenses in line as we've done over the long term.

Adjusted cash operating expenses were $198 million in the quarter, and our compensation ratio was 19% including cash and 23% including stock.

Uh, notably, we've grown and built out significant new businesses and continue to attract top-notch Talent while holding headcount relatively steady and our compensation ratio, within historical norms.

Joseph Molluso: As you can see on slide 12 in the supplemental materials, we ended the quarter with over $2 billion of trading capital, which is buffered by significant additional liquidity sources. We bought back $66 million of our shares in the quarter, and year to date have bought back $135 million. Since the inception of our share repurchase program, we have repurchased $1.4 billion worth of shares at an average cost of a little over $26. We view this deployment of capital as strategic, and we continue to evaluate our repurchase program going forward and expect to be within the ranges that we have published publicly. With that, I am going to turn it over to Cindy to complete the prepared remarks.

And as I mentioned in my remarks last quarter, despite significant volatility in our quarter to quarter results which we expect to continue over time. There is a long-term up and to the right skew to our results and our growth

as you can see on slide 12 in the supplemental materials, we ended the quarter with uh,

Over 2 billion of trading Capital, which is buffered by significant additional liquidity sources.

We bought back 66 million of our shares in this in the quarter uh, and year to date of bought back 135 million. And then since the Inception of our share repurchase program, we've repurchased 1.4 billion dollars worth of shares and an average cost of a little over $26. We view this deployment of capital of strategic and we continue to evaluate our repurchase program.

Uh, going forward and expect to be within the uh ranges that we have published.

Cindy Lee: Thank you, Joe. Good morning, everyone. On slide three of our supplemental materials, we provided a summary of our quarterly performance. Looking at our performance trajectory, our second quarter 2025 adjusted net trading income of $568 million or $9.2 million per day, a 50% increase from the $6.1 million per day in Q2 2024. Our normalized adjusted EPS of $1.53 for the second quarter 2025 increased 83% compared to Q2 2024. Our adjusted EBITDA margin of 65% demonstrated our disciplined expense management approach and operational efficiency. In Q2 2025, we repurchased up to 1.7 million shares for a total of $66 million. Today, we have repurchased almost 54 million shares at an average price of $26.35 per share for a total of $1.4 billion, representing close to 20% of our fully diluted shares outstanding net emissions.

Publicly, and with that, I'm going to turn it over to Cindy to complete the prepared remarks.

Thank you Joe. Good morning, everyone.

53 of our supplemental. Materials were provided a summary of our quarterly performance.

Cindy Lee: Our balance sheet remains well positioned with the debt-to-LTN adjusted EBITDA ratio of 1.5 times, providing us with financial flexibility while maintaining our commitment to returning capital to our shareholders through our dividend and share repurchase program. I would like to turn the call over to the operator for the Q&A.

Looking at our our performance directory, our second quarter, 2025 adjustment Med, fitting income of 568 million or 9.2 million dollars per day. 50% increase from the 6.1 million dollars per day. In Q2 202024, our normalized adjusted EPS of $1.53 cents for the second quarter 2025. Increased 83% compared to Q2 2020244 our adjusted EOP margin of 65%, demonstrated our discipline expense management approach and operational efficiency in Q2. The 2025 we repurchase of 1.7 million shares for the total of 66 million dollars today. We have repurchased almost 54 million shares at an average price of 26.35 cents per share for a total of 1.4 billion dollars representing close to 20% of our fully diluted shares outstanding, not a mission.

Our balance sheet remains well positioned with the debt to LTM adjusted EBITDA ratio of 1.5 times, providing us with financial flexibility while maintaining our commitment to returning capital to our shareholders through our dividends and share repurchase programs.

Now, I would like to turn the call over to the operator for the Q&A.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Today, we ask you to limit yourself to one question and one follow-up. First question comes from Ken Worthington with J.P. Morgan. The line is open. Please go ahead.

Thank you. If you would like to ask a question, please press star, followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star, followed by 2.

When preparing to ask your question, please ensure your device is unmuted locally.

And today, we ask you to limit yourself to one question and one follow-up.

First question comes from Ken Worthington with J.P. Morgan. Your line is open. Please go ahead.

Ken Worthington: Hi. Good morning. Thanks for taking the questions. Doug, congratulations on all you have built and accomplished. It has been a pleasure working with you. Can you give us an introduction to Eli Abboud, give us maybe some more color on his responsibilities and accomplishments at Virtu Financial, and what the transition from you to Eli Abboud will look like, over the next six months or five months?

Douglas Cifu: Sure. Sure. That's a great question. Thank you very much for your kind words. Just some background on Aaron, which you can read his CV. He's a very intellectually powerful man. As I have always told people, he is, in my view, the smartest guy at Virtu Financial. I first met Aaron in May of 2008, maybe a month after we had started Virtu Financial, when he interviewed. I distinctly remember the interview because I understood very little of what he was trying to describe to me was his dissertation in string theory. But I remember thinking, this is maybe the smartest, most articulate, decent person I've ever met in my life, and I wouldn't let him leave the office, which was a very small startup office, until he had agreed to work at Virtu Financial. Thankfully, he did. He began his career at Virtu Financial in August of 2008.

It's been a pleasure working with you. Um, can you give us an introduction to Aaron? Give us maybe some more color on his responsibilities and accomplishments at virtue and what the transition from? Uh you to Aaron will look like, uh, over the next 6 months or 5 months.

Douglas Cifu: Ken, you may remember the firm back then. It was 10 folks in a temporary office on Park Avenue. Aaron was a developer and a trader and probably made some coffee, if you will, at the time and put together some furniture. So he knows the spirit, the culture, and if you will, the zeitgeist of Virtu Financial from the beginning. He's always been, I will immodestly say, my friend and my mentee. Through the years, we're not big on titles until more recently, but he's always been in the inner sanctum of Virtu Financial and somebody that I relied on for advice about the firm. Frankly, when I didn't understand something, including my math, my kids' geometry homework, Aaron would do that for me and for the firm. He's well-liked within the firm.

Sure, sure, that's a great question. Thank you very much for your kind words. So, just just some background on Aaron which, you know, uh, you can read his CV. I mean, he's, uh, you know, uh, a very intellectually powerful man as I have always told people, uh, he is in my view, the smartest guy at virtue. Um, I first met Aaron in May of 2008, maybe a month after we had started virtue when he interviewed. Uh, I distinctly remember the interview because, um, I understood very little of what he was trying to describe to me was his dissertation and string theory, but I remember thinking this is maybe the smartest most articulate decent person. I've ever met in my life and I wouldn't let him leave the office which was a very small startup office. Uh, until he had agreed to work at virtue and thankfully, he did and he began his career at virtue in August of 2008. Uh, and can you may remember the firm back then it was, you know, 10 folks in a temporary office.

Office on Park Avenue. So Aaron was a developer and a Trader, and probably made some coffee if you will, uh, at the time and put together some furniture. So he knows the spirit the culture and if you will the Zeitgeist of virtue from the beginning, um, he's always been, I will immodestly say, uh, my friend and my mentee, uh, and Through the Years, you know, we're not big on titles until more recently, but he's always been in the inner sanctum of virtue and somebody that I relied on

For advice.

Um, about the firm and, you know, Franklin, when I didn't understand something, including my math, my kids, you know, geometry homework, Aaron would do that for me.

Douglas Cifu: About five or six years ago, it really was triggered by the growth of the firm and the pandemic, and with the advice and counsel of my board and Vinnie, we put together a senior leadership team at this firm. Some of it's obviously described in the public filings, but we have Joe and Brett and Steve Covoli and Aaron Simons, and they were the kind of the four horsemen, if you will, that really began to guide and lead the firm. Not that I was actively transitioning, but I definitely took a step back in the micromanaging day-to-day of a startup and gave them significant responsibilities. With that, they began to interact on a daily basis and a monthly basis and a quarterly basis with our board and with Vinnie and others. Vinnie obviously has known Aaron for years.

Uh, and for the firm, uh, he's well-liked within the firm uh about 5 or 6 years ago and it really was triggered um by the growth of the firm and and the pandemic. Um and with the advice and and Council of my board and Vinnie, uh, we put together a senior leadership team at this firm. Some of it's obviously described in the public filings but, you know, we had Joe and Brett Steve cavoli and Aaron Simons and they were the, you know, kind of the 4 Horsemen, if you will. Um that really uh began to guide and lead the firm, and not that I was actively transitioning but I definitely took a step back in the micromanaging day today of a startup and gave them significant responsibilities. And with that, they began to interact on a daily basis and a monthly basis and a quarterly basis with our board. And with with

Douglas Cifu: The transition really began in earnest five or six years ago with that structure, if you will. Obviously, the board has gotten to know Eli Abboud over the years. He has presented, been at every board meeting, and clearly a generationally talented young man when it comes to technology and building out large technology systems. He has been great with our clients and great with significant investors that have come into the firm and whatnot, and just a real amiable person that is well-liked and well-regarded around the firm. In terms of how that will work and what he will continue to do, I mean, the culture and the business purpose of Virtu Financial will not be changed. Clearly, he has a different, thankfully, personality than I do, maybe not as brash and outspoken, but certainly a lot smarter and careful about the words he uses.

Vinnie and others and Vinnie obviously has known Aaron for years and so the transition really began in Earnest 5 or 6 years ago with that structure if you will and obviously the board has gotten to know Aaron over the years. He's presented been at every board meeting and it, you know and clearly a

A generationally, talented young man. Uh when it comes to uh technology and building out large technology.

Douglas Cifu: I am extremely excited for him and for the firm, and for his family and for my family and for everything that he has meant and will continue to mean to the firm. I am going to ask Joseph Molluso to say a few words from his perspective about the transition and whatnot. Joseph?

Joseph Molluso: Oh, thank you. No, look, Ken, of course, Doug and I have worked together for many years, and we're naturally sorry to see him retire. But I've worked with Aaron and know him for many years as well and endorse completely his appointment as CEO. I know Brett and Steve will speak for them, but I know I think we're all in unison and in sync with this development, and it's the best thing for Virtu Financial at this point. I very much look forward to the future.

Um, systems, uh, he's been great with our clients and great with significant investors that have come into the firm and and whatnot. Um, and just a real, uh, amiable person. That is well-liked and well regarded around the firm um, in terms of how that will work and what he will continue to do. I mean, I, you know, the, the culture and the business purpose of virtue will not be changed. Um, clearly he's got a different thankfully personality than I do, uh, maybe not as Brash and outspoken, but certainly a lot smarter and careful about the words he uses. So, I'm extremely excited for him and for the firm, uh, and for his family, and for my family and, and for everything that he has, that he has meant and will continue to mean to the firm. I'm going to ask Joe to say a few words from his perspective about the transition and and whatnot. Joe sure. Oh, thank you know, look um,

10, you know, of course, Doug and I have worked together for many years and, uh, were naturally, you know. Sorry to see and retire. But, you know, I've worked with Aaron and known for many years as well and and endorsed completely his appointment as CEO.

Uh, and I know, I know Brett and Steve, uh, will speak for them. But I know, I think we're all in unison and in sync, uh, with this development, and it's the best thing for her at this point. And, uh, you know, I very much look forward to the future.

Ken Worthington: Okay. Great. I will leave it there. Thank you so much.

Joseph Molluso: Thank you.

Okay, great. I'll be there. Thank you so much.

Thank you.

Operator: We now turn to Craig Sighgendola with Bank of America. The line is open. Please go ahead.

Craig Sighgendola: Thank you. Good morning, everyone, and I hope you are doing well. Doug, we wanted to wish you the best in your retirement. Aaron, we look forward to meeting you soon. Our first question is on the potential repeal of the order protection rule. I am wondering, what do you see as the major impact on the ecosystem if this goes through, and more specifically to Virtu Financial and the market makers?

Douglas Cifu: Yeah. I mean, it's a great question. Obviously, we've been in the public debate, and we knew Atkins' position from, frankly, 2005. He's never been a fan of Rule 611. I think as a firm, we're sort of agnostic. I think where this will probably shake out is similar, and where it probably should shake out is similar to what you see up in Canada, which is in order to have a protected quote, a venue has to have a certain market share, right? I think in Canada, it's like 2.5%, and I'm not suggesting that number, but I think a reasonable number, a minimum market threshold in order to be viewed as a protected quote. I think that will answer some of the critics that talk about excessive fragmentation and lack of liquidity gathering, if you will, on the displayed markets.

Thank you. Good morning everyone and hope you're doing well. Uh, Doug. We wanted to wish you the best in your retirement and Aaron we look forward to meeting you soon. Um, our first question is on the potential repeal of the order protection role I'm wondering. What do you see as the major impact on the ecosystem? If this goes through and more specifically to Virtue and the market makers?

Yeah, I mean, it's a great question, obviously. You know, we've been in the public debate, and uh, we...

Knew Atkins position from frankly, 2005. He's never been a fan of of rule 611.

Um, you know, I think as a firm um you know where we're sort of agnostic. I think where I think this will probably shake out is a similar and we're probably should shake out is similar to what you see up in Canada.

Douglas Cifu: I should know, but I think we have 15 medallions these days and going to, soon to 20. And that may be a few too many. So from a liquidity, gathering efficiency of the market, it probably does make some sense. Obviously, we own an interest in the members' exchange, which we think is a great exchange, and, you know, we continue to wish them well. And that's a very significant investment for us. But we do think that that makes sense. From a market-making perspective, the pros are that we spend a lot of time, money, and technology, if you will, connecting to venues that frankly don't have significant market share, and that there's a cost to that. You will continue to have best execution, right? And we have always been a firm, through technology and transparency that has demonstrated best execution to our clients and to the regulators.

Uh, which is, in order to have a protected, quote, a venue has to have a certain market share, right? So, uh, I think in Canada, it's like 2.5 percent, and I'm not suggesting that number, but I think a reasonable number, you know, minimum market threshold in order to be viewed as a protected, quote, I think that will answer some of the critics that talk about excessive fragmentation and lack of liquidity gathering, if you will, on the displayed markets.

I should know, but I think we have 15 medallions these days and are going to, you know, soon to 20, and that may be a few too many. So from a liquidity, uh, gathering efficiency of the market, it probably does make some sense. Obviously, you know, we own an interest in the Members Exchange, which we think is a great exchange, and, uh, you know, we continue to wish them well. Um, and that's a very significant investment for us, but we do think that that makes sense from a market-maker.

Douglas Cifu: So we don't need the, if you will, the protections of the order protection rule in order to do the right thing for the market. So I think on balance, it's neutral to slightly positive for Virtu Financial in the sense that it probably will lead to a reduction of like overhead, fixed, you know, fixed costs, if you will, with regard to connecting to these venues. And, you know, to the extent there's inefficiencies and trade throughs in the market, that's what market makers do. We keep markets in equilibrium and make sure that they are efficient, fair, and transparent.

Uh, you know, the pros are that we spend a lot of time, money, and, and Technology. If you will connecting to venues that, frankly don't have to get market share and that there's a cost to that you will continue to have best execution, right? And we have always been a firm um, through technology and transparency, that is demonstrated best execution to our clients and to The Regulators. So we don't need the if you will the protections of the order protection rule in order to do the right thing for the market. So I think on balance, uh, it's neutral to slightly positive for virtue in the sense that it probably will lead to a reduction of like overhead fix, you know, fixed costs. If you will, with regard to connecting to these venues and uh, you know, to the extent, there's inefficiencies and trade throughs in the market, you know, that's what market makers. Do we? We keep markets in equilibrium and make sure that they are efficient fair and transparent.

Craig Sighgendola: Thanks, Doug. Just for my follow-up, I wanted to see if you had any thoughts on the strategic merit of operating a hedge fund in parallel to the market making and execution businesses. The reason we are asking is that Tower is launching a hedge fund. Some of your other competitors like Citadel, Susquehanna, Two Sigma, they also run hedge funds side by side. So why doesn't Virtu launch a hedge fund? It could expand your revenue base. It shouldn't be diluted to your stock valuation and also not require that much capital.

Thanks, Doug. Just for my follow-up, I wanted to see if you had any thoughts on the strategic merits of operating a hedge fund in parallel to the market-making and execution businesses. The reason we're asking is that Towers is launching a hedge fund, and some of your other competitors, like Citadel, Susquehanna, and Sigma, also run hedge funds side by side. So, why doesn't it work to launch a hedge fund? It could expand your revenue base, it shouldn't dilute your stock value or evaluation, and it also wouldn't require that much capital.

Douglas Cifu: Yeah, it's a great question. I mean, we have over the years, considered it. There's obviously a lot of infrastructure and conflict management, if you will, that you have to deal with with regard to a hedge fund. Certainly, those are all manageable. You do mention that there are firms like Citadel that have managed them quite well. I guess they had the hedge fund before they had the market maker. It is certainly possible. This firm has always prided itself in being as risk-averse, if you will, as possible and capital light and providing a service to the marketplace. In terms of like holding positions, we measure things in nano, micro, and milliseconds here. Certainly, some of our strategies are longer than that.

There it is. There's obviously um a lot of infrastructure and conflict management. If you will that you have to deal with with regard to.

Uh, a hedge fund. Certainly, those are all manageable and you do mention that there are uh firms like Citadel that have managed them uh, quite well. And I guess they had the hedge fund before they had the market maker.

Douglas Cifu: Just culturally, we might be a bit of a shift, but it is definitely something that I think Eli Abboud, who's, as I said in response to Ken Worthington's question, is a heck of a lot smarter than I am and younger and more vivacious. I would imagine he will consider. Joe, any thoughts?

Uh and so it it is certainly possible. Um you know this firm has always prided itself in being uh as risk averse if you will as possible and and and capital light and providing a service to the marketplace and in terms of like holding positions, you know, we measure things in Nano micro and milliseconds here, certainly some of our strategies are longer than that. And so, you know, just

Joseph Molluso: No, Craig, we've looked at it as we've looked at everything. We've looked at what that looks like side by side over the years. It's just been a matter of what do you prioritize? Here we sit today with a couple of thousand real buy-side clients, as well as the market-making business. It's something that's out there that we revisit from time to time.

Culturally, we might see a bit of a shift, but it is definitely something that I think Aaron, who's, as I said in response to Ken's question, is a heck of a lot smarter than I am, younger, and more vivacious. I would imagine he will consider Joe. Any thoughts?

No, I I great you know we've looked at it as we've looked at everything, right? We've looked at um,

uh,

You know what? That? Looks like side by side over the years, it's just been a matter of, you know, what do you prioritize? And and you know, here we sit today with

A couple of thousand, like Rio bicycle clients.

As the market making business. So, you know, it's, it's something that's out there that, that we we revisit from time to time.

Craig Sighgendola: Thank you, Joe.

Thank you, Joe.

Joseph Molluso: Thank you.

Douglas Cifu: Thank you.

Thank you. Thank you.

Operator: We now turn to Alex Blostein with Goldman Sachs. Your line is open. Please go ahead.

We now turn to our explosion with Goldman Sachs, your line is open. Please go ahead.

Ken Worthington: Hey, good morning. Thanks. Doug, just to again echo everybody else's comments, congrats. Definitely a bit of end of an era. We will miss your passion on these earnings calls, but I am sure the content will remain quite rich. So, it has been great working with you. A question maybe strategically, and I am not sure if that is better for next call when Eli Abboud is on, but just thinking through the M&A opportunities for Virtu Financial. The reason I ask is because the balance sheet continues to get stronger and stronger. The leverage ratios continue to come down. You guys have done successful deals in the past. With the way the ecosystem evolving, particularly around cryptocurrency, are there things that might be interesting that could accelerate you guys' growth? Where does M&A stack up on your priority list right now?

Joseph Molluso: Yeah. You know, Alex, it's Joe. I will address that. You know, it's really, you have got to look at cycles and how cycles develop. I think there was a time period when if you look at the acquisitions we have done, I think we are very astute in our timing, and effectively, bought volatility, at low points. In the instances of ITG and Knight Capital, they were different, but there was a common theme around technology, leverage, and timing. In the past five years, you know, we look and our board expects us to look, and we look at every opportunity that is out there, and we measure it against our internal opportunities, and we measure it against buying back our own stock, I think. You know, so in the past five years, we have effectively, made an acquisition, right?

Hey, good morning, thanks. Um, Doug just to again, Echo, everybody else's comments. Congrats definitely, uh, a bit of end of a narrow. We'll miss your, uh, passion on these earnings calls, but I'm sure the, uh, you know, the content of learning quite Rich. So, uh, so it's been great, great working with you. Um, question, maybe strategically and I'm not sure if that's, uh, better for next call when Aaron is on. But, uh, just thinking through the m&a opportunities, for virtue, and the reason I ask is because the balance should continues to get stronger and stronger, you know, the leverage ratios continue to come down. You guys have done successful deals in the past. Um, with the way, the ecosystem evolving particularly around crypto other things, uh, that might be interesting, that could accelerate you guys' growth and where does m&a stick up on your priority list right now?

Okay. Yeah, you know uh Alex, it's Joe I'll address that, you know, it's it's really.

You've got to look at cycles and how Cycles. Develop.

Uh, and you know, I think there was a time period when, if you look at the acquisitions we've done.

Uh, we I, I think we're very astute in, in our timing, uh, and effectively, uh, bought volatility, uh, at low points. And, uh, in in, you know, the instances of itg and, and, and and night capital.

Uh, there were different, uh, but there was a common theme around technology leverage and, you know, timing.

Uh in the past 5 years, you know, we look and our and our board expects us to look and we look at every opportunity that's out there.

Joseph Molluso: We made a $1.4 billion acquisition of 20-ish percent of our own company at $26 a share. I think that was probably the most accretive, and shareholder value-creating, allocation of capital that we could have deployed. What does that mean for the future? I think maybe there is a premise to your question, which is that things may be changing, and there may be opportunities where the deployment of capital to an acquisition, you know, beats, buying back our own stock, and we are open to it. You know, we continue to look at everything, and I would not, we will not rule it out. We have never ruled it out, really.

Uh, and we measure it against, you know, our internal opportunities, uh, and we measure it against buying back our own stock. I think, you know, so in the past 5 years, we've effectively uh bought made an acquisition, right? We we made a 1.4 billion dollar acquisition of

20-ish percent of our own company at, at 26 dollars a share. And I think that was probably the most accretive

Uh, and shareholder value creating, uh, allocation of capital that we could have deployed.

Uh and what does that mean for the future? I I think maybe there's a premise to your question which is that things may be changing.

Uh, and uh, there may be opportunities where, you know, the deployment of capital to an acquisition, you know beats uh buying back our own stock and we're open to it, you know, we we continue to look at everything. Uh and you know I wouldn't I we we won't rule it out.

Joseph Molluso: It is but I get your point, and I think, you know, there may very well be opportunities in the future, but you know, we are going to treat it the same way we did in 2017, 2019, and over the past five years, we are going to look at what is the best return on our capital.

We've never ruled it out really. It's it's but but I I I get your point and I think, uh, you know, there may very well be opportunities in the future but you know, we're going to treat it the same way we did in 2017 and 2019 and over the past 5 years, we're going to look at what's the best return on our Capitol.

Ken Worthington: I gotcha. Thank you.

I got you. Thank you.

Operator: Our next question comes from Patrick Moley with Piper Sandler. Your line is open. Please go ahead.

Our next question comes from Patrick Molly with Piper Sandler. Your line is open. Please go ahead.

Chris Allen: Yes. Good morning. Thanks for taking the question. Doug, congrats on your retirement and look forward to working with Eli Abboud as well. First off, Doug, you spoke about it in your prepared remarks, but with the recent passage of the Genius Act, what sort of new opportunities do you think a proliferation of stablecoin adoption would open up for Virtu Financial? Then, just in terms of the overall crypto opportunity, where do you think you are in your journey? Is there more that you can be doing, or are you just sort of watching the ecosystem evolve and kind of picking your spot there? Any color would be great. Thanks.

Yes, good morning. Thank you for taking the question, uh, and Doug congrats on, on your retirement and look forward to working with, Aaron, as well. Um, so first off Doug, you spoke about it in your prepared remarks. But with the recent passage of the genius act, what sort of New Opportunities do you think a proliferation of stablecoin adoption would open up for virtue? And then just in terms of the overall you know crypto opportunity, where do you think you are?

Douglas Cifu: Yeah. No, thank you very much for the kind words, and it is a really good question. I mean, I could not be more excited, if you will, from the tailwinds within the digital asset space. I mean, I think stablecoins just provide for more adoption of digital assets and more need, frankly, for providers like Virtu Financial to provide that on-off ramp. I mean, the analogy I used yesterday with our board was, you know, think of the ADR market, which we are super good at, and where we are providing a service. Someone is going to need to harmonize and handle the off-ramp between fiat and stablecoin and stablecoin and fiat. Then there is going to be variants of that. No firm better than Virtu Financial to handle that type of transaction.

In your journey, is there more you that you can be doing? Or you just sort of watching the, um, ecosystem evolved and kind of picking your spots there? Any color would be great. Thanks. Yeah. Thank you very much for the kind words. And, and, and it's a really good question. I mean, I, I I couldn't be more excited if you will from the Tailwind within the digital asset space, I mean I think stable coins

Provides for, you know, more adoption of digital assets and more need frankly.

Douglas Cifu: So I think there is going to be a lot of opportunities to facilitate those conversions and USD to Ethereum and USD to Solana and back and forth and blah, blah, blah. You kind of get it. I think what we have thought of strategically and are very proud of what we envisioned post-FTX, I guess it was three years ago, we said, "Okay, there is a lot of interest in this asset class." Right now, it is a little bit all over the place regulatorily, and obviously, the prior administration had a different view about digital assets than this administration does. But still, let us invest in a Virtu Financial-style business where we can be a value-added participant between spot, ETF, future, perpetuals, you name the instrument, CFD, multi-currency. Let us be prepared to do that as a first step.

You know, better than virtue to handle that type of transaction. So I think there's going to be a lot of opportunities to facilitate, you know, those conversions and, you know, USD to ethereum and, you know, USD to Solana and back and forth and blah, blah, blah. You you kind of get it. I think what we have thought of strategically in a very proud of what we

Uh, envisioned post FTX, I guess, it was 3 years ago. We said, okay there's a lot of interest in this asset class, right now, it's a little bit all over the place Regulatory, and obviously, the prior administration had a different view about digital assets than this Administration does. But still, let's invest in a virtue style business, where we can be a value, added participant between spot,

Douglas Cifu: Then as a second step, let us do that 24 hours a day, seven days a week. Now as a third step, let us be prepared to do that bilaterally in the same way that we do with our VEQ Link product and our VFX product and our VFI product. I think we are going to call this VF Crypto because we are not great about marketing. But it will be a 24, it is a 24 by 7, global service that is on exchange, if you will, with institutions, directly to institutions.

Uh, ETFs future perpetuals, you name the instrument cfd multitask. You know. Multi-currency, let's be prepared to do that as a first step and then as a second step, let's do that 24 hours a day. 7 days a week. And now as a third step, let's be prepared to do that by by laterally in the same way that we do with our you know, beq link product and our VFX product and our vfi product.

Douglas Cifu: So be agnostic as a liquidity provider and be that, one of the folks in the middle of this ecosystem. We have made a strategic hire of a young man that will start on Monday to help facilitate and grow that business. We have got the relationships already. There is nobody better than Joseph Molluso about managing capital and risk. So it is a, as you can hopefully tell by my voice, it is a business that we are extremely excited about. Joseph Molluso, any other color?

Joseph Molluso: No, I think that's it.

Douglas Cifu: Okay. Thank you.

I think we're going to call this VF crypto because we're not great at that Marketing in crypto. Uh, but it'll be a 24. It is a 24 by 7 uh Global you know uh service that's on Exchange if you will with institutions directly to institutions. And so be agnostic as a liquidity provider and be that, you know, 1 of the folks, in the middle of this ecosystem, we've made a strategic hire, um, uh, of a young man that will start, uh, on Monday, uh, to help facilitate and grow that business. We've got the relationships already. Um, there's nobody better than Joe about managing capital and, and risk. And so it's a it's a as you can hopefully tell by my voice. It's a business that we are extremely excited about Joey other colors. No, I think that's it. Okay, thank you.

Chris Allen: Okay. That is great. Then maybe just as a follow-up on the topic of tokenization, we heard Robinhood earlier this month announced that they were going to launch tokenized equity trading for their customers in Europe. You spoke about it a little in your prepared remarks as well, but could you just elaborate on that opportunity and how you maybe see the tokenization landscape evolving as it relates to equities? Is it going to make more sense in Europe? Do you think it makes sense in the U.S.? How do you think about that kind of evolving from here?

Okay, that's great. Uh and then maybe just as a follow-up on the topic of tokenization. We we heard, you know, Robin Hood earlier. This month announced that they were going to launch tokenized Equity trading for their customers in Europe.

Douglas Cifu: Yeah. What I would say is, again, I want to be a little careful what I say because of some of the regulatory implications of tokenization. Our great friends at Citadel sent a very, very thoughtful, constructive letter to the SEC about, you know, let's make sure we understand the rules of the road here because, you know, it shouldn't be the Wild West and replace, if you will, regulated environments that function very well. But we do think that there is something to this, that, you know, and probably not for U.S. persons, right? So you're right. It probably is more geared towards folks that exist overseas that want to have access to U.S. markets. And that really then relies on our core skill, much like an ETF issuer, you know, tokenized stocks really are just wrappers, if you will, of existing underlying assets.

You spoke about it a little and you're prepared to March as well, but could you just elaborate on that opportunity and how you maybe see the tokenization landscape evolving? As it relates to equities? Is it going to? Is it going to make more sense in Europe? Do you think it makes sense in the US? How do you think about, you know, that kind of evolving from here?

Yeah, I what I would say is again, I want to be a little careful what I say because of some of the regulatory. Um,

Implications of tokenization. I mean, our great friends at Citadel.

Douglas Cifu: We're quite good at understanding the mechanics of how that works, of providing attractive two-sided liquidity, and then ultimately being one of the firms that can, you know, quote-unquote, "create redeem," if you will. And we can do that, as I said before, globally and now 24 by 7. So if it engenders incremental interest in U.S. assets and in U.S. equity assets in particular, you know, it's a strong tailwind and positive. So we're going to work hand in hand, as we always do, with our partners at Robinhood and Schwab and Fidelity and Weibo and eTrade. And I don't want to, you know, and everybody else, that we consider good, trustworthy counterparties and clients to address this addressable market. Vinnie taught me a long time ago that marketplaces are like pies. We're both Italian American, so we always talk about Italian American things.

Sent a very, very thoughtful constructive letter to the FCC about, you know, let's make sure we understand, uh, the rules of the road here because, you know, it shouldn't be the wild west and replace if you will, uh, regulated environments that function very well. But we do think that there is something to their, um, that, you know, and and and probably not for us persons. Right. So you're right, it probably is more geared towards folks that exists overseas that want to have access to us markets. And that really then relies on our core skills. Um, much like an ETF issuers, you know, tokenized stocks really are just wrappers if you will of existing underlying assets.

Uh, we're quite good at understanding the mechanics of how that works of providing attractive 2-sided liquidity and then ultimately being 1 of the firms that can, you know, quote unquote, create redeem if you will. Uh, and we can do that as I said before a globally and and now 24 by 7. So if it engenders incremental interest in US assets and in US Equity assets in particular, you know, it's a strong tailwind and positive and so we're going to work hand in hand as we always do.

With our partners at Robin Hood and Schwab and Fidelity, and webull, and, and E-Trade. And I don't want to, you know, and everybody else, uh, that we consider good trustworthy counterparties and and clients

Douglas Cifu: And our job is not necessarily to have a bigger slice of the pie, but to maintain our slice, but to grow the pie, to grow the pie. And this is a pie-growing exercise, if you will. So it's a strong positive for the firm.

To address this addressable Market. I mean if any taught me a long time ago that that, that marketplaces are like, are like pies. We're both Italian Americans. So we always talk about Italian-American things and our, our job is not necessarily to have a bigger slice of the pie, but to maintain our slice. But to grow the pie,

To grow the pie. And this is a pie growing uh, exercise if you will. So it's a strong positive for the firm.

Chris Allen: Okay. Great. That's it for me.

Okay, great. That's it for me.

Douglas Cifu: Thank you.

Thank you.

Operator: As another reminder, if you would like to ask a question, please press star one on your telephone keypad now. We now turn to Chris Allen with Citi. Your line is open. Please go ahead.

That's another reminder. If you'd like to ask a question, please press star 1 on your telephone keypad now.

We now turn to Chris Allen with City, your line is open. Please go ahead.

Chris Allen: Morning everyone. Doug, congrats on the retirement. It's been a fun run with you. I wanted to ask a little bit about execution services. Up really nice year-over-year. I continue to see strong trends there. I was a little bit surprised we didn't see better sequential growth just given the overall volume trends. Maybe give us some color in terms of what's going on underneath there and what is that growth driver for Virtu Financial.

Yeah, good morning everyone. Uh, Doug, congrats on the retirement. Uh, it's been a, it's been a fun fun, run with you. Um,

wanted to ask a little bit about execution Services up really nice year of year. As you can see strong Trend zero, it's kind of a little bit, a little bit surprising to see better sequential growth. Just give them the overall volume Trends. They give us some call or just in terms of what's going on underneath the underneath there and what are the growth drivers move. So,

Douglas Cifu: Again, it's, I mean, it's been a labor of love. I give all the credit in the world to Steve Covoli, who is a, you know, just a fabulous leader, person. No one could have cobbled together really three franchises: the small legacy Virtu, the very substantial Knight institutional business that had been around for a long time, and then this giant global franchise and product company we bought called ITG. It was, I mean, frankly, I think, I underestimated how challenging that was going to be with, you know, 2,000 clients. Frankly, the analogy I've always used is, you know, we're trying to change the tires on the car as it's speeding down the highway at 60 miles an hour. Demanding revenue at the same time, changing, the underside, if you will, of what clients we're interacting with.

Yeah, again, it's, uh, I mean it's been a labor of love. I give all the credit in the world to Steve Cavali, who is a, you know, just a fabulous leader and person.

Uh, you know, no 1 could have cobbled together, really 3 franchises, the the small Legacy virtue, the very substantial night, institutional business that had been around for a long time and then, this giant Global franchise and Product Company we bought called itg. And it was, I mean frankly I I think uh I underestimated how challenging that was going to be with, you know, 2,000 clients and frankly, the analogy I've always used is, you know, we're trying to change the tires on the

Douglas Cifu: I think we have built a first, you know, best-in-class offering that is truly, cross-asset, that is cross-product. I think it is, you know, the only advantage we have is, excellence, transparency, and performance. We don't have a calendar, balance sheet. We don't have Prime. We don't have research, right? We have to, in, you know, the knife fight, if you will, of execution services, we have to be really, really acute. That's what we have done. Steve has emphasized cross-product selling. That has worked. Steve and the guys have emphasized cross-asset development. Mike Loja and the team around Triton have truly developed a cross-asset, you know, EMS product that global, asset managers are now looking at, for, you know, credit rates, options, and equities, right? We're not losing those jump balls to firms that had a cross-asset product. We're winning those jump balls.

The car, as it's speeding down the highway at 60 miles an hour. So, demanding Revenue at the same time changing, um, the under the underside, if you will of what clients were interacting with. So, I think we have built a first, you know, a best-in-class offering that is truly, uh, cross asset. That is Crossroads. I think it is. You know, the only Advantage we have is, uh, Excellence, transparency and performance. We don't have

Calendar balance sheet, we don't have Prime we don't have research right? So we have to in you know, the knife fight. If you will of execution Services we have to be really really acute and so um that's what we have done. Steve has emphasized cross product selling that has worked Steve and the guys have emphasized cross asset development, Mike loeya and the team around, Triton have truly developed

A cross-asset, uh, you know, EMS.

product, that global

Uh, asset managers are now looking at, uh, for you know, credit rates.

Douglas Cifu: The same thing with regard to our analytics business. You know, we used to be more viewed as like, I don't want to say niche because the global equities market is a large niche, but a global equities firm exclusively, and we're not anymore. We're not anymore. We're viewed as a really leading cross-asset firm. That's the strategy going forward. There obviously are behemoths in the market that you want to sell. You want to be very cross-asset too. The last thing I would say is the benefits of the market maker and offering that as a product in a very transparent, virtuous way, if you will, that liquidity, which is really bespoke and can be measured and is, you know, a differentiator from other, frankly, just about any other offering out there.

Um options and equities, right? So we're not losing those jump balls to firms. That had a cross asset product. We're winning those jump balls and the same thing with regard to our analytics business. You know, we used to be more viewed as like

Douglas Cifu: You know, we've seen the both the the impact, if you will, of orders and the size of orders have dramatically improved in the last four or five years as as we have integrated that offering, Chris, with our market maker. Clients have been extremely, extremely happy and responded to that.

I want to say Niche because the global equities Market is a large Niche, but a global equities firm exclusively and we're not anymore, we're not anymore. We're viewed as a really leading cross asset firm, so that's the strategy growing forward going forward. Um, there obviously are behemoths in the market that you want to sell, you want to be very cross asset to. And then the last thing I would say, is the benefits of the market maker and offering that as a product in a very transparent virtue, is way if you will that liquidity, which is really bespoke and can be measured and is, you know, a differentiator from other frankly just about any other offering out there. You know, we've seen the both the the

Impact, if you will, of of orders and the size of orders have dramatically improved in the, last 4, or 5 years. As, as we have integrated that offering Chris with our Market maker, and clients have been extremely, extremely happy and responded to that.

Chris Allen: Thanks for that, Carter. Just a quick follow-up. How are you thinking about the opportunity set or environment moving forward, obviously coming out of a somewhat of a unique Q2?

Thanks for that caller. Just a quick follow-up. I mean, how are you thinking about the, the opportunity set or or environment moving forward, I'll just coming out of

Some of the unique, uh, second quarter.

Douglas Cifu: Yeah. I mean, I think, obviously, look, it's all about wallet market share, cross-selling, creating new products, Virtu Technology services, right? Broker-in-a-box going to sell-side firms that have real institutional pressures to be excellent and save costs. It's a balancing act. They have a hard time balancing. But at the end of the day, obviously, you're beholden to what the universe or the marketplace will give you. So you're going to have the ebbs and flows with volumes in global volumes. But the key is obviously to grow that wallet and grow that market share. Joe, any other thoughts?

yeah, I mean, I I think

Uh, you know, creating new products, you know, Virtu Technology Services, right? You know, broker in a box, going to sell side firms that have real institutional pressures to be excellent and save costs. And it's, you know, a balancing act. They have a hard time balancing, but at the end of the day, you're beholden to what the universe of the marketplace will give you. So you're going to have the ups and downs with.

Uh, volumes.

Joseph Molluso: No. I think, look, Chris, it was just from a more macro standpoint, it was obviously an extraordinary environment. I think with the underpinnings of some of it continuing are in place, but I'm obviously, the activity around Liberation Day and coming out of that time was fairly unique.

Uh no I I think um look, you know, Chris the it was just for a more macro standpoint. It was obviously an extraordinary environment, um, you know, and and I think with the underpinnings of of some of it continuing are in place but I you know obviously uh you know, the the activity around Liberation day and coming out of that uh that time was was was fairly unique.

um,

Douglas Cifu: Thanks.

Chris Allen: Thank you.

thanks.

Thank you.

Operator: We now turn to Dan Fannon with Jefferies. Your line is open. Please go ahead.

Right now. I'll send you Dan sanon, with Jeffrey's. Your line is open. Please go ahead.

Ken Worthington: Thanks. Good morning. Yeah. Congrats, Doug, on your retirement. You will certainly be missed on these calls. I was hoping you could just talk a bit about overnight trading. That has been a growing, I think, part of the market, but really not sure how big of a contributor that is for you and how to think about that opportunity. So hoping you could put a little more context around that.

Douglas Cifu: it is a great question. Thank you for the kind words. I think it is very early days. We were a pioneer. I distinctly remember, oh gosh, maybe it was 2018. I am getting old, Dan, so I cannot remember exactly when, but when my friend Steve Kirk, then at TD Ameritrade, said, "We want to trade 24 hours, and we want you guys to do it for us." People in the firm kind of looked around, and we were like, "Okay," because that is what you do when you are in the client business. So we figured it out in a Virtu way. We were the first firm for bot debt service. I know other firms do now, and we are working with Blue Ocean and blah, blah, blah. So it has been on for a while.

Uh, thanks. Good morning. Yeah. Congrats Doug on your retirement. You will certainly be missed on these calls um was hoping you could just talk a bit about uh overnight trading. Um that's been a growing I think part of the market. But really not sure how big of a contributor that is for you and how to think about that opportunity. So hoping you could put a little more context around that.

Yeah it's a great question. Thank you for the kind words. Um I you know I think it's very early days. Um we were a Pioneer a distinctly remember

Oh gosh, maybe it was 2018. I'm getting old so I can't remember exactly when but when um um,

My friend Steve Kirk at then at TD Ameritrade.

Said, uh, we want to trade 24 hours and we want you guys to do it for us and people in The Firm kind of looked around. And we were like,

Okay.

Douglas Cifu: Obviously, you look at, you know, if you watch CNBC, which we all do, or Fox Business, you know, you see the all-night long, whatever it is, commercials with, I guess, Lionel Richie, right? Was not that the Commodores? Was that Lionel? But anyhow, and so it is something that our clients, you know, think is very significant. Obviously, crypto ties into that because it is a global asset class. A little bit futures, right? You are seeing the ES become more of a retail product, and that is kind of 24 hours, and maybe it becomes seven days a week. So I think over the next, fill in the blank, you know, 6, 12, 18, 36 months, you are going to continue to see market share and a need for that trading skill and that liquidity provision.

Douglas Cifu: Frankly, not every firm can or will be able to do that. It is not that easy. We are truly a global firm. We do not have pockets of traders. We have a global, thanks to Aaron Simon, the global integrated infrastructure that hands off, quote-unquote, "the book" very well. We have been really, really good about managing expenses. So I think it is going to be really hard for investors ultimately to ignore it. Right now, I would say it is probably 99% retail-driven, if you will, and individual trading-driven. But I could see a moment in time, Dan, where there is more liquidity that institutional investors, you know, come into the fray. Again, it is the Virtu model, right? We are the, as I used to say, we are the Switzerland of liquidity provisioning, and this is where the world is going.

Uh, because that's what you do when you're in the client's business. And so we figured it out in a virtue and way, we were the first firm to provide that service. I know other firms do not and we're working with blue ocean and blah, blah blah. So, uh, it's it's been on for a while and obviously you look at, you know, if you watch CNBC which we all do or Fox Business, you know, you see the all night long, whatever it is commercials with, I guess, the final Richie right. Wasn't that the Commodore was that line? But anyhow, uh, and so, it's, it's something that our clients, you know, think are is very significant, obviously crypto ties into that, because it's a, it's a global asset class a little bit Futures, right? You're seeing the es become more of a retail product and that's kind of 24 hours and maybe it becomes 7 days a week. So I think over the next bill in the blank, you know, 6121836 months you're going to continue to see market share in a need for that trading skill. And that liquidity provision and frankly, not every firm can or will

Be able to do that. It's not that easy. We're truly a global firm. We don't have pockets of Traders. We have a global. Thanks Aaron Simons. A global integrated infrastructure that hands off quote unquote the book very well and we've been really really good about managing expenses so I think it's going to be really hard for

Investors ultimately to ignore it right now. I would say it's probably 99%, uh, retail driven if you will an individual trading driven. Um, but I could see a moment in time then where there's more liquidity that institutional investors.

Douglas Cifu: We want to be, you know, at the center of it. So it is definitely a tailwind. Again, whether it reaches, you know, 5% of the market in two years or, you know, it is going to take longer, I do not know, but it is a great incremental revenue opportunity for the firm.

Um, you know, come into the front again. It's the Virtu model, right? We are, as I used to say, where the Switzerland of liquidity provisioning, and this is where the world is going. We want to be, you know, at the center of it. So it is definitely a tailwind again. Whether it's it reaches, you know,

5% of the market in 2 years or, you know, it's going to take longer, I don't know, but it's a great incremental Revenue opportunity for the firm.

Ken Worthington: Got it. Just as a follow-up, Doug, as you take a step back, I was hoping to get a little perspective on what you think, if you look out a couple of years, let us say three years, what do you think of your organic growth initiatives will be the biggest contributor in three years' time?

Got it and then just as a follow-up, you know, Doug as you as you take a step back, um, I was hoping to get a little perspective on what you think. As if you look out a couple years, you know, let's say 3 years, what you think of your organic growth initiatives will be the biggest contributor. Uh you know, in 3 years time

Joseph Molluso: am going to ask Joe to answer that one. You know, it is hard to say. I would, you know, you look at the end markets that are that are in those. You know, obviously, crypto is an enormous opportunity. Our ETF block franchise has been, you know, having a stellar year so far. Options is a big opportunity as well, right? So, I think some of the things we just talked about on this call kind of overlay those, whether it is tokenization or whether it is stablecoin and crypto. But I think you see kind of a convergence among some of those opportunities, as end markets grow, as overnight trading grows, as, you know, sort of the scope of what we do expands. And, you know, we just talked about overnight trading. You know, that opens up international markets, in a way that had not existed before.

look at this, Joe to answer that 1 since uh,

Uh, you know, it's, it's hard to say I would, um, you look at the end markets that are that are in those, you know, obviously, your crypto is an enormous opportunity. Uh, you know, our ETF block, franchise has been, you know, having a stellar, uh, year so far. Uh, options is a, is a is a big opportunity as well. All right, so, I think some of the things we just talked about on this call. Kind of overlay though, is whether it's tokenization or stablecoin in crypto, uh, but I think you see kind of a convergence among some of those opportunities.

Joseph Molluso: So it is hard to say. I mean, if you if you pushed me, I would say crypto and options. But again, the ETF block franchise, you know, has been having a record year, so.

Uh, in a, in a way that hadn't existed before. So it's hard to say. I mean, if if you, if you pushed me, I'd say crypto crypto and options. But again, the the ETF block franchises, uh, you know, has been having a record year. So,

Ken Worthington: Got it. Thank you.

Got it. Thank you.

Operator: Our final question today comes from Michael Cypress with Morningstar. Your line is open. Please go ahead.

Our final question. Today comes from Michael Cyprus with Morgan Stanley. Your line is open. Please go ahead.

Ken Worthington: Great. Thanks. Good morning. Doug, congratulations on your retirement. I would like to dig in a little bit further on the overnight trading opportunity. Sounds interesting. I was hoping you could elaborate on your views around the institutional use case, how you see that. What does it take for liquidity to build in that overnight session? How do you see that evolving? I understand retail is driving the meaningful portion of that activity today in the overnight trading. I am just curious if you could maybe help quantify the magnitude of what you are seeing in terms of that retail activity in the overnight session. Thanks.

Douglas Cifu: Yeah. Yeah. It is a great question. Thank you for the kind words. As I indicated, it is 99.9%, probably, retail today. I think there are a couple of issues. One is, obviously, institutional investors will trade in significantly more size. So it is hard to go to a party and be the only person there. You need a dance partner. Obviously, we would provide the liquidity, but they do not want to just trade with one or two market makers. So you need some forces to encourage institutions, if you will, to do that. I think the second thing is, you need more regularization. In other words, you need demonstrable levels of best execution and, frankly, execution that fits within the parameters of the institutions that would be sending orders there. So I could see it first being like a risk mitigant.

Great. Thanks. Good morning and and uh, congratulations on your uh, retirement. I would like to to dig in a little bit further, on the overnight trading opportunities. Sounds interesting, I was hoping you could elaborate on your views, around the institutional, use case. How you see that, what does it take for liquidity to build and that overnight session? How you see that evolving? And then understand retail is driving uh, the meaningful portion of that activity today in the overnight trading, but just curious, if you could maybe help quantify the magnitude of what you're seeing in terms of that uh retail activity in the overnight session. Thanks.

Yeah. Yeah.

You know 99.9% retail today. I think there's a couple of issues 1 is obviously institutional investors will you know trade in significantly more size, right? So it's hard to go to a a party and be the only person there you need a dance partner or not. Because we would provide the liquidity but they don't want to just trade with a 1 or 2 market makers.

so, you need

Douglas Cifu: You know, like there is going to be news. I want to put on a hedge. I want to do this. I want to do that. It is in the aftermarket because I am hedging a portfolio or, God forbid, I had an out trade and I want to hedge that risk, et cetera, et cetera. That used to be a call-around market. Maybe that becomes more of an electronic all-to-all marketplace. But I think more broadly, it is going to be very difficult ultimately as the liquidity builds there for institutions to ignore it as an opportunity for them to put risk on and take risk off. But as with building any marketplace, you need those first people to leap and maybe put a toe in the water, and then you get multiple toes in the water, and that is how marketplaces grow.

Some forces to uh you know, encourage institutions, if you will to do that. I think it's probably the second thing is uh you need more regularization. In other words, you need, you know, demonstrable uh levels of best execution and frankly execution that fits within the parameters of the institutions that would be sending orders there. Um, so I could see it first being like a risk mitigant, you know, like there's going to be news. I want to put on a hedge. I want to do this. I want to do that. And it's in the aftermarket because I'm hedging a portfolio or, you know, God forbid, I had an out trade and I want to hedge that risk and etc etc that used to be a call around Market. Maybe that becomes a more of an electronic all-to-all Marketplace, but I think it more broadly it's going to be very difficult. Ultimately, as the liquidity bills there or institutions to ignore it as an opportunity for them to, you know, put put risk on and and take risk off. But as with building any Marketplace, um, you know, you need those first

Douglas Cifu: So it seems inevitable it is going to happen. Again, as I said in answer to the prior question, whether that is 6, 12, 18, or 36 months, it is impossible to know. But I see it as a real use case and a real opportunity for this firm and for firms like us to provide that unique liquidity.

People to leap and maybe put a toe in the water and then you get multiple toes in the water and that's how Marketplace is growing. So it seems inevitable. It's going to happen again. As I

set an answer to the prior question, whether that's 61218 or 36 months in possible to know, uh, but I see it as a, as a, a real use case and a real opportunity for for firm for this firm, and for firms, like us to provide that unique liquidity,

Ken Worthington: Great. Thanks for that. Just as a follow-up question, I wanted to dig in a little further on the tokenized U.S. equity trading for overseas clients that we are seeing some firms already begin to announce and launch. Curious how you see that ramping. How much in terms of volumes are you seeing so far from these platforms that have brought this to the marketplace? What challenges do you see the development of this sort of market overseas when you think about implications for liquidity back in the U.S. markets, particularly if there is no SIP or market data repository for capturing this sort of data? Curious how you see all that developing and the risks and opportunities there.

Douglas Cifu: Yeah, great question. I think, look, the most important thing is the firms that are doing this, the Robinhoods, the Fidelities, the Schwabs, etc., they care and will obviously manage expectations and, frankly, best execution for their clients. So they are still going to route this flow, tokenized or not, to the market makers where they receive the best execution. So you are going to have a competitive ecosystem where non-U.S. persons who want access to markets and the rails and getting on and off and the simplicity, if you will, of the tokenization of that equity security is attractive to those investors. And, frankly, it is an important product offering as our friends at Robinhood have been very, very public about it.

Great, thanks for that. And just as a follow-up question, wanted to dig in a little further on the tokenized US Equity trading for overseas clients that were seeing some firms. Already begin to announce and launch. Just curious how you see that ramping? How much in terms of volumes? Are you seeing so far from these platforms that have brought this to the marketplace? What challenges do you see the development of the sort of Market overseas? When you think about implications for liquidity back in the US markets, particularly if there's no sip or Market data repository for capturing, this sort of data, just curious how you see all that developing and the risks and opportunities there.

Yeah, great question. I I think look, I mean the most important thing is like, you know, the firms that are doing this. The Robin Hood is the Fidelity is the Schwabs Etc. Like, you know, they they care and uh well obviously manage expectations and frankly best execution for their clients so they're still going to route.

Douglas Cifu: I think, again, to echo what I said earlier, the comments from Citadel around making sure that this is not a way to do an end run, if you will, around the very, true and tried principles of the U.S. regulated ecosystem is very important. So again, I look at it as an opportunity to expand the pie to non-U.S. persons. I think it fits right into our wheelhouse of instrument A, instrument B. We need someone to provide that liquidity, if you will, to switch to the switch market. We know the marketplace very well. We are a trusted business partner of these firms. We have demonstrable and certifiable and, frankly, public best execution statistics with regard to U.S. equities. And so we could promulgate those very easily to a tokenized environment and are doing that.

Douglas Cifu: So it is very, very early days. It is something that these firms are excited about. I think it is a way for them to expand their footprint outside the United States and into the United States, which is the largest capital markets by far in the world. And so it is an opportunity for them. And as trusted business partners of all of the aforementioned, it is an opportunity for us to be a good partner and to grow our revenue base. So exciting tailwind.

Yeah, so the switch Market, we know the marketplace very well. We're a trusted business partner of these firms, we have demonstrable and uh certifiable and frankly public best execution statistics with regard to us equities. And so we could promulgate those very easily to a tokenized environment and are doing that. So it's very very early days. It's something that these firms are excited about, I think it's a way for them to expand their footprint outside the United States and into the United States, which is the largest Capital markets by far in the world and so it's an opportunity for them. And as trusted business partners of all of the aforementioned, it's an opportunity for us to be a good partner and to grow our Revenue base. So exciting to work with

Ken Worthington: Great. Thank you.

Douglas Cifu: Thank you.

great. Thank you.

Thank you.

Operator: We have no further questions, so I will now hand back to the management team for any final remarks.

Chris Allen: Thank you, everybody, very much for participating today. For the last 10 years, in these calls, I greatly appreciate everybody putting a lot of work and effort and answering, excuse me, mostly really interesting, great questions that have forced me to think and respond. Thank you for being gracious always to the firm that I truly love. I am excited to listen to Eli Abboud and Joseph Molluso and Cindy Lee on the next earnings call. I will probably be on a golf course somewhere, but I will listen very, very acutely. Thank you, everybody, for your interest in Virtu Financial, and have a wonderful day. Thank you.

We have no further questions, so I'll now hand back to the management team for any final remarks.

Well, thank

The last 10 years, uh, in these calls, I greatly appreciate everybody, uh, putting a lot of work and effort, and answering most and asking, excuse me. Mostly really interesting great questions that have forced me to think and respond and thank you for being gracious. Uh always to the firm that I truly love, and I am excited uh to listen to Aaron and Joe and Cindy on the next earnings call.

I'll probably be on a golf course somewhere, but I will listen very, very, uh, acutely. And thank you, everybody, for your interest in Virtu, and have a wonderful day. Thank you.

Operator: Ladies and gentlemen, today's call is now concluded. We would like to thank you for your participation. You may now disconnect your lines.

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.