VIRT - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen thank you for standing by and welcome to Virtu Financial 2019 Third Quarter Results Conference Call. At this time all participants are in a listen only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]

Thank you.

to Smith, conference of Senior and Strategy. like speaker to Investor now Corporate Andrew today Vice would turn over the your Relations I President Head Please ahead sir. go

Andrew Smith

morning Good Jacqueline. you, Thank everyone.

which website. company's released third our and on assumptions include current represent quarter risks statements were belief control. events uncertainties Today's As therefore this regarding subject may call to may future results are the morning available which be Virtu's outside forward-looking our and and are

statements refer public condition may in available. information financial this information materially annual from It press in Our important forward-looking And as indicated report and the actual based in that presently to our on contained Form differ to what new is the you company. statements we other and these is disclaimers upon of results to XX-K call update We are filings. encourage made you statements. description our do and release review forward-looking revise available any not becomes to factors or risk to any and note forward-looking undertake

equivalent all clearing adjusted expense dividend as income and information and rebates When management and addition trading to In measures. income reconciliation superior the adjusted we these net be or in uses an GAAP fees. be should exchange EBITDA with well call certain and term a of refer supplemental net income Non-GAAP financial and GAAP considered all the trading of to adjusted prepared income refers on non-GAAP margin. deem adjusted earnings measures materials how income and trading this EBITDA net brokerage with of our measures used Joined to adjusted GAAP. we and including as to interest non-GAAP measures explanation meaningful as measures accordance to to results net as may not why to this in these

and take questions. Officer; Mr. our Financial Douglas Mr. with then today Officer. Chief Executive Cifu begin Speaking They our your Chief your are questions and will Alex and answering Ioffe remarks prepared

I'd like over the Doug. to turn call to

Douglas Cifu

also Today Good results very XXXX. you to Thank morning. Thank pleased you, joining our Andrew. third report I'm of financial us for quarter for the today.

of was markets the across quarter on on business segments market able punctuated Making the the third continued uncertainty second to reflect expectations. this our with similar and environment episodic to some periods capitalize on and growth the results backdrop service strategic across volatility Market our whole and both initiatives our our While Execution executing on sustainable global performed volatility quarter. Despite were both short the disciplined in our with our otherwise and focus and line achieving In segments. was

we've transaction today performance Xst In my strong quarter. in the in March the we the spite in closed short since on exciting made months I our eight the will highlight ITG the discuss and of remarks progress opportunity muted

at first overwhelmingly the feedback lies much the integration me we've Looking client distances and positive while come. importantly has enhancements, you about ahead runway been constructive. Most tell and let product

client base institutional we global-scaled sustainable receive our to constructive as platform global opportunities. offshore accelerate feedback to and from in and continue invest We our support our growth

for service like to as clients the a our concierge execution initiatives. These improving toolkit seemed Clients deliver on new our latent benefit dozen we discussed our the functioning migrated tell to income and our from we product enhancements recently EMS. to and to a Triton new our Triton and call platform. first analytics already re-platforming With over Triton bringing each completed of trades of previously months trading offering. platform alert are new in the Alert last a initiatives FX is multi-asset Triton our opportunities that on modules global latency FX capabilities and three the less have and block that discussed class well recently valor initiatives the include the re-platforming we crossing you since and better from enhancing fixed I'm as to platform like these true new last outsourced pleased announced and Triton our call. EMS begun

is days highly still early it is client Although feedback complementary.

incremental Our our announced are generate with sustainable of the to entry analytics organic deliver and our unique FX recently Concierge trading clients ways examples position fixed income Service our and modules value to leveraging great business Execution capabilities outsourced both into and find growth. and to our

provide strategy the structure including a with our of market to products network will issuers. technology but with to our Keeping details Virtu offerings launch discuss select efficient services solutions that I'll corporate announcing expertise of the Markets market and platform and the to the are further Capital idea at-the-market theme is and which transparent core capital in we consistent today deliver leveraging market. and distribution global moment buybacks

daily been impressive relatively results, business average X% income achieving. This is net specific environment. growth given our which on have our the focused is Execution quarter service our at Now increased challenging looking growth of the segment we adjusted prior trading versus turning the reflective to especially

clients wallet that noting compared services our Execution we our to testament segment and trends product business place is the the quarter equity to were strong considering and on Specifically the global global negative volumes service outperformance to flat the value provide. prior the a commission of

a includes business. and our analytics execution workflow As technology our reminder our segment Execution Services and brokerage

the products million of in those on we leveraging QX. $XX best-in-class legacy to from benefits identified As expertise have we to previous we're updates our million technology ITG some and and and seeing operational outlined $XX Virtu's of already opportunities quarterly enhance expand

our represents third a organization. second operations as and only Virtu quarter ITG you the combined full know quarter the As of

capturing automation made have Virtu. priority our for as and be revenue we continues well However to as businesses progress integrating a at leadership significant the opportunities. synergy position Building workflow our products identifying meaningful forefront and

services. across nexus of complete engine and Specifically the our Triton suite EMS class our at products multi-broker and multi-asset the is

existing more our have of integrate beginning launch Analytics highlighted analytics Triton to migrate We are into clients Valor. of our and new encouraged to are modules to their Fixed choosing FX have seen the products materials supplemental today's operations. with portal embraced In from the growth and daily how and we've we clients

As including capital offerings mentioned to to space services are Capital we and platform Virtue our trading the corporate Markets buybacks. money offerings select client unique and to the and capabilities products at a me expertise efficient way issuers solutions launching transparent and natural the for today the market structure excuse into technology provide Capital more extension briefly services same entry core to I've likewise was at outsourced In market. network broad global and the native of that our market base leverages Markets market our our to provide our Virtu position deliver distribution

useful tool any company a looking are in offerings capital. that for public is sector to raise a ATM equity

on focus efficient listings, provides initial to focus efficiencies for has ATM As a with an capital. cost ecosystem raising recent services as increased avenue seeking the An public the raise on offering public more other alternative the the marketplace and there equity efficiency been increased to function company offerings. by parts capital of the direct scale of of an existing at financial as witnessed

efficiencies the Virtu engage growing As are with with markets. applying in enable other a capital new expertise us and sector we initiatives to to

sell-side global to leader to us business have the structure. strengths Virtu's Virtu Jeff last will both execution new Joshua and through whom to side in in and Capital were X trading liquidity space platform led Feldman companies decades allow same As is Capital Virtu the the to technology providing public core ATM Markets Markets and offer those the and by attracted and the Lumby records distribution capabilities. of ATM extensive buy the over

down at of financial and were technology-driven for global major volume to of retail indicators or a mostly example volumes of perform market presented our opportunities of this global any Overall diversified OTC reduced mix short realized segment quarter this like to Looking great challenges volatility In making Making quarter up and lagged operations Market equity the Virtu's market-making. in environment. flat. engagement and how strength while indices was sustainability is a flat continues

by factors. largely conditions outperformed we these However enabled despite two

efforts our yield on efforts our helped has improve our have increase and to rates opportunities; First, us improve capture second reach opportunities. existing our to helped grow our global addressable our

by deployment of of of our ex-KCG and presence. from wins early ex-Getco growing integration success with making largely desk strategies trading technology Virtu quant continued our driven market continued and is options our and This ETF block

able are to experience to develop market-making We scale markets constantly with the uniquely knowledge strategies firm. opportunities where as across on our the working addressable to as true This existing increase products with are strategies business well markets. new we building and end global untraded briefly segment especially is our

of new to both derived and strategies results the and and that market-making Getco Knight quarter's brought technology markets strategies meaningful reflect This legacy and from Virtu using Knight. from combine best strategies new Getco legacy Virtu contribution

transaction are we strategies we mid-XXXX improving these estimate trading acquisition rate that Since through been merged Knight is have in of on synergies these $XX bid-ask with to and the Internalization we've as retain legacy it broker-dealer. this costs. legacy opportunities internalization. is rates a the creates broker-dealer essential the Revenue net run previously we the reduce that of to function income synergies exactly our capture our spread competitive the revenue adjusted the recently have making Knight approximately XXXX an call million. market To discussed working Virtu grow end and

how one much the was million up could only $XXX of to Not last $XX we million has interact merging last which just loan limiting approximately within us our we major used broker-dealers repay firm hurdles term allowed week. this to free our the of

how market quickly block call our we This and mobilize. Virtu desk. customer-facing ETF grow On our quarter's can organically options teams our demonstrates also efforts performance mentioned to making last

full year-to-date block results. above already for year XX% results ETF desk our Our XXXX XXXX

making a did dollars very we strong in all than earning market million more of third options quarter start of as Our well several XXXX. off in XXXX is the to

In today's presence. how made have grow market-making allowed the see can we've to us supplemental technological advancements you options our materials

have Our market-making clients some continues to observers zero of of and recent move the improvement valued in customer-facing keen by price to We customers. announcements essential for course U.S. been their our their clients equities. around unit liquidity commissions to of deliver

These together retail U.S. firms great retail market equities about and market the have transparency to for the partners cost reductions speak our brought making Virtu efficiency the investors. with volumes and other

we partnership have provide We investors U.S. partners. are and value to over retail the ecosystem in in role with XXX the we proud retail of this played

price all the could be quarter to have exchange never over $XX proud than be of good For we example investor. and investors Retail in end better should any the so on provided million ecosystem. Virtu third this in it obtained improvement had

proud made we've for to on progress and introduce date Alex like I future. I integration I am the CFO of very how very comment I'd Ioffe, and our optimistic Before to the enhancements am new

to together technology to strategic meaningful come teams have and services. leverage platform our deploying of progress and toward to make our global our suite Our across and clients scale new of veteran Virtuans initiatives products advancements our

our many at Interactive and Now Chief in from as to I Alex new Officer executive the look and already a you am previously veteran of know. a Financial Ioffe, his industry to senior XX-year leadership. who Alex introduce brokerage forward deep is benefiting serving electronic Brokers we pleased experience

over Now the call Alex. let turn Alex? to me

Alex Ioffe

here. good you, be Thank to Doug. It's Good morning everyone.

ITG for details quarter few comparison. financial this integration Our the and the this costs compared basis on The GAAP quarter onetime on was and loss relevant EPS of of first March $X.X of prior the the I $X.XX $X.XX. integration the per net transaction revenues of was Xst will prior and minutes. full quarter results the provide for ITG after loss $X.XX diluted We of items progress Normalized million quarter. $XXX a third adjusted share closed in noncash and acquisition to year in a million removing

consistency lines ITG net a part $XXX the of segment by was business was net quarter trading average our substantial That million trading subscription last X% components net trading Execution in XX% Adjusted the of trading was quarter. million improve income market-making than Services and income in income which our the net trading is which in to X.X% Within and expenses A the third increase the from rose recurring the results. the trading is day of gains XX%. adjusted our better daily income The quarter. that Services adjusted additional of which helps the $X.X acquired ITG. has Execution direct income trading addition came of driven third X from

capabilities Virtu analytics As underlying detail legacy and Triton in to described we to existing products products for enhancing put latency are adding capabilities ITG Doug multi-asset Alert leveraging for technology. the modernize the products. new by Improving features EMS

adding one set Virtue utilizing Concierge two desk; outsourced institutional trading to clients Markets. needs product capabilities we also with capabilities existing our Capital by: which Execution what our and fill call extending of We are new the Services is with

leverage offering and to goal streams. growing market customers the knowledge to Our our and agency complete is together institutional our to bring revenue technology recurring

in extended options we Switching of X.XX% approximately billion in over $X.X to transaction are of third The a favorable this $X.X debt XXXX. the additional This continues favorable of rate interest to to our closed our floating lower of expense evaluating quarter we to will rate notes XXXX. the refinanced the interest bankers October outstanding environment we XXXX to term was at rate and maturing and $XXX from fixed by the years interest year. be X.X% interest billion basis on optimization attention maturity of debt, points from X. per for debt end The reduce This XXX environment. reduced advantage for take five or rate million

end mentioned the $XX outstanding we debt. quarter As of the million prepaid third Doug of after

quarter However of million. $XXX notes. million. the of the $XXX we EBITDA net expense quarter for was months million. synergies with included Consequently third Adjusted Integration trailing third XX% accrued quarter to interest the Net $XX target X.Xx. was the EBITDA at the in $XXX we the interest third $XX ITG well. of million paydown refinancing Through was since is of stood million debt million. original million Debt proceeding or realized XX $XX $XX the

quarterly a original call XXX% the To total on million expect synergies million million fair $XXX $XXX last $XXX year, increase. to to of we raised realize the XX% For the from expense we in synergies be full target or target.

the on second of midpoint of total synergies achieve by end the are quarter We of XXXX. to track $XXX million or higher guidance better

for an of for Virtu working per we reasonable. integration of are is think on This quarter better run quarter. rate through $XXX operating rate put we As compared us and million would in expense or ITG premerger to the million $XX million combined savings million the a $XXX run $XXX

for would like point out run quarterly from KCG rate that as result acquisition. to expense a Virtu reduced already I $XXX the million of synergies the was

This reduced are be with for but the not the and do We and that periods. XXXX guidance XXXX range The savings. no the in reductions main projected for continue is the does were: the due the the for range. rate timing longer is future end of components expense two impact of timing timing within higher at to space mostly sub staff we leases needed which expense to run

paid Finally we declared December a customary $X.XX dividend for the quarter XX. which will on be

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

Operator

[Operator question Instructions] Rich from from Repetto Your first O'Neill. comes Sandler

Your line open. is

Rich Repetto

more question strong it the other. in global up you options on XX% And us FICC I little the could give go quarter-over-quarter. I and and guess on outperformance I my segment? a details was mean bit specific is that guess outperformance

Douglas Cifu

the periods volatility. quarter Rich. participating, there of episodic is Yes. in that during remarks my Thanks was for Yes a I One of things. couple mentioned

and spike in quarter East. the during thanks example a upheaval had the energy in for Middle we So to volatility some energy volumes

were there like so events And that.

front There options I business started the as fixed market significant mentioned well that traditionally remarks the to some ETF in in opportunity there's income. good has making our were organic well side in And opportunities the quarter. as On perform. on my like

that so that gets area. And classified in

in credit now on the in me participant excuse -- we've I mentioned become last are call a So we as XXXX.

on also seeing So on ETF fixed the opportunities but we're income both side. the credit side

really it's So those. of combination a

brief the If quarter at was I down. something XXX% for There think in was CME was I volume volatility like of look volatility. volatility prices. in time spike energy the in you saw And example CL that right? period it when story on up although kind virtue was WTI that's two-sided to and the provide September the you think there We're of and of capture really terms it

options growth trade to nice of also block geopolitical organic During in times of Rich. the our some our business and business event and well very stress as pickup. it continue serious I that stress resulted we would ETF P&L during But

Rich Repetto

do beginning follow-up do not to just positive that seems cuts commissions. versus effect the to have should want sort it the different the to I'm some zero October? but went payment in I X you're some I the like expected me it's very to trying my for feel thin And But pretty asking ebrokers topic flow price outlook. your of these remiss a I So improvement with for a have efforts you're of a did on And communications on increase know are then since the the excuse a know I And now. get try order in etc. seeing into what margins

Douglas Cifu

in I'll this your preached about we zero when institutional think retail in customer they're a you obviously efficient scaled Vinnie this speak seeing otherwise to I'm mean generally services we from if talk are mosaic here. and do toward never specific part business. I this But the scale. going whether is demand started the well. efficiency customers generally. to And that market is XXXX just I view would which around Virtu not we move very or of Yes. here's from music that as I what commissions and and and scale efficiency publicly. of I And going sheet say. seeing I to are a financial I or larger will still you same and are And do what we're

Virtu a of possible by to of and just Financial. is market the evolution made is this me good the so And services natural it

Two them as or market space. Sigma to what XXX in that makers give firms wholesalers or we credit our the refer Susquehanna to Citadel And great other

I is improvement. and provide it of lion mentioned and script I think we the So price this the but share what in

that to or improvement so offer the national period that some story. XXX business than of user are fully means So business to from we that price the There as best the of our are retail best retail to that brokers that every of We them end is disclosed. a back interaction part of better provide end do is actually will we retail we broker price with. in us do take Everything a that addition providing them. bid right with with that rebate or

transparent. fully size on Everything is customers that have orders sending the are based We of rebate. the us don't

market improvement. competing those making to provide on our aforementioned with are firms We ability based price

move this are that support and at incredibly So providing the I ecosystem competitors and our Virtu the works as for further well. this zero commissions you efficiency and look in toward will service if ecosystem this

me for basket. So it great that obviously provide But Rich sort business here. run a eggs in we really so belief back but in the buttresses We our lot of value of only many a there's there's business. only

eggs if so And in certainly should not creating be engage want at we're more the eggs that about our to discussion discussion. any how those to time. obviously But allocated customers open we're

And to of we is positive so the at the ecosystem. strong the ultimately bring day for think this bring the our a end and competitors I that value

script to amazing. could name in price investor is get or large-cap in and an think zero a that been created. for As that think benefits ecosystem. of dollar endorsement a or the role terminal I'm retail I brought very a than that proud in any all to that's on we've small-cap get or incredible ecosystem just our exchange you the medium-cap for is you handheld better said a have The I on can go that it in XXXX, a literally

Operator

Your comes Alex from Goldman Blostein from next Sachs. question

is line open. Your

Alex Blostein

important. pricing So or becoming that increasingly you last opportunity like players if brokers to Doug we scale can that change need Because whether small go not make and up it for But efficiencies point maybe the flow payment your building will the talk will incremental about debate could how happens if it M&A because And set? feel they feels there pressure. that other somewhere. more does -- be money do on

So of the M&A next of to a big do anticipate driver over landscape you as years evaluate you Virtu? kind couple the of be for how

Douglas Cifu

I public think And in I regard of in over are business now a Yes. marketable retail orders obviously of on we we're in I follow-up XXX providing public to our all XXX mean good with good market September up doing something saying was land points basis theme statistics. since right? as these particularly price first but Thank odd service said the just I'm XXX you, a to share the both with. and and all terms Alex. partners do XXX FD they're a right So that

we're to So that committed business.

institutions night it's privileged business because to their I you equities you which the business There's We aren't infrastructure theme here the seismic gotten streamlined. up a the that going of been we've Alex names it side and in more going not it scaled better to know large that but I'm inherit. the are shifts there's down a out think large great is is on larger business. pool commission right? either on name back in have equities the think these marketplace. rates a And made going And or long-standing see the we've going and so it's It's business institutional that

the small deal to broker all it. deals big are trying And with medium-sized

the truly that and we is most and Virtu going ITG provide this prices and of we've build was prices. provide a a acquisitions frankly those scaled is we theme those build but really we're what we to to truly have can an principle ability the started firm institution. since scaled as as theme We can a think the behind important provide that can stressing the I efficient been this Knight

RFQ And technology -- we Alert really like etcetera. scaled Triton products a excuse on can financial like analytics that Hub like top of provide droid-skilled me like

going to class asset don't They're right? be different. the going I do and forced prices be going can't to firms to to risks. scaled prices legacy something and take They're and are And that going so institutional think forced to be are to to survive to to costs forced principal have They're going combine. provide and aren't firms more aren't efficient survive

lot of those for a be to going we're firms. natural a landing so place And

into opportunity. was I we friend because brought firm and by One firm opportunities of find to that guy Rosenthal where help my were as to can inundated I needed smart being path navigate Marc us reasons the a the the

other I I so Virtu pre-trade is And analytics right? will to settlement pre-trade available of is is an being post-trade we can we have a have the now skill exchange in provide what think restate clearing something service and we We than said have continuum can technology that between provide before post-trade offering. we to everything and in provide address financial that analytics we

there extent that think it. are the M&A supplement geographically a something to that machine either or can we're happening here. firms to we they an organic develop of So at that look a or this sure right opportunities lot to around There's willing right? or add just product a is take But great not through

and the Virtue. Jeff great was a Markets saw I me. when me guys educated you've don't He's you ATM cash can this of got because own all business begin in brokers pioneer And want conflicted Capital and educated credit the machine as you your you Jeff a candidly Give the the issuers.". to Two firm the really an light things He have that was. a had bulb come initiative. smart fit this it I'm When guy you've because He's liquidity Jeff provide no "I to a the these said not world. our and world. to on He is we'd is to in idea guy our to not brilliant scale One tools you've Lumby in service what boom a smartest off guy. have business. you're thought went comes highlighted got it said natural the came with. research it natural a in -- your I today outsider. the was I said this your sense great you to for corporate firm. like got don't to

and that's we're all -- but strategically of meandered a I know how to middle So in the this I've Alex firm going wanted is to I the where grow. sense of give that positioned you kind

Alex Blostein

And of speaking my follow-up and guess cash. I

the the or might are XX meaningful at over of utilization next business call that How be kind does buybacks the do months? taking it contributor deleveraging etcetera? that have sort the course the impact to of announced XX expect impact the you plans there. So and Capital you place capital that today revenue Markets your sheet intensity balance of a of guys business And all these initiatives to and that

Douglas Cifu

the each are nice really we're That's Look about. talking they're the individually is these things In answer of businesses. right? what aggregate significant

showing rate can $XX our competitors a grown So has on this business. business size not share that meaningful this right? our have the I've But great be market business a supplemental today again of a materials I'm you said options in we're business. block ETF meaningful on opportunity I are going suggesting have in right? ATM synergies it Page the maker. X of it We're we're now to said the revenue XX%. lot double-digit market run we there's for million year a The

we here. folks Jeff talented are So but opportunity of have accoutrements right? time to subject matter and have we we a for all set. they couple and additive had -- sure they're right? bring things -- needed they into all this of firm here Jeff point a that done the key The all we infrastructure long Josh Josh had other have So expertise of are the the the did to these and that is because that not the

incremental no there's that investment needed. is So

you agent as will. acting side as if an a we're conduit On capital the

ATM that. obviously incremental for self-clearing really the broker-dealer distribution other no having We So already than there's capital a have business that capability. has full

that's on script on of of that the our about structure the all options even making talked on we've as the Concierge of part our Services we've ATM all of Execution things call broker-dealers. merged the broker-dealer as the business done announced -- So all ETF we within the which the the business

we've So efficiency capital even there. brought more

just So paid we last week. back $XX million We dividend. our announced

So for the to trying same at deleveraging time plan firm. our and dividend while we're maintaining grow on our the

Operator

comes from question Ken next Worthington JPMorgan. Your from

Your line is open.

Ken Worthington

mentioned the you merger of Maybe Virtu KCG along broker-dealers. those and lines first and the

of more expense the of then ITG Are paid the side other can that on come the You are with see merger capital or $XX from up million? be trading And debt. the integration? $XX broker-dealers What you this side that acquisition? expect considering for down efficiencies from the there to that the either you benefits other million any there freed are

Douglas Cifu

So you're correct.

broker We name large this clients are I into forgot broker-dealer. dealer Virtu migrating ITG the from whose

different all the know units and both of the broker-dealer we as large-scale that you will at as stuff So day one that States end have very acts in that ad agent a and with the well. United principal

bringing So today broker-dealer it's other $XX we're right? regard to... going in the we the are So efficiency. to With million

Alex Ioffe

right a altogether. freed broker-dealer. little in million absolutely $XXX million $XX keeping the It the Ken. You're over up other we're And

Douglas Cifu

for time -- see and of see it plays of to the how to kind yes being kind Yes just out.

changed larger you. needs to on a put Ken capital our So it haven't position there. here we right? dramatically explained We and The So business. if

broker-dealers requirements of And We're three about. perspective. with RBH trying audit there's that's We have need new internal much getting lot my changing for our and available flex We're where business make DNA separate having not terms where of But have dramatic and some just of firm or flexes with is we lines satisfy not in didn't need efficiencies. incremental separate a in right? to the funds to the as compliance capital create from those. what to a into just effectively sense two DNA

why that's all -- doing together. mushing we're so we're it And

was most at broker-dealers think the see of how these operationally is from internalization. and globally. don't thing that. legacy though people convergence important I that Virtu to The is going understand good at candidly important how You're that

can cost now be and night and that internalized rigor to everything and that. should We financial that it's the is It's order technology even ITG and the the the our friction that the on business that of doing to built technology basis the our marketplace the the and DNA just firm monumentally and or applying intention important. exposing financial not

net talk a the going and that of flow But we So reduce pay to which we're internalize if everything lot right of talk just we it gross trading line a of can that commission exchanges can always right? lot reduce about to back never we opportunities net exchange to we more creates we trading more because and we about and in make terms firm. brokerage brokers. P&L our for If

Ken Worthington

to hoping two hurt deeper helped or may under then a one pieces I revenue factors factors this or were there's of things some on things pressure lot the may capture is quarter. trading layer What are that that for the were I And quarter. have for And moving better two do be dig know net a some the net the quarter. both one worse. on was

that You positive one had to things negative two further OTC of the being step the Could of the maybe maybe or go lower. us things volume but volatility you being a understand and one or this impact mentioned had better a two the better help layer deeper of quarter?

Douglas Cifu

complex a this opportunities give bespoke the in a there some segmentation directly I'll mentioned already is there to when capture spike the we first providing by just which where rate we're answered business positives. say and to definition about That to volatility is going your And some to Tweet-related in And script China ETF liquidity the were Yes saw then would volatility. you some energy quarter big were enhance because be Ken is capture in always capture it's to particularly our globally volatility. I positives. a or talked Trump overall right? you counter-parties the -- Those block going Rich's question as rate positive rate. are I more

to by up. definition so you're go risk you're service rate and more capture a going to So going is providing your you're taking better

-- meaningful percentage goes would $XX and are not an volatility meaningful but volume $XX is really although it and off on that volatility that's U.S. change an a the a flat you change was have and volatility coming right? -- really I have equities you up those it's quarter when went realized say these to that the So pressures realized matter was a and as not And change quarter-by-quarter absolute a from the quarter. positives. that you basis is great you

give see to number you also as then per that numbers pressures because share there. you they but interactive for alluded the we end the issue to. continue you mentioned OTC is And number you look So brokers a that two

I think like in it was XX-ish the quarter. down percent

to types is when those opportunity the contract, just going see addressable So you of metrics.

against we positive I think we obviously that wash those there's negatives. so share are a growth performed enhancements continue the the And weight think directionally to we was quarter the And But and positives and better. in organic on.

Operator

Your Hill Rosenblatt. from next question comes Ken from

open. is line Your

Ken Hill

dividend. First question I the on guess is

still But the some the really quarter. dividend You attractive. yield is of takes to capital X% talked and X% during about gives

you that ever time? you reallocating the curious maybe and that the reconsider to get as attractive the tend there. to areas of that to areas revenue lot for credit dividend Just of far Just that stability enhancement ownership the as might add get of kind Do over other shares. repurchases? of guys really given structure curious help kind other your to a despite of growth Or kind via don't

Douglas Cifu

questions is would I'm it not strengths And the of We Capital mean probably your Yes. good we have obviously have and do sell you can me told shareholder would long verify I colleagues better since I've why dividend. I better we asking the people right? that don't have answer as a before will how I cut pay could No saying I to credit. that and I table impassioned a you with dividend to a that XXXX this it. to very could as it's That's continue lovely I'm anything we've these are -- large dividend question. this paid what themes We I my I'm add shareholders scales business can of to we our get here. do probably a job. well. it's return to built core public which am My cost the growth on now That's going and we've my incremental need Concierge Virtu. I is the investors that Markets Services. That's capital Execution the always initiatives. continuing with hammer that one of plant that started one this fixed exceptionally I and capital partners the that's do for job to about my because think firm add to answer

fund. We because hedge not have being our business. but our with wrong that's we're requires go we're of hedge DNA. a spectrum a not not risk out fund There's market-making a to which capital in that's nothing chosen Ultimately not firm the more

If of billions you you fund of need run want to a hedge dollars capital.

a of It's run dollars you tried If to the it's market I've make. capital. not capital. to you risk need most That's maker capital facilitation want always billion important that distinction

So rates It me. X.X% and the your yes I makes is get I what that you're a Fed's you answer have Ken? again any of growth all But income think from not to reducing the a out to return they forgotten. X% great second of question the buy a that doesn't sense make narrative should interest can been was There When weeds. lot I've there investors a it sense. stock Virtu. at I'm excited which answer your right to lost about the investors seems public apparently in Did question convincing because got I a part

Ken Hill

you as capital as far there. answered allocating and Yes, where strength you're dividend

The second on Concierge have question guess Service. is Execution I I

to broadly on care the an indications hoping just you folks? And get October You of you're share? in recently hearing that from to of anything environment kind I update more about what was launched just October. it interest

Douglas Cifu

fellow's mean a business of long years nice we've great. which that's great out XX we runs about. has there got I some inbound. with a Jack good And and We look to and been announcement it Yes subsequent release been was the -- inundated were was the term press press who question. over on here Yes ITG Polina

substantial theme trading of and desk scale. efficiency outsourcing concerns about our all profile of that it either to the a so that's signed portion that announced customer runs feeling the week the natural right? thinking we're or first have of because of We a firm the gamut entirety midsized is And cost of right the your last a customer. We right? small Again

If an at generating alpha great you're manager great product. of at? you're and what that you distribution hopefully are asset Well

larger to be as perhaps are the Virtu you. trading expert in i.e. part of subject less internationally. don't outsource You looking they need matter for a do well do to matter that what that And subject experts institutions

of book up I you do course want a a this solution. Let's for Asia I not don't Virtu can in XX% -- Kong of my Hong set that's trade to office.

So, We're completely great own and for connected into getting I the We all we again think that cost connectivity. algos to of been business our by ITG project We XX management obviously led non-conflicted. how years. and or perspective nets got know brokers. from Virtu got last trade right? to are we've commission effectively business zero that's incremental had a We was the a the

you a don't use algo. So to Virtu have

is theme. not this start about service to the our the don't the through globally. investment the it's individually execute right. to of provide to scal, can our our move unit effectively any technology that a whoever and that a giving service You services the using providing product. incremental Virtu dial opportunity possibly most can we isn't we on our you because going assets, zero. This and they're street think That's using you products the a jointly really per at or cost may you but that to have to banking pushing cost good Using provide about of collectively is dial And want sell at low-cost that research with competitive that you

Operator

comes question from Your Jefferies. from next Dan Fannon

open. is line Your

Dan Fannon

regulatory on kind was focus is data front. year the the exchange question of My market Virtu. kind a of Last of

of If focused XX, you about most you areas the I think on? about months, XX or can talk X guess the kind next X you're

Douglas Cifu

haven't I before the probably so the around Yes mean beating Yes to louder. shy But been drum I too one quietly I calls. a and good we're zero stand commission question. race think reform. on a think the is I drum this mentioned of -- little going offshoots bit -- a this generally of start guy I've beating and I'm We've little XXX the not been to

are Under the a was provide an is that when all right? kind what doesn't of really a best to will Rule a way challenging don't you can that in improvements think antiquated is know. for order. newcomer order flow a very make user at lot lot handle little XXX user each service sense. to as of say of way. share surprising. before of A makes segment not existed would I willing order which from was Amazon makes And mid-cap handled orders maker That's agree share right? retail I sense provide is to an sense. that that company there And the share same how even end stock created that two not looking more is before a XXXX the Amazon is you a we that Like, So industry terms guys same end Everybody this for XXX maker right? the a lot for market those. it I Those if bit a market was of to In a and of X,XXX price to right? flow different it's

be there. trying So a that create leader public we Virtu because we segment think terms I have with some with solution to flow. regulatory a to to way around of been there's quietly partners in more our sensible go And a and to is our working thoughts thought of want going

a an retail I is institutional to little price akin investor more a the that an important make to probably send way user think investor. and than that end that's an better improvement to industry ultimately to

think focus. I one of that's intense area

of terms and a been some that's are grind But halt. to other we've the access Obviously right maelstrom kind six I priorities XXX think bit the of for pilot because and around reform Market think animus there's did that's of I be the Connectivity of around a of to months. items Data at Same that our next little center there's we now. obviously XX ultimately that in the regulatory main going for fee with litigation right so on -- the such In going to Washington, reasons.

Alex Ioffe

commissions incentives for And that go forward. additional to with zero

Dan Fannon

next. are what expenses of expenses the environment pull as in levers trajectory we versus or think to of of kind of of reduce of moving for just kind the guess of of follow-up parts synergy be to to revenue the kind you constructive level lower that as about some forward regards about that baseline that on we kind then or particularly to And kind as this Alex mentioned year not I think of the with you XXXX continues have a expectation have? you that expenses. investment half might

Douglas Cifu

to levers biggest XXXX in consolidate we ITG of really in bank the and good toward in of expenses. very terms integration to the most should is be get reduction continues companies. continuing end Well synergies The the and have shape

Dan Fannon

this just think -- or guess associated in there of the duplicate year? like is timing I You that Or rent end just I should with anything that some Okay. is sublease is specific? sub anything stuff talked about we else? --

Douglas Cifu

Yes. I mean I enough. here I've think I been mean long

the long kid take I have I'm I'll sub estate. Joe blame to and were used some of our running with two offices. companies for these mean Because it. real it -- they REIT the sometimes a feels bought like So we former Molluso I CFO lot of very we a right?

anybody's lot in take our you a York floors. hard XXX have if we'd And of of here under rules And New They've vessel a had so sublet. to sublet. you been of the actually can't these GAAP be write-offs sublet building one the a happy until we interested some to space

things and what We then it need licenses partner is dance And so longer. Dan. of in some and And once terms of or and just marketplaces happens. here can data that a that's at issue for how my part look centers the is runoff technology take that get sometimes issue these in of the you been some of it from like

ultimately nuanced very will that slipped the timing it little it second slightly. scaled I point So of a this some of at was to firm XXXX in is finish backside come of has end let the out Alex's we than a a bit the -- them in which

Alex Ioffe

of It's in also of why straight first quickly. things Yes. is line And is that's the big about up Doug bit. you you as a lining the think your of acquisitions linear if a bit And is thing. have improvement set So the timing absolutely practically lull then -- little right? you're next not shifting a right. set comes a middle

Operator

from question comes Allen Your from next Point. Compass Chris

is Your line open.

Chris Allen

to improvement about we on kind path moving good you you level a have quarter some turning synergies a the forward. to challenging X those. leverage off revisit the the if XXXX of see to is know down you obviously Does could kind contemplate also needed environment? X.X the on the of rolling hand we're you tap of targets in kind in fourth trying very have of where that and if And environment at 'XX excess wanted realistic? get of from -- you wrong year-end I debt? let achieving you an Because But tell pay us obviously to maybe guys present. what cash that to to us still continued talked of direction benefits the into And

Douglas Cifu

EBITDA I when of to XXXX state December. a negative. quarter the was Look So I'm it's you're to you're into going still Obviously helps think doing multiple of And It obvious. nice a late like a realistic. to having quarter Yes. mid- all right? November kicked have is more gear nice in right the kind not That the fourth quarter.

We depending upon similar every could So here But free a opportunities. event don't actually free significant day who for oscillates and a it's obviously of have use we but a as well. have what we cash. knows amount. disclose It what's trading separately we lot

also broker-dealer We credit at our lines holding at have our and company.

June $XX May did in last paid $XXX acquired we we we already well million From in when or So the We've aggregate. capitalized. very firm week. and is million did just down million ITG $XX

$XXX So months million. we in eight paid down

something our was so like there eight And I that halfway Yes. or think in we're less or? target Yes months. than XXX-ish

So plan. according to executing we're

to which point that Chris roll make You the also off. these do is right synergies continue

our free just we that And base that more And of as lot is XXXX. as generating to goes is articulated expense back-ended flow. cash down so obviously is a

have. firm capitalized on out that there. opportunities paying well end any get not is an the So paying still or we're confident levers at very based there a we're the of I influx gods volatility get we're not sitting missing can we the to lot of its of here EBITDA. and And There's to we'll growth that don't reasonably day -- for the push trading what we dividend on

Alex Ioffe

take your on to able volatility emerges. of keep be to free we of reasonable point advantage hand when to Chris And amount it cash

Chris Allen

Increased and driving And that of I color processing in guess line. terms follow-up. just amount could ask and data what's to decent Understood. any then sequentially, because I to in down we're about us probably one thinking about well. XXXX, give the wanted fourth pretty XXXX see A just communications the the to Just kind that we moving a think the about how guidance? a of trying forward targets you move hit as big quarter hitting do

Alex Ioffe

question? Yes. Chris can please you repeat the

Chris Allen

was communication yes the technology I think sorry ahead. it question he And higher The was -- go lot than has I'm a -- thought. of and

Alex Ioffe

right. is That's part it of of expenses between some Yes. timing of it part is and rationalizing the And categories.

Chris Allen

just... terms Okay. we're Any about here? categories kind in of incremental what this color of Is talking

Douglas Cifu

things some put a were I they that wrong like right? communications just we I'm and more in think they that fit mean occupancy I we're that reclassification like reclassification we we ITG There here right? things that a when I'm thought did from correct that there if if -- in Alex had properly but was data and technology bought centers an

Alex Ioffe

right. That's was... There

Douglas Cifu

And that was meaningful.

Alex Ioffe

that communications data data we move processing. center occupancy $X.X of million, about and to For from

Douglas Cifu

obviously the was of it. Chris we a want say question It's different like I anything methodology incorrect was mean new expense my data of but same. just ITG Right. colo. market a and like or it wickedly how There's was focused I just not data tell center a ultimately It on was the we to or that classify number employed just that new you than some way don't different positions that. to ours. could are technology on some public thought

And dial here. the has so any important that takeaway. it's moved expense That's the not ongoing

Chris Allen

that think sense about adjusted line. OpEx to specific more makes guide just That versus total

Douglas Cifu

we Yes that. should about have been clear

clear. Yes the have Thank you clarification. we Sorry. been should for

Operator

Cyprys Morgan next Your question Stanley. from Michael from comes

Your line is open.

Michael Cyprys

just about was quarter dive could revenues more million. in market the in hoping a little $XXX.X equity bit we making the on I

and in as the during shaping sharply that's some up Just additional October? August terms progressed could see curious, set through quarter up in on provide around color Will July of if opportunity October? coming we cadence are that things of volatilities How market-making Just the for in September? the well? hoping how you

Douglas Cifu

volatility lot periods a it look a quarter it's my I like I the third -- question. mean think although good in as remarks said quarter. the felt of second there some Yes I the were

of the more as was it out rumblings few monthly that mentioned of think there a balanced September were East some distribution in although Middle I terms in the was significant. times I've

what the fourth of In quarter terms like. looks

you think fairly you point religiously guys to the volume first look track numbers I always here. I we can -- which

day rhino the I've it white pretty notional muted regular Europe a a but like November haven't numbers lot rhino rhino that October in and be was increases to little volume real be Europe date to a and at think seen seen It a you bit I you get to it's say now a material you my just see ever billion like point. not all. mixed. $XX continues any I'll nicely. It's a used

of we focus And we to So firm. chug day story I continues every more along -- scale. don't efficiency challenging be these challenging. firm and And there's in and why even market here terms a the But obviously that's the think look we marketplaces. bigger the the that's market on run in how continues to

Michael Cyprys

value Okay. stocks and derivative payments bonds And there at There's follow-up for a maybe proposal contracts. X.X% out regulatory a on been transaction on the on tax X.X% fee on of just a as theme.

how impacting Just ecosystem curious your you could see how base? Virtu's that on and that impact revenue would the latest on that thinking

Douglas Cifu

tried best not will be anybody. so to political I my do insult very Yes. to I hard not

for my financial class United States. at in not just that a the is middle his at the really staff of pensions along. really statement it. I Biden the tax they just because in that favor for the evidence mark middle But disaster ultimately fail are put which class. keep the really up I an their I pretty the of members a unions guess tax out pension they if in was why out to transaction ultimately President is effect. obviously market very along you the pensions of in Europe this actually pretty It's put a -- It when who Vice I pay this against. paying if would We've head would And particular place understood going schemes week in Sometimes would point think on the in a miserably. scratch markets makers would that violently XXXk. That's political. but be the tax and this ends a to on the that who they where that always FTT efficiency seen direct that exempted is go

is to this an markets a sense absolute disaster. It's and So what's issue. for right really for good a is of political a issue. America not not what's issue kind left the It's good this common and

have this did I evidence very to on moved other is liquidity Sweden seen empirical this in has Friday clear recovered. and never that think business just fleet the marketplaces. derivatives that a marketplaces have XXXX done to Sweden London Monday on the

And the trying to American to trying the are on of put not what's system political you you're on empirical pension middle issue then you're a a it. class me what and and to is parts tax this financial the If just it's show? accomplishing evidence again So accomplish? ruin

trying the financial market celebrate not you're then to job. in If a good greatest world the you're doing

can the on end you is by very of obviously idea. bad remarks I at a So my tell the it We're vocal that. day think catastrophically

out suggests make any Chamber globally lot the great And evidence just commerce a But this recently. guess that can a there sense. of here I very think the differ that reasonable U.S. this doesn't people put I issues. on I think empirical of -- study on

not they them. aisle sides when people the markets level-headed optimistic celebrating realize very be that our that capital destroy this on at I'm we both should of to trying look So will

Operator

Rich comes Your next Repetto from Sandler O'Neill. from question

open. Your line is

Rich Repetto

Yes. share Doug? One CBOE? question. orders the would market impact pass you market more it quick of trying from Is a know the taken see priority how Retail last Just I Or ebrokers. from makers the through? to have -- this limit

Douglas Cifu

trying -- noncustomer we Yes. and customer mean I business. have run to -- always we a mean whatnot. innovative and be responsive folks Look look I commend for I

retail We have customers. institutional

are there are marketplace. institutional think in on a the because lot of that about you're again this I folks public side unhappy a

unfair You're creating seems mechanism priority a to them. which

Richard good retail I a do been mean on very there. not servicing It's on orders do we there candidly our customers. being we impact avalanche job think I have no an business. early posted days impact but our has will of what and no

them I They're think closely don't we them. it's this I with of it -- candidly has a because trying initiative no the think impact I makes disagree credit. do Obviously be work give them And it good for CBOE give I Ultimately sense. problem lot what think on they're people trying doesn't with to solve day-to-day. to a exist. we that competitive. But very credit

Operator

back further at I over the this are questions There turn Cifu, to time. you. call Doug no Mr.

Douglas Cifu

very you thank you you great when February today. for with in participating a announce Have much everybody We to results. Jacqueline, Thank look and day. we again forward speaking year-end our

Operator

Thank today's concludes gentlemen, and participating. for conference call. Ladies you this

disconnect. may now You

Virtu Financial (VIRT) 5 Nov 192019 Q3 Earnings call transcript