Earnings call transcript: Virtu Financial Q2 2025 earnings beat estimates

Virtu Financial Inc. (VIRT) reported its earnings for the second quarter of 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $1.53, compared to the forecasted $1.40. This represents a 9.29% surprise. The company also reported actual revenue of $999.6 million, significantly exceeding the expected $517.93 million. According to InvestingPro analysis, Virtu currently appears undervalued, with a "GREAT" overall financial health score of 3.08 out of 4. Despite these positive results, Virtu’s stock price fell by 2.7% in pre-market trading.

Key Takeaways

• Virtu Financial’s Q2 2025 EPS of $1.53 beat the forecast by 9.29%.
• Revenue reached $999.6 million, nearly doubling expectations.
• Pre-market trading saw a 2.7% decline in stock price.
• Adjusted EBITDA margin hit a record 65%.
• CEO Doug Siegel announced his retirement, with CTO Aaron Simons set to succeed him.

Company Performance

Virtu Financial demonstrated strong performance in Q2 2025, with a significant increase in adjusted net trading income and EPS. The company reported a normalized adjusted EPS growth of 83% year-over-year, driven by robust trading activities and strategic initiatives. This performance reflects Virtu’s ability to capitalize on market volatility and expand its product offerings, particularly in digital assets and options market making.

Financial Highlights

• Revenue: $999.6 million, a substantial increase from the forecast of $517.93 million.
• Earnings per share: $1.53, up 83% year-over-year.
• Adjusted EBITDA margin: 65%, marking the highest level since 2002.
• Adjusted cash operating expenses: $198 million.
• Compensation ratio: 19% (cash), 23% (including stock).

Earnings vs. Forecast

Virtu Financial reported an EPS of $1.53, surpassing the forecasted $1.40, resulting in a 9.29% earnings surprise. Revenue also significantly exceeded expectations, reaching $999.6 million compared to the forecast of $517.93 million. This performance marks a notable improvement over previous quarters and underscores the company’s effective execution of growth strategies.

Market Reaction

Despite the positive earnings report, Virtu Financial’s stock experienced a 2.7% decline in pre-market trading, with the price dropping to $44.04. This movement contrasts with the company’s strong financial results and may reflect broader market trends or investor concerns about future growth prospects.

Outlook & Guidance

Virtu Financial provided guidance for the upcoming quarters, with an EPS forecast of $1.74 for Q3 and Q4 of 2025 and $2.04 for Q1 2026. The company anticipates continued revenue growth, with projections of $410.57 million for Q3 2025 and $414.3 million for Q4 2025. Key growth opportunities include digital assets, stablecoin adoption, and tokenization of equities.

Executive Commentary

CEO Doug Siegel emphasized the company’s commitment to innovation, stating, "We set out to revolutionize how markets operate through cutting-edge technology and relentless innovation." Co-President Joe Meluso highlighted the potential in crypto markets, calling it "an enormous opportunity." With Siegel’s retirement at year-end, Aaron Simons, the current CTO, will assume the role of CEO, ensuring continuity in Virtu’s strategic vision.

Risks and Challenges

• Regulatory developments in the crypto market could impact operations.
• Market volatility may affect trading income and margins.
• Competition in digital asset trading is intensifying.
• Potential macroeconomic pressures could influence investor sentiment.
• The transition in leadership may pose execution risks.

Q&A

During the earnings call, analysts inquired about Virtu’s strategies for stablecoin and tokenized equity trading, as well as the potential repeal of the order protection rule. The company also addressed opportunities in the overnight trading market and the potential launch of a hedge fund, highlighting its focus on expanding cross-asset execution services.

Full transcript - Virtu Financial Inc (VIRT) Q2 2025:

Elliot, Call Coordinator: everybody, and welcome to the Virtu Financial twenty twenty five Second Quarter Results. My name is Elliot, and I’ll be your coordinator for today. I’d now like to hand over to Andrew Smith, Head of Investor Relations. Please go ahead.

Doug Siegel, CEO, Virtu Financial: Andrew? Yes.

: Let me do Yep.

Doug Siegel, CEO, Virtu Financial: Andrew seems to be having technical

Cindy Lee, Chief Financial Officer, Virtu Financial: hear me?

Doug Siegel, CEO, Virtu Financial: Yeah. We can hear you now. Yeah. Go ahead.

Andrew Smith, Head of Investor Relations, Virtu Financial: Alright. Sorry about that. Thank you, Elliot. Good morning, everyone. Thank you for joining us.

Our second quarter twenty twenty five results were released this morning and are available on our website. With us today on this morning’s call, we have mister Douglas Sifu, our chief executive officer Mr. Joseph Meluso, our Co President and Co Chief Operating Officer and Ms. Cindy Lee, our Chief Financial Officer. We will begin with prepared remarks and then take your questions.

First, a few reminders. Today’s call may include forward looking statements, which represent Virtu’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 of risk factors contained in our annual report, Form 10 ks and other public filings.

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’ll find additional supplemental information referred to on this call as well as a reconciliation of non GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful as well as how management uses these measures. And with all that, I’d like to turn the call over to our CEO, Doug Siegel.

Doug Siegel, CEO, Virtu Financial: 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’s second quarter twenty twenty five performance and strategic initiatives. Following my remarks, Joe and Cindy will provide additional details on our results. We realized outstanding results across our businesses in the second quarter, fueled by market turmoil around tariffs, economic policy and general volatility.

We recorded $568,000,000 in adjusted net trading income, which is $9,200,000 per day and $1.53 in adjusted EPS, both numbers’ recent highs and are reflective of our ongoing investments, growth initiatives across the firm and the macro environment. Market Making contributed $451,000,000 and Execution Services contributed $116,000,000 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. It was our sixth straight quarter of increasing adjusted net trading income overall. Our growth initiatives were particularly strong this quarter, reaching an all time high of $1,300,000 per day or 15% of our total adjusted net trading income per day of 9,200,000.0 Our growing ETF block franchise and global digital asset debt 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 ETF desk.

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. 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 remained strong at or above the elevated post pandemic baseline, and our six zero five 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 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 U. Equity volumes were up 9% quarter to quarter. Our non customer making business continued to deliver growth and a strong performance against the growing dynamic opportunity in the quarter.

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 $116,000,000 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 $2,000,000 per day through the cycle, and we are well on our way to achieving this goal.

We recorded two straight quarters of around $1,900,000 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 BES comes from converting our products like Triton, our market leading EMS, into multi asset class products to 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 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 and technology. Since growing this business substantially by acquiring ITG, Virtu has solidified the revenue base, cut costs dramatically and made strategic hires to expand our addressable market across multiple dimensions. We continue to see strong tailwinds from 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 are encouraged by the emerging interest in overnight equity trading.

While still early, we are 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.

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 Stablecoin legislation and the pending Clarity Crypto Market Structure Act and innovations in tokenization are all positive developments for Virtu. Tokenization, in particular, creates new products that need liquidity and order routing playing directly to our 20 fourseven market making strengths. 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 eighteen 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 in 02/2008, 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. 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, Vinny 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. Aaron has been instrumental in building our 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 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, Joe Meluso. Joe?

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: Thank you, Doug. I’ll just underline a few points that you went through and add some additional color. Look, our adjusted EBITDA margin of 65% was the highest since the ’2. We achieved this margin by holding expenses in line as we’ve done over the long term. Adjusted cash operating expenses were $198,000,000 in the quarter, and our compensation ratio was 19%, including cash and 23%, including stock.

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. 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 into 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 over $2,000,000,000 of trading capital, which is buffered by significant additional liquidity sources. We bought back $66,000,000 of our shares in the quarter and year to date have bought back $135,000,000 And then since the inception of our share repurchase program, we’ve repurchased $1,400,000,000 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. And with that, I’m going to turn it over to Cindy to complete the prepared remarks.

Cindy Lee, Chief Financial Officer, Virtu Financial: 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 twenty twenty five adjusted net fitting income of $568,000,000 or $9,200,000 per day, a 50% increase from the $6,100,000 per day in Q2 twenty twenty four. Our normalized adjusted EPS of $1.53 for the second quarter twenty twenty five increased 83% compared to Q2 twenty twenty four.

Our adjusted EBITDA margin of 65% demonstrated our disciplined expense management approach and operational efficiency. In q two twenty twenty five, we’ve repurchased up 1,700,000.0 shares for the total of $66,000,000 Today, we have repurchased almost 54,000,000 shares at an average price of $26.35 per share for a total of $1,400,000,000 representing close to 20% of our fully diluted shares outstanding, net of issuance. Our balance sheet remains well positioned with a 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 dividend and share repurchase programs. Now I would like to turn the call over to the operator for the Q and A.

Elliot, Call Coordinator: Thank you. You. First question comes from Ken Worthington with JPMorgan. Your line is open. Please go ahead.

Ken Worthington, Analyst, JPMorgan: Hi, good morning. Thanks for taking the questions. Doug, congratulations on all you’ve built and accomplished. It’s

Doug Siegel, CEO, Virtu Financial: been

Ken Worthington, Analyst, JPMorgan: a pleasure working with you. Can you give us an introduction to Aaron, give us maybe some more color on his responsibilities and accomplishments at Virtu and what the transition from you to Aaron will look like, over the next six months or five months?

Doug Siegel, CEO, Virtu Financial: Sure. Sure. That’s a great question. Thank you very much for your kind words. So just some background on Aaron, which, you know, you can read his CV.

I mean, he’s, you know, a very intellectually powerful man. As I have always told people, he is, in my view, the smartest guy at Virtu. I first met Aaron in May 2008, maybe a month after we had started Virtu when he interviewed. I distinctly remember the interview because, I understood very little of what he was trying to describe to what 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 start up office, until he had agreed to work at Virtu, and, thankfully, he did.

And he began his career at Virtu in August 2008. And can you may remember the firm back then. It was, you know, 10 folks in a temporary office on Park Avenue. So 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 divert to from the beginning.

He’s always been, I will then modestly say, my friend and my mentee. 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 Virtu and somebody that I relied on for advice about the firm. And, you know, frankly, when I didn’t understand something, including my math, my kids’, you know, geometry homework, Aaron would do that for me, and for the firm. He’s well liked within the firm. About five or six years ago, and it really was triggered, by the growth of the firm and and the pandemic, and with the advice and and counsel of my board and many, 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 four horsemen, if you will, that really, began to guide and lead the firm. And and not that I was actively transitioned, but I definitely took a step back in the micromanaging day to day of a start up 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 Vinny and others. And Vinny, obviously, has known Aaron for years.

And so the transition really began in earnest five or six 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, you know, and clearly a generationally talented young man, when it comes to technology and building out large technology systems. He’s been great with our clients and great with significant investors that have come into the firm and 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, you know, the the culture and the business purpose of Virtu will not be changed.

Clearly, he’s got 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. So I’m extremely excited for him and for the firm, 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 gonna ask Joe to say a few words from his perspective about the transition and and whatnot. Jeff?

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: Sure. Well, thank you. Now look. Ken, you know, of course, Doug and I have worked together for many years, and we’re naturally you’re sorry to see him retire, but, you know, I’ve worked with Aaron. I know him for many years as well and and endorse completely his appointment as CEO.

And I know I know Brett and Steve, won’t speak for them, but but I know I think we’re all in in unison and in sync, with this development. And it’s the best thing for Virtu at this point, and, I very much look forward to the future.

Ken Worthington, Analyst, JPMorgan: Okay. Great. I’ll leave it there. Thank you so much.

Doug Siegel, CEO, Virtu Financial: Thank you.

Elliot, Call Coordinator: We now turn to Craig Siegenthaler with Bank of America. Your line is open. Please go ahead.

Craig Siegenthaler, Analyst, Bank of America: Thank you. Good morning, everyone, and hope you’re doing well. Doug, we wanted to wish you the best in your retirement. And, Aaron, we look forward to meeting you soon. 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 Virtu and the market makers?

Doug Siegel, CEO, Virtu Financial: Yeah. I mean, it’s it’s a great question. Obviously, you know, we’ve been in the public debate, and and we knew Atkins position from, frankly, 02/2005. He’s never been a fan of of rule six eleven. You know, I I think as a firm, you know, we’re we’re sort of agnostic.

I think where I think 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? So I think in Canada, it’s like two and a half 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 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, you know, we have we own an interest in the members exchange, which we think is a great exchange, and and, you know, we continue to wish them well, and and that’s a very significant investment for us. But we do think that that makes sense. From a market making perspective, 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 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. 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 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 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.

Craig Siegenthaler, Analyst, Bank of America: 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 business decision. The reason we’re asking is that Power is launching a hedge fund, and then 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 dilutive to your stock value valuation and also not require that much capital.

Doug Siegel, CEO, Virtu Financial: Yes. It’s a great question. I mean, we have, over the years, you know, 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, and you do mention that there are firms like Citadel that have managed them quite well.

And I guess they had the hedge fund before they had the market maker. And so it is certainly possible. You know, this firm has always prided itself in being, as risk averse, if you will, as possible and and capital light at 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 culturally, it might be 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 and younger and more vivacious. I I would imagine he will consider. Joe, any thoughts?

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: No. Hey, Craig. You know, we’ve looked at it as we’ve looked at everything. Right? We’ve looked at, 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 with a couple of thousand, like, real buy side clients, as well as 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 Siegenthaler, Analyst, Bank of America: Thank you, Joe.

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: Thank you. Thank you.

Elliot, Call Coordinator: We now turn to Alex Blostein with Goldman Sachs. Your line is open. Please go ahead.

Alex Blostein, Analyst, Goldman Sachs: Hi, good morning. Thanks. Doug, just to again echo everybody else’s comments, congrats. Definitely a bit of end of an era. We’ll miss your passion on these earnings calls, I’m sure the content will remain quite rich.

So it’s been great working with you. Question maybe strategically and I’m not sure if that’s better for next call when Aaron is on, but just thinking through the M and A opportunities for Virtu and 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 crypto, are there things that might be interesting that could accelerate you guys’ growth? Where does M and A stack up on your priority list right now?

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: Alex, it’s Joe. I’ll address that. It’s really you’ve got to look at cycles and how cycles develop. And I think there was a time period when if you look at the acquisitions we’ve done, we I think we’re very astute in our timing and effectively bought volatility, at low points. And, in in, you know, the instances of ITG and and and Knight Capital, they were different, but there was a common theme around technology, leverage, and, you know, timing.

In the past five years, you know, we look and our and our board expects us to look, and we look at every opportunity that’s out there, and we measure it against our internal opportunities and we measure it against buying back our own stock. Think so in the past five years, we’ve effectively bought made an acquisition. Right? We we made a $1,400,000,000 acquisition of of 20 ish percent of our own company at at $26 a share. And I think that was probably the most accretive and shareholder value creating allocation of capital that we could have deployed.

And what does that mean for the future? I think maybe there’s 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 beats buying back our own stock, and we’re open to it. We continue to look at everything. And I wouldn’t we won’t rule it out. We’ve never ruled it out, really.

It’s it’s but I but I I I get your point, and I think, you know, there may very well be opportunities in the future. But, you know, we’re gonna treat it the same way we did in 2017, 2019. And over the past five years. We’re going look at what’s the best return on our capital.

Alex Blostein, Analyst, Goldman Sachs: I got you. Thank you.

Elliot, Call Coordinator: Our next question comes from Patrick Molley with Piper Sandler. Your line is open. Please go ahead.

Patrick Molley, Analyst, Piper Sandler: Yes. Good morning. Thanks for taking the question. And, Doug, congrats on on your retirement and look forward to working with Aaron as well. 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 Virtu?

And then just in terms of the overall, you know, crypto opportunity, where do you think you are in your journey? Is there more you that you can be doing, are you just sort of watching the, ecosystem evolve and kind

Andrew Smith, Head of Investor Relations, Virtu Financial: of picking your spots there? Any color would be great. Thanks.

Doug Siegel, CEO, Virtu Financial: Yes. No. Thank you very much for the the kind words, and and and it’s a really good question. I mean, I I couldn’t be more excited, if you will, from the tailwinds within the digital asset space. I mean, I think stablecoins just provides for more adoption of digital assets and more need, frankly, for providers like Virtu 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’re super good at and where we’re providing a service, someone is gonna need to harmonize and handle the off ramp between fiat and stablecoin and stablecoin and fiat. And then there’s gonna be variants of that and no firm, you know, better than Virtu to handle that type of transaction. So I think there’s gonna 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 kinda 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’s a lot of interest in this asset class. Right now, it’s 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’s invest in a Virtu style business where we can be a value added participant between spot, ETF, future, perpetuals, you name the instrument, CFD, multi ask you know, multicurrency. Let’s be prepared to do that as a first step. And then as a second step, let’s do that twenty four hours a day, seven days a week.

And now as a third step, let’s be prepared to do that bilaterally in the same way that we do with our, you know, VEQ link product and our VFX product and our VFI product. I think we’re gonna call this VF crypto because we’re not great at that marketing. V crypto. It’s but it’ll be a 24 it is a 24 by seven global, you know, 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, one of the folks in the middle of this ecosystem.

We’ve made a strategic hire of a young man that will start on Monday to help facilitate and grow that business. We’ve got the relationships already. 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. Joe, any other color?

No.

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: I think that’s it. Okay. Thank you.

Patrick Molley, Analyst, Piper Sandler: Okay. That’s great. And then maybe just as a follow-up on the topic of tokenization. We we heard, you know, Robinhood earlier this month announced that they were gonna 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 gonna is it gonna make more sense in Europe? Do you think it makes sense in The US? How do you think about that kind of evolving from here?

Doug Siegel, CEO, Virtu Financial: Yes. 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. I mean, our great friends at Citadel sent a very, very thoughtful constructive letter to the SEC about, 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 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 skills, much like an ETF issuers. Tokenized stocks really are just wrappers, if you will, of existing underlying assets. 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 create redeem, if you will. And we can do that, as I said before, globally and and now 24 by seven. So if it engenders incremental interest in US assets and in US equity assets in particular, 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 Robinhood and Schwab and Fidelity and Weebull and ETRADE. And I don’t want to and everybody else that we consider good trustworthy counterparties and clients to address this addressable market. Mean, Vinny taught me a long time ago that marketplaces 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 exercise, if you will. So it’s a strong positive for the firm. Okay. Great. That’s it for me.

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: Thank you.

Elliot, Call Coordinator: We now turn to Chris Allen with Citi. Your line is open. Please go ahead.

Doug Siegel, CEO, Virtu Financial0: Yes. Morning, everyone. Doug, congrats on the retirement. It’s been fun run with you. Wanted to ask a little bit about execution services, up really nice year over year.

You can see strong trends there. I was kind of a little bit surprised we didn’t see better sequential growth just given the overall volume trends. Maybe give us some color just in terms of what’s going on underneath the underneath there and, what are the growth drivers moved? So

Doug Siegel, CEO, Virtu Financial: Yeah. Again, it’s, I mean, it’s a labor of love. I give all the credit in the world to, Steve Cavoli, who is a, you know, just a fabulous leader, person. You know, 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. And it was I mean, frankly, I I think, I underestimated how challenging that was gonna 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 car as it’s speeding down the highway at 60 miles an hour. So demanding revenue at the same time changing the underside, if you will, of what clients were interacting with. So I think we have built a first 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 calendar, balance sheet.

We don’t have prime. We don’t have research. Right? So we have to you know, the knife fight, if you will, of execution services, we have to be really, really acute. And so, 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, EMS product that global, asset managers are now looking at, for, you know, credit rates, 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, I won’t 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 going forward going forward. There obviously are behemoths in the market that you wanna sell. You wanna 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, virtuous way, if you will.

That liquidity, is really bespoke and can be measured and is a differentiator from other, frankly, just about any other offering out there. You know, we’ve seen that both the the impact, if you will, of 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. And clients have been extremely, extremely happy and responded to that.

Doug Siegel, CEO, Virtu Financial0: Thanks for that color. Just a quick follow-up. I mean, how are you thinking about the opportunity set or environment moving forward, obviously, coming out of somewhat of a unique second quarter?

Doug Siegel, CEO, Virtu Financial: Yes. I mean, I think, obviously, look, I mean, it’s all about like wallet market share, cross selling, creating new products, virtue 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, you know, 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 of the marketplace will give you. So you’re gonna have the ebbs and flows with, volumes in, you know, global volumes.

But the key is obviously to grow that wallet and then grow that market share. Joe, any other thoughts?

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: No. I I think, look. You know, Chris, the it it was it just from more macro standpoint, it was, obviously, an extraordinary environment, you know, with and and I think with the underpinnings of of some of it continuing are in place. But I you know, obviously, you know, the the activity around Liberation Day coming out of that, that time was was was fairly unique.

Doug Siegel, CEO, Virtu Financial0: Thanks.

Doug Siegel, CEO, Virtu Financial: Thank you.

Elliot, Call Coordinator: We now turn to Dan Sanon with Jefferies. Your line is open. Please go ahead.

Doug Siegel, CEO, Virtu Financial1: Thanks. Good morning. Yes, 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’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.

Doug Siegel, CEO, Virtu Financial: Yeah. It’s a great question. Thank you for the kind words. You know, I think it’s very early days. We were a pioneer.

I distinctly remember oh, gosh. Maybe it was 02/2018. I’m getting old, Dan. So I can’t remember exactly when. But when my friend Steve Quirk at then at TD Ameritrade said, we wanna trade twenty four hours, and we want you guys to do it for us.

And people in the firm kinda looked around, and we were like, okay. Because that’s what you do when you’re in the client business. And so we figured it out in a virtuian way. We were the first firm to provide that service. I know other firms do now, and we work with Blue Ocean and blah blah blah.

So 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, Lionel Richie. Right? Wasn’t that the Commodores? Was that Lionel?

But anyhow And so it’s it’s something that our clients, you know, think is very significant. Obviously, crypto ties into that because it’s a it’s a global asset class. Little bit futures. Right? You’re seeing the ES become more of a retail product, and that’s kind of twenty four hours, and maybe it becomes seven days a week.

So I think over the next, fill in the blank, you know, six, twelve, eighteen, thirty six months, you’re gonna continue to see market share and 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 to Aaron Simon, the 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 gonna be really hard for, investors ultimately to ignore it. Right now, I would say it’s probably 99%, retail driven, if you will, and individual trading driven. But I could see a moment in time, Dan, where there’s more liquidity that institutional investors, you know, come into the fray. Again, it’s the Virtu model.

Right? We are the as I used to say, we’re the Switzerland of liquidity provisioning, and this is where the world is going. We wanna 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 two years or it’s going to take longer, I don’t know.

But it’s a great incremental revenue opportunity for the firm.

Doug Siegel, CEO, Virtu Financial1: Got it. And then just as a follow-up, you know, Doug, as you as you take a step back, I was hoping to get a little perspective on what you think is if you look out a couple years, you know, let’s say, three years, what do you think of your organic growth initiatives will be the biggest contributor, you know, in three years’ time?

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: I’m gonna ask Joe

Doug Siegel, CEO, Virtu Financial: to answer that one. That’s

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: You know, it’s it’s hard to say. I would you look at the end markets that are that are in those. You know, obviously, crypto is an enormous opportunity. You know, our ETF block franchise has been, you know, having a stellar year so far. Options is a big opportunity as well.

So I think some of the things we just talked about on this call kind of overlay those, whether it’s tokenization or 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 sort of the scope of what we do expands. We just talked about overnight trading. That opens up international markets in a way that hadn’t existed before. So it’s hard to say.

I mean, you pushed me, I’d say crypto and options. But again, the ETF block franchise has been having a record year.

Doug Siegel, CEO, Virtu Financial1: Got it. Thank you.

Elliot, Call Coordinator: Our final question today comes from Michael Cyprys with Morgan Stanley. Your line is open. Please go ahead.

: Great. Thanks. Good morning. And Doug, congratulations on your retirement. I would like to 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 you see that evolving, and then understand retail is driving, 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 retail activity in the overnight session? Thanks.

Doug Siegel, CEO, Virtu Financial: Yes. Yes. It’s a great question. Thank you for the kind words. I mean, as I indicated, it’s 99.9% probably retail today.

I think there’s a couple of issues. One is, obviously, investors will trade in significantly more size, right? So it’s hard to go to a party and be the only person there. You need advanced partner. And obviously, we would provide the liquidity, but they don’t 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 it’s probably the second thing is you need more regularization. In other words, you need you know, 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. You know?

Like, there’s gonna be news I wanna put on a hedge. I wanna do this. I wanna 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 wanna hedge that risk and etcetera, etcetera. That used to be a call around market.

Maybe that becomes more of an electronic all to all marketplace. But I think it more broadly, it’s gonna be very difficult ultimately as the liquidity builds there for institutions to ignore it as an opportunity for them to you know, put a put risk on and and and take risk off. But as with building any marketplace, you know, 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’s how marketplaces grow. So it seems inevitable it’s gonna happen again as I said in answer to the prior question, whether that’s six, twelve, eighteen, or thirty six months, impossible to know. 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.

: Great. Thanks for that. And just as a follow-up question, I wanted to dig in a little further on the tokenized US equity trading for overseas clients that we’re seeing some firms already begin to announce and 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.

Doug Siegel, CEO, Virtu Financial: Yeah. Great question. I I think look. I mean, the most important thing is, like, you know, the firms that are doing it, the Robinhood, the Fidelity, the Schwab, etcetera, like, you know, they they care and, will obviously manage expectations and, frankly, best execution for their clients. So they’re still gonna route this flow tokenized or not to the market makers where they receive the best execution.

So you’re gonna have a competitive ecosystem where non US persons who want access to market 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 and, frankly, it’s an important product offering as, you know, our friends at Robinhood have been very, public about. I think, again, to echo what I said earlier, the the comments from Citadel around making sure that, you know, this isn’t a way to do an end run, if you will, around the very, you know, trued and tried principles of The US regulated ecosystem is very important. So, I look at it as an opportunity to expand the pie, to non US persons. I think it fits right into our wheelhouse of, you know, instrument a, instrument b.

We need someone to provide that liquidity, if you will, to switch, you know, to the switch market. We know the marketplace very well. We’re a trusted business partner of these firms. We have demonstrable and, 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 tailwind.

Great. Thank you.

Joe Meluso, Co President and Co Chief Operating Officer, Virtu Financial: Thank you.

Elliot, Call Coordinator: We have no further questions. So I’ll now hand back to the management team for any final remarks.

Doug Siegel, CEO, Virtu Financial: Well, thank you everybody very much for participating today and for the last ten years, in these calls. I greatly appreciate everybody, putting a lot of work and effort in 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, always to the firm that I duly love. And I am excited, 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 acutely.

And thank you, everybody, for your interest in Virtu, and have a wonderful day. Thank you.

Elliot, Call Coordinator: Ladies and gentlemen, today’s call has now concluded. We’d like to thank you for your participation. You may now disconnect your lines.

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