Virtu Financial(VIRT) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2023, the company generated $4.7 million of adjusted net trading income per day, a 5% increase from the prior quarter, and a normalized adjusted EPS of $0.45 per share, up 22% from the prior quarter [7] - Adjusted net trading income totaled $298 million for Q3 2023, with Market Making adjusted net trading income at $208 million and Execution Services adjusted net trading income at $90 million [19] Business Line Data and Key Metrics Changes - The Market Making segment earned an average of $3.3 million per day of adjusted net trading income, rising 6% compared to the prior quarter, while Execution Services delivered $1.4 million per day, an increase of 4% [8] - Organic growth initiatives contributed $488,000 per day, accounting for 10% of adjusted net trading income in the quarter [9] Market Data and Key Metrics Changes - The overall market environment was characterized by reduced opportunity, but the company's market share in the wholesale Market Making business remained solidly within historic ranges [8][9] - Institutional activity remained slow due to a higher rate environment, impacting overall market opportunities [10] Company Strategy and Development Direction - The company remains focused on growth initiatives, including expansion into Options Market Making and enhancing spread capture rates [8][11] - The Options business has performed well despite a declining opportunity set, with continued expansion across venues and geographies [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities across all initiatives, despite challenges in the current market environment [11][12] - The company is well-positioned to capitalize on volatile markets and increasing global tensions [11] Other Important Information - The company is facing civil litigation from the SEC regarding historical internal information barriers, but management rejects the allegations and has not observed any impact on client engagement [13][14] - The company maintained a $0.96 annual dividend and repurchased 2.7 million shares for approximately $49 million in Q3 [17][18] Q&A Session Summary Question: Product expansion in ETF Block, Options Market Making, and crypto - Management discussed the significant interest in crypto ETFs and the potential for increased trading volumes as regulatory clarity improves [23][24] - The company has focused on expanding its ETF Block business in Europe and has made progress in pricing and distribution [26] Question: Update on rate side build-out and options environment - Management noted that index volumes were strong, but realized volatility declined, impacting opportunities [31] - The company is building connectivity and distribution for treasury products, supporting the SEC's proposal for centralized clearing [33] Question: Thoughts on expenses and future guidance - Management expects non-comp expenses to grow at a low-single digit rate, with compensation ratios remaining stable [36] Question: Leverage ratio and share repurchase ability - Management is comfortable with the current leverage ratio and plans to continue share repurchases as excess cash allows [38] Question: Evolution of index options marketplace - Management highlighted the growing use of index options as a flexible tool for managing volatility and expressed excitement about the product's development [42]