VIRT - NASDAQ

Hello. And welcome to the Virtu Financial 2022 Second Quarter Results Call. My name is Laura, and I will be operating your call today. There will be an opportunity for questions at the end of the presentation. [Operator Instructions] I will now hand you over to your host, Andrew Smith, Head of Investor Relations for Virtu Financial to begin. Andrew, please go ahead.

Thank you, Laura, and good morning, everyone. Thanks for joining us. Our second quarter results were released this morning and are available on our website. On this morning’s call, we have Mr. Douglas Cifu, our Chief Executive Officer; Ms. Cindy Lee, our Deputy CFO, speaking with you and they will begin with prepared remarks and 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-K and other public filings. During today’s call, in addition to GAAP measures -- in addition to GAAP results, we may refer to certain non-GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA and adjusted EBITDA margin. These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the Investor portion of our website where you will find supplemental information referred to on this call, as well as the reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful, as well as how management uses these measures. And with that, I’d like to turn the call over to Doug.

Good morning, and thank you, Andrew. This morning we reported our second quarter results. For the quarter ended June 30th, we generated $0.73 of adjusted EPS on $5.8 million per day of adjusted net trading income, bringing our results for the first half of 2022 to $2 per share and an average adjusted net trading income of $7 million per day. Our business performed well and exceeded our internal benchmarks. Both our global customer and non-customer Market Making, as well as our Execution Services franchises delivered solid results. Our firm is resilient and built to deliver what we consider excellent returns in all environments. We continue to see important success in our growth initiatives and on page five of the supplemental materials, you can see how these initiatives contributes meaningfully to our performance, again generating over $575,000 per day of ANTI, representing 10% of our adjusted net trading income in the quarter. Our options business, which we launched just a few years ago is thriving and will continue to grow along with our ETF block crypto Virtu Capital Markets and other initiatives. These initiatives are truly work again in that our adjusted net trading income from these revenue sources with [inaudible] owing a few years ago and we have achieved these results by leveraging our scaled infrastructure and distribution channels, supplemented with a handful of individual hires. In options Market Making, for example, we continue to improve our models, expand our simple universe and have begun to interact with options routers in a limited way. Our triple-digit growth year-to-date is especially impressive, given that option volumes are relatively flat for the same period. We continue to view our investments into options as a key long-term engine of growth, which complements our core capabilities and expands our addressable market by enabling new revenue opportunities that leverage our existing Market Making business across products, asset classes and regions. Our expansions into crypto also continues to progress, our ANTI from crypto Market Making set a record for Virtu in the second quarter, despite the market-wide downturn in crypto. Our crypto desk remains focused on Market Making at this point Serums and other top cryptocurrencies in various forms including spot, as well as ETF and futures. In addition, as has been reported, we have created a new venture with Citadel Securities, Fidelity and Charles Schwab to develop a crypto ecosystem to serve the interest of global investors. Along with investments from Sequoia and Paradigm, we believe that this initiative will ultimately fill the void for a stable and resilient ecosystem for investing in crypto across established global brokerage platforms. Our global ETF block initiative is also contributing meaningfully to our results. Year-to-date ANTI from ETF block has grown almost 20% versus full year of 2021 as we have expanded the symbols and markets that we cover, and continues to onboard new clients across around the world that demand our liquidity. Taken together, our growth initiatives are making tremendous progress and it helped to raise our baseline performance in any market environment throughout the cycle. We continue to return capital to our shareholders through our ongoing share repurchase. As of today, we have repurchased a total of 27.4 million shares or almost $800 million in aggregate at current -- and at current levels, we continue to be aggressive in repurchasing our shares every day with over $425 million of remaining capacity. At current levels of ANTI, we expect to repurchase this amount over the next 12 months to 18 months. Based on the guidance we have provided on page eight of our supplemental materials, we are on pace to exceed our targeted buybacks for the year, given the opportunistic refinancing we completed in the first quarter we would anticipate share repurchase that corresponds to the public buyback ranges for the foreseeable future. As I mentioned above, we have generated an average of $7 million per day in ANTI year-to-date through June 30, totaling $2 in EPS and $553 million in adjusted EBITDA, both are on target with the ranges provided. As we have said in the past, we believe the range of outcomes on this page are sustainable through the cycle. The levels on this page are the result of significant growth we have achieved to raise our baseline performance over the years organically and through acquisition. Consistent with our ethos of disciplined expense management, we have successfully held costs in line despite the worst inflation since the 1970s, producing a 58.6 EBITDA margin this quarter and 64.1% year-to-date. Touching on the performance of our segments, Market Making performed as expected for the volatility and mix of volumes in the period. Our diversified Market Making businesses performed well against their respective opportunities, especially within customer Market Making where we realized benefits of our improved internalization capabilities. Our Execution Services business also performed in line, with the market opportunity this quarter, realizing $104 million in adjusted net trading income. We are now three full years past the acquisition of ITG and we have overhauled and reflex platform to technology to have a suite, reduced cost from our equity and retained our broad deep blue chip client base. Virtu Execution Services has a complete complementary suite of products, encompassing every state in the normal life. Taken together, our suite of products reduced costs, enhance productivity and help us manage operational risks. Broader adoption of our product yields a better client experience, deepens our relationships and leads to higher client retention, all of which will ultimately help increase our share of wallet and grow our scale. We are confident that the truly global organization we have built is to poised to make it much easier for clients to integrate more of our products into their daily business and we see this as an exciting area of growth. Before I turn it over to Cindy for our financial review, let’s address the latest statements and press reports regarding potential changes to U.S. equity market structure being bandied about by the Chair of the SEC. There are three important points I’d like to make regarding the latest discussions and commentary around potential market structures. First, Virtu has previously publicly supported many of the ideas and shared Gensler’s June 8th speech at the Piper Sandler Conference. We agree that exchanges should be able to display in the quotes, unlike court should be included in the NBBO and disclosures and retail execution quality reports, Rule 605 are desperately in need of enhancement and modernization. Second, there is currently no formal proposal related to the ideas mentioned by the Chair in his speech. The rule making process that the SEC must follow can take years for the time any formal rule making process announced to adoption and the implementations it requires copious data, thorough economic analysis to evaluate impact to the U.S. capital markets, as well as adequate notice and comments period. This process is designed to ensure market structure reforms are driven by data and not politics. Importantly, over the last 20-plus years, the SEC has on several occasions examined the retail trading ecosystems, including payment order flow and wholesaling, and they favorably concluded that it provides material benefits to retail investors. The law is perfectly clear. The burden is entirely on Gensler to unequivocally demonstrate that his idea materially improved this ecosystem. This will prove to be an impossible task. As a result, we believe that the ideas suggested by the Chair will need to change significantly and be supported by sufficient data and economic analysis before they can be approved in order to withstand the likely challenges. Third, if somehow despite these impossibly high burdens of data on the Chair, the current SEC Chair ideas make it through as currently described, they would most significantly and negatively harm retail investors, retail brokers, institutional investors, and public companies and ETF providers. Because of our decades of experience as a provider of Market Making services to retail investors, Virtu would remain highly competitive and opportunistically provide liquidity to the so-called retail auction. The end result would likely save Virtu hundreds of billions of dollars in exchange and ETF cost and ironically SEC fees, and perhaps, multiples of these amounts in price and size improvement to our clients. The retail brokers and their customers, however, would be denied, the certainty of execution and services that the current providers compete to provide today with liquidity possibly widening and thinning, assuming as we have seen in other markets where competition has been impeded. The knock-on effect of these ideas will reduce liquidity and widen the spread in thinly traded mid and small cap securities. These small to mid-sized names would likely to see less liquidity, making it more costly for investors to trade these names and to the issuers to raise capital to fund growth. These market structure changes would be harmful long-term for the markets as they would introduce more friction in the form of greater intermediation and cost for investors. Cost that prior to the proliferation of zero commission trading had historically served as a barrier that limited younger and lower income investor’s access to the markets. As we and many others, including retail brokers and independent academics have publicly stated, there is a plethora of timely, relevant and compelling data that supports the fact that retail investors in the United States is free to choose among many great brokers that offer competitive access to largest capital markets in the world for a little to no cost. This contract -- these contracts will be obviously politically motivated, false narrative, misconceptions and factually unsupportable conclusions that are being pushed in disguise at so called reforms to the benefit of investors. For these and many other reasons, we continue to believe that the estimate if the SEC move forward with proposals along the lines of the Chair’s public statement. It will continue to be met with substantial industry-wide universal resistance including potentially in the form of litigation. An overwhelmingly amount to credible evidence from numerous diverse sources demonstrates that the current market structure and infrastructure enhanced with some of the sensible reforms which we support does an incredible job of serving retail investors. We will remain constructively engaged in the dialog and advocate for policies that enhance transparency, competition and that promote investor choice and superior execute -- execution quality. I will now turn the call over to Cindy Lee, our Deputy Chief Financial Officer, to review the financials in more detail. Cindy?

Thank you, Doug. In the second quarter, as presented on slide three on our supplemental materials, our adjusted net trading income, which represents our trading gains, net of direct trading expenses totaled $357 million or $5.8 million per day, which is 6% higher than Q2 2021 and 29% lower than the first quarter. Market Making adjusted net trading income was $254 million or $4.1 million per day, 11% higher than a year ago quarter and 34% lower than the first quarter. Execution Services adjusted net trading income was $104 million or $1.7 million per day, which is a 4% decrease year-over-year. Our adjusted EPS was $0.73 for the second quarter. For the second quarter, our overall compensation expense was $99 million or 5% less than Q1. Our cash and overall compensation ratios were 22% and 27% of adjusted net trading income, respectively, and were 19% and 23% year-to-date. Adjusted EBITDA was $209 million for Q2, 5% higher than the prior year quarter and 39% below the first quarter. Our adjusted EBITDA margin was 58.6% for the second quarter, which is down 9 points from the first quarter, but continues to be reflective of our efficient cost structure and disciplined expense management. Our capitalization remains adequate. Our long-term debt was $1.8 billion at quarter end, reflecting a debt-to-trailing EBITDA ratio of 1.7. Finance interest expense was $22 million for the second quarter of 2022, compared to $20 million in the prior year second quarter. We remain committed to our 20% quarterly dividend, which we have consistently paid over 26 quarters in every environment since our IPO. And our approximately $334 million share repurchase year-to-date demonstrates our continued commitment to return capital to our shareholders. I will now turn it back -- turn the call back over to the Operator for Q&A.

Thank you. [Operator Instructions] Our first question comes from Rich Repetto from Piper Sandler. Rich, please go ahead.

Yeah. Good morning, Doug, and Joe, and I guess, and Cindy. I guess, Doug, the first question is around the volatility that you experienced in the quarter. At least you look at from the published metrics that most people use, volatile was flat to up, but I get a feeling that wasn’t -- that doesn’t tell the whole story. So could you just talk about the trading environment, I guess, in 2Q?

Yes. Thank you. Very good question. I mean I think you do make the observation and the facts there that that this is a very unique quarter and the volatility we saw this quarter was much more concentrated than we have seen in the past. In fact, the mean volatility in the quarter was 34% as you see, which is from quarter-over-quarter, but the medium volatility from Q1 to Q2 was only up 2%. So that means that we had very sharp period of extreme volatility driven by macro events and so a few trading days, few opportunity to have outsized returns and risk, et cetera. And so really the way we look at it quarter-over-quarter volatility effectively was flat and there was one less trading day this quarter. So there’s always a little bit of nuance, if you look under the covers and I think that kind of explains the performance this quarter.

Understood. Thanks. And the one follow-up for his -- thanks for the powerful and detailed comments on regulation. So, I guess, the one question I have -- ask is about size improvement because I think you have made the point and I think it’s backed up by others in the industry that size improvement, it’s almost 2x the benefit of price improvement.

Yeah.

The question is do you see the SEC incorporating any of the benefits like size improvement into the analysis and how would size improvement go away given some of the -- if you got -- Chair guy would got his way with some of these proposals. But, again, we heard you -- your comments and we appreciate those as well in the prepared remarks?

Yeah. Look, I mean, thanks, Rich. I appreciate that. I mean, obviously, look, I am very front footed and very forceful on these issues, because I think somebody needs to be. I have deep respect for the Chair, his experiences, his background and what he’s accomplished. This is not a personal diatribe by any stretch of imagination. However, I will always defend what I think is right for this firm and more important for our clients. And I think the ecosystem has developed in this country, frankly, over the last 30 years really drives significant, and frankly, unfold benefit to retail investors, largest of which we have been very clear about and we provided a white paper is what we does size improvement and the current rules, 605 rules and 606, do a very, very poor job in capturing what that means. So what does that mean? It means that when an order comes to a wholesaler, be Virtu, Citadel, or one of the half dozen or so competitors and more are being added every day, we are obligated to fill that order and indeed we do fill that order regardless of the size of the inside at the National -- at any National Securities Exchange. Obviously, with respect to small and mid cap names that is meaningful liquidity. We have in our white paper in 2020, we estimate that the value of that was exceeded or price improvement exceeded over $2 billion in a selectively competitive marketplace, which is what Gensler was suggesting, i.e., he is, quote-unquote, retail option, the details of which he has not provided. There would just be selective competition. There would be no obligation on behalf of any wholesaler or indeed any market participant to provide that size improvement. So as a result, the order as it would if it were an institutional order without these obligations, we will just trade through the book. What does that mean? That means that the retail investor gets a substantially worse fill. That means that the issuers would offer spreads widen, which means that when that issuer goes to raise capital, it will pay more money. This is trading one-on-one. And so I don’t know that frankly what what’s in his brain and what’s in the brain of the Head of Trading and Markets and as they have thought about these issues. We have clearly made it -- made them aware of it. The burden of proof is 1000% on them to demonstrate that this is not the case. The Chief Economist of the SEC has an incredibly talented individual that will have look at this. My view and this firm’s view that there is no chance that she and they will be able to credibly can met all of the data and facts that are out there and the burden on them, right? Let’s be very clear. You can’t just wave a magic wand on the Chair of the SEC and change 30 years of market structure. And as markets get more volatile the service provided by the wholesaler and this size improvement is even more important. So we look at this and scratch our heads and say, where is this all coming from, who is the plaintiff, what was the genesis of this suggestion, and to me, it’s very obvious, it’s just a politically driven approach and we would strongly encourage the Chair to reflect on what he has suggested to sit with market participants and come up with sensible reforms. We are not suggesting that there are changes that need to be made. We have made our own proposal to the SEC. We haven’t heard back but we have made our own proposal to the SEC, but without any facts in that, without any background. In fact, as I said in my prepared remarks, you often misconstrue the facts, right, for political end. So we are here to engage, but we want all of our investors to know that the likelihood of this happening is to de minimis in our view and even if it did happen, Virtu would adapt to be fine. Most importantly, don’t forget, Rich, that -- and everybody listening, this is the firm that has thousands of institutional customers. We have spoken to our clients on the buy side. The vast, vast majority of them, major asset managers, look at these proposals, scratch their heads and say, this makes no sense to us either. We don’t want tiny ticket sizes. We don’t want quotes to fade. We have no problem with retail investors getting the ecosystem that they have. We know that we can and do interact with retail investors. So all of this narrative out there that he has put out in his various appearances on television or whatnot are frankly just not supported by the fact, not compelled by data and every market participant that we have spoken to that is in on Twitter with their followers, doesn’t agree with what he’s suggesting. So whatever comes out in the wash in a couple of years, we will look back in this episode and say, boy, that was a lot of conversation, unfortunately, a lot of wasted money and not a lot’s going to change here.

Understood. Thanks for the color, Doug. Thanks.

Yeah.

Thank you. Our next question comes from Dan Fannon from Jefferies. Dan, please go ahead.

Thanks. Good morning. I do want to go back to the earlier question, just with regard to the environment. Maybe you brought it for the first half, because if you are looking at the metrics that you gave us on slide four and then I just kind of look at the ANTI from the first quarter, the second quarter decline. It doesn’t really match up, so I understand there is some specific things within maybe 2Q that were different, but can you talk about like, levels of internalization or other areas that are impact -- that were impacted more significantly, maybe in your business in the second quarter, because as I said, these external factors still don’t look nearly as down as much as what we are seeing in your numbers?

Yeah. I appreciate it and I certainly superficially, I could see how you could say that. But if you look at the retail like on page four, if you look at the IBKR retail equity share volumes being down 17%, notional volumes being down 15%. And as I said 4Q, if you look at mean versus median volatility quarter-over-quarter, it was flat. So like on all of our internal metrics, we have performed and are exposed, we have beaten guidance here as well to the extent that that means anything. So the realized meaning Russell 2000 volatility was down 2% quarter-over-quarter. That’s significant, Dan. So I get it. You can look at realized volatility in a very superficial topline manner and say, okay, I don’t understand quarter-to-quarter results. But when you look under the covers and kind of, look at on page four there is a whole number of indices like, I am looking at sort of towards the bottom of the page that the European and Japanese realized volatility being down 25% to 21%. Goldman Sachs’ commodities realized volatility index is down 34%. I mean there’s a whole host of global indices in the various products and services that we provide that were either flat or materially down quarter-over-quarter. So this quarter looks a lot like the second quarter of 2021. I think we performed exceptionally well and based on all of our internal metrics, we outperformed, so.

Okay. Thanks. And just to clarify, I think the statement you made 12 months to 18 months, I think it was something that was the time period, I think, you said to exhaust the buyback and just want to make sure I heard that correctly and based on everything you are seeing in the environment, I think, you have given us some quarter date metrics, the buybacks remains the primary use of excess capital and still no thoughts around M&A or other things that might be increasing in terms of priority here?

Yeah. Absolutely. Dan, great question. Yeah. That is exactly what I said. We have $425 million remaining in our program. We would think that would be exhausted in the next 12 months to 18 months. We are in the market every day. We don’t try to time the market. Obviously, we use a great broker and attempt to get new app every day. And so based on the public guidance we have given you in the materials, yeah, we have made here under $7 million per day, we are right on target. We were opportunistic. There was a shareholder in our block that we were able to purchase in the first quarter from a significant investor and we will continue to look to do that. But 100% our focus is on capital return and so we have our dividend. That then we will continue the buyback program. The hurdle for any type of merger acquisition is significantly higher, because we think the shares as I have said publicly for years are significantly undervalued by the public markets and so we think it’s incredibly lucrative and the right thing and in our shareholders’ best interest for us to continue to buy back stock.

Thank you.

Thank you.

Our next question comes from Alex Kramm from UBS. Alex, please go ahead.

Yeah. Hey. Good morning, everyone. I noticed that you took the retail slide out that you had last quarter -- over the last two quarters. So just wondering if you can give us, I mean, I think, we can all track the same thing. But maybe from your perspective, what you have seen in retail in terms of participation, any changes in terms of the type of retail that you are getting or any other color it helps us, because it seems like retail, unless I heard you incorrectly, it was probably the biggest driver of the quarter-over-quarter decline?

No. I don’t think that’s the biggest driver. It certainly is a driver. We have a very large diversified business. I suppose we took the slide after it is just public data and we then people focus and they were exclusively a reseller, we are not. There’s significant demand. More than half of our revenue comes from not retail trading. But certainly, yes, that along with all the other metrics that I went through in response to Dan’s question earlier tends to drive results if you look at the Commodities Indices. If you look at what happened in Europe and you look at Japan, and look at other global indices and the fact that they were down quarter-over-quarter in terms of volumes and volatility that will end up driving results. We continue to be very, very bullish on the future of retail. If you just look at 2019 pre-zero commission trading involvement as compared to what is the retail engagement today, you will see that the amount of retail engagement is significantly increased, it’s almost 100% increase from the pre-zero commission, not for pandemic, pre-zero commission. Remember that happened in October of 2019 when our friends at Schwab worked at zero commission and then a bunch of competitors matched them and the new norm in the industry. So, that introduced to investing a whole new class of investors, young, previously under broken, under banked -- brokered and under bank’s individuals. So we think that is a systemic change. No one has ever shown me an evidence that it’s not. We are not putting that genie back in the bottle. We are not going to go to a marketplace where people are not -- don’t have access on a smartphone to the U.S. equities market and these are the markets. But again, we are a very large diversified Market Making business. I am very proud of what we do in retail, I am obviously going to be a spokesperson and we will continue to be spokespeople for the industry and for our clients. But we run a very large diversified business and I am happy to talk about the other segments as well.

Very good. Thank you and thanks for the status of retail validates the other businesses. That’s definitely helpful. And then just maybe this is more of numbers questions, but you obviously have that slide that gives the various scenarios in different ANTI environments. Just curious why if you look quarter-over-quarter, those I guess scenarios changed a bit. So, for whatever reason, the OpEx is higher in particular the low end, the EPS is lower, the EBITDA is lower. So just wondering what changed quarter-over-quarter in those scenarios and then maybe just a quick other data question. I saw share-based comp or stock-based comp increased quarter-over-quarter, just curious why that will be up in a lower revenue and earnings environment? Thank you.

Yeah. I will ask Cindy to answer the second question which is, I know there were some technical reason why we had a recognized some stock-based comp in the second quarter, right? Cindy? Please.

Yes. Yes, Dough. In the second quarter, we have to accrue a percentage of share-based comp piece of performance and these of the incentive comp. That’s why it increased compared to the previous quarter publication.

Yeah. I guess the answer to the first question, maybe we can follow-up offline, but there were some modest increases in OpEx. I mean nothing really material here, and candidly, nothing is jumping to my mind as to there is no individual item and maybe it’s up a couple of million bucks here there. But otherwise, given the -- as I said in my prepared remarks, given the environment we are all in -- inflationary environment we are all in, we are doing our best to kind of hold the line here. So maybe we can follow up offline, because I don’t -- nothing has really jumping out of me, Alex.

Yeah. Makes sense. And I know it’s just for illustrative purposes anyways. So thanks again.

Yeah. Yes. Thank you.

Our next question comes from Michael Cyprys from Morgan Stanley. Michael, please go ahead.

Hey. Good morning. Thanks for taking the question. I wanted to ask and talk about the options Market Making business, I know that’s a big focus and priority for you guys. So just curious how many single-name tickers are you guys making markets in today on the options Market Making side? And maybe just any color how that compares to a year ago and any thoughts on where you would like that to be looking out three years or so or some timeframe? And maybe you could talk little about some of the actions you are taking that would allow you to increase the number of upticks that you are making markets in today on the option side? Thank you.

Yeah. Yeah. Thank you. It’s a great question and you are right, it’s obviously a key growth area. I mean we hadn’t been at all really an options market maker three years ago, and certainly, two years ago, we were just getting started. So I am very, very proud of the folks in that group here in New York and in Singapore because we truly become more of a global firm. They will kill me if I give an exact data to we are going to start expanding symbology. The answer is, right now we are training dozens of individual names. We try to improve and increase that every day. As I mentioned in my prepared remarks, we are now interacting with routers, which is the first step towards having a more broad, what we call retail options Market Making business. We have learned an awful lot. We have improved our tools. As I said before, we re-engineered and re-architected all of our technology, frankly, to be competitive. And I can’t be really more pleased with the progress we have made both in cash, equity options, as well as what we are learned in the options Market Making to other regions as other asset classes as I said previously that we have launched index options Market Making in Asia. So I am not going to give a definitive date, and say, by the next quarter of next year, we are going to be full hog into the 605 options business, because that would frankly be irresponsible of me, because I frankly don’t know right now. It really depends on how we continue to grow, what the market opportunities look like, what our clients are asking us to do and how the market structure continues to evolve. The good news is that it is a meaningful growth area. If you have said to me two years ago that we were going to have near a nine-figure adjusted net trading income business in option. I might have questioned whether that was feasible. But that’s where are, we are full at and so I am very, very proud of what we have accomplished. Everybody can look at the marketplace and look at the volumes, and look at the competitors and say this is a very significant opportunity for the firm. I continue to be very, very bullish on it. We are going to work our tails off to accomplish it.

Great. Thank you. And just maybe a follow-up question on the fixed income. Maybe you could just a little bit of color on how meaningful that contributed in the quarter relative to the first quarter and maybe you could talk a little bit about some of the initiatives that you have going on on the fixed income side?. Thank you.

Yeah. Great question. It’s still very early in fixed income. I mean, where options rose a couple of years ago. So very, very nascent, good group. We have got some lateral hiring. We have established connectivity to electronic fixed income markets like market access, and obviously, Bloomberg and Tradeweb. Ad more importantly, we are onboarding clients and we have done our first portfolio trades for clients of corporate credit, which is again, instead, never thought I would say even as recently as a year ago. So I am very proud of the accomplishments we have made there. It’s a big asset class obviously. Historically it has been dominated by dealers who are a number of our competitors that are very meaningful in it. It is important to us because obviously the large asset class. But more importantly, it is part and parcel of what we offer as a global ETF market maker, in order to be in that business, we concluded that. We needed to have a corporate credit capability as well because obviously there’s a lot of fixed income ETF both here, Europe, and in Asia. And so we just needed to be in that marketplace and so it was done methodically and strategically. It is not at all the material part of what we do today, but I am optimistic that it will grow in the same with our options capability has grown.

Great. Thank you.

Thank you.

[Operator Instructions] Our next question comes from Paul Gulberg from Bloomberg Intelligence. Paul, please go ahead.

Yes. Good morning and thank you very much for the commentary. Quick questions on the crypto, which is kind of broader in terms than just Virtu and given the good joint venture with Citadel and other partners. Looking to see where you would look into differentiate from the entire EcoSpace, because everybody’s from both sides trying to get into the space. The crypto guys trying to get into the equities and options trading, and the traditional players are looking into crypto. So where is the differentiation we should look for?

Yeah. Look, it’s a great question. We are very, very excited about this venture. We have got some incredibly talented partners. We have partnered again with our main competitor, Citadel Securities that just shows you how when we need to collaborate on something we need to collaborate. Again this is client driven. So clients are come for us and said, we recognize that this is an asset class that’s not going away. I am not commenting on whether Bitcoin is going to be a 1,000 or 100,000, I don’t know, and frankly, I am either not really interested to be in that. But when clients come to us, and say, we have both retail and institutional interest in this asset class. We are not satisfied. We are not satisfied. I am speaking as if I am an investor. With the ecosystems that exist today. We trust you guys. You have done a great job for us in equities and in Citadel’s case, they have done a great job in options and then in other asset classes. We know that you will architect this the right way. We have got great potential partners that have a great relationship with Citadel, our partners and happen unbelievable understanding of the marketplace. So the goal of this venture is to create a reliable and stable ecosystem around crypto. That is client driven, whether that’s an indictment or a reflection of the competitors in the marketplace? I don’t really know and I don’t really care. I know clients come to us and say, we want you to do something. If you do it properly, we will trade on that venue, and therefore, you will be part of that as a partner in it. But more importantly, we will have more confidence in that ecosystem and so therefore we will send more client flows there and that’s a Market Making opportunity for Virtu Financial. So it’s a strategic initiative on our part. And your second question crypto players becoming stock trading venues. I support that. That’s exciting. It’s great. It brings more people into the marketplace. It’s a very crowded field. So I wish them luck. But more people trading is not only good thing we have relationships with FTX and Coinbase and everybody else. So, if they start trading cash equities and options, god bless them more power to them, bring more investors into the market in a sensible, safe and transparent manner. We are all in favor of that.

Okay. I appreciate it.

Thank you. Our next question comes from Alex Kramm from UBS. Alex, please go ahead.

Yeah. Hello, everyone. Again, I guess, it looks like a lot of people tied up. So I figured I coming for a follow-up, so a couple of them. well, first of all, you mentioned, Doug, three years of ITG integration, the Execution Services business doesn’t get a lot of attention from investors. I think a lot of people still think this is predominantly a U.S. equities business and I know it’s not. So maybe just quick reminder, where that business stands today, maybe in terms of the biggest buckets or it makes money? And then what the biggest opportunity sets are that you are kind of like going after right now?

Yeah. Yeah. A great question. I appreciate it very much. Right. You can take it overshadowed by the market maker and what’s you are against was up to and all that kind of stuff. Look, just to go back in time, we started a very small -- we call it [inaudible] offering. We bought Knight. They had a subscale largely U.S., largely hedge fund, single broker, high touch and low touch business. We looked at it and said, we can do this better. We can create a truly global integrated financial products business. We can do it by buying ITG which is a world-class firm that was desperately in need of a technology refresh. So we bought ITG. It was not without its challenges. Very similar to Knight capital in that, it was originally a market leader that has fallen on tough times. We have fully integrated it and reduced costs in a very, very meaningful way. And today we have in our view, the leading non-big bank if you will. We don’t have Prime, we don’t have calendar, we don’t have IT, we don’t have research, lovely folks like yourself. We are an execution-only shop that also provides other financial products. And our margins in that business, I would mention to say, not that anyone else is showing in their equity institutional, equity margins have to be industry-leading, because, they are Virtu like. So we have taken an enormous amount of costs. We have re-platformed all of the Knight and ITG algo offerings to a single algo offering. And so today, we have a full financial services offering, which provides both high and low touch execution. We are a top 10 broker in the United States and in Europe. Again, without prime and research, et cetera, which is just truly remarkable and we sell more products and services to existing clients that we have in Execution management service, we have an analytics business. So our Virtu Execution Services revenue the makeup is commission base is more than half of it, but not the best of product offering and then the workflow solutions, which tends to be more recurring revenue and more subscription base and there is a transaction element to it as well, makes up the rest of it. And the goal -- and the growth is to focus on those global clients that can use more than one of our products because what we have seen and this is kind of sales one-on-one is when a client uses more than one and up to six products, we get a lot more revenue per vision if you will or per client. Then we would -- they just used one product. So get on the desktop. Have them use try it, sell on analytics. Have them use commission management, right? Have them route to other brokers using our ITG net capabilities. And have them use our block trading capability through conditional orders on alert as well when they choose to use it as an execution broker gives them a truly global integrated product that is best in class in terms of Execution capabilities. That’s the model. It really is, I give the [inaudible] and the folks in Execution Services all the credit in the world, because we have changed the wheels on the car as it’s going down the highways at 90 miles an hour and that’s not without risks to clients and to just disrupting an existing ecosystem. But we have accomplished it exceedingly well and I am very, very happy with where we are at. I’d like to thank all of our clients as well for hanging in there with us that we basically said, tools that you are using from ITG, we are going to make them better trust us and they have -- and the results have been very, very promising.

Very good. Thanks for the update. And then, just lastly, you get on these calls, and it sound little bit like a broken record in a positive way I guess that the stock is undervalued and you think it’s the best investment, so not really interested in M&A right now. So I guess the question is, like, why do you think it still makes sense to be a public company, why do you need that currency? If you think the stock is still undervalued, a lot of your peers are obviously private, some of your peers have gotten investments, some real blue chip investors out there. So is that something that crosses your mind and does it eventually make sense if it doesn’t feel like the public market really gets the story that you are trying to tell us?

Yeah. It’s a great question. It’s kind of an obvious question. And we have for the record, no plans or intentions to go private obviously. I am a former M&A lawyer, so I understand all the nuances there and I certainly understand all the rules. So I am going to be very, very careful about what I say. Look, we are very, very happy and we have been a company, has given us an opportunity to raise an order amount of capital in my view, it’s still humbling the trust that debt and equity investment have provide to us. It enables us to do two game changing acquisitions of amazing businesses that frankly had a much better franchise than we could ever dream of having grown on our own and we did that with the public with the currency that we were able to have as a result of being a public company. Is it frustrating that public investors seem not to understand the growth story here. Of course, I have -- I started this firm with my partner Vincent Viola, so I think it’s the greatest firm in the world. We have continued to grow EPS from around $1 pre-acquisition to we made $2 in the first half of 2022 and it seems all that happened that we had multiple contraction of just kind of shuffling from when we went public we were trading at like 15 times or 16 times and now you can do the math as to where you guys have us. So we have raised the bar. We have consistently we have given you model that how we have accomplished that. We have maintained our expense base in ways that our competitors frankly have not. We have reduced headcount. We have returned capital to shareholders. So I continue to believe in the public markets, obviously, that’s kind of what we do. We think that eventually investors will get it. We think this quarter for example is a great example of where the environment was not compelling. There was no great macros that indeed some of the volatility was a bit of a challenge and we still produced $0.73 a share. I can do math multiply $0.73 times 4 and it doesn’t make any sense to me that the stock doesn’t trade at a meaningful -- at price meaningfully larger than where a trade that was trading yesterday. So, as a result, I look at that. I am not the smartest guy in the world and I say, okay, if I have an extra dollar, should I go try to buy a competitor and take all the risks and uncertainties of that or should I take a dollar and buyback my stock, which I think is horribly undervalued and it’s accretive. So I am going to continue to do the latter until proven otherwise.

All right. Thanks for your thoughts.

Thank you.

We currently have no further questions. So I will now hand it back to the management team for closing remark.

Thank you very much and thank you everybody very much for your interest in Virtu. We look forward to speaking with you in the fall. Have a great day.