VIRT - NASDAQ

Ladies and gentlemen, thank you for standing by. Welcome to Virtu earnings call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Andrew Smith, Investor Relations. Please go ahead.

Thank you, Michelle, and good morning, everyone. Thank you for joining us. Our first quarter results were released this morning and are available on our website. With us today on this morning's call, we have Mr. Douglas Cifu, our Chief Executive Officer; Mr. Joseph Molluso, our Co-Financing and Co-Chief Operating Officer; and Mr. Sean Galvin, 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 being presently available to the company and we do not undertake to update or revise any forward-looking statements as new information be comfortable. We refer you to disclaimers in our press release and encourage you to review the description of Risk Factors contained in our annual reports, Form 10-K and other public filings. During today's call, in addition to GAAP measures, we may refer to certain non-GAAP measures, including adjusted net 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 in the earnings material 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 first quarter results. For the quarter ended March 31, Virtu earned $0.76 of adjusted EPS on $6 million per day of adjusted net trading income. We generated a 55% EBITDA margin and $203 million of EBITDA, both on an adjusted basis. We outperformed headline volume and volatility statistics in the quarter as a result of our organic growth initiatives as well as the solid performance in both our customer and noncustomer market making businesses. In particular, we had record performance in both our crypto and ETF market making operations, which I will discuss further in a moment. Overall, the environment was mixed compared to the prior quarter. Realized volatility was down about 10%, but volumes were elevated across global equities and commodities, while options volumes were flat and retail volumes were up modestly. Our core business generally performed well against this backdrop. Our customer market making operations saw a modest uptick in retail volume and an increase in the attractiveness of the flow we received offset by reduced volatility. Our market share of Rule 605 volumes remained within historical ranges, and we saw increases in executed shares and quoted spread values compared to the fourth quarter of 2023. Growth initiatives generated $1 million per day in adjusted net trading income, contributing 17% of our ANTI. I will highlight our performance in digital assets as well as ETF block, which were the standout performer this quarter. In crypto, as I just mentioned, we had a record quarter. The principal catalyst was the launch of 11 Spot Bitcoin ETFs in the United States, which were approved by the SEC on January 10. If you recall, for several years, we have discussed how our disciplined approach to counterparty risk management and commitment to capital efficiency has intentionally limited our presence in crypto. In fact, it was only a year ago when we announced that we had resumed limited market-making in crypto, which we had pause around the collapse of [indiscernible]. Since then, and until January, our crypto initiatives were focused on market making and top cryptocurrencies on a limited basis. The introduction of spot crypto ETF has transformed Virtu's role in the crypto ecosystem. The introduction of the ETF has played to Virtu's strength and enabled us to leverage our scale capabilities to service clients and the markets. In advance of the ETF launch, Virtu was approved as an ETF authorized participant, and we were there on day 1 of trading, making market and facilitating flows. After normalizing for the appreciation of Bitcoin this year, the flows into these securities have been meaningful over $14 billion of net new inflows into spot Bitcoin ETFs and the gross flows have been over $56 billion. Our ability to create tight prices in like instruments, in this case, the ETFs our [indiscernible] spot Bitcoin. Bitcoin is very similar to how we make markets in a plethora of equity and multi-asset class ETF products across the globe. We are very encouraged by the persistent opportunities in these products, which has continued into the second quarter. Further, we remain confident that the inherent underlying volatility of crypto as an asset class will drive sustained elevated opportunities in crypto ETFs and contributes to heightened levels of broader investor engagement and awareness across equities and options. The market is anticipating the launch of new crypto products across ETFs, options and futures, both in the U.S. and abroad, which will further expand the addressable market for Virtu. We look forward to more products coming online and for the market's continued evolution, bringing greater transparency in the efficiency that comes with centralized clearing and settlement. Turning now to ETF block. Our global ETF block initiatives also contributed meaningfully to our results and had one of its best quarters since 2020. While global ETF volumes were up across the board, our robust performance was further enabled by our efforts to broaden our distribution and our increased competitive capabilities in both equity ETFs and fixed income ETFs combined with the depth and breadth of our global client franchises. Finally, our options market making expansion continues at pace. Despite total OCC volumes up only 2% compared to the prior quarter and muted volatility, our performance was solid, improving quarter-over-quarter. Over the last year, our market share in index options has more than doubled, and our share of ETF options remain strong despite fluctuations in market volumes. We expect our options business to continue to grow as we incrementally expand our symbol universe and look forward to another record year, building on what we have achieved since beginning this business from scratch in 2019. To summarize our market-making performance, we believe that our established businesses executed well against our internal benchmarks, yet we remain focused on our efforts to improve our yield on every opportunity and to address more of the significant opportunities available in both new and existing markets, including the ones I just mentioned. We are very excited about the continued real progress in these areas, which we had no presence in only a few years ago. Execution Services was up 3% over the fourth quarter, delivering $93 million of anti or $1.53 million per day. While institutional activity remains muted, there were pockets of increased activity as clients adjusted their portfolios in light of evolving global monetary policy expectations. Our ongoing efforts globally and across the BES products have continued to bear fruit. We saw outsized trading volumes in Japan and in Asia overall this quarter as we invested resources in those regions and we reached a high watermark in EMEA equity market share, an uptick in adoption of our EMS Triton has led to further cross-selling opportunity in our brokerage and analytics businesses as well. We are nearing the end of a multiyear technological transformation to create a platform focused on providing clients seamless automation of their multi-asset workflows through the life cycle of a trade in all regions globally, making us a one-stop shop for all clients market activity. We believe these investments focused on technology and infrastructure are producing a uniquely valuable platform, which reduces many of the frictions traders encountered on a daily basis. Our client in search of efficiencies have asked for multi-asset class full life cycle capabilities. And because of our extensive technology replatform, we will be able to deliver new products quickly. In addition, we continue to enhance our existing flagship equity products. Our new algo of algos provides smart automation where based on current market conditions for a given stock, we help the client choose the best algorithm to execute its objective. Our new alert block crossing client interface streamlines client's ability to cross blocks of stock, saving time and money. Our data analytics platform, API provides clients more choices with pre-trade decision-making and post-trade review of those decisions. In addition to adding multi-asset class capabilities to existing products, we're expanding our potential client base by offering our products to new client segments through redistribution partnerships or what we call Virtu Technology Services, offering our technology via new additional strategic channels allows us to accelerate the distribution of our global multi-asset class offerings in a scalable manner to help us realize these important opportunities in BES, we have made a number of senior hires who are attracted to Virtu by our broad suite of cutting-edge projects. We are excited about the future of this business as ever. As always, our offerings are based on client demand and built around long-term partnerships. Overall, our businesses continue to grow and demonstrated an impressive yield this quarter in a market environment that was mixed in terms of the opportunity, of course the opportunity set afforded by the market. Finally, you will note in our press release that effective August 1, Cindy Lee, a long time Virtuian, will become the Chief Financial Officer of Virtu succeeding my friend, Sean Galvin in that position. Cindy joined Virtu in 2011, and she will be an extraordinary CFO, given her knowledge of Virtu and has been instrumental in our success over the years. I am very happy and pleased to report that Sean is remaining with Virtu in a senior capacity. Sean's contributions to Virtu and Knight KCG over his 22 years here have been very meaningful, and we expect to continue to benefit from Sean's professionalism and experience. Thank you, Sean and Cindy. Now I'll turn the call over to Joe Molluso.

Good morning. I'll speak a bit about our growth levers from our new initiatives as well as our buyback program. At March 31, total trading capital on Slide 9 in the supplement was $1.7 billion. Our scaled business is not limited by our capital base, as evidenced by the impressive results generated in the first quarter without the need for material incremental trading capital. Our capital base remains more than adequate to support our ongoing and growing businesses. In Q1, we used a portion of our free cash flow to repurchase 2 million shares at an average price of $18.31 per share. To date, we have repurchased 45.9 million shares at an average price of $25.10 per share. Quarter end share count was 163 million shares outstanding, bringing our buybacks on target to fit the range as we have set forth publicly. Since we initiated our share repurchase program we have repurchased over 17% of the fully diluted shares of Virtu, net after new issuances. Consistent with our continued commitment to returning capital to shareholders, our Board of Directors has authorized an additional $500 million in share repurchases. We are often asked about future nonorganic growth opportunities, including acquisitions. The answer to this is that we evaluate any opportunity presented versus the relative attractiveness of buying back our shares and investing in our businesses, including our growth initiatives. So it is a high bar in our opinion. You can see the demonstrated earnings leverage in our business from both capital management and our growth initiatives. While we understand our business is volatile, we believe Slides 6 and 7 illustrate our long-term earnings power as a result of both organic growth initiatives and the cumulative impact of share repurchases. On the expense side, adjusted cash operating expenses were $164 million in the first quarter. Our quarterly cash OpEx for the last 5 quarters has remained essentially flat despite the external environment of the past few years, which has placed significant pressure on costs. Our cash compensation ratio was 23%, and our total compensation ratio was 27% for the quarter compared to 26% and 32%, respectively, for the full year 2023. We expect cash operating expenses to remain within the recent historical range and will provide more clarity on compensation ratios as the year unfolds, although we also expect the ratio to remain within historical norms. If you look at the 5-year period from 2019 ending in 2023, our total cash operating expenses grew only 3.4% on a compound annual basis, which we consider a strong performance. Going forward, we will assume this type of low single-digit overall increases in non-compensation expenses. Now I'll turn it over to our CFO, Sean.

Thank you, Joe. Good morning, everyone. On Slide 3 of our supplemental materials, we provided a summary of our quarterly performance. For the first quarter of 2024, our adjusted net trading income or anti which represents our trading gains, net of direct trading expenses, totaled $367 million or $6 million per day. Market Making adjusted net trading income was $274 million or $4.5 million per day. Execution Services adjusted net trading income was $93 million or $1.5 million per day. Our first quarter 2024 normalized adjusted EPS was $0.76. Adjusted EBITDA was $203 million for the first quarter of 2024, and our adjusted EBITDA margin was 55%. On Slide 11, we provide a summary of our operating expense results. For the first quarter of 2024, we recorded $180 million of adjusted operating expenses. We continue to maintain an efficient cost structure and disciplined expense management just helped us to control our operating expenses during the inflationary environment. Financing interest expense was $23 million for the first quarter of 2024. With the benefit of the interest rate swap contracts that we introduced it in prior years, our blended interest rate was around 7.6% for our long-term debt in aggregate. We remain committed to our $0.24 per share quarterly dividend and combined with our share repurchase program, this demonstrates our commitment to return capital to our shareholders. Now I would like to return the call over to our operator for the Q&A.

[Operator Instructions] The first question comes from Patrick Moley with Piper Sandler.

So I was hoping we could just dig a little deeper into the impact crypto Market Making had in the quarter. Doug, is there any chance you could quantify like what the overall contribution was to anti judging by the organic growth initiatives? And it seems like maybe it was a couple of hundred thousand dollars a day. So any color you can give us there would be great. And then second, could you speak to just kind of the distribution of revenues you're seeing in that business? Is it fairly steady day-to-day? Or are there any outlier days where you're seeing the bulk of the revenues?

Yes. Thank you. Good question. Yes, I think you are in the

Okay. Great. And then just as a follow-up, as we think about that few hundred thousand of ANTI a day, can you help us understand like what amount of that is coming from trading in the ETFs versus the money that you're making trading the Spot Bitcoin and kind of like selling that back to the ETF issuers?

Yes. I mean it's all -- we look at it as all one big integrated pot. I mean, obviously, the strategies that we run market making in the ETFs work in concert with what we do in the futures in the Spot market. And it's like what we do in gold. We look at GLD, we look at Spot gold. We look at gold futures on -- and all of those strategies are sort of integrated, Patrick. So I'm not trying to be a punk and not answer your question, but it certainly -- it's a universe, if you will, of products that all integrate and work together. And frankly, we don't break it down in that regard. And so as I said in the answer to your first part of your question, as that universe continues to grow and expand, we're very confident that we'll be at the middle of it. And the market maker will continue to provide competitive prices, whether it's in an ETF, a Spot or a future. And frankly, whether it's cross-border, I mean you can throw currency on top of that, right? There's going to be products that will be -- you'll have a yen-denominated Bitcoin ETF at some point that people will be interested into, and that's right in our wheelhouse.

The next question comes from Kenneth Worthington with JPMorgan Securities.

Maybe first for Joe. In terms of capital management, you purchased, I think, $36 million of stock this quarter. That was lower than the level of repurchases we've seen over the last year. And if you look at 1Q '23, you spent roughly double on buybacks last year despite 1Q '24 having a lower stock price and a lower average stock price. Any reasons for the more modest buybacks this quarter? Was it just sort of truing up relative to ANTI or something else philosophical?

No, it's nothing philosophical. We have these ranges that we posted that at different levels of net trading income. This is what you should expect in terms of the ranges. The amount of kind of free cash flow we have doesn't necessarily line up precisely with those ranges every quarter. So there's ebbs and flows. When we embarked on our share repurchase program, we made a decision that we're just going to use the proceeds and apply them to the stock price as it is. And I think looking back over 3-plus years that we've done this, I think we're satisfied with where it came out. And you should expect fully that we would -- we're going to be within those ranges that we published. And the first quarter is even if you just annualize it, it's right there in the range that we've -- that we posted for 6 a day. So I wouldn't read anything into that.

Cool. And then just a follow-up on the Bitcoin ETFs. Bitcoin ETFs have moved from strong inflows in 1Q '24 to closer to breakeven so far in 2Q '24. If flat Bitcoin ETF flows were to persist, does that impact the revenue opportunity for you in Bitcoin or crypto broadly?

It's a good question. I think we really more look at kind of like gross flows as opposed to net because that means there's a portfolio reallocations and opportunities, Ken. I mean, certainly, look, I mean when the Spot Bitcoin ETFs were approved, as I said earlier, that was massive and you follow and I track your metrics that you put out every day, there were massive rejiggering from the closed-end fund to the handful of the ETFs. And certainly, that was episodic and that's not going to happen again. But there has been a consistent nice pattern. And again, I think the best analogy is really looking at like another commodities market and the most analogous one would be gold. And so in that marketplace every day, there are people that are getting in and out of ETF positions and getting it in and out Spot or reallocating from a different asset class. So if you look at digital assets and Bitcoin specifically, as just a slice of a pie that wealth managers are now looking at in institutions that are looking at as an investable asset over some time period. That's the thing that is compelling. It's no longer in my view, a novelty asset that people are sort of trading and has like this somewhat nefarious tinge to it. It is now an investable asset that is on a meaningful number of platforms and is certainly being advocated for lack of a better word, or allocated by gatekeepers. And so that means that there's going to be volume. You'll have spikes when [indiscernible] is approved and when options come on and when the U.K. and Hong Kong and blah, blah, blah but the theme here is that you now have a large investable asset class, there'll be volatility opportunities. And the underlying asset class for better or worse, has a certain amount of volatility to it. And the other interesting thing is it's a 24/7 market in the form of spot. So I think there's a lot of attributes to it that are compelling from a market-making standpoint and provide a lot of opportunity for a firm like ours that is scaled, global, and can manage the intricacies, if you will, from the various forms that Bitcoin and these other points will take, be it spot, ETF or future.

The next question comes from Chris Allen with Citi.

Nice quarter and again, a nice one by the Panthers last night. Maybe just on block ETFs. You noticed a greater contribution than crypto this quarter. Can you help us think about how that business breaks down between equities and FICC? What the drivers have been? I think you talked about efforts to broaden distribution. Maybe give us some color on that front. Because that, to me, seems like a more sustainable business from a longer term relative to maybe a crypto where we are seeing a little bit lower flows in the near term. So any color there would be great.

Yes. Great. I mean I think I mean just from a metric standpoint, what we saw in the quarter was roughly double what we saw in 2021 in terms of ANTI performance. So that's a significant result. In terms of like what the breakdown is, what we have ascertained and what we've built over the last couple of years is you have to kind of be in everything, Chris, and you have to be global. And so certainly, we're very proficient obviously, in equities. That's kind of the entomology, if you will, of the firm. And so that's very good. But there -- you have to be competitive in fixed income and commodity products. And certainly, there's more margin and there's more risk and there's more challenges associated with being in fixed income and indeed in crypto as we've indicated. So the fact that we are a full-service firm that provides 2-sided prices in all of those products. The fact that we now have a global offering with a credible desk in Europe for the first time is important. The fact that we have the same thing in Asia is important. We're not nearly as scale to some of our competitors. We don't have dozens and dozens of salespeople on the street. We don't have 20 years of relationships in Europe, but we do have, thanks to the ITG and the old legacy Knight franchises. We do have a significant amount of customer relationships. We are obviously leveraging the old ITG infrastructure in terms of customer relationships in Europe and in Asia, in particular, which has been incredibly helpful. So we do have a built-in sales force. And we do have great partners in Bloomberg and MarketAxess and others that provide RFQ capability so that we can be competitive. And just about every counterparty will enable Virtu and give us a shot, because we have a pretty good brand name in terms of customer service and whatnot. So if you add up A plus B plus C, we have a scaled credible global offering that allow us to be competitive. Certainly, in the quarter, there was more portfolio shifting and the people were moving out from fixed income to hear some people wanting to get 2-way prices in large block. Bitcoin ETFs. So there were definitely some episodic transitions, if you will, that were very helpful to the results. But that's kind of what the business is for. And hopefully, you get a couple or 3 of those or 10 of those a quarter, and that repeats itself. So again, it's one of these businesses and our growth initiatives where we have spent a lot of time, a lot of money and a lot of resources to build the technological infrastructure to be responsive. We understand the products very well. We're a fully integrated firm, so we're able to provide tight prices because the ETF desk is not an island unto itself. It's working with the entire firm. We're internalizing the flows that we get with the noncustomer market making depths around the firm. There's one P&L in this firm. So we're very, very efficient in doing that. And we made a conscious decision 3 or 4 years ago to dip our toes and now we've got both feet in the fixed income waters, which gives us -- we've got true scale and global capabilities. And then as I said, we've made significant investments and hires in Europe and in Asia to give us a global presence. So we're a long ways away from being one of the larger name players like Flow Traders or Citadel some of these other firms that have much larger infrastructure, and they're great firms and they're great competitors. We think we -- there's a value that we can add. We think we have attractive 2-way prices. We think we have operational excellence. And most importantly, thanks to the legacy ITG and the Knight businesses, we have a very, very credible brand name and a very credible global network of clients that will do business with us. So all of those [indiscernible] lead to our ability to have a truly scaled global block business in a Virtu style, which means our headcount is going to be a fraction of what the competitors are going to be. Our capital base is going to be smaller than some of our competitors. We're going to take less fresh than some of our competitors. But at the end of the day, there is a role for us in that marketplace, and I'm very, very happy with the results we had this quarter. And indeed, I've been very happy with the results we've had over the last 3 years. The quarter in particular was a standout ones for that group.

Appreciate all the color there. And just a follow-up on that business. Is there a good indicator for us to look at here? Is it ETF flows from a fixed equity perspective, ETF trading activity? Or is it because of the block nature is it something that will just have to attempt to kind of triangulate off of different things?

Yes. I mean obviously, overall ETF volumes are a good thing to look at globally. I mean it is a little bit lumpy, right? Because within that, you'll see there'll be huge blocks that come through periodically. And obviously, there's risk associated with those, but there's more reward associated with those. So certainly, we have clients that are sending in smaller clips and that will be done through the RFQ. If it's a larger block of a transition of an RIA. We may be putting competition with 2 or 3 other market makers and we try to price that as tightly as we possibly can. A lot of folks will do that once a year, sometimes they'll do that 4 times a year. And the key is to provide really good customer service so that you're in the wheel and you could be competitive. I mean no one is coming to us because where Virtu and they happen to think we're good guys they're coming to us because we provide really, really good tight pricing with immediacy if need be and good customer service. And not only that, we can provide because of our analytics business, a real pre- and post-trade analysis so that they can satisfy themselves in their own best execution committees that they've done the right thing by their investors in terms of allocating assets from asset class A to asset class B, both expressed as ETFs, if that makes sense.

Our next question comes from Craig Siegenthaler with Bank of America.

So it's hard for me to congratulate you on the Panthers win last night because I'm sadly a Flyers fan.

Well, we all have our crosses to bear.

Well, back to business here. We're hoping you could spend a little more time on the effective spreads. So you could see this developing in the 605 data in Jan and Feb. I was hoping you could walk us through the underlying factors that drove this, especially with realized volatility lower?

Yes. It's actually -- it's a great question because for years, people have looked at realized volatility overall at Virtu and the strong appropriate correlations between what our P&L should and shouldn't be. And I think we're still true. And so as I said in my prepared remarks, I'm very pleased with the overall performance, particularly in [ VPMM ], given the fact -- excuse me, that we had a mixed environment in volumes slightly up and realized volatility materially down. I mean it's -- as a side note, it is surprising to me, and I'm not an expert in this to look at the VIX and say, okay, well, we've got some global conflicts going on in Central Bank scratching ahead trying to figure out. We got inflation and we got a presidential election on the horizon, and the VIX is still at well, 13, 14, 15 and hasn't really shut off, but that's neither here nor there. I think with regard to our [ VPMM ] business, we have always tried to indicate, and I do think that some of the information, as you indicated in the 605 reports, are important and that you have to look at that, and we certainly look at that internally here at Virtu as sort of a sub business, if you will, within our customer market making business because we are dependent, if you will, one on the flows that we get from our retail clients, and there's hundreds of them. So certainly, retail volumes are important because if you're not getting the widgets, you can't make money on each of the widgets. And then secondly, within that, what's the spread at time of arrival, if you will, within the orders that we received. Some of that, Craig, is the best explanation I give you, some of that is the mix of the flows that we get. I mean, if you're getting higher priced names as opposed to some of these smaller penny names, if you will, or low price names that trade an awful lot. You're going to have a greater opportunity. So some of it is mix of business. And some of it, frankly, is the environment where, again, retail is a slight misnomer because a lot of it is also high net worth and RIA flow that comes through the pipe. So it's not just day traders, if you will. And we sort that by each of our clients. I mean some of the flows will be more high net worth RIA type of flows. And there, similar to the answer I gave Chris around the ETF block desk, you have clients that are doing their own portfolio rebalancing or they're coming off the sideline from fixed income and they're deciding they want to lie a bunch of Tesla and Amazon and a bunch of technology, whatever it may be, and that flow will tend to be a little less correlated to the market and maybe we'll present a better opportunity to Virtu. So more engagement and more allocation into equities. And the mix of the business is probably the best explanation I can give you as to why we spread at time of arrival, as measured by our 605 reports, was significantly higher in the first quarter as compared to the fourth quarter. Obviously, that does help drive results. And that's offset, I guess, as I indicated earlier, by the significant decrease quarter-over-quarter in realized volatility. I hope that give you some explanation. And again, at the panthers, we're always open to new fans. So you are welcome.

After our 18 losing streak at the end of the season, I might have to switch. But Doug, one follow-up here. So how are spreads trending in March or April, just given we haven't seen the 605 data yet for those 2 months. And in April, volatility has actually spiked up.

Yes. I'm always hesitant to like every time I do this, then one of you guys jumps on it. I would say that they've been consistent. I mean our March report is due out on May 1. I think, Andrew, is that about right? Yes. So you'll see it on May 1. And it is consistent with what we saw in January and February. So again, I'm not smart enough to give you all of the macro reasons I've given you the best explanation that I can in terms of what we're seeing. Obviously, it's a positive for the customer Market Making business. We've seen ebbs and flows over the last -- since we bought Knight in 2017 in terms of that. And so we try not to get too high and not too low, because every time that the spread numbers come in, we know that they're going to revert back. And so these are -- we just do our best to try to monetize the flow that comes to us.

The next question comes from Dan Fannon with Jefferies.

I was hoping to get an update on options market making where you are in terms of number of single names as well as kind of index. Trying to get a sense of what percentage of the market you are interacting with at this point?

Yes, it's a great question. And I guess I get it every quarter. So as I should. We continue to chug along. We have expanded the single names that we are trading if there are -- again, -- we are not directly taking flow from clients, and that is a strategic decision that we have made. I'm not saying that we won't at some point, but that -- there's 1,000 names if you would need to be active in. And today, not every day, but we are up and capable of quoting in 10% to 20% of the overall universe. And so we pick and choose our Spots, obviously, when there is excitement, Dan, around a particular name like Tesla earnings or this and that, and that's the name that will always be up and active in. We will be market making there. We had a really good quarter in options. We have launched and are profitable in India already, which is exciting. I mean it's a small business and it's growing. I want to get into them the options because there's been a lot of news around that. And that does not involve Virtu, that's not our style. But certainly, we think that there's a significant opportunity there in Japan where we're up and running. So again, I'm very pleased with the progress. Our market share in the index family has continued to grow and is meaningful. And we have -- we're active on all of the 17 or 18 options venues that are out there. And we're focused on capturing the significant opportunity that like at our feet and in our wheelhouse. And if you look at like the mix of business, again, I don't want to pat ourselves on the back, if I told you so, but a lot of the -- I would say there's been a shift more towards these index products as opposed to the single names. So I think there's plenty of opportunity there. There's plenty of opportunity overseas, and we will continue to grow. I'm not saying we're not going to ultimately take direct flow. We are competitive there. We do take some of it through other -- through other means. There's other ATF. There's routers that send us retail flow, you can be competitive in the options. And so we're in the business. We're just not fully scaled and competing with Citadel and Susquehanna get in that business. But we will at some point.

Understood. And then -- just thinking about the regulatory calendar over the next couple of months, can you help us know what you're focused on in terms of rulings, kind of where your processes that are kind of working down that you're still waiting to hear back from as we think about, I don't know, not the full year, but maybe in the more shorter time period?

Yes. Great question. I was really trying to get through an earnings call without disparage and Gary Gensler, and I guess you're not going to let me. I'm joking, but not really. As you have seen, there has been a -- I think we're up to 10 or 12 litigations now against the SEC by business groups, industry participants, everything from the proxy adviser rule to the climate rule, which they have stayed. It's really become -- I don't say comical, I would say actually kind of sad, if you will, that there's been such a lack of engagement with American participants, if you will, and the SEC has just gone full steam ahead with a lot of these rules. And frankly, they're going to just continue to rack up losses based on the briefs and some of the analysis that I have read. In terms of the proposals that more directly impact Virtu, the climate thing impacts us because we're a public company. And I don't think that's really even worth talking back of that. I think that will see the light of the day because it was so broad in overreaching and the economic analysis was so future in that, I think the court will reject it. But in terms of the proposals that impact Virtu the rule was adopted and that's favorable, it's something that we had advocated for. I think the other 3 proposals I hear will come out of the SEC at some point this year. I think there's going to be significant changes to the auction proposal. I think that will -- I think there's been an avalanche of comments from just anybody who's credible in the industry that says, this is just silly and not workable, and it's solution chasing a problem that doesn't exist. So if that even sees the light of the day, I think it will be very different than the proposal that came out and it will have no real impact on Virtu or the marketplace at all. I think the best execution rule will come out. It will be vague overreaching, and we will not have a significant economic analysis underlying it. So there'll be litigation that somebody will bring in one of the nice fifth or 8 circuits and the SEC will lose that one as well because the economic analysis will again not satisfy the standard in the Administrative Procedures Act. And then finally, the Reg NMS in terms of like what they're going to do with your ability to quote at midpoint or some smaller increments that's kind of a TBD. If it's not too overreaching and kind of makes sense, I think the industry will say, okay, we're happy to allow this one to come through without litigation. Maybe the exchanges will sue on that because I think it's not it doesn't allow them to be as competitive. I don't know. I mean that one we'll see. But I think you'll see final rule late beyond all this stuff in the next 3 to 6 months. And obviously, November 4 or 5, there's an election. If there's a change of administration, traditionally, the Chairman would resign. And so I think our long national nightmare will be over, and we can get back to doing business. That was a general quote by the way, for everybody who's interested yes...

Our next question comes from Michael Cyprys with Morgan Stanley.

I wanted to come back to Options Market Making. Doug, I think you mentioned that you're quoting in 10% to 20% of the universe today. Just curious what takes you to 50% or higher over time and what that time frame could look like?

Yes, it's a great question. Again, it's balancing the opportunities, Michael. And I think if you had asked me this question 3 years ago, I might have given you a different answer. I think I don't know which one of you guys put that all this great data. But in terms of -- and someone has done a really good analysis of like opportunities. I mean there's been like a seismic shift towards an SPX line and like the broader index families in terms of volumes. So we kind of -- we go where the opportunities are. The guys in the desk are obviously very keenly aware kind of where they should focus their energies. And so I'm really letting them lead as opposed to me saying, from on top of, we need to be in 122 symbols by X because that would be foolish. Really, all I care about is the bottom line, how much money we're making, and we're doing very well there. So it's really the index family. And then obviously, as I've said, we've pushed internationally in Asia because I think that's the next significant growth area in terms of prioritization. That's not to say that there aren't a significant number of individual names and that will vary day by day, week by week where there is activity, whether it's earnings, whether it's just -- it's the flavor of the month or whether it's this or that. And we're very capable of pouncing on those opportunities and being too sided in those names. So whether it's a name that happens to be in the news or whether it's a name that has earnings or whether it's like a large cap tech company that has significant options activities in it, we'll go with those opportunities. And so there's a benefit to that, which is to say when you're not in a customer relationship with retail brokers where you have to take all the various names you can move and route. And you can kind of say, "All right, I'm going to focus my energy on XY

Okay. Great. And just a follow-up question. I wanted to circle back on Slide 7 where you show your pro forma EPS viewpoint of $3.50 to $4 a share. Just curious what how you're thinking about the time frame to hit that any sort of steps you may need to take in order to get there? And then what sort of market backdrop do you need to be in, in order to kind of get within that range and grow from there?

Yes, Michael, it's Joe. I mean I'd make 2 points. One is that in some respects, we've already achieved this in that we look at this is taking all the growth initiatives away from a 5-year look back on ITG, KCG and Virtu together and what's kind of an average through the cycle earnings base because the feedback we've gotten from you all and shareholders that what is -- what do you think it is? So we looked at the data, stripped out the growth initiatives and came up with the number. And then when you look at those 2 slides together, Slide 6 and 7, at each level of net trading income, we generate significant buyback each year. And I think part of the -- when we originally put this information together, the point we were trying to make was, look, we're emerging from multiple acquisitions and long-term integrations. And our cost base kind of fluctuating and our debt levels fluctuating. And now that we're in a steady state, how do you look at our company over a multiyear period. I think direct answer to your question is we build most of this analysis around a 3-year timeframe. But 3 to 5 years is fair. And I think it's both corporate finance and it's real growth, right? So the corporate finance is look at that net trading income per day chart on Slide 6. And I would venture that in the next 5 years, we're going to be towards the top end, 1 or 2 years towards the lower end 1 or 2 years and maybe 1 year in the middle. But when you look at the impact on, we generate a lot of cash flow. We keep our expenses low and we're prudent in managing capital. So when you put all those 3 things together, just the earnings impact and the reduction of the share count each year, you add up whatever percentages there on the right, you think we're going to achieve those numbers are over a 3-year period. So you kind of start with that as a baseline growth. And then we arrange the growth initiatives from the low to the high in the history that's on that chart. So obviously, the high being this recent quarter and then on average. So I think what we -- the point here is the 3 points I made, right? We generate a lot of cash. We keep expenses low. We're great at managing capital, and we think we've got some built-in growth if you're willing to kind of look at it on at least a 3-year time frame.

I think that was the last question. I want to just thank everybody for participating in this call and for all the great questions, and we look forward to speaking with you all in July. Thank you.