Okay, let's get going for everybody. Welcome to Equity Trading Research Series. We're going to be talking about retail, wholesaling, meme stocks, order flow payments, price improvement, and fairness. We're talking with one of the lions of the industry, Doug Cifu. He is the CEO of Virtu Financial. I am Larry Tabb, head of market structure research with Bloomberg Intelligence. And we'll spend, I don't know, half hour, 45 minutes talking with Doug. You guys can ask some questions, and pop them in the little Q&A box. But first I'm going to talk, you know, go into a couple of slides, and then we'll get Doug on pretty soon. So I'll talk a little bit about retail wholesaling, payment for order flow, price improvement. Is this fair looking at the retail institutional marketplace? Then we'll get to Doug, and he'll talk about wholesaling and payment for order flow and price improvement, GameStop and clearing, and just Better Markets. As I said, you know, put some questions in the Q& A box, and hopefully we can get to them. Volumes, for whatever the reason, this year. Well, of course, you know, the reason is basically COVID and just a radical re-shifting of the economy. Equity volumes, both on a share basis as well as a notional basis, have just been through the roof this last year in 2020 and continue to stay pretty elevated into 2021. We're doing basically, you know, double or one and a half times the volume, in terms of shares, and 49% more in value traded this year over last year. Of course, that's, you know, all of the retail volume that's people reshuffling their portfolios. There's a lot of reasons around it. One of the big drivers we see is just the increased movement of retail traders into the market. If we go back to even just 2019, they were roughly 15% of the market. Last year, we kind of estimate they were 20% of the market. And with all this GameStop and meme stock trading, I think in January, so they were 23% or so of the full market. And most of the share is coming out of the institutional side of the market. Now, this is share volume. The value volume isn't as elevated, because retail guys are trading less expensive stocks. And this is a great view of this. This is breaking down the TRF volume by the price of the symbols. And you see that hockey stick at the end, that yellow line? That is one to five dollar stocks, and even sub-penny stocks have had a pretty significant increase, even though it dropped off really in the last month. So now, 33.9% of the shares traded are for stocks between one and five bucks. And that, of course, most institutional, you know, firms can't trade those names. A lot of that is retail. And I guess there's some hedge fund action going on there. But it's really interesting. And that ties into basically the bulletin boards, which are trading, you know, they're, I think they're on par with trade 2 trillion shares this month alone. And hopefully we'll get to talk to Doug about some of that as well. Doug is one of the few retail wholesalers. They're, you know, retail brokers contract with equity execution through equity market makers, typically called wholesalers. They receive this flow. I'm trying to change this, but execute it mostly internally off exchange, at prices a little bit better than the displayed on exchange market. And they provide price improvement. And they give a little bit back to the retail broker in terms of payment for order flow. Most folks think this flow doesn't all hit, none of it hits exchanges, but actually, some of it does. And we'll talk to Doug about what does and what doesn't hit the exchanges and how that kind of works. In terms of the retail brokers, they can quote a tighter spread, mostly, because they're trading with clients on the retail side who are trading in smaller size. And again, markets are determined by supply and demand. And the larger the trades, the more they're, you know, going to impact the market. So if you're trading with smaller shares, you know, share sizes, they impact supply and demand market. So they can quote a tighter spread. Again, we'll talk with Doug about that. One of the big issues here is that a lot of this flow does not hit exchanges. I said some of it does, but a lot of it doesn't. And we can see that the amount traded over the counter has hit 47.2% of the market for January. And that's just, we thought kind of that the peak of this would be about 40%. But really, over the last couple of months and since really last March, we've seen, you know, the OTC side elevate significantly. And again, that's a retail type thing. Now, everybody's been talking about payment for order flow. That's the bottom yellow line. It basically, on the equity side, reached about $1.2 billion, I think is our estimate, for equities. We're going $1.3 billion. That side, very few people talk about this blue line, which is price improvement, which is the 605 data that's put out by the market makers kind of detail this. We've been looking at the 605 stats for the top market makers. And over 2020, they provided basically $3.7 billion of price improvement. That's, you know, in terms of better prices to their clients. So there is a return there. When you look at the two major players, actually, there are four pretty significant market makers. Citadel's the largest. Virtu is second. You've got Susquehanna or G1X. Execution is three, and Two Sigma is really number four. But if you look at just Citadel and Virtu, they're roughly, and this goes back to December, almost 23% of the total market being traded over the counter. This is just the over the counter volume, not what they do on exchange, and a pitch for our dashboard. Our dashboard is BI space MKTS. That's where we have all our research. As you know, the research is kind of on the top. But also, if you look at the data library, you can find payment for order flow information. You can find volumes. You can find the FINRA Data. You can find a lot of real interesting stuff that we aggregate for the market. And with that, we've had a great discussion with Doug Cifu. Doug is the CEO of Virtu Financial. He's a member of their board of directors. He was responsible for the acquisition of ITG and KCG and Knight. He led the Virtu Financial IPO. And hopefully we'll get to talk about hockey too because he's vice chairman of the Florida Panthers. Do it. Let's see. Stop sharing. There we are. Hey. Oh, welcome. How are you, man? Great, Larry. Thanks. Thanks for having me. Excited to do this. Actually, the picture you had up, I looked a lot better. So maybe. Well, you know, that was pre-pandemic, you know. I had a little more hair. That was 2015, I think, so. We were all younger back then. Yeah, right? So crazy times, man. So. Yeah. Let's talk about the first thing I think that's on a lot of people's minds, the hearing last week. What's your overall takeaway from this five-hour, five and a half hour meeting with the regulator or with the legislators? Yeah. I mean, other than I was happy I was in Florida and not around the time. You Yeah, putting that aside. I mean, look, it's obviously a little too early to tell, right? I mean, you know, the chairperson announced that there's going to be more hearings. And we're waiting, you know, reports from the SEC and FINRA, and then SEC's going to testify. So there'll be a lot more, I'll say, substance and maybe, you know, less theater, I would hope, to the second and third hearings that they'll have. And, you know, we've come to expect theater in Washington. So none of that really surprised me. I think there were, and one of the reasons why, frankly, why I wanted to do this with you today was because I think there was a lot of misunderstanding and a lot of noise around payment for order flow and a lot of confusion as to what that really means. And you've seen that propagated in popular media. You know, you, every time I turn on CNBC, it seems like one of the talking heads is confusing wholesaling and payment for order flow and whatnot. I think, you know, as a positive, I think there was some good discussion around clearing and shortening of the settlement cycle. I know we're going to talk about that. I think that's imperative. And I think Mike Dissey are working hard on that. And I think that's good for the market. I think, you know, Robinhood has recently announced some initiatives to improve their customer support and all that kind of stuff. So I think they certainly heard the marketplace loud and clear there. And I think, you know, people talk a little bit about educating retail customers. But more importantly, educating people about how the market really works. As you said, all of this data is out there. Maybe it's not as user-friendly. Bloomberg, you guys do a great job of assimilating it all into one spot. All of the 605 and 606 data about routing and payment for order flow, it's all publicly available. Execution quality statistics and price improvements, it's all publicly available. I think some of the folks that I've seen on CNBC are acting like this is some new thing that's just been uncovered, right? Like they just discovered the Rosetta Stone and, oh my God, we can now interpret like the market. It's been on, you know, it's been part of the ecosystem, and I think in a very, very positive way for more than 20 years. And the SEC and a lot of experts have looked at this concept of internalization and indeed payment for order flow, which I'll know we'll talk about, at great length and have studied it. And it all has concluded with the benefit of data and the understanding of how it works that ultimately the customer, the end user, the retail investor has benefited. The one thing that I was surprised about, like, and again, I make a habit of not talking about politics and religion, you know, publicly. And I try to not even do it privately. But, you know, there were a lot of folks on the left, you know, progressives that were, you know, slamming the witnesses about, like, payment for order flow and the rigged system. If you take a step back, Larry, and you say, you know, here's my phone, right? On this thing today, I don't trade, obviously, because I run a large market making firm. But any retail customer can download an app of probably 100 different brokers and literally for nothing can get a price stream to them, which is a price of Tesla or, you know, some other name that they're interested in. And they can literally, with a mouse click or a push of a button, buy 100 shares of that for nothing. And it's the exact same price or a better price that you would otherwise get on an exchange. If you take a step back, and if you're a retail customer, think of the power of that and think how much that has changed. You've been in this industry for longer than I have, Larry. I just, I was a lawyer until 13 years ago. But think back 20 years ago or even 10 years ago. So rather than even paying $0.95 a trade, now you're paying $0. I get it. The critics look at that and say, well, someone's got to be making somewhere the money somewhere to pay for all that. And of course, that is the case. And we're going to talk about payment for order flow and how that's been confused in everybody's brain. But if you take a step back, I was just frankly shocked that, and I know some of these Democrats on the committee because I've spoken with them. I've been in Washington a bunch. And I'm going to. I have talked to some of them, and I will continue to talk to them and say, do you understand how non-rigged and how positive the system has become for the retail investor? And that explains a lot of the statistics that you went through, in your opening. So I think, look, there, there's a lot of work that needs to be done here. I'm a big believer in hopefully not playing into the histrionics of what's going on in the marketplace, but dealing with data and facts and being really, really transparent about what we do as a firm and more importantly what the industry does. And that's what the Rule 605 and the Rule 606 statistics point to. So I think when people, you know, spend time understanding that and putting aside this dogma that something must be rigged, I think they'll conclude that, you know, the ecosystem is pretty darn good. Yeah. No, I agree. I remember when I started in 1980, I worked for what's now a large bank. And I had to trade through them. It would cost $200 a trade just to get in or get out. And I didn't get a confirmation till if I was lucky two or three days later. And then I came back and took a look at the high and low. And there were times I traded outside the high and the low for that day. It's like, how did that happen? Now I get, now it's free. I get a fill in microseconds. And. Yeah. I'm. Generally, I'm trading better than the bid offer. Yeah. And look, I mean, there are things we can do at the firm. We make it very clear as to, like, you know, what you paid and if there was PFOF, what it was and what level of price improvement you got. I think some of the brokers do that. Obviously, I don't get those confirmations. I don't see them. And I know that a lot of the brokers advertise their price improvement statistics that I've seen ads on CNBC, which is to my left, from some of the big brokers where they trumpet their levels of price improvement. So I think, again, beyond, hey, you know, Robinhood invented PFOF. It didn't, right? This has been around for a long, long time. Has it helped their business? And is it part of their business model? Of course. But that's not like some state secret that was just unearthed. Yeah, so let's talk about payment for order flow a little bit. I hit the button on my squad screen. That order then gets routed. How does that work? And how can you guys kind of, you know, execute that? And how do the mechanics work and the payment for order flow and price improvement and stuff like that work? Sure. Let me just delineate. Let me do sort of the easier example first, and then I'll go through. Let's just make it real simple and say there's two types of orders. You got a non-marketable limit order. You got a marketable order, right? So if you wanted to put in a non-marketable limit order, right, the market is higher or lower. You put in an order with a limit price that gets sent to your broker. Your broker then has a choice. Does it send that order to an exchange to be displayed? Or does it use the service, right, of the market making firm? The firms you mentioned, Virtu, Citadel, Susquehanna, Two Sigma, UBS is in the business, right? They do a great job, right? So there's a whole multitude of competitors here. It's a very competitive market. If it's a non-marketable limit order, as you know very well, not to be too wonky, but, you know, Rule 612, the order display rule says, we have to reflect that order on a national securities exchange. And we do. We do. And the exchanges compete for that, right? So people that say, oh, retail is wholly unavailable and it's not part of price discovery, it's just not true, right? So we are right now displaying, I'm sure, tens of thousands of non-marketable limit orders from over 200 brokers on one of the 15, is it 15 these days? National, you know, securities exchanges. 16. Yeah. 16, I'd say. I don't, I just. I think you're counting Long-Term Stock Exchange, which I think you and I trade individually more than I do. There you go. Okay. Right. So we're displaying all that, and exchanges compete for that. And they've got their, you know, Nasdaq has its own program, ARKA. New York has the Retail Liquidity Provider Program, right? All of those incentives exchanges, Cboe has its own program, and they're competing for that level of flow. So there's a heck of a lot of retail flow that is right now being displayed and is part of the whole price discovery mechanism, okay? Put that to the side. Larry sends an order to his broker, and he says, you know what? I see this price on my little handheld, and Tesla is $662. I have no clue what it is. I don't trade it, right? And, and I want to buy that. So he says, I want to buy 100 shares. Or he can even, because of the power of what has been created, he can buy a fractional share. But let's say he wants to buy 100 shares of that. He gets his tablet. He sends the order to his broker. That broker then has a choice. That broker has negotiated with the five or six or seven wholesalers, right, market making firms that I just described. And every single one of, in every single instance, that broker is sending that order to a market maker based upon the level of execution quality or price improvement we are willing to provide to that order. So believe you me, these brokers do a really good job of playing each, playing each other, us against, against each other, right? So we're competing every day with Citadel, which is an amazing firm. You saw Ken Griffin. He's a once-in-a-lifetime type of leader and entrepreneur, right? He's created this great firm. They're one of our biggest competitors. And so we're competing with them every day. Can we provide more price improvement to orders from brokers A, B, and C, and D? Okay? Does that happen on the order basis or does that happen? No. On kind of like a weekly basis? Does it like Robinhood or somebody say, okay, well, last week you did well. I'll give you more flow this week. And. Yeah. The answer is. The answer is every broker has its own manner in which it will allocate flow. Every single, but the important point is, and this was completely lost last week, every single one of them are sending orders based on price improvement, okay? There are some that take payment for order flow, and we're going to talk about that. But in terms of they're making their routing decisions, they're sending it based on price improvement. That's the key metric. And some will be. And I think. Daily, weekly, monthly, right? And it's done by some will break it up by ADV or by this or that or the other thing. And obviously, over the years, we've worked with the brokers so we understand how they are doing their wheel or their routing decisions. And we're going to make business judgments, right, as to how, what level of price improvement do we want to give to broker A, B, or C, right? And it's a little bit of game theory. We're competing against Citadel, Susquehanna, Jane Street, Two Sigma, UBS that are all doing the exact same thing. So we're kind of fighting to see, you know, how much money can we provide back and still be profitable and keep the lights on here, right? So it's a very, very competitive business. Again, the important point is every single one of those routing decisions is made by the broker by looking at the amount of price improvement that we're providing, right? So in that case, right, Larry sends it to broker, right? I'm not going to use names, right, because I love all my customers. I'm the Switzerland of liquidity providing, Larry, so I don't make qualitative judgments. And when that order gets sent to the Virtu environment, right, for those 100 shares of whatever stock it was, at that moment in time, there was a national best bid or national best offer for that stock, right? You know, our deal with our broker is we are in 90%, you know, whatever, and this is all publicly disclosed, right, by broker. We're going to give you a price that is at or better than what the National Best Bid and Offer was in that instance, okay? So as soon as you get to our environment, you're done. Now, we as the market maker have a decision to make, right? Do we take that out of inventory? Do we internalize that, right? And we like to do that, right, because that's where we think we're going to make that bid-offer spread that you described in your preamble. Or if we're at a risk limit, or if, you know, for whatever reason, you know, our strategies say we don't want to internalize that order, more often than not we are, we go to an exchange or to some other liquidity source, whether it's a dark pool, whether it's another broker, whether it's an exchange, and we're filling that order for the customer. And we're price improving it and sending it back to the customer, okay? The retail broker and then back to Larry Tabb. So either way, heads you win, tails you win, right? Heads, sometimes I win if I internalize and I've made the right decision. A lot of times, like this morning when the retail imbalance was very sharply towards the sell, it was a struggle this morning, right? It's not always, you know, rainbows and unicorns here at Virtu. But every time you're always winning because you're getting that fill. I'm either taking out of inventory, right, and price improving it, or I'm going to an exchange and I'm price improving. Because at the end of the day, I've got this big bucket of orders I've got from brokers A, B, and C. And if I don't provide X, Y, and Z of price improvement, they're going to say, hey, you guys are falling behind. We're going to take share away from you, and we're going to give it to Citadel, Susquehanna, whomever else, right? So we're always competing for that. It's all fully disclosed. It's all out there in statistics. Maybe we can do a better job as an industry of making that more ascertainable by folks that are not experts like yourself. But at the end of the day, that's how it works. That's how it works. Now, I'm having to. Talk about it. And Larry, we can talk about payment for order flow in a second. Yep. Yeah. No, so in doing that, I guess, you know, there's a tremendous investment in technology and infrastructure and basically, you know, connectivity to basically. Yes. Fight that fight. Yeah. Look, I mean, I said this. I've always said too, and I said it in our preamble, and I understand people were listening. We have spent literally billions of dollars over the last 12 years building, as Vinny would call it, the stadium, the infrastructure of what Virtu is. We're connected to 250 different markets in every conceivable asset class, right? A lot of that investment in understanding how markets work and indeed the architecture and the stadium of the U.S. equity market, we use for other things, right? So it's only that scale and that investment that enables us to provide that level of service. The other point I should make, by the way, is that it really is a service, right? If that order comes to our environment and we have an issue, right, like a gap, we have, you know, a server that goes down, a switch that craps out for whatever reason, and these things happen, the client is still done, right? In the famous example, I probably shouldn't talk about that because my chairman was the CEO of Nasdaq at the time. But when the Facebook IPO happened, you know, there was a big, the retail brokers got made whole by the market makers. That's why Knight and Citadel were so unhappy about the situation, right? So we are providing a real service and a real guaranteed execution back to the customer. And it's only because we have this infrastructure that we've built, this understanding of market structure and unbelievably talented people that we're able to make a margin on that business. That's a really good point. You know, when I talk with folks like you and some of the other, you know, retail guys, you know, they talk about routing flow to the wholesalers because they do stand behind that execution service. You know, and let's talk a little bit about, you know, some of those, you know, those services you provide that if they routed their orders directly to the exchange. They may not necessarily get. Yeah. Look, if you take a step back, I mean, the complaint about the U.S. equity market structure and by no means did I design it, right? I was humbly a lawyer in 2005 when Reg NMS came into being, and I had no clue about any of this stuff. But if you look at the U.S. equity market structure, one of the big complaints is it's Byzantine, it's very fractured, it's hard to get liquidity, and it's really expensive to connect all these different venues, right? You know, 16 apparently national securities exchanges, let's call it 40 ATSs and a whole bunch of other brokers that like to send order back and forth to each other, right? That's an unbelievable exercise and incredibly difficult. That's our business. That's really all we do at Virtu Financial, right? Understanding those markets, spending the money, writing the APIs, buying the latest gear, right? That's all we do. If you're a broker, right, again, I'm not going to use names, but if you're a new style broker like the one that, you know, I'll just say Robinhood that testified, right? Why would you want to go through the hundreds and hundreds of millions of dollars of expense to do that, right? It's the last inch of the marketplace as opposed to the asset gathering part, which is having, I suppose, a great application and having, you know, good customers. There's all the other things that, you know, providing margin financing, having good stock loan desk, all the other things that I would imagine a retail, or wealth management style broker would have. All of those things, they're good at. We're good at that last inch of the marketplace, and that's where we spend our time. So if you think about it, Larry, it's really not inconsistent with the notion of outsourcing, right, to use a buzzword, that service, right, to a number of companies, I've listed them, right, that are really competitive for your business, and you don't have to pay anything for it, right? Putting aside PFOF, we actually are paying, you know, for the 180-ish or so brokers that don't take a rebate or payment for workflow, they're getting that service for free. They're not paying a commission like an institutional customer, and they know they're getting great execution because it's giving them all the statistics so they can measure it. And if we're not doing a good job, it's a bit of a mouse click business, right? They can send more flow to my friends at Citadel who do a great job, and they're doing a better job than Virtu. They're going to get that flow. So it's really a win-win ultimately. Ultimately, every one of those routing decisions is made by the retail broker based on the execution quality and the level of service that we're providing back. It's a standard service business. Interesting. So this whole idea that, you know, X, Y, Z broker is creating bells and whistles and stuff because they want PFOF and they want to get more compensation from you and pushing their folks into riskier investments, do you, is there credence in that or are they just trying to, you know, build their business? You know, look, obviously, you know, where, where you stand depends upon where you sit. You see where I sit, right? Here I am on running Virtu. So I don't think there's any credence to that. I think there are firms, and it's not just Robinhood, there are a number of firms that have, you know, decided that that is part of their business plan. They've built amazing interfaces that have brought a whole new category of people that are interested in trading, investing, speculating, whatever you want to call it, into the marketplace. I personally think that's a good thing. I'm a big believer in democratizing things. That's what Virtu is all about. I wouldn't be sitting there having this conversation with you if it wasn't for democratization of marketplaces and collapsing of bid offer spreads and reduction of commissions. That's all Virtu is about, right? When Vinny and I started this firm, we didn't have a single customer. No one knew who the hell I was. Some people knew who Vinny was, right? And ultimately, we were successful because we worked really hard and we kept our costs low. We didn't believe our own BS, and we scaled. That's all Virtu was about in the beginning, right? We moved upstream through the acquisition, as you noted, of KCG and now of ITG because we thought we could bring that service and that scale to a customer segment of the marketplace. And indeed, it has proven successful. But at the end of the day, this is really about, you know, reducing the friction costs of the marketplace. And I think that's what the new entrants have done, right? And so, you know, they certainly, a big part of their business model is getting rebated, right, which happens all over the marketplace, right? It's not just in US equities, right? It happens in FX and other marketplaces where people are paying for customer order flow because they think they can make money off that. But at the end of the day, the thing that kind of irked me the most hearing was if you still think about the retail customer, right? You know, Larry Tabb is sitting up in his cape house in Cape Cod. He's got his tablet. He wants to buy 400 shares of a $40 stock, let's say it's $4,000, right? So you'd, and you see the price is $40, you're happy to pay $4,000. You're not paying a commission on that. You're not paying $8.95 or $4.95. Your total cost then is $4,000, right? If your broker happens to take payment for order flow, the rate is, you know, for some brokers, it's 10 mils, right? So that's $0.10 cents per 100. So for those 100 shares, Larry, you know, your broker put a dime in his or her pocket, and Larry paid $4,000. If all of that came back in price improvement, Larry would have paid $3,999.90 for that same 100 shares. I'm not belittling it, right? It's money, you know, I watch every penny here at Virtu. But the next tick of that stock from $40- $40.01 on that 100 shares, you know, you made a dollar, right? So you're okay. So Larry's not investing because he's worried about that dime. Larry's buying it at $40 because presumably Larry, I'm just picking on you, thinks it's going at $62.5, right? So the friction of that dime is going to be in the noise. And that dime is effectively paying for Larry's broker to pay for all the market data that's getting exchanged, that's being typed through the phone to build that interface, to provide for all of that innovation. And so that's kind of what irked me the most, which is that all of that, you know, bid offer spread effectively that's being returned back in the form of a payment for order flow has really enabled this democratization and creation of these wonderful businesses that really have, I think, have helped, ultimately Wall Street. Are there some excesses and challenges and things that need to be addressed? Of course. But ultimately, at the end of the day, you know, we have a much better marketplace than we did even, you know, five or 10 years ago. I wouldn't disagree with that. Wait, I think. Totally. There are a couple of things I want to bring up market data, but before we get to market data, this movement in the OTC side of the business up to 47% or so of the marketplace. Yeah. It, does that worry you? Because to a certain extent, you kind of need a viable price discovery market to kind of do your job. Do you think we'll ever get to like 50%, 60%, 70% of the market just being, you know, out of the dark? You know, I want to be careful how I answer this because if I sound very cavalier about it, like I don't worry about things, then people will be dismissive of it. And obviously, we benefit from increases in off-exchange trading. I do want to point out that non-exchange trading is not just retail. And obviously, you know this. It's ATSs. It's. ATSs as well. It's blockchain in big banks. It's brokers trading back and forth. You know, we have a feed with Citibank, and Citibank has one with Virtu, and we do that with J.P. Morgan and Barclays, and so that's all of it, it's a confluence of that. I think the most important thing, and my philosophy in running this firm has always been about we want to give people choice, okay? I'm going to get to some statistics, but ultimately, when someone is sending an order to a place, whether it's an exchange, whether it's an ATS, whether it's a bank, or whether it's a wholesaler like Virtu, it's because they have that choice. We don't want governments and regulators interfering in choices, I don't think, because I think the marketplace generally works and the market always finds its level, right? So that's my fundamental backstop, which is be really careful when you're trying to intervene into marketplace. There's a lot of benefits, obviously, to having an exchange and mid-markets, and they get well compensated, as you know, in my huge market data, right? So the exchanges have a real purpose, and they continue to get their flow, and they will continue to be competitive for that. But ultimately, don't limit investors' choices, okay? I think if you peel back the onion on a lot of the data where people are talking about 47%, I think you've got to look at notional. You had it in your preamble, which is there has been this explosion of interest in low-priced names, both in terms of NMS stocks and OTC stocks, right? So, you know, again, I want to be careful how I say this because I really don't want to be disparaging people that are trying to make a point and trying to run a business and whatnot. But I think a lot of the it's either exchanges trying to talk their own book, which I totally get. I talk my own book all day. That's why we're having this conversation. Or it is folks that are representing or want to represent institutional holders that are trying to say you aren't institutional holders are not getting access to price discovery and liquidity because of this retail explosion. I don't think that is factually correct and supported by the data. I think the data you showed would show that there has been this explosion of interest, right? There's been an 83% increase in less than $5 stocks from on the TRF from last year, right? Those are generally not names that large institutions are interested in in terms of long-term investment. Certainly, these are names that are very interesting to retail. And I think people, retail investors just like lower-priced names because they can buy more of them. And they think that when they increase a tick or two, right, they can pick, they can day trade, they can still have them. That's the theory that anyone's ever explained to me. So I think when you separate out the wheat from the chaff in terms of what the data really shows, there really has not been a huge surge in off-exchange trading, you know, in those $5 and beyond type of names. And if you're an institutional customer, and here comes the public service announcement, Larry. Nothing's for free, and you're using the right broker, like a Virtu Financial that understands the marketplace, has superior algos, also has access to all the liquidity sources, including our own, right? So we're going to allow that institutional order to interact with the market maker, and we're going to allow that institutional order, obviously fully disclosed, to interact with Citadel and other places, right? Because that, I think that's part of what the new marketplace is about. Those institutional customers still can get excellent liquidity and great execution. That's kind of part of the model, which is to bring both sides of the business together. So I've kind of gone full circle on you here, but I think I answered the question in terms of, do I really think it's a hindrance to price discovery? No, I don't. I don't think the data really supports it. And so maybe we're just looking at the market wrong. Everybody else, you know, looks at it in terms of notional around the globe. We look at it in terms of shares traded. Maybe we should be looking at it in terms of value traded. Yeah, and I think we should charge institutions or customers based on notional. We'd make more money as brokers too, Larry, like in Europe. But I don't think that one's going to pass either, yeah. Yeah. I don't think so either. Yeah. Let's talk about GameStop, and then we can open it up for a couple of questions. What's your take on this GameStop/meme stock trend? And should we be worried about all these stocks trading way above or below, you know, their fair value? Yeah. Look, again, I try very hard not to have religion about these things, right? I mean, we didn't, as a country and as a market, we didn't invent speculation. You know, people talk about, look, the Tulip Crisis, in the, I guess it was the 1600s in, in Amsterdam, right? So speculation and these bubbles have been around for a long, long time. I think the important things are, and the SEC will look at this as, I used to be a lawyer. I understand, like, you know, 10b-5 violations. On the surface, it doesn't appear that that's the case, but the SEC and FINRA will look into all that and understand what happened there. I think, you know, and that's a bigger question than, like, Robinhood or whatnot. It's just, you know, was there any manipulation of the marketplace going on? I don't have a clue. I have no ability to understand that. I can tell you with 100% certainty based on, obviously, the testimony I saw and what I know about how the, you know, the market worked, that it, you know, there was no collusion between Citadel, Melvin, and Robinhood to somehow shut them down. All of that was, I think, debunked by the testimony of the, of the principal. But more importantly, it was obvious to me as someone who understands how the clearing system worked, what happened. I mean, Robinhood had positions that were incredibly one-way and very volatile stock. We're a clearing member, a very proud clearing member of the NSCC. I know how they margin. And I know when volatility spikes, because we've lived this here at Virtu, right, margin calls go up. And if you're not prepared for that, the only way to satisfy that risk, which is to de-risk it by turning off trading or reducing your position, right? When you're a market-making firm, that's a lot easier. We just skew the trading, right, to trade out of position and reduce our overnight margin. When you run an institutional retail business, you don't have that luxury because clients are going to do what they're going to do, right? So Robinhood went into an almost untenable position and did the only thing that they could possibly do to ameliorate that margin call. So I think at the end of the day, as long as there, just to come back to your question, look, as long as there are disclosures, as long as there's enough education, you know, these aren't like complex options, presumably, that people are buying. They're buying and selling a security, right? I don't talk about fundamental value of any company other than my own. And I, obviously, I think it's horribly undervalued as, you know, and that's my job. But putting aside, you know, those other businesses, at the end of the day, right, you have consenting adults, right, who are fully informed as to the risks of what they're doing. You know, I don't think it's the marketplace's job, assuming they're educated and whatnot, and they've been properly margined and all that kind of stuff, and they've checked all the boxes and they're adults. I don't think it's the marketplace's, you know, job to prevent those things from happening, Larry. I really don't. Yeah, this is very different than kind of a pump, pump, and dump scheme where I own this shell company and the sales guy goes and sells it to, you know, grap, you know, folks who don't understand. This is really a diversified group of people that really know what they're getting into. That you said that's kind of the real difference between that and some of the other stuff? Yeah. I mean, we all saw that movie. It was a Boiler Room, right? I forgot who was in it, right? Oh, right. This was not. I don't think this was that. I mean, I see no evidence of that. And I think, look, I mean, obviously, and this is all public, I mean, Robinhood raised billions of dollars, you know, in a matter of like 24 or 48 hours. So obviously, there's some very well-capitalized people who see the value of their business model. They're a client of ours, a very important client of ours, and we continue to service them throughout that episode and proudly have significant market share with them, all publicly disclosed. And we're going to continue to do our best to provide good quality service to their end users. Sounds good. I'm going to take a couple of questions from the audience here. You know, there's a couple of questions on payment for order flow versus folks who take payment for order flow, who don't, and those who don't. And you know, if you know, if my execution is through somebody who takes more payment for order flow, is my execution going to be worse than someone who doesn't? How do you kind of approach that? And then you know, does that then mean that if my firm takes payment for order flow, then I'm not getting best execution? Or how does that? No. No, I think the answer to that is no, and let me, let me give you the, the best analogy I can think of. I, I saw Congressman Sherman ask Ken Griffin that question. I, and I scratched my head thinking, how would I answer that question, and I probably couldn't have done it in the 20 seconds that he was allotted before he got excoriated for, for wanting to be a, a senator who was filibustering. Look, you know, here's how I would look at it. One of the things I really love about living in suburbia is on Saturday morning going out and getting gas for my car. Don't ask me why I like to do that. I'm sure maybe you've experienced that too. You go out, you get your cup of coffee, you go to the gas station. I live in Short Hills, New Jersey. There's three gas stations that compete with each other on price. And my wife always says to go there because it's going to be $0.10 less a gallon. Then the Exxon I go to that's closer to my house. Why do I go to the Exxon close to my house? Because I know the guy. It's full service, always in New Jersey. They pump. I know I'm paying a little bit more, but it's all publicly disclosed. It's all out there. And they got one of those great freezers where you can open up and you can get yourself like a little strawberry shortcake and ice cream. And I do that occasionally, right? So I'm willing to pay $0.10 more a gallon to go get gasoline over there, right? It's no different. Everybody's got charges with their real estate, with their, excuse me, with their retail brokers. It's all fully disclosed. Everybody's going to get a price. It's even better than the gas station now because everybody knows you're not going to pay more than $2 a gallon. Maybe one store has it at $1.95 a gallon. My store happens to charge $2 a gallon, but I like it because I can go in there and talk to my friend, and I can get my little strawberry shortcake every now and then and throw the wrapper away, and my wife doesn't know, and everybody's happy, right? So it's the same thing with your retail broker. There are hundreds of different choices. Do you get, might you get a slightly better price because a broker is passing back the entire portion of the price improvement? Yeah, you might, but maybe they're charging you more for margin, or maybe their stock loan costs are more, or maybe you don't like their interface, or maybe it was harder to sign up for that. I don't know. It's not my business. But ultimately, we're, you know, every single one of those brokers is giving you at or better than what's displayed on an exchange. If not, it's explaining to you why and what percentage of those orders are not. So if you want the absolute best price, then research around. And that's what those brokers are competing on. If you like the interface better, if you want a lower margin rate, if you like the customer service desk, if you like the fact that your 401(k) is there, then maybe you go trade there. Those are choices that investors have, right? But again, boiling it back, nobody is sending an order to Virtu or Citadel and to our other competitors based on the amount of payment for order flow we're providing. And every single one of those brokers has a fixed amount, right, that it is, it's either a formula or a set amount that you're paying in the beginning of the day. They're not adjusting it during the day. And if the spreads widen or lower, if we make or lose money, we're still making that rebate payment. And again, that rebate payment is paying for all of the infrastructure that that broker has that it has to deal with, right? So again, it's a small price that's getting sucked out of the ecosystem, out of the bid-offer spread that's enabling all of this innovation and participation in the marketplace. I would argue that's a small price to pay. Rather than having the consumer pay it, you got firms like Virtu and Citadel, ultimately paying and helping enable all of that innovation. Why is that a bad thing? Yeah. When you look at price improvement and stuff like that, are you using more the direct feeds? Are you using kind of the SIP or both? Or how does that work? Yeah. I mean, as a general matter, we're using both. I mean, the standard in the industry, and now since the SIP has been, I'll try to use polite words, sped up and kind of harmonized. As a general matter, we're using the SIP, but every broker will use whatever, you know, it chooses to use, and we will conform to whatever standards or whatever rules that they want to put in place. And again, every broker is different in terms of how they are looking at their execution quality statistics. And again, it's all publicly disclosed. I'm not going to name brokers, but if you go to broker A, B, and C and type in, like, you know, 606 statistics and price improvement statistics, if you're really interested in that kind of stuff, you can go see how much price improvement you're getting and off of what and how many orders are improved off of the NBBO and what percentage of price improvement. You said the number. It's $3.7 billion was effectively taken out of the bid-offer spread in the universe in 2020 and put into the pockets of retail investors. Period. End of story, right? No other country in the world has an ecosystem that does anything close to that. Yeah. Still one last question or two, and we'll wrap it up. There's some talks about intelligent ticks and maybe some market data rules that get odd lots on the tape. Is this a good thing? Yeah. I mean, as a general matter, we put in a letter supporting that. I mean, again, there's an urban legend that somehow Virtu, Citadel, and all these other firms make a ton of money off of odd lots. It's actually not true. The brokers are smart enough to figure out that even though it's not covered, you know, by the current order protection rules, they still will measure our execution quality on odd lots, right? So these are large, sophisticated institutions, right? So we're competing again with those aforementioned four, five, six wholesalers based on the amount of execution quality provided on odd lots. So when I see those kinds of things out there in the ecosystem, I get a little frustrated, but I, you know, decide not to go on Twitter and deal with it publicly. But I know, you know, all of that is factored into the ecosystem, right? So at the end of the day, supportive of that. You know, we, I was a big proponent of having, you know, competitive consolidators. Virtu wants to be in that mix. I've publicly said I think we can do it as well or better and, frankly, a lot cheaper than the current consolidator. So it's something, that we would look to do on our own or do in partnership, Larry, assuming that that litigation, which I imagine is going to be going for a long time, between the exchanges ultimately gets resolved. I mean, I used to be a lawyer. I read the complaints and whatnot. You know, on the fence, I, I find myself, but, you know, it's America and anybody can sue anybody for anything. Yeah. It's kind of crazy. So, let's wrap this up a little bit. Tell us about your wonderful Panthers and, Yeah. What's the story with hot dogs? You You got this thing going on with Feltman. Yeah. Well, it's a great thing because, since Feltmans became the sponsor of the Florida Panthers weren't in the first place, there's obviously a strong correlation between hot dogs and hockey. I made a mistake a long time ago going on Twitter. I thought, "Oh, I got to be a good guy and engage with hockey fans." And then ultimately that got a little rotten, so I kind of pulled back from that. Then I did a little bit of market structure. And when I do that, then sometimes the HFT haters come after me. So I've decided that the one area which nobody can disagree with me on is hot dogs because I say I'm a hot dog influencer and I really know hot dogs. And the great thing is Feltmans. Real quick story. Charles Feltman created the hot dog. He came over here from Germany. Great immigrant story. He's the first guy to put a sausage in a bun, and one of his employees was a guy named Nathan something. He basically stole the recipe and opened up a competitor across the street. That's a good analogy here for what's happened in the market. Mr. Feltman was charging a dime and Nathan was charging a nickel. You guess what happened to Mr. Feltman? You never heard of him, right? Cost does matter. Scale does matter, but ultimately it's a great hot dog. A great American, a great West Pointer named Joe Quinn, who loves hot dogs, decided he wanted to bring them back, so he bought the brand and to my partner, Vinny Viola, a West Pointer, and Vinny to support Joe, and I just love the hot dog. It's fun, trust me, I'm like a Kardashian of grilled meat. I understand I'm an influencer. That's the most important thing for me on a Saturday or being at a hockey game. So everybody go out and get yourself a Feltman. Larry, your package is on its way. The mustard is a 10 as well. That's awesome. Okay, Doug, I want to thank you for doing this. This was great. Thank you, Larry. Anything, you want to get off your chest that you haven't talked about? I got plenty of stuff I want to go for now. I'm a happy guy. I run a great firm. I got, you know, about 1,000 wonderful employees here, and Virtu is having, you know, as we publicly announced before, we're in the midst of of another really successful year providing, we think, a great service to the marketplace. So I'm a very blessed guy. Nothing at all to be angry about. With that, Doug, thanks. I want to thank Doug Cifu, the CEO of Virtu Financial, for sitting up with me for about 45 minutes, maybe a little longer. I want to thank everybody in the community for listening. We got a lot of great questions here. Sorry we weren't able to get to all of them. We got a fair amount. With that, I'm Larry Tabb, head of market structure research for Bloomberg. And thanks for joining us. Thank you. Okay. Take care, Doug.