Good day, welcome to the Virtu Financial 2021 second quarter results conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Andrew Smith. Please go ahead. Thanks, Tom, and good morning, everyone. Thank you for joining us today. Our second quarter results were released this morning and are available on our website. On this morning's call, we have Mr. Douglas Cifu, our Chief Executive Officer, and Mr. Joseph Molluso, our Co-President and Co-Chief Operating Officer, and Mr. Sean Galvin, our Chief Financial Officer. They 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 condition may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report in Form 10-K and 10-Q and other public filings. During today's call, in addition to GAAP results, we may refer to certain non-GAAP measures, including Adjusted Net Trading Income, adjusted net income, adjusted EBITDA, and adjusted EBITDA margin. Non-GAAP measures should be considered as supplemental to, and not superior to, financial measures prepared in accordance with GAAP. We direct listeners to consult the investor portion of our website, where you'll find supplemental information referred to on this call, as well as a reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful, as well as how management uses these measures. With that, I'd like to turn the call over to Doug. Good morning. Thank you, Andrew. This morning we reported our second quarter results, which reflect our resilient and balanced business model as well as the continued success of our organic growth initiative. For the quarter ended June 30th, we generated $0.63 of adjusted EPS on $5.4 million per day of adjusted net trading income, bringing our results for the first half of 2021 to $2.67 per share and an average adjusted net trading income of $8.63 million per day. Last quarter, we announced a $300 million increase to our share repurchase program, which brought our total authorization to $470 million. We have repurchased 3.4 million shares for approximately $100 million during the second quarter and over $30 million worth since the end of the second quarter, bringing the total amount repurchased under the current authorization to approximately $230 million. As we stated previously, we remain committed to returning capital to investors and have prioritized share repurchases for the foreseeable future. We aim to be in the market consistently buying back shares as we work to accomplish our capital management goals. Importantly, in the second quarter, our more greenfield growth initiatives continued to shine in both relative and absolute terms compared to historical results. On page 6, you can see how these initiatives contributed meaningfully to our performance, generating $500,000 per day of Adjusted Net Trading Income and representing 9% of our ANTI for the quarter. These initiatives are truly organic in that our ANTI from these revenue sources was nascent only a few years ago, and we've achieved these results by leveraging our scaled infrastructure and distribution channel, supplemented with a handful of individual hires. While these results are impressive, we are especially excited about the continued growth potential of these truly organic opportunities. In options market making, for example, our daily Adjusted Net Trading Income grew quarter-over-quarter despite the 13% decline in options market volume. We continue to view options market making as a key long-term engine of growth that complements and enhances our existing market-making business, creating new revenue synergies across asset classes and regions. Other key initiatives include our ETF block desk and our deployment of legacy KCG quant- style strategies continued their long-term growth trend in the quarter. Market volumes in U.S. ETF declined about 13% in the quarter, while our ETF block volume was down less than 1%, illustrating the strength of our unique offering in various market conditions. Our expansion into cryptocurrency market making also continues to progress with our ANTI from crypto market making doubling in Q2 versus Q1. To date, our focus has been on market making in Bitcoin and Ether in various forms, including spot instruments on a couple of the major venues, as well as ETFs and futures. As a leading market maker in ETFs around the globe, crypto ETFs fit naturally into our scaled market-making operation, leveraging our growing ETF block desk. We are also in the early stages of developing our ability to stream cryptocurrencies over our direct-to-dealer streaming liquidity platform, VFX. Through this platform, we will provide liquidity in cryptocurrencies to select brokers and institutions around the globe. The key takeaway here is that the growth of liquid tradable crypto-related products is yet another way that the total addressable market is growing for Virtu's scaled liquidity provisioning and execution services. Taken together, our growth initiatives are making tremendous progress and help raise our baseline performance through the cycle. As Joe will detail in a few moments, we believe that this positive growth trajectory, combined with our stock buyback program, provides a compelling long-term story for our investors. We look forward to updating you in the future about the progress we're making on each of these opportunities and their contribution to our growth. Additionally, the steady growth of these initiatives, as well as the continued less volatile performance of our execution services segment, has led us to provide public guidance around where Virtu's results should be given various levels of ANTI in a given quarter. We believe our performance this quarter is consistent with that guidance. After several quarters of elevated market activity, realized volatility fell nearly 30% in the second quarter, dropping to 9% below the 2019 average. As you know, 2019 was a historically low point for volatility. Further, U.S. equity volumes were down 28% overall, and retail equity volumes in the United States were down even more compared to Q1. Despite the steep drop in volatility, which highlights the sustained levels of retail engagement and general market volumes compared to historical levels, it is important to note that despite the changing operating conditions versus last quarter, our market-making business realized $232 million in Adjusted Net Trading Income, or $3.7 million per day. This quarter's performance is similar to the third quarter of 2020, where we generated $4 million of ANTI per day, albeit realized volatility was 34% lower this quarter than in Q3 2020. Our execution services business also performed in line with the market opportunity this quarter, realizing $110 million in Adjusted Net Trading Income. We are now two full years past the acquisition of ITG, and looking at the bottom of page three, you can see the steady progression of this business. This continued growth reduces the quarter-to-quarter variability to our operations while still giving investors significant upside exposure from our global market-making operations. Before I turn it over to Joe, I'd like to take a few minutes to talk about the recent industry discussion around market structure, payment for order flow, and wholesale market making. As I said in the first quarter earnings call, we at Virtu welcome the robust dialogue around the regulatory framework that governs our capital market. However, we and others are concerned that the calls for reform are based on false narratives and factually unsupportable conclusions. These misconceptions obscure the fact that we are participants in the most robust, transparent, and fair marketplace in the world. For retail investors, their experience in the U.S. has never been better and, by comparison, is markedly worse in Canada, the U.K., and Europe. Developments in market structure, advances in technology, and the introduction of intense competition have resulted in vastly expanded product offerings, low or no-cost trading, and importantly, superior execution quality. In summary, the benefits of today's market structure to retail investors are quantifiable, and the supporting factual evidence is striking. In the current high-profile debate about U.S. equity market structure, many folks, including regulators, politicians, and critics, are looking at the available data to draw conclusions. However, the data being used to assess execution quality for retail investors comes from Rule 605, which most agree has significant shortcomings and provides an incomplete view of execution quality. Current Rule 605 significantly underestimates the benefits that regulation, competition, transparency, and the current market structure have created for retail investors. We recently published a report, which we furnished to the SEC, that addresses many of 605's shortcomings and proposes updates to enhance the rule. The biggest hole in Rule 605 is that it measures price improvement by comparing an order's execution price to the prevailing NBBO without regard for the number of shares being executed. This means, for example, that when we fill a retail order for 9,000 shares of a stock, execution quality is measured based on the NBBO price level, no matter how many or how few shares are available at the NBBO price. When we fill an order for more size than is available at the NBBO, that provides the retail investor with size improvement, and it happens a lot. In fact, in 2020, 45% of the shares we filled were on orders that outsized the entire NBBO. That's 45%. If Rule 605 was updated to measure this benefit, as many folks have requested, including numerous retail brokers and exchanges like Nasdaq, regulators and brokers would see that in 2020, Virtu provided over $3 billion in price and size improvement to retail investors. That's 3 times the amount reported under Rule 605 today. It defies logic to conclude that this price and size improvement retail investors receive today would exist if, as some critics suggest, retail orders were all sent to exchanges. Thankfully, in part due to the requests from Virtu and many other brokers and exchanges, the SEC is now reviewing Rule 605. In addition to having a complete view of all available data, which means actual trades, not theoretical models, having an accurate understanding of our current market structure is imperative to conducting a thorough review and proposing changes that help, not hurt, retail investors. We have had multiple meetings with regulators and politicians to help correct various myths and misconceptions that cloud the existing debate. In our report that I just mentioned, which is included in the appendix of today's investor presentation, and in our discussions with the staff and commissioners at the SEC, as well as folks on Capitol Hill, we use data to address their concerns, and we will be releasing a follow-up paper to provide even further important details. At Virtu, we serve as a trusted counterparty to nearly every retail broker and wealth manager in the United States, but also to all of the top broker-dealers and hundreds of institutional buy-side firms, including the top 10 asset managers in the United States. Regulators, politicians, and critics will continue to see the massive benefits of the ecosystem which regulation, competition, and transparency have created for retail investors. With that, Joe will now provide more details on our quarter and our growth initiatives. Joseph? All right. Thanks, Doug. I will give you some thoughts on Virtu's ability to generate growth through both organic initiatives and through the excess cash flow we generate, and how this all translates into revenue and earnings growth rates over time. If you look at slide 5 in our supplemental materials, we tried to distill what a peak-to-trough growth rate for Virtu looks like. We're reproducing it here. Understanding that our results will be volatile on a quarter-to-quarter basis, on this slide, we have distilled the historical pro forma median [NT] for Virtu. That's assuming Virtu, KCG, and ITG were one company from the time Virtu went public. You can see that this is the $5.5 million per day. Using the current operating expense projections, this translates into $2.69 of EPS. Using the current capital structure, it produces $831 million. This is the historical median performance over a six-year period that excludes any of the growth initiatives Doug talked about. Next, we look at the parameters around the growth initiatives. Again, these amounts may be themselves volatile. We believe a near-term set of organic initiatives can generate between $500,000 per day to $1.5 million. We applied some marginal cost figures to these amounts and arrived at the 18% revenue and 26% growth rate you see on this slide, and that is assuming no share repurchase. While we understand this growth is difficult to determine on a straight-line basis, I wanted to point out this real underlying significant growth in Virtu's core business. Layering on top of this growth is our ability to generate significant cash flow. Virtu generates significant amounts of free cash flow across any environment, including an environment like this one, in this quarter. It's worth noting that even in this more subdued environment, our business generated $0.63 of EPS, almost 58% EBITDA margin, and we were able to buy back approximately $100 million worth of our shares. With our current overall debt levels now at a long-term sustainable notional amount of $1.6 billion, our quarterly dividend of $0.24 more than secure, and no immediate plans for any major acquisition, our ability to devote a substantial cash return to repurchases will continue. We believe this cash flow is substantial in relation to our current market capitalization and allows us over time, in any sample time period through the cycle, to acquire, through open market repurchases, a meaningful percentage of our company. Importantly, if you look at the chart at the bottom of the page of slide 5, you see the annual amount of free cash flow expected to be generated by Virtu at various hypothetical NTI amounts. Corresponding percentages represent, based on shares outstanding, the amount we can repurchase in any one year. It's important to note that these are annual amounts. Even if you factor in a full year at the lower end of the chart, at any given time period, we should be able to repurchase a significant amount of our company. For example, in the first half of this year, we have averaged $8.6 million per day in NTI. We have repurchased $195 million of our shares year to date, representing approximately 4% of the total shares outstanding, and this is consistent with the guidance we've provided. Our organic growth initiatives, while again, themselves volatile quarter to quarter, are real and accrue to our bottom line and have significant runway to grow. These organic initiatives, together with the substantial cash flow and appropriate levels of debt going forward, enhance our evidence of Virtu's ability to thrive in any environment while producing significant returns to shareholders. Sean? Thank you, Joe. The second quarter, as presented on slide 3 of our supplemental materials, our Adjusted Net Trading Income, which represents our trading gains, net of direct trading expenses, totaled $342 million, or $5.4 million per day, which is 49% lower than Q2 of 2020 and 55% below the first quarter. Market making Adjusted Net Trading Income was $232 million, or $3.7 million per day, 58% lower than the year-ago quarter and 61% below the first quarter. Execution services Adjusted Net Trading Income was $110 million, or $1.7 million per day, which is a 6% decrease year over- $84 million or 20% less than Q1. Our cash and overall compensation ratios were 21% and 25%, Adjusted Net Trading Income respectively. As I previously said about our compensation ratio, consistent with best practice, we accrue year-end temp compensation to a range of percentages earlier in the year. Depending upon how the remainder of the year unfolds, this may result in adjustments to our compensation ratio in later quarters this year as we refine our specific compensation targets. Overall, we believe that our full-year cost results will be consistent with the specific cost guidance we previously provided for 2021. adjusted EBITDA was $197 million for Q2, 59% lower than the prior year quarter and 65% below the first quarter. Our adjusted EBITDA margin was 57.6% for the second quarter, which is down 20 points from the first quarter, continues to be reflective of our efficient cost structure and disciplined expense management. As Joe mentioned, our capitalization remains adequate. Our long-term debt was $1.6 billion at quarter end, reflecting a $35 million repayment in the second quarter. Finance interest expense is $20 million for the second quarter of 2021 compared to $22 million for the prior year second quarter, with this decrease primarily due to the repayment of $289 million of long-term debt in 2020. We remain committed to our $0.24 quarterly dividend, which we have consistently paid over 24 quarters in every environment since our IPO. Our approximately $100 million share repurchase in the second quarter demonstrate our continued commitment to return capital to our shareholders. I'll now turn the call back over to the operator for Q&A. We will now begin the question and answer session. The first question comes from Rich Repetto with Piper Sandler. Please go ahead. Good morning, Doug. Good morning, Joe, and team. I guess the first question is a follow-up on the size improvement that Doug, I've got a chance to go through the deck and see the deck again on it. I guess the question is about that you brought it to them and they're reviewing the Rule 605 reports, but are you getting any, what do you call, indications that this is actually sinking in, they're absorbed next in the coming months? Yeah. Good morning, Rich, thanks for the question. I think it has been very impactful. The response from, I'll talk about the regulators in a second, from the industry was, wow. We recognized that 605 was outdated and that there was need for reform. Frankly, the primary driving force behind our report was there was this narrative myth out there that somehow, oh, odd lots are skewing the data, and a lot of the critics were saying it's just about odd lots on Robinhood, blah. Well, that was complete bunk. We knew it was complete bunk, and we debunked it. We just showed the data and said when you actually include odd lots and assume they're quotes, then it actually improves the 605 statistics. We kind of flipped the script, if you will, on the critics there. We're all about myth busting here and providing facts and data. When we brought this to the regulators, I think they were frankly shocked and in a positive way that I don't think they recognized the value. It's not just Virtu, it's the entire wholesaling ecosystem. It's Citadel, Susquehanna, the other six or seven competitors that provide this price and size improvement. It's meaningful. When you segment order flow, it permits the wholesaler to the great benefit of the retail investor to have meaningful size and price improvement. I said it in my script, and let me reiterate it. 45% of the shares that we fill, the orders that we get exceed the liquidity that is at the top of the book on national securities exchanges, 45%. 54% of the notional size. There we are providing real liquidity to small and mid-cap issuers. This is exactly what the regulators and the critics want, and this is what helps capital formation. There was an intense focus at the SEC in the last 10 years in terms of how do you get liquidity to small and mid-cap names. Well, there it is, folks. That's what we do, right? If the wholesalers weren't there, you would have enormous widening of bid-offer exchanges and the capital markets would suffer. The evidence is compelling. At the end of the day, the SEC has always been driven by facts and data. That's what they're there for, right? Analyze the facts and data that are available to them and then propose rules and regulations that enhance the marketplace. Every one of the proposals I've heard thus far bandied around in the Twitter sphere, if you will, would have the opposite effect. We're going to continue to be forceful advocates for what we think is right. We're going to continue to be very transparent and positive in how we present this information, and we're going to continue to be responsive to requests for data. As I said in my prepared remarks, we're updating our reports to include some supplemental questions. We've got to address the narrative somehow that execution quality in Canada and Europe is better because they've banned or they've limited PFOF. Actually, the opposite is exactly the case, that there's lack of competition out there. The opposite is exactly the case. Price improvement has increased 750% since 2013. The facts and data don't lie. When regulators look at that, and this is a country of laws and rules, right? The Administrative Procedure Act is very, very clear. If you're going to start changing rules and regulations, you better have the facts and data to support them. This isn't about politics. This is about impacting marketplaces. We take our responsibilities very, very seriously as a market regulator, and we know that regulators will do the right thing, and we're here to assist in that process. Thanks, Doug. That's very helpful. Maybe if you could do it simple, so I think most of us can understand it, but a lot has been said about payment for order flow not being accepted in Canada and Europe. Could you explain why that is in sort of simple terms, brief terms, so a lot of us can follow along with it, but that's been used as a big comparison, I guess? Yeah, look, I understand the appeal and the headline of saying, well, if payment for order flow is banned in Canada, for example. In Canada, there's I want to be very careful about how I describe this because I don't want to disparage anybody's motivations, but there's no price improvement in Canada. The retail brokers, which in large measure are the large financial institutions, because of the market structure up in Canada, which provides for price-broker-time, right? If you are a broker and you're posting as a market maker an order, you're able to have priority over other market participants. If you have a retail broker that has the order, the order gets sent to a national securities exchange, the dealers can selectively internalize, right? Because of the price-broker-time preference. Firms like Virtu, Citadel, and others are effectively excluded even if we have the ability to match or even improve that price. You have selective internalization in Canada. Talk about conflicts, right? There's concern that payment for order flow creates a conflict between the broker. How about a marketplace where the retail broker is the market maker? Right? People's hair would be on fire here in the United States if they saw that level of conflict. In Canada, if you're a retail broker and you choose not to internalize an order, you can route that order to a taker-maker venue, and you have a firm like Virtu, Citadel, et cetera, that they're making progress. Well, that's just payment for order flow by another name. Right? Again, I have no problem with that. I think that's part of what makes markets function. Let's not mischaracterize Virtu, and I'm very proud of the ecosystem because it's just much better. I'm happy to go through Europe. I don't want to belabor it there. Effectively, the bid offer is just widened out rather than having a direct rebate. No concern that the level of competition and transparency here is just markedly better, and the experience is markedly better than any other jurisdiction. The facts and data don't lie. The next question comes from Ken Worthington with JP Morgan. Please go ahead. Hi. Good morning. Thinking about new initiatives, it seems to me like Virtu is well-positioned to further expand into the 606 or 605 versions of market-making for both equity options and crypto. Both seem like big businesses and potentially big opportunities. I guess, is it logical to extend your current presence in options in crypto to the equivalent of the 605 business? Is this where you ultimately expect to take these asset classes for Virtu? If so, what are the challenges you see in expanding your market-making there? What is the reasonable timeframe to build out these businesses to scale in those asset classes? Yeah, great question, Ken. Thank you, and good morning to you. Let me address options first. Categorically, that's the plan. I mean, we have all of the infrastructure in place. That's a nice way of saying we have the relationships with Schwab, the [ETF], and all of the other aggregators of retail options flow in this country. I've said many times on these calls, and in my conversations with investors, that we began our path towards being an options market maker by taking on the most challenging of challenges, which is to be a market maker in index products on lit exchanges in the U.S., right? That is what I would call the knife fight, and you got to bring a big machete to that knife fight if you want to be successful. Well, we have seen success. We've built the infrastructure where we have a very robust, low latency infrastructure that we were able to leverage off of. We've built the technology in order to become a firm that could quote in options and to be competitive in options. We have all of the tools to compete, and we've got significant resources to do that. Now we have the relationships on the other side, and candidly, all of our counterparties which trust us and which have gotten great service and experience from us in cash equities have asked us to be a competitor. They want more competition. There are two firms today that are very significant players. They're great firms. We're not suggesting we're going to overtake them tomorrow. We're not. It would be wonderful to be number three at some point. That would be a success in the first instance. In terms of when that will launch, we will launch that sometime in 2022, probably in the first half, Ken, and we hope to see meaningful runway. I'm excited about it. This is a similar feeling to I had back in 2008 and 2009 when we were starting Virtu. We had nothing. It was Vinnie, myself, and another partner, a bunch of capital, and some great ideas. We grew Virtu really from nothing to something that I think is very meaningful. It's the same kind of feeling we have in options. We have a wonderful team, which is both an internal team, and we've supplemented with some wonderful people from the outside. We're excited. There's a ton of runway there, and you can make your own estimates on the total addressable market. With respect to crypto, it's a similar story. Obviously, we want to make sure that the regulation sort of catches up to the marketplace. We've taken great strides in Canada and Europe, where there have been ETFs that have been launched. The chairman was on television this morning, talking about regulation of crypto exchanges and how that's so important. I couldn't agree more with him. We think that's incredibly sensible. Again, we have all of the accoutrements, if you will, to manage the counterparty risk to be a meaningful participant in crypto. It's spot, future, and ETF. It's kind of right in our wheelhouse. That's the beauty and the scale of the model that we've created. We've always said we wanted to be a ubiquitous market maker that could be at the bid and the offer as much as possible for as long as possible during the day, and that's the Virtu DNA. We've supplemented that with customer market-making through the acquisition of Knight. We've expanded our reach, and these two initiatives are of that expansion. Okay, great. Just following up on that, as you expand into the 605 business, how should we think about capital requirements or even other risks to further building out those businesses? Yeah, it's a great question. I'll address the risk first. Obviously, when you are making markets in single names, there's idiosyncratic risks, both from a dividend and a corporate action perspective with regard to those names, right? There's clearly more risk, no different than the risk we took on when we bought Knight, and we became a market maker in 8,000 names. It's very different from what we did at legacy Virtu. Options are a different breed, right? I don't speak to Greeks particularly well. We have people here that do. Clearly, in terms of idiosyncratic and volatility curve risk, there's more exposure, and we will manage those in a Virtu-y kind of way. We have our global risk management framework, can cover that. We'll supplement it with subject matter experts in options, which we already have, and we will continue to market-make in the Virtu style. This is not going to be a firm that's betting on vol curve. That's just not what we do. We don't bet on directions of markets. We certainly don't bet on the direction of volatility. We need to understand the vol curve, and we've built models to price it. At the end of the day, that's not really what we're about. We're not a hedge fund that makes bets on things. Managing risk there will be meaningful. In terms of capital, I'm going to actually ask Joe to address that because he'll do a much better job than I will. Okay. It's a market that is suited to Virtu's style of market making, like Doug said. There's essentially cleared. We would use a prime broker. Anything that we put out there in terms of a capital plan for share buybacks and different amounts of cash flow at different levels of ANTI contemplates required capital for expansion. It doesn't matter whether it's options, ETF block, or even crypto. Crypto's a little bit different in that we're managing different counterparties. We are very conservative initially here in terms of how we access counterparties and how we just manage that exposure. The last thing I should mention is, Joe, if you were finished, which is with regard to options, the thing that's obvious, and I'll state it again, is that we have the delta hedge in all these products, Ken, right? We're really, really well-positioned. We're obviously a large market maker in U.S. equities, also commodity products. Internationally, we're going to be launching an Asian options business in the fourth quarter of this year. We're already there. That's just in terms of adding some subject matter experts. We have connectivity, and we have the delta hedge. The growth in options just enables us to achieve more synergies within our equities business globally and within our commodities business. We're excited about it going forward. Okay, great. Thank you. Thank you. The next question comes from Dan Fannon with Jefferies. Please go ahead. Thanks, and good morning. I guess as a follow-up is just on when we think about options market making, and you obviously saw strong quarter-over-quarter growth despite industry volumes coming down. As you look at the capabilities and what you've built out, is there anything that you're lacking? Just trying to think about the potential of this business and kind of the growth from here. Is there anything on your end from either a capability, technology, functionality that still needs to be built out? Or is it now just more kind of the blocking and tackling of normal competition? Yeah, no, Dan, it's a great question, and good morning. Look, it really is blocking and tackling. Like I said in answer to the last question, it feels to me like it's 2009, and I'm a younger man, and we're at Virtu, and we're starting to launch U.S. equities, and then we launch FX, and then we launch energy products. It is a laborious time taking, if you will, activity to grow a business. It's what we have done exceptionally well here. You grow in step functionality. I remember when we launched Virtu, the first day we traded, we had spent a year getting the thing ready, and we made $24,000 the first day. Vinnie said to me, Don't worry, the next time you'll get excited when it's $100,000, then you'll get excited when it's $1 million. You know what? He was right, as he was right about a lot of different things. It's the same thing with options. We started two years ago, we were making a pittance, and we're banging our head against the wall, and all of a sudden, you have a good day and you get connectivity, and you add new venues, and you learn about the micro market structure of each venue. It is a very difficult thing to build a market-making business. The good news is we've done it before. We have all of the blocking pieces, and all the credibility, and all the capital that we need to do it. It's just a question of doing the hard work to build the business. We've done it before at Virtu, and we will be successful in it because that's what we do. There's no impediment. The only impediment is the frustration of time and of having the right personnel to do it. It's just going to take putting our heads down and doing the hard work, which we like doing here at Virtu. Got it. Obviously the environment, much different 2Q versus the previous several quarters. Could you maybe talk about the progression of ANTI throughout on a monthly basis, kind of throughout the quarter? I know that you've gone away from kind of the shorter-term stuff, but maybe some context for how Q3 has started and just from kind of a run rate perspective. Yeah. That's fine. Obviously, we've gone away from monthlies. Yeah, the quarter was. I don't recall each of the months. I could probably look them up here. I have no recollection that there was a big uptake and then a downtake. It was kind of around the same feeling for the entire quarter. It felt like a little bit, Dan, like the market was just taking a deep breath. Between the election and all of the events, shall I say, surrounding that, a new administration, COVID spending bills, potential changes to tax policy, opening, reopening, what's going to happen, vaccine rollout, all this kind of stuff. It was clear that the marketplace was taking a deep breath. Volumes overall were down. Volatility was markedly down. payment for order flow for equities, for example, was down 41% from Q2 to Q1. That's obviously a significant indicia about our retail engagement. There was just a lot narrowing of spreads during the quarter. You could see because of realized volatility being down almost 40%. Look, we were very competitive during the quarter. We gained market share in our 605 business. Our options business continued to grow. It's a constant fight here, if you will, to continue to maintain and grow our market share and to improve our growth initiatives. That's what we continue to do. Was I satisfied with the quarter? No, I'm never satisfied with the quarter. If we had made $0.68, I would've said we should have made $0.72. That's what you want out of a CEO. I've never been satisfied with any quarter we've ever had, even when we've made $2.05. I know we can do better, and we will continue to do better. The most important thing, though, is that the plan that we laid out a year and a half ago, whatever it was, where we said, "Listen, this is what we're going to do. We're going to grow this firm organically. We're going to continue to fight to maintain and to grow same-store sales. We're going to manage our expenses the way we've always managed our expenses, and we're going to be incredibly judicious about capital management." That's a nice way of saying, every penny here that we don't need for market making, that's not nailed down, we're going to return to our investors in the form of our $0.96 dividend and buying stock back. That's my game plan for the foreseeable future. Thanks for answering my questions. Thank you. The next question comes from Alex Blostein with Goldman Sachs. Please go ahead. Hey, guys. Good morning. Thanks for the question. Look, so the market making business continues to be volatile, as we know, quarter to quarter. I was hoping we could take maybe a little bit of a step back and, Doug or Joe, if you could talk about the confidence level around sort of the lower end of the range of NTI per day, so call it about $6 per day in your slides. As you look out this year, next year, the year beyond that, right? Maybe help us frame how much in your budgeting plans and your growth initiatives is expected to come from things that are smaller today, like options that might scale, that could compensate for any of the volatility in some of the legacy businesses. Just trying to get a better framework of how to think about the kind of the minimum revenue levels for the company. Hey, Alex. It's Joe. The answer really isn't any different than over the past year. When you look at slide 5, those illustrative ranges of outcomes where the chart starts with 6, I think from the first time we put this chart out, every time I've talked about it, we emphasize this is an annual range, right? This is an annual illustrative range, that quarter to quarter we could be below it. Look at the first half of 2008, we're at 8.6, right? Why are we confident kind of starting the chart at 6? Again, look at slide 5. Look historically. Stripping out all of the initiatives, stripping out the organic growth, options, block, and everything else we talked about, the three companies together, you're going to historically 5.5 average ANTI. We hit on the growth initiatives. This is why on an annual basis, I think we're very confident putting out this chart and saying that's the low end. Quarter-to-quarter, things are going to continue to be volatile. We take a step back in this quarter to look at the levels of volatility, look at where we are. We're printing a 16% quarter in a [pretty environment], and buying back $100 million worth of stock, 4% of the company. I think, as Doug said, we're just going to keep hammering on that. Year-to-date, if you look, we're between 8 and 9. All the numbers that we put out in terms of share repurchase, in terms of where we should come in EPS, we're spot on in terms of that guidance. Still feel pretty good about simplifying the story that way. Okay. I guess just around the new initiatives again, like options, when you look out the next, let's say, year to 2, what% do you think of ANTI could come from things that are much smaller today? Well, again, I look at it, you look at the new initiatives chart, you can see there's in 2018, you do 160,000 a day, and in a muted quarter, they're at half a million a day. First quarter of 2021, they're almost 1 million. We put that range in of half a million to 1.5 million. I think they'll continue to grow through the cycle. The options are much better. Just look at it versus the median. I think it's hard to pinpoint on a straight line basis, Alex, just look at it at this quarter is 9%. It's been consistently between 7%, 8%, 9% over the past couple of quarters and past year. I'd expect it to uptick a little bit as we continue to hopefully get closer to that 1.5 a day. I'd expect it. All right, cool. Thanks very much. Sure. The next question comes from Chris Allen with Compass Point. Please go ahead. Good morning, guys. Maybe just to follow up on Alex's question on the new initiatives. We saw year-over-year decline from 2Q '20 to 2Q '21. I'm assuming most of that decline was driven by lower contribution from the quant strategies from KCG. Maybe you can just give us some color there. What saw year-over-year growth and what businesses within the new initiatives feel better on a near-term basis versus others right now? Yeah. I think I'll take that one. You hit it right on the head, Chris, which is there's going to be volatility within the growth initiatives because there's more marketplace opportunity. For example, ETF block in the 2nd quarter of last year, maybe I kind of wish that would happen again today, because we'd be better positioned for it, but you probably couldn't have a better environment for fixed income ETF block market making than you had in the 2nd quarter of 2020. It's kind of hard to compare Q2 2020 to this period because realized volatility is down 65%. A lot of what we're doing there, options, block ETF, is susceptible to the whims of volatility. Right? You're going to see that. Capital markets, which is more of a commission-based business, no. The lion's share of what we're doing in the growth area will be impacted by volatility. The way to look at it is look at it over the longer cycle, as Joe indicated, and look at what the CAGR is, and it's meaningful. There's nothing really to read into there other than they are parts of our market-making business. They will continue to grow organically as they have. There will be periods where volatility ramps it up and ramps it down. As Joe said, it is consistently somewhere between 7%, 8%, 9% of our net trading income. Our expectation and hope is that as a contributor to the overall firm P&L, that they continue throughout the cycle to grow. Chris, we break out, we bucket the initiatives into existing markets growth versus new markets. If you go back to the earlier periods, if you look at 2018 on that slide, most of those amounts in 2019, most of that was from the existing markets, right? In a volatile business where you have a quarter like the second quarter of 2020, which is a great environment, the growth in the existing markets, the legacy KCG strategies and the ETF block business are going to perform better, right? You're starting from a much smaller base in the options market making and the market and some of the other stuff. Those are continuing to grow. It's just growing from a small base. That's another reason why your intuition is correct. Got it. I also wanted to ask about Execution Services. Last quarter, if I recall correctly, you talked about some of the growth in the recurring elements of the business had been taking market share from other players. Maybe you could give us an update on both of those angles and maybe talk about where you are from a customer penetration perspective? Yeah, sure. Great question. I love that business, right? We obviously've grown it organically from an inorganic start because we combined the Knight and the ITG businesses together. We extracted a meaningful amount of synergies. Let's be candid, when you price a customer business and you effectively say to every customer, "We're migrating everything you've been using for the last umpteen years" is terrific. Guess what? We're migrating onto this new technology and this new platform called Frontier, which is a Virtu system. Trust us, it'll be better. You'll have a better experience. That's been a bit of a process. I am very grateful and thankful to our customers who took the time to do the A/B testing, and they have seen that the Virtu system is highly performant, and so as a result, we are winning share and winning wallet. Our market share in Q2 was higher than it was this time last year. We are adding new asset classes to Triton. Triton executed its first fixed-income trades and its FX trades during the quarter. We added new asset classes, CDS and swaptions, to our [RFQ-hub] product. We're doing things that we talked about when we bought ITG, we merged with ITG rather, that we thought would be impactful to our customer base and will help us grow, and that's what we're doing. We're focusing on leveraging our core technology to do more for our clients and addressing opportunities that we find in the marketplace, and we will continue to grow. In terms of the capital markets business can be a little more up and down. A little more lumpy is probably the right way to describe it, similar to, I guess, what you'd see at a large investment bank. Capital markets has been a fantastic business for us. The guys that run it are wonderful and have vastly exceeded even my own aggressive expectations as to performance. It was down from Q2 to Q1, not by any fault of their own, just because the market was less robust. I continue to be excited about the trajectory of our execution services business led by Steve Cavoli, who's done a great job. The last thing I'll say with regard to some of our subscription businesses, we really launched these big data offerings, I guess you would call it, our Open Intelligent and our Open Python products out of our analytics business, which clients and customers really like a lot. A lot of really good tailwinds in that business. Again, it's still going to be driven a lot by volumes and what the marketplace offers, but excited about that business going forward. Thanks, guys. Let's go back to queue. The next question comes from Sean Horgan with Rosenblatt Securities. Please go ahead. Hey, guys. Good morning. I hate to continue to harp on payment for order flow, but I do have 1 question, maybe for you, Doug. It seems there's some misperception of wholesalers' dependence on PFOF. I was just wondering if you could explain, in your own words, what the impact of a ban, putting aside the chances of that happening, would be on Virtu or wholesalers in general. Thank you, Sean. It's actually a great question. In my little diatribe before, I should've actually mentioned this. Payment for order flow is an expense to Virtu. It's picked up in our BC&E line, in our GAAP financial statement. It's an expense to us. It's not revenue to Virtu. Obviously, we're paying it. Every single retail broker, wealth manager, whatever you want to call them globally, that sends us 605-eligible order flow does it based on the amount of price improvement we are providing to that broker. Let me repeat that. Every single broker we get routes to us based on price improvement, not payment for order flow. There is a small subset of retail brokers. We all know who they are. It's all public, it's all transparent, it's all out there. Yes, there's a conflict, but yes, it's fully disclosed that as part of our arrangement with them, ask us to pay them a rebate. That's fine. It's been going on for 30 years. This is not some new nefarious market structure, niche of the market that somehow some people uncovered. The ecosystem works. If payment for order flow were to be banned, which it will not be, because that is nonsensical. It is fostered innovation in this country. I cannot believe in a rational world that that would happen. Putting that aside, it would have no net effect to Virtu at all. You might ask, "Why am I doing this and why am I so strident about it?" Because, one, my customers like it, and two, I think it's just the right thing to do. I think this ecosystem, I'm very, very proud of it. At the end of the day, there are brokers, including a very big one in Boston that everybody knows, that doesn't take payment for order flow for cash equities, and that's fine. They route 99% of their marketable orders to wholesalers. Why? Not because they're getting any payment for order flow. They don't take a nickel of it in cash equities. They route because we provide superior execution quality and a guaranteed execution. They've effectively outsourced that service to Virtu and to the 6 or 7 other wholesalers that they deal with, and these are really, really smart, really, really successful people with access to every piece of technology and understanding of the market that they possibly could. In what universe is that wrong? In what universe is that not good for the retail investor? Again, that's why we'll continue to be front-footed on this, positive and strident and very transparent, because I know that the wholesaling ecosystem has provided an enormous amount of value, and has enabled an enormous amount of innovation. People talk about lack of access to this and that and equality and whatnot. We should all be very proud that in this marketplace, anybody that has an iPhone or type of device can download an application from, I don't care what broker it is, and for $0, $0 commission, can buy not only just a share, but $5 worth of some stock that they may have interest in. That's empowering. That's democratization of a marketplace. That's what competition and regulation has brought to this country. We should all be very proud of that. Great, thanks. Sort of along those same lines, we've heard talks of vertical integration from the retail brokers, and things like that. Just wanted to get your thoughts on that or just an update on what you're seeing on the M&A front, in general. Yeah. It's a great question. Look, I think when people say, I'm not trying to talk about any particular broker or anybody, what anyone has said. They're all my customers. We love them all. Okay. I am the Switzerland here of customers. At the end of the day, people are concerned about conflict. The notion that a retail broker would somehow start up a market-making unit and try to internalize its own flow, if there is concern about payment for order flow where you have a third party, multiple third parties in a fully transparent, regulated way providing a rebate, can you imagine what the regulators down in Washington and at FINRA would say about a retail broker starting up its own wholesaling unit? That's the first thing. The second thing is it lacks a fundamental understanding of how wholesaling works. The reason the ecosystem works for Virtu, Citadel, Susquehanna, Two Sigma, UBS, and everybody else is because we have 200 relationships. If we were solely a market-maker for pick your name of ABC broker, we would not be in business today. It doesn't work that way. You need a full cornucopia of these orders that balance against themselves. We have had many periods of time, days, weeks, months, this will surprise people, where we are losing a meaningful amount of money from large retail brokers, individuals. Right? We adjust our execution quality. Sometimes it gets better, sometimes it gets worse. If we were solely trying to provide market-making services to a single retail broker, it would not work. The notion that a retail broker, which has no ability to do this today, would somehow wave a magic wand and throw some fairy dust on a situation and become a wholesaler with regard to its own order flow, candidly is almost naive. Please go ahead. Okay. -sized quarter where we kind of get that back to the nominal level that we think we are at today. We're at the right capital structure today. I guess, to the extent that you want to model in a kind of like a re-upping of any kind of a reduction because of a required repayment, then you're right, Got it. Okay, thanks. Apologies if I missed this earlier. I hopped on late, but just hoping you could talk a little bit about the monthly progression of the Adjusted Trading Net Income throughout the second quarter, and maybe you could also touch upon the mix and composition within the different strategies, how that sort of evolved, and then how you see the environment shaping up in July for the environment relative to those three months of the second quarter. Thanks. Yeah, sure. Great question. Dan Fannon, I think, answered about this before. Obviously, we've gotten away from monthly results. What I did say is, to my recollection, there wasn't a material swing from April, May, June. It was kind of a consistent month. I said earlier, I'll repeat, which is that, it felt like the wind kind of came out of the market a little bit, and people kind of took a deep breath. Volumes were down almost 30% and realized volatility was down 30%-40% on all of the metrics I know you have access to and you're aware of. That kind of combined for the type of quarter that we had, which again, if this is the new normal in terms of volume and volatility, we'll take it. It provided a reduced market-making opportunity. We gained Rule 605 market share. Our ETF block volumes were roughly flat relative to the marketplace being down. We continue to march forward. Again, I've kind of gotten away from the monthly financial, and I've gotten away from prognosticating about the next quarter. I'm not going to really comment on July other than to note that it looks like some of the volumes and volatility numbers are coming back in July. August has always been either kind of a feast or famine kind of month, Michael. Sometimes when the S&P downgraded the United States in 2012, it was a great month for a market maker, and then other years everybody's in the Hamptons. Maybe they're in the Hamptons already because they've been there for a long time. It's kind of hard to look forward beyond that. Again, we're running this firm for the long term and trying to get away from kind of forget about quarter-to-quarter fluctuations, but certainly month to month, because I just don't think that they're really meaningful in the longer story that we're trying to lay out here. Great. Thanks so much. Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Douglas Cifu for any closing remarks. I just want to thank everybody for taking the time, and I would be remiss if I did not note and comment as [Christian Cannon], [Billy Holsogge] about [Rich Repetto's] running style. Rich, we're proud of the fact that you're out there exercising, and we assure you that you are much faster than Joe and myself. We are not a running management team. We would beat you in the shot put. Anyhow, we look very much forward to engaging with our investors and talking to you all next quarter. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.