More annual reports from Virtu Financial:
2023 Report2019 Annual Report 20 19 1 2 3 4 5 6 We are Virtu A message from our CEO Our evolution Our numbers 2019: A year of transformation Knowing who we are Leadership Our people Investment case Corporate social responsibility Corporate information 06 08 10 12 14 16 32 37 38 40 42 Transparent trading solutions meet advanced technology 6 // 44 7 // 44 We are Virtu One for all. Virtu is a global financial technology company delivering innovative, transparent trading solutions that are designed to reduce investors’ end-to- end cost and provide reliable liquidity to global markets. Virtu was founded on the belief that transparency enables market participants to make better, more informed decisions and that all investors benefit from markets that are more efficient. We use technology to solve problems and reduce risk. Virtu’s application of technology to create solutions, automate processes and enhance risk controls has enabled us to provide customized, reliable liquidity and raise the bar of transparency into client order handling and trade analysis. Our DNA. Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 8 // 44 Virtu Financial 2019 Annual Report A message from our CEO Change is constant. I have always believed that the cornerstone of Virtu’s success lies in our ability to scale and adapt our technology and services to meet the market’s demands. Our willingness and flexibility to redefine and expand what Virtu means to our clients, shareholders and the global capital markets is what keeps us at the forefront of such a rapidly evolving industry. Over the course of 2018 and 2019, we observed an accelerated pace of change, largely driven by technology and continued fragmentation of capital markets, leading to the increased adoption of electronic trading solutions across more asset classes. In response, we invested in adapting our complementary strengths to meet the growing demands of our institutional clients. In March of 2019, we completed our acquisition of ITG which added significant scale to our growing business. ITG was a pioneer in the global execution services business and our combination leverages Virtu’s financial technology—the same technology that drives our market making performance— to optimize all aspects of the business, from order routing and algo performance to middle- and back-office efficiencies. In the first year following the ITG transaction, we made significant integration progress, realizing meaningful synergies within both revenues and expenses. We have enhanced our operating leverage and scale, improving our competitive positioning and allowing us to launch new organic growth initiatives that leverage our existing capabilities. Central to Virtu’s mission, we have also amplified our ability to help clients source liquidity and improve their workflow. Some of our 2019 initiatives included: the launch of Execution Concierge Service (ECS), our global and broker-neutral outsourced trading service; the expansion of our Analytics Portal; the release of Triton Valor, our next generation and multi-asset class global execution management system (EMS); technology and logic upgrades to POSIT Alert, our anonymous block indications network, which improved latency in the US by 73%; the introduction of Virtu Capital Markets, which assists public companies raising equity capital through our At-the-Market (ATM) offering; and the extension of our asset class coverage through the addition of fixed income and FX products to our Trade Analytics and Data suite. We also took important steps to further strengthen our balance sheet by refinancing our long-term debt and locking in lower rates. We remain committed to paying our dividend, which has totaled 85% of earnings since our IPO in 2015. Thus far, 2020 has posed a completely different challenge. Although we are still in the early days of seeing the full impact of COVID-19, I am struck by how acutely the pandemic has touched so many facets of daily life—upending communities, businesses and economies the world over. Historic levels of trading activity and volatility have spread across all markets and asset classes, testing people, networks, connectivity and systems. We remain focused on the health and safety of our employees and we are operating with over 95% of our global staff working from home. Our people have been amazing at adapting to this challenging environment and we have continued to innovate and deliver client-driven solutions in these difficult times. I am honored, in better times and especially during this period of uncertainty, to lead a team so passionately devoted to delivering excellence in all aspects of our business and client-service efforts. Our people are the best of Virtu. “There is power in continually refocusing on the idea of change—it has helped define Virtu’s legacy and it will be instrumental to our future.” As a trusted trading partner and liquidity provider to the global markets, we play a critical role in the electronic trading ecosystem by supporting the orderly transfer of risk and ensuring a well-functioning market. Today, our market making operations leverage technology to provide liquidity for investors and other market participants on hundreds of venues in over 35 countries around the world and our two-sided liquidity facilitates price discovery in over 25,000 financial instruments. In 2019, we improved price on over 75% of retail orders, delivering over $300 million of price improvement to retail investors. As a financial technology company, we have no omniscient view on the direction of markets or market sentiment; what we do is adhere to our founding principles: integrity, transparency, innovation and reliability, and this has served us well. From the earliest days in the commodities trading pits—where price discovery and transferring risk from buyers to sellers was confined to the floors of exchanges and transactions took place by hand signals, open outcry and paper trading tickets—we have charted Virtu’s growth trajectory guided by these standards. Our capacity to quickly adapt to changing environments is not only a competitive advantage, it fuels our objective to deliver, for the buy-side, a transparent and efficient one-stop shop to service their needs throughout the entire trade lifecycle. 2019 was a busy year, and if the first quarter of 2020 is any indication, we should expect more of the same this year. Today, more than ever, our clients rely on us both for the liquidity access we provide them and the high quality, independent, useful technology and measurement of their performance. They put their trust in us every day—a trust we have earned over many decades. Despite changes brought on by COVID-19, we are improving our platforms and refining other tools so that we, our clients and our investors can all emerge stronger. There is power in continually refocusing on the idea of change—it has helped define Virtu’s legacy and it will be instrumental to our future. Douglas Cifu Chief Executive Officer Virtu Financial 2019 Annual Report 10 // 44 Our evolution Our journey to success. 11 // 44 2008 2011 Virtu Financial founded by Vincent Viola, former Chairman of the New York Mercantile Exchange, and Doug Cifu, Virtu’s CEO Virtu Financial merges with Madison Tyler Holdings, a financial technology firm founded by Vincent Viola 2015 Virtu Financial completes IPO 2017 Virtu Financial merges with KCG Holdings, forming one of the world’s leading financial technology firms 2019 Virtu Financial merges with ITG, a pioneer in technology- enabled trading solutions since 1987 Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 12 // 44 Our numbers $1.5b revenues 1 13 // 44 $975m adjusted net trading income 1 $300M+ >30% price improvement provided to retail investors 1 market share in retail order flow 2 Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual ReportSource: Virtu Financial; 1 Fiscal 2019; 2 Based on latest available statistics at 12/31/19 14 // 44 2019 Milestones 15 // 44 2019: A year of transformation How we build an even stronger Virtu. As financial technology accelerates we know that complacency can lead to extinction. We stress agility and constant improvement as the qualities that fuel our success. This requires excellence in client service, a thorough understanding of market structure and disciplined measurement of our response which governs the strategic deployment of our people and capital for the most beneficial outcome. Our ongoing investment in innovation enables us to build and refine scalable products which allows us to tap into new markets and provide liquidity and client solutions in a variety of market conditions across the globe. Our applications are developed and used in-house which reduces testing and implementation lag. This approach helps us to seize growth opportunities in a targeted, cost effective way that benefit our strategic goals, our clients and shareholders. Continuing integration of ITG following March 2019 transaction • Expanded Virtu’s institutional client business with complete suite of broker neutral products that cover the entire trade lifecycle • Provides steady stream of reoccurring revenues Multi-asset Triton and Analytics • Roll-out of multi-asset Triton EMS next- generation: Valor release 55 Triton Valor clients live as of March 2020, up from 14 at the end of 3Q19 • Roll-out of multi-asset Analytics Portal 43 new Analytics subscriptions in 2019, and an additional 11 in 1Q20 Virtu Capital Markets (VCM) • Launched in November 2019 to leverage our core competency of best in class technology and deliver liquidity to corporate issues • We support At the Market (ATM) offerings for companies looking to raise capital and corporate stock buybacks • Our VCM team has already filed five ATM offerings; marking the first time corporate issuers have access to Virtu’s technology and liquidity Execution Concierge Service (ECS) for outsourced trading • • • Launched in October 2019 to combine full scope of Virtu’s execution services, trading expertise and global, multi asset class offering into one client solution Fully operational in the U.S.; expanding globally Leveraging our strong broker relationships to Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 16 // 44 Virtu solutions spans the entire trade lifecycle: 17 // 44 Client Solutions Knowing who we are Powerful end-to-end trading technology and personal client service. Virtu provides market making, execution services and analytics to a diverse client base of retail and institutional capital market participants • Workflow Technology • Trade Analytics & Data • Liquidity Sourcing • Execution Services Profit drivers: market volumes and recurring fee-based services Market Making Provides deep liquidity in 25,000 instruments globally by connecting natural buyers and sellers Profit drivers: market volumes and volatility Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 18 // 44 19 // 44 Transparency Virtu is relentlessly committed to operational excellence and fosters an environment where openness and raising issues is encouraged to deliver the greatest results for our clients, shareholders and ourselves. Integrity Working with integrity is a professional virtue expected of all employees and is embedded in all of our interactions a. As a trusted partner to our clients, the global capital markets, the investing public and investors. In doing so, we uphold the principles of transparency and open, meaningful dialogue with our clients, strategic partners, shareholders and each other. Innovation & Reliability We invest time, talent and resources in activities that deliver optimal results for our clients. Our advanced analytics enable us to act on insights and refine opportunities across the entire product and service execution lifecycle. This approach enables us to navigate around challenges and deliver quality results. Knowing who we are Our values and client focus. Delivering meaningful products and support to our clients is at the core of what we do. As innovators and thought leaders we actively collaborate with our clients and partners to lead change. Our talented workforce is never satisfied by good enough—every day, they mobilize Virtu’s powerful connectivity, technology and willingness to consider new ideas, approaches and solutions to move our business and clients forward. Virtu is expanding its collaboration, combining its own strengths and unique tools from strategic partnerships, to evaluate our solutions to a new level. Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 20 // 44 21 // 44 Knowing who we are Expansive scale and reach Our global footprint helps clients extend their reach and links them with liquidity, trading access and support across geographies and asset classes. North America Austin • Boston • Chicago • Los Angeles • New York • San Francisco • Toronto EMEA Dublin • London • Madrid • Paris APAC Hong Kong • Singapore • Sydney 25,000+ securities 60+ accessible global markets 235 venues 50+ countries Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual ReportSource: Virtu Financial, 2019 22 // 44 23 // 44 75% of the largest global institutional asset managers rely on our TCA.2 to improve their multi-asset to improve their multi-asset execution performance before, execution performance before, during and after trades. during and after trades. c s n n ti o a A )3 a t a M d a C s C e C o b e s t ulti- a s s e t tr a aly sis ( T c o st a n e r Glo b al P E ) a t o r ( A p ti m i z g e n c y O E sti m P o rtfolio O elis t Tra d e Tra d s s e e p p O O A S T T r r a a d d e r n e c p ti m i z e ill a u r v Sin gle Tic k et mission M Co m Cle arin anager g RFQ-hub AlgoWheel ITG Net Triton EMS | OMS ow gy olo fl rk n o h W c e t P r e - trade R e a l-time r e P o s t - t rade APAC APAC CAN CAN POSIT ATS POSIT ATS POSIT MTF POSIT MTF MATCHNowATS4 MATCHNowATS4 MatchItATS MatchItATS POSIT Alert POSIT Alert At-the-Market At-the-Market E E M M E E A A a d i n g i c s l y t a r n T a Liquidity sourcin g i e n t solutions C l E s x e e r c v u i t c i e o s n Our global and anonymous Our global and anonymous block indications network, block indications network, POSIT Alert delivers block POSIT Alert delivers block liquidity to liquidity to 38 countries daily.3 countries daily.3 o s u it e o s u it e L L A A T T A A M M U U S S al alg al alg b b G lo G lo #1 electronic trading electronic trading client service.4 client service.4 Our comprehensive suite of Our comprehensive suite of single stock, portfolio and single stock, portfolio and pairs strategies is designed for pairs strategies is designed for low latency and maximum low latency and maximum flexibility. flexibility. Knowing who we are Our products and services #1 leading European execution management system.1 Triton EMS is a global, Triton EMS is a global, broker-neutral, multi-asset platform broker-neutral, multi-asset platform that combines Virtu’s advanced that combines Virtu’s advanced liquidity, execution, analytics and liquidity, execution, analytics and workflow solution into one unified workflow solution into one unified and customizable interface. and customizable interface. g m akin e t k r M a e d y C u s t o m i z i q u i d i t l We make markets in 25,000 securities. securities. vEQ Link, our single dealer platform/systematic vEQ Link, our single dealer platform/systematic internaliser, has high internalization rates that internaliser, has high internalization rates that help you access liquidity in a thin market, help you access liquidity in a thin market, anonymously and with no information leakage. anonymously and with no information leakage. F X a n d M e t a ( v F X , v M X ) l s L i q u i d i t y V i r t u F i x e d I n c o m e ( v F I ) p l U a E T F S t f o s i r n m g l t r a d i n ( e g i n E t U e r s v n y E d s e Q a l L i n e r k ) a l t i e s e m r a ( t v i F c S I ) Hundreds of broker-dealers Hundreds of broker-dealers in the marketplace rely on in the marketplace rely on Virtu’s market-making Virtu’s market-making capabilities. We handle capabilities. We handle ~ 30% of market orders of market orders placed by retail placed by retail investors in the US.5 investors in the US.5 r r e e t t u u o o r r r r e e d d r r o o r t r t S m a S m a v e r v e r S e r S e r t M a r k e t t M a r k e t B e s B e s E T F t r a d i n g E T F t r a d i n g High-touch, electronic High-touch, electronic and PT trading and PT trading Deep liquidity Deep liquidity Renownedorder Renownedorder executionand executionand clientservice clientservice High-touch High-touch blocktrading O T C se c d d ic ic a a tio tio urities n n s s (I O o o f f Is) i i n n t t e e r r e e s s t t g t e k r a m nt Clie kin a m I I n n Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report1 The Trade EMS Survey 2017; 2 IPE Top Global Asset Managers, 2019; 3 Virtu Financial, 2019; 4 All-America Trading Team Rankings, Institutional Investor, 2018 ; 5 Based on Rule 605 Market Share, December 2019 24 // 44 25 // 44 Client Solutions Our complete suite of solutions. We leverage our exceptional technology, market structure expertise and scale to drive value and lower execution costs for our clients throughout the entire trade cycle. Virtu Financial 2019 Annual Report 26 // 44 27 // 44 Client Solutions: Product Highlight Triton Execution Management System (EMS) Multi-Asset Solution Equities, ETFs, foreign exchange, fixed income, options and futures Robust technology consolidates the desktop From a single access point trade: • Block trading • • • • • Algo integration Portfolio trading Pairs strategies Single-stock execution IOIs, actionable IOIs • RFS/RFQ globally #1 leading European execution • Integrated access to Analytics portal management system1 For shareholders Value Add • • Scalable, client-centric technology platforms A leading EMS/OMS like Triton is an increasingly embedded component of clients’ operations for order management, execution, compliance, record keeping and data management Key Characteristics • Revenue streams are steadier • • • Includes fees for installations and services Integral to overall growth opportunities CSA and commission allocations Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report1 The Trade EMS Survey 2017 28 // 44 29 // 44 Client Solutions: Product Highlight Trading Analytics and Data Multi-Asset Solution Equities, foreign exchange, fixed income, and futures One platform, rich in analytics Single access point for global Triton EMS, ITG Net and Virtu’s broker flow • Pre-, real-time and post-trade transaction cost analytics • Global Peer database • • Agency Cost Estimator (ACE) Trade Surveillance 75% of the largest global institutional asset managers rely on our TCA1 For shareholders Value Add • • Virtu’s analytics and data products are industry-leading and provide recurring revenue stream Clients rely on Virtu as a trusted partner with best-in-class tools that help support decision making, evidence best execution, provide outlier monitoring and audit trail, performance improvement and facilitate regulatory reporting Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report1 IPE Top Global Asset Managers, 2019 We handle 30 // 44 ~30% of market orders placed by retail investors in the US 1 We provide price improvement on 75% of retails orders executed 1 Client Market Making Our global footprint combined with our deep market-making expertise uniquely positions us to provide institutional and retail clients with the best pricing, liquidity and service in the industry Customized Liquidity As your partner, we will help you trade smarter by ensuring you understand how best to source liquidity and provide clear and precise transparency around our execution. We combine specialized market structure expertise with real-time data to provide you with unique product and trading solutions in equities (vEQ link), fixed income (vFI), foreign exchange (vFX) and Metals (vMX). Virtu combines our deep understanding of market structure, technology, automation and risk management tools to provide a fundamental service to the global markets by providing two- sided prices to investors in over 25,000 financial instruments on more than 235 venues in 36 countries. Market Making 31 // 44 Technology service provider to the global financial markets. Benefits to all market participants • • Increased global liquidity Efficiently priced capital markets • Manage impact cost • Makes global capital markets less volatile Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report1 Based on Rule 605 Market Share, December 2019 Leadership Our management. 33 // 44 Stephen Cavoli EVP, Global Head of Execution Services Marc Rosenthal EVP, Strategy & Corporate Development Kevin O’Connor Head of Analytics & Workflow Douglas Cifu Chief Executive Officer Brett Fairclough COO & Global Head of Business Alex Ioffe EVP & Chief Financial Officer Development Andrew Smith SVP, Business Development & Strategy Deborah Belevan SVP, Investor Relations & Communications Virtu Financial 2019 Annual Report Leadership Our board. 35 // 44 Robert Greifeld Chairman Douglas Cifu Chief Executive Officer Vincent Viola Founder & Chairman Emeritus Glenn Hutchins Director John D. Nixon Director Christopher C. Quick Director William F. Cruger Jr. Director Virginia Gambale Director Joseph J. Grano Director John F. Sandner Director David Urban Director Michael T. Viola Director Virtu Financial 2019 Annual Report 36 // 44 Our People The very best person for every role. 37 // 44 Our workforce must reflect the communities and cultures in which we operate. Accordingly, we believe strongly in diversity and reject any form of discrimination. Given our global footprint, we ensure that employees feel connected via hosted social and in-house educational events, an internal communications portal as well as regular e-mails from our CEO. We also promote: Thinking outside the box We take great pride in the uncompromising quality of our products and services. In-line with our core value of innovation we encourage intellectual curiosity and creativity as a means of creating better solutions both internally and externally. Teamwork and learning from one another In-line with our core value of transparency and constant improvement we value teamwork and mind-share across regions and product lines. We host product and thought leadership teach-ins through internal events. 80 new hires in 2019 Maintaining our competitive edge requires uncommon effort to identify, attract and retain best-in-class people who fit our values, culture and share our vision, globally. Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 38 // 44 Investment case Our path to growth. Higher Margins & Returns More Durable Earnings • Operating efficiency • Grow and strengthen existing business • Drive revenue synergies Continued deployment and integration of ex-KCG/Getco quant strategies to drive capture rate through improving internalization • Technology innovation Modern tools and simple processes Leverage Virtu’s market making technology and algo suite to improve upon existing ITG products & services • Manage resource consumption Innovate to service client needs • Expand assets Expand product reach to include multiple asset classes and products • Cross-sell/partnerships Grow via partnerships, such as MarketAxess and cross-sell enhanced products to embedded client base • Reduce operating expenses Increase Wallet Share • Diversify products and services • Drive revenue synergies • • Scalable natural liquidity Leverage desktop presence via Triton to offer clients the ability to interact with Virtu’s unique liquidity offerings Investing in new product development and diversification Continually looking for strategic growth opportunities that can leverage our core competencies of best-in-class technology and global liquidity • Enhance client experience Deploy technology Execute in the core franchise Deepen relationship with institutional clients 39 // 44 Efficiency and scale Low fixed cost structure and broad global reach Market structure expertise • Over 35 year history of innovation • Global established presence • Experienced talent pool Track record for driving organic growth and highly accretive acquisitions Significant top and bottom line synergies achieved to date from KCG and ITG, with additional benefits to be realized in 2020 and beyond Advanced technology and scale • Nimble and dynamic • Market maker powered technology and liquidity; delivered to clients’ desktops • Highly scalable, global, multi-asset technology platform Beneficiary of favorable trends owards transparency Industry regulators are increasingly focused on advocating transparency and fair access for all investors, both tenets of Virtu’s culture Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report 40 // 44 Corporate social responsibility Giving back to our communities. In 2019, we initiated a Virtu Green campaign to reduce our footprint of single-use disposable cups and utensils in favor of compostable options. All US based offices are participating, including New York, Chicago, Los Angeles and Boston. In Europe (UK and continental offices) we have reusable utensils and dishes. Our forward looking goal is that all global offices will be fully transitioned to LED lights for better energy efficiency. Virtu intends to combine its existing and new community, educational outreach and regional charity initiatives into one global giving footprint. The effect of this unified approach will provide meaningful aid and sustained partnership where the need is greatest. Virtu’s success is not only measured in percentages and profits but by how we interact with the communities in which our employees, clients and investors live in across the globe Charitable works are a major touchstone of Virtu. Virtu not only gives but does. Virtu participates in many charitable marathons, environmental cleanups, soup kitchens, mentoring programs for children and the like. Virtu does this in conjunction with some of its clients so there is a definitive sense of purpose between company and company users. Our people are passionate agents of change and so giving back is an important priority at the firm level. 41 // 44 Virtu is a community conscience company. Our community outreach efforts are widespread both geographically and in terms of the causes themselves which range from environmental issues, medical equipment supply, child wellness, hunger eradication, find-a- cure efforts, mental health and much more. Diversity and gender equality is embraced and reflected in our employee make-up; it is also emphasized firm-wide in our recruiting and hiring practices. Promoting women in capital markets is an important goal for Virtu. At our headquarters in NYC, we launched Winternship for college sophomore women. It is a one-week program aimed at introducing students to financial services and showcasing Virtu’s role in the capital markets. The program was such a success that the Winternship program will be expanded to other regional offices in 2021. Virtu Financial 2019 Annual ReportVirtu Financial 2019 Annual Report Corporate Information Annual Meeting The Annual Meeting of Shareholders of Virtu Financial, Inc. will be held virtually on June 5 at 9:00 a.m. Eastern Time. Transfer Agent and Registrar American Stock Transfer Trust Company, LLC (AST) Stock Since the Company’s initial public offering on April 16, 2015, shares of Virtu have been quoted on the NASDAQ, and trade under the symbol “VIRT”. Independent Registered Accounting Firm PricewaterhouseCoopers LLP Contact One Liberty Plaza 165 Broadway New York, NY 10006 +1.646.682.6000 — investor_relations@virtu.com | media@virtu.com 2019annualreport.virtu.com | virtu.com © 2020 VIRTU Financial Inc. 2019annualreport.virtu.com
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