Virtu Financial Inc (VIRT) 2023 Q3 法說會逐字稿

Hello and welcome to Virtu Financial 2023 Third Quarter Results. My name is Kerry, and I'll be the conference operator for today. (Operator Instructions) I would now like to hand the call over to Andrew Smith from Investor Relations to begin. Please go ahead.

您好，歡迎閱讀 Virtu Financial 2023 年第三季業績。我叫克里，我將擔任今天的會議操作員。 （操作員指示）我現在想將電話轉交給投資者關係部門的安德魯史密斯（Andrew Smith）。請繼續。

Thank you, Kerry, and good morning, everyone. Thank you for joining us. Our third quarter results were released this morning and are available on our website. With us today on this morning's call, we have Mr. Douglas Cifu, our Chief Executive Officer; Mr. Joseph Molluso, our Co-President and Co-Chief Operating Officer; and Mr. Sean Galvin, our Chief Financial Officer. We will begin with prepared remarks and then take your questions.

謝謝你，克里，大家早安。感謝您加入我們。我們的第三季業績已於今天上午發布，可在我們的網站上查看。今天早上參加電話會議的有我們的執行長 Douglas Cifu 先生； Joseph Molluso 先生，我們的聯合總裁兼聯席營運長；以及我們的財務長 Sean Galvin 先生。我們將從準備好的演講開始，然後回答您的問題。

First, a few reminders. Today's call may include forward-looking statements, which represent Virtu's current belief regarding future events and are, therefore, subject to risks, assumptions and uncertainties, which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available.

首先，有幾點提醒。今天的電話會議可能包含前瞻性陳述，這些陳述代表了 Virtu 目前對未來事件的信念，因此受到風險、假設和不確定性的影響，這些風險、假設和不確定性可能超出了公司的控制範圍。請注意，我們的實際結果和財務狀況可能與這些前瞻性聲明中所示的內容有重大差異。值得注意的是，本次電話會議中所做的任何前瞻性陳述均基於公司目前掌握的信息，我們不承諾在新信息出現時更新或修改任何前瞻性陳述。

We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report, Form 10-K and other public filings. During today's call, in addition to GAAP measures, we may refer to certain non-GAAP measures including adjusted net trading income, adjusted net income, adjusted EBITDA and adjusted EBITDA margin.

我們建議您參閱我們新聞稿中的免責聲明，並鼓勵您查看我們的年度報告、10-K 表格和其他公開文件中包含的風險因素描述。在今天的電話會議中，除了 GAAP 指標外，我們還可能參考某些非 GAAP 指標，包括調整後淨交易收入、調整後淨利潤、調整後 EBITDA 和調整後 EBITDA 利潤率。

These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the Investor portion of our website, where you'll find additional supplemental information referred to on this call as well as a reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings material and with an explanation of why we deem this information to be meaningful as well as how as management uses these measures.

這些非公認會計原則措施應被視為根據公認會計原則報告的財務措施的補充，而不是優於其。我們引導聽眾諮詢我們網站的投資者部分，您可以在其中找到本次電話會議中提到的其他補充信息，以及非 GAAP 指標與收益材料中等效 GAAP 術語的對賬，並解釋原因我們認為這些信息以及管理階層如何使用這些措施是有意義的。

And with that, I'll turn the call over to Doug.

然後，我會將電話轉給道格。

Good morning, and thank you, Andrew. Thank you for joining us this morning. In my remarks today, I will focus on Virtu's third quarter 2023 financial and business performance and strategic initiatives. Following my remarks, Joe and Sean will provide additional details on our performance. Looking at our year-to-date and third quarter results, which are summarized on Slide 2 of the supplemental material, we generated $4.7 million of adjusted net trading income per day, up 5% per day from the prior quarter and normalized adjusted EPS of $0.45 per share, up 22% from the prior quarter.

早安，謝謝你，安德魯。感謝您今天早上加入我們。在今天的演講中，我將重點介紹 Virtu 2023 年第三季的財務和業務業績以及策略舉措。在我發言之後，喬和肖恩將提供有關我們表現的更多詳細資訊。看看補充資料投影片 2 中總結的年初至今和第三季的業績，我們每天產生 470 萬美元的調整後淨交易收入，比上一季每天增長 5%，標準化調整後每股收益為每股0.45 美元，較上一季成長22%。

Slide 3 highlights that our Market Making segment earned an average of $3.3 million per day of adjusted net trading income in the quarter rising 6% compared to the prior quarter. And our Execution Services business delivered $1.4 million per day, an increase of 4% per day over the prior quarter. The overall market environment that underlies Virtu's performance this quarter was not dissimilar to what we have seen at times in the past and most recently in the second quarter. Periods like these are characterized primarily by reduced opportunity. And while we typically see reversion, we remain focused on our growth initiatives as well as enhancing our spread capture rates in any environment, thanks to our global scale and diversity.

投影片 3 強調，我們的做市業務部門本季調整後淨交易收入平均每天 330 萬美元，比上一季成長 6%。我們的執行服務業務每天交付 140 萬美元，比上一季每天成長 4%。 Virtu 本季業績的整體市場環境與我們過去以及最近第二季所看到的情況並無不同。像這樣的時期的主要特徵是機會減少。雖然我們通常會看到回歸，但由於我們的全球規模和多樣性，我們仍然專注於我們的成長計劃以及提高我們在任何環境下的價差捕獲率。

As we've said previously, market share alone is limited as a gauge of performance, but it's worth noting that our market share in the wholesale Market Making business remains solidly within historic ranges even up slightly recently. Our noncustomer Market Making business, which provides liquidity across asset classes globally, performed well in the quarter relative to the opportunity set. Our organic growth initiatives, including our expansion into options Market Making continued to perform well and make meaningful progress. Our $488,000 per day from organic growth was 10% of adjusted net trading income in the quarter. Our ETF Block business, including our fixed income business had an excellent quarter as did our ATM Virtu Capital Markets business.

正如我們之前所說，僅以市場份額作為業績衡量標準是有限的，但值得注意的是，我們在批發做市業務中的市場份額仍然穩定在歷史範圍內，甚至最近略有上升。我們的非客戶做市業務為全球資產類別提供流動性，在本季相對於機會集表現良好。我們的有機成長計劃，包括擴展到選擇權做市業務，繼續表現良好並取得有意義的進展。我們每天的有機成長為 488,000 美元，佔本季調整後淨交易收入的 10%。我們的 ETF Block 業務（包括固定收益業務）和 ATM Virtu 資本市場業務都表現出色。

We remain very optimistic about the opportunities across all our growth initiatives. On the Execution Services side, our adjusted net trading income averaged $1.4 million per day in the third quarter, about 4% per day above the prior quarter, impressive results given the general decline in market opportunity. For much of 2023, institutional activity remains slow as institutional investors have become less active in the higher rate environment. Despite these challenging markets, thanks to our continued investments VES performed in line with its opportunity quarter-over-quarter as well as year-to-date.

我們對所有成長計劃中的機會仍然非常樂觀。在執行服務方面，第三季調整後的淨交易收入平均每天為 140 萬美元，比上一季每天成長約 4%，考慮到市場機會普遍下降，這一結果令人印象深刻。在 2023 年的大部分時間裡，機構活動仍然緩慢，因為機構投資者在利率較高的環境中變得不那麼活躍。儘管市場充滿挑戰，但由於我們的持續投資，VES 的季度環比以及年初至今的表現都符合其機會。

Taking a step back, I look at our third quarter and year-to-date results and see the success of our long-term disciplined overall strategy. We continue to hire and make investments in our business, remaining disciplined around cost, which enabled us to realize a 47% EBITDA margin and report respectable $0.45 per share in a challenging environment.

退後一步，我回顧了我們第三季和年初至今的業績，並看到了我們長期嚴格的整體策略的成功。我們繼續在我們的業務中招募和投資，保持嚴格的成本控制，這使我們能夠在充滿挑戰的環境中實現 47% 的 EBITDA 利潤率，並報告每股 0.45 美元。

Our focus on enhancing our core businesses and the continued success of our growth initiatives positions us well for any macro environment, including significant spikes in volatility in volumes and increasing global tensions and economic uncertainty.

我們對增強核心業務的關注以及成長計畫的持續成功使我們能夠很好地應對任何宏觀環境，包括銷售波動性的大幅上升以及全球緊張局勢和經濟不確定性的加劇。

Touching briefly on our growth initiatives. In Options, coming off a record 2022, our Options business has performed well against a declining opportunity set in the quarter. We continue to expand across venues and geographies, including single names in addition to the index complex. Our ETF Block business was up meaningfully in the third quarter. We continue to expand our offering to cover more products in more regions, including fixed income both in credit and rates. We are also seeing an uptick in our crypto Market Making business in the last 30 days as the SEC moves closer to what we think will be the inevitable approval of spot crypto ETFs in the United States.

簡要介紹我們的成長計劃。在選擇權方面，我們的選擇權業務在 2022 年創歷史新高後，在本季機會不斷減少的情況下表現良好。我們繼續在不同地點和地區進行擴張，除了索引綜合體之外還包括單一名稱。我們的 ETF Block 業務在第三季大幅成長。我們繼續擴大我們的產品範圍，以涵蓋更多地區的更多產品，包括信貸和利率方面的固定收益。我們也看到，隨著美國證券交易委員會 (SEC) 距離我們認為美國現貨加密 ETF 不可避免獲得批准的日子越來越近，我們的加密做市業務在過去 30 天內有所增加。

In addition, our Virtu Capital Markets business had an excellent quarter as financing activity began to return to the market and a number of issuers use our service to raise primary capital.

此外，我們的 Virtu 資本市場業務在本季度表現出色，因為融資活動開始重返市場，許多發行人使用我們的服務來籌集主要資本。

Finally, you'll likely notice the litigation brought by the SEC related to Virtu's historical internal information barriers. I do not have much to add that is not in the detailed materials and supplemental information that we have already published. Suffice to say, this is a civil litigation, and we reject completely the SEC's allegations. The SEC does not assure that any customer information was ever inappropriately accessed and the period focused ended 4.5 years ago, predating Virtu's integration with any of the ITG businesses.

最後，您可能會注意到 SEC 提起的與 Virtu 歷史內部資訊障礙相關的訴訟。我沒有太多要補充的內容，這些內容都包含在我們已經發布的詳細資料和補充資訊中。可以說，這是民事訴訟，我們完全拒絕 SEC 的指控。 SEC 不保證任何客戶資訊曾被不當訪問，且該期間結束於 4.5 年前，早於 Virtu 與任何 ITG 業務的整合。

We have engaged with many of our clients about the news, and we have not observed any impact to client engagement. As a general rule, we try to avoid litigation. And given the facts in this case, and the relevant legal precedence, a proportionate commercial settlement could certainly have been achieved under different circumstances. However, it seems to be the sad and unfortunate trend whether it involves equally serious matters such as crypto ETFs, market structure reform, private equity fee disclosures or the funding of the consolidated audit trail or other issues that the commission seems increasingly litigious and their approach and actions are inviting further litigation. So Virtu is not alone in this unfortunate trend.

我們已就該新聞與許多客戶進行了接觸，並且我們沒有觀察到對客戶參與度的任何影響。作為一般規則，我們盡量避免訴訟。考慮到本案的事實以及相關的法律優先權，在不同情況下當然可以達成適當的商業和解。然而，無論它涉及同樣嚴重的問題，例如加密貨幣ETF、市場結構改革、私募股權費用披露或綜合審計跟踪的資金，還是委員會似乎越來越喜歡訴訟的其他問題，這似乎都是令人悲傷和不幸的趨勢，以及他們的做法和行動正在招致進一步的訴訟。因此，Virtu 並不是唯一陷入這種不幸趨勢的公司。

I'll now turn it over to Joe and Sean, who will provide some additional details about the quarter. Joseph?

我現在將其交給 Joe 和 Sean，他們將提供有關本季的一些其他詳細資訊。約瑟夫？

Thank you, Doug. Turning to expenses and capital. On expenses, we ended the first 9 months of the year with cash operating expenses of $481 million, 4.6% ahead of last year. We think this is a solid performance in this inflationary environment. Our cash compensation ratio is 26% for the first 9 months of 2023, which is at the upper end of our historical range.

謝謝你，道格。轉向費用和資本。在費用方面，今年前 9 個月我們的現金營運費用為 4.81 億美元，比去年成長 4.6%。我們認為，在通膨環境下，這是一個穩健的表現。 2023 年前 9 個月，我們的現金薪資率為 26%，處於歷史範圍的上限。

Consistent with Virtu's history, we will manage discretionary compensation and headcount to drive profitability for our shareholders while retaining and recruiting world-class talent. Other noncompensation expenses were up slightly in line with our expectations. Communications and data processing expenses were up 3.9% versus last year owing to investment in building out new businesses and price increases for infrastructure and market data.

與 Virtu 的歷史一致，我們將管理可自由支配的薪資和員工人數，以提高股東的獲利能力，同時留住和招募世界一流的人才。其他非補償費用略有上升，符合我們的預期。由於建設新業務的投資以及基礎設施和市場數據價格的上漲，通訊和數據處理費用比去年增長了 3.9%。

Other expenses on an annualized basis are up a bit, primarily due to favorable foreign exchange adjustments in the prior year. Turning to capital management. On Slide 11, you could see that our invested capital has remained within a range of $1.8 billion to $2 billion for this year. We remain very well capitalized from a trading capital and long-term debt standpoint. We also remain well positioned from a liquidity standpoint and we'll be able to capitalize on more volatile markets as and when they appear. We maintained our public $0.96 annual dividend, which we have paid steadily now for 8 years, and you could see that our payout has remained steady despite our variable results over the long term.

其他費用按年計算略有增加，主要是由於上一年有利的外匯調整。轉向資本管理。在投影片 11 上，您可以看到我們今年的投資資本維持在 18 億美元至 20 億美元的範圍內。從交易資本和長期債務的角度來看，我們的資本仍然非常充足。從流動性的角度來看，我們也保持著良好的地位，當市場出現波動時，我們將能夠利用它們。我們維持了 0.96 美元的年度公開股息，我們已經穩定支付了 8 年，您可以看到，儘管我們的長期業績存在差異，但我們的派息仍然保持穩定。

In addition, we repurchased 2.7 million shares for approximately $49 million in the third quarter. Our period end share count is now 165.2 million shares and including repurchases through October, we have repurchased net of new issuances, 17% of our company in the 3 years since beginning our share repurchase program. This brings our total repurchases to 42.2 million shares for over $1 billion. And with that, I'll turn it over to Sean to review the financial details before we open the call to your questions.

此外，我們在第三季以約 4,900 萬美元的價格回購了 270 萬股股票。我們的期末股票數量目前為 1.652 億股，包括截至 10 月的回購，扣除新發行的股票，我們在開始股票回購計畫的 3 年內回購了公司的 17%。這使得我們的回購總額達到 4,220 萬股，價值超過 10 億美元。這樣，在我們開始回答您的問題之前，我會將其交給 Sean 審核財務詳細資料。

Thank you, Joe, and good morning, everyone. On Slide 3 of our supplemental materials, we've provided a summary of our quarterly performance. For the third quarter of 2023, our adjusted net trading income which represents our trading gains, net of direct trading expenses, totaled $298 million or $4.7 million per day. Market Making adjusted net trading income was $208 million or $3.3 million per day, and Execution Services adjusted net trading income was $90 million or $1.4 million per day. Our third quarter 2023 normalized adjusted EPS was $0.45. Adjusted EBITDA was $140 million for the third quarter of 2023 and our adjusted EBITDA margin was 47%.

謝謝你，喬，大家早安。在補充資料的幻燈片 3 中，我們提供了季度業績摘要。 2023 年第三季度，我們的調整後淨交易收入（扣除直接交易費用後的交易收益）總計 2.98 億美元，即每天 470 萬美元。做市調整後的淨交易收入為 2.08 億美元，即每天 330 萬美元，執行服務調整後的淨交易收入為 9,000 萬美元，即每天 140 萬美元。我們的 2023 年第三季標準化調整後每股收益為 0.45 美元。 2023 年第三季調整後 EBITDA 為 1.4 億美元，調整後 EBITDA 利潤率為 47%。

On Slide 9, we provide a summary of our operating expense results. For the third quarter of 2023, we recorded $174 million of adjusted operating expenses. We continue to maintain an efficient cost structure and disciplined expense management, which has helped us to control our operating expenses during the inflationary environment. Financing interest expense was $25 million for the third quarter of 2023. With the benefit of the interest rate swap contracts that we entered into in the prior year, our blended interest rate was around 5% for our long-term debt in aggregate. We remain committed to our $0.24 per quarter dividend and combined with our share repurchase program, this demonstrates our continued commitment to return capital to our shareholders.

在投影片 9 上，我們提供了營運費用結果的摘要。 2023 年第三季度，我們記錄了 1.74 億美元的調整後營運費用。我們繼續保持高效的成本結構和嚴格的費用管理，這有助於我們在通膨環境下控制營運費用。 2023 年第三季的融資利息支出為 2,500 萬美元。得益於我們上一年簽訂的利率掉期合同，我們的長期債務總計混合利率約為 5%。我們仍然致力於每季 0.24 美元的股息，並結合我們的股票回購計劃，這表明我們繼續致力於向股東返還資本。

Now I would like to turn the call over to the operator for the Q&A.

現在我想將電話轉給接線員進行問答。

(Operator Instructions) The first question on the line comes from Ken Worthington of JPMorgan.

（操作員說明） 線路上的第一個問題來自摩根大通的 Ken Worthington。

I wanted to dig into product expansion, particularly ETF Block Options Market Making in crypto. So I guess, 3 parts to hopefully 1 question. So for ETF Block, you mentioned you added a new region and new products. What new regions did you add this year? And maybe how many new products have been added. For Options, where do single names stand right now? And where would you expect this to be a year from now? And then lastly, on crypto, is it possible to size the Bitcoin ETF opportunity. My understanding is, as you add new overlapping opportunities in an asset class, the potential to profit increases exponentially, not linearly. So could you walk us through that as well?

我想深入研究產品擴展，特別是加密貨幣中的 ETF 大宗選擇權做市。所以我想，希望 1 個問題由 3 個部分組成。對於 ETF Block，您提到新增了新區域和新產品。今年你們新增了哪些地區？也許增加了多少新產品。對於選擇權，單一名稱現在處於什麼位置？您預計一年後會是什麼樣子？最後，關於加密貨幣，是否有可能確定比特幣 ETF 機會的規模。我的理解是，當您在資產類別中添加新的重疊機會時，獲利潛力會呈指數級增長，而不是線性增長。那麼您也可以引導我們完成這個過程嗎？

Yes. Great. So let me try to handle those in reverse order since I'll remember them better. But let me talk first about crypto, which we had started talking about maybe 2 years ago. And then unfortunately, had a lot of disruption in the market to put it mildly with FTX and some of the other bad actors in the marketplace. And so volumes dramatically declined, as you are aware. There is still significant interest in the asset class. You can look at like the closed-end fund rate scale and the amount of volume, if you will, that it does in the amount of bitcoin in its corpus and so if you assume that sometime between today and January 10, which I understand is sort of the drop dead date with respect to SEC approval, given what happened in the District Court, the loss by the SEC, there's going to be, I would think, a significant influx of interest in the ETFs that are kind of queued up.

是的。偉大的。因此，讓我嘗試以相反的順序處理它們，因為我會更好地記住它們。但讓我先談談加密貨幣，我們大約在兩年前就開始談論加密貨幣了。不幸的是，市場出現了很多混亂，溫和地說是 FTX 和市場上其他一些不良行為者。如您所知，因此銷量急劇下降。人們對該資產類別仍有很大興趣。如果你願意的話，你可以看看封閉式基金的利率規模和交易量，它的語料庫中的比特幣數量，所以如果你假設從今天到 1 月 10 日之間的某個時間，我的理解是考慮到地方法院發生的事情以及SEC 的損失，我認為，對於SEC 批准的截止日期，將會有大量的興趣湧入排隊的ETF。

I think there's 10 to 12 of them. Some of the big names, BlackRock, et cetera, have proposals on the table, [Schwab]. And we are an AP with each of those 10. And I think there's going to be a significant amount of trading from the closed-end fund that will migrate, if you will, to these other funds. It's just kind of the natural fluidity people will move to lower fee, ETFs were moved because it's part of another portfolio or they get an offset. Whatever it is, I think they'll be kind of almost letting the air out of the balloon kind of effect of all of that. But once people can look at a price on a screen and say, okay, I know that, that is one, the price of a Bitcoin or Ethereum or whatever the product is within an ETF, and it's traded in a product that's listed on a national security exchange that is centrally cleared.

我認為有 10 到 12 個。貝萊德等一些知名企業已提出建議[施瓦布]。我們是這 10 個基金中的每一個的 AP。我認為，如果您願意的話，封閉式基金中將會有大量交易轉移到這些其他基金。這只是一種自然的流動性，人們會轉向更低的費用，ETF 被轉移是因為它是另一個投資組合的一部分，或者他們得到了抵消。不管是什麼，我認為他們幾乎會讓氣球中的空氣漏掉，這是這一切的影響。但是，一旦人們可以看到螢幕上的價格並說，好吧，我知道，那就是比特幣或以太坊或 ETF 中的任何產品的價格，並且它在交易所上市的產品中進行交易。中央清算的國家安全交易所。

And I know there's not going to be a shenanigans because we have a proper regulatory environment, people are going to get a closing price, et cetera, we think then you can see a significant increase in real retail and even institutional volumes, and that's what we're setting up for. In addition, as you know, we've partnered with Citadel, Schwab and Fidelity and some others to create a platform called [EDX] which would be a front through back custody and clearing solution and execution. So there will be spot venues that will emerge in addition to that, ErisX, which is now owned by CBOE, that is a great platform. So there will be real volumes, and we'll see a marketplace that we will kind of know and understand unlike as (inaudible) said, a little bit of the Wild West that we have dealt with historically.

我知道不會有惡作劇，因為我們有適當的監管環境，人們會得到收盤價等等，我們認為這樣你就可以看到實際零售量甚至機構交易量的顯著增加，這就是我們正在做準備。此外，如您所知，我們還與 Citadel、Schwab 和 Fidelity 以及其他一些公司合作創建了一個名為 [EDX] 的平台，該平台將成為從前端到後端的託管和清算解決方案和執行。因此，除此之外還會出現現場場地，ErisX，現在歸 CBOE 所有，這是一個很棒的平台。因此，將會有真正的交易量，我們將看到一個我們會有所了解和理解的市場，不像（聽不清楚）所說的那樣，有點像我們歷史上處理過的狂野西部。

So that's why I'm very happy we made the investments that we did a couple of years ago, and I think we're very well positioned to be a significant market maker in this asset class.

因此，我很高興我們進行了幾年前的投資，而且我認為我們完全有能力成為這個資產類別的重要做市商。

With regard to ETF Block, again, this is something we've been talking about for the last couple of years. In terms of regions, we've really focused this year on Europe, in particular. We think there's significant opportunities. Obviously, there's a number of large competitors, flow traders and others. We've done all of the hard work in terms of pricing the products, both domestic and international products, which we've gotten better at and fixed income products in that region. We have distribution in that region because of the ITG acquisition, right? So we have connectivity to both the RFQ platforms, but more importantly, end users in that marketplace know who we are because of the ITG-Virtu relationships both in the U.K. and on the continent. So we have distribution there as well. So we're very excited about that.

關於 ETF Block，這也是我們過去幾年一直在談論的事情。就地區而言，我們今年特別關注歐洲。我們認為存在重大機會。顯然，有許多大型競爭對手、流量交易者和其他人。我們在產品定價方面做了所有艱苦的工作，包括國內和國際產品，我們在該地區的固定收益產品方面做得更好。由於 ITG 收購，我們在該地區有分銷，對吧？因此，我們可以連接到兩個 RFQ 平台，但更重要的是，由於 ITG-Virtu 在英國和歐洲大陸的關係，該市場的最終用戶知道我們是誰。所以我們在那裡也有分銷。所以我們對此感到非常興奮。

As we've also talked about the synergy between what we are doing in credit and rates like being a market maker for the first time in those products enables us to be, we think, a significant contributor to being a market maker in ETF fixed income products. Obviously, there's a lot of incumbents there, [Jane, Flow], et cetera, Citadel that do an excellent job, but we do think there's room for Virtu. And then finally, with respect to options, I think we've been somewhat validated, if you will, with regard to our approach to attack the big index family. I saw some information just in the last day or 2 about the explosion of growth in index volumes. And that's really been our big focus and single name index options have -- volumes have significantly dropped off.

正如我們還討論過的，我們在信貸和利率方面所做的工作之間的協同作用，例如首次成為這些產品的做市商，我們認為，這使我們能夠成為ETF 固定收益做市商的重要貢獻者產品。顯然，那裡有很多現任者，[Jane、Flow] 等，Citadel 都做得非常出色，但我們確實認為 Virtu 有空間。最後，關於選擇，如果你願意的話，我認為我們在攻擊大指數係列的方法方面已經得到了一定的驗證。就在最後一兩天，我看到了一些關於指數交易量爆炸性增長的信息。這確實是我們的重點，單一名稱指數選擇權的交易量已大幅下降。

Again, we are trading single name options, we'll continue to do so. Whether in 2024, we start taking directed flow from retail brokers or not is still an open question in my mind. It's probably not -- given what's happened with the shift of volumes, it's probably not a significant priority at this point, but something we will get to.

同樣，我們正在交易單一名稱期權，我們將繼續這樣做。到 2024 年，我們是否開始接受零售經紀商的定向流量在我看來仍然是一個懸而未決的問題。可能不是——考慮到數量變化所發生的情況，目前這可能不是一個重要的優先事項，但我們將會做到這一點。

The next question on the line comes from Chris Allen of Citi.

下一個問題來自花旗銀行的克里斯艾倫。

I've got some follow-ups on Ken question. It's only going to be a 2-quarter. Just on the build-out on the rate side in particular, last quarter, you noted it was very early days. You're doing a lot of 5% volume for 5% to 10% of clients on the platform. Any update on that front? And then on Options, you talked about a declining rev opportunity set during the quarter. And while volumes overall were not great, index volumes where your focus were pretty strong. Was that just a function of realized volatility declining and how are you thinking about the Options environment specifically right now?

我對肯的問題有一些後續行動。這只會是 2 個季度。尤其是在上個季度的利率方面，您指出現在還為時過早。你為平台上 5% 到 10% 的客戶做了很多 5% 的交易量。這方面有什麼更新嗎？然後在選項中，您談到了本季收益機會的下降。雖然整體成交量並不大，但您關注的指數成交量卻相當強勁。這只是實際波動率下降的函數嗎？您現在如何具體考慮選擇權環境？

Yes. That's a great question. We take them again in reverse order. I think you nailed it. Index volumes were up, but in terms of realized volatility, and if you will, like rate per contract to kind of be more specific in what we were expecting in terms of opportunity that did decline during the quarter. That being said, we outperformed and our market share has grown considerably in SPX and the big options family. We are like a meaningful single-digit player now in Options, which is a statement that I would have been reluctant to make 2 years ago. So I'm very, very pleased with the growth there. We are now generating decent P&L like not material in the Virtu sense but individually in Asia, both in India and in Japan, which again, things I would not have thought to mention 2 years ago. So I'm very, very pleased with the progress we have made there.

是的。這是一個很好的問題。我們以相反的順序再次取出它們。我想你已經成功了。指數交易量有所上升，但就已實現的波動性而言，如果您願意的話，例如每份合約的利率，可以更具體地說明我們對本季度確實下降的機會的預期。話雖這麼說，我們的表現優於其他公司，我們在 SPX 和大型選擇權系列中的市佔率也大幅成長。我們現在就像是選擇權中一個有意義的個位數玩家，這是我兩年前不願意做出的聲明。所以我對那裡的成長非常非常滿意。我們現在正在產生不錯的損益表，這不是 Virtu 意義上的物質，而是亞洲的個別情況，無論是在印度還是在日本，這也是我兩年前不會想到提及的事情。所以我對我們在那裡取得的進展感到非常非常滿意。

And again, I'm not like the greatest macro predictor, Chris. We just kind of like build it and we hope that it will come. But I do see a continued interest in like single day options and in the index family. So that will continue to be our focus. Again, I think with increased volatility and uncertainty and macro events around the world between global conflict and central banks having to deal with interest rates, I think we'll continue to see an increase in options activity. You can kind of see the shift that's gone from like the VIX family, if you will, to like single day options and other products that enable traders to expose themselves to intraday and over week and month volatilities and things like that. You had another question? What was the second part? I forgot it.

再說一遍，我不像最偉大的宏觀預測者克里斯。我們只是想建造它，並希望它能夠到來。但我確實看到人們對單日期權和指數系列的持續興趣。因此，這將繼續是我們的重點。再次，我認為，隨著全球衝突和央行必須處理利率問題之間的波動性和不確定性以及世界各地宏觀事件的增加，我認為我們將繼續看到選擇活動的增加。如果你願意的話，你可以看到從像 VIX 系列這樣的產品到單日期權和其他產品的轉變，這些產品使交易者能夠暴露於日內、週內和月內的波動以及類似的情況。您還有其他問題嗎？第二部分是什麼？我忘了。

Yes, rates is an interesting market, right? Obviously, it's the 1 market that today doesn't have centralized clearing. There is an SEC proposal that we have been supportive of, one of the few things we think the SEC is actually right about and so we would love to see centralized clearing of treasury products. That is a typical Virtu-style build-out. We've got, obviously, connectivity. We've got strategies going in now. It's really a question of distribution. So we have significant -- we've established this year significant connectivity or substantial connectivity to top clients, and we've grown reasonable amounts of market share again, doing it methodically. There's a lot of counterparties we can now go to with a credible product, and that's kind of the game plan, which is build the technology, have a great team, come up with a product that you feel good about, i.e., prices that are competitive and then figure out what the distribution mechanism is.

是的，利率是一個有趣的市場，對吧？顯然，這是今天沒有集中清算的第一個市場。我們一直支持 SEC 的一項提案，這是我們認為 SEC 實際上正確的少數幾件事之一，因此我們希望看到國債產品的集中清算。這是典型的 Virtu 風格的建造。顯然，我們已經實現了互聯互通。我們現在已經制定了策略。這實際上是一個分配問題。因此，我們今年已經與頂級客戶建立了重要的連接或實質的連接，並且我們再次有條不紊地增加了合理數量的市場份額。我們現在可以向許多交易對手提供可信的產品，這就是一種遊戲計劃，即構建技術，擁有一支優秀的團隊，推出一種讓您感覺良好的產品，即價格競爭，然後弄清楚分配機制是什麼。

Obviously, we go to [ECM] but also this is a marketplace that we think where clients will take direct feeds or go through large dealers, and that's -- we've made a lot of progress on that in 2023.

顯然，我們會轉向 [ECM]，但我們認為這是一個客戶將直接獲取資訊或透過大型經銷商的​​市場，我們在 2023 年在這方面取得了很大進展。

Our next question comes from Dan Fannon of Jefferies.

我們的下一個問題來自 Jefferies 的 Dan Fannon。

My question is on expenses. So as we think about the environment, which is still somewhat subdued, how should we think about the fourth quarter and the true-up and/or comp allocation associated with cash in this revenue environment. And then also just looking at next year, should we just think about inflation as a reasonable framework for both comp and noncomp expense or any other framework that you could help us with that would be great.

我的問題是關於費用。因此，當我們考慮仍然有些低迷的環境時，我們應該如何考慮第四季度以及在這種收入環境下與現金相關的調整和/或補償分配。然後再看看明年，我們是否應該將通貨膨脹視為補償和非補償費用的合理框架，或者您可以幫助我們的任何其他框架，那就太好了。

Dan, it's Joe. Look, I think that I'll take them in reverse order as well. I mean the non-comp expenses. I think we've always said that they're going to grow at kind of a low single-digit rate. Maybe we were a touch higher than that this year. We do a lot of work every day, especially on our connectivity, our infrastructure plan, our market data. We monitor everything down to everyone's Bloombergs and everything and all the other market data subscriptions. And I think if you look at that line item, up a few million dollars in this kind of environment where there's been price increases, I think that's a pretty good outcome. And I would expect much of the same next year, right, all things equal. On the other expenses, where it's just kind of keeping the lights on type of expenses. Again, we were fortunate last year 2022. We had some favorable foreign exchange adjustments.

丹，是喬。聽著，我想我也會以相反的順序來處理它們。我指的是非補償費用。我認為我們一直說它們將以較低的個位數成長率成長。也許我們比今年高了一點。我們每天都會做很多工作，特別是在我們的連接、我們的基礎設施計劃和我們的市場數據方面。我們監控一切，包括每個人的彭博社、所有內容以及所有其他市場數據訂閱。我認為，如果你看看該訂單項，在這種價格上漲的環境下，價格上漲了幾百萬美元，我認為這是一個相當不錯的結果。我預計明年也會有很多相同的情況，對吧，所有條件都相同。至於其他開支，只是維持開支類型。 2022 年我們再次感到幸運。我們進行了一些有利的外匯調整。

So the year-over-year increase is a lot less than it looks on a constant dollar basis. And again, more of the same, I would anticipate a couple of percents. And again, we monitor those very closely, whether it's space or whether it's professional fees, professional fees are up slightly this year in addition to the foreign exchange adjustments. And then on comp, look, I think -- we have emerged in the past year or two from multiyear integrations of large acquisitions. Our headcount has remained relatively steady and what that masks is we have really restocked the talent pool over the past 2 years.

因此，年成長遠低於以不變美元計算的情況。同樣，我預計會有幾個百分點。再說一次，我們非常密切地監控這些，無論是空間還是專業費用，除了外匯調整之外，今年專業費用略有上漲。然後在比較方面，我認為，我們在過去一兩年裡從大型收購的多年整合中脫穎而出。我們的員工數量保持相對穩定，在過去的兩年裡，我們確實重新補充了人才庫。

We really, I think, upgraded our employee base in terms of talent, in terms of capabilities. And we've always held ourselves out as not a payout shop, and that's the way it's going to -- and that's the way it's going to remain. So I would say our comp ratio coming in, in the mid-20s this year from a cash standpoint, we're very comfortable with that, right? We think it's what we need to do to adequately pay people. I think we did hire quite a lot of people in the past couple of years. I think we did it in a disciplined way. So I think we're in a fortunate position to continue recruiting and again, I have no issue with our comp ratio where it is.

我認為，我們確實在人才和能力方面提升了我們的員工基礎。我們一直表明自己不是一家支付商店，這就是它的方式，這就是它將保持的方式。所以我想說，從現金的角度來看，今年我們的補償比率在 20 多歲左右，我們對此感到非常滿意，對嗎？我們認為這是我們需要採取的措施來向人們支付足夠的工資。我認為過去幾年我們確實僱用了很多人。我認為我們以一種有紀律的方式做到了這一點。因此，我認為我們很幸運能夠繼續招聘，而且我對我們目前的薪酬比率沒有任何問題。

If you look back a couple of years, it was in the mid-teens, right? So I think we're going to be -- if you want to look at that as kind of the pendulum from boom times to more less subdued markets, then I think that's kind of -- we're very happy with that.

如果你回顧幾年前，那是在十幾歲的時候，對吧？所以我認為我們將會 - 如果你想將其視為從繁榮時期到更加不那麼低迷的市場的鐘擺，那麼我認為這就是 - 我們對此非常滿意。

The next question comes from Alex Blostein of Goldman Sachs.

下一個問題來自高盛的亞歷克斯·布洛斯坦。

Quick financial question for you. So the leverage ratio is back at around 3x debt to EBITDA. So obviously, it's been not the best trading environment for the business so that will bounce around. But how are you feeling about this creeping back up here with respect to your ability to continue share repurchases at this kind of pace if the environment kind of continues to be what it's been.

向您快速提出財務問題。因此，槓桿率回到了債務與 EBITDA 的 3 倍左右。顯然，這對企業來說並不是最好的交易環境，因此會出現反彈。但是，如果環境繼續保持原來的樣子，您對這種情況的回升有何感想，因為您是否有能力繼續以這種速度回購股票。

Look, I think we provide a pretty detailed analysis of our ability to repurchase shares at different levels of trading income. So I think there's really 2 separate questions there, right, is we are going to use our excess cash to repurchase our shares, absent any other alternative for them, right? And people ask us all the time, are we looking at other acquisitions? The answer is we look at everything, but we haven't come across anything that represents close to the value of repurchasing our shares at this level.

看，我認為我們對我們在不同交易收入水平下回購股票的能力進行了相當詳細的分析。所以我認為確實有兩個不同的問題，對吧，我們是否會使用多餘的現金來回購我們的股票，而沒有其他選擇，對嗎？人們總是問我們，我們是否正在考慮其他收購？答案是我們考慮了一切，但我們還沒有發現任何接近在這個水平上回購我們股票的價值的東西。

So I think to the extent we have the dollar of excess cash, that's how it's going to be deployed. And that's after, as I said, after we pay our expenses, pay our people, invest in our growth initiatives, et cetera. So I think that's kind of one part of the question. On the leverage ratio, I don't really feel like we are worried about whether it's 3x, 3.25x, 2.5x.

因此，我認為，只要我們擁有多餘的現金，就會以這種方式部署。正如我所說，這是在我們支付費用、支付員工薪水、投資我們的成長計劃等等之後。所以我認為這只是問題的一部分。關於槓桿率，我真的不覺得我們擔心是3倍、3.25倍、2.5倍。

We reset our debt. We were very fortunate and very happy that we did this in early 2022 when we had -- we're in a different interest rate environment, obviously. We've got swaps on our debt. And we always look at it and try to keep that quantum as cheap as possible. We want to optimize that from a cost standpoint. But the question that we ask ourselves is, does the rate environment change the quantum of debt that we're comfortable with. And the answer is not really. I mean, we'll always look to make it as cheap as possible. But we're pretty comfortable with that total level.

我們重置了我們的債務。我們非常幸運，也非常高興我們在 2022 年初做到了這一點，當時我們顯然處於不同的利率環境中。我們有債務互換。我們總是關注它並嘗試使該量子量盡可能便宜。我們希望從成本角度對其進行最佳化。但我們問自己的問題是，利率環境是否改變了我們所能承受的債務規模。答案並不是真的。我的意思是，我們將始終尋求使其盡可能便宜。但我們對這個整體水準感到非常滿意。

The next question comes from Michael Cyprys of Morgan Stanley.

下一個問題來自摩根士丹利的邁克爾·賽普里斯。

Wanted to drill down on index options to some of your earlier commentary. Just curious how you see the evolution of the index option marketplace here, the evolution of the different customer types that are emerging use cases? And to what extent do you view this as sustainable just in terms of this level of activity and then also related to that, to what extent are you seeing these index options like SPX being used as a replacement for, say, E-mini futures, E-mini options on the future? Just curious how you're seeing that all evolve.

想深入了解您之前的一些評論的索引選項。只是好奇您如何看待指數期權市場的演變，以及新興用例的不同客戶類型的演變？就這種活動水平而言，您認為這種情況在多大程度上是可持續的，並且與此相關的是，您在多大程度上看到SPX 等指數期權被用作E-mini 期貨等的替代品， E-mini的未來選擇？只是好奇你如何看待這一切的演變。

Yes, it's a great question. It's been sort of fascinating to watch. And I think you kind of nailed it which is -- and again, I don't -- we get along right with all exchanges and people are creating products, I'm not trying to disparage any of the product or whatnot -- because we're sort of the Switzerland of liquidity provisioning. So we encourage innovation and whatnot. But I think people have looked at that product and said, look, it's a really good way to manage volatility in a good way, if you want to be speculative on volatility, it provides you the innate leverage, if you will, of the options market, and it's affordable and it's very acceptable. So just it is a complementary product, if you will, to what you see in futures and equities [world's] byproducts, et cetera. And I think it complements them very well. So it has really resonated with the marketplace.

是的，這是一個很好的問題。觀看起來有點令人著迷。我認為你有點搞清楚了——再說一次，我不這麼認為——我們與所有交易所相處融洽，人們正在創造產品，我並不是想貶低任何產品或諸如此類的東西——因為我們有點像流動性供應方面的瑞士。所以我們鼓勵創新等等。但我認為人們已經看過該產品並說，看，這是一種以良好方式管理波動性的好方法，如果你想對波動性進行投機，它為你提供了固有的槓桿作用，如果你願意的話，選擇權市場上，而且價格實惠，很容易接受。因此，如果您願意的話，它只是您在期貨和股票[世界]副產品等中看到的補充產品。我認為這很好地補充了它們。所以它確實引起了市場的共鳴。

I think it adds flexibility to all stripes of traders, investors. So clearly, institutional investors are now using it as a product. there's a huge debate going on between JPMorgan and Goldman Sachs as to whether it's retail or not, I'm not going to get involved in that, let the big guys fight that out. At the end of the day, again, we don't care because we service both -- all sides of the continuum of the spectrum of traders and users of that product.

我認為它為各類交易者和投資者增加了靈活性。很明顯，機構投資者現在正在將其用作產品。摩根大通和高盛之間正在進行一場關於零售與否的激烈爭論，我不會參與其中，讓大公司來爭論吧。歸根結底，我們再次不在乎，因為我們為雙方提供服務——該產品的交易者和用戶的連續體的所有方面。

So we like the product a lot. We think it expands the market and provides access to investors that want to engage and express an interest in either volatility or use it to hedge the rest of the portfolio. So I think it's been a really healthy development for the marketplace. And obviously, the options market is incredibly competitive from a venue perspective.

所以我們非常喜歡這個產品。我們認為它擴大了市場，並為那些想要參與和表達對波動性的興趣或用它來對沖投資組合其餘部分的投資者提供了機會。所以我認為這對市場來說是一個非常健康的發展。顯然，從場地角度來看，選擇權市場的競爭非常激烈。

At last count, I believe we have 17 options exchanges. I could be wrong. Maybe I missed the 18th. So there is a need for market makers to provide inter-connectivity, if you will, between those various venues. That's not the easiest circus trick in the world to pull off because of the difference in technologies, but that's fantastic for Virtu. That's kind of like Virtu 101, which is understanding products, understanding how they interact and relate to related products, understanding the DNA, if you will, we call that market structure 101 of how all these venues work, making that work within our technology plan and then providing a service in the form of an attractive price that we can distribute through these various venues. So we continue to be very excited about how that has evolved in the United States.

根據最新統計，我相信我們有 17 個選擇權交易所。我可能是錯的。也許我錯過了18號。因此，如果願意的話，做市商需要在這些不同場所之間提供互連性。由於技術的差異，這並不是世界上最容易實現的馬戲戲法，但這對 Virtu 來說太棒了。這有點像Virtu 101，它是理解產品，理解它們如何交互以及與相關產品的關係，理解DNA，如果你願意的話，我們將所有這些場所如何運作的市場結構101 稱為市場結構101，使其在我們的技術計劃中發揮作用然後以具有吸引力的價格形式提供服務，我們可以透過這些不同的場所進行分發。因此，我們仍然對美國的發展感到非常興奮。

And as I mentioned earlier, there are similar like global index products in other countries that we have found attractive as well that we can approach and provide value to with our scope and scale, namely India -- right now, namely India and Japan. But good observation. Thank you for the question, Michael.

正如我之前提到的，我們發現其他國家也有類似的全球指數產品，我們也發現這些產品很有吸引力，我們可以通過我們的範圍和規模來接近並提供價值，即印度- 目前，即印度和日本。但觀察力很好。謝謝你的提問，麥可。

Thank you. We currently have no further questions. So this concludes today's conference call. Thank you all for joining. You may now disconnect your lines.

謝謝。目前我們沒有進一步的問題。今天的電話會議到此結束。感謝大家的加入。現在您可以斷開線路。

Thank you, everyone.

謝謝大家。