Virtu is a leading technology-enabled market maker and liquidity provider
to the global financial markets. We stand ready, at any time, to buy or sell
a broad range of securities and other financial instruments, and we generate
revenue by buying and selling securities and other financial instruments and
earning small bid/ask spreads across a large volume of transactions. We make
markets by providing quotations to buyers and sellers in more than 12,000 securities
and other financial instruments on more than 230 unique exchanges, markets and
liquidity pools in 35 countries around the world. We believe that our broad
diversification, in combination with our proprietary technology platform and
low-cost structure, enables us to facilitate risk transfer between global capital
markets participants by supplying liquidity and competitive pricing while at
the same time earning attractive margins and returns.
We believe that market makers like us serve an important role in maintaining
and improving the overall health and efficiency of the global capital markets
by continuously posting bids and offers for financial instruments and thereby
providing to market participants an efficient means to transfer risk. All market
participants benefit from the increased liquidity, lower overall trading costs
and enhanced execution certainty that we provide. While we do not have customers
in a traditional sense, we make markets for global banks, brokers and other
intermediaries, and indirectly provide services to retail and institutional
investors, including corporations, individuals, hedge funds, mutual funds, pension
funds and other investors, all of whom can access our liquidity on exchanges
or venues in order to transfer risk in multiple securities and asset classes
for their own accounts and/or on behalf of their customers.
We refer to our market making activities as being “market neutral,”
which means that we are not dependent on the direction of any particular market
nor do we speculate. Our market making activities are designed to minimize capital
at risk at any given time by limiting the notional size of our positions. Our
strategies are also designed to lock in returns through precise hedging in the
primary instrument or in one or more economically equivalent instruments, as
we seek to eliminate the price risk in any positions held. Our revenue generation
is driven primarily by transaction volume across a broad range of securities
and other financial instruments, asset classes and geographies. We avoid the
risk of long or short positions in favor of seeking to earn small bid/ask spreads
on large trading volumes across thousands of securities and financial instruments.
We do not engage in the types of principal investing and predictive, momentum
and signal trading in which many other broker-dealers and trading firms engage.
In fact, in order to minimize the likelihood of unintended activities by our
market making strategies, if our risk management system detects a trading strategy
generating revenues outside of our preset limits, it will freeze, or “lockdown,”
that strategy and alert risk management personnel and management. Although this
approach may prevent us from maximizing potential returns in times of extreme
market volatility, we believe the reduction in risk is an appropriate trade-off
that is in keeping with our aim of generating consistently strong revenue from
trading.
Our market making activities employ the following three basic strategies: a
“single instrument” market making strategy, a “one to one”
market making strategy and a “one to many” market making strategy.
The single instrument market making strategy involves actively quoting in a
single instrument with the intention of profiting by capturing the spread between
the bid and offer. This strategy places buy orders, or bids, and sell orders,
or offers, in the market for the subject instrument at or near the inside of
the market with the intention of achieving an execution. If another market participant
executes against the strategy’s bid or offer by crossing the spread, the
strategy will attempt to exit the position by continuing to quote on the opposite
side of the market in order to execute an offsetting position. The one to one
market making strategy involves continuously quoting a two-sided market in a
single instrument with the intention of either capturing the spread in the primary
instrument or locking in a return by hedging in a different but economically
similar instrument. The one to many market making strategy involves continuously
quoting a two-sided market in a primary instrument (typically an ETF) with the
intention of either capturing the spread in the primary instrument or attempting
to lock in a return by hedging in a basket of instruments that represent an
economically equivalent value to the primary instrument.
Technology and operational efficiency are at the core of our business, and our
focus on market making technology is a key element of our success. We have developed
a proprietary, multi-asset, multi-currency technology platform that is highly
reliable, scalable and modular, and we integrate directly with exchanges and
other liquidity centers. Our market data, order routing, transaction processing,
risk management and market surveillance technology modules manage our market
making activities in an efficient manner and enable us to scale our market making
activities globally and across additional securities and other financial instruments
and asset classes without significant incremental costs or third-party licensing
or processing fees.
We are a self-clearing registered broker-dealer in the U.S. and are registered
with the Central Bank of Ireland for our European trading. We participate on
more than 230 unique exchanges, and register as a market maker or liquidity
provider and/or enter into direct obligations to provide liquidity on nearly
every exchange or venue that offers such programs. We engage regularly with
regulators around the world on issues affecting electronic trading and have
been a proponent with the SEC of affirmative market making obligations for electronic
market makers in U.S. equities in an effort to enhance the transparency and
liquidity provided to capital markets. In the U.S., we conduct our business
from our headquarters in New York, New York and our trading center in Austin,
Texas. Abroad, we conduct our business through trading centers located in Dublin
and Singapore.
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