Virtu Financial, Inc. 10-Q

ITEM 1A. RISK FACTORS There have been no material changes to the Risk Factors described in Part I Item 1A. “Risk Factors” in our 2019 Form 10-K, except for the following: The effects of the outbreak of the novel coronavirus (COVID-19) have negatively affected the global economy, the United States economy and the global financial markets, and may disrupt our operations and our clients' operations, which could have an adverse effect on our business, financial condition and results of operations. The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused, among other matters, illness, death, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The United States now has the world’s most reported COVID-19 cases, and all 50 states and the District of Columbia have reported cases of infected individuals. Similar impacts have been experienced in every country in which we do business. The full impact this virus may have on the global financial markets and the overall economy is not currently known. Impacts to our business could be widespread and global, and material impacts may be possible, including the following: • Employees, including our senior executives, contracting COVID-19; • Reductions in our operating effectiveness or efficiency as a significant number of our employees currently work from home and potential disruptions or adverse impacts as and when we implement a return to work policy for certain employees; • Unprecedented volatility in global financial markets, which may increase the risk or potential magnitude of operational errors; • Increases in liquidity needs, including but not limited to margin funding requirements with clearinghouses or prime brokers, for our business and challenges obtaining sufficient liquidity sources to meet such needs or requirements; • Adverse impacts on our clients, counterparties, vendors and other business partners on whom we rely for order flow, funding, and critical technological or operational services and the potential increase in risk of counterparty default or insolvency event; • Closures of our offices or the offices of our clients; and • Travel restrictions limiting our ability to collaborate internally and engage with current and potential clients and counterparties externally. We are taking precautions to protect the safety and well-being of our employees, customers and business partners. However, we cannot be certain that the steps we have taken or will take will be deemed to be adequate or appropriate, nor can we predict the level of disruption which will occur to our employee's ability to perform their functions. The further spread of the COVID-19 outbreak may materially disrupt financial activity generally and in the areas in which we operate. This could result in a decline in demand for our products and services, which would negatively impact our liquidity position and our results. Any one or more of these developments could have a material adverse effect on our and our consolidated subsidiaries' business, operations, consolidated financial condition, and consolidated results of operations. 93 Table of Contents Significant market volatility relating to the outbreak of the novel coronavirus (COVID-19) has significantly increased and could in the future significantly increase our liquidity needs, which could impact our business, financial condition and results of operations if we face challenges in obtaining liquidity. The COVID-19 pandemic and governmental and other responses thereto has caused and may continue to cause substantially elevated volume and volatility, which has and may continue to result in material increases in our trading activities both in our market making segment and in our execution services segment. This increase in our activity and our customers’ activity together with the extraordinary volatility has resulted in, and may continue to result in, significantly increased margin requirements with the National Securities Clearing Corporation (“NSCC”), the Options Clearing Corporation (“OCC”), as well as certain prime brokers, clearing brokers, and other counterparties. In order to manage these increased daily funding obligations, we have taken and may continue to have to take measures to increase available short-term liquidity and to reduce our short term funding requirements, which may require us to depend on additional sources of liquidity and upon the availability of third parties for services such as trade clearing, and has required and may continue to require us to limit certain of our activities in certain asset classes or products. If such sources of short-term liquidity or third-party services are not available, or if we encounter challenges obtaining such short-term liquidity or third-party services on terms favorable to us or at all, then our business, financial condition and results of operations may be adversely impacted. In response to the effects of the outbreak of the novel coronavirus (COVID-19) and in accordance with applicable governmental orders and the guidelines of the Center for Disease Control (CDC), we have implemented our business continuity plan (BCP), which may disrupt or negatively impact our business. As of September 30, 2020, under our BCP a significant majority of our global work force was working remotely, which may increase various risks to our business. These include the risks associated with a computer systems and software failure, cyber risks, capacity constraints, malfunctions and delays. Risks associated with trading operations, financial reporting, internal controls and other key functions and responsibilities may also be elevated, as employees rely on critical technologies to communicate and collaborate and perform core functions remotely. The risk of further disruption or adverse impact may also be heightened as and when governmental orders are lifted or relaxed and we begin to reintegrate our personnel and business into our office locations pursuant to our return to office policy.