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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-04 · 141 added, 143 removed, 695 unchanged (29% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis covers the three and six months ended June 30, 2021 and 2020 and should be read in conjunction with the consolidated financial statements of Virtu Financial, Inc.

(the “Company”) for the period ended June 30, 2021, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and accompanying notes and MD&A for the year ended December 31, 2020, which are included in Items 8 and 7, respectively, of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

The following management’s discussion and analysis covers the three and nine months ended September 30, 2021 and 2020 and should be read in conjunction with the consolidated financial statements of Virtu Financial, Inc.

(the “Company”) for the period ended September 30, 2021, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and accompanying notes and MD&A for the year ended December 31, 2020, which are included in Items 8 and 7, respectively, of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

This management's discussion and analysis contains forward-looking statements that involve risks and uncertainties.

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and its subsidiaries ("ITG") in an all-cash transaction valued at $30.30 per ITG share, for a total of approximately $1.0 billion (the "ITG Acquisition").

In connection with the ITG Acquisition, Virtu Financial, VFH, and the Acquisition Borrower entered into the Credit Agreement, with the lenders party thereto, Jefferies Finance LLC, as administrative agent and Jefferies Finance LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners.

In connection with the ITG Acquisition, Virtu Financial, VFH Parent LLC, a Delaware limited liability company and a subsidiary of Virtu Financial ("VFH"), and Imapala Borrower LLC (the "Acquisition Borrower"), a subsidiary of the Company, entered into a Credit Agreement (the "Credit Agreement"), with the lenders party thereto, Jefferies Finance LLC, as administrative agent and Jefferies Finance LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners.

The Credit Agreement provided (i) the First Lien Term Loan Facility (as defined below) in an aggregate principal amount of $1.5 billion, drawn in its entirety on the ITG Closing Date, with approximately $404.5 million borrowed by VFH to repay all amounts outstanding under its existing term loan facility and the remaining approximately $1,095.0 million borrowed by the Acquisition Borrower to finance the consideration and fees and expenses to be paid in connection with the ITG Acquisition, and (ii) the First Lien Revolving Facility (as defined below), with a $5.0 million letter of credit subfacility and a $5.0 million swingline subfacility.

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In connection with the IPO, non-qualified stock options to purchase 9,228,000 shares were granted at the IPO per share price, each of which vests in equal annual installments over a period of four years from the grant date and expires not later than 10 years from the grant date.

Subsequent to the IPO and through June 30, 2021, options to purchase 1,628,750 shares in the aggregate were forfeited and 5,683,095 options were exercised.

Subsequent to the IPO and through September 30, 2021, options to purchase 1,628,750 shares in the aggregate were forfeited and 5,722,095 options were exercised.

The fair value of the stock option grants was determined through the application of the Black-Scholes-Merton model and was recognized on a straight-line basis over the vesting period.

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There are no material differences between our condensed consolidated financial statements and the financial statements of Virtu Financial except as follows:

(i) cash and cash equivalents reflected on our Condensed Consolidated Statements of Financial Condition as of June 30, 2021 in the amount of $111.2 million;

(ii) deferred tax assets reflected on our Condensed Consolidated Statements of Financial Condition as of June 30, 2021 in the amount of $171.0 million and tax receivable agreement obligation in the amount of $254.7 million, in each case as described in greater detail in Note 4 "Tax Receivable Agreements" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q;

(iii) a portion of the member's equity of Virtu Financial is represented as non-controlling interest on our Condensed Consolidated Statements of Financial Condition as of June 30, 2021;

and (iv) provision for corporate income tax in the amount of $17.4 million and $79.8 million reflected on our Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021, respectively.

(i) cash and cash equivalents reflected on our Condensed Consolidated Statements of Financial Condition as of September 30, 2021 in the amount of $60.1 million;

(ii) deferred tax assets reflected on our Condensed Consolidated Statements of Financial Condition as of September 30, 2021 in the amount of $167.5 million and tax receivable agreement obligation in the amount of $254.7 million, in each case as described in greater detail in Note 5 "Tax Receivable Agreements" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q;

(iii) a portion of the member's equity of Virtu Financial is represented as noncontrolling interest on our Condensed Consolidated Statements of Financial Condition as of September 30, 2021;

and (iv) provision for corporate income tax in the amount of $17.7 million and $97.5 million reflected on our Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021, respectively.

Components of Our Results of Operations

The following table shows our i) Total revenue, ii) Total operating expenses, and iii) Income before income taxes and noncontrolling interest by segment for the three and six months ended June 30, 2021 and 2020:

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

The following table shows our i) Total revenue, ii) Total operating expenses, and iii) Income before income taxes and noncontrolling interest by segment for the three and nine months ended September 30, 2021 and 2020:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

Market Making 2021 2020 2021 2020

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Income before income taxes and noncontrolling interest $ 145,099 $ 252,515 $ 769,887 $ 1,123,272

The following table shows our results of operations for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

The following table shows our results of operations for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2021 2020 2021 2020

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Trading income is generated in the normal course of our market making activities and is typically proportional to the level of trading activity, or volumes, and bid/ask spreads in the asset classes we serve.

Our trading income is highly diversified by asset class and geography and is comprised of small amounts earned on millions of trades on various exchanges, primarily in the following two categories:

(i) Global Equities and (ii) Global FICC, Options and Other.

Our trading income is highly diversified by asset class and geography and is comprised of small amounts earned on millions of trades on various exchanges.

Our trading income, net, results from gains and losses associated with trading strategies, which are designed to capture small bid ask spreads, while hedging risks.

Trading income, net, accounted for 77% and 81% of our total revenues for the six months ended June 30, 2021 and 2020, respectively.

Trading income, net, accounted for 76% and 78% of our total revenues for the nine months ended September 30, 2021 and 2020, respectively.

Interest and dividends income.

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We record our pro-rata share of each JV’s earnings or losses within other, net, while fees related to the use of communication services provided by the JVs are recorded within communications and data processing.

We have a noncontrolling investment (the “JNX Investment”) in JNX, a proprietary trading system based in Tokyo.

We have a noncontrolling investment (the “JNX Investment”) in Japannext Co., Ltd.

(“JNX”), a proprietary trading system based in Tokyo.

In connection with the investment, we issued bonds to certain affiliates of JNX and used the proceeds to partially finance the transaction.

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GAAP measure.

The following table reconciles the Condensed Consolidated Statements of Comprehensive Income to arrive at Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, and Operating Margins for the three and six months ended June 30, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2021 2020 2021 2020

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Termination of office leases 238 60 5,126 343

Gain on sale of MATCHNow — (58,652) — (58,652)

Other (4,225) (11,138) (12,827) (10,157)

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(3) Calculated by dividing Adjusted EBITDA by Adjusted Net Trading Income.

The following table reconciles Net Income to arrive at Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted Net Income and Normalized Adjusted EPS for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except share and per share data) 2021 2020 2021 2020

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Termination of office leases 238 60 5,126 343

Gain on sale of MATCHNow — (58,652) — (58,652)

Other (4,225) (11,138) (12,827) (10,157)

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(2) Assumes that (1) holders of all vested and unvested non-vesting Virtu Financial Units (together with corresponding shares of the Company's Class C common stock, par value $0.00001 per share (the “Class C Common Stock”)) have exercised their right to exchange such Virtu Financial Units for shares of Class A Common Stock on a one-for-one basis, (2) holders of all Virtu Financial Units (together with corresponding shares of the Company's Class D common stock, par value $0.00001 per share (the “Class D Common Stock”)) have exercised their right to exchange such Virtu Financial Units for shares of the Company's Class B common stock, par value $0.00001 per share (the “Class B Common Stock”) on a one-for-one basis, and subsequently exercised their right to convert the shares of Class B Common Stock into shares of Class A Common Stock on a one-for-one basis.

Includes additional shares from dilutive impact of options, restricted stock units and restricted stock awards outstanding under the Amended and Restated 2015 Management Incentive Plan and the Amended and Restated ITG 2007 Equity Plan during the three and six months ended June 30, 2021 and 2020 as well as warrants issued in connection with the Founder Member Loan during the three and six months ended June 30, 2020.

The following tables reconcile Trading income, net to Adjusted Net Trading Income by segment for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

Includes additional shares from dilutive impact of options, restricted stock units and restricted stock awards outstanding under the Amended and Restated 2015 Management Incentive Plan and the Amended and Restated ITG 2007 Equity Plan during the three and nine months ended September 30, 2021 and 2020 as well as warrants issued in connection with the Founder Member Loan during the three and nine months ended September 30, 2020.

The following tables reconcile Trading income, net to Adjusted Net Trading Income by segment for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, 2021

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 248,702 $ 105,742 $ — $ 354,444

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 257,235 $ 105,023 $ — $ 362,258

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 1,055,899 $ 368,404 $ — $ 1,424,303

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 1,461,622 $ 353,830 $ — $ 1,815,452

The following table shows our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by segment for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,

The following table shows our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by segment for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Adjusted Net Trading Income by Segment (in thousands):

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Adjusted Net Trading Income $ 354,444 $ 362,258 (2.2)%

Three Months Ended June 30,

Three Months Ended September 30,

Average Daily Adjusted Net Trading Income by Segment (in thousands):

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Average Daily Adjusted Net Trading Income $ 5,538 $ 5,660 (2.2)%

Six Months Ended June 30,

Nine Months Ended September 30,

Adjusted Net Trading Income by Segment (in thousands):

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Adjusted Net Trading Income $ 1,424,303 $ 1,815,452 (21.5)%

Six Months Ended June 30,

Nine Months Ended September 30,

Average Daily Adjusted Net Trading Income by Segment (in thousands):

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Average Daily Adjusted Net Trading Income $ 7,576 $ 9,605 (21.1)%

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Total Revenues

Our total revenues decreased $356.9 million, or 39.4%, to $549.0 million for the three months ended June 30, 2021, compared to $905.9 million for the three months ended June 30, 2020.

The decrease was primarily driven by a decrease of $359.2 million in Trading income, net, which was primarily driven by lower market volatility and trading volumes across global markets and major asset categories during the three months ended June 30, 2021 compared to the same period in 2020, which experienced elevated levels of market volatility and trading volumes largely due to the impacts of the COVID-19 pandemic and the governmental and other responses thereto.

The following table shows total revenues by segment for the three months ended June 30, 2021 and 2020.

Three Months Ended June 30,

Our total revenues decreased $111.8 million, or 17.0%, to $544.3 million for the three months ended September 30, 2021, compared to $656.1 million for the three months ended September 30, 2020.

The decrease was primarily driven by a decrease of $47.0 million in Trading income, net, which was driven by lower market volatility across global markets and major asset categories during the three months ended September 30, 2021 compared to the same period in 2020, which experienced elevated levels of market volatility and trading volumes largely due to the impacts of the COVID-19 pandemic and the governmental and other responses thereto.

Additionally, Other, net declined $65.6 million primarily attributable to the sale of MATCHNow on August 4, 2020.

The following table shows total revenues by segment for the three months ended September 30, 2021 and 2020.

Three Months Ended September 30,

(in thousands, except for percentage) 2021 2020 % Change

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Interest and dividends income 9,704 10,763 (9.8)%

Commissions, net and technology services 9,087 (634) NM

Commissions, net and technology services 8,894 9,391 (5.3)%

Other, net 1,270 12,615 (89.9)%

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Trading income, net $ 4,843 $ (534) NM

Interest and dividends income (24) 320 NM

Interest and dividends income — 169 (100.0)%

Commissions, net and technology services 127,029 124,462 2.1%

Other, net (62) 75 NM

Other, net 677 58,583 (98.8)%

Total revenues from Execution Services $ 132,549 $ 182,680 (27.4)%

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Trading income, net was primarily earned by our Market Making segment.

Trading income, net decreased $359.2 million, or 48.3%, to $384.8 million for the three months ended June 30, 2021, compared to $744.0 million for the three months ended June 30, 2020.

The decrease was primarily driven by the lower market volatility and trading volumes across global markets and major asset categories during the three months ended June 30, 2021 compared to the same period in 2020, which experienced elevated levels of market volatility and trading volumes largely due to the impacts of the COVID-19 and the governmental and other responses thereto.

Trading income, net decreased $47.0 million, or 10.7%, to $394.3 million for the three months ended September 30, 2021, compared to $441.3 million for the three months ended September 30, 2020.

The decrease was primarily driven by the lower market volatility across global markets and major asset categories during the three months ended September 30, 2021 compared to the same period in 2020, which experienced elevated levels of market volatility largely due to the impacts of the COVID-19 and the governmental and other responses thereto.

Average daily realized volatility of the S&P 500 Index decreased 34.6% during the period as compared to the prior period, while average daily U.S.

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Interest and dividends income was primarily earned by our Market Making segment.

Interest and dividends income increased $0.2 million, or 2.2%, to $9.5 million for the three months ended June 30, 2021, compared to $9.3 million for the three months ended June 30, 2020.

This increase was primarily attributable to the higher interest income earned on cash collateral posted as part of securities borrowing transactions driven by a slight increase in balances compared to the same period in 2020.

Interest and dividends income decreased $1.2 million, or 11.2%, to $9.7 million for the three months ended September 30, 2021, compared to $10.9 million for the three months ended September 30, 2020.

This decrease was primarily attributable to the lower interest income earned on cash collateral posted as part of securities borrowing transactions as well as a reduction in securities borrowing transactions for the period compared to the same period during the prior year.

As indicated above, rather than analyzing interest and dividends income in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

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Commissions, net and technology services revenues were primarily earned by our Execution Services segment.

Commissions, net and technology services revenues decreased $4.6 million, or 3.1%, to $143.1 million for the three months ended June 30, 2021, compared to $147.7 million for the three months ended June 30, 2020.

The decrease was primarily attributable to lower market volatility and trading volumes.

Other, net increased $6.6 million, or 137.5%, to $11.5 million for the three months ended June 30, 2021, compared to $4.8 million for the three months ended June 30, 2020.

The increase was primarily due to a $12.2 million unrealized gain recorded on the minority investment in Japannext Co., Ltd.

(see Note 9 "Financial Assets and Liabilities" of Part I Item I "Financial Statements" of this Quarterly Report on Form 10-Q for details on the JNX Investment).

Commissions, net and technology services revenues remained fairly consistent, increasing $2.1 million, or 1.5%, to $135.9 million for the three months ended September 30, 2021, compared to $133.9 million for the three months ended September 30, 2020.

Other, net decreased $65.6 million, or 93.6%, to $4.5 million for the three months ended September 30, 2021, compared to $70.0 million for the three months ended September 30, 2020.

The decrease was primarily due to a $56.2 million gain recorded on the sale of MATCHNow in the third quarter of 2020 (see Note 3 "Sale of MATCHNow" of Part I Item I "Financial Statements" of this Quarterly Report on Form 10-Q for details on the MATCHNow Sale).

Adjusted Net Trading Income

Adjusted Net Trading Income decreased $326.9 million, or 48.9%, to $341.8 million for the three months ended June 30, 2021, compared to $668.7 million for the three months ended June 30, 2020.

This decrease was primarily attributable to lower Trading income, net in the Market Making segment driven by lower market volatility and trading volumes across major asset categories during the three months ended June 30, 2021 compared to the same period in 2020.

Adjusted Net Trading Income decreased $7.8 million, or 2.2%, to $354.4 million for the three months ended September 30, 2021, compared to $362.3 million for the three months ended September 30, 2020.

This decrease was primarily attributable to lower Trading income, net in the Market Making segment driven by lower market volatility across major asset categories during the three months ended September 30, 2021 compared to the same period in 2020.

Average daily realized volatility of the S&P 500 Index and average daily CVIX realized volatility decreased 34.6% and 59.1%, respectively, compared to the prior period, while average daily U.S.

equity consolidated volumes decreased 1.8%.

Adjusted Net Trading Income per day decreased $5.2 million, or 48.9%, to $5.4 million for the three months ended June 30, 2021, compared to $10.6 million for the three months ended June 30, 2020.

There were 63 trading days for both the three months ended June 30, 2021 and 2020.

Adjusted Net Trading Income per day decreased $0.1 million, or 2.2%, to $5.5 million for the three months ended September 30, 2021, compared to $5.7 million for the three months ended September 30, 2020.

There were 64 trading days for both the three months ended September 30, 2021 and 2020.

Adjusted Net Trading Income is a non-GAAP measure.

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Operating Expenses

Our operating expenses decreased $87.4 million, or 17.4%, to $414.0 million for the three months ended June 30, 2021, compared to $501.4 million for the three months ended June 30, 2020.

The decrease in operating expenses is primarily due to a decrease in brokerage, exchange, clearance fees and payments for order flow, net and employee compensation and payroll taxes and other operating expenses described in more detail below.

Our operating expenses decreased $4.4 million, or 1.1%, to $399.2 million for the three months ended September 30, 2021, compared to $403.6 million for the three months ended September 30, 2020.

The decrease in operating expenses is primarily due to a decrease in brokerage, exchange, clearance fees and payments for order flow, net and debt issue cost related to debt refinancing, prepayment and commitment fees, partially offset by an increase in employee compensation and payroll taxes and other operating expenses described in more detail below.

Brokerage, exchange, clearance fees and payments for order flow, net.

Brokerage exchange, clearance fees and payments for order flow, net, decreased $32.8 million, or 16.1%, to $170.7 million for the three months ended June 30, 2021, compared to $203.5 million for the three months ended June 30, 2020.

This decrease was primarily attributable to the decrease in market volatility and trading volumes during the three months ended June 30, 2021 compared to the same period in 2020.

Brokerage exchange, clearance fees and payments for order flow, net, decreased $37.6 million, or 19.1%, to $158.9 million for the three months ended September 30, 2021, compared to $196.4 million for the three months ended September 30, 2020.

This decrease was primarily attributable to the decrease in market volatility during the three months ended September 30, 2021 compared to the same period in 2020.

We evaluate this category representing direct costs associated with transacting business, in the broader context of our Adjusted Net Trading Income.

Communication and data processing.

Communication and data processing expense decreased $3.2 million, or 5.7%, to $52.5 million for the three months ended June 30, 2021, compared to $55.7 million for the three months ended June 30, 2020.

This decrease was primarily due to reductions in connectivity connections as a result of an on-going effort to consolidate various communication and data processing subscriptions.

Communication and data processing expense increased $4.0 million, or 7.7%, to $55.6 million for the three months ended September 30, 2021, compared to $51.6 million for the three months ended September 30, 2020.

This increase was primarily due to increased connectivity spending on colocation, subscriber connections and trading membership fees.

Employee compensation and payroll taxes.

Employee compensation and payroll taxes decreased $37.1 million, or 30.7%, to $83.8 million for the three months ended June 30, 2021, compared to $120.9 million for the three months ended June 30, 2020.

The decrease in compensation levels was primarily attributable to a reduction in accrued incentive compensation in the second quarter, which is recorded at management’s discretion and is generally accrued in connection with the overall level of profitability on a year-to-date basis, as well as the anticipated mix of cash and stock-based awards.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $8.9 million and $11.7 million for the three months ended June 30, 2021, and 2020, respectively.

Employee compensation and payroll taxes increased $48.8 million, or 136.2%, to $84.6 million for the three months ended September 30, 2021, compared to $35.8 million for the three months ended September 30, 2020.

The increase in compensation levels was primarily attributable to an increase in accrued incentive compensation, which is recorded at management’s discretion and is generally accrued in connection with the overall level of profitability on a year-to-date basis, as well as the anticipated mix of cash and stock-based awards.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $8.7 million for both the three months ended September 30, 2021, and 2020.

Interest and dividends expense.

Interest and dividends expense decreased $3.9 million, or 13.4%, to $25.0 million for the three months ended June 30, 2021, compared to $28.8 million for the three months ended June 30, 2020.

Interest and dividends expense decreased $0.8 million or 2.9% to $26.6 million for the three months ended September 30, 2021, compared to $27.4 million for the three months ended September 30, 2020.

This decrease was primarily attributable to lower interest expense incurred on cash collateral received as part of securities lending transactions, as well as a reduction in securities lending transactions for the period compared to the same period during the prior year.

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Operations and administrative.

Operations and administrative expense remained consistent at $21.8 million for the three months ended June 30, 2021, compared to $21.7 million for the three months ended June 30, 2020.

Operations and administrative expense decreased $6.4 million or 25.9%, to $18.2 million for the three months ended September 30, 2021, compared to $24.6 million for the three months ended September 30, 2020.

This decrease was driven primarily by increased subleasing, combined with on-going efforts to consolidate office premises and professional services after the ITG Acquisition.

Depreciation and amortization.

Depreciation and amortization decreased $0.4 million, or 2.2%, to $16.3 million for the three months ended June 30, 2021, compared to $16.7 million for the three months ended June 30, 2020.

This decrease was primarily attributable to certain assets being fully depreciated partially offset by an increase in capital expenditures on telecommunication, networking and other assets.

Depreciation and amortization remained consistent at $16.6 million for the three months ended September 30, 2021, compared to $16.7 million for the three months ended September 30, 2020.

Amortization of purchased intangibles and acquired capitalized software.

Amortization of purchased intangibles and acquired capitalized software decreased $0.9 million, or 4.6%, to $18.1 million for the three months ended June 30, 2021,

compared to $19.0 million for the three months ended June 30, 2020.

Amortization of purchased intangibles and acquired capitalized software decreased $1.3 million, or 7.3%, to $16.9 million for the three months ended September 30, 2021, compared to $18.3 million for the three months ended September 30, 2020.

This decrease was due to certain technology intangible assets acquired in connection with the KCG Acquisition being fully amortized.

Termination of office leases.

Termination of office leases was $3.7 million for the three months ended June 30, 2021 due to the impairment of leasehold improvements and fixed assets for certain abandoned office space as part of the effort to integrate and consolidate office space in connection with the Acquisition of KCG and the ITG Acquisition.

There were minimal expenses incurred on termination of office leases for the three months ended June 30, 2020.

Termination of office leases remained consistent at $0.2 million for the three months ended September 30, 2021, compared to $0.1 million for the three months ended September 30, 2020.

These expenses are related to the impairment of leasehold improvements and fixed assets for certain abandoned office space as part of the effort to integrate and consolidate office space in connection with the Acquisition of KCG and the ITG Acquisition.

Debt issue cost related to debt refinancing, prepayment and commitment fees.

Expense from debt issue costs related to debt refinancing, prepayment and commitment fees decreased $11.2 million, or 84.9%, to $2.0 million for the three months ended June 30, 2021, compared to $13.2 million for the three months ended June 30, 2020.

The decrease was primarily driven by the prepayment of $188.5 million made during the second quarter of 2020.

Expense from debt issue costs related to debt refinancing, prepayment and commitment fees decreased $8.7 million, or 87.5%, to $1.2 million for the three months ended September 30, 2021, compared to $9.9 million for the three months ended September 30, 2020.

The decrease was primarily driven by the prepayment of $100.0 million made during the third quarter of 2020.

Transaction advisory fees and expenses.

There was minimal expense incurred related to transaction advisory fees and expenses during the three months ended June 30, 2021, compared to $0.1 million during the three months ended June 30, 2020.

These expenses were primarily incurred in prior years related to the ITG Acquisition and Acquisition of KCG, for which we incurred significant transaction advisory fees.

Transaction advisory fees and expenses decreased $2.3 million, or 93.2%, to $0.2 million for the three months ended September 30, 2021, compared to $2.5 million during the three months ended September 30, 2020.

These expenses were primarily incurred in the prior period related to the sale of MATCHNow, as discussed in Note 3 "Sale of MATCHNow" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Financing interest expense on long-term borrowings.

Financing interest expense on long-term borrowings decreased $1.6 million, or 7.5%, to $20.1 million for the three months ended June 30, 2021, compared to $21.7 million for the three months ended June 30, 2020.

This decrease was primarily attributable to the decrease in outstanding principal as a result of the prepayment on the First Lien Term Loan Facility in the second and third quarters of 2020.

Financing interest expense on long-term borrowings remained consistent at $20.2 million for the three months ended September 30, 2021, compared to $20.4 million for the three months ended September 30, 2020.

Provision for income taxes

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subsidiaries.

Our provision for income taxes was $26.1 million for the three months ended June 30, 2021, compared to $69.3 million for the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Our provision for income taxes and effective tax rates were $22.0 million, 15.1% for the three months ended September 30, 2021, compared to $52.8 million, 20.9% for the three months ended September 30, 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Total Revenues

Our total revenues decreased $345.0 million, or 18.1%, to $1,561.5 million for the six months ended June 30, 2021, compared to $1,906.5 million for the six months ended June 30, 2020.

This decrease was primarily attributable to a decrease of $348.9 million in Trading income, net, which was primarily driven by lower market volatility during the six months ended June 30, 2021 compared to the prior period.

The following table shows the total revenues by segment for the six months ended June 30, 2021 and 2020.

Six Months Ended June 30,

Our total revenues decreased $456.8 million, or 17.8%, to $2,105.9 million for the nine months ended September 30, 2021, compared to $2,562.6 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to a decrease of $395.9 million in Trading income, net, which was primarily driven by lower market volatility during the nine months ended September 30, 2021 compared to the prior period.

Additionally, Other, net declined $58.7 million primarily attributable to the sale of MATCHNow on August 4, 2020.

The following table shows the total revenues by segment for the nine months ended September 30, 2021 and 2020.

Nine Months Ended September 30,

(in thousands, except for percentage) 2021 2020 % Change

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Interest and dividends income 26,174 46,216 (43.4)%

Commissions, net and technology services 23,217 136 NM

Commissions, net and technology services 32,111 9,526 237.1%

Other, net 5,923 19,382 (69.4)%

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Trading income, net was primarily earned by our Market Making segment.

Trading income, net, decreased $348.9 million, or 22.6%, to $1,197.6 million for the six months ended June 30, 2021, compared to $1,546.5 million for the six months ended June 30, 2020.

The decrease was primarily driven by lower market volatility during the six months ended June 30, 2021 compared to the same period of 2020, which experienced elevated levels of market volatility and trading volumes largely due to the impacts of the COVID-19 and the governmental and other responses thereto.

Trading income, net, decreased $395.9 million, or 19.9%, to $1,591.8 million for the nine months ended September 30, 2021, compared to $1,987.8 million for the nine months ended September 30, 2020.

The decrease was primarily driven by lower market volatility during the nine months ended September 30, 2021 compared to the same period of 2020, which experienced elevated levels of market volatility and trading volumes largely due to the impacts of the COVID-19 and the governmental and other responses thereto.

Average daily realized volatility of the S&P 500 Index decreased 55.4% compared to the prior period, and the average daily realized volatility of the CVIX decreased 64.4% compared to prior period.

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Interest and dividends income was primarily earned by our Market Making segment.

Interest and dividends income decreased $19.3 million, or 53.9%, to $16.5 million for the six months ended June 30, 2021, compared to $35.9 million for the six months ended June 30, 2020.

This decrease was primarily attributable to lower interest income earned on cash collateral posted as part of securities borrowed transactions driven by lower interest rates compared to the prior period.

Interest and dividends income decreased $20.5 million, or 43.9%, to $26.2 million for the nine months ended September 30, 2021, compared to $46.8 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to lower interest income earned on cash collateral posted as part of securities borrowed transactions driven by lower interest rates as well as a reduction in securities borrowing transactions for the period compared to the same period during the prior year.

As indicated above, rather than analyzing interest and dividends income in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

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Commissions, net and technology services revenues were primarily earned by our Execution Services segment.

Commissions, net and technology services revenues increased $16.3 million, or 5.1%, to $334.8 million for the six months ended June 30, 2021, compared to $318.5 million for the six months ended June 30, 2020.

Commissions, net and technology services revenues increased $18.4 million, or 4.1%, to $470.7 million for the nine months ended September 30, 2021, compared to $452.3 million for the nine months ended September 30, 2020.

The increase was primarily attributable to higher trading volumes in U.S.

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As indicated above, rather than analyzing commissions, net and technology services in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

Other, net increased $6.9 million to $12.7 million for the six months ended June 30, 2021, compared to $5.7 million for the six months ended June 30, 2020.

The increase was primarily due to a $12.2 million unrealized gain

recorded on the minority investment in JNX (see Note 9 "Financial Assets and Liabilities" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for details on the JNX Investment).

Other, net decreased $58.7 million, or 77.4%, to $17.1 million for the nine months ended September 30, 2021, compared to $75.8 million for the nine months ended September 30, 2020.

The decrease was primarily due to a $56.2 million gain recorded on the sale of MATCHNow in the third quarter 2020 (see Note 3 "Sale of MATCHNow" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for details on the MATCHNow sale).

Adjusted Net Trading Income

Adjusted Net Trading Income decreased $383.3 million, or 26.4%, to $1,069.9 million for the six months ended June 30, 2021, compared to $1,453.2 million for the six months ended June 30, 2020.

This decrease was primarily attributable to higher Brokerage, exchange, clearance fees and payments for order flow, net (described below) incurred by Market Making and higher Commissions, net and technology services earned, driven by higher trading volumes despite lower volatility during the six months ended June 30, 2021 compared to the prior period.

Adjusted Net Trading Income decreased $391.1 million, or 21.5%, to $1,424.3 million for the nine months ended September 30, 2021, compared to $1,815.5 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to lower Trading Income, net (described above), driven by lower market volatility during the nine months ended September 30, 2021 compared to the prior period, and higher Brokerage, exchange, clearance fees and payments for order flow, net (described below) incurred by Market Making.

Average daily realized volatility of the S&P 500 Index and average daily CVIX realized volatility decreased 55.4% and 64.4%, respectively, compared to the prior period, while average daily U.S.

equity consolidated volumes increased 11.1%.

Adjusted Net Trading Income per day decreased $3.0 million, or 25.8%, to $8.6 million for the six months ended June 30, 2021, compared to $11.6 million for the six months ended June 30, 2020.

The number of trading days was 124 days for the six months ended June 30, 2021 and 125 days for the six months ended June 30, 2020.

Adjusted Net Trading Income per day decreased $2.0 million, or 21.1%, to $7.6 million for the nine months ended September 30, 2021, compared to $9.6 million for the nine months ended September 30, 2020.

The number of trading days was 188 days for the nine months ended September 30, 2021 and 189 days for the nine months ended September 30, 2020.

Adjusted Net Trading Income is a non-GAAP measure.

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Operating Expenses

Our operating expenses decreased $99.0 million, or 9.6%, to $936.7 million for the six months ended June 30, 2021, compared to $1,035.8 million for the six months ended June 30, 2020.

The decrease in operating expenses was primarily due to lower employee compensation and payroll taxes and interest and dividends expense, offset by an increase in Brokerage, exchange, clearance fees and payments for order flow, net compared to the same period in the prior year, described in more detail below.

Our operating expenses decreased $103.4 million, or 7.2%, to $1,336.0 million for the nine months ended September 30, 2021, compared to $1,439.4 million for the nine months ended September 30, 2020.

The decrease in operating expenses was primarily due to lower employee compensation and payroll taxes, interest and dividends expense, and debt issue cost related to debt refinancing, prepayment, and commitment fees, offset by an increase in Brokerage, exchange, clearance fees and payments for order flow, net compared to the same period in the prior year, described in more detail below.

Brokerage, exchange, clearance fees and payments for order flow, net.

Brokerage, exchange, clearance fees and payments for order flow, net, increased $52.7 million, or 14.0%, to $430.0 million for the six months ended June 30, 2021, compared to $377.3 million for the six months ended June 30, 2020.

Brokerage, exchange, clearance fees and payments for order flow, net, increased $15.1 million, or 2.6%, to $588.9 million for the nine months ended September 30, 2021, compared to $573.8 million for the nine months ended September 30, 2020.

This increase was primarily attributable to increases in volumes from our broker-dealer clients eligible for payments for order flow, driven by higher participation of retail investors in the market during the quarter compared to the prior year.

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Communication and data processing.

Communication and data processing expense decreased $6.5 million, or 5.9%, to $104.2 million for the six months ended June 30, 2021, compared to $110.7 million for the six months ended June 30, 2020.

Communication and data processing expense decreased $2.5 million, or 1.5%, to $159.8 million for the nine months ended September 30, 2021, compared to $162.3 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to reductions in connectivity connections as a result of an on-going effort to consolidate various communication and data processing services and subscriptions.

Employee compensation and payroll taxes.

Employee compensation and payroll taxes decreased $102.7 million, or 35.2%, to $188.6 million for the six months ended June 30, 2021, compared to $291.3 million for the six months ended June 30, 2020.

Employee compensation and payroll taxes decreased $53.9 million, or 16.5%, to $273.2 million for the nine months ended September 30, 2021, compared to $327.1 million for the nine months ended September 30, 2020.

The decrease in compensation levels was primarily attributable to a reduction in accrued incentive compensation in the current period, relative to the prior period, which is recorded at management’s discretion and is generally accrued in connection with the overall level of profitability, as well as a result of one-time cash bonuses awarded in the first quarter of 2020 to certain employees to mitigate the effects of the COVID-19 pandemic.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $18.0 million and $19.5 million for the six months ended June 30, 2021 and 2020, respectively.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $26.7 million and $28.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Interest and dividends expense.

Interest and dividends expense decreased $21.3 million, or 30.3%, to $49.0 million for the six months ended June 30, 2021, compared to $70.3 million for the six months ended June 30, 2020.

This decrease was primarily attributable to lower interest expense incurred on cash collateral received as part of securities lending transactions.

Interest and dividends expense decreased $22.1 million, or 22.6%, to $75.6 million for the nine months ended September 30, 2021, compared to $97.7 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to lower interest expense incurred on cash collateral received as well as a reduction in securities lending transactions for the period compared to the same period during the prior year.

As indicated above, rather than analyzing interest and dividends expense in isolation, we generally evaluate it in the broader context of our Adjusted Net Trading Income.

Operations and administrative.

Operations and administrative expense decreased $1.5 million, or 3.0%, to $47.4 million for the six months ended June 30, 2021, compared to $48.9 million for the six months ended June 30, 2020.

Operations and administrative expense decreased $7.8 million, or 10.7%, to $65.6 million for the nine months ended September 30, 2021, compared to $73.5 million for the nine months ended September 30, 2020.

The decrease was primarily attributable to decreases in travel and entertainment due to the on-going effects of the COVID-19 pandemic as well the on-going efforts to consolidate office premises and professional services after the ITG Acquisition.

Depreciation and amortization.

Depreciation and amortization decreased $0.9 million, or 2.8%, to $33.1 million for the six months ended June 30, 2021, compared to $34.1 million for the six months ended June 30, 2020.

Depreciation and amortization decreased $1.0 million, or 1.9%, to $49.8 million for the nine months ended September 30, 2021, compared to $50.7 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to certain assets being fully depreciated in 2020 partially offset by an increase in capital expenditures on telecommunication, networking, and other assets.

Amortization of purchased intangibles and acquired capitalized software.

Amortization of purchased intangibles and acquired capitalized software decreased $1.8 million, or 4.6%, to $36.2 million for the six months ended June 30, 2021, compared to $37.9 million for the six months ended June 30, 2020.

Amortization of purchased intangibles and acquired capitalized software decreased $3.1 million, or 5.5%, to $53.1 million for the nine months ended September 30, 2021, compared to $56.2 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to certain intangible assets being fully amortized in 2020.

Termination of office leases.

Termination of office leases was $4.9 million for the six months ended June 30, 2021, compared to $0.3 million for the six months ended June 30, 2020.

Termination of office leases was $5.1 million for the nine months ended September 30, 2021, compared to $0.3 million for the nine months ended September 30, 2020.

Expense from termination of office leases was due to the impairment of operating lease right-of-use assets and leasehold improvements and fixed assets for certain abandoned office space as part of the efforts to integrate and consolidate office space in connection with the Acquisition of KCG and the ITG Acquisition.

Debt issue costs related to debt refinancing, prepayment and commitment fees.

Expense from debt issue costs related to debt refinancing, prepayment and commitment fees decreased $13.6 million, or 78.4%, to $3.7 million for the six months ended June 30, 2021, compared to $17.4 million for the six months ended June 30, 2020.

The amount for the six months ended June 30, 2020 was primarily driven by the amortization of debt issue costs related to the addition of the Founder Member Loan Facility in March 2020, which expired as of September 20, 2020, costs incurred related to Amendment No.

2 to the Credit Agreement (as defined below), and the prepayment of $188.5 million made during the second quarter of 2020.

Expense from debt issue costs related to debt refinancing, prepayment and commitment fees decreased $22.3 million, or 81.7%, to $5.0 million for the nine months ended September 30, 2021, compared to $27.3 million for the nine months ended September 30, 2020.

The amount for the nine months ended September 30, 2020 was primarily driven by the amortization of debt issue costs related to the addition of the Founder Member Loan Facility in March 2020, which expired as of September 20, 2020, costs incurred related to Amendment No.

2 to the Credit Agreement (as defined below), and the prepayment of $288.5 million made during the the nine months ended September 30, 2020.

See Note 9 "Borrowings" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for additional details.

Transaction advisory fees and expenses.

Transaction advisory fees and expenses were immaterial for the six months ended June 30, 2021, compared to $0.3 million for the six months ended June 30, 2020.

Transaction advisory fees and expenses decreased $2.6 million, or 94.5%, to $0.2 million for the nine months ended September 30, 2021, compared to $2.7 million for the nine months ended September 30, 2020.

These expenses were primarily incurred in prior years related to the ITG Acquisition and Acquisition of KCG, for which we incurred significant transaction advisory fees.

Financing interest expense on long term borrowings.

Financing interest expense on long-term borrowings decreased $7.8 million, or 16.5%, to $39.6 million for the six months ended June 30, 2021, compared to $47.4 million for the six months ended June 30, 2020.

This decrease was primarily attributable to a decrease in outstanding principal as a result of prepayments made during the year ended December 31, 2020, in addition to lower interest rates, as discussed in Note 8 "Borrowings" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Financing interest expense on long-term borrowings decreased $8.0 million, or 11.8%, to $59.8 million for the nine months ended September 30, 2021, compared to $67.8 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to a decrease in outstanding principal as a result of prepayments made during the nine months ended September 30, 2020, as discussed in Note 9 "Borrowings" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q, in addition to lower interest rates.

Provision for income taxes

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subsidiaries.

Our provision for income taxes was $106.7 million for the six months ended June 30, 2021, compared to a provision for income taxes of $147.2 million for the six months ended June 30, 2020.

Our provision for income taxes and effective tax rates were $128.6 million, 16.7% for the nine months ended September 30, 2021, compared to a provision for income taxes of $200.0 million, 17.8% for the nine months ended September 30, 2020.

Liquidity and Capital Resources

As of June 30, 2021, we had $848.1 million in Cash and cash equivalents.

As of September 30, 2021, we had $683.8 million in Cash and cash equivalents.

This balance is maintained primarily to support operating activities for capital expenditures and for short-term access to liquidity, and for other general corporate purposes.

As of June 30, 2021, we had borrowings under our prime brokerage credit facilities of approximately $201.8 million, borrowings under our broker dealer facilities of $198.0 million, short-term bank overdrafts of $18.5 million, and long-term debt outstanding in an aggregate principal amount of approximately $1,631.3 million.

As of September 30, 2021, we had borrowings under our prime brokerage credit facilities of approximately $202.5 million, borrowings under our broker dealer facilities of $178.0 million, short-term bank overdrafts of $136.7 million, and long-term debt outstanding in an aggregate principal amount of approximately $1,631.2 million.

The majority of our trading assets consist of exchange-listed marketable securities, which are marked-to-market daily, and collateralized receivables from broker-dealers and clearing organizations arising from proprietary securities transactions.

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We have continually received the benefit of uncommitted margin financing from our prime brokers globally.

These margin facilities are

secured by securities in accounts held at the prime brokers.

These margin facilities are secured by securities in accounts held at the prime brokers.

For purposes of providing additional liquidity, we maintain a committed credit facility and an uncommitted credit facility for our wholly-owned broker-dealer subsidiary, as discussed in Note 9 "Borrowings" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

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Our principal U.S.

subsidiary is subject to separate regulation and capital requirements in the U.S.

subsidiary, Virtu Americas LLC ("VAL") is subject to separate regulation and capital requirements in the U.S.

and other jurisdictions.

Virtu Americas LLC is a registered U.S.

broker-dealer, and its primary regulators include the SEC and FINRA.

VAL is a registered U.S.

broker-dealer, and its primary regulators include the SEC and the Financial Industry Regulatory Authority ("FINRA").

The SEC and FINRA impose rules that require notification when regulatory capital falls below certain pre-defined criteria.

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Additionally, certain applicable rules impose requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to and/or approval from the SEC and FINRA for certain capital withdrawals.

Virtu Americas LLC is also subject to rules set forth by NYSE and is required to maintain a certain level of capital in connection with the operation of its designated market maker business.

VAL is also subject to rules set forth by NYSE and is required to maintain a certain level of capital in connection with the operation of its designated market maker business.

Our Canadian subsidiaries, Virtu ITG Canada Corp.

and Virtu Financial Canada ULC, are subject to regulatory capital requirements and periodic requirements to report their regulatory capital and submit other regulatory reports set forth by the IIROC.

VFIL and VIEL are regulated by the CBI as Investment Firms and in accordance with European Union law are required to maintain a minimum amount of regulatory capital based upon their positions, financial conditions, and other factors.

and Virtu Financial Canada ULC, are subject to regulatory capital requirements and periodic requirements to report their regulatory capital and submit other regulatory reports set forth by the the Investment Industry Regulatory Organization of Canada.

Our Irish subsidiaries, Virtu Financial Ireland Limited ("VFIL") and Virtu ITG Europe Limited ("VIEL") are regulated by the Central Bank of Ireland as Investment Firms and in accordance with European Union law are required to maintain a minimum amount of regulatory capital based upon their positions, financial conditions, and other factors.

In addition to periodic requirements to report their regulatory capital and submit other regulatory reports, VFIL and VIEL are required to obtain consent prior to receiving capital contributions or making capital distributions from their regulatory capital.

Failure to comply with their regulatory capital requirements could result in regulatory sanction or revocation of their regulatory license.

VIUK is regulated by the FCA in the United Kingdom and is subject to similar prudential capital requirements.

Virtu ITG UK Limited is regulated by the Financial Conduct Authority in the United Kingdom and is subject to similar prudential capital requirements.

Virtu ITG Australia Limited, Virtu ITG Hong Kong Limited, and Virtu ITG Singapore Pte Limited are also subject to local regulatory capital requirements and are regulated by the Australian Securities and Investments Commission, the Securities and Futures Commission of Hong Kong, and the Monetary Authority of Singapore, respectively.

See Note 20 "Regulatory Requirement" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of regulatory capital requirements of our regulated subsidiaries.

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See Note 9 "Borrowings" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for details on our various credit facilities.

As of June 30, 2021, the outstanding principal balance on our broker-dealer facilities was $198.0 million and the outstanding aggregate short-term credit facilities with various prime brokers and other financial institutions from which the Company receives execution or clearing services was approximately $201.8 million, which was netted within Receivables from broker-dealers and clearing organizations on the Condensed Consolidated Statements of Financial Condition of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

As of September 30, 2021, the outstanding principal balance on our broker-dealer facilities was $178.0 million and the outstanding aggregate short-term credit facilities with various prime brokers and other financial institutions from which the Company receives execution or clearing services was approximately $202.5 million, which was netted within Receivables from broker-dealers and clearing organizations on the Condensed Consolidated Statements of Financial Condition of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

On March 10, 2020, a broker-dealer subsidiary of the Company entered into a short-term loan arrangement with Jefferies Financial Group, Inc., as lender, for a $20 million demand loan (the "Demand Loan") repayable no later than ninety (90) days after the date of borrowing.

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In connection with the ITG Acquisition, Virtu Financial, VFH and the Acquisition Borrower entered into the Credit Agreement, with the lenders party thereto, Jefferies Finance LLC, as administrative agent and Jefferies Finance LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners.

approximately $1,095 million was borrowed by the Acquisition Borrower to finance the consideration and fees and expenses paid in connection with the ITG Acquisition, and (ii) a $50.0 million senior secured first lien revolving facility to VFH (the “First Lien Revolving Facility”), with a $5.0 million letter of credit sub-facility and a $5.0 million swing-line sub-facility.

The Credit Agreement provided (i) a senior secured first lien term loan (the “First Lien Term Loan Facility”) in an aggregate principal amount of $1,500 million, drawn in its entirety on the ITG Closing Date, of which approximately $404.5 million was borrowed by VFH to repay all amounts outstanding under a previous term loan facility and the remaining approximately $1,095 million was borrowed by the Acquisition Borrower to finance the consideration and fees and expenses paid in connection with the ITG Acquisition, and (ii) a $50.0 million senior secured first lien revolving facility to VFH (the “First Lien Revolving Facility”), with a $5.0 million letter of credit sub-facility and a $5.0 million swing-line sub-facility.

After the ITG Closing Date, VFH assumed the obligations of the Acquisition Borrower in respect of the acquisition term loans.

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The amendments included certain changes to collateral posting obligations and also had the effect of increasing the effective fixed interest payment obligations to rates of 4.5%, with respect to the earlier maturing swap arrangement, and 4.6% with respect to the later maturing swap arrangement.

We were in compliance with all applicable covenants under the Amended Credit Agreement as of June 30, 2021.

We were in compliance with all applicable covenants under the Amended Credit Agreement as of September 30, 2021.

Our main sources of liquidity are cash flow from the operations of our subsidiaries, our broker-dealer credit facilities (as described above), margin financing provided by our prime brokers and cash on hand.

The table below summarizes our primary sources and uses of cash for the six months ended June 30, 2021 and 2020.

Six Months Ended June 30,

The table below summarizes our primary sources and uses of cash for the nine months ended September 30, 2021 and 2020.

Nine Months Ended September 30,

Net cash provided by (used in):

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Effect of exchange rate changes on cash and cash equivalents (11,452) 3,860

Net increase in cash and cash equivalents $ (91,750) $ (25,265)

Net decrease in cash and cash equivalents $ (252,692) $ (107,318)

Operating Activities

Net cash provided by operating activities was $355.4 million for the six months ended June 30, 2021, compared to net cash provided by operating activities of $499.3 million for the six months ended June 30, 2020.

The decrease in net cash provided by operating activities was primarily attributable to lower revenues, and an increase in trading assets, at fair value, for the six months ended June 30, 2021 compared to the current period.

Net cash provided by operating activities was $374.5 million for the nine months ended September 30, 2021, compared to net cash provided by operating activities of $483.6 million for the nine months ended September 30, 2020.

The decrease in net cash provided by operating activities was primarily attributable to lower revenues, and an increase in trading assets, at fair value, for the nine months ended September 30, 2021 compared to the prior period.

Investing Activities

Net cash used in investing activities was $42.7 million for the six months ended June 30, 2021, compared to net cash used in investing activities of $36.7 million for the six months ended June 30, 2020.

The increase in cash used in investing activities for the six months ended June 30, 2021 was primarily attributable to an increase in development of capitalized development costs, partially offset by a decrease in acquisition of property and equipment.

Net cash used in investing activities was $65.4 million for the nine months ended September 30, 2021, compared to net cash provided by investing activities of $3.4 million for the nine months ended September 30, 2020.

The increase in cash used in investing activities for the nine months ended September 30, 2021 was primarily attributable to an increase in contributions to our strategic investments in the current period, offset by the sale of MATCHNow in the prior period.

Financing Activities

Net cash used in financing activities was $400.8 million for the six months ended June 30, 2021, while net cash used in financing activities was $483.9 million for the six months ended June 30, 2020.

The cash used in financing activities for the six months ended June 30, 2021 was primarily attributable to $321.9 million in dividends to stockholders and distributions made to noncontrolling interests and $180.8 million in purchases of treasury stock.

Net cash used in financing activities was $550.3 million for the nine months ended September 30, 2021, while net cash used in financing activities was $598.2 million for the nine months ended September 30, 2020.

The cash used in financing activities for the nine months ended September 30, 2021 was primarily attributable to $430.6 million in dividends to stockholders and distributions made to noncontrolling interests and $320.2 million in purchases of treasury stock, partially offset by the proceeds of $249.6 million of short term borrowings.

The cash used in financing activities of $598.2 million during the same period of 2020 primarily reflects net dividends to stockholders and distributions to noncontrolling interests and repayment of long term borrowings.

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The timing and amount of repurchase transactions are determined by the Company's management based on its evaluation of market conditions, share price, cash sources, legal requirements and other factors.

From the inception of the program through June 30, 2021, the Company repurchased approximately 7.1 million shares of Class A Common Stock and Virtu Financial Units for approximately $198.6 million.

As of June 30, 2021, the Company has approximately of $271.4 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

From the inception of the program through September 30, 2021, the Company repurchased approximately 12.5 million shares of Class A Common Stock and Virtu Financial Units for approximately $337.5 million.

As of September 30, 2021, the Company has approximately of $132.5 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have current or future effects on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

We believe inflation has not had a material effect on our financial condition as of June 30, 2021, and December 31, 2020, or on our results of operations and cash flows for the three and six months ended June 30, 2021 and 2020.

As of September 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have current or future effects on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

We believe inflation has not had a material effect on our financial condition as of September 30, 2021, and December 31, 2020, or on our results of operations and cash flows for the three and nine months ended September 30, 2021 and 2020.

Critical Accounting Policies and Estimates

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We recognize the tax benefit from an uncertain tax position in accordance with ASC 740, Income Taxes, only if it is more likely than not that the tax position will be sustained on examination by the applicable taxing authority, including resolution of the appeals or litigation processes, based on the technical merits of the position.

The tax benefits recognized in the condensed consolidated financial statements from such a position are measured based on the largest benefit for each such position that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

upon ultimate resolution.

Many factors are considered when evaluating and estimating the tax positions and tax benefits.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis