What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-18 compared with 2021-02-25 · 148 added, 197 removed, 601 unchanged (36% of the section changed)

14 unchanged sentences

Although we believe that the forward-looking statements contained in this Annual Report on Form 10-K are based on reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors” in this Annual Report on Form 10-K, could affect our actual financial results or results of operations and cash flows, and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

• the continuing impacts of COVID-19 and the governmental and other responses thereto, including but not limited to the risk of employees and executives contracting COVID-19 and the deployment of our business continuity plan pursuant to which a significant number of our employees currently work remotely and our return to office plan, each of which may increase operational risk, as well as increases in market, counterparty and other forms of operational risk;

• the continuing impacts of COVID-19 and the governmental and other responses thereto, including but not limited to the risk of employees and executives contracting COVID-19 and the deployment of our business continuity plan pursuant to which a significant number of our employees may work remotely and our return to office plan, each of which may increase operational risk, as well as increases in market, counterparty and other forms of operational risk;

• volatility in levels of overall trading activity;

2 unchanged sentences

• risks inherent to the electronic market making business and trading generally;

• enhanced regulatory media scrutiny, including attention to electronic trading, wholesale market making and off-exchange trading, payment for order flow, and other market structure topics and both the impact of potential changes in regulation or law which could have an adverse effect on our business as well as the potential impact upon public perception of us or of companies in our industry;

• increased competition in market making activities and execution services;

6 unchanged sentences

• obligations to comply with laws and regulations applicable to our operations in the U.S.

• enhanced media and regulatory scrutiny and its impact upon public perception of us or of companies in our industry;

• need to maintain and continue developing proprietary technologies;

• the effect of the Acquisition of KCG and ITG Acquisition (as defined below) on ongoing business operations generally, including our ability to achieve cost-saving synergies related to these historical acquisitions, and the assumption of potential liabilities and risks relating to these historical acquisitions, and the significant costs and significant indebtedness that we have incurred in connection therewith;

• the effect of the Acquisition of KCG and the ITG Acquisition (as defined below) on ongoing business operations generally, including the assumption of potential liabilities and risks relating to these historical acquisitions;

• capacity constraints, system failures, and delays;

3 unchanged sentences

• failure to protect confidential and proprietary information;

• failure to protect our systems from internal or external cyber threats that could result in damage to our computer systems, business interruption, loss of data or other consequences;

• failure to protect our systems from internal or external cyber threats that could result in damage to our computer systems, business interruption, loss of data, monetary payment demands or other consequences;

• risks associated with international operations and expansion, including failed acquisitions or dispositions;

7 unchanged sentences

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report on Form 10-K.

Unless the context otherwise requires, the terms "we," "us," "our," "Virtu" and the "Company" refer to Virtu Financial, Inc., a Delaware corporation, and its consolidated subsidiaries and the term "Virtu Financial" refers to Virtu Financial LLC, a Delaware limited liability company and a consolidated subsidiary of ours.

Basis of Preparation

3 unchanged sentences

Our reported financial condition, results of operations and cash flows for the periods following the ITG Closing Date reflect ITG's and our balances, and reflect the impact of purchase accounting adjustments, including revised amortization and depreciation expense for acquired assets.

The financial results for the year ended December 31, 2019 comprise our results for the entire applicable period and the results of ITG from the ITG Closing Date through December 31, 2019.

All periods prior to the ITG Closing Date comprise our results without the results of ITG.

Recent Developments

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 volatility and 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 Company has been impacted in various ways by the COVID-19 outbreak, including experiencing elevated levels of trading volumes and market volatility in the markets in which we operate during certain periods, which contributed positively to our results, and increases in short term funding requirements with clearing houses and counterparties as a consequence of these elevated trading volumes and market volatility.

The Company also implemented its business continuity plan, including remote work arrangements for the majority of our employees during this pandemic.

We will continue to monitor the impact of COVID-19, but at the date of this report it is too early to determine the full impact this virus may have on the global financial markets and the overall economy, as well as our business.

Should this emerging macro-economic risk continue for an extended period, there could be an adverse material financial impact to the Company's businesses and investments, including a material reduction in the Company's results of operations.

For more information on the potential impacts of the COVID-19 outbreak on our business, see Part I Item 1A “Risk Factors” of this Annual Report on Form 10-K.

We are a leading financial services firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients.

Leveraging our global market structure expertise and scaled, multi-asset technology infrastructure, we provide our clients with a robust product suite including offerings in execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms in workflow technology.

Our product offerings allow our clients to trade on hundreds of venues across over 50 countries and in multiple asset classes, including global equities, ETFs, foreign exchange, futures, fixed income and other commodities.

Our integrated, multi-asset analytics platform provides a range of pre- and post-trade services, data products and compliance tools that our clients rely upon to invest, trade and manage risk across global markets.

13 unchanged sentences

We leverage cutting edge technology to provide competitive and deep liquidity that helps to create more efficient markets around the world.

As a market maker and liquidity provider, we stand ready, at any time, to buy or sell a broad range of securities, and we generate profits by buying and selling large volumes of securities and other financial instruments and earning small bid/ask spreads.

As a market maker and liquidity provider, we stand ready, at any time, to buy or sell a broad range of securities and other financial instruments, and we generate profits by buying and selling large volumes of securities and other financial instruments and earning small bid/ask spreads.

Our market structure expertise, broad diversification, and scalable execution technology enable us to provide competitive bids and offers in over 25,000 securities and other financial instruments, on over 235 venues, in 36 countries worldwide.

11 unchanged sentences

We also earn revenues (a) by providing our proprietary technology and infrastructure to select third parties for a service fee, (b) through workflow technology and our integrated, broker-neutral trading tools delivered across the globe, including order and execution management systems and order management software applications and network connectivity and (c) through trading analytics, including (1) tools enabling portfolio managers and traders to improve pre-trade, real-time and post-trade execution performance, (2) portfolio construction and optimization decisions and (3) securities valuation.

The segment also includes the results of our capital markets business, in which we act as an agent for issuers in connection with at-the-market offerings and buyback programs.

Our Corporate segment contains investments principally in strategic financial services-oriented opportunities and maintains corporate overhead expenses and all other income and expenses that are not attributable to our other segments.

Acquisition of ITG

On March 1, 2019, the ITG Closing Date, we announced the completion of the ITG Acquisition, a cash transaction valued at $30.30 per ITG share, or a total of approximately $1.0 billion.

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.

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.

On March 1, 2019, the "ITG Closing Date", we announced the completion of Investment Technology Group, Inc.

and its subsidiaries ("ITG") in an all-cash transaction (the "ITG Acquisition").

In connection with the ITG Acquisition, Virtu Financial, VFH Parent LLC, a Delaware limited liability company and a subsidiary of Virtu Financial ("VFH"), and Impala Borrower LLC (the "Acquisition Borrower"), a subsidiary of the Company, entered into the Acquisition 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 Acquisition 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.

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

Additionally, on the ITG Closing Date, the Company’s fourth amended and restated credit agreement, dated as of June 30, 2017 (as amended on January 2, 2018 and September 19, 2018, the “Fourth Amended and Restated Credit Agreement”) was terminated.

As described below, the Credit Agreement was amended on October 9, 2019, on which date VFH borrowed and additional $525.0 million of incremental first lien term loans, the proceeds of which were used together with cash on hand to redeem the Notes (as defined below).

As described below, the Acquisition Credit Agreement was amended on October 9, 2019, on which date VFH borrowed an additional $525.0 million of incremental first lien term loans, the proceeds of which were used together with cash on hand to redeem the Notes (as defined below).

The Indenture (as defined below) was fully terminated following such redemption.

The Credit Agreement was further amended on March 2, 2020 to, among other things, reduce the interest rate spread over LIBOR or the applicable benchmark by 0.50%.

On January 13, 2022, VFH and Virtu Financial entered into the Credit Agreement, with the lenders party thereto, JPMorgan Chase Bank, N.A.

as administrative agent and JPMorgan Chase bank, N.A., Goldman Sachs Bank USA, RBC Capital Markets, Barclays Bank plc, Jefferies Finance LLC, BMO Capital Markets Corp., and CIBC World Markets Corp., as joint lead arrangers and bookrunners.

The proceeds of the Credit Agreement were used to pay off the Acquisition Credit Agreement.

A further description of the Credit Agreement is set forth below in Note 26 “Subsequent Events” of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Amended and Restated 2015 Management Incentive Plan

49 unchanged sentences

Transaction advisory fees and expenses 843 2,941 26,117

Charges related to share based compensation at IPO — — 24

Financing interest expense on long-term borrowings 79,969 87,735 121,859

18 unchanged sentences

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.

20 unchanged sentences

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.

Revenues or losses are recognized due to the changes in fair value of the investment or fluctuations in Japanese Yen conversion rates within Other, net.

Other, net also includes gains on sales of businesses, revenues from service agreements related to the sale of MATCHNow, and the gain or loss on the ineffective portion of derivatives used as cash flow hedging instruments.

Other, net can also include gains on sales of businesses, revenues from service agreements related to the sale of businesses, and the gain or loss on the ineffective portion of derivatives used as cash flow hedging instruments.

Operating Expenses

33 unchanged sentences

Transaction advisory fees and expenses.

Transaction advisory fees and expenses primarily reflect professional fees incurred by us in connection with the ITG Acquisition in 2019 and the sale of BondPoint in 2018.

Transaction advisory fees and expenses primarily reflect professional fees incurred by us in connection with one or more acquisitions or dispositions.

Financing interest expense on long-term borrowings.

18 unchanged sentences

• “EBITDA”, which measures our operating performance by adjusting net income to exclude Financing interest expense on long-term borrowings, Debt issue cost related to debt refinancing, prepayment, and commitment fees, Depreciation and amortization, Amortization of purchased intangibles and acquired capitalized software, and Income tax expense, and “Adjusted EBITDA”, which measures our operating performance by further adjusting EBITDA to exclude severance, transaction advisory fees and expenses, termination of office leases, charges related to share based compensation and other expenses, which includes reserves for legal matters, COVID-19 one-time costs and donations and Other, net.

• “Normalized Adjusted Net Income”, “Normalized Adjusted Net Income before income taxes”, “Normalized provision for income taxes”, and “Normalized Adjusted EPS”, which we calculate by adjusting Net Income to exclude certain items including IPO-related adjustments and other non-cash items, assuming that all vested and unvested Virtu Financial Units have been exchanged for Class A Common Stock, and applying an effective tax rate, which was approximately 24%.

• “Normalized Adjusted Net Income”, “Normalized Adjusted Net Income before income taxes”, “Normalized provision for income taxes”, and “Normalized Adjusted EPS”, which we calculate by adjusting Net Income to exclude certain items and other non-cash items, assuming that all vested and unvested Virtu Financial Units have been exchanged for Class A Common Stock, and applying an effective tax rate, which was approximately 24%.

• Operating Margins, which are calculated by dividing net income, EBITDA, and Adjusted EBITDA by Adjusted Net Trading Income.

Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS, and Operating Margins (collectively, the “Company's Non-GAAP Measures”) are non-GAAP financial measures used by management in evaluating operating performance and in making strategic decisions.

Additional information provided regarding the breakdown of total Adjusted Net Trading Income by category is also a non-GAAP financial measure but is not used by the Company in evaluating operating performance and in making strategic decisions.

In addition, the Company's Non-GAAP Measures or similar non-GAAP financial measures are used by research analysts, investment bankers and lenders to assess our operating performance.

13 unchanged sentences

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and our EBITDA-based measures do not reflect any cash requirement for such replacements or improvements;

• they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;

• they are not adjusted for all non-cash income or expense items that are reflected in our consolidated statements of cash flows;

• they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;

27 unchanged sentences

Termination of office leases 28,138 9,608 66,452

Gain on sale of business (58,652) — (335,210)

Gain on sale of MATCHNow — (58,652) —

Other (10,558) (16,418) 2,651

Share based compensation 55,751 59,838 50,627

Charges related to share based compensation at IPO, Amended and Restated 2015 Management Incentive Plan — — 5,781

Charges related to share based compensation awards at IPO — — 24

Adjusted EBITDA $ 1,301,233 $ 1,648,049 $ 431,863

18 unchanged sentences

Termination of office leases 28,138 9,608 66,452

Gain on sale of business (58,652) — (335,210)

Gain on sale of MATCHNow — (58,652) —

Other (10,558) (16,418) 2,651

Share based compensation 55,751 59,838 50,627

Charges related to share based compensation at IPO, 2015 Management Incentive Plan — — 5,781

Charges related to share based compensation awards at IPO — — 24

Normalized Adjusted Net Income before income taxes 1,153,448 1,493,573 244,360

4 unchanged sentences

(1) Reflects U.S.

federal, state, and local income tax rate applicable to corporations of approximately 24% for 2020, 24% for 2019 and 23% for 2018.

federal, state, and local income tax rate applicable to corporations of approximately 24% for 2021, 2020, and 2019.

(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.

25 unchanged sentences

Adjusted Net Trading Income $ 604,601 $ 370,110 $ — $ 974,711

The following tables reconcile our Market Making segment Trading income, net to Adjusted Net Trading Income by category for the years ended December 31, 2020, 2019 and 2018:

Year Ended December 31, 2020

(in thousands) Global Equities Global FICC, Options and Other Unallocated Total Market Making

Trading income, net $ 2,182,234 $ 272,948 $ — $ 2,455,182

Commissions, net and technology services 52,453 — — 52,453

Brokerage, exchange, clearance fees and payments for order flow, net (631,354) (31,640) — (662,994)

Interest and dividends, net (54,557) (7,673) — (62,230)

Adjusted Net Trading Income $ 1,548,776 $ 233,635 $ — $ 1,782,411

Year Ended December 31, 2019

(in thousands) Global Equities Global FICC, Options and Other Unallocated Total Market Making

Trading income, net $ 730,215 $ 178,639 $ (526) $ 908,328

Commissions, net and technology services 23,554 (28) — 23,526

Brokerage, exchange, clearance fees and payments for order flow, net (238,590) (39,648) 570 (277,668)

Interest and dividends, net (39,335) (10,090) (160) (49,585)

Adjusted Net Trading Income $ 475,844 $ 128,873 $ (116) $ 604,601

Year Ended December 31, 2018

Global Equities Global FICC, Options and Other Unallocated Total Market Making

Trading income, net $ 1,013,728 $ 250,521 $ 1,617 $ 1,265,866

Commissions, net and technology services 28,583 230 — 28,813

Brokerage, exchange, clearance fees and payments for order flow, net (257,061) (56,633) (3,671) (317,365)

Interest and dividends, net (40,548) (11,326) (1,505) (53,379)

Adjusted Net Trading Income $ 744,702 $ 182,792 $ (3,559) $ 923,935

The following table shows our Adjusted Net Trading Income, average daily Adjusted Net Trading Income and percentage of Adjusted Net Trading Income by asset class for the years ended December 31, 2020, 2019 and 2018:

The following table shows our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by segment for the years ended December 31, 2021, 2020 and 2019:

(in thousands, except %) 2021 2020 2019

Adjusted Net Trading Income by Category:

Adjusted Net Trading Income by Segment:

Total Average Daily % Total Average Daily % Total Average Daily %

Market Making $ 1,427,552 $ 5,665 74.7 % $ 1,782,411 $ 7,045 78.5 % $ 604,601 $ 2,390 62.0 %

Global Equities $ 1,548,776 $ 6,122 68.2 % $ 475,844 $ 1,881 48.8 % $ 744,702 $ 2,967 73.0 %

Global FICC, Options and Other 233,635 923 10.3 % 128,873 509 13.2 % 182,792 $ 728 17.9 %

Unallocated(1) — — — % (116) — — % (3,559) $ (14) (0.3) %

Total Market Making $ 1,782,411 $ 7,045 78.5 % $ 604,601 $ 2,390 62.0 % $ 923,935 $ 3,681 90.6 %

Execution Services 482,377 1,914 25.3 % 488,974 1,933 21.5 % 370,110 1,463 38.0 %

Corporate — — — % — — — % 62 — — %

Adjusted Net Trading Income $ 1,909,929 $ 7,579 100.0 % $ 2,271,385 $ 8,978 100.0 % $ 974,711 $ 3,853 100.0 %

(1) Under our methodology for recording “trading income, net” in our Consolidated Statements of Comprehensive Income from Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, we recognize revenues based on the exit price of assets and liabilities in accordance with applicable U.S.

GAAP rules, and when we calculate Adjusted Net Trading Income for corresponding reporting periods, we start with trading income, net, so calculated.

By contrast, when we calculate Adjusted Net Trading Income by category, we do so on a daily basis, and as a result prices used in recognizing revenues may differ.

Because we provide liquidity on a global basis, across asset classes and time zones, the timing of any particular Adjusted Net Trading Income calculation may defer or accelerate the amount in a particular category from one day to another, and, at the end of a reporting period, from one reporting period to another.

The purpose of the Unallocated category is to ensure that Adjusted Net Trading Income by category sums to total Adjusted Net Trading Income, which can be reconciled to Trading Income, net, calculated in accordance with U.S.

We do not allocate any resulting differences based on the timing of revenue recognition.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Total Revenues

Our total revenues increased $1,721.8 million, or 113.5%, to $3,239.3 million for the year ended December 31, 2020, compared to $1,517.5 million for the year ended December 31, 2019.

This increase was primarily attributable to an increase in Trading income, net, of $1,580.9 million, which was driven by higher market volatility and trading volumes during 2020 compared to 2019, from the impacts of COVID-19 and the governmental and other responses thereto.

In addition, 2020 included the results of ITG for the full first quarter of 2020 compared to the results of ITG from the ITG Closing Date through December 31, 2019 in the prior year.

Though our total revenues increased during the period, Commissions, net and technology services within the Execution Services segment did not have the same relative increase in part because we selectively limited our client trading business during certain periods throughout 2020 due to the extraordinary volume and volatility during the period and the operational challenges caused directly or indirectly by COVID-19, including working remotely and increases in short term liquidity requirements.

Our total revenues decreased $427.8 million, or 13.2%, to $2,811.5 million for the year ended December 31, 2021, compared to $3,239.3 million for the year ended December 31, 2020.

This decrease was primarily attributable to a decrease of $388.1 million in Trading income, net, which was primarily driven by lower market volatility during the year ended December 31, 2021 compared to the prior period.

Additionally, Other, net declined $67.0 million primarily attributable to the sale of MATCHNow on August 4, 2020.

The following table shows the total revenues by segment for the years ended December 31, 2021 and 2020.

5 unchanged sentences

Commissions, net and technology services 40,955 52,453 (21.9)%

Other, net 24,222 43 NM

Other, net 7,127 24,222 (70.6)%

Total revenues from Market Making $ 2,203,046 $ 2,593,342 (15.0)%

3 unchanged sentences

Commissions, net and technology services 573,534 548,057 4.6%

Other, net 63,386 149 NM

Total revenues from Execution Services 650,143 491,736 32.2%

Other, net 1,067 63,386 (98)%

Total revenues from Corporate (4,154) (2,338) 77.7%

Total revenues from Execution Services $ 600,215 $ 650,143 (7.7)%

Other, net $ 8,224 $ (4,154) NM

Total revenues from Corporate $ 8,224 $ (4,154) NM

Trading income, net $ 2,105,194 $ 2,493,248 (15.6)%

1 unchanged sentence

Commissions, net and technology services 614,489 600,510 2.3%

Other, net 83,454 (2,146) NM

Other, net 16,418 83,454 (80.3)%

Total revenues $ 2,811,485 $ 3,239,331 (13.2)%

1 unchanged sentence

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

Trading income, net, increased $1,580.9 million, or 173.3%, to $2,493.2 million for the year ended December 31, 2020, compared to $912.3 million for the year ended December 31, 2019.

The increase was primarily driven by the higher market volatility and trading volumes across global markets and major asset categories during the year ended December 31, 2020 compared to the same period in the prior year.

Average daily realized volatility of the S&P 500 Index increased 145.4% compared to the prior period, while average daily U.S.

equity consolidated volumes increased 55.4%.

Trading income, net, decreased $388.1 million, or 15.6%, to $2,105.2 million for the year ended December 31, 2021, compared to $2,493.2 million for the year ended December 31, 2020.

The decrease was primarily driven by lower market volatility during the year ended December 31, 2021 compared to 2020, which experienced elevated levels of market volatility and trading volumes largely due to the impacts of COVID-19 and the governmental and other responses thereto.

Average daily realized volatility of the S&P 500 Index decreased 57.27.2% compared to the prior period, and the average daily realized volatility of the CVIX decreased 611.22 compared to prior period.

Rather than analyzing trading income, net, in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income, together with Interest and dividends income, Interest and dividends expense, Commissions, net and technology services and Brokerage, exchange, clearance fees and payments for order flow, net, each of which are described below.

1 unchanged sentence

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

Interest and dividends income decreased $46.7 million, or 42.9%, to $62.1 million for the year ended December 31, 2020, compared to $108.8 million for the year ended December 31, 2019.

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 and lower balances compared to the prior period.

Interest and dividends income increased $13.3 million, or 21.4%, to $75.4 million for the year ended December 31, 2021, compared to $62.1 million for the year ended December 31, 2020.

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

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.

2 unchanged sentences

Commissions, net and technology services revenues increased $14.0 million, or 2.3%, to $614.5 million for the year ended December 31, 2021, compared to $600.5 million for the year ended December 31, 2020.

The increase was primarily attributable to the results of ITG for the full year 2020 compared to the results of ITG from the ITG Closing Date through December 31, 2019.

The ITG Acquisition brought recurring connectivity revenues generated from workflow technology and subscription revenues from analytics services to Commissions, net and technology services.

Other, net increased $85.6 million to $83.5 million for the year ended December 31, 2020, compared to $(2.1) million for the year ended December 31, 2019.

The increase was primarily due to a $58.7 million gain recognized on the sale of MATCHNow (see Note 5 "Sale of MATCHNow" of Part II Item 8 “Financial Statements and Supplementary Data” of

this Annual Report on Form 10-K).

In addition, we recognized a $17.4 million gain on the minority investment in JNX (see Note 12 "Financial Assets and Liabilities" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for details on the JNX Investment).

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

Average daily U.S.

equities consolidated volumes increased 4.4% compared to prior period.

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 decreased $67.0 million, or 80.3%, to $16.4 million for the year ended December 31, 2021, compared to $83.5 million for the year ended December 31, 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 4 "Sale of MATCHNow" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for details on the MATCHNow sale).

Adjusted Net Trading Income

Adjusted Net Trading Income increased $1,296.7 million, or 133.0%, to $2,271.4 million for the year ended December 31, 2020, compared to $974.7 million for the year ended December 31, 2019.

This increase was primarily attributable to higher Trading income, net, driven by higher market volatility and trading volumes across major asset categories during the year ended December 31, 2020 compared to the prior period.

Average daily realized volatility of the S&P 500 Index and average daily CVIX realized volatility increased 145.4% and 86.5%, respectively, compared to the prior period, while average daily U.S.

Adjusted Net Trading Income decreased $361.5 million, or 15.9%, to $1,909.9 million for the year ended December 31, 2021, compared to $2,271.4 million for the year ended December 31, 2020.

This decrease was primarily attributable to lower Trading Income, net (described above), driven by lower market volatility during the year ended December 31, 2021 compared to the prior period, partially offset by lower 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 57.272% and 61.212%, respectively, compared to the prior period, while average daily U.S.

equity consolidated volumes increased 4.44.4%.

There were increases in Trading income, net in Global Equities of $1,072.9 million, and in Global FICC, Options and Other of $104.8 million, from the Market Making segment.

There was also an increase of $118.9 million, or 32.1%, in the Execution Services segment primarily driven by the increase in Commissions, net and technology services that was primarily attributable to the results of ITG for the full year of 2020 compared to the results of ITG from the ITG Closing Date through December 31, 2019.

Adjusted Net Trading Income per day increased $5.1 million, or 133.0%, to $9.0 million for the year ended December 31, 2020, compared to $3.9 million for the year ended December 31, 2019.

The number of trading days was 253 for both the year ended December 31, 2020 and 2019, respectively.

Adjusted Net Trading Income per day decreased $1.4 million, or 15.6%, to $7.6 million for the year ended December 31, 2021, compared to $9.0 million for the year ended December 31, 2020.

The number of trading days was 252 days for the year ended December 31, 2021 and 253 days for the year ended December 31, 2020.

Adjusted Net Trading Income is a non-GAAP measure.

2 unchanged sentences

Operating Expenses

Our operating expenses increased $223.0 million, or 13.7%, to $1,856.5 million for the year ended December 31, 2020, compared to $1,633.5 million for the year ended December 31, 2019.

The increase in operating expenses was primarily due to higher trading related expenses as a result of the increases in volumes traded during the year ended December 31, 2020 compared to the prior period.

Additionally, the results of ITG for the full year of 2020 compared to the results of ITG from the ITG Closing Date through December 31, 2019 caused an overall increase in expenses in multiple expense categories as described in more detail below.

Our operating expenses decreased $41.9 million, or 2.3%, to $1,814.6 million for the year ended December 31, 2021, compared to $1,856.5 million for the year ended December 31, 2020.

The decrease in operating expenses was primarily due to lower Employee compensation and payroll taxes, Brokerage, exchange, clearance fees and payments for order flow, net, and Debt issue cost related to debt refinancing, prepayment, and commitment fees, offset by increases in Interest and dividends expense and Termination of office leases as compared to 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 $372.0 million, or 96.1%, to $758.8 million for the year ended December 31, 2020, compared to $386.9 million for the year ended December 31, 2019.

This increase was primarily attributable to an increase in payments for order flow and increases in volumes we traded in Global Equities instruments and other asset categories.

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

Brokerage, exchange, clearance fees and payments for order flow, net, decreased $13.4 million, or 1.8%, to $745.4 million for the year ended December 31, 2021, compared to $758.8 million for the year ended December 31, 2020.

This decrease was primarily attributable to decreases in market volatility in U.S.

equities markets offset by 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 current year compared to the prior year.

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

Communication and data processing.

Communication and data processing expense increased $4.4 million, or 2.1%, to $213.8 million for the year ended December 31, 2020, compared to $209.4 million for the year ended December 31, 2019.

This increase was primarily attributable to the results of ITG for the full year of 2020 compared to the results of ITG from the ITG Closing Date through December 31, 2019, as well as additional telecommunication and networking services from activating our back-up facilities and enabling the majority of our employees to work from home.

The increase was partially offset by 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 decreased $1.8 million, or 0.8%, to $212.0 million for the year ended December 31, 2021, compared to $213.8 million for the year ended December 31, 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 increased $9.8 million, or 2.6%, to $393.5 million for the year ended December 31, 2020, compared to $383.7 million for the year ended December 31, 2019.

The increase in compensation levels was primarily attributable to increased incentive compensation, which is recorded at management’s discretion and is generally accrued in connection with the overall level of profitability.

Furthermore, we incurred additional compensation expense as a result of one-time cash bonuses awarded to certain employees to mitigate the effects of the COVID-19 pandemic.

Employee compensation and payroll taxes decreased $17.3 million, or 4.4%, to $376.3 million for the year ended December 31, 2021, compared to $393.5 million for the year ended December 31, 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 $35.8 million and $37.0 million for the years ended December 31, 2021 and 2020, respectively.

Interest and dividends expense.

Interest and dividends expense decreased $32.4 million, or 20.5%, to $125.6 million for the year ended December 31, 2020, compared to $158.0 million for the year ended December 31, 2019.

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

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.

Interest and dividends expense increased $14.1 million, or 11.2%, to $139.7 million for the year ended December 31, 2021, compared to $125.6 million for the year ended December 31, 2020.

This increase was primarily attributable to higher interest expense incurred on cash collateral received driven by higher interest rates, as well as an increase 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 $6.4 million, or 6.8%, to $88.1 million for the year ended December 31, 2021, compared to $94.6 million for the year ended December 31, 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 increased $1.1 million, or 1.6%, to $67.8 million for the year ended December 31, 2021, compared to $66.7 million for the year ended December 31, 2020.

This increase was primarily attributable to depreciation and amortization of additional assets resulting from the ITG acquisition for the full year of 2020 compared to the prior period which excluded depreciation and amortization on ITG assets prior to the ITG Closing Date, partially offset by certain assets being fully depreciated in 2020.

This increase was primarily attributable to 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 increased $3.7 million, or 5.2%, to $74.3 million for the year ended December 31, 2020, compared to $70.6 million for the year ended December 31, 2019.

This increase was due to the amortization of intangible assets acquired in connection with the ITG Acquisition for the full year of 2020 compared to amortization from the ITG Closing Date through December 31, 2019 in the prior year.

Amortization of purchased intangibles and acquired capitalized software decreased $4.6 million, or 6.2%, to $69.7 million for the year ended December 31, 2021, compared to $74.3 million for the year ended December 31, 2020.

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

Termination of office leases.

Termination of office leases was $28.1 million for the year ended December 31, 2021, compared to $9.6 million for the year ended December 31, 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 incurred in 2019 and 2020 for certain abandoned office space as part of the efforts to integrate and consolidate office space in connection with the ITG Acquisition.

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

The 2021 expense included the impairment of the lease and leasehold improvements of our former headquarters at One Liberty Plaza.

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 $22.3 million, or 77.2%, to $6.6 million for the year ended December 31, 2021, compared to $28.9 million for the year ended December 31, 2020.

The amount for the year ended December 31, 2019 was primarily driven by costs incurred related to the termination of the Previous Term Loan Facility (as defined below) in the first quarter of 2019, and costs incurred related to Amendment No.

1 to the Credit Agreement (as defined below) in the fourth quarter of 2019 that provided for $525.0 million of incremental term loans.

The amount for the year ended December 31, 2020 mainly reflects amortization of debt issue costs related to the Founder Member Loan Facility (see Note 11 "Borrowings" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K), which expired as of September 20, 2020, in addition to debt issue costs that were accelerated as a result of $288.5 million in prepayments made during the year ended December 31, 2020.

The amount for the year ended December 31, 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 acceleration of amortization as a result of the prepayment of $288.5 million of long term borrowings made during the year ended December 31, 2020.

See Note 10 "Borrowings" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional details.

Transaction advisory fees and expenses.

Transaction advisory fees and expenses decreased $2.1 million, or 71.3%, to $0.8 million for the year ended December 31, 2021, compared to $2.9 million for the year ended December 31, 2020.

The decrease was primarily attributable to the ITG Acquisition, for which we incurred significant transaction advisory fees during 2019.

The decrease was partially offset by one-time transaction costs incurred as a result of the sale of MATCHNow.

The expense incurred in 2020 was primarily related to the sale of MatchNOW.

See Note 4 "Sale of MATCHNow" of this Annual Report on Form 10-K for additional details.

Financing interest expense on long term borrowings.

Financing interest expense on long-term borrowings decreased $7.8 million, or 8.9%, to $80.0 million for the year ended December 31, 2021, compared to $87.7 million for the year ended December 31, 2020.

This decrease was primarily attributable to a decrease in outstanding principal as a result of the First Lien Term Loan Facility and the Incremental Term Loans in addition to lower interest rates as discussed in Note 11 "Borrowings" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

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

Provision for (benefit from) income taxes

4 unchanged sentences

subsidiaries.

Our provision for income taxes was $261.9 million for the year ended December 31, 2020, compared to a benefit from income taxes of $12.3 million for the year ended December 31, 2019.

The change was primarily due to the income before income taxes and noncontrolling interest for the year ended December 31, 2020, compared to a loss before taxes during the prior year period.

Our provision for income taxes and effective tax rates were $169.7 million, 17.0% for the year ended December 31, 2021, compared to a provision for income taxes of $261.9 million, 18.9% for the year ended December 31, 2020.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

10 unchanged sentences

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 10 "Borrowings" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

As a result of the substantially elevated volume and volatility environment during the year attributable largely to the COVID-19 pandemic and governmental and other responses thereto, our trading activities both in our market making segment and in our execution services segment increased materially relative to the prior year.

This increase in our activity and our customers’ activity together with the extraordinary volatility during certain periods within the year has driven our short-term liquidity needs significantly higher as compared to prior periods, though these levels declined meaningfully during the year relative to their peaks in the first quarter of 2020.

In order to manage these increased daily funding obligations, we have taken steps to increase available short-term liquidity and to reduce our short term funding requirements.

Increases to our available short-term liquidity included entering into the Founder Member Loan Facility (as defined below, and which expired in the third quarter of 2020), the Demand Loan (as defined below, which was fully repaid during the second quarter of 2020) and certain changes to the Committed Broker Dealer Facility, each of which are described in further detail below as well as in Note 11 "Borrowings" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Steps taken to reduce our short-term funding requirements have included arranging for select clients trades to be cleared by another large financial institution, reducing limits on daily client trading activity on a client-by-client basis and selectively reducing our market making activities in certain asset classes or products.

Based on our current level of operations and following the steps taken as detailed above, we believe our cash flows from operations, available cash and cash equivalents, and available borrowings under our broker-dealer credit facilities will be adequate to meet our future liquidity needs for more than the next twelve months.

Short-term Liquidity and Capital Resources

Based on our current level of operations, we believe our cash flows from operations, available cash and cash equivalents, and available borrowings under our broker-dealer credit facilities will be adequate to meet our future liquidity needs for the next twelve months.

We anticipate that our primary upcoming cash and liquidity needs will be increased margin requirements from increased trading activities in markets where we currently provide liquidity and in new markets into which we plan to expand.

We manage and monitor our margin and liquidity needs on a real-time basis and can adjust our requirements both intra-day and inter-day, as required.

We do not believe that the impacts of COVID-19 or the governmental and other responses thereto to date have adversely impacted our long-term financial condition or long-term capital requirements.

We expect our principal sources of future liquidity to come from cash flows provided by operating activities and financing activities.

2 unchanged sentences

We consider highly liquid investments with original maturities of less than three months, when acquired, to be cash equivalents.

Long-term Liquidity and Capital Resources

Our principal demand for funds beyond the next twelve months will be payments on our long-term debt, operating lease payments, common stock repurchases under our share repurchase program, and dividend payments.

Based on our current level of operations, we believe our cash flow from operations, and ability to raise funding, notably the refinancing of our term loan in January 2022, will be sufficient to fund capital demands.

Our long-term debt was rated Ba3, and BB- by Moody's Investors Service and Fitch Ratings, respectively, with both firms giving an outlook of Stable.

Tax Receivable Agreements

1 unchanged sentence

We will retain the remaining 15% of any such cash tax savings.

We expect that future payments to certain direct or indirect equity holders of Virtu Financial described in Note 7 "Tax Receivable Agreements" to the consolidated financial statements included in Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K are expected to range from approximately $0.9 million to $21.7 million per year over the next 15 years.

We expect that future payments to certain direct or indirect equity holders of Virtu Financial described in Note 6 "Tax Receivable Agreements" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K are expected to range from approximately $0.4 million to $22.0 million per year over the next 15 years.

Such payments will occur only after we have filed our U.S.

federal and state income tax returns and realized the cash tax savings from the favorable tax attributes.

We made our first payment of $7.0 million in February 2017, our second payment of $12.4 million in September 2018, and our third payment of $13.3 million in March 2020.

We made our first payment of $7.0 million in February 2017, our second payment of $12.4 million in September 2018, our third payment of $13.3 million in March 2020, and our fourth payment of $16.5 million in April 2021.

Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts.

6 unchanged sentences

Our principal U.S.

subsidiary is subject to separate regulation and capital requirements in the United States and other jurisdictions.

Virtu Americas LLC is a registered U.S.

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

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

and other jurisdictions.

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.

2 unchanged sentences

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 IIIROC.

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.

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 22 "Regulatory Requirement" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for a discussion of regulatory capital requirements of our regulated subsidiaries.

10 unchanged sentences

Vincent Viola, the Company’s founder and Chairman Emeritus.

Upon the execution of and in consideration for the Lender’s commitments under the Loan Agreement, the Company delivered to the Founder Member a warrant to purchase shares of the Company’s Class A Common Stock, as described below.

Upon the execution of and in consideration for the Lender’s commitments under the Founder Member Loan Facility, the Company delivered to the Founder Member a warrant to purchase shares of the Company’s Class A Common Stock, as described below.

On March 20, 2020, in connection with and in consideration of the Founder Member’s commitments under the Founder Member Loan Facility, the Company delivered to the Founder Member a warrant (the “Warrant”) to purchase shares of the Company’s Class A Common Stock.

Pursuant to the Warrant, the Founder Member may purchase up to 3,000,000 shares of Class A Common Stock.

If at any time during the term of the Founder Member Facility, the Founder Member Loans equal to or greater than $100 million had remained outstanding for a certain period of time specified in the Warrant, the number of shares would have increased to 10,000,000.

The exercise price per share of the Class A Common Stock issuable pursuant to the Warrant is $22.98, and the Warrant may be exercised to purchase up to 3,000,000 shares of the Company's Class A Common Stock on or after May 22, 2020 up to and including January 15, 2022.

The Warrant and Class A Common Stock issuable pursuant to the Warrant were offered, and will be issued and sold, in reliance on the exemption from the registration requirements of the Securities Act, set forth under Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering.

Pursuant to the Warrant, the Founder Member was entitled to purchase up to 3,000,000 shares of Class A Common Stock on or after May 22, 2020 up to and including January 15, 2022.

If at any time during the term of the Founder Member Loan Facility, the Founder Member Loans equal to or greater than $100 million had remained outstanding for a certain period of time specified in the Warrant, the number of shares would have increased to 10,000,000.

The exercise price per share of the Class A Common Stock issuable pursuant to the Warrant was $22.98.

The Warrant was exercised on December 17, 2021 for the full 3,000,000 shares of the Company's Class A Common Stock.

The Warrant and Class A Common Stock issued pursuant to the Warrant were offered, issued and sold, in reliance on the exemption from the registration requirements of the Securities Act, set forth under Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering.

Credit Agreement

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.

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 the Previous Term Loan Facility (as defined below) 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.

The Acquisition Credit Agreement provided (i) the First Lien Term Loan Facility (as defined below) 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.

On October 9, 2019 (the “Amendment No.

1 Closing Date”), VFH entered into an amendment (“Amendment No.

1”), which amended the Credit Agreement dated as of March 1, 2019, by and among VFH, Virtu Financial, the lenders party thereto, and Jefferies Finance, LLC, as administrative agent and collateral agent, to, among other things, provide for $525.0 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”), and amend the related collateral agreement.

On the Amendment No.

1 Closing Date, VFH borrowed the Incremental Term Loans and used the proceeds together with available cash to redeem all of the $500.0 million aggregate principal amount of the outstanding 6.750% Senior Secured Second Lien Notes (as defined below) due 2022 issued by VFH and Orchestra Co Issuer, Inc., a Delaware corporation and indirect subsidiary of the Company (together with VFH, the “Issuers”), and paid related fees and expenses.

terms, conditions and covenants applicable to the Incremental Term Loans are the same as the terms, conditions and covenants applicable to the existing term loans under the Credit Agreement, including a maturity date of March 1, 2026.

On March 2, 2020 (the “Amendment No.

2 Closing Date”), VFH entered into a second amendment (“Amendment No.

On October 9, 2019, VFH entered into an amendment (“Amendment No.

1”), which amended the Acquisition Credit Agreement dated as of March 1, 2019, to, among other things, provide for $525.0 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”), and amend the related collateral agreement.

On March 2, 2020, VFH entered into a second amendment (“Amendment No.

2”), which further amended the Credit Agreement (as amended by Amendment No.

1 and Amendment No.

2, the “Amended Credit Agreement”) to, among other things, reduce the interest rate spread over adjusted LIBOR or the alternate base rate by 0.50% per annum and eliminated any stepdown in the spread based on VFH's first lien leverage ratio.

The term loan borrowings and revolver borrowings under the Amended Credit Agreement bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.50%, (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1.00% and (d) 1.00%, plus, in each case, 2.00%, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0%, plus, in each case, 3.00%.

In addition, a commitment fee accrues at a rate of 0.50% per annum on the average daily unused amount of the First Lien Revolving Facility, with stepdowns to 0.375% and 0.25% per annum based on VFH’s first lien leverage ratio, and is payable quarterly in arrears.

2, the “Amended Credit Agreement”) to, among other things, reduce the interest rate spread over adjusted LIBOR or the alternate base rate by 0.50% per annum and eliminated any step-down in the spread based on VFH's first lien leverage ratio.

The term loan borrowings and revolver borrowings under the Amended Credit Agreement bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a)

the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.50%, (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1.00% and (d) 1.00%, plus, in each case, 2.00%, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0%, plus, in each case, 3.00%.

In addition, a commitment fee accrues at a rate of 0.50% per annum on the average daily unused amount of the First Lien Revolving Facility, with step-downs to 0.375% and 0.25% per annum based on VFH’s first lien leverage ratio, and is payable quarterly in arrears.

Under the Amended Credit Agreement, the term loans will mature on March 1, 2026.

8 unchanged sentences

In January 2020, we entered into a five-year $1,000.0 million floating-to-fixed interest rate swap agreement.

These two interest rate swaps meet the criteria to be considered and were designated as qualifying cash flow hedges under ASC 815 in the first quarter of 2020, and they effectively fix interest payment obligations on $1,000.0 million and $525.0 million of principal under the First Lien Term Loan Facility at rates of 4.4% and 4.3% through January 2025 and September 2024, respectively, based on the interest rates set forth in the Amended Credit Agreement.

To finance the Acquisition of KCG, on June 30, 2017, Virtu Financial and VFH previously entered into the Fourth Amended and Restated Credit Agreement which, upon the closing of the Acquisition of KCG, provided for an aggregate $1.15 billion of first lien secured term loans (the “Previous Term Loan Facility”).

As described above, the Previous Term Loan Facility was fully terminated following its repayment in full with the proceeds of the First Lien Term Loan Facility.

These two interest rate swaps met the criteria to be considered and were designated as qualifying cash flow hedges under ASC 815 in the first quarter of 2020, and they effectively fix interest payment obligations on $525.0 million and $1,000.0 million of principal under the First Lien Term Loan Facility at rates of 4.3% and 4.4% through September 2024 and January 2025, respectively, based on the interest rates set forth in the Amended Credit Agreement.

In April 2021, each of the swap agreements described above was novated to another counterparty and amended in connection with such novation.

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.

In January 2022, we entered into a new senior secured first lien term loan for $1,800.0 million of principal.

The proceeds from this new loan were primarily used to repay the First Lien Term Loan Facility.

Refer to Note 26 "Subsequent Events" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

We were in compliance with all applicable covenants under the Amended Credit Agreement as of December 31, 2021.

11 unchanged sentences

Net cash provided by operating activities was $1,171.6 million for the year ended December 31, 2021, compared to net cash provided by operating activities of $1,060.9 million for the year ended December 31, 2020.

The increase in net cash provided by operating activities was primarily attributable to increases in trading income, net for the year ended December 31, 2020 compared to the prior period.

The increase in net cash provided by operating activities was primarily attributable to an increase in Securities loaned, a decrease in Receivables from broker-dealers and clearing organizations, and an increase in trading liabilities, at fair value, offset by an increase in trading assets, at fair value, and a decrease in Payables to broker-dealers and clearing organizations for the year ended December 31, 2021 compared to the prior period.

Investing Activities

Net cash used in investing activities was $87.3 million for the year ended December 31, 2021, compared to net cash used in investing activities of $2.6 million for the year ended December 31, 2020.

The decrease in cash used in investing activities for the year ended December 31, 2020 was primarily attributable to the $835.6 million cash used for the ITG Acquisition on the ITG Closing Date during the same period of 2019 (see Note 3 "ITG Acquisition" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K), partially offset by $60.6 million cash provided by the sale of MATCHNow in the third quarter of 2020 (see Note 5 "Sale of MATCHNow" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K).

The increase in cash used in investing activities for the year ended December 31, 2021 was primarily attributable to an increase in contributions to our strategic investments in the current year, shown in Other investing activities on our consolidated statement of cash flows, offset by the sale of MATCHNow in the prior year.

Financing Activities

Net cash used in financing activities was $839.9 million for the year ended December 31, 2020, while net cash provided by financing activities was $769.6 million for the year ended December 31, 2019.

The cash used in financing activities for the year ended December 31, 2020 was primarily attributable to $288.5 million in prepayments on our long-term borrowings and by distributions made to noncontrolling interests of $363.9 million.

The cash provided by financing activities of $769.6 million during the same period of 2019 primarily reflects net proceeds from long-term borrowings associated with our entering into the Credit Agreement on the ITG Closing Date, as described above.

Net cash used in financing activities was $957.9 million for the year ended December 31, 2021, while net cash used in financing activities was $839.9 million for the year ended December 31, 2020.

The cash used in financing activities for the year ended December 31, 2021 was primarily attributable to $548.0 million in dividends to stockholders and distributions made to noncontrolling interests and $427.5 million in purchases of treasury stock, partially offset by the proceeds of $68.9 million of Warrants exercised.

The cash used in financing activities of $839.9 million during the same period of 2020 primarily reflects net dividends to stockholders and distributions to noncontrolling interests and repayment of long-term borrowings.

Share Repurchase Program

3 unchanged sentences

On November 6, 2020, the Company's Board of Directors authorized a new share repurchase program of up to $100.0 million in Class A common stock and Virtu Financial Units by December 31, 2021.

On February 11, 2021, the Company's Board of Directors authorized the expansion of the Company's share repurchase program, increasing the total authorized amount by $70.0 million to $170.0 million in Class A Common Stock and Virtu Financial Units up to December 31, 2021.

On May 4, 2021, the Company's Board of Directors authorized the expansion of the Company's share repurchase program, increasing the total authorized amount by $300 million to $470 million in Class A Common Stock and Virtu Financial Units and extending the duration of the program through May 4, 2022.

On November 3, 2021, the Company's Board of Directors authorized the expansion of the Company's current share repurchase program, increasing the total authorized amount by $750 million to $1,220 million and extended the duration through November 3, 2023.

Since the inception of the program through November 3, 2021.

The share repurchase program authorizes the Company to repurchase shares from time to time in open market transactions, privately negotiated transactions or by other means.

Repurchases are also permitted to be made under Rule 10b5-1 plans.

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 December 31, 2021, the Company repurchased approximately 16.1 million shares of Class A Common Stock and Virtu Financial Units for approximately $439.1 million.

As of December 31, 2021, the Company has approximately of $780.9 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

Secondary Offerings

In May 2018, the Company and certain selling stockholders completed a public offering (the “May 2018 Secondary Offering”) of 17,250,000 shares of Class A Common Stock by the Company and certain selling stockholders at a purchase price per share of $27.16 (the offering price to the public of $28.00 per share minus the underwriters’ discount), which included the exercise in full by the underwriters of their option to purchase additional shares in the May 2018 Secondary Offering.

The Company sold 10,518,750 shares of Class A Common Stock in the offering, the net proceeds of which were used to purchase an equivalent number of Virtu Financial Units and corresponding shares of Class D Common Stock from TJMT Holdings LLC pursuant to that certain Member Purchase Agreement, entered into on May 15, 2018 by and between the Company and TJMT Holdings LLC.

The selling stockholders sold 6,731,250 shares of Class A Common Stock in the May 2018 Secondary Offering, including 2,081,250 shares of Class A Common Stock issued by the Company upon the exercise of vested stock options.

In connection with the May 2018 Secondary Offering, the Company, TJMT Holdings LLC, the North Island Stockholder, Havelock Fund Investments Pte.

(“Havelock”) and Aranda entered into that certain Amendment No.

1 to the Amended and Restated Registration Rights Agreement dated April 20, 2017, by and among the Company, TJMT Holdings LLC, the North Island Stockholder, Havelock, Aranda and certain direct or indirect equity holders of the Company (the “Amended and Restated Registration Rights Agreement”) to add Mr.

Vincent Viola and Mr.

Michael Viola, directors of the Company, and to confirm that certain other persons (including the Company’s CEO) remain parties to the Amended and Restated Registration Rights Agreement.

In May 2019, the Company completed a public offering (the “May 2019 Secondary Offering”) of 9,000,000 shares of Class A Common Stock at a purchase price per share paid by the underwriters of $22.00, the net proceeds of which were used to purchase an equivalent number of Virtu Financial Units and corresponding shares of Class D Common Stock from TJMT Holdings LLC pursuant to that certain Member Purchase Agreement, entered into on May 14, 2019 by and between the Company and TJMT Holdings LLC.

Contractual Obligations

The following table reflects our contractual obligations as of December 31, 2020.

Amounts we pay in future periods may vary from those reflected in the table.

Payments due by periods

(in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years

Long-term debt obligations (1) $ 1,670,410 $ — $ 33,898 $ 1,636,512 $ —

Capital leases 12,247 6,774 5,473 — —

Operating leases 384,951 74,590 132,600 62,888 114,873

Total contractual obligations $ 2,067,608 $ 81,364 $ 171,971 $ 1,699,400 $ 114,873

(1) Balances consist of principal payments under the First Lien Term Loan Facility and the SBI bonds, which do not include unamortized discount, unamortized commitment fees or utilization fees, and interest accrued.

Our expected material cash requirements include the following contractual obligations:

As of December 31, 2021, we had $1,599.8 million of outstanding principal on our First Lien Term Loan Facility.

Subsequent to year end, we completed the issuance of a $1.8 billion senior secured first lien term loan due in 2029 ("New Term Loan"), and proceeds were used to repay the outstanding balance on the First Lien Term Loan Facility.

See Note 26 "Subsequent Events" in Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for more details on this transaction.

Additionally, $30.7 million of long-term debt related to the SBI bonds is due in 2023.

See Note 10 "Borrowings" in Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for more details.

We have lease arrangements, primarily for office space and technology and equipment.

As of December 31, 2021, we had $66.6 million of operating lease payments and $4.6 million of finance lease payments due within twelve months, and $268.1 million of operating lease payments and $2.2 million of finance leases payments due after twelve months

Tax Receivable Agreement

The contractual obligation table above excludes contractual amounts owed under the tax receivable agreement as the ultimate amount and timing of the amounts due are not presently known.

As of December 31, 2021, a total of $259.3 million has been recorded for amounts due pursuant to tax receivable agreements in the consolidated financial statements representing management’s best estimate of the amounts currently expected to be owed under the tax receivable agreement, as savings are realized as a result of favorable tax attributes.

Off-Balance Sheet Arrangements

As of December 31, 2020, 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 December 31, 2020, and December 31, 2019, or on our results of operations and cash flows for the years ended December 31, 2020, 2019 and 2018.

Critical Accounting Policies and Estimates

19 unchanged sentences

Estimating the fair value of level 3 financial instruments requires judgments to be made.

See Note 12 "Financial Assets and Liabilities" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information about fair value measurements.

Due to the relative immateriality of our financial instruments classified as level 3, we do not believe that a significant change to the inputs underlying the fair value of our level 3 financial instruments would have a material impact on our consolidated financial statements See Note 11 "Financial Assets and Liabilities" of Part II Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information about fair value measurements.

Revenue Recognition

20 unchanged sentences

License fee revenues, generated for the use of our OMS and other software products, are fixed and recognized at the point in time at which the customer is able to use and benefit from the license.

Connectivity revenue is variable in nature, based on the number of live connections, and is recognized over time on a monthly basis using a time-based measure of progress.

revenue is variable in nature, based on the number of live connections, and is recognized over time on a monthly basis using a time-based measure of progress.

Analytics revenues are earned from providing customers with analytics products and services, including trading and portfolio analytics tools.

19 unchanged sentences

The fair value of share-based awards granted to employees is expensed based on the vesting conditions and is recognized on a straight-line basis over the vesting period, or, in the case of RSAs subject to performance conditions, from the date that achievement becomes probable through the remainder of the vesting period.

The assessment of the performance condition becomes certain within the year of grant.

At year end there is no future assessment that would affect grants with a performance condition.

We record as treasury stock shares repurchased from employees for the purpose of settling tax liabilities incurred upon the issuance of common stock, the vesting of RSUs or the exercise of stock options.

7 unchanged sentences

Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles, and interpretations could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.

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.

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 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.

3 unchanged sentences

Our estimates may require periodic adjustments and may not accurately anticipate actual outcomes as resolution of income tax treatments in individual jurisdictions typically would not be known for several years after completion of any fiscal year.

We believe the judgments and estimates discussed above are reasonable.

However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

Tax Receivable Agreements

21 unchanged sentences

if the fair value of the reporting unit is less than its carrying value, a goodwill impairment loss is recorded, equal to the excess of the reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit).

our estimate of

goodwill impairment, if indicated based on results of the qualitative assessment, is highly dependent on our estimate of a reporting unit’s fair value.

We assess goodwill for impairment on an annual basis as of July 1st and on an interim basis when certain events or circumstances exist.

3 unchanged sentences

We amortize finite-lived intangible assets over their estimated useful lives.

Our largest finite-lived intangible asset is customer relationships, which is being amortized over an estimated useful life of ten years.

Had we used a shorter estimated useful life of seven years, the Company would have recorded an additional $16.5 million of amortization expense for the years ended 2021 and 2020, and an additional $7.0 million of expense for the year ended 2019.

We test finite-lived intangible assets for impairment when impairment indicators are present, and if impaired, they are written down to fair value.

2 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis