What changed in this filing

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Item 1. Business

2023-02-17 compared with 2022-02-18 · 45 added, 51 removed, 311 unchanged (24% of the section changed)

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Leveraging our global market structure expertise and scaled, multi-asset infrastructure, we provide our clients 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, Exchange Traded Funds ("ETFs"), foreign exchange, futures, fixed income, cryptocurrencies, and myriad other commodities.

Our product offerings allow our clients to trade on hundreds of venues across over 50 countries and in multiple asset classes, including global equities, Exchange Traded Funds ("ETFs"), options, foreign exchange, futures, fixed income, cryptocurrencies, and myriad 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.

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Our market data, order routing, transaction processing, risk management and market surveillance technology modules manage our market making and institutional agency activities in an efficient manner that enables us to scale our activities globally, across additional securities and other financial instruments and asset classes, without significant incremental costs or third-party licensing or processing fees.

We believe that technology-enabled market makers like Virtu serve an important role in maintaining and improving the overall health and efficiency of the global capital markets by providing market participants with an efficient means to transfer risk and analyze the quality of execution.

transfer risk and analyze the quality of execution.

We believe that market participants benefit from the increased liquidity, lower overall trading costs and execution transparency that Virtu provides.

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We use the latest technology to create and deliver liquidity to global markets and innovative trading solutions and analytics tools to our clients.

We interact directly

with hundreds of retail brokers, Registered Investment Advisors, private client networks, sell-side brokers, and buy-side institutions.

We interact directly with hundreds of retail brokers, Registered Investment Advisors, private client networks, sell-side brokers, and buy-side institutions.

We have two operating segments:

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As a market maker, we commit capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions.

We engage in principal trading in the Market Making segment direct to clients as well as in a supplemental capacity on exchanges, Electronic Communications Networks ("ECNs)" and on alternative trading systems (“ATSs”).

We engage in principal trading in the Market Making segment direct to clients as well as in a supplemental capacity on exchanges, ATSs and other market centers.

As a complement to electronic market making, our cash trading business handles specialized orders and transacts on the OTC Link ATS operated by OTC Markets Group Inc.

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

We stand ready, at any time, to buy or sell a broad range of securities, and we generate revenue by buying and selling large volumes of securities and other financial instruments while earning small bid/ask spreads.

We believe the overall level of volumes and realized volatility in the various markets we serve have the greatest impact on our businesses.

We stand ready, at any time, to buy or sell a broad range of securities and other financial instruments, and we generate revenue by buying and selling large volumes of securities and other financial instruments while earning small bid/ask spreads.

We believe the overall level of volumes and realized volatility as well as the attractiveness of the order flow we interact with and the level of retail participation in the various markets we serve have the greatest impact on our businesses.

Increases in market volatility can cause bid/ask spreads to temporarily widen as market participants are more willing to transact immediately and as a result market makers’ capture rate per notional amount transacted increases.

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Our market making platform generates and disseminates continuous bid and offer quotes.

At the moment when a trade is executed, our systems capture and deliver this

information back to the source, in most cases within a fraction of a second, and the trade record is written into our clearing system, where it flows through a chain of control accounts that allow us to automatically and efficiently reconcile trades, positions and payments until the final settlement occurs.

At the moment when a trade is executed, our systems capture and deliver this information back to the source, in most cases within a fraction of a second, and the trade record is written into our clearing system, where it flows through a chain of control accounts that allow us to automatically and efficiently reconcile trades, positions and payments until the final settlement occurs.

We have built and continuously refine our automated and integrated, real time systems for global trading, risk management, clearing and cash management, among other purposes.

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We trade over 25,000 listed and over-the-counter ("OTC") securities including, among others, equity related futures and exchange traded products ("ETPs"), on sixteen U.S.

Securities and Exchange Commission (“SEC”) registered exchanges and other market centers around the world, including the New York Stock Exchange (“NYSE”), the NASDAQ, NYSE Arca, Cboe BATS, Chicago Stock Exchange, the TSX in Canada, Bovespa in Brazil and BMV in Mexico, as well as other ATSs and more than 20 private liquidity pools.

Our strategy in the Americas and the rest of world is to utilize high speed, efficient connections to all of the registered exchanges and market centers, including the London Stock Exchange, Cboe Europe Equities, Euronext, Six Swiss Exchange, Australian Securities Exchange, Tokyo Stock Exchange and Singapore Exchange, as well as other trading venues and additional pools of liquidity to which we can gain access either directly or through a broker.

Securities and Exchange Commission (“SEC”) registered exchanges and other market centers around the world, including the New York Stock Exchange (“NYSE”), the Nasdaq, NYSE Arca, Cboe BATS, Chicago Stock Exchange, the Member's Exchange ("MEMX"), the TSX in Canada, Bovespa in Brazil and BMV in Mexico, as well as other ATSs and more than 20 private liquidity pools.

Our strategy globally is to utilize high speed, efficient connections to all of the registered exchanges and market centers, including the London Stock Exchange, Cboe Europe Equities, Euronext, Six Swiss Exchange, Australian Securities Exchange, Tokyo Stock Exchange and Singapore Exchange, as well as other trading venues and additional pools of liquidity to which we can gain access either directly or through a broker.

As ETPs and other similar products have proliferated both domestically and internationally, demand has increased for trading the underlying assets or hedging such funds.

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We trade approximately 100 energy products and futures on the ICE, CME, and TOCOM.

actively trade precious metals, including gold, silver, platinum and palladium, as well as base metals such as aluminum and copper.

We also actively trade precious metals, including gold, silver, platinum and palladium, as well as base metals such as aluminum and copper.

Our Options and Other market making includes our activity on all of the U.S.

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futures exchanges, as well as our activity in cryptocurrencies.

Our cryptocurrency market making includes spot, perpetuals, futures, and ETFs and takes place across eight venues and exchanges.

Our cryptocurrency market making includes spot, perpetuals, futures, and ETFs and takes place across 55 venues and exchanges.

Execution Services

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Our algorithms and order routers help portfolio managers and traders to trade orders quickly, comprehensively and cost‑efficiently from our EMS or our Order Management System (“OMS”) and most third‑party trading platforms.

Our institutional sales

traders offer portfolio trading and single stock sales trading which provides execution expertise for program, block and riskless principal trades in global equities and ETFs.

Our institutional sales traders offer portfolio trading and single stock sales trading which provides execution expertise for program, block and riskless principal trades in global equities and ETFs.

We provide matching of client orders in our ATSs, including Virtu MatchIt, POSIT ATS, and POSIT MTF.

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RFQ‑hub is available as a stand‑alone platform and is also integrated with Triton.

In May 2022, we formed a consortium of strategic partners and investors to own and support the growth of the RFQ-hub business.

Through a series of related transactions, we sold a substantial minority interest in the business to multiple strategic partners and have maintained a majority ownership interest.

We offer administration and consolidation of client commission arrangements across a wide range of our clients’ preferred brokerage and research providers through Commission Manager, a robust, multi‑asset, web‑based commission management portal, and Budget Tracker, which enables asset managers to set research allocations and create and track budgets for their end clients.

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We aim to mitigate these risks through prudent risk management practices.

We have a Chief Risk Officer (“CRO”) who reports independently into the Board Risk Committee.

We also have a Risk Advisory Committee, which includes key personnel from each of our regions globally and comprises our CRO and our Chief Compliance Officer (“CCO”), members of our senior management team, senior technologists and traders, and certain other senior officers.

Our Risk Advisory Committee provides advice to our CRO and our senior management team in connection with our key risk management policies, procedures and risk limits.

We have senior risk personnel who report independently into the Board Risk Committee.

We also have a Risk Advisory Committee, which includes key personnel from each of our regions globally and is comprised of our senior risk personnel, members of our senior management team, senior technologists and traders, and certain other senior officers.

Our Risk Advisory Committee provides advice to our senior management team in connection with our key risk management policies, procedures and risk limits.

Our Board of Directors, through the Board Risk Committee, is periodically apprised of risk events, risk profiles, trends and the activities of our Risk Advisory Committee, including our risk management policies, procedures and controls.

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◦ Our technical operations system continuously monitors our network and the proper functioning of each of our trading centers around the world;

◦ Our market making system continuously evaluates the listed securities and other financial products in which we provide bid and offer quotes and changes its bids and offers in such a way as to minimize exposure to directional price movements.

The speed of communicating with exchanges and market centers is maximized through continuous software and network engineering innovation, allowing us to achieve real‑time controls over market exposure.

We connect to exchanges and other electronic venues through a network of co‑location

facilities around the world that are monitored 24 hours a day, five days a week, by our staff of experienced network professionals;

◦ Our market making system continuously evaluates the listed securities and other financial products in which we provide bid and offer quotes and changes its bids and offers to reflect changes in market conditions.

The latency of communicating with exchanges and market centers is reduced through continuous software and network engineering innovation, allowing us to achieve real‑time controls over market exposure.

We connect to exchanges and other electronic venues through a network of co‑location facilities around the world that are monitored 24 hours a day, five days a week, by our staff of experienced network professionals;

◦ Our clearing system captures trades in real-time and performs automated reconciliations of trades and positions, corporate action processing, options exercises, securities lending and inventory management, allowing us to effectively manage operational risk;

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• Liquidity Controls .

We seek to minimize liquidity risk by focusing the majority of trading in highly active and liquid instruments.

Less liquid securities are identified and restrictions are in place as to the size of positions we hold in such instruments.

We seek to minimize liquidity risk by focusing in highly active and liquid instruments.

Less liquid instruments are identified and restrictions are in place as to the size of positions we hold in such instruments.

Our approach to risk mitigation can in some cases limit our overall opportunities, including by adding a degree of latency to our trading infrastructure which can, for example, prevent us from earning outsized returns in times of extreme market volatility.

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Some of our competitors in market making and execution services are larger than we are and have more captive order flow in certain assets.

We believe that the high cost of developing a competitive technological framework is a significant barrier to entry by new market participants.

Technology and software innovation is a primary focus for us, rather than relying solely on the speed of our network.

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The DE&I Committee has focused on broadening recruitment efforts, increasing awareness of diversity and inclusiveness related issues through internal trainings and communications, and internal and external mentorship, including mentorships with New York City high school students.

Additionally, we have hosted an annual Women's Winternship program since 2019, which provides a week-long internship program aimed at introducing sophomore-level female college students to a career path in financial services and features over 30 instructors across the firm from various business lines and disciplines.

Additionally, we have hosted an annual Women's Winternship program since 2019, which provides a week-long internship program aimed at introducing sophomore-level female college students to a career path in financial services and features instructors across the firm from various business lines and disciplines.

We conduct our U.S.

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VAL is also registered as a floor trader firm with the Commodity Futures Trading Commission (“CFTC”).

We are a full clearing member of the National Securities Clearing Corporation (“NSCC”) and the Depository Trust & Clearing Corporation (“DTCC”).

Our activities in U.S.

equities are both self‑cleared and rely on fully-disclosed clearing arrangements with third-party clearing firms.

We are a full clearing member of the National Securities Clearing Corporation (“NSCC”) and the Depository Trust & Clearing Corporation (“DTCC”).

We use the services of prime brokers, primarily in other asset classes, who provide us direct market access to markets and often cross‑margining and margin financing in return for execution and clearing fees.

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We conduct our European, Middle Eastern and African (“EMEA”) market making activities from Dublin and through our subsidiary Virtu Financial Ireland Limited ("VFIL"), which is authorized as an “Investment Firm” with the CBI.

VFIL maintains a branch office in London.

maintains a branch office in London.

We conduct our EMEA execution services trading activity from Dublin, London, and Paris through our subsidiary Virtu ITG Europe Limited ("VIEL").

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VIEL's Paris branch is registered with the Banque de France.

VIEL also operates a multi-lateral trading facility (“MTF”) in

Ireland and Virtu ITG UK Limited ("VIUK"), a U.K.

VIEL also operates a multi-lateral trading facility (“MTF”) in Ireland and Virtu ITG UK Limited ("VIUK"), a U.K.

investment firm, operates a MTF in the U.K.

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Virtu ITG Australia Limited’s principal regulators are the ASX and ASIC.

Our Canadian market making activities are conducted through our subsidiary Virtu Financial Canada ULC.

Virtu Financial Canada ULC is a Canadian broker‑dealer registered as an investment dealer with the IIROC.

Our Canadian execution services trading activities are conducted through our subsidiary Virtu ITG Canada Corp.

Virtu ITG Canada Corp.

Our Canadian market making activities and our Canadian execution services trading activities are conducted through our subsidiary Virtu Canada Corp (f/k/a Virtu ITG Canada Corp.).

Virtu Canada Corp.

is a Canadian broker‑dealer registered as an investment dealer with IIROC, Ontario Securities Commission (“OSC”), the Autorité Des Marchés Financiers in Quebec, Alberta Securities Commission (“ASC”), British Columbia Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, Nova Scotia Securities Commission and Saskatchewan Financial Services Commission.

Virtu ITG Canada Corp.

Virtu Canada Corp.

is also registered as a Futures Commission Merchant in Ontario and Manitoba and Derivatives Dealer in Quebec.

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We cannot predict what effect, if any, future legislative or regulatory changes might have.

However, there have been in the past, and could be in the future, significant technological, operational and compliance costs associated with the obligations which derive from compliance with

such regulations.

However, there have been in the past, and could be in the future, significant technological, operational and compliance costs associated with the obligations which derive from compliance with such regulations.

Regulators may propose market structure changes particularly considering the continued regulatory, congressional and media scrutiny of U.S.

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The SEC and other SROs have enacted and are actively considering rules that may affect our operations and profitability.

Among these potential changes are bans on payment for order flow;

changes to Regulation NMS that would alter the market structure for NMS securities in ways that would disfavor the current competing market center model and lessen the amount of volume executed off exchange in favor of a central limit order book model or other centralized model for order interaction;

and revisions to SEC Rule 3b-16, Regulation ATS, and Regulation SCI.

These potential changes would increase the number of technology platforms that meet the definition of an exchange and would then be required to register as an exchange or alternatively operate as an ATS, and/or operate under the more complex and costly Regulation SCI regime.

Specifically, in 2022 the SEC has proposed several rule changes focused on equity market structure reform.

These proposals include, but are not limited to, (i) Proposed Rule 615 of Regulation NMS, which proposes to dramatically change the U.S.

equities market structure, the routing, handling and potentially the amount, character, and cost of retail order flow, (ii) Regulation Best Execution, which would impose best execution requirements on broker-dealers which would be distinct from, but overlapping with, FINRA’s existing best execution rule (Rule 5310), (iii) proposed rule amendments to minimum pricing increments under Rule 612 or Regulation NMS, access fee caps under Rule 610 of Regulation NMS, acceleration of implementation of certain Market Data Infrastructure Rules, and amendment to the odd-lot information definition adopted under the MDI rules (collectively referred to as the “tick size, access fees and infostructure rule proposals”), and (iv) amendments to Rule 605 of Regulation NMS, along with a series of amendments to the definition of Exchange and Alternative Trading Systems (ATS), which would expand the scope of exchange and ATS registration and compliance requirements.

If adopted, these or other potential rule changes may alter the market structure for NMS securities in ways that would disfavor the current competing market center model and lessen the amount of volume executed off-exchange in favor of a central limit order book model or other centralized model for order interaction.

Proposed revisions to SEC Rule 3b-16, Regulation ATS, and Regulation SCI would increase the number of technology platforms that meet the definition of an exchange and would then be required to register as an exchange or alternatively operate as an ATS, and/or operate under the more complex and costly Regulation SCI regime.

Proposed changes to Regulation ATS would revise the format of Form ATS required to be filed and would impose additional disclosures and costs to rewrite and refile those forms.

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The MiFID II regime is currently under review, with European Union authorities proposing to make further changes to the regime.

Various consultation papers have been published on different aspects of the MiFID II regime, including, on February 4, 2020, an ESMA Consultation Paper entitled “MiFID II/MiFIR Review Report on the Transparency Regime for Equity and Equity-like Instruments, the Double Volume Cap Mechanism and the Trading Obligations for Shares”, on February 17, 2020, a European Commission public consultation on the review of the MiFIDII/MiFIR regulatory framework and on December 18, 2020 an ESMA Consultation Paper entitled "MiFID II/MiFIR Review Report on Algorithmic Trading".

Various consultation papers have been published on different aspects of the MiFID II regime, including, on February 4, 2020, an ESMA Consultation Paper entitled “MiFID II/MiFIR Review Report on the Transparency Regime for Equity and Equity-like Instruments, the Double Volume Cap Mechanism and the Trading Obligations for Shares”, on December 18, 2020 an ESMA Consultation Paper entitled "MiFID II/MiFIR Review Report on Algorithmic Trading" and on January 28, 2022 an ESMA Consultation Paper “on ESMA”s Opinion on the trading venue perimeter.”.

In its communication on “The European economic and financial system:

fostering openness, strength and resilience” of January 19, 2021, the European Commission confirmed its intention to propose to make changes with a view to improving simplifying and further harmonizing capital markets’ transparency as part of the review of the MiFID II and MiFIR framework.

On November 25, 2021, the European Commission published a “Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments” which is currently under comment from the E.U.

Member States.

On December 21, 2022, the Council of the European Union published the texts of its general approach on the proposed regulation to amend MiFIR “as regards enhancing market

data transparency, removing obstacles to the emergence of a consolidated tape, optimizing the trading obligations and amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012” and on the proposed directive “amending Directive 2014/65/EU on markets in financial instruments and amending Directive 2013/36/EU on access of the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC”, each dated December 16, 2022;

as well as publishing an “I” item note, also dated December 16, 2022, inviting the Council’s Permanent Representatives Committee to agree the text of the mandate for negotiations with European Parliament on the basis of the published general approaches, with a view to reaching agreement at first reading.

Further, in light of the U.K.'s withdrawal of its membership from the E.U., which is commonly referred to as "Brexit", the passporting regime under MiFID II, which enables firms to provide services to countries across the E.U., no longer encompasses the U.K.

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FCA’s Temporary Permissions Regime is due to come to an end at the end of 2023.

During the course of 2022, VIEL and VFIL will go through an authorization process with the FCA to secure the appropriate authorizations under the prevailing U.K.

regulatory framework to seek to ensure the long-term operational footprint of VIEL and VFIL’s branches in the U.K.

VIEL and VFIL have submitted applications for full third country branch authorization to ensure the long-term operational footprint of Virtu’s branches in the U.K.

These authorization processes are ongoing.

Each of these legislative and regulatory requirements imposes additional technological, operational and compliance costs on us.

New laws, rules or regulations as well as any regulatory or legal actions or proceedings, changes in legislation or

regulation and changes in market customs and practices could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

New laws, rules or regulations as well as any regulatory or legal actions or proceedings, changes in legislation or regulation and changes in market customs and practices could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Certain of our subsidiaries are subject to regulatory capital rules of the SEC, FINRA, other SROs and foreign regulators.

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Viola, our Founder and Chairman Emeritus.

We have completed two significant acquisitions over the past five years that have expanded and complemented Virtu Financial's original electronic trading and market making business.

We have completed two significant acquisitions that have expanded and complemented Virtu Financial's original electronic trading and market making business.

On July 20, 2017 (the "KCG Closing Date"), the Company completed the all-cash acquisition (the "Acquisition of KCG") of KCG Holdings, Inc.

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(“ITG”) in an all-cash transaction (the “ITG Acquisition”).

As described in “Acquisition of Investment Technology Group,

Inc.” below, ITG was a global financial technology company that offered a suite of trading and financial technology products to help leading brokers and asset managers improve returns for investors around the world.

As described in “Acquisition of Investment Technology Group, Inc.” below, ITG was a global financial technology company that offered a suite of trading and financial technology products to help leading brokers and asset managers improve returns for investors around the world.

ITG empowered traders and investors to reduce the end-to-end cost of implementing investment decisions via liquidity, execution, analytics and workflow technology solutions.

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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-K

Item 1. Business