Virtu Financial, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS Index to Consolidated Financial Statements PAGE NUMBER Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 78 Consolidated Statements of Financial Condition 80 Consolidated Statements of Comprehensive Income 82 Consolidated Statements of Changes in Equity 83 Consolidated Statements of Cash Flows 85 Notes to Consolidated Financial Statements 87 77 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Virtu Financial, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated statements of financial condition of Virtu Financial, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 78 The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Trading Income, net (“Trading Income”) As described in Note 2 to the consolidated financial statements, $1.301 billion of the Company’s Trading Income for the year ended December 31, 2023 is composed of changes in the fair value of trading assets and liabilities (i.e., unrealized gains and losses) and realized gains and losses on trading assets and liabilities. Trading gains and losses on financial instruments owned and financial instruments sold, not yet purchased, are recorded on the trade date and reported on a net basis in the consolidated statements of comprehensive income. The principal considerations for our determination that performing procedures relating to Trading Income is a critical audit matter are the significant audit effort in performing procedures and evaluating audit evidence related to the transactions which comprise the trading income. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s calculation of Trading Income, including controls over the completeness, accuracy, existence, and valuation of trading assets and trading liabilities. These procedures also included, among others, testing of the inputs used by management in their trading income calculations and independently recalculating trading income. The procedures performed over testing of the inputs include (i) confirming a sample of trading assets, trading liabilities and cash (collectively the “equity value”) within each trading portfolio at the balance sheet date with external third parties; (ii) developing independent prices for a sample of trading assets and liabilities at the balance sheet date and comparing management’s prices to the independently developed prices; (iii) testing a sample of purchases and sales throughout the year by agreeing the quantity and price to settlement documentation, and (iv) testing the equity value of a sample of trading portfolios throughout the year by comparing the amounts to third party clearing statements. /s/ PricewaterhouseCoopers LLP New York, New York February 16, 2024 We have served as the Company’s auditor since 2018. 79 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Financial Condition (in thousands, except share data) December 31, 2023 December 31, 2022 Assets Cash and cash equivalents $ 820,436 $ 981,580 Cash restricted or segregated under regulations and other 35,024 56,662 Securities borrowed 1,722,440 1,187,674 Securities purchased under agreements to resell 1,512,114 336,999 Receivables from broker-dealers and clearing organizations 737,724 1,115,185 Trading assets, at fair value: Financial instruments owned 6,127,752 3,667,481 Financial instruments owned and pledged 1,230,859 963,071 Receivables from customers 106,245 80,830 Property, equipment and capitalized software (net of accumulated depreciation of $ 367,779 and $ 460,763 as of December 31, 2023 and December 31, 2022, respectively) 100,365 85,194 Operating lease right-of-use assets 229,499 187,442 Goodwill 1,148,926 1,148,926 Intangibles (net of accumulated amortization of $ 381,973 and $ 318,013 as of December 31, 2023 and December 31, 2022, respectively) 257,520 321,480 Deferred tax assets 133,760 146,801 Other assets ($ 84,521 and $ 78,965 , at fair value, as of December 31, 2023 and December 31, 2022, respectively) 303,720 303,916 Total assets $ 14,466,384 $ 10,583,241 Liabilities and equity Liabilities Short-term borrowings $ — $ 3,944 Securities loaned 1,329,446 1,060,432 Securities sold under agreements to repurchase 1,795,994 627,549 Payables to broker-dealers and clearing organizations 1,167,712 273,843 Payables to customers 23,229 46,525 Trading liabilities, at fair value: Financial instruments sold, not yet purchased 6,071,352 4,196,974 Tax receivable agreement obligations 216,480 238,758 Accounts payable, accrued expenses and other liabilities 451,293 448,635 Operating lease liabilities 278,317 239,202 Long-term borrowings 1,727,205 1,795,952 Total liabilities 13,061,028 8,931,814 Commitments and Contingencies (Note 14) Virtu Financial Inc. Stockholders' equity Class A common stock (par value $ 0.00001 ), Authorized — 1,000,000,000 and 1,000,000,000 shares, Issued — 134,901,037 and 133,071,754 shares, Outstanding — 89,092,686 and 98,549,464 shares at December 31, 2023 and December 31, 2022, respectively 1 1 Class B common stock (par value $ 0.00001 ), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 0 and 0 shares at December 31, 2023 and December 31, 2022, respectively — — Class C common stock (par value $ 0.00001 ), Authorized — 90,000,000 and 90,000,000 shares, Issued and Outstanding — 8,607,998 and 9,030,066 shares at December 31, 2023 and December 31, 2022, respectively — — Class D common stock (par value $ 0.00001 ), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 60,091,740 and 60,091,740 shares at December 31, 2023 and December 31, 2022, respectively 1 1 Treasury stock, at cost, 45,808,351 and 34,522,290 shares at December 31, 2023 and December 31, 2022, respectively ( 1,166,299 ) ( 954,637 ) Additional paid-in capital 1,351,574 1,292,613 Retained earnings (accumulated deficit) 1,000,403 972,317 Accumulated other comprehensive income (loss) 17,047 31,604 Total Virtu Financial Inc. stockholders' equity 1,202,727 1,341,899 Noncontrolling interest 202,629 309,528 80 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Financial Condition (in thousands, except share data) December 31, 2023 December 31, 2022 Total equity 1,405,356 1,651,427 Total liabilities and equity $ 14,466,384 $ 10,583,241 See accompanying Notes to the Consolidated Financial Statements. 81 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income Years Ended December 31, (in thousands, except share and per share data) 2023 2022 2021 Revenues: Trading income, net $ 1,301,344 $ 1,628,898 $ 2,105,194 Interest and dividends income 462,566 159,120 75,384 Commissions, net and technology services 455,598 529,845 614,489 Other, net 73,865 46,949 16,418 Total revenue 2,293,373 2,364,812 2,811,485 Operating Expenses: Brokerage, exchange, clearance fees and payments for order flow, net 508,358 619,168 745,434 Communication and data processing 230,760 219,505 211,988 Employee compensation and payroll taxes 394,039 390,947 376,282 Interest and dividends expense 500,467 231,060 139,704 Operations and administrative 98,972 86,069 88,149 Depreciation and amortization 63,306 66,377 67,816 Amortization of purchased intangibles and acquired capitalized software 63,960 64,837 69,668 Termination of office leases 455 6,982 28,138 Debt issue cost related to debt refinancing, prepayment and commitment fees 8,317 29,910 6,590 Transaction advisory fees and expenses 314 1,124 843 Financing interest expense on long-term borrowings 99,294 92,035 79,969 Total operating expenses 1,968,242 1,808,014 1,814,581 Income before income taxes and noncontrolling interest 325,131 556,798 996,904 Provision for income taxes 61,210 88,466 169,670 Net income 263,921 468,332 827,234 Noncontrolling interest ( 121,885 ) ( 203,306 ) ( 350,356 ) Net income available for common stockholders $ 142,036 $ 265,026 $ 476,878 Earnings per share Basic $ 1.42 $ 2.45 $ 3.95 Diluted $ 1.42 $ 2.44 $ 3.91 Weighted average common shares outstanding Basic 94,076,165 103,997,767 117,339,539 Diluted 94,076,165 104,422,443 118,423,928 Net income $ 263,921 $ 468,332 $ 827,234 Other comprehensive income Foreign exchange translation adjustment, net of taxes 4,957 ( 24,254 ) ( 12,470 ) Net change in unrealized cash flow hedges gain (loss), net of taxes ( 36,993 ) 90,865 37,794 Comprehensive income 231,885 534,943 852,558 Less: Comprehensive income attributable to noncontrolling interest ( 104,406 ) ( 228,117 ) ( 360,389 ) Comprehensive income attributable to common stockholders $ 127,479 $ 306,826 $ 492,169 See accompanying Notes to the Consolidated Financial Statements. 82 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Changes in Equity Years Ended December 31, 2023, 2022, and 2021 Class A Common Stock Class C Common Stock Class D Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (loss) Total Virtu Financial Inc. Stockholders' Equity Noncontrolling Interest Total Equity (in thousands, except share and interest data) Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts Balance at December 31, 2020 125,627,277 $ 1 10,226,939 $ — 60,091,740 $ 1 ( 3,615,097 ) $ ( 88,923 ) $ 1,160,567 $ 422,381 $ ( 25,487 ) $ 1,468,540 $ 386,498 $ 1,855,038 Share based compensation 2,434,251 — — — — — — — $ 55,654 $ — $ — $ 55,654 $ — $ 55,654 Repurchase of Class C common stock — — ( 120,025 ) — — — — — $ ( 3,455 ) $ — $ — $ ( 3,455 ) $ — $ ( 3,455 ) Treasury stock purchases ( 840,229 ) — — — — — ( 14,711,766 ) ( 405,152 ) $ — $ ( 22,301 ) $ — $ ( 427,453 ) $ — $ ( 427,453 ) Stock option exercised 528,497 — — — — — — — $ 10,042 $ — $ — $ 10,042 $ — $ 10,042 Net Income — — — — — — — — $ — $ 476,878 $ — $ 476,878 $ 350,356 $ 827,234 Foreign exchange translation adjustment — — — — — — — — $ — $ — $ ( 7,673 ) $ ( 7,673 ) $ ( 4,797 ) $ ( 12,470 ) Warrants exercised 3,000,000 — — — — — — — $ — $ 68,940 $ — $ 68,940 $ — $ 68,940 Net change in unrealized cash flow hedges gains — — — — — — — — $ — $ — $ 22,964 $ 22,964 $ 14,830 $ 37,794 Dividends ($ 0.24 per share of Class A common stock and participating Restricted Stock Unit and Restricted Stock Award) and distributions from Virtu Financial to non-controlling interest — — — — — — — — $ — $ ( 115,360 ) $ — $ ( 115,360 ) $ ( 432,657 ) $ ( 548,017 ) Issuance of Common Stock in connection with employee exchanges 747,849 — — — — — — — $ — $ — $ — $ — $ — $ — Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 747,849 ) — — — — — $ — $ — $ — $ — $ — $ — Issuance of tax receivable agreements in connection with employee exchange — — — — — — — — $ 311 $ — $ — $ 311 $ — $ 311 Balance at December 31, 2021 131,497,645 1 9,359,065 — 60,091,740 1 ( 18,326,863 ) ( 494,075 ) $ 1,223,119 $ 830,538 $ ( 10,196 ) $ 1,549,388 $ 314,230 $ 1,863,618 Share based compensation 1,897,030 — — — — — — — $ 71,597 $ — $ — $ 71,597 $ — $ 71,597 Repurchase of Class C common stock — — ( 236,069 ) — — — — — $ ( 8,256 ) $ — $ — $ ( 8,256 ) $ — $ ( 8,256 ) Treasury stock purchases ( 684,730 ) — — — — — ( 16,195,427 ) ( 460,562 ) $ — $ ( 19,982 ) $ — $ ( 480,544 ) $ — $ ( 480,544 ) Stock option exercised 268,879 — — — — — — — $ 5,109 $ — $ — $ 5,109 $ — $ 5,109 Net Income — — — — — — — — $ — $ 265,026 $ — $ 265,026 $ 203,306 $ 468,332 Foreign exchange translation adjustment — — — — — — — — $ — $ — $ ( 13,605 ) $ ( 13,605 ) $ ( 10,649 ) $ ( 24,254 ) Net change in unrealized cash flow hedges gains — — — — — — — — — — 55,405 55,405 35,460 90,865 Dividends ($ 0.24 per share of Class A common stock and participating Restricted Stock Unit and Restricted Stock Award) and distributions from Virtu Financial to non-controlling interest — — — — — — — — $ — $ ( 103,265 ) $ — $ ( 103,265 ) $ ( 272,019 ) $ ( 375,284 ) Issuance of Common Stock in connection with employee exchanges 92,930 — — — — — — — $ — $ — $ — $ — $ — $ — Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 92,930 ) — — — — — $ — $ — $ — $ — $ — $ — Contributions from noncontrolling interests — — — — — — — — $ — $ — $ — $ — $ 39,200 $ 39,200 Issuance of tax receivable agreements in connection with employee exchange — — — — — — — — $ 1,044 $ — $ — $ 1,044 $ — $ 1,044 Balance at December 31, 2022 133,071,754 1 9,030,066 — 60,091,740 1 ( 34,522,290 ) ( 954,637 ) $ 1,292,613 $ 972,317 $ 31,604 $ 1,341,899 $ 309,528 $ 1,651,427 Share based compensation 2,627,823 — — — — — — — $ 66,644 $ — $ — 66,644 — 66,644 Repurchase of Class C common stock — — ( 235,674 ) — — — — — $ ( 3,896 ) $ — $ — ( 3,896 ) — ( 3,896 ) Treasury stock purchases ( 984,934 ) — — — — — ( 11,286,061 ) ( 211,662 ) $ — $ ( 19,119 ) $ — ( 230,781 ) — ( 230,781 ) 83 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Changes in Equity Years Ended December 31, 2023, 2022, and 2021 Class A Common Stock Class C Common Stock Class D Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (loss) Total Virtu Financial Inc. Stockholders' Equity Noncontrolling Interest Total Equity (in thousands, except share and interest data) Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts Stock option exercised — — — — — — — — $ — $ — $ — — — — Net Income — — — — — — — — $ — $ 142,036 $ — 142,036 121,885 263,921 Foreign exchange translation adjustment — — — — — — — — $ — $ — $ 6,952 6,952 ( 1,995 ) 4,957 Net change in unrealized cash flow hedges gains — — — — — — — — $ — $ — $ ( 21,509 ) ( 21,509 ) ( 15,484 ) ( 36,993 ) Dividends ($ 0.24 per share of Class A common stock and participating Restricted Stock Unit and Restricted Stock Award) and distributions from Virtu Financial to non-controlling interest — — — — — — — — $ — $ ( 94,831 ) $ — ( 94,831 ) ( 211,305 ) ( 306,136 ) Issuance of Common Stock in connection with employee exchanges 186,394 — — — — — — — $ — $ — $ — — — — Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 186,394 ) — — — — — $ — $ — $ — — — — Issuance of tax receivable agreements in connection with employee exchange — — — — — — — — $ ( 3,787 ) $ — $ — ( 3,787 ) — ( 3,787 ) Balance at December 31, 2023 134,901,037 $ 1 8,607,998 $ — 60,091,740 $ 1 ( 45,808,351 ) $ ( 1,166,299 ) $ 1,351,574 $ 1,000,403 $ 17,047 $ 1,202,727 $ 202,629 $ 1,405,356 See accompanying Notes to the Consolidated Financial Statements. 84 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, (in thousands) 2023 2022 2021 Cash flows from operating activities Net income $ 263,921 $ 468,332 $ 827,234 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 63,306 66,377 67,816 Amortization of purchased intangibles and acquired capitalized software 63,960 64,837 69,668 Debt issue cost related to debt refinancing and prepayment 1,098 24,316 649 Amortization of debt issuance costs and deferred financing fees 11,388 6,919 6,939 Termination of office leases 455 4,707 28,138 Share-based compensation 63,933 67,219 55,751 Deferred taxes 19,069 ( 3,468 ) 34,617 Other ( 12,795 ) 11,392 ( 5,556 ) Changes in operating assets and liabilities: Securities borrowed ( 534,766 ) 161,648 75,694 Securities purchased under agreements to resell ( 1,175,115 ) ( 217,546 ) ( 96,587 ) Receivables from broker-dealers and clearing organizations 290,193 ( 1,110 ) 657,199 Trading assets, at fair value ( 2,728,059 ) ( 373,597 ) ( 1,141,224 ) Receivables from customers ( 25,415 ) 65,646 68,002 Operating lease right-of-use assets ( 42,057 ) 28,670 33,930 Other assets 20,331 ( 62,799 ) 59,209 Securities loaned 269,014 ( 81,616 ) 193,792 Securities sold under agreements to repurchase 1,168,445 113,224 53,090 Payables to broker-dealers and clearing organizations 886,208 ( 276,646 ) ( 267,126 ) Payables to customers ( 23,296 ) ( 8,474 ) ( 63,827 ) Trading liabilities, at fair value 1,874,378 686,195 587,071 Operating lease liabilities 39,115 ( 33,322 ) ( 36,595 ) Accounts payable, accrued expenses and other liabilities ( 1,534 ) ( 4,101 ) ( 36,258 ) Net cash provided by operating activities 491,777 706,803 1,171,626 Cash flows from investing activities Development of capitalized software ( 38,355 ) ( 37,658 ) ( 35,508 ) Acquisition of property and equipment ( 37,774 ) ( 27,201 ) ( 24,562 ) Other investing activities ( 18,355 ) 35,329 ( 27,279 ) Net cash used in investing activities ( 94,484 ) ( 29,530 ) ( 87,349 ) Cash flows from financing activities Dividends to stockholders and distributions from Virtu Financial to noncontrolling interest ( 306,136 ) ( 375,284 ) ( 548,017 ) Repurchase of Class C common stock ( 1,566 ) ( 8,256 ) ( 3,454 ) Purchase of treasury stock ( 229,012 ) ( 480,544 ) ( 427,453 ) Stock options exercised — 5,109 10,042 Short-term borrowings, net ( 3,944 ) ( 59,112 ) ( 2,017 ) Proceeds from long-term borrowings — 1,800,000 — Repayment of long-term borrowings ( 73,000 ) ( 1,599,774 ) ( 36,737 ) Proceeds from interest rate swaps 55,830 — — Payment of tax receivable agreement obligations ( 23,275 ) ( 21,343 ) ( 16,505 ) Debt issuance costs ( 3,929 ) ( 35,741 ) ( 2,658 ) Warrants exercised — — 68,940 Contributions from noncontrolling interests — 39,200 — Net cash used in financing activities ( 585,032 ) ( 735,745 ) ( 957,859 ) Effect of exchange rate changes on cash and cash equivalents 4,957 ( 24,239 ) ( 12,470 ) Net increase (decrease) in cash and cash equivalents ( 182,782 ) ( 82,711 ) 113,948 Cash, cash equivalents, and restricted or segregated cash, beginning of period 1,038,242 1,120,953 1,007,005 Cash, cash equivalents, and restricted or segregated cash, end of period $ 855,460 $ 1,038,242 $ 1,120,953 85 Table of Contents Virtu Financial, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, (in thousands) 2023 2022 2021 Supplementary disclosure of cash flow information Cash paid for interest $ 632,263 $ 246,985 $ 159,864 Cash paid for taxes 38,687 103,965 134,878 Non-cash investing activities Share-based and accrued incentive compensation to developers relating to capitalized software 19,691 17,356 17,239 Non-cash financing activities Tax receivable agreement described in Note 4 ( 3,787 ) 1,044 311 Repurchase of Class C common stock ( 2,330 ) — — See accompanying Notes to the Consolidated Financial Statements. 86 Virtu Financial, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (dollars in thousands, except shares and per share amounts, unless otherwise noted) 1. Organization and Basis of Presentation Organization The accompanying Consolidated Financial Statements include the accounts and operations of Virtu Financial, Inc. (“VFI” or, collectively with its wholly owned or controlled subsidiaries, “Virtu” or the “Company”). VFI is a Delaware corporation whose primary asset is its ownership interest in Virtu Financial LLC (“Virtu Financial”). As of December 31, 2023, VFI owned approximately 57.8 % of the membership interests of Virtu Financial. VFI is the sole managing member of Virtu Financial and operates and controls all of the businesses and affairs of Virtu Financial and its subsidiaries (the “Group”). The Company is a leading financial firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to its clients. The Company provides deep liquidity in over 25,000 financial instruments, on over 235 venues, in 36 countries worldwide to help create more efficient markets. Leveraging its global market structure expertise and scaled, multi-asset infrastructure, the Company provides its clients with a robust product suite including offerings in execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms in workflow technology. The Company’s product offerings allow its clients to trade on hundreds of venues in over 50 countries and across multiple asset classes, including global equities, Exchange-Traded Funds (“ETFs”), options, foreign exchange, futures, fixed income, cryptocurrencies, and other commodities. The Company’s integrated, multi-asset analytics platform provides a range of pre- and post-trade services, data products and compliance tools that its clients rely upon to invest, trade and manage risk across global markets. The Company has completed two significant acquisitions that have expanded and complemented Virtu Financial's original electronic trading and marking making business. On July 20, 2017, the Company completed the all-cash acquisition of KCG Holdings, Inc. (“KCG”) (the “Acquisition of KCG”). On March 1, 2019 (the “ITG Closing Date”), the Company completed the acquisition of Investment Technology Group, Inc. and its subsidiaries (“ITG”) in an all-cash transaction (the “ITG Acquisition”). Virtu Financial’s principal United States (“U.S.”) subsidiary is Virtu Americas LLC (“VAL”), which is a U.S. broker-dealer. Other principal U.S. subsidiaries include Virtu Financial Global Markets LLC, a U.S. trading entity focused on futures and currencies; Virtu ITG Analytics LLC, a provider of pre- and post-trade analysis, fair value, and trade optimization services; and Virtu ITG Platforms LLC, a provider of workflow technology solutions and network connectivity services. Principal foreign subsidiaries include Virtu Financial Ireland Limited (“VFIL”) and Virtu Europe Trading Limited (“VETL”) (f/k/a Virtu ITG Europe Limited), each formed in Ireland; Virtu ITG UK Limited (“VIUK”), formed in the United Kingdom; Virtu Canada Corp (f/k/a Virtu ITG Canada Corp.), formed in Canada; Virtu Financial Asia Pty Ltd. and Virtu ITG Australia Limited, each formed in Australia; Virtu ITG Hong Kong Limited, formed in Hong Kong; and Virtu Financial Singapore Pte. Ltd. and Virtu ITG Singapore Pte. Ltd., each formed in Singapore, all of which are trading entities focused on asset classes in their respective geographic regions. The Company has two operating segments: (i) Market Making and (ii) Execution Services; and one non-operating segment: Corporate. See Note 21 “Geographic Information and Business Segments” for a further discussion of the Company’s segments. Basis of Consolidation and Form of Presentation These Consolidated Financial Statements are presented in U.S. dollars, have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding financial reporting with respect to Form 10-K and accounting standards generally accepted in the United States of America (“U.S. GAAP”) promulgated by the Financial Accounting Standards Board (“FASB”) in the Accounting Standards Codification (“ASC” or the “Codification”), and reflect all adjustments that, in the opinion of management, are normal and recurring, and that are necessary for a fair statement of the results for the periods presented. The Consolidated Financial Statements of the Company include its equity interests in Virtu Financial and its subsidiaries. As sole managing member of Virtu Financial, the Company exerts control over the Group’s operations. The Company consolidates Virtu Financial and its subsidiaries’ financial statements and records the interests in 87 Virtu Financial that the Company does not own as noncontrolling interests. All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior periods' Consolidated Financial Statements in order to conform to the current period presentation. Such reclassifications are immaterial, individually and in the aggregate, to both current and all previously issued financial statements taken as a whole and have no effect on previously reported consolidated net income available to common stockholders. 2. Summary of Significant Accounting Policies Use of Estimates The Company's Consolidated Financial Statements are prepared in conformity with U.S. GAAP, which require management to make estimates and assumptions regarding measurements including the fair value of trading assets and liabilities, allowance for doubtful accounts, goodwill and intangibles, compensation accruals, capitalized software, income tax, tax receivable agreements, leases, litigation accruals, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ materially from those estimates. Earnings Per Share Earnings per share (“EPS”) is calculated on both a basic and diluted basis. Basic EPS excludes dilution and is calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing the net income available for common stockholders by the diluted weighted average shares outstanding for that period. Diluted EPS includes the determinants of the basic EPS and, in addition, reflects the dilutive effect of shares of common stock estimated to be distributed in the future. The Company grants restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), certain of which entitle recipients to receive non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. As a result, the unvested RSAs and participating unvested RSUs meet the definition of a participating security requiring the application of the two-class method. Under the two-class method, earnings available to common shareholders, including both distributed and undistributed earnings, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted EPS to be more dilutive than the calculation using the treasury stock method. Cash and Cash Equivalents Cash and cash equivalents include money market accounts, which are payable on demand, and short-term investments with an original maturity of less than 90 days. The Company maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company manages this risk by selecting financial institutions deemed highly creditworthy to minimize the risk. Cash restricted or segregated under regulations and other represents (i) special reserve bank accounts for the exclusive benefit of customers (“Special Reserve Bank Account”) maintained by VAL in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”), and special reserve accounts for the exclusive benefit of proprietary accounts of broker-dealers, (ii) funds on deposit for Canadian and European trade clearing and settlement activity, (iii) segregated balances under a collateral account control agreement for the benefit of certain customers in Hong Kong, and (iv) funds relating to the securitization of bank guarantees supporting certain of the Company’s foreign leases. 88 Securities Borrowed and Securities Loaned The Company conducts securities borrowing and lending activities with external counterparties. In connection with these transactions, the Company receives or posts collateral, which comprises cash and/or securities. In accordance with substantially all of its securities borrow agreements, the Company is permitted to sell or repledge the securities received. Securities borrowed or loaned are recorded based on the amount of cash collateral advanced or received. The initial cash collateral advanced or received generally approximates or is greater than 102 % of the fair value of the underlying securities borrowed or loaned. The Company monitors the fair value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Receivables and payables with the same counterparty are not offset in the Consolidated Statements of Financial Condition. Interest received or paid by the Company for these transactions is recorded gross on an accrual basis under Interest and dividends income or Interest and dividends expense in the Consolidated Statements of Comprehensive Income. Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase In a repurchase agreement, securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at contract value, plus accrued interest, which approximates fair value. It is the Company's policy that its custodian take possession of the underlying collateral securities with a fair value approximately equal to the principal amount of the repurchase transaction, including accrued interest. For reverse repurchase agreements, the Company typically requires delivery of collateral with a fair value approximately equal to the carrying value of the relevant assets in the Consolidated Statements of Financial Condition. To ensure that the fair value of the underlying collateral remains sufficient, the collateral is valued daily with additional collateral obtained or excess collateral returned, as permitted under contractual provisions. The Company does not net securities purchased under agreements to resell transactions with securities sold under agreements to repurchase transactions entered into with the same counterparty. The Company has entered into bilateral and tri-party term and overnight repurchase and other collateralized financing agreements which bear interest at negotiated rates. The Company receives cash and makes delivery of financial instruments to a custodian who monitors the market value of these instruments on a daily basis. The market value of the instruments delivered must be equal to or in excess of the principal amount loaned under the repurchase agreements plus the agreed upon margin requirement. The custodian may request additional collateral, if appropriate. Interest received or paid by the Company for these transactions is recorded gross on an accrual basis under Interest and dividends income or Interest and dividends expense in the Consolidated Statements of Comprehensive Income. Receivables from/Payables to Broker-dealers and Clearing Organizations Receivables from and payables to broker-dealers and clearing organizations primarily represent amounts due for unsettled trades, open equity in futures transactions, securities failed to deliver or failed to receive, deposits with clearing organizations or exchanges, and balances due from or due to prime brokers in relation to the Company’s trading. Amounts receivable from broker-dealers and clearing organizations may be restricted to the extent that they serve as deposits for securities sold, not yet purchased. The Company presents its balances, including outstanding principal balances on all broker credit facilities, on a net-by-counterparty basis within receivables from and payables to broker-dealers and clearing organizations when the criteria for offsetting are met. In the normal course of business, a significant portion of the Company’s securities transactions, money balances, and security positions are transacted with several third-party brokers. The Company is subject to credit risk to the extent any broker with whom it conducts business is unable to fulfill contractual obligations on its behalf. The Company monitors the financial condition of such brokers to minimize the risk of any losses from these counterparties. Financial Instruments Owned Including Those Pledged as Collateral and Financial Instruments Sold, Not Yet Purchased Financial instruments owned and Financial instruments sold, not yet purchased relate to market making and trading activities, and include listed and other equity securities, listed equity options and fixed income securities. The Company records Financial instruments owned, Financial instruments owned and pledged, and Financial instruments sold, not yet purchased at fair value. Gains and losses arising from financial instrument transactions are recorded net on a trade-date basis in Trading income, net, in the Consolidated Statements of Comprehensive Income. 89 Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The recognition of “block discounts” for large holdings of unrestricted financial instruments where quoted prices are readily and regularly available in an active market is prohibited. The Company categorizes its financial instruments into a three level hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each financial instrument is based on the assessment of the transparency and reliability of the inputs used in the valuation of such financial instruments at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements). Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories based on inputs: Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 — Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly; or Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Fair Value Option The fair value option election allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are recorded in other, net in the Consolidated Statements of Comprehensive Income. The decision to elect the fair value option is determined on an instrument by instrument basis, which must be applied to an entire instrument and is irrevocable once elected. Derivative Instruments - Trading Derivative instruments are used for trading purposes, including economic hedges of trading instruments, are carried at fair value, and include futures, forward contracts, and options. The Company does not apply hedge accounting as defined in ASC 815, Derivatives and Hedging, and accordingly gains or losses on these derivative instruments are recognized currently within Trading income, net in the Consolidated Statements of Comprehensive Income. Fair values for exchange-traded derivatives, principally futures, are based on quoted market prices. Fair values for over-the-counter derivative instruments, principally forward contracts, are based on the values of the underlying financial instruments within the contract. The underlying instruments are currencies, which are actively traded. The Company presents its trading derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met. Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows. 90 Derivative Instruments - Hedging The Company may use derivative instruments for risk management purposes, including cash flow hedges used to manage interest rate risk on long-term borrowings. The Company has entered into floating-to-fixed interest rate swap agreements in order to manage interest rate risk associated with its long-term debt obligations. For interest rate swap agreements designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. The effectiveness of the hedge is assessed based on the overall changes in the fair value of the interest rate swaps. For instruments that meet the criteria to be considered hedging instruments under ASC 815, any gains or losses, to the extent effective, are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Other comprehensive income on the Consolidated Statements of Comprehensive Income. The ineffective portion, if any, is recorded in Other, net on the Consolidated Statements of Comprehensive Income. The Company presents its hedging derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met. Balances associated with hedging derivatives are recorded within Receivables from/Payables to broker-dealers and clearing organizations on the Consolidated Statements of Financial Condition. Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows. Property and Equipment Property and equipment are carried at cost, less accumulated depreciation, except for the assets acquired in connection with acquisitions using the purchase accounting method, which were recorded at fair value on date of acquisition. Depreciation is provided using the straight-line method over estimated useful lives of the underlying assets. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that appreciably extend the useful life of the assets are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. Furniture, fixtures, and equipment are depreciated over three to seven years . Leasehold improvements are amortized over the lesser of the life of the improvement or the term of the lease. Capitalized Software The Company capitalizes costs of materials, consultants, and payroll and payroll-related costs for employees incurred in developing internal-use software. Costs incurred during the preliminary project and post-implementation stages are charged to expense. Management’s judgment is required in determining the point at which various projects enter the stages at which costs may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. Capitalized software development costs and related accumulated amortization are included in Property, equipment and capitalized software in the accompanying Consolidated Statements of Financial Condition and are amortized over a period of 1.5 to 3 years, which represents the estimated useful lives of the underlying software. 91 Leases The Company determines if an arrangement is a lease at the inception of the arrangement. Operating leases are included in Operating lease right-of-use (“ROU”) assets and Operating lease liabilities on the Consolidated Statements of Financial Condition. Operating lease ROU assets are assets that represent the lessee’s right to use, or control the use of, a specified asset for the lease term. Finance leases consist primarily of leases for technology and equipment and are included in Property, equipment, and capitalized software and Accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company uses its incremental borrowing rate, based on the information available at the commencement date of the lease, in determining the present value of future payments. The ROU assets are reduced by lease incentives and initial direct costs incurred. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases and amortization of the finance lease ROU asset is recognized on a straight-line basis over the lease term. Lease expense related to the leasing of corporate office space is recorded in Operations and Administrative expenses on the Consolidated Statements of Comprehensive Income. Lease expense related to the leasing of data centers and other technology is recorded in Communication and Data Processing on the Consolidated Statements of Comprehensive Income. Certain of the Company's lease agreements contain fixed lease payments that contain lease and non-lease components; for such leases, the Company accounts for the lease and non-lease components as a single lease component. The Company nets its sublease income against corresponding lease expenses within Operations and Administrative expenses on the Consolidated Statements of Comprehensive Income. Goodwill Goodwill represents the excess of the purchase price over the underlying net tangible and intangible assets of the Company’s acquisitions. Goodwill is not amortized but is assessed for impairment on an annual basis and between annual assessments whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is assessed at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company assesses goodwill for impairment on an annual basis on July 1 and on an interim basis when certain events occur or certain circumstances exist. In the impairment assessment as of July 1, 2023, the Company assessed quantitative factors as described in ASC 350-20 for each of its reporting units for any indicators that the fair values of the reporting units were less than their carrying values. No impairment was identified. Intangible Assets The Company amortizes finite-lived intangible assets over their estimated useful lives. Finite-lived intangible assets are tested for impairment when impairment indicators are present, and if impaired, they are written down to fair value. Exchange Memberships and Stock Exchange memberships are recorded at cost or, if any other than temporary impairment in value has occurred, at a value that reflects management’s estimate of fair value. Exchange stock includes shares that entitle the Company to certain trading privileges. Trading Income, net Trading income, net is composed of changes in the fair value of trading assets and liabilities (i.e., unrealized gains and losses) and realized gains and losses on trading assets and liabilities. Trading gains and losses on financial instruments owned and financial instruments sold, not yet purchased are recorded on the trade date and reported on a net basis in the Consolidated Statements of Comprehensive Income. Commissions, net and Technology Services Commissions, net, which primarily comprise commissions and commission equivalents earned on institutional client orders, are recorded on a trade date basis. Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions, net and technology services in the Consolidated Statements of Comprehensive Income. 92 The Company provides order management software (“OMS”) and related software products and connectivity services to customers and recognizes license fee revenues and monthly connectivity fees. License fee revenues, generated for the use of the Company’s OMS and other software products, is 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. The Company also provides analytics products and services to customers and recognizes subscription fees, which are fixed for the contract term, based on when the products and services are delivered. Analytics products and services may be bundled with trade execution services, in which case commissions are allocated to the analytics performance obligations using an allocation methodology. Interest and Dividends Income/Interest and Dividends Expense Interest income and interest expense are accrued in accordance with contractual rates. Interest income consists of interest earned on collateralized financing arrangements and on cash held by brokers. Interest expense includes interest expense from collateralized transactions, margin and related lines of credit. Dividends on financial instruments owned including those pledged as collateral and financial instruments sold, not yet purchased are recorded on the ex-dividend date and interest is recognized on an accrual basis. Brokerage, Exchange, Clearance Fees and Payments for Order Flow, Net Brokerage, exchange, clearance fees and payments for order flow, net, comprise the costs of executing and clearing trades and are accrued on a trade date basis in the Consolidated Statements of Comprehensive Income. These costs are net of rebates, which consist of volume discounts, credits or payments received from exchanges or other marketplaces related to the placement and/or removal of liquidity from the order flow in the marketplace. Rebates are recorded on an accrual basis. Payments for order flow represent payments to broker-dealer clients, in the normal course of business, for directing their order flow in U.S. equities to the Company. Income Taxes The Company is subject to U.S. federal, state and local income taxes on its taxable income. The Company's subsidiaries are subject to income taxes in the respective jurisdictions (including foreign jurisdictions) in which they operate. The provision for income tax comprises current tax and deferred tax. Current tax represents the tax on current year tax returns, using tax rates enacted at the balance sheet date. Deferred tax assets are recognized in full and then reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be recognized. The Company recognizes the tax benefit from an uncertain tax position 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. Many factors are considered when evaluating and estimating the tax positions and tax benefits. Such estimates involve interpretations of regulations, rulings, case law, etc. and are inherently complex. The Company’s 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. Comprehensive Income Comprehensive income consists of two components: net income and other comprehensive income (“OCI”). The Company’s OCI comprises foreign currency translation adjustments, net of taxes and mark-to-market gains and losses on the Company's derivative instruments designated as hedging instruments under ASC 815, net of taxes. 93 Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at period-end exchange rates, and revenues and expenses are translated at weighted average exchange rates for the period. Gains and losses resulting from translating foreign currency financial statements, net of related tax effects, are reflected in Accumulated OCI, a component of stockholders’ equity. While certain of the Company's foreign subsidiaries use the U.S. dollar as their functional currency, the Company also has subsidiaries that utilize a functional currency other than the U.S. dollar, primarily comprising its subsidiaries domiciled in Ireland, which utilize the Euro and Pound Sterling as the functional currency, and subsidiaries domiciled in Canada, which utilize the Canadian dollar as the functional currency. The Company may use derivative instruments for risk management purposes, including cash flow hedges used to manage interest rate risk on long-term borrowings and net investment hedges used to manage foreign exchange risk. For instruments that meet the criteria to be considered hedging instruments under ASC 815, any gains or losses are initially included in Accumulated OCI on the Consolidated Statements of Financial Condition and OCI on the Consolidated Statements of Comprehensive Income, as the hedged item affects earnings. Share-Based Compensation Share-based awards issued for compensation in connection with or subsequent to the Company's initial public offering in April 2015 (the “IPO”) and certain reorganization transactions consummated in connection with the IPO (the “Reorganization Transactions”) pursuant to the Virtu Financial, Inc. 2015 Management Incentive Plan (as amended, the “Amended and Restated 2015 Management Incentive Plan”) and pursuant to the Amended and Restated Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan, dated as of June 8, 2017 (the “Amended and Restated ITG 2007 Equity Plan”), are in the form of stock options, Class A common stock, par value $ 0.00001 per share (the “Class A Common Stock”), RSAs and RSUs, as applicable. The fair values of the Class A Common Stock and RSUs are determined based on the volume weighted average price for the three days preceding the grant. With respect to the RSUs, forfeitures are accounted for as they occur. The fair value of RSAs is determined based on the closing price as of the grant date. 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 of the performance target becomes probable through the remainder of the vesting period. The Company records as treasury stock shares repurchased from its employees for the purpose of settling tax liabilities incurred upon the issuance of Class A Common Stock, the vesting of RSUs or the exercise of stock options. Variable Interest Entities A variable interest entity (“VIE”) is an entity that lacks one or more of the following characteristics: (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Accounting Pronouncements, Recently Adopted Derivatives and Hedging - In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging - Fair Value Hedging - Portfolio Layer Method (Topic 815) . The ASU expands the scope of permissible hedging, and permits the use of different derivative structures as hedging instruments. The Company adopted this ASU on January 1, 2023 and it did not have a material impact on its Consolidated Financial Statements. Liabilities - Supplier Finance Programs - In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) . This ASU requires new quantitative and qualitative disclosure requirements for a buyer who enters into supplier financing programs. The Company adopted this ASU on January 1, 2023 and it did not have a material impact on its Consolidated Financial Statements. 94 The FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock (SEC Update) in July 2023, and ASU 2023-04, Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121 (SEC Update) in August 2023. These ASUs amend and supersede various SEC paragraphs across multiple topics within the Codification to conform to past SEC announcements and guidance issued by the SEC. As the ASUs do not provide any new accounting standards, no transition or effective dates are associated with them. As such, the Company considers these adopted as of September 30, 2023 with no material impact on its Consolidated Financial Statements. Accounting Pronouncements, Not Yet Adopted as of December 31, 2023 Fair Value Measurement - In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 326) . The ASU clarifies the impact of contractual sale restrictions on the fair value of an equity security. Additionally, this ASU requires disclosure of the nature and remaining duration of the sale restriction. This ASU is effective for periods beginning after December 15, 2023. The Company does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures. Leases - Common Control Arrangements - In March 2023, the FASB issued ASU 2023-01, Leases—Common Control Arrangements (Topic 842) . This ASU provides updated guidance for accounting for common control leases and leasehold improvements. This ASU is effective for periods beginning after December 15, 2023. The Company does not expect it to have a material impact on its Consolidated Financial Statements. Investments - Equity Method and Joint Ventures - In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323) . This ASU provides updated guidance for accounting for investments in tax credit structures. This ASU is effective for periods beginning after December 15, 2023. The Company does not expect it to have a material impact on its Consolidated Financial Statements. Business Combinations—Joint Venture Formations - In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60) . This ASU provides updated guidance on accounting for the formation of joint ventures. This ASU is effective prospectively for joint ventures formed on or after January 1, 2025. The Company does not expect it to have a material impact on its Consolidated Financial Statements. Segment Reporting - In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) . This ASU requires incremental disclosures related to a public entity’s reportable segments. It aims to provide financial statement users with more disaggregated information, specifically, significant expenses for each reportable segment. This ASU is effective for periods beginning after December 15, 2023. The Company does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures. Intangibles—Goodwill and Other—Crypto Assets - In December 2023, the FASB issued ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60) . This ASU requires measurement of in-scope crypto assets at fair value and provides updated guidance on presentation and disclosure requirements for crypto assets. This ASU is effective for periods beginning after December 15, 2024. The Company is currently evaluating the impact of this ASU but does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures. Income Taxes - In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) . This ASU requires disclosure of additional information on effective tax rate reconciliation and income taxes paid. This ASU is effective for periods beginning after December 15, 2024. The Company is currently evaluating the impact of this ASU but does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures. 95 3. Earnings per Share The below table contains a reconciliation of Net income before income taxes and noncontrolling interest to Net income available for common stockholders: Years Ended December 31, (in thousands) 2023 2022 2021 Income before income taxes and noncontrolling interest $ 325,131 $ 556,798 $ 996,904 Provision for income taxes 61,210 88,466 169,670 Net income 263,921 468,332 827,234 Noncontrolling interest ( 121,885 ) ( 203,306 ) ( 350,356 ) Net income available for common stockholders $ 142,036 $ 265,026 $ 476,878 The calculation of basic and diluted earnings per share is presented below: Years Ended December 31, (in thousands, except for share or per share data) 2023 2022 2021 Basic earnings per share: Net income available for common stockholders $ 142,036 $ 265,026 $ 476,878 Less: Dividends and undistributed earnings allocated to participating securities ( 8,151 ) ( 9,811 ) ( 13,674 ) Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities 133,885 255,215 463,204 Weighted average shares of common stock outstanding: Class A 94,076,165 103,997,767 117,339,539 Basic earnings per share $ 1.42 $ 2.45 $ 3.95 Years Ended December 31, (in thousands, except for share or per share data) 2023 2022 2021 Diluted earnings per share: Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ 133,885 $ 255,215 $ 463,204 Weighted average shares of common stock outstanding: Class A Issued and outstanding 94,076,165 103,997,767 117,339,539 Issuable pursuant to Amended and Restated 2015 Management Incentive Plan — 424,676 1,084,389 94,076,165 104,422,443 118,423,928 Diluted earnings per share (1) $ 1.42 $ 2.44 $ 3.91 (1) Excluded from the computation of diluted Earnings per share were 37,274 unexercised stock options for the year ended December 31, 2023 because inclusion of the options would have been anti-dilutive. 4. Tax Receivable Agreements In connection with the IPO and the Reorganization Transactions, the Company entered into tax receivable agreements (“TRA”) to make payments to certain pre-IPO equity holders (“Virtu Members”) that are generally equal to 85 % of the applicable cash tax savings, if any, that the Company actually realizes as a result of favorable tax attributes that were and will continue to be available to the Company as a result of the Reorganization Transactions, exchanges of membership interests for Class A Common Stock or Class B common stock, par value $ 0.00001 per share (the “Class B Common Stock”), (an “Exchange”), and payments made under the tax receivable agreements. An Exchange during the year will give rise to favorable tax attributes that may generate cash tax savings specific to the Exchange to be realized over a specific period of time (generally 15 years). At each Exchange, management estimates the Company’s cumulative TRA obligations to be reported on the Consolidated Statements of Financial Condition, which amounted to $ 216.5 million and $ 238.8 million as of December 31, 96 2023 and December 31, 2022, respectively. The tax attributes are computed as the difference between the Company's basis in the partnership interest (“outside basis”) as compared to the Company’s share of the adjusted tax basis of partnership property (“inside basis”) at the time of each Exchange. The computation of inside basis requires management to make judgments in estimating the components included in the inside basis as of the date of the Exchange (i.e., cash received by the Company on hypothetical sale of assets, allocation of gain/loss to the Company at the time of the Exchange taking into account complex partnership tax rules). In addition, management estimates the period of time that may generate cash tax savings of such tax attributes and the realizability of the tax attributes. Payments will occur only after the filing of the U.S. federal and state income tax returns and realization of the cash tax savings from the favorable tax attributes. The Company made its first payment of $ 7.0 million in February 2017, and subsequent payments of $ 12.4 million in September 2018, $ 13.3 million in March 2020, $ 16.5 million in April 2021, $ 21.3 million in March 2022, and $ 23.3 million in April 2023. As a result of (i) the purchase of equity interests in Virtu Financial from certain Virtu Members in connection with the Reorganization Transactions, (ii) the purchase of non-voting common interest units in Virtu Financial (the “Virtu Financial Units”) (along with the corresponding shares of Class C common stock, par value $ 0.00001 per share (the “Class C Common Stock”)) from certain of the Virtu Members in connection with the IPO, (iii) the purchase of Virtu Financial Units (along with the corresponding shares of Class C Common Stock) and the exchange of Virtu Financial Units (along with the corresponding shares of Class C Common Stock) for shares of Class A Common Stock in connection with the secondary offerings completed in November 2015 (the “November 2015 Secondary Offering”) and September 2016 (the “September 2016 Secondary Offering”), and (iv) the purchase of Virtu Financial Units (along with corresponding shares of the Company’s Class D common stock, par value $ 0.00001 per share (the “Class D Common Stock”) in connection with the May 2018 Secondary Offering (defined below) and the May 2019 Secondary Offering (defined below, and, together with the November 2015 Secondary Offering, the September 2016 Secondary Offering, and the May 2018 Secondary Offering, the “Secondary Offerings”), payments to certain Virtu Members in respect of the purchases are expected to range from approximately $ 0.1 million to $ 22.1 million per year over the next 15 years. At December 31, 2023 and December 31, 2022, the Company’s remaining deferred tax assets that relate to the matters described above were approximately $ 135.7 million and $ 162.1 million, respectively, and the Company’s liabilities over the next 15 years pursuant to the tax receivable agreements were approximately $ 216.5 million and $ 238.8 million for December 31, 2023 and December 31, 2022, respectively. The amounts recorded as of December 31, 2023 and December 31, 2022 are based on best estimates available at the respective dates and may be subject to change after the filing of the Company’s U.S. federal and state income tax returns for the years in which tax savings were realized. For the purposes of the tax receivable agreements discussed above, the cash savings realized by the Company are computed by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been (i) no increase to the tax basis of the assets of Virtu Financial as a result of the purchase or exchange of Virtu Financial Units, (ii) no tax benefit from the tax basis in the intangible assets of Virtu Financial on the date of the IPO and (iii) no tax benefit as a result of the Net Operating Losses (“NOLs”) and other tax attributes of Virtu Financial. Subsequent adjustments of the tax receivable agreements obligations due to certain events (e.g., changes to the expected realization of NOLs or changes in tax rates) will be recognized within income before taxes and noncontrolling interests in the Consolidated Statements of Comprehensive Income. 5. Goodwill and Intangible Assets The Company has two operating segments: (i) Market Making; and (ii) Execution Services; and one non-operating segment: Corporate. As of December 31, 2023 and December 31, 2022, the Company’s total amount of goodwill recorded was $ 1,148.9 million. No goodwill impairment was recognized during the years ended December 31, 2023 and 2022. The following table presents the details of goodwill by segment as of December 31, 2023 and December 31, 2022: (in thousands) Market Making Execution Services Corporate Total Balance as of period-end $ 755,292 $ 393,634 $ — $ 1,148,926 As of December 31, 2023 and December 31, 2022, the Company's total amount of intangible assets recorded was $ 257.5 million and $ 321.5 million, respectively. Acquired intangible assets consisted of the following as of December 31, 2023 and December 31, 2022: 97 As of December 31, 2023 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Useful Lives (Years) Customer relationships $ 486,600 $ ( 237,829 ) $ 248,771 10 to 12 Technology 136,000 ( 133,467 ) 2,533 1 to 6 Favorable occupancy leases 5,895 ( 5,177 ) 718 3 to 15 Exchange memberships 3,998 — 3,998 Indefinite Trade name 3,600 ( 3,600 ) — 3 ETF issuer relationships 950 ( 950 ) — 9 ETF buyer relationships 950 ( 950 ) — 9 Other $ 1,500 $ — $ 1,500 Indefinite $ 639,493 $ ( 381,973 ) $ 257,520 As of December 31, 2022 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Useful Lives (Years) Customer relationships $ 486,600 $ ( 189,986 ) $ 296,614 10 to 12 Technology 136,000 ( 118,119 ) 17,881 1 to 6 Favorable occupancy leases 5,895 ( 4,408 ) 1,487 3 to 15 Exchange memberships 3,998 — 3,998 Indefinite Trade name 3,600 ( 3,600 ) — 3 ETF issuer relationships 950 ( 950 ) — 9 ETF buyer relationships 950 ( 950 ) — 9 Other $ 1,500 $ — $ 1,500 Indefinite $ 639,493 $ ( 318,013 ) $ 321,480 Amortization expense relating to finite-lived intangible assets was approximately $ 64.0 million, $ 64.8 million, and $ 69.7 million for the years ended December 31, 2023, 2022, and 2021, respectively. This is included in Amortization of purchased intangibles and acquired capitalized software in the accompanying Consolidated Statements of Comprehensive Income. The Company expects to record amortization expense as follows over the next five subsequent years: (in thousands) 2024 $ 50,845 2025 47,879 2026 47,879 2027 47,879 2028 47,879 98 6. Receivables from/Payables to Broker-Dealers and Clearing Organizations The following is a summary of receivables from and payables to brokers-dealers and clearing organizations at December 31, 2023 and December 31, 2022: (in thousands) December 31, 2023 December 31, 2022 Assets Due from prime brokers $ 208,639 $ 560,111 Deposits with clearing organizations 182,008 146,927 Net equity with futures commission merchants 166,808 137,312 Unsettled trades with clearing organizations 1,096 87,145 Securities failed to deliver 148,822 149,747 Commissions and fees 30,351 33,943 Total receivables from broker-dealers and clearing organizations $ 737,724 $ 1,115,185 Liabilities Due to prime brokers $ 780,310 $ 229,424 Net equity with futures commission merchants (1) ( 36,059 ) ( 32,381 ) Unsettled trades with clearing organizations 313,875 38 Securities failed to receive 104,702 70,576 Commissions and fees 4,884 6,186 Total payables to broker-dealers and clearing organizations $ 1,167,712 $ 273,843 (1) The Company presents its balances, including outstanding principal balances on all broker credit facilities, on a net-by-counterparty basis within receivables from and payables to broker-dealers and clearing organizations when the criteria for offsetting are met . Included as a deduction from “Due from prime brokers” and “Net equity with futures commission merchants” is the outstanding principal balance on all of the Company’s prime brokerage credit facilities (described in Note 8 “Borrowings”) of approximately $ 175.3 million and $ 212.9 million as of December 31, 2023 and December 31, 2022, respectively. The loan proceeds from the credit facilities are available only to meet the initial margin requirements associated with the Company’s ordinary course futures and other trading positions, which are held in the Company’s trading accounts with an affiliate of the respective financial institutions. The credit facilities are fully collateralized by the Company’s trading accounts and deposit accounts with these financial institutions. “Securities failed to deliver” and “Securities failed to receive” include amounts with a clearing organization and other broker-dealers. 7. Collateralized Transactions The Company is permitted to sell or repledge securities received as collateral and use these securities to secure repurchase agreements, enter into securities lending transactions or deliver these securities to counterparties or clearing organizations to cover short positions. At December 31, 2023 and December 31, 2022, substantially all of the securities received as collateral have been repledged. The fair value of the collateralized transactions at December 31, 2023 and December 31, 2022 are summarized as follows: (in thousands) December 31, 2023 December 31, 2022 Securities received as collateral: Securities borrowed $ 1,665,860 $ 1,148,238 Securities purchased under agreements to resell 1,512,114 336,849 $ 3,177,974 $ 1,485,087 In the normal course of business, the Company pledges qualified securities with clearing organizations to satisfy daily margin and clearing fund requirements. Financial instruments owned and pledged, where the counterparty has the right to repledge, at December 31, 2023 and December 31, 2022 consisted of the following: 99 (in thousands) December 31, 2023 December 31, 2022 Equities $ 1,222,559 $ 957,443 Exchange traded notes 8,300 5,628 $ 1,230,859 $ 963,071 8. Borrowings Short-term Borrowings, net The following summarizes the Company's short-term borrowing balances outstanding, net of related debt issuance costs, with each described in further detail below. December 31, 2023 (in thousands) Borrowing Outstanding Deferred Debt Issuance Cost Short-term Borrowings, net Broker-dealer credit facilities $ — $ — $ — $ — $ — $ — December 31, 2022 (in thousands) Borrowing Outstanding Deferred Debt Issuance Cost Short-term Borrowings, net Short-term bank loans 3,944 — 3,944 $ 3,944 $ — $ 3,944 Broker-Dealer Credit Facilities The Company is a party to two secured credit facilities with a financial institution to finance overnight securities positions purchased as part of its ordinary course broker-dealer market making activities. One of the facilities (the “Uncommitted Facility”) is provided on an uncommitted basis with an aggregate borrowing limit of $ 400 million, and is collateralized by VAL's trading and deposit account maintained at the financial institution. The second credit facility (the “Committed Facility”) with the same financial institution has a borrowing limit of $ 650 million. The Committed Facility consists of two borrowing bases: Borrowing Base A Loan is to be used to finance the purchase and settlement of securities; Borrowing Base B Loan is to be used to fund margin deposit with the National Securities Clearing Corporation. Borrowing Base A Loans are available up to $ 650 million and bear interest at the adjusted Secured Overnight Financing Rate (“SOFR”) or base rate plus 1.25 % per annum. Borrowing Base B Loans are subject to a sublimit of $ 300 million and bear interest at the adjusted SOFR or base rate plus 2.50 % per annum. A commitment fee of 0.50 % per annum on the average daily unused portion of this facility is payable quarterly in arrears. On May 25, 2022, Virtu Financial Singapore Pte. Ltd. entered into a revolving credit facility with a financial institution (the "Overdraft Facility") to provide a source of short-term financing. The facility has an aggregate borrowing limit of $ 10 million, and bears interest at the adjusted SOFR or base rate plus 3.5 % per annum. On March 20, 2020, VAL entered into a Loan Agreement (the “Founder Member Loan Facility”) with TJMT Holdings LLC (the “Founder Member”), as lender and administrative agent, providing for unsecured term loans from time to time (the “Founder Member Loans”) in an aggregate original principal amount not to exceed $ 300 million. The Founder Member Loans were available to be borrowed in one or more borrowings on or after March 20, 2020 and prior to September 20, 2020 (the “Founder Member Loan Term”). The Founder Member Loan Facility Term expired as of September 20, 2020 without VAL having borrowed any Founder Member Loans at any time. The Founder Member is an affiliate of Mr. Vincent Viola, the Company’s founder and Chairman Emeritus. Upon the execution of and in consideration for the Lender’s (as defined in the Founder Member Loan Facility) 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. Terms of the warrant are set forth in further detail in Note 17 “Capital Structure”. The following summarizes the Company’s broker-dealer credit facilities' carrying values, net of unamortized debt issuance costs, where applicable. These balances are included within Short-term borrowings on the Consolidated Statements of Financial Condition. 100 At December 31, 2023 (in thousands) Interest Rate Financing Available Borrowing Outstanding Deferred Debt Issuance Cost Outstanding Borrowings, net Broker-dealer credit facilities: Uncommitted facility (1) 6.50 % $ 400,000 $ — $ — $ — Committed facility 6.75 % 650,000 — — — Overdraft facility 8.88 % 10,000 — — — $ 1,060,000 $ — $ — $ — (1) $ 2.3 million of deferred debt issuance costs are included within Other assets on the Consolidated Statement of Financial Condition At December 31, 2022 (in thousands) Interest Rate Financing Available Borrowing Outstanding Deferred Debt Issuance Cost Outstanding Borrowings, net Broker-dealer credit facilities: Uncommitted facility (1) 5.50 % $ 400,000 $ — $ — $ — Committed facility 7.67 % 650,000 — — — Overdraft facility 7.80 % 10,000 — — — $ 1,060,000 $ — $ — $ — (1) $ 0.2 million of deferred debt issuance costs are included within Other assets on the Consolidated Statement of Financial Condition. The following summarizes interest expense for the broker-dealer facilities. Interest expense is included within Interest and dividends expense in the accompanying Consolidated Statements of Comprehensive Income. Years Ended December 31, (in thousands) 2023 2022 2021 Broker-dealer credit facilities: Uncommitted facility $ 5,431 $ 4,247 $ 2,327 Committed facility 533 112 82 Overdraft facility 274 144 — $ 6,238 $ 4,503 $ 2,409 Short-Term Bank Loans The Company’s international securities clearance and settlement activities are funded with operating cash or with short-term bank loans in the form of overdraft facilities. At December 31, 2023, there was no balance associated with international settlement activities outstanding under these facilities. At December 31, 2022, there was $ 3.9 million associated with international settlement activities outstanding under these facilities at a weighted average interest rate of approximately 3.8 %. These short-term bank loan balances are included within Short-term borrowings on the Consolidated Statements of Financial Condition. 101 Prime Brokerage Credit Facilities The Company maintains short-term credit facilities with various prime brokers and other financial institutions from which it receives execution or clearing services. The proceeds of these facilities are used to meet margin requirements associated with the products traded by the Company in the ordinary course, and amounts borrowed are collateralized by the Company’s trading accounts with the applicable financial institution. At December 31, 2023 (in thousands) Weighted Average Interest Rate Financing Available Borrowing Outstanding Prime Brokerage Credit Facilities: Prime brokerage credit facilities (1) 7.96 % $ 599,180 $ 175,256 $ 599,180 $ 175,256 At December 31, 2022 (in thousands) Weighted Average Interest Rate Financing Available Borrowing Outstanding Prime Brokerage Credit Facilities: Prime brokerage credit facilities (1) 7.42 % $ 591,000 $ 212,912 $ 591,000 $ 212,912 (1) Outstanding borrowings are included with Receivables from/Payables to broker-dealers and clearing organizations within the Consolidated Statements of Financial Condition. Interest expense in relation to the facilities was $ 13.1 million, $ 9.3 million, and $ 4.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. Long-Term Borrowings The following summarizes the Company’s long-term borrowings, net of unamortized discount and debt issuance costs, where applicable: At December 31, 2023 (in thousands) Maturity Date Interest Rate Outstanding Principal Discount Deferred Debt Issuance Cost Outstanding Borrowings, net Long-term borrowings: First Lien Term Loan Facility January 2029 8.46 % $ 1,727,000 $ ( 3,107 ) $ ( 21,504 ) $ 1,702,389 SBI bonds January 2026 5.00 % 24,816 — — 24,816 $ 1,751,816 $ ( 3,107 ) $ ( 21,504 ) $ 1,727,205 At December 31, 2022 (in thousands) Maturity Date Interest Rate Outstanding Principal Discount Deferred Debt Issuance Cost Outstanding Borrowings, net Long-term borrowings: First Lien Term Loan Facility January 2029 7.42 % $ 1,800,000 $ ( 3,881 ) $ ( 26,858 ) $ 1,769,261 SBI bonds January 2026 5.00 % 26,693 — ( 2 ) 26,691 $ 1,826,693 $ ( 3,881 ) $ ( 26,860 ) $ 1,795,952 Credit Agreement 102 On January 13, 2022 (the “Credit Agreement Closing Date”), Virtu Financial, VFH Parent LLC, a Delaware limited liability company and a subsidiary of Virtu Financial (“VFH”), entered into a 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 “Credit Agreement”). The Credit Agreement provides (i) a senior secured first lien term loan in an aggregate principal amount of $ 1,800.0 million, drawn in its entirety on the Credit Agreement Closing Date, the proceeds of which were used by VFH to repay all amounts outstanding under the previous Credit Agreement, to pay fees and expenses in connection therewith, to fund share repurchases under the Company’s repurchase program, and for general corporate purposes, and (ii) a $ 250.0 million senior secured first lien revolving facility to VFH, with a $ 20.0 million letter of credit subfacility and a $ 20.0 million swingline subfacility. The term loan borrowings and revolver borrowings under the 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 term SOFR rate with an interest period of one month plus 1.00 % and (d)(1) in the case of term loan borrowings, 1.50 % and (2) in the case of revolver borrowings, 1.00 %, plus, (x) in the case of term loan borrowings, 2.00 % and (y) in the case of revolver borrowings, 1.50 %, or (ii) the greater of (a) an adjusted term SOFR rate for the interest period in effect and (b) (1) in the case of term loan borrowings, 0.50 % and (2) in the case of revolver borrowings, 0.00 %, plus, (x) in the case of term loan borrowings, 3.00 % and (y) in the case of revolver borrowings, 2.50 %. In addition, a commitment fee accrues at a rate of 0.50 % per annum on the average daily unused amount of the 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. The revolving facility under the Credit Agreement is subject to a springing net first lien leverage ratio test which may spring into effect as of the last day of a fiscal quarter if usage of the aggregate revolving commitments exceeds a specified level as of such date. VFH is also subject to contingent principal prepayments based on excess cash flow and certain other triggering events. Borrowings under the Credit Agreement are guaranteed by Virtu Financial and VFH’s material non-regulated domestic restricted subsidiaries and secured by substantially all of the assets of VFH and the guarantors, in each case, subject to certain exceptions. The Credit Agreement contains certain customary covenants and events of default, including relating to a change of control. If an event of default occurs and is continuing, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Credit Agreement. Under the Credit Agreement, the term loans will mature on January 13, 2029. The term loans amortize in annual installments equal to 1.0 % of the original aggregate principal amount of the term loans and the Company repaid $ 18.0 million on January 13, 2023. On December 12, 2023, the Company made a voluntary prepayment of $ 55.0 million, and the payment is applied toward subsequent annual amortization installments. The revolving commitments will terminate on January 13, 2025. As of December 31, 2023, $ 1,727 million was outstanding under the term loans, and there were no amounts outstanding under the first lien revolving facility. In October 2019, the Company entered into a five-year $ 525 million floating-to-fixed interest rate swap agreement. In January 2020, the Company also entered into a five-year $ 1,000 million floating-to-fixed interest rate swap agreement. These two interest rate swaps met the criteria to be considered and were designated qualifying cash flow hedges under ASC 815 in the first quarter of 2020, and they effectively fixed interest payment obligations on $ 525.0 million and $ 1,000 million of principal under the Acquisition 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 Acquisition 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, in order to align the swap agreements with the Credit Agreement, the Company amended each of the swap agreements to align the floating rate term of such swap agreements to SOFR. The effective fixed interest payment obligations remained at 4.5 %, with respect to the earlier maturing swap arrangement, and 4.6 % with respect to the later maturing swap arrangement. In December 2023, the Company terminated the two interest rate swap arrangements and received $ 55.8 million in proceeds from the counterparty. The Company therefore dedesignated those cash flow hedges under ASC 815, and the amounts in AOCI related to the terminated swaps are to be amortized through interest expense. The Company simultaneously entered into a two-year $ 1,525 million floating-to-fixed interest rate swap agreement with the same counterparty. The new interest rate swap met the criteria to be considered and was designated as a qualifying cash flow hedge under ASC 815 as of December 103 2023, and it effectively fixed interest payment obligations on $ 1,525 million of principal under the First Lien Term Loan Facility at rate of 7.5 % through November 2025, based on the interest rates set forth in the Credit Agreement. SBI Bonds On July 25, 2016, VFH issued Japanese Yen Bonds (collectively the “SBI Bonds”) in the aggregate principal amount of ¥ 3.5 billion ($ 33.1 million at issuance date) to SBI Life Insurance Co., Ltd. and SBI Insurance Co., Ltd. The proceeds from the SBI Bonds were used to partially fund the investment in Japannext Co., Ltd. (as described in Note 9 “Financial Assets and Liabilities”). The SBI Bonds are guaranteed by Virtu Financial. The SBI Bonds are subject to fluctuations on the Japanese Yen currency rates relative to the Company’s reporting currency (U.S. Dollar) with the changes reflected in Other, net in the Consolidated Statements of Comprehensive Income. In December 2022, the maturity of the SBI Bonds was extended to 2026. The principal balance was ¥ 3.5 billion ($ 24.8 million) as of December 31, 2023 and ¥ 3.5 billion ($ 26.7 million) as of December 31, 2022. The Company had a gain of $ 1.9 million, $ 4.0 million, and $ 3.2 million during the years ended December 31, 2023, 2022, and 2021, respectively, due to changes in foreign currency rates. As of December 31, 2023, aggregate future required minimum principal payments based on the terms of the long-term borrowings were as follows: (in thousands) December 31, 2023 2024 $ — 2025 — 2026 24,816 2027 17,000 2028 18,000 Thereafter 1,692,000 Total principal of long-term borrowings $ 1,751,816 9. Financial Assets and Liabilities Financial Instruments Measured at Fair Value The fair value of equities, options, on-the-run U.S. government obligations and exchange traded notes is estimated using recently executed transactions and market price quotations in active markets and are categorized as Level 1 with the exception of inactively traded equities and certain other financial instruments, which are categorized as Level 2. The Company’s corporate bonds, derivative contracts and other U.S. and non-U.S. government obligations have been categorized as Level 2. Fair value of the Company’s derivative contracts is based on the indicative prices obtained from a number of banks and broker-dealers, as well as management’s own analyses. The indicative prices have been independently validated through the Company’s risk management systems, which are designed to check prices with information independently obtained from exchanges and venues where such financial instruments are listed or to compare prices of similar instruments with similar maturities for listed financial futures in foreign exchange. The Company prices certain financial instruments held for trading at fair value based on theoretical prices, which can differ from quoted market prices. The theoretical prices reflect price adjustments primarily caused by the fact that the Company continuously prices its financial instruments based on all available information. This information includes prices for identical and near-identical positions, as well as the prices for securities underlying the Company’s positions, on other exchanges that are open after the exchange on which the financial instruments is traded closes. The Company validates that all price adjustments can be substantiated with market inputs and checks the theoretical prices independently. Consequently, such financial instruments are classified as Level 2. 104 Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2023: December 31, 2023 (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Counterparty and Cash Collateral Netting Total Fair Value Assets Financial instruments owned, at fair value: Equity securities $ 710,699 $ 1,844,106 $ — $ — $ 2,554,805 U.S. and Non-U.S. government obligations 521,542 1,775,177 — — 2,296,719 Corporate Bonds — 1,232,097 — — 1,232,097 Exchange traded notes 10 18,055 — — 18,065 Currency forwards — 377,279 — ( 354,698 ) 22,581 Options 3,485 — — — 3,485 $ 1,235,736 $ 5,246,714 $ — $ ( 354,698 ) $ 6,127,752 Financial instruments owned, pledged as collateral: Equity securities $ 871,237 $ 351,322 $ — $ — $ 1,222,559 Exchange traded notes 3 8,297 — — 8,300 $ 871,240 $ 359,619 $ — $ — $ 1,230,859 Other Assets Equity investment $ — $ — $ 81,805 $ — $ 81,805 Exchange stock 2,716 — — — 2,716 $ 2,716 $ — $ 81,805 $ — $ 84,521 Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ 1,447,726 $ 1,165,091 $ — $ — $ 2,612,817 U.S. and Non-U.S. government obligations 181,393 1,891,556 — — 2,072,949 Corporate Bonds — 1,358,522 — — 1,358,522 Exchange traded notes — 21,104 — — 21,104 Currency forwards — 339,085 ( 336,311 ) 2,774 Options 3,186 — 3,186 $ 1,632,305 $ 4,775,358 $ — $ ( 336,311 ) $ 6,071,352 Payables to broker dealers and clearing organizations: Interest rate swap $ — $ 7,661 $ — $ — $ 7,661 105 Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2022: December 31, 2022 (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Counterparty and Cash Collateral Netting Total Fair Value Assets Financial instruments owned, at fair value: Equity securities $ 461,487 $ 1,545,116 $ — $ — $ 2,006,603 U.S. and Non-U.S. government obligations 251,708 575,946 — — 827,654 Corporate Bonds — 803,880 — — 803,880 Exchange traded notes 51 16,777 — — 16,828 Currency forwards — 500,553 — ( 493,237 ) 7,316 Options 5,200 — — — 5,200 $ 718,446 $ 3,442,272 $ — $ ( 493,237 ) $ 3,667,481 Financial instruments owned, pledged as collateral: Equity securities $ 552,641 $ 404,802 $ — $ — $ 957,443 Exchange traded notes 6 5,622 — — 5,628 $ 552,647 $ 410,424 $ — $ — $ 963,071 Other Assets Equity investment $ — $ — $ 76,613 $ — $ 76,613 Exchange stock 2,352 — — — 2,352 $ 2,352 $ — $ 76,613 $ — $ 78,965 Receivables from broker dealers and clearing organizations: Interest rate swap $ — $ 87,268 $ — $ — $ 87,268 Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ 1,146,701 $ 1,016,893 $ — $ — $ 2,163,594 U.S. and Non-U.S. government obligations 147,418 690,480 — — 837,898 Corporate Bonds — 1,183,394 — — 1,183,394 Exchange traded notes — 8,199 — — 8,199 Currency forwards — 497,799 — ( 497,799 ) — Options 3,889 — — — 3,889 $ 1,298,008 $ 3,396,765 $ — $ ( 497,799 ) $ 4,196,974 JNX Investment The Company has a minority investment (the “JNX Investment”) in Japannext Co., Ltd. (“JNX”), formerly known as SBI Japannext Co., Ltd., a proprietary trading system based in Tokyo. In connection with the JNX Investment, the Company issued the SBI Bonds (as described in Note 8 “Borrowings”) and used the proceeds to partially finance the transaction. The JNX Investment is included within Level 3 of the fair value hierarchy. As of December 31, 2023 and December 31, 2022, the fair value of the JNX Investment was determined using a weighted average of valuations using 1) the discounted cash flow method, an income approach; 2) a market approach based on average enterprise value/EBITDA ratios of comparable companies; and to a lesser extent 3) a transaction approach based on transaction values of comparable companies. The fair value measurement is highly sensitive to significant changes in the unobservable inputs, and significant increases (decreases) in discount rate or decreases (increases) in enterprise value/EBITDA multiples would result in a significantly lower (higher) fair value measurement. 106 The table below presents information on the valuation techniques, significant unobservable inputs and their ranges for the JNX Investment: December 31, 2023 (in thousands) Fair Value Valuation Technique Significant Unobservable Input Range Weighted Average Equity investment $ 81,805 Discounted cash flow Estimated revenue growth 5.0 % - 6.8 % 5.8 % Discount rate 15.6 % - 15.6 % 15.6 % Market Future enterprise value/ EBIDTA ratio 8.7 x - 17.8 x 12.9 x December 31, 2022 (in thousands) Fair Value Valuation Technique Significant Unobservable Input Range Weighted Average Equity investment $ 76,613 Discounted cash flow Estimated revenue growth ( 5.7 )% - 5.0 % 3.1 % Discount rate 15.5 % - 15.5 % 15.5 % Market Future enterprise value/ EBIDTA ratio ( 1.2 )x - 18.1 x 12.2 x Changes in the fair value of the JNX Investment are included within Other, net in the Consolidated Statements of Comprehensive Income. The following presents the changes in the Company's Level 3 financial instruments measured at fair value on a recurring basis: Year Ended December 31, 2023 (in thousands) Balance at December 31, 2022 Purchases Total Realized and Unrealized Gains / (Losses) (1) Net Transfers into (out of) Level 3 Settlement Balance at December 31, 2023 Change in Net Unrealized Gains / (Losses) on Investments still held at December 31, 2023 Assets Other assets: Equity investment $ 76,613 $ — $ 5,192 $ — $ — $ 81,805 $ 5,192 Total $ 76,613 $ — $ 5,192 $ — $ — $ 81,805 $ 5,192 (1) Total realized and unrealized gains/(losses) includes gains and losses due to fluctuations in currency rates as well as gains and losses recognized on changes in the fair value of the JNX Investment. Year Ended December 31, 2022 (in thousands) Balance at December 31, 2021 Purchases Total Realized and Unrealized Gains / (Losses) (1) Net Transfers into (out of) Level 3 Settlement Balance at December 31, 2022 Change in Net Unrealized Gains / (Losses) on Investments still held at December 31, 2022 Assets Other assets: Equity investment $ 81,358 $ — $ ( 4,745 ) $ — $ — $ 76,613 $ ( 4,745 ) Total $ 81,358 $ — $ ( 4,745 ) $ — $ — $ 76,613 $ ( 4,745 ) (1) Total realized and unrealized gains/(losses) includes gains and losses due to fluctuations in currency rates as well as gains and losses recognized on changes in the fair value of the JNX Investment. 107 Financial Instruments Not Measured at Fair Value The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value on the Consolidated Statements of Financial Condition. The table below excludes non-financial assets and liabilities. The carrying value of financial instruments not measured at fair value categorized in the fair value hierarchy as Level 1 and Level 2 approximates fair value due to the relatively short-term nature of the underlying assets. The fair value of the Company’s long-term borrowings is based on quoted prices from the market for similar instruments, and is categorized as Level 2 in the fair value hierarchy. The table below summarizes financial assets and liabilities not carried at fair value on a recurring basis as of December 31, 2023: December 31, 2023 Carrying Value Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) Fair Value (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents $ 820,436 $ 820,436 $ 820,436 $ — $ — Cash restricted or segregated under regulations and other 35,024 35,024 35,024 — — Securities borrowed 1,722,440 1,722,440 — 1,722,440 — Securities purchased under agreements to resell 1,512,114 1,512,114 — 1,512,114 — Receivables from broker-dealers and clearing organizations 737,724 737,724 — 737,724 — Receivables from customers 106,245 106,245 — 106,245 — Other assets (1) 31,022 31,022 10,444 20,578 — Total Assets $ 4,965,005 $ 4,965,005 $ 865,904 $ 4,099,101 $ — Liabilities Short-term borrowings $ — $ — $ — $ — $ — Long-term borrowings 1,727,205 1,758,292 — 1,758,292 — Securities loaned 1,329,446 1,329,446 — 1,329,446 — Securities sold under agreements to repurchase 1,795,994 1,795,994 — 1,795,994 — Payables to broker-dealers and clearing organizations 1,160,051 1,160,051 — 1,160,051 — Payables to customers 23,229 23,229 — 23,229 — Other liabilities (2) 19,300 19,300 — 19,300 — Total Liabilities $ 6,055,225 $ 6,086,312 $ — $ 6,086,312 $ — (1) Includes cash collateral and deposits, and interest and dividends receivables. (2) Includes deposits, interest and dividends payable. 108 The table below summarizes financial assets and liabilities not carried at fair value on a recurring basis as of December 31, 2022: December 31, 2022 Carrying Value Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) Fair Value (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents $ 981,580 $ 981,580 $ 981,580 $ — $ — Cash restricted or segregated under regulations and other 56,662 56,662 56,662 — — Securities borrowed 1,187,674 1,187,674 — 1,187,674 — Securities purchased under agreements to resell 336,999 336,999 — 336,999 — Receivables from broker-dealers and clearing organizations 1,027,917 1,027,917 — 1,027,917 — Receivables from customers 80,830 80,830 — 80,830 — Other assets (1) 30,579 30,579 — 30,579 — Total Assets $ 3,702,241 $ 3,702,241 $ 1,038,242 $ 2,663,999 $ — Liabilities Short-term borrowings $ 3,944 $ 3,944 $ — $ 3,944 $ — Long-term borrowings 1,795,952 1,783,943 — 1,783,943 — Securities loaned 1,060,432 1,060,432 — 1,060,432 — Securities sold under agreements to repurchase 627,549 627,549 — 627,549 — Payables to broker-dealers and clearing organizations 273,843 273,843 — 273,843 — Payables to customers 46,525 46,525 — 46,525 — Other liabilities (2) 23,776 23,776 — 23,776 — Total Liabilities $ 3,832,021 $ 3,820,012 $ — $ 3,820,012 $ — (1) Includes cash collateral and deposits, and interest and dividends receivables. (2) Includes deposits, interest and dividends payable. Offsetting of Financial Assets and Liabilities The Company does not net securities borrowed and securities loaned, or securities purchased under agreements to resell and securities sold under agreements to repurchase. These financial instruments are presented on a gross basis in the Consolidated Statements of Financial Condition. In the tables below, the amounts of financial instruments owned that are not offset in the Consolidated Statements of Financial Condition, but could be netted against financial liabilities with specific counterparties under legally enforceable master netting agreements in the event of default, are presented to provide financial statement readers with the Company’s estimate of its net exposure to counterparties for these financial instruments. 109 The following tables set forth the gross and net presentation of certain financial assets and financial liabilities as of December 31, 2023 and December 31, 2022: December 31, 2023 Gross Amounts of Recognized Assets Amounts Offset in the Consolidated Statements of Financial Condition Net Amounts of Assets Presented in the Consolidated Statements of Financial Condition Amounts Not Offset in the Consolidated Statements of Financial Condition (in thousands) Financial Instrument Collateral Counterparty Netting/ Cash Collateral Net Amount Offsetting of Financial Assets: Securities borrowed $ 1,722,440 $ — $ 1,722,440 $ ( 1,665,860 ) $ ( 27,538 ) $ 29,042 Securities purchased under agreements to resell 1,512,114 — 1,512,114 ( 1,512,114 ) — Trading assets, at fair value: Currency forwards 377,279 ( 354,698 ) 22,581 — — 22,581 Options 3,485 — 3,485 — ( 2,914 ) 571 Total $ 3,615,318 $ ( 354,698 ) $ 3,260,620 $ ( 3,177,974 ) $ ( 30,452 ) $ 52,194 Gross Amounts of Recognized Liabilities Amounts Offset in the Consolidated Statements of Financial Condition Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition Amounts Not Offset in the Consolidated Statements of Financial Condition (in thousands) Financial Instrument Collateral Counterparty Netting/ Cash Collateral Net Amount Offsetting of Financial Liabilities: Securities loaned $ 1,329,446 $ — $ 1,329,446 $ ( 1,291,376 ) $ ( 31,509 ) $ 6,561 Securities sold under agreements to repurchase 1,795,994 — 1,795,994 ( 1,795,994 ) — Payable to broker-dealers and clearing organizations: Interest rate swaps 7,661 — 7,661 — — 7,661 Trading liabilities, at fair value: Currency forwards 339,085 ( 336,311 ) 2,774 — — 2,774 Options 3,186 — 3,186 — ( 2,914 ) 272 Total $ 3,475,372 $ ( 336,311 ) $ 3,139,061 $ ( 3,087,370 ) $ ( 34,423 ) $ 17,268 December 31, 2022 Gross Amounts of Recognized Assets Amounts Offset in the Consolidated Statements of Financial Condition Net Amounts of Assets Presented in the Consolidated Statements of Financial Condition Amounts Not Offset in the Consolidated Statements of Financial Condition (in thousands) Financial Instrument Collateral Counterparty Netting/ Cash Collateral Net Amount Offsetting of Financial Assets: Securities borrowed $ 1,187,674 $ — $ 1,187,674 $ ( 1,148,238 ) $ ( 5,138 ) $ 34,298 Securities purchased under agreements to resell 336,999 — 336,999 ( 336,849 ) — 150 Receivables from broker-dealers and clearing organizations Interest rate swaps 87,268 — 87,268 — — 87,268 Trading assets, at fair value: Currency forwards 500,553 ( 493,237 ) 7,316 — — 7,316 Options 5,200 — 5,200 — ( 3,889 ) 1,311 Total $ 2,117,694 $ ( 493,237 ) $ 1,624,457 $ ( 1,485,087 ) $ ( 9,027 ) $ 130,343 110 Gross Amounts of Recognized Liabilities Amounts Offset in the Consolidated Statements of Financial Condition Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition Amounts Not Offset in the Consolidated Statements of Financial Condition (in thousands) Financial Instrument Collateral Counterparty Netting/ Cash Collateral Net Amount Offsetting of Financial Liabilities: Securities loaned $ 1,060,432 $ — $ 1,060,432 $ ( 1,027,062 ) $ ( 9,100 ) $ 24,270 Securities sold under agreements to repurchase 627,549 — 627,549 ( 627,388 ) — 161 Trading liabilities, at fair value: Currency forwards 497,799 ( 497,799 ) — — — — Options 3,889 — 3,889 — ( 3,889 ) — Total $ 2,189,669 $ ( 497,799 ) $ 1,691,870 $ ( 1,654,450 ) $ ( 12,989 ) $ 24,431 The following table presents gross obligations for securities sold under agreements to repurchase and for securities lending transactions by remaining contractual maturity and the class of collateral pledged as of December 31, 2023 and December 31, 2022: December 31, 2023 Remaining Contractual Maturity (in thousands) Overnight and Continuous Less than 30 days 30 - 60 days 61 - 90 Days Greater than 90 days Total Securities sold under agreements to repurchase: Equity securities $ — $ 140,000 $ 185,000 $ 75,000 $ — $ 400,000 U.S. and Non-U.S. government obligations 1,395,994 — — — — 1,395,994 Total $ 1,395,994 $ 140,000 $ 185,000 $ 75,000 $ — $ 1,795,994 Securities loaned: Equity securities $ 1,329,446 $ — $ — $ — $ — $ 1,329,446 Total $ 1,329,446 $ — $ — $ — $ — $ 1,329,446 December 31, 2022 Remaining Contractual Maturity (in thousands) Overnight and Continuous Less than 30 days 30 - 60 days 61 - 90 Days Greater than 90 days Total Securities sold under agreements to repurchase: Equity securities $ — $ 250,000 $ 100,000 $ 50,000 $ — $ 400,000 U.S. and Non-U.S. government obligations 227,549 — — — — 227,549 Total $ 227,549 $ 250,000 $ 100,000 $ 50,000 $ — $ 627,549 Securities loaned: Equity securities 1,060,432 — — — — 1,060,432 Total $ 1,060,432 $ — $ — $ — $ — $ 1,060,432 111 10. Derivative Instruments The fair value of the Company’s derivative instruments on a gross basis consisted of the following at December 31, 2023 and December 31, 2022: (in thousands) December 31, 2023 December 31, 2022 Derivatives Assets Financial Statement Location Fair Value Notional Fair Value Notional Derivative instruments not designated as hedging instruments: Equities futures Receivables from broker-dealers and clearing organizations $ ( 741 ) $ 1,944,872 $ ( 575 ) $ 663,110 Commodity futures Receivables from broker-dealers and clearing organizations ( 7,017 ) 6,489,328 ( 31,007 ) 7,597,057 Currency futures Receivables from broker-dealers and clearing organizations 707 6,964,937 ( 24,023 ) 7,460,531 Fixed income futures Receivables from broker-dealers and clearing organizations 1 5,989 ( 360 ) 30,292 Options Financial instruments owned 3,485 1,167,643 5,200 691,737 Currency forwards Financial instruments owned 377,279 33,579,641 500,553 30,286,330 Derivative instruments designated as hedging instruments: Interest rate swap Receivables from broker-dealers and clearing organizations — — 87,268 1,525,000 Derivatives Liabilities Financial Statement Location Fair Value Notional Fair Value Notional Derivative instruments not designated as hedging instruments: Equities futures Payables to broker-dealers and clearing organizations $ ( 558 ) $ 501,978 $ 1,819 $ 3,238,651 Commodity futures Payables to broker-dealers and clearing organizations ( 4 ) 25,462 597 39,046 Currency futures Payables to broker-dealers and clearing organizations 12,031 1,518,087 8 6,386 Fixed income futures Payables to broker-dealers and clearing organizations 165 82,044 ( 264 ) 123,043 Options Financial instruments sold, not yet purchased 3,186 1,173,351 3,889 742,531 Currency forwards Financial instruments sold, not yet purchased 339,085 33,560,544 497,799 30,284,952 Derivative instruments designated as hedging instruments: Interest rate swaps Payables to broker-dealers and clearing organizations 7,661 1,525,000 — — Amounts included in receivables from and payables to broker-dealers and clearing organizations represent net variation margin on long and short futures contracts as well as amounts receivable or payable on interest rate swaps. The following table summarizes the net gain (loss) from derivative instruments not designated as hedging instruments under ASC 815, which are recorded in total revenues, and from those designated as hedging instruments under ASC 815, which are initially recorded in other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2023. 2022, and 2021. 112 Years Ended December 31, (in thousands) Financial Statements Location 2023 2022 2021 Derivative instruments not designated as hedging instruments: Futures Trading income, net $ 297,345 $ 257,258 $ 283,482 Currency forwards Trading income, net ( 150,071 ) 12,492 1,077 Options Trading income, net 21,224 30,339 95,828 Interest rate swap on term loan Other, net ( 1,720 ) ( 1,879 ) ( 1,871 ) Terminated interest rate swaps Financing interest expense on long-term borrowings ( 3,994 ) — — $ 162,784 $ 298,210 $ 378,516 Derivative instruments designated as hedging instruments: Interest rate swaps (1) Other comprehensive income $ ( 35,990 ) $ 106,329 $ 44,541 $ ( 35,990 ) $ 106,329 $ 44,541 (1) The Company entered into a five-year $ 1,000 million floating-to-fixed interest rate swap agreement in the first quarter of 2020 and a five-year $ 525 million floating-to-fixed interest rate swap agreement in the fourth quarter of 2019. These two interest rate swaps met the criteria to be considered qualifying cash flow hedges under ASC 815 in the first quarter of 2020, and as such, the mark-to-market gains (losses) on the instruments were deferred within Other comprehensive income on the Consolidated Statements of Comprehensive Income beginning in the first quarter of 2020. The two interest rate swaps were terminated and dedesignated as cash flow hedges in December 2023. The Company entered into a two-year $ 1,525 million floating-to-fixed interest rate agreement in December 2023. The two-year interest rate swap met the criteria to be considered as a qualifying cash flow hedge under ASC 815 as of December 2023, and the mark-to-market gains (losses) on the instrument was deferred within Other comprehensive income on the Consolidated Statements of Comprehensive Income. 11. Variable Interest Entities A variable interest entity (“VIE”) is an entity that lacks one or more of the following characteristics: (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company has interests in two joint ventures (“JV”) that build and maintain microwave communication networks in the U.S., Europe, and Asia. The Company and its JV partners each pay monthly fees for the use of the microwave communication networks in connection with their respective trading activities, and the JVs may sell excess bandwidth that is not utilized by the JV members to third parties. As of December 31, 2023, the Company held noncontrolling interests of 12.5 % and 50.0 %, respectively, in these JVs. The Company has an interest in a JV that offers derivatives trading technology and execution services to broker-dealers, professional traders and select hedge funds. As of December 31, 2023, the Company held approximately a 9.8 % noncontrolling interest in this JV. The Company has an interest in a JV that operates a member-owned equities exchange with the goal of increasing competition and transparency, while reducing fixed costs and simplifying execution of equity trading in the U.S. As of December 31, 2023, the Company held approximately a 13.5 % noncontrolling interest in this JV. In the second quarter of 2022, the Company invested in a JV that was formed for the purpose of developing and operating a cryptocurrency trading platform with the goal of increasing competition and transparency, while improving trading performance and reducing operational risk. As of December 31, 2023, the Company held approximately a 6.9 % noncontrolling interest in this JV. The Company's five JVs noted above meet the criteria to be considered VIEs, which it does not consolidate. The Company records its interest in each JV under the equity method of accounting and records its investment in the JVs within Other assets and its amounts payable for communication services provided by the applicable JVs within Accounts payable, accrued expenses and other liabilities on the Statements of Financial Condition. The Company records its pro-rata share of each 113 JV's earnings or losses within Other, net and fees related to the use of communication services provided by the JVs within Communications and data processing on the Consolidated Statements of Comprehensive Income. The Company’s exposure to the obligations of these VIEs is generally limited to its interests in each respective JV, which is the carrying value of the equity investment in each JV. The following table presents the Company’s nonconsolidated VIEs at December 31, 2023: Carrying Amount Maximum Exposure to Loss VIEs' assets (in thousands) Asset Liability Equity investment $ 59,713 $ — $ 59,713 $ 273,905 The following table presents the Company’s nonconsolidated VIEs at December 31, 2022: Carrying Amount Maximum Exposure to Loss VIEs' assets (in thousands) Asset Liability Equity investment $ 43,589 $ — $ 43,589 $ 239,682 During the second quarter of 2022, the Company formed a JV to support the growth and expansion of a multi-asset request-for-quote communication platform. As of December 31, 2023, the Company held a 51 % controlling interest in this entity. This JV meets the criteria to be considered a VIE, and based on the standard for control set forth above, the Company consolidates this entity and records the interest that the Company does not own as noncontrolling interest in the Consolidated Financial Statements. 12. Revenues from Contracts with Customers Commissions, net . The Company earns commission revenue by acting as an agent on behalf of customers. The Company’s performance obligations consist of trade execution and clearing services and are satisfied on the trade date; accordingly, commission revenues are recorded on the trade date. Commission revenues are received on settlement date; therefore, a receivable is recognized as of the trade date. Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions, net and technology services in the Consolidated Statements of Comprehensive Income. Workflow technology . Through its front-end workflow solutions and network capabilities, the Company provides order and trade execution management and order routing services. The Company provides trade order routing from its execution management system (“EMS”) to its execution services offerings, with each trade order routed through the EMS representing a separate performance obligation that is satisfied at a point in time. Commissions earned are fixed and revenue is recognized on the trade date. A portion of the commissions earned on the trade is then allocated to workflow technology based on the stand-alone selling price paid by third-party brokers for order routing. The remaining commission is allocated to Commissions, net using a residual allocation approach. The Company participates in commission sharing arrangements, where trade orders are routed to third-party brokers from its EMS and its order management system (“OMS”). Commission share revenues from third-party brokers are generally fixed and revenue is recognized at a point in time on the trade date. The Company provides OMS and related software products and connectivity services to customers and recognizes license fee revenues and monthly connectivity fees. License fee revenues, generated for the use of the Company’s OMS and other software products, is 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. Analytics . The Company provides customers with analytics products and services, including trading and portfolio analytics tools. The Company provides analytics products and services to customers and recognizes subscription fees, which are 114 fixed for the contract term, based on when the products and services are delivered. Analytics services can be delivered either over time (when customers are provided with distinct ongoing access to analytics data) or at a point in time (when reports are only delivered to the customer on a periodic basis). Over time performance obligations are recognized using a time-based measure of progress on a monthly basis, since the analytics products and services are continually provided to the client. Point in time performance obligations are recognized when the analytics reports are delivered to the client. Analytics products and services can also be paid for through variable bundled arrangements with trade execution services. Customers agree to pay for analytics products and services with commissions generated from trade execution services, and commissions are allocated to the analytics performance obligation(s) using: (i) the commission value for each customer for the products and services it receives, which is priced using the value for similar stand-alone subscription arrangements; and (ii) a calculated ratio of the commission value for the products and services relative to the total amount of commissions generated from the customer. For these bundled commission arrangements, the allocated commissions to each analytics performance obligation are then recognized as revenue when the analytics product is delivered, either over time or at a point in time. These allocated commissions may be deferred if the allocated amount exceeds the amount recognizable based on delivery. Disaggregation of Revenues The following tables present the Company’s revenue from contracts with customers disaggregated by service, and timing of revenue recognition, reconciled to the Company’s segments, for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 (in thousands) Market Making Execution Services Corporate Total Revenues from contracts with customers: Commissions, net $ 29,571 $ 297,089 $ — $ 326,660 Workflow technology — 90,654 — 90,654 Analytics — 38,284 — 38,284 Total revenue from contracts with customers 29,571 426,027 — 455,598 Other sources of revenue 1,813,952 20,515 3,308 1,837,775 Total revenues $ 1,843,523 $ 446,542 $ 3,308 $ 2,293,373 Timing of revenue recognition: Services transferred at a point in time $ 1,843,523 $ 374,306 $ 3,308 $ 2,221,137 Services transferred over time — 72,236 — 72,236 Total revenues $ 1,843,523 $ 446,542 $ 3,308 $ 2,293,373 115 Year Ended December 31, 2022 (in thousands) Market Making Execution Services Corporate Total Revenues from contracts with customers: Commissions, net $ 42,180 $ 356,090 $ — $ 398,270 Workflow technology — 91,667 — 91,667 Analytics — 39,908 — 39,908 Total revenue from contracts with customers 42,180 487,665 — 529,845 Other sources of revenue 1,770,659 26,576 37,732 1,834,967 Total revenues $ 1,812,839 $ 514,241 $ 37,732 $ 2,364,812 Timing of revenue recognition: Services transferred at a point in time $ 1,812,839 $ 444,483 $ 37,732 $ 2,295,054 Services transferred over time — 69,758 — 69,758 Total revenues $ 1,812,839 $ 514,241 $ 37,732 $ 2,364,812 Year Ended December 31, 2021 (in thousands) Market Making Execution Services Corporate Total Revenues from contracts with customers: Commissions, net $ 40,955 $ 433,755 $ — $ 474,710 Workflow technology — 98,486 — 98,486 Analytics — 41,293 41,293 Total revenue from contracts with customers 40,955 573,534 — 614,489 Other sources of revenue 2,162,091 26,681 8,224 2,196,996 Total revenues $ 2,203,046 $ 600,215 $ 8,224 $ 2,811,485 Timing of revenue recognition: Services transferred at a point in time $ 2,203,046 $ 525,960 $ 8,224 $ 2,737,230 Services transferred over time — 74,255 — 74,255 Total revenues $ 2,203,046 $ 600,215 $ 8,224 $ 2,811,485 Remaining Performance Obligations and Revenue Recognized from Past Performance Obligations As of December 31, 2023 and 2022, the aggregate amount of the transaction price allocated to the performance obligations relating to workflow technology and analytics revenues that are unsatisfied (or partially unsatisfied) was not material. Contract Assets and Contract Liabilities The timing of the revenue recognition may differ from the timing of payment from customers. The Company records a receivable when revenue is recognized prior to payment, and when the Company has an unconditional right to payment. The Company records a contract liability when payment is received prior to the time at which the satisfaction of the service obligation occurs. Receivables related to revenues from contracts with customers amounted to $ 56.4 million and $ 56.1 million as of December 31, 2023 and December 31, 2022, respectively. The Company did not identify any contract assets. There were no impairment losses on receivables as of December 31, 2023. Deferred revenue primarily relates to deferred commissions allocated to analytics products and subscription fees billed 116 in advance of satisfying the performance obligations. Deferred revenue related to contracts with customers was $ 8.4 million and $ 9.6 million as of December 31, 2023 and December 31, 2022, respectively. The Company recognized the full amount of revenue during the years ended December 31, 2023 and 2022, that had been recorded as deferred revenue in the respective prior year. The Company has not identified any costs to obtain or fulfill its contracts under ASC 606. 13. Income Taxes Income before income taxes and noncontrolling interest is as follows for the years ended December 31, 2023, 2022, and 2021: Years Ended December 31, 2023 2022 2021 (in thousands) U.S. operations $ 248,987 $ 426,902 $ 804,358 Non-U.S. operations 76,144 129,896 192,546 $ 325,131 $ 556,798 $ 996,904 The provision for income taxes consists of the following for the years ended December 31, 2023, 2022, and 2021: Years Ended December 31, (in thousands) 2023 2022 2021 Current provision (benefit) Federal $ 14,959 $ 40,887 $ 80,203 State and Local 12,972 17,216 24,282 Foreign 18,016 26,974 29,790 Deferred provision (benefit) Federal 9,125 911 30,519 State and Local 1,832 131 4,984 Foreign 4,306 2,347 ( 108 ) Provision for income taxes $ 61,210 $ 88,466 $ 169,670 The reconciliation of the tax provision at the U.S. federal statutory rate to the provision for income taxes for the years ended December 31, 2023, 2022, and 2021 is as follows: Years Ended December 31, 2023 2022 2021 (in thousands, except percentages) Tax provision at the U.S. federal statutory rate 21.0 % 21.0 % 21.0 % Less: rate attributable to noncontrolling interest ( 8.7 ) % ( 8.3 ) % ( 7.7 ) % State and local taxes, net of federal benefit 3.5 % 2.5 % 3.0 % Non-deductible expenses, net 0.5 % 0.3 % 0.1 % Excess tax benefit(deficiency) from share based compensation 0.3 % ( 0.3 ) % ( 0.2 ) % Foreign taxes 6.9 % 5.1 % 3.0 % Foreign tax credits ( 3.8 ) % ( 2.8 ) % ( 1.8 ) % Other, net ( 0.9 ) % ( 1.6 ) % ( 0.4 ) % Effective tax rate 18.8 % 15.9 % 17.0 % The components of the deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows: 117 December 31, (in thousands) 2023 2022 Deferred income tax assets Tax Receivable Agreement $ 135,709 $ 162,098 Share-based compensation 18,152 18,043 Fixed assets and other 14,084 10,260 Tax credits and net operating loss carryforwards 57,138 57,797 Less: Valuation allowance on net operating loss carryforwards and tax credits ( 57,138 ) ( 57,389 ) Total deferred income tax assets $ 167,945 $ 190,809 Deferred income tax liabilities Intangibles $ 34,185 $ 44,008 Fixed assets $ 101 $ 343 Total deferred income tax liabilities $ 34,286 $ 44,351 The Company is subject to U.S. federal, state and local income tax at the rate applicable to corporations less the rate attributable to the noncontrolling interest in Virtu Financial. These noncontrolling interests are subject to U.S. taxation as partnerships. Accordingly, for the years ended December 31, 2023, 2022, and 2021, the income attributable to these noncontrolling interests is reported in the Consolidated Statements of Comprehensive Income, but the related U.S. income tax expense attributable to these noncontrolling interests is not reported by the Company as it is the obligation of the individual partners. Income tax expense is also affected by the differing effective tax rates in foreign, state and local jurisdictions where certain of the Company’s subsidiaries are subject to corporate taxation. Included in Other assets on the Consolidated Statements of Financial Condition at December 31, 2023 and December 31, 2022 are current income tax receivables of $ 44.3 million and $ 54.1 million, respectively. These balances primarily comprise income tax benefits due to the Company from federal, state and local, and foreign tax jurisdictions based on income before taxes. Included in Accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition at December 31, 2023 and December 31, 2022 are current tax liabilities of $ 6.8 million and $ 13.4 million, respectively. These balances primarily comprise income taxes owed to federal, state and local, and foreign tax jurisdictions based on income before taxes. Deferred income taxes arise primarily due to the amortization of the deferred tax assets recognized in connection with the IPO (see Note 4 “Tax Receivable Agreements”), the Acquisition of KCG and the ITG Acquisition, differences in the valuation of financial assets and liabilities, and other temporary differences arising from the deductibility of compensation, depreciation, and other expenses in different time periods for book and income tax return purposes. There are no expiration dates on the deferred tax assets. The provisions of ASC 740 require that carrying amounts of deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically with appropriate consideration given to all positive and negative evidence related to the realization of the deferred tax assets. At December 31, 2023, the Company did not have any U.S. federal, state or local net operating loss carryforwards and therefore the Company did not record a deferred tax asset related to any federal net operating loss carryforwards. As a result of the acquisitions of ITG and KCG, the Company has non-U.S. net operating losses at December 31, 2023 and 2022 of $ 304.5 million and $ 303.9 million, respectively, and has recorded related deferred tax assets of $ 57.1 million and $ 57.3 million, respectively. A full valuation allowance was recorded against these deferred tax assets at December 31, 2023 and 2022 as it is more likely than not that these deferred tax assets will not be realized. No valuation allowance against the remaining deferred taxes was recorded as of December 31, 2023 and 2022 because it is more likely than not that these deferred tax assets will be fully realized. The Company is subject to taxation in U.S. federal, state, local and foreign jurisdictions. As a result of the acquisitions of ITG and KCG, the Company has assumed any ITG and KCG tax exposures. As of December 31, 2023, the Company’s tax years for 2015 through 2022 and 2017 through 2022 are subject to examination by U.S. and non-U.S. tax authorities, respectively. In addition, the Company is subject to state and local income tax examinations in various jurisdictions for the tax years 2013 through 2022. The outcome of these examinations is not yet determinable. However, the Company anticipates that adjustments to the unrecognized tax benefits, if any, will not result in a material change to the financial condition, results of 118 operations and cash flows. The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income or loss before income taxes and noncontrolling interest. Penalties, if any, are recorded in Operations and administrative expense and interest received or paid is recorded in Other, net or Operations and administrative expense in the Consolidated Statements of Comprehensive Income. The Company had $ 6.8 million of unrecognized tax benefits as of December 31, 2023, all of which would affect the Company’s effective tax rate if recognized. The Company has determined that there are no uncertain tax positions that would have a material impact on the Company’s financial position as of December 31, 2023. The table below presents the changes in the liability for unrecognized tax benefits. This liability is included in Accounts payable and accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. (in thousands) Balance at December 31, 2021 $ 6,297 Decreases based on tax positions related to prior period — Increase based on tax positions related to current period 317 Balance at December 31, 2022 6,614 Decreases based on tax positions related to prior period — Increase based on tax positions related to current period 188 Balance at December 31, 2023 $ 6,802 14. Commitments, Contingencies and Guarantees Legal and Regulatory Proceedings In the ordinary course of business, the nature of the Company’s business subjects it to claims, lawsuits, regulatory examinations or investigations and other proceedings, any of which could result in the imposition of fines, penalties or other sanctions against the Company. The Company and its subsidiaries are subject to several of these matters at the present time. As previously disclosed, the U.S. Securities and Exchange Commission undertook an investigation of aspects of the Company’s internal information access barriers. The Company cooperated with this civil investigation and engaged in settlement discussions but has been unable to reach a settlement. In September 2023, the SEC filed an action against the Company alleging violations of federal securities laws with respect to the Company’s information barriers policies and procedures for a specified time period in and around January 2018 to April 2019 and related statements made by the Company during such period. The Company believes it has meritorious defenses and is defending itself vigorously. Specifically, the Company is asserting, among other defenses, that it maintained reasonable policies, procedures and controls to protect data during the period consistent with applicable law, that related statements made to clients and investors were true and accurate, and that the statute of limitations has expired with respect to certain claims. In matters related to the SEC investigation noted above, the Company and certain of its current and former executive officers were named as defendants on May 19, 2023 in Hiebert v. Virtu Financial, Inc., No. 23-cv-03770 and on October 31, 2023 in City of Birmingham Retirement and Relief System v. Virtu Financial, Inc., No. 23-cv-08123. The complaints were each filed by purported stockholders in the Eastern District of New York on behalf of a putative class and assert that the Company made materially false and misleading statements and omissions in its public filings in violation of federal securities laws. The complaints were subsequently consolidated and recaptioned in re Virtu Financial, Inc. Securities Litigation , No. 23-cv-03770. The Company also received a request for information related to the SEC investigation pursuant to Section 220 of the Delaware General Corporation Law from counsel for a purported stockholder. The Company believes it has meritorious defenses against pending or contemplated claims that its public disclosures in relation to the SEC investigation were inadequate or misleading. The Company maintains that such disclosures were true and accurate and compliant with applicable law and will defend itself vigorously. On November 30, 2020, the Company was named as a defendant in In re United States Oil Fund, LP Securities Litigation , No. 20-cv-4740. The consolidated amended complaint was filed in federal district court in New York on behalf of a putative class, and asserts claims against the Company and numerous other financial institutions under Section 11 of the Securities Act of 1933 in connection with trading in United States Oil Fund, LP, a crude oil ETF. The complaint also names the ETF, its sponsor, and related individuals as defendants. The complaint did not specify the amount of alleged damages. Defendants moved to dismiss the consolidated amended complaint on January 29, 2021; the motion is fully briefed and pending before the court. The Company believes that the claims are without merit and is defending itself vigorously. 119 On March 7, 2022, the Company was named as a defendant in Iron Workers Local No. 55 Pension Fund v. Virtu Financial, Inc. , No. 2022-0211-PAF pending in the Court of Chancery of the State of Delaware. The complaint, filed by a purported stockholder, seeks to compel the inspection of certain Company books and records pursuant to Section 220 of the Delaware General Corporation Law. The complaint alleges that the stockholder seeks Company information to investigate (a) whether wrongdoing or mismanagement occurred in connection with distributions made to the partners of Virtu Financial pursuant to the Company’s Up-C corporate structure; (b) the independence and disinterestedness of the Company’s directors and/or officers and whether the directors breached their fiduciary duties; and (c) potential damages relating thereto. The Company has made substantial productions of documents and other information in response to plaintiff's requests. Though no substantive claim has been brought, the Company believes that any potential allegations of wrongdoing are without merit and is defending itself vigorously. On October 17, 2022, the Company’s subsidiary, along with several other parties, was named as a defendant in Mallinckrodt PLC, et al. (Reorganized Debtors); Opioid Master Disbursement Trust II v. Argos Capital Appreciation Master Fund LP et al No. 20-12522. The complaint alleges that Mallinckrodt PLC engaged in a share repurchase program from 2015 through 2018 pursuant to which it repurchased its own shares in various open market transactions, a period during which it was allegedly insolvent. The plaintiff is seeking to unwind the transactions consummated under the program, alleging such transactions constituted fraudulent transfers by the debtor. The Company believes it has meritorious defenses against any unwinding of transactions, which it has asserted, and will continue to defend itself vigorously. On December 1, 2022, the Company’s subsidiary, along with several other parties, was named as a defendant in Northwest Biotherapeutics, Inc. v. Canaccord Genuity LLC, et al No. 1:22-cv-10185. The complaint alleges that defendants engaged in market manipulation in the plaintiff’s stock during a period from 2018 to 2022. The complaint did not specify the amount of alleged damages. The Company believes that the claims are without merit and is defending itself vigorously. Given the inherent difficulty of predicting the outcome of litigation and regulatory matters, particularly in regulatory examinations or investigations or other proceedings in which substantial or indeterminate judgments, settlements, disgorgements, restitution, penalties, injunctions, damages or fines are sought, or where such matters are in the early stages, the Company cannot estimate losses or ranges of losses for such matters where there is only a reasonable possibility that a loss may be incurred, and utilizes its judgment in accordance with applicable accounting standards in booking any associated estimated liability. It is not presently possible to determine the ultimate exposure to these matters and it is possible that the resolution of the outstanding matters will significantly exceed any estimated liabilities accrued by the Company. In addition, there are numerous factors that result in a greater degree of complexity in class-action lawsuits as compared to other types of litigation. There can be no assurance that these various legal proceedings will not significantly exceed any estimated liability accrued by the Company or have a material adverse effect on the Company’s results of operations in any future period, and a material judgment, fine or sanction could have a material adverse impact on the Company’s financial condition, results of operations and cash flows. However, it is the opinion of management, after consultation with legal counsel that, based on information currently available, the ultimate outcome of these matters will not have a material adverse impact on the business, financial condition or operating results of the Company, although they might be material to the operating results for any particular reporting period. The Company carries directors’ and officers’ liability insurance coverage and other insurance coverage for potential claims, including securities actions, against the Company and its respective directors and officers. 120 Other Legal and Regulatory Matters The Company owns subsidiaries including regulated entities that are subject to extensive oversight under federal, state and applicable international laws as well as self-regulatory organization (“SRO”) rules. Changes in market structure and the need to remain competitive require constant changes to the Company's systems, order routing and order handling procedures. The Company makes these changes while continuously endeavoring to comply with many complex laws and rules. Compliance, surveillance and trading issues common in the securities industry are monitored by, reported to, and/or reviewed in the ordinary course of business by the Company's regulators in the U.S. and abroad. As a major order flow execution destination, the Company is named from time to time in, or is asked to respond to a number of regulatory matters brought by U.S. regulators, foreign regulators, SROs, as well as actions brought by private plaintiffs, which arise from its business activities. There has recently been an increased focus by regulators on Anti-Money Laundering and sanctions compliance by broker-dealers and similar entities, as well as an enhanced interest on suspicious activity reporting and transactions involving microcap and low-priced securities. In addition, there has been increased regulatory, congressional and media scrutiny of U.S. equities market structure, the retail trading environment in the U.S., wholesale market making and the relationships between retail broker-dealers and market making firms including, but not limited to, payment for order flow arrangements, other remuneration arrangements such as profit-sharing relationships and exchange fee and rebate structures, alternative trading systems and off-exchange trading more generally, high frequency trading, short selling, market fragmentation, colocation, and access to market data feeds. Specifically, in 2022 the SEC 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 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 the 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. Further, in 2023, the SEC proposed amendments to expand and update Regulation Systems Compliance and Integrity (SCI) and to restrict volume based tiered pricing by equity exchanges in certain cases, approved an amendment to adopt a revised funding model for the Consolidated Audit Trail (CAT), and has indicated that additional rule proposals may be forthcoming. Additionally, rules to amend the definitions of “dealer” and “government securities dealer” within the Exchange Act were recently adopted, and are expected to broaden the scope of these registrant categories. These pending or potential rule changes, to the extent adopted, could adversely affect the Company’s business or the Company’s industry. As indicated above, from time to time, the Company is the subject of requests for information and documents from the SEC, the Financial Industry Regulatory Authority (“FINRA”), state attorneys general, and other regulators and governmental authorities. It is the Company's practice to cooperate and comply with the requests for information and documents. Additional information regarding legal and regulatory risks is described within the “Risk Factors” section under the sub header of “Legal and Regulatory Risks” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. As indicated above, the Company is currently the subject of various regulatory reviews and investigations by state, federal and foreign regulators and SROs, including the SEC and FINRA. In some instances, these matters may result in a disciplinary action and/or a civil or administrative action. Representations and Warranties; Indemnification Arrangements In the normal course of its operations, the Company enters into contracts that contain a variety of representations and warranties in addition to indemnification obligations, including indemnification obligations in connection with the Acquisition of KCG and the ITG Acquisition. The Company's maximum exposure under these arrangements is currently unknown, as any such exposure could relate to claims not yet brought or events which have not yet occurred. Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and general indemnifications. The Company has also provided general indemnifications to its managers, officers, directors, employees, and agents against expenses, legal fees, judgments, fines, settlements, and other amounts actually and reasonably incurred by such persons under certain circumstances as more fully disclosed in its operating agreement. The overall maximum amount of the obligations (if any) cannot reasonably be estimated as it will depend on the facts and circumstances that give rise to any future claims. 121 15. Leases The Company's leases are primarily for corporate office space, datacenters, and technology equipment. The leases have remaining terms of 1 to 9 years, some of which include options to extend the initial term at the Company's discretion. The lease terms used in calculating ROU assets and lease liabilities include the options to extend the initial term when the Company is reasonably certain of exercising the options. The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants. In addition to the base rental costs, the Company’s lease agreements for corporate office space generally provide for rent escalations resulting from increased assessments for operating expenses, real estate taxes and other charges. Payments for such reimbursable expenses are considered variable and are recognized as variable lease costs in the period in which the obligation for those payments was incurred. The Company also subleases certain office space and facilities to third parties. The subleases have remaining terms of 1 to 8 years. The Company recognizes amounts received from subleases on a straight-line basis over the term of the sublease within Operations and administrative expense on the Consolidated Statements of Comprehensive Income. As the implied discount rate for most of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate on its secured borrowings in determining the present value of lease payments. During the year ended December 31, 2021, the Company ceased use of certain office lease premises as part of efforts to consolidate office space. For the year ended December 31, 2021, the Company recognized $ 28.1 million in Termination of office leases on the Consolidated Statement of Comprehensive Income, primarily related to the move of our global headquarters, comprising $ 9.6 million impairments of ROU assets, $ 17.6 million of write-off of leasehold improvements and fixed assets, and $ 1 million of dilapidation charges. Lease assets and liabilities are summarized as follows: (in thousands) Financial Statement Location December 31, 2023 December 31, 2022 Operating leases Operating lease right-of-use assets Operating lease right-of-use assets $ 229,499 $ 187,442 Operating lease liabilities Operating lease liabilities 278,317 239,202 Finance leases Property and equipment, at cost Property, equipment, and capitalized software, net 40,857 27,908 Accumulated depreciation Property, equipment, and capitalized software, net ( 11,781 ) ( 12,736 ) Finance lease liabilities Accounts payable, accrued expenses, and other liabilities 29,609 15,323 Weighted average remaining lease term and discount rate are as follows: December 31, 2023 December 31, 2022 Weighted average remaining lease term Operating leases 5.25 years 6.21 years Finance leases 3.5 years 2.84 years Weighted average discount rate Operating leases 6.40 % 5.43 % Finance leases 5.51 % 3.92 % 122 The components of lease expense are as follows: Years Ended December 31, (in thousands) 2023 2022 2021 Operating lease cost: Fixed $ 76,424 $ 72,749 $ 74,699 Variable 6,151 6,079 6,247 Impairment of ROU Asset — 5,270 9,606 Total Operating lease cost $ 82,575 $ 84,098 $ 90,552 Sublease income 19,506 19,679 17,758 Finance lease cost: Amortization of ROU Asset $ 9,079 $ 7,685 $ 6,587 Interest on lease liabilities 1,156 366 230 Total Finance lease cost $ 10,235 $ 8,051 $ 6,817 See Note 2 “Summary of Significant Accounting Policies” in Part II Item 8 “Financial Statements and Supplementary Data” of this Form 10-K for details on the classification of these expenses in the Consolidated Statements of Comprehensive Income. Future minimum lease payments under operating and finance leases with non-cancelable lease terms, as of December 31, 2023, are as follows: (in thousands) Operating Leases Finance Leases 2024 $ 76,295 $ 11,264 2025 70,210 7,677 2026 67,220 6,683 2027 31,278 5,513 2028 28,022 1,941 2029 and thereafter 55,296 — Total lease payments $ 328,321 $ 33,078 Less imputed interest ( 50,004 ) ( 3,469 ) Total lease liability $ 278,317 $ 29,609 16. Cash The following table provides a reconciliation of cash and cash equivalents together with restricted or segregated cash as reported within the Consolidated Statements of Financial Condition to the sum of the same such amounts shown in the Consolidated Statements of Cash Flows. (in thousands) December 31, 2023 December 31, 2022 Cash and cash equivalents $ 820,436 $ 981,580 Cash restricted or segregated under regulations and other 35,024 56,662 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 855,460 $ 1,038,242 123 17. Capital Structure The Company has four classes of authorized common stock. The Class A Common Stock and the Class C Common Stock have one vote per share. The Class B Common Stock and the Class D Common Stock have 10 votes per share. Shares of the Company’s common stock generally vote together as a single class on all matters submitted to a vote of the Company’s stockholders. The Founder Member controls approximately 86.5 % of the combined voting power of our common stock as a result of its ownership of our Class A, Class C and Class D Common Stock. The Company holds approximately a 57.8 % interest in Virtu Financial at December 31, 2023. During the period prior to the Company's IPO and certain reorganization transactions consummated in connection with the IPO, Class A-2 profits interests and Class B interests in Virtu Financial were issued to Employee Holdco (as defined below) on behalf of certain key employees and stakeholders. In connection with these reorganization transactions, all Class A-2 profits interests and Class B interests were reclassified into Virtu Financial Units. As of December 31, 2023 and December 31, 2022, there were 4,040,772 and 4,462,840 Virtu Financial Units outstanding held by Employee Holdco (as defined below), respectively, and 422,068 , 328,999 , and 467,874 of such Virtu Financial Units and corresponding Class C Common Stock were exchanged into Class A Common Stock, forfeited or repurchased during the years ended December 31, 2023, 2022, and 2021, respectively. Amended and Restated 2015 Management Incentive Plan The Company’s Board of Directors and stockholders adopted the 2015 Management Incentive Plan, which became effective upon consummation of the IPO, and was subsequently amended and restated following receipt of approval from the Company’s stockholders on June 30, 2017, June 5, 2020 and June 2, 2022. The Amended and Restated 2015 Management Incentive Plan provides for the grant of stock options, restricted stock units, and other awards based on an aggregate of 26,000,000 shares of Class A Common Stock, subject to additional sublimits, including limits on the total option grant to any one participant in a single year and the total performance award to any one participant in a single year. On November 13, 2020, the Company amended its form award agreement for the issuance of RSUs to provide for the continued vesting of outstanding RSU awards upon the occurrence of a qualified retirement (the “RSU Amendment”). A qualified retirement generally means a voluntary resignation by the participant (i) after five years of service, (ii) the participant attaining the age of 50 and (iii) the sum of the participant's age and service at the time of termination equaling or exceeding 65. Continued vesting is subject to the participant entering into a 2 year non-compete. The RSU Amendment was authorized and approved by the Compensation Committee of the Company's Board of Directors. As a result of the RSU Amendment, currently issued and outstanding RSUs held by the Company's employees, including its executive officers, shall be deemed to be subject to the amended terms of the form award agreement, and any future RSU awards shall also be governed by such amended terms. Amended and Restated Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan On the ITG Closing Date, the Company assumed the Amended and Restated ITG 2007 Equity Plan and the Assumed Awards. As of the ITG Closing Date, the aggregate number of shares of Class A Common Stock subject to such Assumed Awards was 2,497,028 and the aggregate number of shares of Class A Common Stock that remained issuable pursuant to the Amended and Restated ITG 2007 Equity Plan was 1,230,406 . Share Repurchase Program On November 6, 2020, the Company's Board of Directors authorized a 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 program by an additional $ 70 million in Class A Common Stock and Virtu Financial Units. 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 an additional $ 300 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 another expansion of the program by an additional $ 750 million to $ 1,220 million and extending the duration of the program through November 3, 2023, which was subsequently extended through December 31, 2024. 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, 2023, the Company repurchased approximately 43.6 million shares of Class A Common Stock and Virtu Financial Units for 124 approximately $ 1,109.6 million. As of December 31, 2023, the Company has approximately $ 110.4 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program. Employee Exchanges During the years ended December 31, 2023, 2022, and 2021, pursuant to the exchange agreement by and among the Company, Virtu Financial and holders of Virtu Financial Units, certain current and former employees elected to exchange 186,394 , 92,930 , and 747,849 units, respectively in Virtu Financial held directly or on their behalf by Virtu Employee Holdco LLC (“Employee Holdco”) on a one -for-one basis for shares of Class A Common Stock. Warrant Issuance On March 20, 2020, in connection with and in consideration of the Founder Member’s commitments under the Founder Member Loan Facility (as described in Note 8 “Borrowings”), 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 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. The Founder Member Loan Facility Term expired on September 20, 2020 without the Company having borrowed any Founder Member Loans thereunder (as described in Note 8 “Borrowings”). The exercise price per share of the Class A Common Stock issuable pursuant to the Warrant was $ 22.98 , which in accordance with the terms of the Warrant, is equal to the average of the volume weighted average prices of the Class A Common Stock for the ten ( 10 ) trading days following May 7, 2020, the date on which the Company publicly announced its earnings results for the first quarter of 2020. On December 17, 2021, the Founder Member exercised in full the Warrant to purchase 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 of 1933, as amended (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. Upon issuance, the fair value of the Warrant was determined using a Black-Scholes-Merton model, and was recorded as a debt issuance cost within Other assets on the Consolidated Statements of Financial Condition and as an increase to Additional paid-in capital on the Consolidated Statements of Changes in Equity. The balance was amortized on a straight-line basis from March 20, 2020 through September 20, 2020, the date on which the Founder Member Loan Facility expired, and recorded as expense within Debt issue cost related to debt refinancing, prepayment and commitment fees in the Consolidated Statements of Comprehensive Income. Accumulated Other Comprehensive Income The following table presents the changes in Other Comprehensive Income for the years ended December 31, 2023 and 2022: 125 Year Ended December 31, 2023 (in thousands) AOCI Beginning Balance Amounts recorded in AOCI Amounts reclassified from AOCI to income AOCI Ending Balance Net change in unrealized cash flow hedges gains (losses) (1) $ 44,925 $ 8,798 $ ( 30,307 ) $ 23,416 Foreign exchange translation adjustment ( 13,321 ) 6,952 — ( 6,369 ) Total $ 31,604 $ 15,750 $ ( 30,307 ) $ 17,047 (1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the Consolidated Statements of Comprehensive Income. As of December 31, 2023, the Company expects approximately $ 33.3 million to be reclassified from AOCI into earnings over the next 12 months. The timing of the reclassification is based on the interest payment schedule of the long-term borrowings. Year Ended December 31, 2022 (in thousands) AOCI Beginning Balance Amounts recorded in AOCI Amounts reclassified from AOCI to income AOCI Ending Balance Net change in unrealized cash flow hedges gains (losses) (1) $ ( 10,480 ) $ 55,955 $ ( 550 ) $ 44,925 Foreign exchange translation adjustment 284 ( 13,605 ) — ( 13,321 ) Total $ ( 10,196 ) $ 42,350 $ ( 550 ) $ 31,604 (1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the Consolidated Statements of Comprehensive Income. Year Ended December 31, 2021 (in thousands) AOCI Beginning Balance Amounts recorded in AOCI Amounts reclassified from AOCI to income AOCI Ending Balance Net change in unrealized cash flow hedges gains (losses) (1) $ ( 33,444 ) $ 8,374 $ 14,590 $ ( 10,480 ) Foreign exchange translation adjustment 7,957 ( 7,673 ) — 284 Total $ ( 25,487 ) $ 701 $ 14,590 $ ( 10,196 ) (1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the Consolidated Statements of Comprehensive Income. 18. Share-based Compensation Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 “Capital Structure”, and in connection with the IPO, non-qualified stock options to purchase shares of Class A Common Stock were granted, each of which vests in equal annual installments over a period of four years from grant date and expires not later than 10 years from the date of grant. The following table summarizes activity related to stock options for the years ended December 31, 2023, 2022, and 2021: Options Outstanding Options Exercisable Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Number of Options Weighted Average Exercise Price Per Share At December 31, 2020 2,324,152 $ 19.00 4.24 2,324,152 $ 19.00 Granted — — — — — Exercised ( 528,497 ) 19.00 — ( 528,497 ) 19.00 Forfeited or expired — — — — — At December 31, 2021 1,795,655 $ 19.00 3.24 1,795,655 $ 19.00 Granted — — — — — Exercised ( 268,879 ) 19.00 — ( 268,879 ) 19.00 Forfeited or expired ( 5,000 ) — — ( 5,000 ) — At December 31, 2022 1,521,776 $ 19.00 2.24 1,521,776 $ 19.00 Granted — — — — — Exercised — — — — — Forfeited or expired ( 10,000 ) — — ( 10,000 ) — At December 31, 2023 1,511,776 $ 19.00 1.24 1,511,776 $ 19.00 126 The expected life was determined based on an average of vesting and contractual period. The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The expected stock price volatility was determined based on historical volatilities of comparable companies. The expected dividend yield was determined based on estimated future dividend payments divided by the IPO stock price. Amended and Restated Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan On the ITG Closing Date, the Company assumed the Amended and Restated ITG 2007 Equity Plan and certain stock option awards, restricted stock unit awards, deferred stock unit awards and performance stock unit awards granted thereunder ( the “Assumed Awards”). The Assumed Awards are subject to the same terms and conditions that were applicable to them under the Amended and Restated ITG 2007 Equity Plan, except that (i) the Assumed Awards relate to shares of the Company’s Class A Common Stock, (ii) the number of shares of Class A Common Stock subject to the Assumed Awards was the result of an adjustment based upon an Exchange Ratio (as defined in the ITG Merger Agreement) and (iii) the performance share unit awards were converted into service-based vesting restricted stock unit awards that were no longer subject to any performance based vesting conditions. Class A Common Stock, Restricted Stock Units and Restricted Stock Awards Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 “Capital Structure”, subsequent to the IPO, shares of immediately vested Class A Common Stock, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) were granted, with RSUs and RSAs vesting over a period of up to 4 years. The fair value of the Class A Common Stock and RSUs was determined based on a volume weighted average price and the expense is recognized on a straight-line basis over the vesting period. The fair value of the RSAs was determined based on the closing price as of the date of grant and the expense is recognized from the date that achievement of the performance target becomes probable through the remainder of the vesting period. Performance targets are based on the Company's adjusted EBITDA for certain future periods. For the years ended December 31, 2023, 2022, and 2021, respectively, there were 868,315 , 580,710 , and 633,938 shares of immediately vested Class A Common Stock granted as part of year-end compensation. In addition, the Company accrued compensation expense of $ 22.2 million, $ 31.9 million, and $ 29.4 million for the years ended December 31, 2023, 2022, and 2021, respectively, related to immediately vested Class A Common Stock expected to be awarded as part of year-end incentive compensation, which was included in Employee compensation and payroll taxes on the Consolidated Statements of Comprehensive Income and Accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The following table summarizes activity related to RSUs (including the Assumed Awards) and RSAs for the years ended December 31, 2023, 2022, and 2021: Number of RSUs and RSAs Weighted Average Fair Value At December 31, 2020 3,393,084 $ 21.35 Granted 2,466,311 27.07 Forfeited ( 200,697 ) 22.95 Vested ( 2,434,251 ) 23.11 At December 31, 2021 3,224,447 $ 24.30 Granted (1) 3,046,623 29.83 Forfeited ( 419,207 ) 26.01 Vested ( 1,897,030 ) 24.80 At December 31, 2022 3,954,833 $ 28.13 Granted (1) 3,763,217 19.28 Forfeited ( 187,053 ) 26.45 Vested ( 2,627,823 ) 23.46 At December 31, 2023 4,903,174 $ 23.90 (1) Excluded in the number of RSUs and RSAs are 37,500 and 75,000 participating RSAs for December 31, 2023 and 2022, respectively, where the grant date has not been achieved because the performance conditions have not been met. The Company recognized $ 42.5 million, $ 36.2 million, and $ 26.4 million for the years ended December 31, 2023, 2022, and 2021, respectively, of compensation expense in relation to RSUs. As of December 31, 2023 and December 31, 2022, total unrecognized share-based compensation expense related to unvested RSUs was $ 55.2 million and $ 54.6 million, respectively, and this amount is to be recognized over a weighted average period of 0.9 years and 0.9 years, respectively. 127 Awards in which the specific performance conditions have not been met are not included in unrecognized share-based compensation expense. On November 13, 2020, the Company adopted the Virtu Financial, Inc. Deferred Compensation Plan (the “DCP”). The DCP permits eligible executive officers and other employees to defer cash or equity-based compensation beginning in the calendar year ending December 31, 2021, subject to certain limitations and restrictions. Deferrals of cash compensation may also be directed to notional investments in certain of the employee investment opportunities. 19. Property, Equipment and Capitalized Software Property, equipment and capitalized software consisted of the following at December 31, 2023 and December 31, 2022: (in thousands) December 31, 2023 December 31, 2022 Capitalized software costs $ 136,873 $ 242,769 Leasehold improvements 22,188 18,370 Furniture and equipment 309,083 284,818 Total 468,144 545,957 Less: Accumulated depreciation and amortization ( 367,779 ) ( 460,763 ) Total property, equipment and capitalized software, net $ 100,365 $ 85,194 Depreciation expense for property and equipment for the years ended December 31, 2023, 2022, and 2021 was approximately $ 25.6 million, $ 26.1 million, and $ 28.4 million, respectively, and is included within depreciation and amortization expense in the Consolidated Statements of Comprehensive Income. The Company’s capitalized software development costs were approximately $ 40.4 million, $ 35.5 million, and $ 35.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. The related amortization expense was approximately $ 37.7 million, $ 40.2 million, and $ 39.4 million for the years ended December 31, 2023, 2022, and 2021, respectively, and is included within Depreciation and amortization in the Consolidated Statements of Comprehensive Income. 20. Regulatory Requirement U.S. Subsidiary The Company's U.S. broker-dealer subsidiaries VAL and RFQ-Hub Americas LLC (“RAL”), are subject to the SEC Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital as detailed in the table below. RAL became a U.S. broker-dealer in June 2023. Pursuant to New York Stock Exchange (“NYSE”) rules, VAL was also required to maintain $ 1.0 million of capital in connection with the operation of its designated market maker (“DMM”) business as of December 31, 2023. The required amount is determined under the exchange rules as the greater of (i) $ 1.0 million or (ii) $ 75,000 for every 0.1 % of NYSE transaction dollar volume in each of the securities for which the Company is registered as the DMM. The regulatory capital and regulatory capital requirements of the Company's U.S. subsidiaries as of December 31, 2023 was as follows: (in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital Virtu Americas LLC $ 412,626 $ 1,000 $ 411,626 RFQ-Hub Americas LLC 1,425 15 1,410 As of December 31, 2023, VAL had $ 28.7 million of cash in special reserve bank accounts for the benefit of customers pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements, and $ 6.1 million of cash in reserve bank accounts for the benefit of proprietary accounts of brokers. The balances are included within Cash restricted or segregated under regulations and other on the Consolidated Statements of Financial Condition. The regulatory capital and regulatory capital requirements of the Company's U.S. subsidiaries as of December 31, 2022 was as follows: 128 (in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital Virtu Americas LLC $ 554,550 $ 1,000 $ 553,550 As of December 31, 2022, VAL had $ 50.2 million of cash in special reserve bank accounts for the benefit of customers pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements, and $ 5.8 million of cash in reserve bank accounts for the benefit of proprietary accounts of brokers. Foreign Subsidiaries The Company’s foreign subsidiaries are subject to regulatory capital requirements set by local regulatory bodies, including the Canadian Investment Regulatory Organization (“CIRO”), the Central Bank of Ireland (“CBI”), the Financial Conduct Authority (“FCA”) in the United Kingdom, the Australian Securities and Investments Commission (“ASIC”), the Securities and Futures Commission in Hong Kong (“SFC”), and the Monetary Authority of Singapore (“MAS”). The regulatory net capital balances and regulatory capital requirements applicable to the Company's foreign subsidiaries as of December 31, 2023 were as follows: (in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital Canada Virtu Canada Corp $ 14,630 $ 189 $ 14,441 Virtu Financial Canada ULC 1,197 189 1,008 Ireland Virtu Europe Trading Limited 86,370 27,821 58,549 Virtu Financial Ireland Limited 88,939 40,459 48,480 United Kingdom Virtu ITG UK Limited 2,040 955 1,085 Asia Pacific Virtu ITG Australia Limited 24,788 3,856 20,932 Virtu ITG Hong Kong Limited 2,786 445 2,341 Virtu ITG Singapore Pte Limited 953 130 823 Virtu Financial Singapore Pte. Ltd. 126,022 73,407 52,615 As of December 31, 2023, Virtu Europe Trading Limited had $ 36 thousand of segregated funds on deposit for trade clearing and settlement activity, and Virtu ITG Hong Kong Ltd. had $ 30 thousand of segregated balances under a collateral account control agreement for the benefit of certain customers. The regulatory net capital balances and regulatory capital requirements applicable to the Company's foreign subsidiaries as of December 31, 2022 were as follows: (in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital Canada Virtu ITG Canada Corp $ 14,248 $ 184 $ 14,064 Virtu Financial Canada ULC 2,663 184 2,479 Ireland Virtu Europe Trading Limited 78,834 28,502 50,332 Virtu Financial Ireland Limited 89,853 39,768 50,085 United Kingdom Virtu ITG UK Limited 1,405 906 499 Asia Pacific Virtu ITG Australia Limited 30,027 3,115 26,912 Virtu ITG Hong Kong Limited 1,683 497 1,186 Virtu ITG Singapore Pte Limited 1,147 91 1,056 Virtu Financial Singapore Pte. Ltd. 121,166 46,025 75,141 129 As of December 31, 2022, Virtu Europe Trading Limited and Virtu Canada Corp had $ 0.1 million and $ 0.4 million, respectively, of funds on deposit for trade clearing and settlement activity, and Virtu ITG Hong Kong Ltd had $ 30 thousand of segregated balances under a collateral account control agreement for the benefit of certain customers. 21. Geographic Information and Business Segments The Company operates its business in the U.S. and internationally, primarily in Europe and Asia. Significant transactions and balances between geographic regions occur primarily as a result of certain of the Company’s subsidiaries incurring operating expenses such as employee compensation, communications and data processing and other overhead costs, for the purpose of providing execution, clearing and other support services to affiliates. Charges for transactions between regions are designed to approximate full costs. Intra-region income and expenses and related balances have been eliminated in the geographic information presented below to accurately reflect the external business conducted in each geographical region. The revenues are attributed to countries based on the locations of the subsidiaries. The following table presents total revenues by geographic area for the years ended December 31, 2023, 2022, and 2021 : Years Ended December 31, (in thousands) 2023 2022 2021 Revenues: United States $ 1,920,748 $ 1,914,223 $ 2,260,750 Ireland 206,507 222,178 305,509 Others 166,118 228,411 245,226 Total revenues $ 2,293,373 $ 2,364,812 $ 2,811,485 The Company has two operating segments: (i) Market Making and (ii) Execution Services; and one non-operating segment: Corporate. The Market Making segment principally consists of market making in the cash, futures, and options markets across global equities, fixed income, currencies, and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker-dealers, banks and institutions. The Company engages 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 alternative trading systems (“ATSs”). The Company is an active participant on all major global equity and futures exchanges and also trades on substantially all domestic electronic options exchanges. As a complement to electronic market making, the cash trading business handles specialized orders and also transacts on the OTC Link ATS operated by OTC Markets Group Inc. The Execution Services segment comprises client-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker-dealers. The Company earns commissions and commission equivalents as an agent on behalf of clients as well as between principals to transactions; in addition, the Company will commit capital on behalf of clients as needed. Client-based, execution-only trading in the segment is done primarily through a variety of access points including: (i) algorithmic trading and order routing in global equities and options; (ii) institutional sales traders who offer portfolio trading and single stock sales trading which provides execution expertise for program, block and riskless principal trades in global equities and ETFs; and (iii) matching of client conditional orders in POSIT Alert and client orders in the Company's ATSs, including Virtu MatchIt, and POSIT. The Execution Services segment also includes revenues derived from providing (a) proprietary risk management and trading infrastructure technology to select third parties for a service fee, (b) workflow technology, the Company’s integrated, broker-neutral trading tools delivered across the globe including trade order and execution management and order management software applications and network connectivity and (c) 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 the Company's capital markets business, in which the Company acts as an agent for issuers in connection with at-the-market offerings and buyback programs. The Corporate segment contains the Company's investments, principally in strategic trading-related opportunities and maintains corporate overhead expenses and all other income and expenses that are not attributable to the Company's other segments. Management evaluates the performance of its segments on a pre-tax basis. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. The Company’s total revenues and 130 income before income taxes and noncontrolling interest (“Pre-tax earnings”) by segment for the years ended December 31, 2023, 2022, and 2021 are summarized in the following table: (in thousands) Market Making Execution Services Corporate Consolidated Total 2023 Total revenue $ 1,843,523 $ 446,542 $ 3,308 $ 2,293,373 Income (loss) before income taxes and noncontrolling interest 315,602 10,440 ( 911 ) 325,131 2022 Total revenue $ 1,812,839 $ 514,241 $ 37,732 $ 2,364,812 Income before income taxes and noncontrolling interest 480,559 41,342 34,897 556,798 2021 Total revenue $ 2,203,046 $ 600,215 $ 8,224 $ 2,811,485 Income before income taxes and noncontrolling interest 925,968 70,019 917 996,904 22. Related Party Transactions The Company incurs expenses and maintains balances with its affiliates in the ordinary course of business. As of December 31, 2023, and December 31, 2022, the Company had a net payables to its affiliates of $ 1.5 million and a net receivables from its affiliates of $ 0.5 million, respectively. The Company has held a minority interest in JNX since 2016 (see Note 9 “Financial Assets and Liabilities”). The Company pays exchange fees to JNX for the trading activities conducted on its proprietary trading system. The Company paid $ 12.1 million, $ 13.8 million, and $ 12.5 million for the years ended December 31, 2023, 2022, and 2021, respectively, to JNX for these trading activities. The Company makes payments to two JVs (see Note 2 “Summary of Significant Accounting Policies”) to fund the construction of the microwave communication networks, and to purchase microwave communication networks, which are recorded within Communications and data processing on the Consolidated Statements of Comprehensive Income. The Company made payments of $ 32.6 million, $ 27.7 million, and $ 25.3 million to the JVs for the years ended December 31, 2023, 2022, and 2021, respectively. The Company has an interest in Members Exchange, a member-owned equities exchange. The Company pays regulatory and transaction fees and receives rebates from trading activities. The Company paid $ 4.8 million, received $ 16.0 million, and received $ 3.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. In the second quarter of 2022, the Company formed a JV to support the growth and expansion of a multi-asset request-for-quote communication platform. The Company consolidates this JV and recorded noncontrolling interest of $ 39.2 million in the condensed consolidated statement of changes in equity during the year ended December 31, 2022. Refer to Note 11 “Variable Interest Entities” for further details. On August 12, 2021, the Company entered into a Purchase Agreement with Ordinal Holdings I, LP to repurchase 1.5 million shares of the Company's Class A common stock for $ 39.2 million in accordance with the Company's previously disclosed share repurchase program. See Note 17 “Capital Structure” for a further discussion of the Company's share repurchase program. As described in Note 8 “Borrowings” and Note 17 “Capital Structure”, on March 20, 2020 a subsidiary of the Company entered into an agreement with the Founder Member to establish the Founder Member Facility and, upon the execution of the Founder Member Facility and in consideration of the Founder Member’s commitments thereunder, the Company delivered to the Founder Member the Warrant. The transactions were unanimously approved by the Company’s disinterested Directors. The Founder Member Loan Term expired as of September 20, 2020. On December 17, 2021, the Founder Member exercised in full its Warrant to purchase 3,000,000 shares of the Company's Class A Common Stock. 23. Parent Company 131 VFI is the sole managing member of Virtu Financial, which guarantees the indebtedness of its direct subsidiary under the First Lien Term Loan Facility (see Note 8 “Borrowings”). VFI is limited to its ability to receive distributions (including for purposes of paying corporate and other overhead expenses and dividends) from Virtu Financial under the Credit Agreement. The following financial statements (the “Parent Company Only Financial Statements”) should be read in conjunction with the Consolidated Financial Statements of the Company and the foregoing. Virtu Financial, Inc. (Parent Company Only) Statements of Financial Condition (In thousands except interest data) December 31, 2023 December 31, 2022 Assets Cash $ 27,981 $ 6,264 Deferred tax asset 130,344 139,139 Investment in subsidiary 2,955,137 3,119,418 Other assets 49,964 52,153 Total assets $ 3,163,426 $ 3,316,974 Liabilities, redeemable membership interest and equity Liabilities Payable to affiliate $ 1,738,291 $ 1,733,429 Accounts payable and accrued expenses and other liabilities 3,928 888 Deferred tax liabilities 2,000 2,000 Tax receivable agreement obligations 216,480 238,758 Total liabilities 1,960,699 1,975,075 Virtu Financial Inc. Stockholders' equity Class A common stock (par value $ 0.00001 ), Authorized — 1,000,000,000 and 1,000,000,000 shares, Issued — 134,901,037 and 133,071,754 shares, Outstanding — 89,092,686 and 98,549,464 shares at December 31, 2023 and December 31, 2022, respectively 1 1 Class B common stock (par value $ 0.00001 ), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 0 and 0 shares at December 31, 2023 and December 31, 2022, respectively — — Class C common stock (par value $ 0.00001 ), Authorized — 90,000,000 and 90,000,000 shares, Issued and Outstanding — 8,607,998 and 9,030,066 shares at December 31, 2023 and December 31, 2022, respectively — — Class D common stock (par value $ 0.00001 ), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 60,091,740 and 60,091,740 shares at December 31, 2023 and December 31, 2022, respectively 1 1 Treasury stock, at cost, 45,808,351 and 34,522,290 shares at December 31, 2023 and December 31, 2022, respectively ( 1,166,299 ) ( 954,637 ) Additional paid-in capital 1,351,574 1,292,613 Retained earnings (accumulated deficit) 1,000,403 972,317 Accumulated other comprehensive income (loss) 17,047 31,604 Total Virtu Financial Inc. stockholders' equity 1,202,727 1,341,899 Total liabilities and stockholders' equity $ 3,163,426 $ 3,316,974 132 Virtu Financial, Inc. (Parent Company Only) Statements of Comprehensive Income Years Ended December 31, (in thousands) 2023 2022 2021 Revenues: Other Income $ — $ — $ — — — — Operating Expenses: Operations and administrative ( 213 ) 36 734 Income (loss) before equity in income of subsidiary 213 ( 36 ) ( 734 ) Equity in income (loss) of subsidiary, net of tax 263,708 468,368 827,968 Net income (loss) $ 263,921 $ 468,332 $ 827,234 Net income (loss) attributable to common stockholders $ 263,921 $ 468,332 $ 827,234 Other comprehensive income (loss): Foreign currency translation adjustment, net of taxes 6,952 ( 13,604 ) ( 7,672 ) Net change in unrealized cash flow hedges gains (losses), net of taxes ( 21,509 ) 55,404 22,964 Comprehensive income (loss) $ 249,364 $ 510,132 $ 842,526 133 Virtu Financial, Inc. (Parent Company Only) Statements of Cash Flows Years Ended December 31, (in thousands) 2023 2022 2021 Cash flows from operating activities Net income $ 263,921 $ 468,332 $ 827,234 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of subsidiary, net of tax 223,376 239,807 87,055 Tax receivable agreement obligation reduction 997 819 4,622 Deferred taxes 8,795 9,884 36,526 Changes in operating assets and liabilities: 1,129 ( 11,132 ) 42,086 Net cash provided by operating activities 498,218 707,710 997,523 Cash flows from investing activities Investments in subsidiaries, equity basis 66,644 71,597 55,654 Net cash provided by investing activities 66,644 71,597 55,654 Cash flows from financing activities Dividends to stockholders and distributions from Virtu Financial to noncontrolling interest ( 306,136 ) ( 375,284 ) ( 548,017 ) Repurchase of Class C common stock ( 1,566 ) ( 8,256 ) ( 3,454 ) Purchase of treasury stock ( 229,012 ) ( 480,544 ) ( 427,454 ) Tax receivable agreement obligations ( 23,275 ) ( 21,343 ) ( 16,505 ) Issuance of common stock in connection with secondary offering, net of offering costs — — — Net cash used in financing activities ( 559,989 ) ( 885,427 ) ( 995,430 ) Net increase (decrease) in Cash 4,873 ( 106,120 ) 57,747 Cash, beginning of period 23,108 129,228 71,481 Cash, end of period $ 27,981 $ 23,108 $ 129,228 Supplemental disclosure of cash flow information: Taxes paid $ 14,957 $ 64,775 $ 78,844 Non-cash financing activities Tax receivable agreement described in Note 4 ( 3,787 ) 1,044 311 Repurchase of Class C common stock ( 2,330 ) — — 24. Subsequent Events The Company has evaluated subsequent events for adjustment to or disclosure in its Consolidated Financial Statements through the date of this report, and has not identified any recordable or disclosable events, not otherwise reported in these Consolidated Financial Statements or the notes thereto, except for the following: On January 25, 2024, the Company’s Board of Directors declared a dividend of $ 0.24 per share of Class A Common Stock and Class B Common Stock and per participating Restricted Stock Unit and Restricted Stock Award that will be paid on March 15, 2024 to holders of record as of March 1, 2024. 134 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.