Good morning, and welcome to the Virtu Financial 2021 third quarter results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Andrew Smith, Head of Investor Relations. Please go ahead
Thank you, Anthony, and good morning, everyone. Thanks for joining us. Our third quarter results were released this morning and are available on our website. This morning's call, we have Mr. Douglas Cifu, our Chief Executive Officer, and Mr. Joseph Molluso, our Co-President and Co-Chief Operating Officer, and Mr. Sean Galvin, our Chief Financial Officer. They will begin with prepared remarks and then take your questions. First, a few reminders. Today's call may include forward-looking statements which represent Virtu's current beliefs regarding future events and are therefore subject to risks, assumptions, and uncertainties which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements.
It is important to note that any forward-looking statements made on this call are based upon information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report in Form 10-K and other public filings. During today's call, in addition to GAAP results, we may refer to certain non-GAAP measures, including Adjusted Net Trading Income, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA margin. Non-GAAP measures should be considered as supplemental to and not as superior to financial measures prepared in accordance with GAAP.
Direct listeners to consult the investor portion of our website, where you'll find supplemental information referred to on this call, as well as a reconciliation of non-GAAP measures to the equivalent GAAP terms in the earnings materials with an explanation of why we deem this information to be meaningful as well as how management uses these measures. With that, I'd like to turn the call over to Doug.
Good morning, and thank you, Andrew. This morning we reported our third quarter results, which reflect an 11% increase in adjusted EPS in a market environment that was slightly softer than the second quarter. For the quarter ended September 30th, we generated $0.70 of adjusted EPS on $5.5 million per day of adjusted net trading income, bringing our results for the first three quarters of 2021 to $3.38 per share and an average adjusted net trading income of $7.6 million per day. Our performance in a quarter such as this highlights the success of our organic business growth plan, the goal of which is to increase our overall baseline performance in two ways. First, by expanding our addressable market by approaching new opportunities such as options, market making, crypto, and Virtu Capital Markets.
Second, by increasing the competitiveness and profitability in our existing offerings through the hard work of integrating Virtu's best-in-class technology with the businesses we have acquired, evidenced by Virtu's algo technology, legacy KCG quant style strategies, and our customer-facing ETF block desk. I'll point out some important highlights for this quarter. Our growth initiatives generated over $350,000 of ANTI per day, which represents 6% of our ANTI in the third quarter. Since 2018, we have grown these initiatives by a 61% CAGR, and in many cases leveraged our existing technology infrastructure to build these businesses from scratch. In particular, I would highlight that our options market making business continues to expand.
While we do not expect this business to simply grow in a straight line, we continue to evolve our capabilities, connectivity, and expand the amount of symbols and venues we trade. In the latest quarter, this business saw strong results despite options volumes being down 15% from recent peak in early 2021. We continue to make select key hires to expand the geographic footprint of this business and accelerate our growth. I also want to provide an update on cryptocurrencies. We form a dedicated team of traders and technologists and plan to add additional resources in the near term. With the launch of Crypto ETFs globally, we now trade approximately 20 products across the U.S., Canada, and Europe. We are now connected to the principal spot venues to source liquidity and have meaningfully increased the number of venues and markets we can access.
Given our historical expertise in market making across a diverse range of products and our scale in ETF pricing, combined with our global connectivity with institutions and retail clients, we believe Virtu is uniquely positioned to provide liquidity to our customers in crypto products. Our ETF block desk continues to make meaningful progress, and we are now a top five liquidity provider as measured by the winning hit rate and total notional volume dealt in U.S. ETFs. I also want to note the progress we have made in our commitment to return capital to our shareholders. Our board of directors has previously authorized $470 million in share repurchases.
Through the end of October, we have repurchased 13.4 million shares at an average price of $26.95, for a total of $361 million, consistent with our previously announced targets for share repurchases. In the third quarter alone, we repurchased 5.4 million shares at an average price of $25.71, for a total approximately of $139 million. As we look out on the next 12-24 months, we want to reiterate our commitment to returning capital to shareholders, and I'm announcing that Virtu's board of directors has approved an additional repurchase authorization of $750 million over the next two-year horizon to complete the buybacks. As we stated previously, we remain committed to returning capital to investors and have prioritized share repurchases for the foreseeable future.
We aim to be in the market consistently, buying back shares as we work to accomplish our capital management goals. Our baseline performance through the cycle is enhanced by incremental ante from our organic business growth plan and the effect of returning capital to our shareholders through share buybacks. We believe that over the long term, this combination will be a powerful driver of growth. The steady growth of these initiatives, as well as the continued less volatile performance of our execution services segment, coupled with the culmination of our multi-year integrations of KCG and ITG, has led us to provide clear detail around where Virtu results should be given various levels of ante in a given time period. We believe our performance this quarter is consistent with that guidance and value creation for shareholders.
I'd like to take a few minutes to provide an update on the recent industry discussions around market structure, payment for order flow, and wholesale market making. I provided a detailed update in our last public earnings call, and there has been no shortage of activity since then. As I have said many times, we welcome the dialogue and we are eager to have fact and data-driven discussions with regulators, customers and other constituents as we do on a regular basis. Since I last spoke to you, it is clearer than ever that our markets, especially where retail order flow is concerned, remain fair, transparent and resilient. Study after study and empirical analysis after empirical analysis continues to show that the U.S. equity markets are more accessible than ever, and U.S. retail investor experience has never been better and is decidedly better than any market in the world.
As such, we and many other market participants remain concerned that calls for reform are based on false narratives and factually unsupportable conclusions and innuendo. Today, we have a robust regulatory framework that has been developed and maintained by the SEC, FINRA, and others, which was designed to foster competition and has always been transparent, fact and data-driven, and mostly free of the politics of the day. In an effort to further enhance transparency, we recently petitioned the SEC for specific regulatory reforms to enhance the measurement and objective disclosure of the enormous benefits that U.S. retail investors receive today. We believe reforms centered on enhancing transparency and enhancing competition will deliver tangible market-led benefits to retail investors. Despite the noise, innuendo, and political environment, we are confident that the facts, data, and a desire to continue to put retail investors first will win the day.
When they look at the data, regulators, politicians, and critics will see that the massive benefits of today's competitive ecosystem, which regulation and transparency have created for retail investors. Now I would like to turn the call over to Joe Molluso. Joe.
Thanks, Doug. Sean and I will have some brief comments and then we will turn to questions. After several quarters of elevated market activity, realized volatility dropped to 11.1, which is the lowest we have seen in several years and 10% below the 2019 average. As you know, 2019 was a historically low point for volatility. Further, U.S. equity volumes were down 8% overall, and retail equity 605 volumes in the United States were down 6.6%. Despite the market conditions that were softer than the second quarter and meaningfully below the market activity of 2020 and first quarter of this year, our market-making business outperformed, realizing $249 million in Adjusted Net Trading Income, or $3.9 million per day, or 5% better than the second quarter.
Our execution services business also performed better than the market opportunity this quarter, realizing $106 million in adjusted net trading income, or $1.66 million per day. This is 5% less than 2Q. However, VES is a global business and market volumes were down a larger percent quarter-over-quarter in most regions. For example, the U.S. was down 8%, Canada was down 21%, and Europe 6%, with only APAC seeing a slight 3% increase in volumes. VES continues to contribute to our global scale and reduce the quarter-to-quarter variability to our firm-wide results. I will review some thoughts on Virtu's ability to generate growth through both organic initiatives and through the excess cash flow we generate and how this all translates into revenue and earnings growth rates.
Last quarter, we reviewed a slide which showed Virtu's ability to generate earnings at various levels of Adjusted Net Trading Income, coupled with our share repurchase capabilities. Our results year to date and this quarter are consistent with prior indications and demonstrate the earnings and growth potential of our base level of earnings power combined. A year ago, we repurchased approximately 7% of the company. This effect over a number of years should meaningfully elevate Virtu's base earnings power regardless of the environment. Our current overall debt levels are now well within a long-term sustainable nominal amount. Our quarterly dividend of $0.24 is more than secure, and we have no immediate plans for any major acquisitions. Our ability to devote most of this substantial cash flow to repurchases will continue.
The announced $750 million incremental repurchase authorization will target a two-year period. Over a really long period of time, Virtu will generate significant cash flows, however episodic. Finally, our growth initiatives, while themselves volatile quarter to quarter, are real and accrue to our bottom line with significant runway to grow. It is worth noting that while many of the initiatives included in our growth slide began only a few years ago, they will not grow in a straight line as volumes and volatility fluctuate. In the most recent quarter, we witnessed continued strength in some areas such as options, crypto, and Virtu Capital Markets, and experienced a slight slowdown in others like block ETF. We remain bullish on these initiatives and the potential for them to contribute meaningfully towards growing our baseline performance in any environment.
These organic initiatives, together with the substantial cash flow and appropriate levels of debt going forward, evidence Virtu's ability to thrive in any environment while producing significant returns to shareholders. Now on to Sean to conclude.
Thank you, Joe. In the third quarter, as presented on slide three of our supplemental materials, our adjusted net trading income, which represents our trading gains ahead of direct trading expenses, totaled $354 million or $5.5 million per day, which is 2% lower than the third quarter of 2020 and 2% higher than the second quarter of 2021. Market making adjusted net trading income was $249 million or $3.9 million per day, 3% lower than the year-ago quarter and 5% higher than the second quarter of 2021. Execution services adjusted net trading income was $106 million or $1.65 million per day, which is a 1% increase year-over-year and 5% decrease from second quarter.
Our Adjusted EPS was $0.70 for the third quarter, 11% higher than the second quarter of 2021. For the third quarter, our overall compensation expense was $84.6 million, which is basically flat from Q2. Our cash and overall compensation ratios were 20% and 23.7% of income respectively, which is also consistent with the second quarter. As I've previously said about our compensation ratio, consistent with past practice, we accrue year-end incentive compensation to a range of percentages earlier in the year. Depending upon how the remainder of the year unfolds, this may result in adjustments in later quarters as we refine our specific compensation targets. We will update guidance for 2022 expenses with our fourth quarter report early in 2022.
Overall, we believe our cost results going forward should be consistent with the specific cost guidance and actual performance for 2021. Adjusted EBITDA was $210.8 million for Q3, up from $196.8 million in Q2, down from $248.7 million in the prior year quarter. Our adjusted EBITDA margin was 59.5% for the third quarter, which is an approximately two point increase from the second quarter and continues to be reflective of our efficient cost structure and disciplined expense management. Our capital long-term debt was $1.6 billion at quarter end. Financing interest expense was $20 million for the third quarter, which is flat from both the second quarter as well as prior year third quarter.
We remain committed to our 24% quarterly dividend, which we have consistently paid over 25 quarters in every environment since our IPO. Our approximately $139 million share repurchase in the third quarter demonstrates our continued commitment to returning capital to our shareholders. With that, I'll turn the question over to the operator for the Q&A.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one question and one relating follow-up question. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Rich Repetto with Piper Sandler. You may go ahead.
Hey, good morning, Doug. Good morning, Joe and Sean, and congrats on the good quarter, and thanks for your candid remarks on equity market structure, Doug. You know, strong quarter, we're trying to understand, you know, one of your peers had very dismal results and you know, blamed it on the lower volatility. You yourselves recognize that, you know, volumes were down and volatility metrics were slightly down as well quarter-over-quarter. I'm just trying to see where the outperformance came from, if you could just highlight in retail market making, just trying to understand in the market making segment.
Yes. Thank you, Rich, and I appreciate the question. I think what you've seen in this quarter, and we've been attempting to describe it quarter by quarter, is the strength of a scaled global franchise. You know, I obviously know the competitor you're referring to, which is a great company, but they are much more of a specialized market making firm in that, you know, 90 whatever it is percentage of their revenue comes from global ETF market making, which is a great business, but that's a small part of what we do globally. You know, the philosophy behind Virtu always was, let's try to be the best bid and best offer in every marketplace you find.
Well. Through the years, we've built this scale franchise. Certainly, like ETF block market making in the U.S., you know, was a little bit down this quarter, but it gets lost in the avalanche of other results that we have. We in particular, we've grown our options business. We've done great work internalizing between our market-making businesses. Like our ETF business is now internalizing off of our single stock market-making business. Our options group doesn't have to worry about hedging their delta risk because you can hand it off to, you know, our single stock market-making business. You know, we're able to leverage everything that we do globally to really, you know, improve our market-making capabilities. Retail had a nice quarter.
Obviously, we don't break these things out independently and individually because we look at this all as a single franchise and a single firm. I think this quarter is just emblematic of what we've been talking about, you know, over the last five, six, seven quarters, which was, you know, we're gonna continue to, you know, put our heads down, work on the blocking and tackling, integrate the firm, manage our expenses. Even though, like, 605 volumes were down, like 5%-6%, this quarter, we did better in retail market making this quarter than we did last quarter because we worked hard and the strategies performed better.
Okay, that's helpful, Doug. My related follow-up would be crypto and options opportunities. They both look like great opportunities for, you know, electronic market maker like yourselves. Just trying to see where you see the bigger opportunity. Like with crypto, did the ETF approval of futures, you know, ETF, that sort of jumps out to you a bit? Where do you see more opportunities, I guess, crypto versus options?
Yeah, I think that's a great question. You know, sitting here today, I would say options to me is a very, like, large, compelling, very well-known opportunity. I mean, we can all look at what the total addressable market is. You all know what the volumes are. You know, everything's published by the OCC in terms of market making firm.
As I've reiterated a number of times in these calls, we obviously made a key strategic decision to get into this business a couple years ago, and it's been a bit of a slog, obviously reorienting our technology, our infrastructure, everything from the GUIs to the trading infrastructure to the middle and back office to make sure that we could be a competitive options market maker. We've done a lot of the work. There's more work to do. You know, we're in the early innings, so we think it's exciting because we can be a low-cost market maker. There's obviously a significant customer segment here in the United States. You know, as you know very well, we're a market maker of commodities products and FX products and whatnot.
The delta hedge there is well known and understood by us. We're in a unique position to be scaled in options. When it comes to crypto, obviously it's a newer asset class, if you will. You know, we've been monitoring it very closely. But again, we've made a strategic decision that it fits nicely into what we do as a firm. Clearly, with the SEC approving, you know, at least a futures-based ETF, that has widened the number of participants in the marketplace. It kind of plays right into the core strengths of what Virtu is all about, which is to say we are a market maker that is quite capable of interconnecting asset classes, whether they're expressed as a spot, a future or an ETF. That's exactly what is happening with crypto products.
ETFs, the core coins, explosion in ETF volumes in United States. That's obviously gonna be, you know, good for Virtu because we're an authorized participant with all the issuers that have filed. We're very well known as a lead market maker on the New York Stock Exchange. All of the things that we do exceptionally well would play right into our hand. You know, you saw, like, our friends at the Cboe decided to buy ErisX, which we thought was really interesting because really what that means, Rich, is that people have concluded that this asset class is gonna be institutionalized, right? That institutional traders want access to it. You know, Cboe, I hope we're a part of that.
We were a part owner of ErisX, so we're excited about that as an opportunity to further institutionalize crypto products as an asset class.
Got it. Great job, guys. Thanks.
Thank you, Rich.
Our next question comes from Chris Allen with Compass Point. You may go ahead.
Morning, guys. Nice quarter. Just to kind of follow up on Rich's question, just on kind of the outperformance competitive environment in wholesale market making. Looking at Bloomberg report, retail shares executed, looks like you guys are picking up share. Coincidentally, it looks like Citadel has seen a decent amount of shares since Gensler made comments around concentration risk. If you could just provide some commentary what the competitive environment looks like, whether there's been some changes, maybe in response to the regulatory pressures. Any comments?
I thought were frankly off target in terms of the competitive nature of the environment. It's always been a very, very competitive marketplace. This, you know, somehow the notion that it was dominated by one firm, Citadel. I mean, obviously. They have significant market share, but we've been punching and fighting and trying to get market share from them. Other competitors have been doing the same thing for years. It's not an easy business to be in. You need to be scaled. You're providing effectively guaranteed execution to the marketplace to be in. Frankly, three years ago, we had effectively zero. You know, we had to adapt to handle their flow. It's obviously, you know, voluminous, to put it mildly. I think we're now like somewhere in the neighborhood of 37%-38% of their marketable.
This is all public information from the 605 and 606 SEC reports. Jane Street, Hudson River, these are great firms. Good thing. Keeps us sharp. It demonstrates that the myth that somehow this is a, you know, concentrated winner. The winners ultimately are retail investors because what happened is retail brokers have made a business, market-driven decision that rather than trying to internalize or route flow on their own, there are firms called wholesalers or market makers that are really good at. We provide a service of routing, excuse me, non-marketable and marketable orders. We internalize some of them. The other ones we obtain price-improved liquidity and pass it on, and we absorb all of the costs. The system is all about. The retail brokers have made a conscious decision.
For them to outsource this business because they save on expense and also their customers get a much better execution. I know this is not the question you answered, but I can't help myself. I have to answer it. When you peel back the onion and actually look and understand how the ecosystem works, it is impossible for me to conclude that someone would look at this and say, "You know, we need to throw this entire ecosystem out." I mean, first of all, there's no statutory basis for that. We're really talking about nothing. But at the end of the day, the facts and the data are just so overwhelmingly competitive. It just shocks me every time I have a conversation with someone, most of whom are really uninformed about how this all works. There you go.
I answered a question you didn't even ask. You didn't even ask.
The competitive environment's been stable? Is that the answer there? I mean, how has that evolved maybe over the last couple of quarters? That's what I was really getting at.
Yeah, I mean, we haven't seen much of a change. Obviously, new entrants are in, and frankly, we worry about the competition. We're in constant dialogue with them. We understand the targets they want us to achieve in terms of price improvement, and that's how they route their flow. You know, obviously, you know, we continue to improve what we do as a low-cost provider. That's really the key here. That's really been the key to our growth and will continue to be the key to our growth. It's the same thing in our wholesale business, right? We view this as being scaled. The fact that we're good at non-custody technology just makes our wholesale business that much better. Thank you.
Comes from Ken Worthington with JP Morgan. You may go ahead.
Hi. Good morning. I'd love to hear how FX and commodity market making did this quarter. Was there growth in those markets from 2Q to 3Q? I know you don't break it out, but when looking at the U.S. equity business, given sort of flattish volatility and lower volumes, how did revenue capture fare in that business? I know you don't provide specific numbers, but directionally, was it, you know, up, down or flat? Like that would help me a lot. Thank you.
Yeah, sure. I mean, again, we've gotten away from looking at the various like sub-segments, I would call it, of our market making business as they become smaller parts of what we do. You know, again, I'm not trying to avoid the question. I'll try to answer the best I can, but we do look at the firm, you know, as a mosaic of market making and the scaled opportunity to continue to grow. We've pointed out like some new areas we've gotten into. In terms of, you know, like a subarea, you know, FX has been under pressure the last couple quarters or longer in FX and in commodities and volatility's been down.
In terms of how they performed, Ken, what we do is we look at like internal metrics as to what the opportunity is and then measure on that basis. It's obviously all internal data. On those metrics, both segments performed well. In commodities in particular, we've seen good growth. Really, in natural gas as well during the quarter because you saw the spikes in natural gas as we come into the September-October period. It's been a, you know, a slower area for us in the last couple, three, four quarters, and that's the low in the crude market. I can't even remember when crude went negative within the last year or two. That really impacted the ETF market as well, right?
You saw a lot of folks and a lot of the volumes in crude were impacted by that, you know, strange market event. Things like that that are out of our control. If you just look at like, you know, crude volumes since that event have obviously been pretty dramatically down. I would say overall we continue to be pleased with those segments. Joe, I don't know if you had anything to add.
Yeah, no, we're pleased with the segments, Ken. If you look at it, you know, quarter-over-quarter is always tough.
Even if you look at it versus 2019 and 2020, you know, in foreign exchange, in 2020, if you look at the volumes on the spot venues, they weren't really up much versus 2019, even in a year like 2020, and they're kind of flat year-over-year. In some of the other areas, you know, there's been an energy as well until recently, you know, really muted environments. I think over the long term, if you look, you know, versus 2019, you know, versus where we are today, we're pleased with where those businesses are. They're still very good, solid businesses.
Right. Equity capture? Up, down, sideways.
It was up this quarter, which helps our results.
Obviously, Rich had asked that question earlier, and I guess I kind of vaguely answered it. Again, we don't publish equity capture because it can be a little bit of serendipity sometimes, particularly in the retail business, when you have, you know, moments of these meme stocks that kind of blow out and there's extreme volatility, so bid offers widen. As an overall firm, including customer and non-customer in terms of certainly U.S. equities, which is the numbers that we're looking at right now, we saw an increase in capture over the quarter. I would characterize that more as kind of a growth of same-store sales. I'm trying to recall if there were moments of volatility. I'm sure there were during the quarter, but nothing really sticks out.
That's just really, you know, blocking and tackling, getting better at an increase in same-store sales. Okay. As the follow-up, just love to get a little bit more in depth in the crypto rollout. Can you talk about the evolution of the business maybe through the quarter? I see the prepared remarks where you know, broaden the resources in crypto, but are you market-making at this point in spot tokens or futures? If so, what tokens are you doing? Or is the focus heretofore still been on the crypto ETFs? Yeah, good question. To be more specific, we are connected and trading on four major spot venues with plans to add four to five additional ones.
You know, it's FTX, Coinbase, Binance, and Gemini, I think is the other one, and we're gonna add LMAX, Kraken, and a couple others. You know, we've obviously done our due diligence. There's more counterparty risk and whatnot because right now it's, you know, there's not really the kind of prime brokerage and centralized clearing, all that kind of stuff. It's a little bit of a different asset class for us. We are obviously connected to the futures world, and we are a market maker in the U.S. ETF and then all of the ETFs up in Canada and Europe as well.
I would, the analogy I would use, Ken, is it feels to me it's a little bit like our commodities business in the sense that we've got, you know, spot gold and silver, we've got gold futures, and we've got clearly, obviously gold ETFs in U.S., Canada, Europe, and in Asia. We look at that as a similar style business. You know, one of the things we're looking to add would be, you know, direct market making to retail and institutional customers that want a stream of products. Right now we're market making in five tokens or coins, I guess you'd call them, or, you know, however you would describe them. You know, we'll be judicious about adding those.
We're not gonna go too far out on the skew in terms of adding, you know, 50-odd venues because of risk management. We think, you know, being connected to those four and then ultimately those seven, eight, nine venues, we're gonna be covering 85%-90% of the addressable market in the universe. So that's kind of the business plan there. I would say, you know, we're doing a lot of blocking and tackling in terms of understanding the operations around borrowing and handling the wallet and, you know, moving, you know, coins back and forth. It's a little bit different. Trying to do it securely and intelligently in the Virtu kind of way because as I've always said, I don't want to have a Mt. Gox.
Gox type of situation, right, where all of a sudden our collateral disappears someplace. I'm excited about it as an asset class. We don't have to have the burden of saying or deciding whether or not it, there's any value to these things because the marketplace has spoken. People are interested in it. We've had retail clients come to us and say, "Can you provide us a stream?" We're in discussions with institutional counterparties that are anticipating that their clients will want this as an asset class. As it becomes more of a regularized, I guess I would describe it, or institutionalized asset class, that's exciting for us in terms of what the total addressable market would be. You know, your analysis would probably be better than mine in terms of there's no central repository to these things.
Clearly, there's, you know, a ton of volume, and you can see other institutions getting involved with it. I think we're very, very early innings in terms of where this is gonna head, but I'm excited that it fits very, very nicely into what we do as a global market maker. You know, obviously, we're gonna add people, but in terms of like, you know, connectivity. In terms of trading strategies, in terms of like operational, in terms of being a lead market maker and being an authorized participant and connectivity, we have all those things, right? The incremental spend for us to get into this is effectively, you know, de minimis or zero.
That's what, you know, again, the beauty of our scaled model is we can pivot and shift and get into these new opportunities with very, very minimal cost. Obviously, there's a focus cost, and we're reallocating people from other trading areas. But we think in this instance, it's well worth the investment.
Great. Thank you.
Thank you.
Our next question comes from Dan Fannon with Jefferies. You may go ahead.
Thanks. Good morning. Doug, just wanted to follow up on the options market making. You talked about increased symbol and venue coverage in the prepared remarks. Could you, I guess, give us an update on kind of where that sits? Either, I don't know if you want to use a baseball analogy or just thinking about what percentage of the market you're actually interacting with and how we think about the kind of full coverage or what's the goal or time period for the kind of meeting what you think will be kind of the end state?
Yeah. Look, it's a great question. I understand people are very focused on it. You know, to use the baseball analogy, we're definitely out of the dugout. You know, whether it's the first, second inning or the third inning, I don't know. But it's still pretty early innings. You know, it is a very different marketplace and very different market structure from what we are used to. We are now trading, you know, complex instruments. We're involved in a very important step to getting into what I would call customer market making or the kind of quote-unquote 605 options market making, because as you know, the market structure in options is very different than it is in cash equities in terms of off-exchange trading. Everything is done on an exchange. We're doing that.
We are very, very active in the index options, and I'm happy to report in Asia, which is a significant expansion for us. We have gone out of the firm to hire laterally where we need it. We've hired options quants and experienced options traders that have been fully vetted. You know, we combine them with Virtu technologists and people that understand market structure. As I articulated early in my prepared remarks and in answer to a prior question, the fantastic thing about the firm is that when it comes to handing off the delta hedge or understanding pricing around either an underlying stock or an ETF or a commodities product or an FX pair, all of that DNA is already within the firm.
You know, my friends that are options market making at Virtu effectively, you know, have the best hedge desk in the world, which is their own internal colleagues, right? That's really the core strength of the firm. In terms of the setup, we're now connected to all the principal options venues in the United States and understanding their DNA. I will say we're getting approached by option venues all the time because people are excited to have us as a new participant. The last piece of the puzzle is obviously from a business development standpoint, when we want to get into direct, you know, quote-unquote, retail market making, we obviously have all of the relationships with all of the big and small players that have options flow.
All of the infrastructure and business development and, you know, people understanding who Virtu is and do we have credibility, they're all there. It's really just the hard work which we're very good at, and doing the blocking and tackling and getting better. I'm very, very pleased with the progress we have made. Very, very pleased with the progress we've made in options, and I continue to be very optimistic. In terms of where we'll be, I think 2022 is going to be a key year for us. I've said publicly, and I'll say again, we fully intend to be active in the 605 business early in 2022, whether that's by the first quarter or second quarter, I'm not quite sure. It kind of depends upon how we do.
The beauty of that market structure, Dan, as you well know, is that you can experiment in terms of retail options market making by participating in the options, and that's what we're doing right now. We're learning and, you know, we fully intend to be a meaningful participant in that marketplace for the foreseeable future.
Great. Thank you. Sean, just to clarify, I think you reiterated the previously stated expense guidance for this year. I know it's early for next year, but just remind us there's no more synergies coming out from legacy transactions. We can just think about kind of a normal kind of inflation plus some ongoing spend as kind of a reasonable base framework to think about 2022.
Yeah. Big picture, I'd say yes. There's always a little bit more synergy to work on, but I'd say most of that has been realized already.
Okay. Thank you.
Our next question comes from Alex Blostein with Goldman Sachs. Go ahead.
Hey, guys. Good morning. A quick follow-up, I guess, on slide five around some of the new initiatives. I was hoping you guys could break down how much various initiatives certainly guide, you know, either for the quarter or year to date. That'd be helpful. As a kind of secondary part to that, I haven't heard you guys talk much about credit, and I think that, you know, obviously that corner of the market continues to get more electronically traded. What are some of the aspirations and the ideas you might have in credit? I think you had a partnership with MarketAxess at some point of time that could maybe propel some of those initiatives. Curious to get an update there as well. Thanks.
I didn't put it in my prepared remarks. Probably should have in hindsight, because it is. We have so many things going on. It's like you have to pray for time, opportunities. Look, we think it's an important opportunity. It's continued to be electronified. We are now connected and trading corporates anonymously on MarketAxess. We're being onboarded for venue trading in credit, which is a first for Virtu. We've done our first portfolio trades in credit, which words I never thought I would say publicly, you know, because I didn't think this would be an asset class that would be, you know, addressable by Virtu. But it is. And certainly, you know, having an ETF desk that is a significant market maker in fixed income ETFs has really helped us.
I continue to see more automation. We're quoting this in significant enough size that counterparties want to deal with us. You know, but it's a very nascent business for us, and so it has, you know, an immaterial impact on our performance to date. Again, strategically, we think it's really important. Our block desk has real credibility. We're ranked in the top five in the United States in terms of just hit rates of counterparties. We have dedicated folks, Alex, that are now in our, I guess how we call it, our credit market making group. They're attached to the ETF desk, and so we're ready, willing, and prepared to be a liquidity provider.
We've hired some business development people to go out to you know, asset managers and pension funds and folks that need you know, liquidity. We've kept it at this level of detail because there's really a mix of things. It's between you know, new businesses. If you look at the 2018 bar, a lot of these businesses underneath that 160,000 a day were zero. You know, obviously, you know, options crypto were zero. There was a block ETF desk, but it's been really overhauled and you know, we're adding new clients as Doug just spoke about. He also spoke about options in crypto at length. Alex, I think we're gonna continue to present it this way.
You know, I think the opportunities are there. We could add things to this as we need. Look, I think you know, the Virtu Capital Markets business is something to highlight, right? That business that just started last year and the performance is already double 20. You know, we hired a team, and they've done extraordinarily well. You know, we are very excited about that business. We expanded the team. We're hiring someone else to market. Look, I think we're gonna keep it at this level. Part of the reason is because it's going to fluctuate quarter to quarter.
You know, the decline in realized volatility mutes some of the real progress we've made here. We're gonna keep it at this level and, you know, we're not even talking about really transformed and I think outperformed this quarter as well. We're talking a lot about market making. When we look at it internally, the meaningful expansion in the margin of that business since we acquired ITG has been really outstanding. You know, we don't want the focus to be only on these businesses. This is a good way for us to highlight some incremental revenue that was really next to nothing just a few years ago.
Gotcha. Thanks very much.
Our next question comes from Michael Cyprys with Morgan Stanley. You may go ahead.
Hey, good morning. Thanks for taking the question. I just wanted to circle back on crypto. It sounds like you're starting to make markets in the underlying crypto coins, the physical. Just curious about your perspective on what you think it's gonna take to be successful in crypto market making. How different do you see that from other asset classes? What do you have to do differently there? And if you could also talk a little bit about which coins are you making markets in today? And maybe talk a little bit about your process around determining which coins to add.
Yeah, it's a great question. Thank you, Michael. Look, I mean, as a general matter, as I said before, it feels like, you know, any other one of our commodities market making business. So take gold. You know, we trade gold as a spot instrument. We trade gold as futures, obviously in Chicago and in other places around the world. And obviously there's been a proliferation of gold ETFs in just about every jurisdiction. Crypto coins effectively to some digital measure of wealth or value like gold. It's no different. And the strategies that we are running in crypto right now are analogous to what we would do for our gold market make strategy. So that's the kind of 10,000 ft why it's gonna work and why it makes sense for us to be in it.
As I mentioned before, however, it's an operational difference in the sense that, like, you know, for our gold market making, we would go to Morgan Stanley or JP Morgan or somebody like that and say, "Hey, could you be our—the gold for us? Can you be our prime broker in futures and in spots because we need someone to give us leverage and to handle, you know, settlements." In ETFs, obviously we'd be our own settlement person because we're self-clear in the U.S., but otherwise we'd use ABN, our partner in Europe and in Asia. In crypto today, as it sits, those institutions, the JP Morgans, the Morgan Stanleys, are largely not providing that service as a prime broker or as a settlement agent. Doing it largely on our own.
There are new types of institutions that are attempting to provide some level of like, you know, they obviously will manage your wallet, they help you move coins back and forth, and there's some leverage, but it's a different asset class in the sense that it's a new asset class, and the institutions have not yet embraced it as part of a traditional financial services offering. It's a little more work. Certainly from a risk management perspective, we have to be rather than having counterparty risk to JPMorgan or Morgan Stanley or Goldman, we now have counterparty risk to, you know, Coinbase or to an FTX and things like that. We have to monitor it more closely. Those are obviously large institutions. We feel very comfortable around the risk. It fits in nicely as a segment that we can market make in.
Obviously operationally there are some nuances, we're really good at understanding nuances. That's what Virtu's been really good about it. I would then extrapolate to say, as I mentioned earlier, there are obviously retail brokers today that are providing crypto access to their clients. Robinhood is one, and there are others that are doing it. Those firms need liquidity as well. Think of that as like our customer market making business, right? Where we act as a wholesaler. It's no different. Obviously all of those firms know us very well, think we provide good service. We've been a trusted counterparty. We are in the process of launching, we'll just call it V Crypto, like Virtu providing a stream as well.
There, the counterparty would be Robinhood or whoever the retail broker is, and obviously we know them very, very well. The last thing I would say is obviously we've got an EMS business trading. We've got analytics products as well. So as this asset class becomes more institutionalized, there's gonna be a need for institutions as well to have, you know, an EMS, if you will, to access the market, and then they're gonna have their own best execution obligations. So they're gonna need someone to provide analytics. So everything we do, all the products and services we provide, either as a market maker or as an institutional execution services counterparty, we intend to add crypto to each of those products. It's the Virtu playbook. This is like page one of the Virtu playbook.
You got something, it's a widget, we can market make it, and we can provide services as an execution services counterpart.
Great. Just as a related follow-up, if I could. I recall in the past you were a little more hesitant about getting into physical, more your entry point into crypto as a, as a separate entity. I guess what's changed from a regulatory or market structure environment that's got you comfortable to enter the marketplace? What hurdles did you overcome? If you could just maybe share some updated thoughts on ErisX and the opportunity there.
Yeah, it's a great question. Very, very fair question. I mean, I guess I got scared away by Mt. Gox, which I referred to earlier, and hacking and all those things. As we've gotten to know firms like, you know, Coinbase and obviously Gemini and Galaxy and FTX, you know, a couple of, obviously Coinbase is now a very large public company, and as Robinhood has got into it's been very. It's become clear to me that, like, number one, this is an asset class that's here to stay because there's so much value associated with it. I don't have to make that qualitative judgment. More importantly, number two, there are very credible scaled institutions and a lot of money behind them.
I don't know what Coinbase's market cap is, but it seems extraordinarily high, and obviously they've generated significant EBITDA and all those kind of things. Looking at them as a counterparty with transparency, it's less about regulation. It's more about understanding the counterparties and the transparency behind them. The other thing that's evolved is that there are a number of these wallet, you know, infrastructure, I call them crypto infrastructure companies that have come up. I'm not gonna name names because I don't want this to be a PSA for who we're using. But there's a lot of really good companies out there that are getting into the marketplace and understand. I mean, one I will name is Gemini, who we do really good work with, and they're regulated by the New York State Department of Financial Services, that kind of thing.
We feel very comfortable, Michael, with them as kind of trusted counterparties. They've got a clearing service and all that kind of stuff that we take advantage of. It's not quite obviously, as I mentioned before, not quite, you know, gold, if you will, in terms of the infrastructure that has been built up. You're seeing, you know, baby steps towards it, and that's really why we've kind of changed our tune and why we're excited about it and why we think we could kind of be in the middle of it.
Great. Thanks.
Thank you.
Yeah. Thanks for taking my follow-ups. Maybe a quick follow-up just on crypto. Maybe you can give us some color just in terms of how much capital you're deploying this opportunity, for example.
Yeah, great question, Joe. Yeah, Chris, you know, we obviously don't break out segment capital, but it's not an amount that would be considered material overall in Virtu land. I think just following up on the answer to the last question, you know, despite there being no kind of central clearing or even settlement mechanism, you know, like a CLS in FX, you know, the market's matured in terms of some of these, you know, services that Doug was referring to. The companies have matured in terms of the size and their access to the capital markets themselves. You know, our ability, it's not just the amount of capital that we look at very closely.
You'll see we put it in our supplement, you know, we put the amount of capital that we have deployed overall. It really has kind of remained constant, but enough that it's very liquid. You're able to borrow it. We've got, you know, these, you know, wallet management, you know, transfer kind of services. We, you know, feel like, you know, we're able to better examine the counterparties, right? That was always the thing with bilateral
It's a large global bank, and it's different, you know, with some of these venues. But again, the maturity and the amount of capital around them and the visibility to us has got us a lot more comfortable. But we still manage it very closely in terms of maximum exposure, etc. So.
Understood. Just getting some investor questions on just on the expense line. You said, Sean, I just want to confirm that there's no changes there, which implies on the cash comp side about $40 million-$50 million in 4Q comp. Is that the kind of correct way to think about that?
I think when you look at the full year guidance, we will be at the high end of it, maybe a touch higher. I would say that, you know, full year, cash comp and total comp, I think year to date, we're at 16% and 19% respectively. We'll be under 20% or just right around that. But we're comfortable with where we are, especially, you know, when you look at comp to net trading income, and then you look at some of the peers that were referred to earlier. I think just to reiterate what Sean said about 2022 guidance. You know, I think we've always been very specific about guidance because we've been, you know, going through large integrations where the cost base was moving a lot.
I would expect it to move less in the future, you know, as things settle down.
All right. Thanks, guys. Appreciate it.
Thank you, Chris. I'd like to thank everybody for participating today. We look forward to talking with you sometime in 2022. Everybody enjoy the rest of the year. Thank you.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.