We are gaining momentum.
Wow!
-into the home stretch. The fun guys.
Oh, boy.
again, welcome back to-
I'm like the monkey in the circus. I gotta perform.
You, you always have to perform.
All right. Pisani, I won't disappoint.
What? The 20th Global Exchange.
Yeah
FinTech Conference.
Is this really our last one, Rich?
For the time being, yes.
Ah.
Yeah, it is sad.
This guy's been so good to me over the years. He really has. This is like senior cut day.
Yes.
Right? The last day.
There is a cutoff.
You do just enough not to get expelled, and you can still go to graduation, but we're gonna have some fun.
Yeah.
Right? Uh-oh, Alex is here. I better be serious.
There is a cutoff.
Okay.
This isn't our last speaker. We have a next speaker as well.
Oh, yeah.
Doug Cifu.
The only guy who may dislike Gary Gensler more than me.
You compete.
Yeah
you sort of compete for that position.
If that's in the journal tomorrow, we're not talking, all right? Chatham House Rule. Is this Chatham, New Jersey? No. Okay, I'm sorry.
For that comment, yes.
I'm on the record. Okay. That was on background, damn it!
The Doug Cifu.
Poor Andrew. Look at him. Yeah, trying to control me. Go ahead, I'm sorry.
Is the CEO of Virtu.
Yep.
a market-
For now, yep.
One of the lead wholesale market making firms. Lead market making firms,
Yep
... in the globe, actually. We talked a lot this afternoon about the partnership that Doug has with Vinnie Viola and being right there beside him as he created Virtu.
Yep.
Really brought more automation, despite all the pushbacks that were happening at that time, and they were interesting.
Yep.
Let's get to the current environment. 2021, in really good part, 2020, 2021, really strong retail environments. 2022 was a little bit more challenged, up and down, just general outlook, we're not talking specific quarter.
Yep.
We're just talking outlook for the rest of the year, or what you see as good and not so good, you know, over the year period. Again, I'm not gonna pressure on the month or anything.
Yeah, yeah. No, that's right. Yeah, you're retiring. What do you care about the third quarter?
I-
No, look, I think I watched the last panel. It was excellent, by the way. It's always good to see professionals like Joe Mecane, who actually articulate things and don't act like complete jackasses, like I do sometimes. I have a lot of respect for him and for what Citadel does. He articulated it correctly, which is, it was not just a pandemic-driven impact to retail trading, and this is a long time coming. It was a combination of some regulatory changes, marketplace competition, which led to zero commission trading. Everybody knows the story. I give a lot of credit to the Robinhoods of the world.
You know, win, lose, or draw, whether you like them or not, they're obviously a big client of ours, but whether you like them or not, they really were disruptors, if you will, to the financial services industry. I'm sure they would like to have done some things differently than they did, et cetera. We all know that story. In terms of driving innovation, competition, reducing commissions effectively to zero, all of the good things that happened, and I say this at every one of these panels, et cetera, that I do, which is like everybody that has been involved in the industry, this isn't a Virtu public service message, should be very proud of what has... You know, the end state, if you will, and Vinnie said it very well.
He said to Thomas Peterffy today: "Imagine, Thomas, if I had said to you in 1980," whatever, when they first met, "when you were trading options on the floor of the AMEX, that you would have immediacy effectively to unlimited size from a retail perspective at sub-penny pricing to 10,000 Reg NMS names and countless option contracts, et cetera." Right? That is a unfathomable system that we all should be very, very proud of, and it's unprecedented. Globally, we're in 50 different countries around the world. We interact with retail flow in Japan and in Canada and in Europe, nowhere else in the globe is there an experience that is as transparent, efficient, and frictionless as there is in the United States, which is why I get so annoyed about Gensler's tone and his posture on this. It's all political.
It's all political, I think he has thrown kerosene onto the fire of some retail folks by casting aspersions on an industry and on retail practices when there was really no need for it, right? You know, Dan Gallagher, my friend at Robinhood, said it quite well, which is, you know, Gensler's not taking, like, a sledgehammer to a flea. He's taking an anvil to a flea. I originally, two years ago, when these proposals were first being floated, I said, you know, like. This is obviously a legal term. I used to be a lawyer, like, "Who's the plaintiff? Like, where are these coming from? Like, who's complaining so vociferously?" I understand that there was this meme stock phenomenon in January and February of 2021.
I understand that it became incredibly political down in Washington, but it's very disappointing that our chief regulator in Washington has politicized so much the markets, that we are all wasting all of our time and energy, and frankly, hundreds and hundreds of millions of lawyer dollars and other things that, frankly, could be put to much better use, trying to solve problems that, frankly, just don't exist in the marketplace, right? Even the language that he uses, right, is intentionally political. He talks about dark markets. They're not dark markets. They're ATSs. They're regulated by you. What the F are you talking about, dark markets? Right? That's why I get you know, bent out of shape about this. Obviously, it impacts Virtu, and it impacts all of our clients, et cetera.
At the end of the day, it's casting aspersions on all of the good work that a lot of great people have done in this industry, and the pioneers like Vinnie and Thomas, that saw something and acted on it and put their good names and their capital and their hard work to use, and created a system that is incredibly fair, transparent, and beneficial to millions of Americans, right? That's why I think that he has done a real disservice to the markets and, more broadly, to the country. I know this is an open meeting, and I'm happy, and I've talked to him openly about this, and to me, it's a big disappointment, and I think it's bipartisan. In my time down in Washington, there are Republicans and a lot of Democrats that privately and publicly...
You know, I started saying Gensler is a politician, not a regulator, because Ritchie Torres, who's a congressman from the Bronx, you should meet him. He's a wonderful man. There's not a thing, probably politically, Ritchie and I agree on, and we agree on that, right? What he said to me was, is really impactful to me, and he said it publicly, but he said it privately to me, which is: There's nothing that has happened that is more progressive in this country with regard to capital markets than what has happened to retail trading. It has opened up the universe of investing and trading to previously underserved communities, and Ritchie is a minority, talking about himself and socioeconomic communities.
To me, to have a, you know, progressives cast aspersions on that, it's just completely antithetical to what they should stand for, and therefore, it's just wholly political. You know, I was in such a happy mood, Rich. It had a freaking... Yeah, I was, yeah.
This is the panel.
Yeah.
I take it that the
The Panthers are down two, nothing, so I'm gonna mad, you know, anyhow.
You deserve to... Some frus-
Yeah.
Frustration.
I really mean what I said, which is like.
I totally understand.
You know, like, obviously, there's substantive issues. There's this, there's that, there's data, just the language that he uses as the Chair of the SEC, to me, is inappropriate, right? You never heard... You know, Clayton, Mary Jo, you know, we've dealt with four or five different Chairs in the last 15 years. Never have I heard language come out of the SEC like that. It's wholly political. Even yesterday, when I went on CNBC and said that we already have digital currencies, it's called the U.S. dollar, the euro, the yen, et cetera. That's for the Congress to make that determination. You're a regulator, not a politician, right? The House Financial Services Committee and the Ag Committee had a hearing on this, was it yesterday? Right? This is... Let the policymakers make those determinations.
You know, if you wanna be a politician, run for Senate in Maryland. Whatever the max is, I will give it. My wife as well.
To the other side.
Yeah. No, to him.
Oh.
He'd be a fantastic senator. He lives in Maryland, right?
Yeah.
Okay, check.
All right.
You can quote me on that was on the record.
Let's talk just a little bit about Virtu.
Sure.
Virtu.
Great company. I like it. I spent a lot of time there.
You and Vinnie electronify really again, against some process that really took this, his market, making both of your.
Yeah
... energy and ingenuity and made a market-making process electronic. As you did. Today, as you look at the markets today, is there any, and we don't want to talk about per se, about regulation, but any flaws in what you've developed on how you interact with the flow, is there any?
Yeah. I mean, look, I'm not an apologist that's gonna stand up here and say, "Everything's perfect," right? There aren't rules and regulations. I mean, you know, Joe, in the last panel, and we've been very publicly supportive of reforms and amendments to Rule 605 and 606. I mean, there's no reason that the retail brokers, our fine clients, shouldn't have disclosure obligations and more transparency. You know, a payment for order flow is just a rebate, right? At the end of the day, should it be fully disclosed? It is already fully disclosed. Should it show up on a confirm so people understand what the product is that they're buying? Of course, right?
That's not a controversial issue, and I think the industry has been very fashion-forward about that. I think the industry and market forces have made markets more efficient and continue to do so. You see it ripple through asset classes. 15 years ago, when we first started Virtu, the FX asset class, if you will, was a hell of a lot less efficient, more manual, more controlled by the large broker-dealers. Now, you got firms like Jump and XTX and Citadel and Virtu that are significant-sized dealers in FX, and I would argue that the marketplace is a lot more efficient and works better, and people have greater access to it, and transaction costs have been significantly reduced.
There are market-based solutions to all of these things. What gets my gander up is when regulators, it doesn't just happen in the United States, there's gonna be a MiFID 2.5, and then a MiFID III, and a MiFID IV, is because the folks over there, the regulators over there, pick winners and losers. They decided that the exchanges should win, they put these artificial caps on dark pools in Europe. They didn't work, right? Liquidity is like water, it finds its level. People want market-based solutions. They don't want to be told where to trade. I said this to the staff of the SEC and to Gensler, which is: You know, you think that Schwab, Fidelity, Vanguard, Morgan Stanley E*TRADE-...
they need to be told where to send their retail orders? Like, they don't have choice? It's a mouse click business. You know, every day we're working our asses off to compete with Citadel, et cetera, and the exchanges and 40 different ATSs. They send their market orders to us, not because they're getting some, you know, pernicious, conflicted like, you know, rebate or, you know, payment for order flow. It's bullshit. They send it to us because we provide a service. We provide better prices, right? The marketplace has created this unbelievable ecosystem, and it will continue to do it in asset classes around... See, everything I do comes back to Gensler. Have you noticed? Every question you ask me, I'm joking.
I've noticed that.
I think, but I really am, and I'm not some, like, you know, crazy, you know, anti-government, libertarian kind of guy. Nothing's wrong with that, but I'm not gonna go start a militia and go to Idaho. I've thought about it a few times. What bothers me is when regulators and governments get involved in marketplaces, they always screw it up. They always screw it up. The reason we're having a lot of these, you know, conversations about fragmentation and whatnot was because, you know, of what happened in Reg NMS. The unintended consequences lead to, you know, all of this agita and, you know, I'm a big believer, just let the markets work.
My what do you call it? Lack of comment is not an agreement.
You're just, like, winding me up and letting me go?
Yes.
See how much trouble I can get myself in.
Yeah, what I do appreciate is your candidness, and you.
You know, people say to me sometimes, like, "You're a CEO of a public company, how can you speak like this?" Number one, it's who I am. Number two, my partner and I get along great, and he's our controlling shareholder, so, like, I feel great about my position. Vinnie is one of them, you know, and, you know, he's a results-driven guy. He gets the P&L every day, if it's not doing well, believe me, he kicks me in the ass, right? I work really hard to satisfy him and all of our investors. At the end of the day, like, I feel very passionately about these issues, right? If I sat up here...
I sometimes I go to meetings, I say: "Okay, do you want Doug, that went to Ivy League, you know, went to Columbia for seven years and was Phi Beta Kappa, or do you want the real me?" right? You get the real me. If you want, I can pretend I'm used to be a partner of Paul, Weiss, I can speak like a fancy lawyer. At the end of the day, these are not complicated issues, right? You need to distill them down ultimately to, like, their fine points. Really what this is a philosophical, like, debate that we're having. Gensler and the, quote, unquote, "elite progressives" believe in the nanny state, right? They think they should tell us how things should work. I don't agree with that. I think that everybody out here is pretty damn smart.
I think we've created a really good market structure. I think retail investors, with the right information, can make their own choices. At the end of the day, we don't need the government to tell the Charles Schwab company where to send its orders, right? The Charles Schwab company can figure it out on its own. They don't need Gary Gensler to create some prescriptive auction that is as farkakte as it comes, I can go through the details of it, that will negatively impact retail investors and tell them where to send their orders. That's crazy to me. Crazy to me, that a bunch of academics that came in under a political mandate would want to change the equity market structure for no reason whatever, without any substantive data behind them. Think about that for a sec.
As Americans, we should all be offended by that. At least I am.
You talked about again the.
You know what? A lot of good people at the SEC agree with me. They won't say it publicly, but as soon as Gensler is out of there, they will breathe a sigh of relief because a lot of them don't believe any of this bullshit.
A-again-
We need a good head of trading warrants. You know anybody, Brett? What are you doing now? Yeah. Obviously, with that expensive sport coat, you're not in government work anymore. That beautiful haircut you got. That wasn't $15. All right.
We Brett, we appreciate having Brett, as a prior regulator here observing.
Yeah.
to see some of the how.
Boy, do we miss him?
Yeah, how regulation can impact people's strong feelings, to put it that way. Again, I appreciate your candidness.
Yeah.
I mean, I'm gonna stay neutral, like.
I understand.
Like a neutral country.
We'll talk about it. When do you retire? June 30th?
June.
Call me July 1st. All right.
Exactly. You did talk about, the partnership that you have with Vinnie.
Yeah.
Again, I'll go back to how the lunch was tremendous, to hear about how electronic trading developed.
Yeah.
You also said he gets a P&L, which to me just speaks to the discipline that he has, that he would look at.
Yeah
... every day. The question is, as you look out, you know, we've had big years, we've had down years, we've had some environments you can make a lot of money.
Yeah
... $2, you have other environment. How do you and Vinnie look at sort of the longer term profitability?
Yeah, like, I mean, look, we built this firm for. I mean, I'm 50, gonna be 58, so 57. Vinnie's 10 years older than me. I started this when I was 41 or 42, I guess, and Vinnie was obviously 10 years older. Our theory was, or his theory, which I, you know, embraced, was to create a scaled firm that could provide really attractive two-sided prices in any asset class around the world. You all have heard that story. Now, we've expanded our mandate through acquisition and through some organic changes, but the fundamental core of what Virtu is all about, it has not changed in its mission. We've obviously evolved and hired some great people, et cetera, et cetera. At the end of the day, we're not gonna change that fundamental mission. I understand we're a public company.
We take our fiduciary duties very seriously. We're big believers in being good stewards of capital. I run the firm with my partners in a very, very disciplined manner, right? I'm very, very focused on operating expenses. At the end of the day, Virtu exists to return capital to its investors. Hopefully the markets will understand that. As we continue to grow and provide that service to other asset classes and continue to be efficient, we're gonna keep paying our dividend and buying our stock back. We hit singles every day. This has never been a firm that tries to hit a double or triple or a home run. You know the story of Virtu. Be a market structure, market-making firm, try to buy on the bid, sell on the offer, manage your risk. Live to fight another day.
We're not gonna have. Yes, we've had periods where there's been extraordinary opportunities because of expansion of bid offer and because of volumes, and one that Dan Gallagher, I already said nice things about you. Dan Gallagher just walked in. He distracted me. Put a tie on, would you? Be professional.
He's at Robinhood.
Yeah, exactly.
Wear a tie.
Right. He's a disruptor. I'm like part of the... Yeah, I'm the man now, I guess. At the end of the day, like...
The establishment.
We are gonna stick to that mission and not change our fundamental nature. I think where companies get in trouble is when they panic about this, that, or the other thing, and they try to do things that are orthogonal to their mission, right? Like, the old Knight Company had a reverse mortgage business. I don't want to insult anybody. I don't know who bought that. It made no sense, right? It just was not part of the core of what they are. That's what Virtu is and will be as long as I'm living and breathing and running, which I hope is a long time, Rich. I'm working on that. I know you said I was chubby at lunch. I'm working on that, too.
I take that back.
That's all right. I still love you.
Hard not to love you. you know you're good friends when you can call him in public and tell your friend chubby.
That's all right. You did say chubby?
I, I-
Okay.
I don't have.
He admitted it, Your Honor. Okay.
We're gonna have to go back to the transcript and see that.
Yeah.
You've added to, again, your vision, and you were right there because I was visiting you before.
Yeah
... you went public and talking to you and Vinnie about how you would. The dream was, taking what you did, what you and Vinnie did humanly and put it into algorithms. Again, the tenets of creation of electronic trade.
Yep.
Now you've combined it with, wholesale market making.
Yep.
with an agency broker called ITG.
Yep.
You know, probably the most diverse trading firm, I believe, you know.
Yeah, I'd say we're a broad financial services firm. The idea was-
Yeah
... what we saw was, It really stemmed out of August 1st, 2012, when I got in to do some due diligence on Knight Capital when they had their trading error, right? Amazing firm. It really opened my eyes because I was a lawyer in private practice beforehand. I just started Virtu. That's kind of all I knew. When I saw this broad financial services firm, I said: "My gosh, look at this firm. It's got an unbelievable client roster. It's got all this goodwill. It's got some amazing, really talented people. It's not run very well, and it's got some crappy technology.
We can really add a lot of value to that as Virtu. That kind of started, Rich, us on this progression of expanding the financial services we offer, but again, staying core, very, you know, central to that mission. Any, you know, any place we think we can add value through automation, technology, and providing a good two-sided price or access to a marketplace, that's what we're gonna do.
I think, because you know, there's no doubt What's going on with the equity market structure is, you know, you're emotionally committed to it.
Yeah.
Again, you've created the most diverse...
I think it's more than that, though. It's more than that. I mean, the data and the results speak for themselves, right? That's the thing that really. Well, a lot of things infuriate me about the SEC, but the data is so damn compelling. Not only that, like, the data set that they have, the existing Rule 605, in terms of showing what price improvement, is so compelling, they, in their own proposal, acknowledge they don't even have the right data set, and yet they're still gonna do this large compendium of rules. It's crazy what they propose.
When you look at, like, the white paper we put out, the white paper, even better, that Schwab put out, what my friends at Citadel did, what Robinhood did, it's literally tens of billions of dollars of incremental savings and value that is provided to the retail investor today. They don't have an answer for that. If you look at the cost-benefit analysis they put in the auction proposal, for example, I would be charitable to say that it's incomplete. How's that, Dan? Is that okay? I mean, it's, I called it academically sophomore of what they're proposing because it is. It's like a bunch of guys got together and said: "Let's play markets here," without any substantive reason or rationale and without a cost-benefit analysis.
I almost kind of feel bad for the Office of the Chief Economist because they've been handed this, like, pile of crap, and they've said: "Okay, you know what? Here's a pile of crap. Put a bow on it and make it look okay so that it passes the Administrative Procedure Act." It's not going to. It's not going to. If this stuff sees the light of the day, the only thing that's gonna happen, I said it on Bob's show today, with regard to crypto and Gensler, is we're gonna spend years and hundreds of millions of dollars on legal fees. To me, that's, as a former lawyer, that's sinful. Trust me, lawyers charge too much. I used to do it. All right.
Yeah.
Before we have too much, I have something to say. This guy, everybody knows how wonderful Rich is and how instrumental he's been to Virtu Financial over these years. We wanna, on behalf of Virtu and my friends at the Florida Panthers, I wanna thank Rich for everything that he's done, and we wanna give him the ultimate reward. Andrew is gonna bring it up. This is an authentic Florida Panthers jersey with the fight strap.
All right.
If anyone mess with Rich-. See the fight strap.
Thank you, Doug.
On behalf of me and Vinnie, thank you.
Thank you.
Should we make him put it on? Yeah, come on, put it on. There you go. I won't fight you because I'm not a fighter. Just verbally. There you go.
He'd beat the hell out of you.
Yeah, no, you were West Point. You'd kick my ass. I haven't done a chin-up my entire life. Well, you can't get to West Point. You gotta do 15 of them. Does it fit?
You got to do the head space.
Yeah, yeah.
He's got a big head.
He's got a big head, yeah. There it is. How good does that look, huh? Someone take a picture of me and Rich with that. Yeah. There you go. All right, I hope I see you Saturday.
Yeah. Just so you know, I think I can say this: I've been to five of the seven Florida Panthers playoff games.
Home playoff games, yeah.
If I could be there tomorrow night, I would be there tomorrow night.
Yeah, we love that.
The one thing I would last say about Doug: If you're a West Point grad, I totally see why you hire this guy. Who's emotionally committed to his company besides Doug Cifu?
Thanks, pal.
Thank you.
Good luck. Thank you.
Thanks.