Good morning, and thank you for joining the Virtu Financial 2022 3rd quarter results. At this time, all participants have been placed in a listen-only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. Now I will turn the call over to Andrew Smith.
Thank you, Rita, and good morning, everyone. Thank you for joining us. Our 3rd quarter results were released this morning and are available on our website. On this morning's call, we have Mr. Douglas Cifu, our Chief Executive Officer, Mr. Joseph Molluso, our Co-President and Co-Chief Operating Officer, Mr. Sean Galvin, our Chief Financial Officer, and Ms. Cindy Lee, our Deputy Chief Financial Officer. We will begin with prepared remarks and take your questions. First, a few reminders. Today's call may include forward-looking statements which represent Virtu's current belief regarding future events and are therefore subject to risk, 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 on 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 disclosures in our press release and encourage you to review the description of risk factors contained in our annual report, Form 10-K and other public filings. During today's call, in addition to GAAP measures, we may refer to certain non-GAAP measures, including Adjusted Net Trading Income, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA margins. These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP.
We direct listeners to consult the investor relations portion of our website where you'll find additional supplemental information referred to on this call, as well as reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings material 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.
Thank you, Andrew, and good morning, everyone. This morning we reported our 3rd quarter results. For the quarter ended September 30, we generated $0.61 adjusted EPS and $5.2 million per day of adjusted net trading income, bringing our year-to-date results to $2.61 per share and an average adjusted net trading income of $6.3 million per day.
Our business performed well against the opportunity presented for both market making and institutional flows, with both exceeding our internal opportunity benchmarks. Our results enable us to consistently return capital to our shareholders through our ongoing share repurchases. As of today, we've repurchased a total of 31.1 million shares or over $870 million in aggregate. At current levels, we will continue to be aggressive in repurchasing our shares with about $350 million of remaining capacity. Our investments in our growth initiatives continue to return impressive results, accounting for 10% of our Adjusted Net Trading Income for the quarter, up from 7% in 2020 and 2021. Options remain a significant long-term growth driver for us, not just in the U.S. or even just in equities.
Our scaled approach to everything means we're already finding ways to deploy what we are learning in U.S. equity options to opportunities and options abroad and in other asset classes. Speaking of scale, as we grow in options, it will add to our competitive scale in other asset classes, even wholesale equities, as well as the potential to present lateral opportunities for us to add options capabilities to our global execution services footprint, including algos, workflow, and analytics based on client demand. For now, being competitive in options requires significant investment in technology and people to ensure that we have adequate capacity to meet our goals. We continue to make methodical progress in expanding our symbol universe and increasing our interactions with order flow from options routers. Our growth in options year to date is especially impressive given the market-wide options volumes is relatively flat for the same period.
Our growth initiatives to expand into crypto market making has continued to progress since we spoke last quarter. Our growing crypto desk remains focused on developing connectivity and technology to a growing number of the top crypto venues as we work to expand the opportunity that we can address in Bitcoin, Ethereum and other top cryptocurrencies across various forms, including spot as well as ETFs and futures. EDX Markets, our venture with Citadel, Fidelity, Schwab, Sequoia and Paradigm to develop a crypto ecosystem to serve the interests of global investors is proceeding nicely. Our global ETF block initiative also continues to contribute to our results as we focus on growing our footprint in the fixed income ETF universe in conjunction with key investments we're making to become a dealer in the market for corporate bonds.
Before I turn it over to the financial view, I'd like to speak about market structure, what's currently being considered by the SEC, and our efforts to provide facts and data to the public discourse. We believe a positive element of the advocacy work we're conducting is creating a broader understanding of the extraordinary value that the current competitive ecosystem provides to retail investors. There are a number of points worth highlighting about the market structure. First, I want to be very clear that while there are still no official proposals from the SEC, it would likely be years before certain ideas are proposed, adopted, become rules, and then are finally made effective. Virtu remains publicly supportive of several of the ideas discussed by Chair Gensler in his June eighth speech.
Specifically, we agree that exchanges should be able to display narrower quotes. Specifically, half penny quotes for tick-constrained symbols. Odd-lot quotes should be included in the SIP, and disclosures and retail execution quality reports, Rule 605, should be modernized as we requested in our official petition for rulemaking, which we submitted over a year ago. That said, historically, SEC rule proposals with the potential for substantial market impacts have followed a deliberate multi-year process of concept release, roundtables, and other forms of industry engagement designed to solicit broad and substantive feedback on a particular marketplace theme. These processes help ensure that any final proposals ultimately born out of the exercise are responsive to actual marketplace challenges and enjoy broad and diverse support across a range of market participants. Effective and efficient rulemaking is a methodical process.
Doing it right takes time and benefits from the experienced folks at the SEC being involved. This is why the SEC documented its own process, processes, procedures, and requirements for rulemaking. Unfortunately, as was recently reported by the SEC's own inspector general, the current chair and his political appointees tend to prefer speed over accuracy, and as the SEC's inspector general stated, "Lack the resources to keep up with their self-appointed agenda, potentially at the risk of adherence to the agency's own processes and ultimately the rule of law." The SEC's unchecked speed and lack of resources is especially worrisome to a broad range of market participants and investors, including hundreds of our clients, given that the SEC has assigned itself an ambitious agenda with numerous interrelated market structure reforms that, if enacted, could significantly and permanently alter our efficient, accessible, and resilient financial markets.
Despite the industry's general agreement around where the SEC should focus its efforts, the chair's repeated misstatement of facts regarding retail order routing practices and payment for order flow provides little comfort that the staff are empowered to actually listen to industry feedback or are incorporating readily available data into the decision-making processes, but are instead engaged in, as a prominent buy-side commentator noted this week, regulatory by hypothesis . We support Schwab's comment in its recent white paper that the U.S. equity markets are, quote, "The deepest, most liquid, and most efficient in the world, which allows investors to enjoy narrow spreads, low transaction costs, and fast execution speeds." Close quote. We also echo Schwab's concern that the SEC's, quote, "Calls for reform are obscuring the benefits of the current ecosystem to retail investors.
Further, we are alarmed by the current SEC's comments that reflect a divergence from the SEC's long-standing goal of enhancing and protecting the retail investor experience." We will remain earnest in our endeavors to engage the SEC in hopes they embrace the constructive engagement that the industry continues to offer to advance policies that enhance transparency, competition, and that promote investor choice and superior execution quality, rather than the current SEC's obviously politically motivated agenda. I will now turn the call over to Joe.
Thank you, Doug. Based on the guidance we have previously provided, we are on pace to meet or exceed our target buybacks and financial earnings ranges for the year. Given the opportunistic refinancing we completed back in the 1st quarter, we would anticipate share repurchases that correspond to the previously shared public buyback ranges for the foreseeable future. As was mentioned above, we have generated an average of $6.3 million per day in Adjusted Net Trading Income through September 30, totaling $2.61 in adjusted EPS and $733 million in Adjusted EBITDA, both on target with the ranges provided.
As we said in the past, we believe the range of outcomes are sustainable through the cycle, as these levels are the result of significant growth we have achieved to date to raise our baseline performance over the years, both organically and through acquisitions. Consistent with our ethos of disciplined expense management, we have successfully held costs in line despite the worst inflation since the 1970s, producing a 61% EBITDA margin year to date. As Doug mentioned, we remain committed to returning capital to our shareholders, both through our current quarterly dividend and the share repurchase program. Since inception of the share repurchase program, we have repurchased 12.2% of Virtu shares, and that's net of new shares issued for employee compensation. We have a long-term perspective and we'll continue to repurchase our shares in accordance with the ranges that we have previously shared.
Touching on the performance of our segments, market making performed as expected. Broad measures of overall and retail volumes versus the second quarter were down materially. Average realized and implied volatility were down 25% and 10% respectively. U.S. equity share volumes and notional value trading were down 13% and 22% respectively. Average daily shares at IBKR, which is a proxy for retail activity, were down 9%. Rule 605 share volume in the 3rd quarter was down 5%. All in all, our diversified market making business performed well against this environment.
Our execution services business also performed in line with the market opportunity this quarter, realizing $93 million in adjusted net trading income. It's important to note that in a quarter such as this, the multi-year integration of the ITG platform, in particular, that we recently completed allows us to maintain, invest in, and provide critical services to clients in a less than robust environment. We have overhauled and re-platformed the technology in the Algo product suite, reduced costs dramatically, and retained our broad blue-chip client base. Now I'll turn to Sean to wrap up the discussion.
Thank you, Joe. In the 3rd quarter, as presented on slide two of our supplemental materials, our adjusted net trading income, which represents our trading gains net of trading expenses, totaled $331 million or $5.2 million per day, which is 7% lower than Q3 2021 and 10% below the 2nd quarter. Market making adjusted net trading income was $238 million or $3.7 million per day, 4% lower than the year-ago quarter and 9% below the 2nd quarter. Execution services adjusted net trading income was $93 million or $1.5 million per day, which is a 12% decrease year-over-year and a 13% decrease from the 2nd quarter. Our adjusted EPS was $0.61 for the 3rd quarter.
For the 3rd quarter, our overall compensation expense was $103 million, which is up slightly from the 2nd quarter. Our Q3 cash and overall compensation rate ratios were 25% and 31% of Adjusted Net Trading Income respectively, and were 21% and 25% year to date. Adjusted EBITDA was $181 million for Q3, which was down 14% from both the prior year quarter and the 2nd quarter of 2022. Our Adjusted EBITDA margin was 55% for the 3rd quarter, which is down 4 points in the 2nd quarter, but continues to be reflective over our efficient cost structure and disciplined expense management. Our capitalization remains adequate and our long-term debt was $1.8 billion at quarter end, which reflects a debt-to-trailing EBITDA ratio of 1.7 times.
Finance interest expense was $23 million for 3rd quarter of 2022 compared to $20 million for the prior year 3rd quarter. We remain committed to our 24-cent per quarter dividend, which we have consistently paid over 29 quarters in every environment since our IPO. Our approximately $432 million share repurchase year to date demonstrates our continued commitment to returning capital to our shareholders. I will now turn the call back over to the operator for Q&A.
Thank you. If you would like to ask a question at this time, please press star, then the number 1 on your telephone keypad. We'll pause for a moment to compile the Q&A voice stack. The first question from the phone lines comes from Rich Repetto of Piper Sandler. Your line is open.
Yeah. Good morning, Doug. Good morning, Joe. I guess the first question is you pointed investors towards looking at normalized earnings. Just trying to understand, you know, over the last 8 quarters, you've averaged over $1 in EPS per quarter. The last couple of quarters have been a little bit lower. I guess, what's your view on what normalized earnings, you know, are? Is the recent quarters more sort of the trend of what retail flow should be like going forward, or do you still expect, you know, the outsized quarters just from sort of event-driven volatility?
Hey, Rich. It's Joe. Look, I think the answer to that question is that, you know, that slide that we put in, we don't have it in this quarter just because it was just so repetitive, so I won't read anything into it. But you're right. I mean, you know, through the cycle, we think we're gonna wind up on that page, right? We have $6 million on that page as the lowest number. You know, and I think we're $6.3 year to date. I wouldn't read anything into the last 2 quarters as a view on the future in terms of retail participation, in terms of the institutional business, in terms of the prop business. It's just part of the cycle, right?
I think that we, you know, our long-term goal is to continue to kind of move, you know, down that page, move from, you know, 6 to 6.5, 7, you know, up the chart by growing the business and by buying back shares. We bought back, you know, an eighth of the company here in the past 20 months or so. I think that's incredibly powerful. The buyback ranges that are in that slide, again, we didn't repeat it here, but you guys should use those as the future, you know, state looking at wherever we are. We're gonna just continue to grind through that. It's nothing more than that.
Got it. Thanks, Joe. I guess my one follow-up will be on regulation. Doug, you're pretty forceful, you know, in your prepared remarks. I guess just on 2 , you know, now that it appears, at least the media reporting that a ban on payment for order flow is off the table. 2 things being like tick sizes and this order by order competition. Could you just address, like you are in favor of some tick size adjustments? Or could you just comment on those two aspects of it? I think those are still traveling down the line.
Right. Thank you for the question. As I indicated in my prepared remarks, there are, you know, we've been very front-footed, and we put a rulemaking proposal in over a year ago on a number of topics that we would be very supportive of that I think have universal or near universal support around the industry. Obviously, some of the nuances need to be addressed. There was a SIFMA roundtable on September 13, ironically, held in Washington, D.C., that the entire industry was at, other than the SEC, which they probably should have been there. I think there was universal support for odd lot, including the odd lots in the SIP, whether or not they're protective of quotes or not, you know, is, you know, TBD.
Enhancements to Rule 605 disclosures so that investors can understand the impact of size improvement and perhaps, you know, further disclosure around the amounts of rebates that are being paid to some brokers. With regard to tick sizes, I think it's very important, and again, this is something I think that the chair obfuscates, which is that today, ATSs and exchanges can execute at sub-penny prices. There's no restrictions on that. So there are retail liquidity programs on national securities exchanges right now where executions can and do occur at sub-penny prices. So in terms of a level playing field, there's no reason that one of the 17 national securities exchanges can't encourage executions of retail orders, marketable orders at sub-penny prices. Indeed, they happen today.
We did discuss at SIFMA, which we are in favor of. There are a number of stocks that and the Cboe put out a great report on this, that if you look at the penny quoting size, there's ample liquidity at, you know, either side of the touch. It's a significant amount of midpoint executions are actually done either in dark pools or you know, on exchanges. Those tick-constrained names, it's probably useful for, you know, half-penny quotes to be displayed on national securities exchanges. There's a number of things along those lines, Rich, that we are in favor of.
In terms of, you know, payment for order flow and what the chair refers to as order by order execution without any detail, you know, we've been very front-footed on that there's just a fundamental lack of understanding by the chair as to how the entire ecosystem works, that there is competition for every order, and it's very, very wholesome and between, you know, eight or nine different wholesalers, and that the benefits of price improvement and the aggregate amount of price improvement is, you know, so overwhelming and so, you know, data-driven. I mean, the facts are out there. If you look at the Schwab white paper, they talk about $120 billion of price improvement over the next 10 years.
Essentially, by aggregating the responsibility of the wholesaler to effectively take any order that comes to the wholesaler, you would be doing a significant damage to that ecosystem in our view, and frankly, in the view of all the wholesalers. Today, investors have choices. They can send their orders to a retail broker that accepts payment for order flow. There are hundreds that do not. They can send orders to a retail broker that uses wholesalers, ATSs, and exchanges. There are retail brokers that say, "We're not gonna send orders to wholesalers. We're only gonna send them to national securities exchanges." In my view, and I think in the view of people that appreciate and want competition and free markets, all the things that the chair wants are out there.
If an ATS or an exchange wants to create an auction, there are a couple out there. If the retail brokers think that they will get better execution or best execution by sending their orders to an auction, they will do so. When regulators, and this chair in particular, start talking about picking winners and losers in a marketplace, that's where I think they go sideways. That's not. That's regulation by innuendo and hypothesis and not by allowing free markets and competition to work. That's why we will continue to be one, data-driven, and very, very front-footed, and frankly, very outspoken on this issue because we just don't think it's consistent with how markets should work. If the chair really thinks that the markets would be better with an auction, then, you know, institute a pilot program.
Say, "Okay, you know, 100 names, 10 names, 20 names, 50 names, whatever it is, needs to be sent to an auction 6 months. Collect the data, see if execution quality will improve." It won't, right? But otherwise, you know, changing an entire market structure or attempting to change an entire market structure, frankly, just through hypothesis because some academician said it might make sense, to me, is not only nonsensical, but it's not consistent with the policies and procedures of the SEC, and certainly wouldn't stand muster under the Administrative Procedure Act. It's not just Virtu saying that. Dozens of firms came back with that same sentiment.
That's very helpful. Thanks, Doug.
Yeah. Thanks, Rich.
We now have Christopher Allen from Citi. Your line is now open.
Morning, guys, and thanks for taking my question. I wanna talk a little bit about expenses, and just some of the different the adjusted OpEx lines. Cash comp ratio is up to 25%, which is high relative to prior quarters, but on an absolute dollars basis, looks like it's pretty kinda steady. Just wondering if that's being driven by the adjusted cash comp ratio we should be thinking about from a percentage perspective or just in terms of the runway from a dollars perspective moving forward. Just in some of the other lines, where are you from a scale perspective. Looking at G&A specifically, any factors that are gonna deviate or drive the run rate higher from here?
Are you fully built out, and you have the capacity and areas like options and things like that, or you need to build out further?
Yeah. Thanks, Chris. You know, on comp, it's a really simple story. We have been, you know, accruing flat, and for the 3rd quarter, we're gonna look at the year-to-date ratio, right? The flat accrual kind of generated a 21% cash comp ratio year-to-date, and we're very comfortable there. You know, if you look historically, you know, that's right in the zone, and you shouldn't expect, you know, too much of a deviation from that, you know, and depending on where we come out in revenues, obviously. You know, we've always oscillated between kind of the high teens and the low twenties on a cash comp ratio and we shouldn't deviate from that, too much. I wouldn't expect it to be the higher number in this quarter.
You know, this quarter is just a consequence of net trading coming in Q1, we're at 17%, Q2, we're at 22%. We're kind of 21% year-to-date. In terms of your other question, you know, the good thing about the growth initiatives is I think a lot of the investment is kind of done and behind us. I mean, you know, the comms and data processing line, you know, I think we're in the right kind of accrual range there. You know, it was $56 in Q1, $56 in Q2, $53 in the 3rd quarter. You should see things pretty similar going forward. I wouldn't expect any surprises on the OpEx.
You know, ops and administration kind of fluctuates. You know, there are some things that are causing that to go up, you know, like everything else, you know, things that we pay for, like insurance and rates go up, and there's some things that kind of help us in there. You know, we've got foreign subsidiaries that pay bills in different currencies, and some dollar exchange rates help a little bit there. But there's not too much noise, and I wouldn't read too much into it.
I mean, I think, when I look at our quarterly expenses in the past, you know, 4, 6, 8 quarters, and I think about the inflationary environment we're in, you know, I think, you know, that's a pretty good story there in terms of holding the line.
Cool. Maybe just a quick follow-up on just options. Just wondering where you are and your capabilities there from an infrastructure perspective. Is everything fully developed, your coding system fully developed? Is it now just basically blocking and tackling in terms of adding symbols or is there more to be done in terms of building out your capabilities there?
Yeah, it's a great question. It's kind of a hard one to answer. I don't think you're ever really fully developed and fully done with anything. I mean, even within U.S. equities, which obviously we've been in for 15 years. I'm not trying to be a punk and not answer the question, but so yeah, there's continuing development work in options. We have a very robust infrastructure that allows us to quote frankly any and hopefully be profitable, which we are in all the options contracts in the United States. We're connected to the options venues. Obviously, Chris, as you said, there's a lot of blocking and tackling as they go on to very new and different asset class for us.
You know, we've made some great strides in terms of the symbology that we are competitive in and, in taking, the first step towards, you know, taking quote-unquote, I guess, retail order flow, as you would call it, by, taking, options off of, or contracts off of options routers, which is kind of the, like, you know, putting your toe in the water and as well, having a quoting and execution infrastructure in Asia, which we do right now. You know, the good news is, as I indicated in my prepared remarks, if, you know, it's very easy to.
Once we have built out that scale, which we have, to pivot to options that have other than equities as their underlying, delta, because as you well know, we have connectivity and excellence and a lot of experience in commodities and FX, et cetera. In terms of where we are, you know, it's very early inning. Maybe we're in the second inning in terms of, you know, opportunity. The good news is that from a, you know, scale infrastructure, you know, relationship with the exchanges and making sure that we are, you know, capable of expanding, you know, we're in the kind of very late stages. As I said, you know, there's always work to be done, but I'm very, very happy with the progress that the group has made, globally.
Great. Thanks, Chris.
Thank you, Chris.
Thank you, Chris. We now have Kenneth Worthington of JP Morgan. Please go ahead when you're ready.
Hi. Great. Thank you for taking the questions, and good morning. The Virtu new initiatives have been about 10% of NTI for the last three quarters. Why has this been so stable this year as you kind of continued to build out the options and crypto initiatives, rather than showing either sort of steady or episodic growth so far this year? Maybe you can highlight the major milestones you see for the crypto and options build out over the next 2 or 3 quarters or so. Thanks.
Hey, Ken, it's Joe. I think, you know, the 10% number really, as a function of, is where we come out overall in net trading income. You know, it has been pretty steady. You know, there's they're new initiatives and that they're greenfields, and that they were only a handful of years ago, we generated nothing from these businesses. You know, and now we're generating, you know, in this quarter, you know, half a million dollars a day. But, you know, they are, you know, subject to the same kind of volatility that the rest of our business is. Yeah, I wouldn't read anything into the 10%.
I mean, I think Doug just went through some of the milestones in options in terms of you know building the business to scale and going for a broader set of symbols. You know, in crypto, I think it's still kind of early days. It's probably even earlier innings than what Doug mentioned in terms of options. We're connected to multiple venues. We are trading you know multiple coins. And you know we are doing things in a variety of ways, kind of being very incremental around it.
Okay. I guess maybe just to follow up on that. If you're having success in these build-outs, I would think that they would be a bigger part of your franchise over time. They don't seem to be. You know, is this maybe pricing where you're building the business, but it's not necessarily translating, you know, proportionally into earnings right now or NTI right now, but, you know, it will in the coming quarters? Like, I guess I'm just trying to connect those dots.
Yeah
And I-
No, again, I wouldn't read too much into the percentages. Really, you know, you're comparing greenfield businesses that are growing yet are still subscale, you know, to more developed, fully scaled businesses. I think that's kind of the 2 moving pieces that kind of cause these percentages to drop out.
I mean, I think the other point, the good news is that, like, our non-growth initiatives, so I guess you would say our more mature non-customer businesses, had a really nice quarter, Joe. I mean, they outperformed our metrics. Relative, if the, you know, the numerator is improving, but the denominator is improving, that's probably good news as well.
Yeah.
Right? The denominator, our non-core business, which we don't break out, outperformed the metrics. The growth initiatives, you know, have expanded, but they're obviously subject, as Joe indicated, to market conditions as well, right? The fact that they kept pace with the rest of the business, which, you know, did well, outperformed our internal metrics, and that's a positive.
Yeah. I mean, again, another way to say it. I mean, obviously, if you use an exaggerated example, if the non-organic businesses-
Right
You know, had declined or deteriorated, you know, the percentage of ANTI would be a lot higher, but that wouldn't be a good thing.
Right. We would have denominator, like, you know, declines, and you all would be even more unhappy, so.
Okay. Okay, great. Thank you very much.
Thank you.
You're welcome.
We now have Daniel Fannon with Jefferies. Please go ahead.
Thanks. Good morning. Just 2 questions, Joe, on the buyback. Obviously just the year-to-date numbers, I think tracking close to $430 million. I mean, sorry. I wanted to just go back to the normal sensitivity tables. You're tracking obviously well above that. I think you mentioned the debt pay down as a reason. As we think about the 4th quarter and beyond, where do you think you're—where's the normalized level should we be referring to? I guess it's just not matching up with the ANTI numbers.
Yeah. That is a very good question, actually. I think the year-to-date number is well above that range because of the financing we did in Q1 and took that opportunity to dedicate some of those excess proceeds to the buyback. I think in the future, you should refer to those buyback ranges that correspond to the ANTI per day, and, you know, hold us to kind of being within those ranges. I think, you know, going forward especially, we'll be tacking more, you know, hopefully to the midpoint or higher those ranges. You know, that's the way to look at it.
Understood. I guess so just even for this quarter, you know, you did that in the 1st quarter, but obviously even this quarter, your number is quite higher. If we just annualize the ANTI for 3Q versus what you bought back. Is that benefit of the financing done and that still pulled through this quarter as well?
A little bit. You know, we also had some realizations from some of these investments that we had done, you know, as part of kind of, you know, market structure initiatives where we get pulled in and use some of those proceeds. You know, we did this transaction with MarketAxess with our RFQ-hub, and, you know, Ares did a transaction. Some of those proceeds helped along the way. You know, again, you know, our view is we have more than adequate capital to run the firm. We have a debt level in place that's sustainable through any cycle, and that's on that range, and everything else will be returned to the shareholders. You got two factors this year.
You got those, you know, investment proceeds, like I mentioned. You've got the debt refinancing proceeds. Going forward, you know, use those public buyback ranges.
Understood. Okay, thanks.
Sure.
Thank you. If you would like to ask any further questions, please press Star then one on your telephone keypad. Our next question comes from Alex Blostein of Goldman Sachs. Your line is now open.
Hey, guys. Good morning, everybody. Thanks for the question. Maybe a little bit of a bigger picture question, Doug, for you, just around the market quality. You know, we continue to hear of liquidity concerns in sort of various pockets of financial ecosystem. You guys obviously participate in many different asset classes around the world. Any different areas of concern you see from just the market structure and the market quality perspective? Any particular asset class that you'd highlight? In light of those, are you augmenting your sort of trading and behavioral activity?
Yeah. Thank you. It's actually a great question. I think within global equities. You know, in most instruments, there's adequate liquidity. Certainly, as you go out the skew to stocks that maybe institutional investors, for the most part, are not that interested in. Again, to continue to beat this very, very dead horse, absent wholesalers, and the obligations we have to our retail clients, there candidly would not be adequate liquidity.
I mean, a lot of our institutional clients come to me and say, "You know, this narrative that retail and institutions can't interact is poppycock because we're not interested in, you know, sub-$5 stock that's under $5 that trades 200,000 shares a day." So, you know, when those orders come down the pipe, the Virtu, Citadel, Susquehannas of the world have to take them and provide liquidity. In terms of a more macro view, you know, we echo and share some of the concerns in the fixed income market, you know, not with just active treasuries, but off-the-run treasuries where there's just not the same level of big dealer participation. I think that is wholly regulatorily driven. Bad facts make bad law and end up in bad results.
The government scratches their head and says, "How come banks aren't holding the inventory?" Well, because you told them not to, and you charge them a lot for it. That's, you know, unfortunately, an offshoot of the financial crisis. You know, maybe the unintended consequence of that is that, you know, the Treasury market, you know, has had some creakiness in it. One of the reasons that we have gotten into, in such, you know, for us, such large scale fixed income ETFs and now credit trading, is that there's an opportunity for non-dealer, you know, non-big dealers, if you will, to be significant market makers there. I would not have thought five years ago that Virtu would be, you know, a quote-unquote, "dealer" on MarketAxess , which we now are.
I would not have thought that Virtu would have, you know, the ability to price and create and redeem on a bespoke basis, fixed income ETFs as we now do. You know, it's obvious that Jane Street and other great firms have stepped into the void created by this regulatory environment. That's a great opportunity for us because I think there's. It's greenfield. As I said, we weren't doing this even three years ago in any meaningful size. It's only because our acquisition of KCG that we saw this opportunity. I think credit is probably the one area, to answer your question more directly, where we see, you know, pockets of liquidity and the need for incremental liquidity providers. We're never, ever going to replace the large dealers. We're not Goldman, we're not JP Morgan, and we don't want to be.
Those are very, very different and wonderful institutions. There is a need for non-bank liquidity providers, you know, like Virtu and the, you know, dozen or so or other firms that can do that. Look, it leverages our core strengths in terms of pricing ETFs, distributing, those prices to the embedded client base that we have, the same great clients that we have in retail and in other areas that are looking for prices. It's just another incremental benefit to the scale that we have. It's not just here in the United States. You know, we are building out and have a fairly robust ETF block, I guess you would call it, desk in London and in Dublin.
It's one of the benefits of our ITG acquisition because ITG had an agency, ETF pricing business, and so we were, you know, well known. They were well known to institutional clients, pension funds in Europe. That's a great opportunity for us as well. Again, driven largely through this regulatorily induced vacuum of liquidity, that the big dealers have faced because of capital charges, Volcker, Dodd-Frank, you know the rest of the narrative.
Got it. Super helpful. Thanks for that. My second question, a little bit more nitpicky, but I guess I was hoping you could unpack the dynamic between trading revenues and sort of cost of trading this quarter, particularly on the market making side. I guess we can look at, you know, some of disclosure you guys have in the back. The trading income, I think, was flattish quarter-over-quarter, but B, C, and E and payment for order flow was up, I want to say in the teens, again, sequentially. Typically, these two kind of move together. Maybe just give us some sense of kind of what's been driving the divergence this quarter. Is it just, you know, higher margin requirements and maybe higher interest rates charged by the FCMs and prime brokers?
How should we think about, I guess, that relationship going forward?
No, it's not the latter. It's just more of what you were kind of alluding to before in the former. It's just mix of business. It's just mix of business between, you know, the prop market making, the customer market making and execution services.
Okay. Within asset classes, right? Because on the execution services, I think it was fairly consistent, but the divergence was larger on the market maker.
Right. Exactly. Again, that's just mix of business.
Got it. Okay. Thank you very much.
Thank you.
Thank you.
Yes.
We have no further questions on the line. I'd like to hand it back to Doug for any final remarks.
Thank you so much, and thank you everybody for participating today. We hope you all enjoy the end of your year, and we look forward to chatting with you in late January, early February. Thank you. Have a great day.
Thank you all for joining. That does conclude today's call. Please enjoy your day. You may now disconnect your lines.