High-speed trading firm Virtu beats earnings estimates amid volatile markets

(Reuters) - Virtu Financial Inc VIRT.O, the high-speed trading and market-making firm, on Friday reported first-quarter earnings well above expectations, helped by high levels of market volatility in the period.

Virtu earned $410 million, or $1.86 per diluted share, compared with $145 million or 10 cents a diluted share a year earlier.

Stripping out one-time items, such as a $329 million net gain from the sale of fixed income trading platform BondPoint, Virtu earned 76 cents a share. That was 15 cents above the average estimate of analysts, according to Thomson Reuters I/B/E/S.

A stock market selloff in early February spurred volatility in the markets, which had been unusually calm in 2016 and 2017, driving trading volumes higher as investors tried to hedge themselves.

“This environment clearly played a significant role in our Q1 results,” Virtu’s Chief Executive Officer, Doug Cifu, said on a conference call with analysts.

Virtu, a market maker in equities, options, fixed income, currencies and commodities, bought rival KCG Holdings Inc in 2017 for around $1.4 billion and has been integrating the two firms while stripping out costs.

Market makers commit their own capital to offer to buy securities from or sell securities to broker-dealers, banks and institutions.

Because the market-making business thrives on volatility-driven volume, Virtu’s stock was seen by many investors as a way to get upside exposure to the market turbulence. That interest drove the company’s stock up 88 percent from the end of January until Thursday’s market close.

On Friday, Virtu’s stock was down 5.6 percent at $33.95 in early trading as investors tempered their expectations following the company’s acknowledgement that the volatility from the first quarter had eased in the latest quarter. The stock sank 6.7 percent at the open.

However, the trading environment “does remain decidedly better than the second half of 2016 and overall 2017,” Cifu said.

Virtu’s revenues totaled $815.1 million in the quarter, versus $147.3 million for the same period in 2017.

Net trading income nearly tripled to $406.2 million from $139.6 million for the same period in 2017.

Reporting by John McCrank in New York; Editing by Jeffrey Benkoe