Virtu beats forecasts as trading volumes spike on coronavirus turmoil

NEW YORK (Reuters) - Trading firm Virtu Financial Inc VIRT.O on Thursday reported first-quarter earnings well above Wall Street expectations, as the coronavirus pandemic sparked unprecedented market volatility and retail traders scrambled to react to market moves, boosting trading volumes.

Results at Virtu, one of the world’s largest market makers, swung to profit from a year-ago loss, with net trading revenues more than tripling from a year earlier to $802.5 million.

Trading volumes surged in the quarter as markets whipsawed in reaction to countries shutting down non-essential business in an attempt to slow the spread of the coronavirus.

Virtu provides a nearly continuous stream of buy and sell quotes in global equities, options, fixed income, currencies and commodities, for investors to trade against, earning profits from bid-ask spreads. The company also executes trades on behalf of institutions, banks and broker dealers.

Stripping out one-time expenses, like acquisition costs, Virtu said it earned $2.05 per share, well above the $1.39 per share average estimate by analysts, according IBES data from Refinativ.

The flurry of trading activity continued into April, with retail investors playing an outsized role in the markets, a trend that began after large U.S. online brokerages moved to commission-free trading in late 2019, Doug Cifu, chief executive officer of Virtu, said on a call with analysts.

“Retail as a percentage of overall market volumes has increased substantially,” he said.

“When you can do something for free, I guess people do it more often, and number two, since a vast preponderance folks are working from home or at home, there’s more opportunity to trade during the day.”

Virtu earned $388.2 million, or $1.80 a diluted share, in the quarter ended March 31, versus a loss of $13.6 million, or 7 cents a diluted share, in the year earlier period, which included costs from the company’s $1 billion acquisition of brokerage Investment Technology Group Inc.

Virtu reported $1 billion in revenue, handily topping analysts’ expectations of $563.8 million, mainly on the higher trading volumes.

At Virtu, 95% of employees are working from home, Cifu said.

While Virtu is developing plans to bring small groups of staff back to the office once it is safe to do so, the New York-based firm will not pressure staff to commute or return to the office before they feel comfortable, he added.

The company also said it would not initiate any broad-based layoffs this year.

Reporting by John McCrank; Editing by David Gregorio