Markets News

UPDATE 2-Trading firm Virtu's quarterly profit tops views as volumes surge

(Adds details from conference call, CEO quote, file picture available)

NEW YORK, Aug 7 (Reuters) - Trading firm Virtu Financial Inc on Friday reported better-than-expected second-quarter earnings, fueled by a surge in trading by retail investors as markets rose from lows hit earlier during the coronavirus pandemic.

Virtu, one of the world’s largest market makers, provides a nearly continuous stream of buy and sell quotes in global assets, including equities, options, and fixed income, for investors to trade against, profiting from bid-ask spreads. The company also executes trades for institutions, banks and broker dealers.

New York-based Virtu earned $335.3 million, or $1.58 per share, in the quarter, compared with a loss of $55.5 million, or 27 cents per share, a year earlier, following the company’s $1 billion acquisition of brokerage ITG Inc.

Stripping out one-time items, Virtu earned $1.73 per share, 13 cents above analysts’ estimates, on average, according IBES data from Refinitiv.

Retail participation in the stock market exploded in March, as shares soared in response to government stimulus aimed at countering the coronavirus’ economic impact, and Main Street investors cheered a recent move by large U.S. online brokerages to eliminate trading commissions.

“While the work-from-home paradigm has also been a contributing factor, the drivers of increased retail activity are part of a long-term secular trend, which has been accelerated by events this year,” Virtu Chief Executive Officer Doug Cifu said on a conference call.

Trading revenues rose 261.3% from a year earlier to $744.0 million, the company said.

However, Virtu’s shares fell 5.5% to $23.24 early on Friday after the company said net trading income fell 36% in July from June, though it was still well above year-over-year levels.

Virtu executes around 30% of all U.S. retail stock trades, which now make up about 20% the market’s volume - double the historical average, Cifu said.

Total revenues rose 141.5% to $905.9 million. (Reporting by John McCrank; editing by Steve Orlofsky and Nick Zieminski)