Massively higher profits at Virtu Financial and layoffs on hold
All that was promised is true, and more. After disclosing already that its income more doubled in the first quarter of 2020, Virtu Financial revealed today that its revenues actually rose 177% year-on-year to over $1bn, and that net income turned from a $13m loss to a $388m profit over the same period.
Pandemic-inspired March trading conditions are clearly to blame. In the presentation accompanying today's results, Virtu cited a "powerful combination of wider bid/offer plus higher volumes" that helped drive," outsized returns for market makers," as a factor in its results. Virtu said the increase wasn't just down to matters beyond its control: "strategic initiatives" to move into new markets and asset classes were also a factor. It also said the favourable conditions are continuing: Q1's surge is being sustained in Q2; average daily adjusted net trading income in April 2020 is running at $13.5m versus $12.7m in Q1 2020 and a mere $3.8m in Q2 2019.
In the circumstances, it might be supposed that employees would share in the bounty. In some ways they are: Virtu said today that it's deferring "any broad-based reductions in force in 2020." - Those planned layoffs? They're not happening after all.
lt also seems to be the case (contrary to our initial reading of the situation) that Virtu is paying more. Spending on compensation rose 58% in the first quarter, and although this appeared to have been more than offset by the doubling of Virtu's employees from 483 to 1,102 following the acquisition of ITG in March 2019, Virtu says Q1 compensation figures included pay for ITG's employees too, plus severance costs. This being the case, compensation per head at Virtu increased from $67k in the first quarter of 2019 to $168k in the first quarter of 2020.
Virtu's employees will undoubtedly be happy as a result. However, it may not last: it wasn't long ago that the firm was cutting staff in pursuit of profitability. Despite today's excellent results, the implication is that cuts will resume in 2021.
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