Ladies and gentlemen thank you for standing by and welcome to Virtu Financial 2019 Third Quarter Results Conference Call. At this time all participants are in a listen only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to your speaker today Andrew Smith, Senior Vice President Head of Investor Relations and Corporate Strategy. Please go ahead sir.

Thank you, Jacqueline. Good morning everyone. As our third quarter results were released this morning and are available on our website. Today's call may include forward-looking statements which represent Virtu's current belief regarding future events and are therefore subject to risks assumptions and uncertainties which may be outside the company's control. Our actual results and financial condition 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 upon 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 disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report and Form 10-K and other public filings. In addition to GAAP results we may refer to certain non-GAAP measures including adjusted net trading income adjusted net income adjusted EBITDA and adjusted EBITDA margin. Non-GAAP measures should be considered as supplemental to and not as superior to financial measures prepared in accordance with GAAP. Joined a reconciliation of these non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful as well as how management uses these measures. When used on this call adjusted net trading income refers to our trading income net of all interest and dividend income and expense and all brokerage clearing and exchange rebates and or fees. Speaking and answering your questions today are Mr. Douglas Cifu our Chief Executive Officer; and Mr. Alex Ioffe our Chief Financial Officer. They will begin with prepared remarks and then take your questions. I'd like to turn the call over to Doug.

Good morning. Thank you, Andrew. Thank you also for joining us today. Today I'm very pleased to report our financial results for the third quarter of 2019. While the third quarter was punctuated with periods of volatility and uncertainty across the global markets on the whole the market environment was similar to the second quarter. Despite this backdrop both our Market Making and Execution service segments were able to capitalize on some episodic volatility and otherwise performed in line with our expectations. In short our results reflect our continued disciplined focus on achieving and executing on our strategic and sustainable growth initiatives across both our business segments. In my remarks today I will highlight the exciting progress we've made in the short eight months since we closed the ITG transaction on March 1st and discuss our strong performance in spite of the muted opportunity in the quarter. Looking first at the integration and product enhancements, while much runway lies ahead let me tell you about the distances we've come. Most importantly client feedback has been overwhelmingly positive and constructive. We continue to receive support and constructive feedback from our global institutional client base as we invest in our global-scaled platform to accelerate our sustainable growth and offshore opportunities. These opportunities include initiatives that we previously discussed like re-platforming and improving the latency of our alert block crossing product re-platforming and enhancing our global EMS Triton and bringing true multi-asset class capabilities to the new Triton platform as well as new initiatives like our new FX and fixed income modules for our analytics toolkit and our recently announced execution concierge service outsourced trading offering. I'm pleased to tell you that in the three months since our last call we have begun to deliver on each of these initiatives. Alert is a…

Thank you, Doug. Good morning everyone. It's good to be here. Our GAAP results for the third quarter revenues of $385 million net loss of $4.1 million and diluted loss per share of $0.04. Normalized adjusted EPS removing onetime integration costs and noncash items was $0.21 compared to $0.16 in the prior quarter. The prior quarter was the first full quarter after the ITG acquisition and a relevant basis for comparison. We closed the ITG transaction on March 1st of this year and I will provide details on the financial progress of this integration in a few minutes. Adjusted net trading income which is our trading gains net of direct trading expenses was $250 million in the third quarter. That is 4.5% better than the last quarter driven by a 3% increase in the average adjusted daily net trading income which rose to $3.9 million and 1 additional trading day in the third quarter. Within that our Execution Services segment was 43% of the adjusted net trading income and market-making was 57%. The addition of ITG helps improve the consistency of our results. A substantial part of the Execution Services trading income which has recurring subscription income components came from the business lines acquired from ITG. As Doug described in detail we are enhancing legacy ITG products by leveraging existing Virtu capabilities to modernize the underlying technology. Improving latency for Alert products adding multi-asset capabilities for the Triton EMS and new features to put analytics products. We are also extending our product set to fill the needs of institutional clients by: one utilizing our existing capabilities with what we call Execution Concierge Services which is outsourced trading desk; and two adding new capabilities with Virtue Capital Markets. Our goal is to leverage our technology and market knowledge to bring together…

[Operator Instructions] Your first question comes from Rich Repetto from Sandler O'Neill. Your line is open.

I guess my question is on the global FICC options and other. I mean strong outperformance it was up 39% quarter-over-quarter. And I guess could you go and give us a little bit more specific details on the outperformance in that segment?

Yes. Thanks for participating, Rich. Yes a couple of things. One is during the quarter I mentioned in my remarks that there was periods of episodic volatility. So we had during the quarter a spike in energy volumes and energy volatility for example thanks to some upheaval in the Middle East. And so there were events like that. On the organic front I mentioned in my remarks as well that like our options market making business has started to perform. There were some good opportunities in the quarter. And as well on the ETF side there's significant opportunity traditionally in fixed income. And so that gets classified in that area. So we've become as I mentioned on the last call we are now a participant -- excuse me in credit in 2019. So we're seeing opportunities both on the fixed income ETF side but also on the credit side. So it's really a combination of those. If you look at the volatility on energy for example in the quarter I think it was up something like 280% although the CME volume was down. There was that brief period of time I think it was in September when you really saw WTI and CL spike in terms of volatility. And that's kind of the virtue story right? We're there to capture volatility and provide two-sided prices. During times of stress we continue to trade during that very serious geopolitical event and it resulted in some nice P&L pickup. But also I would stress the organic growth of our options business and our block ETF business as well Rich.

So it seems like you're pretty positive on I should have I'm remiss in not asking a sort of the outlook. But I do want to do my 1 follow-up on a different topic but it's a zero commissions. And just trying to get a feel for the communications with the ebrokers I know some have expected that did the some efforts to try to increase payment for order flow excuse me versus price improvement etc. And I know your margins are very thin now. And then what you're seeing since these the cuts went into effect in the beginning of October?

Yes. I mean I'll speak very generally. I never talk about a specific customer publicly. And obviously I'm not going to do that here. But I think generally here's what I would say. I view this move toward zero commissions as just part of a larger mosaic that we're seeing in the financial services market around efficiency and scale. And this is what we Vinnie and I preached this from when we started Virtu in 2008 and we are still seeing from the same sheet of music which is if you are scaled and efficient you will do well. And customers whether they're retail or institutional or otherwise are going to demand efficiency and scale to your business. And so this is just a natural to me evolution of the market and it is made possible by the good services of Virtu Financial. And to give them credit Citadel Susquehanna Two Sigma or other great firms that our wholesalers or market makers in what we refer to as the 605 space. So I think and this but the lion share of what we provide and I mentioned it in the script is price improvement. So that means that we are actually providing a price that is better than the national best bid or best offer back to the retail end user of the 200 or so retail brokers that we do business with. We provide price improvement to every retail broker that we do business with period end of story. There are some of them that in addition to that will take a rebate from us right as part of our interaction with them. Everything is fully disclosed. Everything is fully transparent. We don't have customers that are sending us orders based on the size of the rebate. We are…

Your next question comes from Alex Blostein from Goldman Sachs. Your line is open.

So Doug maybe building on that last point you talk about efficiencies and scale becoming increasingly important. And we can debate whether or not payment for the flow pricing will go up because the brokers need to make money somewhere. But if they do -- if that happens how does it change your M&A opportunity set? Because it feels like there will be other small players that could feel incremental more pressure. So as you kind of evaluate the landscape over the next couple of years how big of a driver do you anticipate M&A to be for Virtu?

Yes. Thank you, Alex. I mean I think first of all just a follow-up on the 605 theme and these are all public statistics. And since I'm saying now they're FD public but our market share in 605 land particularly with regard to marketable orders in September was up over 200 basis points right? So obviously we're doing something right in terms of providing both a good service and a good price to as I said the 200 odd retail partners that we do business with. So we're committed to that business. We think it's a great business. It's a long-standing night business that we've been privileged to inherit. And I think we've made it better and more streamlined. There's a larger theme here Alex which is and it's you see it on the institutional side I'm not going to name names but you know the large institutions that have either gotten out of the equities business or scaled back their infrastructure in the equities business because commission rates aren't going up the pool is going down right? And so there's these large seismic shifts that are going on in the marketplace. And all the big small medium-sized broker deals are trying to deal with it. I think the most important theme and this is what we've been stressing frankly since we started Virtu but this was the theme behind the acquisitions of Knight and ITG is that we're going to build a truly scaled and we have the ability to build a truly scaled really efficient firm that can provide prices. We can provide those prices as a principle we can provide those as an institution. And on top of that we can provide really a droid-skilled -- scaled excuse me financial technology products like Triton like analytics like…

And my follow-up and I guess speaking of cash. So the Capital Markets business that you guys have announced today and the initiatives that are kind of taking place there. How meaningful a revenue contributor do you expect these to be over the course of the next call it 12 to 18 months? And does that at all impact the balance sheet intensity or sort of capital utilization of the business that might impact your deleveraging plans and buybacks etcetera?

Look the answer is each of these things individually are nice businesses. In the aggregate they're significant right? That's really what we're talking about. So our ETF block business has grown 31%. We're now a meaningful options market maker. I've said that the revenue synergies I said today are on a run rate for $40 million this year right? The ATM business we have it in our supplemental materials on Page 8 we're showing you the size of the opportunity right? I'm not suggesting we're going to have double-digit market share there's a lot of great competitors in this business. But again it can be a meaningful business. Jeff and Josh have done this for a long time right? So all of these things are additive to the opportunity set. The key point is that the -- we have all the infrastructure right? So we -- sure we had to bring Jeff and Josh and a couple of other talented folks into the firm because they had subject matter expertise that we did not have but all of the accoutrements that they needed are here they're here. So there's no incremental investment that is needed. On the capital side we're acting as a conduit as an agent if you will. So there's really no incremental capital for the ATM business other than obviously having a self-clearing broker-dealer that has full distribution capability. We already have that. So all of the things that we've talked about Execution Concierge Services the ATM business even the options making on the ETF business that's all done within the structure of our broker-dealer which as we announced on the call on the -- as part of the script we've merged all of our broker-dealers. So we've brought even more capital efficiency there. So we just paid back $50 million last week. We announced our dividend. So we're on plan for our deleveraging and maintaining our dividend while at the same time trying to grow the firm.

Your next question comes from Ken Worthington from JPMorgan. Your line is open.

Maybe first and along those lines you mentioned the merger of the KCG and Virtu broker-dealers. You paid down the $50 million of debt. What are you considering for the other $50 million? Are there more capital efficiencies that can be freed up from the ITG acquisition? And then with this merger of the broker-dealers are there any other benefits that you expect to see either on the trading side or expense side that come from the integration?

So you're correct. We are migrating clients from the ITG broker dealer whose name I forgot into this large Virtu broker-dealer. So at the end of the day we will have in the United States one large-scale broker-dealer that acts as both as a principal and agent with different ad units and all that stuff that you know very well. So we are bringing efficiency. With regard to the other $50 million it's in the broker-dealer today right? So we're going to...

You're absolutely right Ken. It freed up a little over $100 million altogether. And we're keeping the other $50 million in the broker-dealer.

Yes for the time being and just to see kind of -- yes to see how it kind of plays out. So our capital needs Ken haven't changed dramatically right? So if we put on a larger position here and there. The business. We explained it to you. We have flexes where we need to have flex funds effectively available to satisfy those. But in terms of getting into some new business lines where there's a dramatic need for incremental capital that's not in my DNA right? We're not changing the DNA of what the firm is about. We're just trying to create as much internal efficiencies. And having two or three broker-dealers with separate RBH and with separate compliance and audit requirements just didn't make a lot of sense from our perspective. And so that's why we're doing -- we're mushing it all together. You're going to see that globally. The most important thing though operationally from the convergence of these broker-dealers is internalization. I don't think people understand how important that is and how candidly good at legacy Virtu was at that. We built our firm and our financial technology on the basis that everything can and should be internalized applying that financial technology and that DNA and that rigor now to the night and even the ITG business is monumentally important. It's not just exposing the order or the intention to the marketplace it's the friction and the cost of doing that. So if we can internalize more flow we're going to reduce our brokerage commission and exchange line which we never talk about right because we always talk about everything in terms of net trading right? But we make a lot of gross P&L and we pay a lot of it back to exchanges and to brokers. If we can reduce that that just creates more net trading opportunities for the firm.

And then on the net trading revenue net capture were both under pressure this quarter. I know there's a lot of moving pieces some things are better some things were worse. What I was hoping to do is dig a layer deeper on the one or two factors that may be helped for the quarter. And one or two factors that may have hurt for the quarter. You had mentioned volatility being better but OTC volume being lower. Could you go a step further or a layer deeper to help us better understand maybe one or two of the positive things and maybe one of the two of the negative things that had the impact this quarter?

Yes I'll give you the positives. And when we talked about -- I mentioned in the script already or answered to Rich's first question which is there were some opportunities in the energy complex this quarter where you saw a big spike in volatility. That just by definition is going to enhance your capture rate. And then there were some China volatility some Trump Tweet-related volatility. Those are always going to be positives. I would say the ETF block business as a capture rate Ken particularly globally is a positive to our overall capture rate because it's more segmentation and bespoke liquidity we're providing directly to counter-parties right? So you're going to by definition you're taking more risk and you're providing a better service so your capture rate is going to go up. So those are the positives. I would say the pressures and these change quarter-by-quarter is when you have the U.S. equities volume that is flat and it was coming off a quarter that was not a great quarter. And you have -- volatility goes up but you really -- you went from an $11 and change realized volatility to a $15 and change realized volatility although on a percentage basis that's meaningful as an absolute matter it's really not that meaningful right? So you continue to see pressures there. And then as you mentioned the two end issue that we look for is interactive brokers numbers because they give you a per share number but also the OTC number that you alluded to. I think it was down like 10-ish percent in the quarter. So just the addressable opportunity is going to contract, when you see those types of metrics. And so those are the positives weight against to the negatives. And I think the wash share was a directionally positive quarter and that we performed better. But obviously we think there's enhancements in organic growth and we continue on.

Your next question comes from Ken Hill from Rosenblatt. Your line is open.

First question I guess is on the dividend. You talked about some of the capital gives and takes during the quarter. But 5% to 6% dividend yield is still really attractive. Just curious despite that really attractive dividend you don't tend to get a lot of credit for that and the stability of the shares. Do you guys ever kind of reconsider that given the ownership structure as far as maybe reallocating to other areas via repurchases? Or other kind of growth areas that might add to the revenue kind of enhancement over time? Just curious to get your help there.

Yes. No it's a good question. I mean obviously you could probably answer better and your colleagues that are asking me these questions could probably answer better why we don't get that credit. I have -- we've paid a dividend you can have to verify this since 2009 right? And I'm a very large shareholder and we will continue to pay a dividend as long as I have anything to do with it. I've told people I would sell this lovely table that I'm saying before I would cut the dividend. That's how impassioned I am about it because I think it's my job. My job is to return capital to my investors my partners that I started the firm with and now the public shareholders and that's what we do here. We do not need to add incremental capital for our growth initiatives. That's one of the core strengths of Virtu. That's one of the continuing themes that I'm always going to hammer on which is we've built this fixed cost plant that scales exceptionally well. We can add the Capital Markets business Execution Concierge Services. We have chosen not to go out the spectrum of risk which requires more capital because that's not in our DNA. Ultimately we're a market-making firm we're not a hedge fund. There's nothing wrong with being a hedge fund but that's not our business. If you want to run a hedge fund you need billions of dollars of capital. If you want to run a market maker you need billion dollars of capital. It's not risk capital it's facilitation capital. That's the most important distinction that I've always tried to make. So all of the income investors out there yes they should buy a Virtu. It doesn't make any sense to me. When the Fed's reducing interest rates and you can get a 5.5% 6% return from what I think is a growth stock it makes a lot of sense. But again I'm not great at apparently convincing public investors because you're right that narrative seems to have been lost in the weeds. There was a second part to your question which I got excited about the answer that I've forgotten. Did I answer your question Ken?

Yes, you answered as far as where you're allocating capital and dividend strength there. The second question I guess I have is on Execution Concierge Service. You just recently launched it in October. I was hoping to get an update on what kind of indications of interest you're hearing from folks? And just anything more broadly about the October environment that you care to share?

Yes that's a great question. Yes look I mean we've -- subsequent to the announcement there was a nice press release and we got some good press on it which was great. We were inundated with inbound. And Jack Polina who runs the business long term of ITG fellow's been here over 20 years has been out and about. We have signed our first customer. We announced that last week right? And so the profile of a customer runs the gamut of your small to midsized firm that is thinking about outsourcing either the entirety or a substantial portion of the trading desk because of cost concerns right that's a natural we're all feeling it right? Again the theme of efficiency and scale. If you're an asset manager what are you great at? Well you're great at hopefully generating alpha and distribution of that product. You don't need to be a subject matter expert in trading less the subject matter experts i.e. Virtu do that for you. And as well larger institutions that are looking to outsource perhaps part of what they do internationally. Let's not -- I trade 20% of my book in Asia I don't want to set up a Hong Kong office. Virtu can you do this for of course that's a solution. So, I think again from our perspective the incremental cost of Virtu getting into that business was effectively zero right? We had a commission management business that's been led by a great project for the last 20 years. We obviously know how to trade and we got algos and we've got connectivity. We own ITG nets or are connected to all the brokers. We're completely non-conflicted. So you don't have to use a Virtu algo. You don't have to sell a Virtu product. This isn't about research or investment banking it's about giving you the opportunity to execute through whoever you want at a low-cost and the most jointly that you possibly can globally. And we think we can provide that service at a per unit cost that is competitive with any of you on the street because our incremental cost of providing that service is effectively zero. That's the theme. Using our assets, using our scal, using our technology to provide really good products and services that individually may not move the dial but collectively they're going to start pushing this dial to the right.

Your next question comes from Dan Fannon from Jefferies. Your line is open.

My question is on the regulatory front. Last year the kind of exchange market data kind of was a focus of Virtu. If you think about the next kind of 12, 18 months, I guess can you talk about the 1 or 2 areas you're most focused on?

Yes good question. Yes I mean I think the -- and I haven't mentioned this before on calls. But I think one of the offshoots stand of this race to zero around commission is 605 reform. We've been -- I've been beating the drum probably a little too quietly and I'm generally not a shy guy so we're going to start beating the drum a little bit louder. In terms of really what a market maker can provide best service to an end user is when the end user is willing to segment flow in a way that makes sense right? So not all retail flow is the same not surprising. A 200 share order for mid-cap stock is very different from a 9,000 share order for Amazon right? Everybody would agree and it's a lot more challenging for a market maker to handle that 9000 share order. Under Rule 605 which was created before there was an Amazon before the company even existed right? That's how antiquated it is if you will right? Those two orders are kind of handled the same way. And we provide price improvements to each of those. I don't think that that makes a lot of sense. Like, I was a little bit of a newcomer to this industry as you guys know. And looking at that I say that doesn't make a lot of sense. So we have been quietly working with our partners in terms of trying to create a more sensible way to segment flow. And I think there's a regulatory solution and Virtu is going to go public with some of our thoughts around that because we want to be a thought leader there. I think that's an important way to make the industry better and ultimately send that price improvement to an end user that is probably a little more akin to a retail investor than to an institutional investor. I think that's one area of intense focus. In terms of some of the other regulatory items around Market Data and Connectivity I think that's -- obviously there's litigation going on in Washington, so that's kind of grind to a halt. Same with the access fee pilot because there's such animus right now. Obviously we've been at the center of a little bit of that maelstrom and we did that for the right reasons. But I think ultimately our main priorities are going to be around 605 reform for the next six to 12 months.

And zero commissions with additional incentives for that to go forward.

And then just to follow-up on expenses. Alex you mentioned some of the moving parts with regards to kind of the synergy expectation of the lower half for this year versus next. I guess as we think about a revenue environment that continues to be not as constructive what are the levers that you have to kind of pull forward or reduce kind of expenses particularly as we think about kind of 2020 in that baseline level of kind of investment or trajectory of expenses that you might have?

Well the biggest levers we have is really continuing to consolidate companies. The ITG integration continues and should be in very good shape toward the end of 2020 to get the most bank in terms of synergies and reduction in expenses.

Okay. I guess just -- is there anything in specific? You talked about I think some duplicate rent or sub sublease stuff like is that we should -- is that just timing associated with the end of this year? Or anything else?

Yes. I mean I think I mean I've been here long enough. So I'll take the blame for it. I mean some of the sub -- we have a lot of real estate. I used to kid with Joe Molluso our former CFO it feels like sometimes I'm running a REIT right? Because we bought these two companies and they were very long offices. And so we had a lot of space here in New York our building a 300 vessel if anybody's interested we'd be happy to sublet one of the floors. They've been hard to sublet. And under the GAAP rules you can't take some of these write-offs until you actually have a sublet. And so part of that's been my issue or the marketplaces issue in terms of how that happens. We just need a dance partner for some of these Dan. And then some of it is once you get in here and look at what the runoff is from technology licenses and data centers and things like that it sometimes can take longer. So to Alex's point which I will let them finish in a second is that ultimately at the end of this -- in 2020 we come out the backside a very scaled firm the timing of it was a little bit nuanced than some of it has slipped slightly.

Yes. Doug is absolutely right. And also practically if you think about acquisitions your first set of improvement is -- comes quickly. And then you have a bit of a lull in the middle as you're lining up the next set of big things right? So that's why the timing is shifting a little bit. It's not a linear straight line thing.

Your next question comes from Chris Allen from Compass Point. Your line is open.

I wanted to kind of revisit the leverage targets you guys talked about still on the path to achieving those. Does that contemplate an improvement in the environment? Because obviously you have a very good fourth quarter of '18 rolling off and we're turning kind of in the wrong direction at present. And obviously you get some benefits from synergies moving forward. But if we see a continued kind of challenging environment is the 2 to 2.5 year-end of 2020 realistic? And maybe you could also tell us let us know where -- what level of excess cash you have on hand if you needed to trying to tap into that to pay down the debt?

Yes. Look I still think it's realistic. Obviously I'm going to state the obvious. It helps to have more EBITDA when you're doing the multiple right? So like having a nice quarter is not a negative. And you're right the fourth quarter of 2018 was a nice quarter. That all kind of kicked into gear in mid- to late November December. So who knows we could have a similar event here as well. But we have a lot of free cash. We don't disclose separately what's free and what we actually use for trading but it's a significant amount. It obviously oscillates every day depending upon opportunities. We also have credit lines at our broker-dealer and at our holding company. So the firm is very well capitalized. We've already paid down $100 million in aggregate. From when we acquired ITG we did $50 million in May or June and we just did $50 million last week. So in eight months we paid down $100 million. And I think our target was 200-ish or something like that or? Yes. Yes so we're halfway there in less than eight months. So we're executing according to plan. You do make the right point also Chris which is that these synergies continue to roll off. And so as our expense base goes down that obviously is generating more free cash flow. And a lot of that is as we just articulated is back-ended to 2020. So I don't -- we're not sitting here paying to the volatility gods for an influx of EBITDA. There's a lot of levers that we can push to get there and we're still reasonably confident that we'll get there. And at the end of the day the firm is very well capitalized paying its dividend we're not missing out on any growth or trading opportunities based on what we have.

And Chris to your point we keep reasonable amount of free cash on hand to be able to take advantage of volatility when it emerges.

Understood. And then I guess one follow-up. I just wanted to ask about the communications and data processing line. Increased a decent amount sequentially, just A could you give us any color in terms of what's driving that how we're thinking about that moving forward and kind of hitting the targets because we probably do see a pretty big move down in the fourth quarter to hit the 2019 guidance? Just trying to think about 2020, as well.

Yes. Chris can you please repeat the question?

The question was the -- I'm sorry technology and communication was higher than he thought. And I think a lot of it has -- yes go ahead.

Yes. That's right. And part of it is timing and part of it is rationalizing some of the expenses between categories.

Okay. Any incremental color in terms of what kind of categories we're talking about here? Is this just...

I think we're just a reclassification -- I mean Alex if I'm correct if I'm wrong here but there was a reclassification that we did from when we bought ITG right? There were some things that they put in that they had an occupancy like data centers and things like that that we thought more properly fit in technology and communications right?

That's right. There was...

And that was meaningful.

For data center of about $3.1 million, that we move from occupancy to communications and data processing.

Right. It was just Chris a methodology that ITG employed that we thought was different than ours. I don't want to say incorrect but it was just a different way of ultimately the expense number was the same. It's just a question of how to classify it. There's not like some new technology or some new data center or anything like that. I mean we are wickedly focused on obviously you could tell my public positions on market data and colo. And so it's not any ongoing expense that has moved the dial here. That's the important takeaway.

That makes more sense just to think about total adjusted OpEx guide versus that specific line.

Yes we should have been clear about that. Sorry. Yes we should have been clear. Thank you for the clarification.

Your next question comes from Michael Cyprys from Morgan Stanley. Your line is open.

I was just hoping we could dive in a little bit more on the equity market making revenues in the quarter about $102.5 million. Just hoping you could provide some additional color around the cadence of how that progressed during the quarter in July August and September? How things are shaping up on October? Will we see volatilities up sharply in October? Just curious, if that's coming through in terms of the opportunity set for market-making as well?

Yes it's a good question. I mean I think look the -- as I said in my remarks the third quarter although there were some periods of volatility it felt a lot like the second quarter. I think it was more balanced in terms of the monthly distribution although in September there was some rumblings out of the Middle East as I've mentioned a few times that were significant. In terms of what the fourth quarter looks like. I think you guys can look -- I always point you first to the volume numbers which we track fairly religiously here. I think the October and to date November volume numbers you haven't seen any real material increases at all. It's mixed. Europe continues to be pretty muted I'll say nicely. It used to be a $30 billion notional day in Europe was a little bit like a white rhino and now it's just like a regular rhino you see it a lot not that I've ever seen a rhino but you get my point. So I think look the market continues to be challenging. And that's why we don't -- obviously we focus on the market every day and that's how we run the firm. But there's a bigger story here in terms of efficiency and scale. And the firm continues to chug along even in these more challenging marketplaces.

Okay. And maybe just as a follow-up on the regulatory theme. There's been a proposal for a transaction fee tax out there 0.1% of value on stocks and bonds at 0.1% on payments on derivative contracts. Just curious your latest thinking on that on how you could see that impacting the ecosystem and how that would impact Virtu's revenue base?

Yes. I tried very hard not to be political so I will do my best not to insult anybody. Sometimes I fail at that pretty miserably. But this is obviously a disaster not just for the financial markets but for the United States. I guess that was pretty political. It's really a tax on pensions in the middle class in the 401k. That's ultimately who would pay it. We've seen very direct evidence of that in Europe in particular where they put in place an FTT actually exempted at market makers to keep the efficiency of the mark going along. And ultimately if the pensions -- the pension schemes that go along which is why I always scratch my head when the unions are in favor of this because you would think their members if they really understood who ends up paying a transaction tax they would be violently against. It really is a tax on the middle class. I would point out that Vice President Biden just this week and his staff put out a statement to that effect. So this is not a left to right issue. It's not a political issue this is really a common sense and what's good for the markets and what's good for America kind of issue. It's an absolute disaster. I think the empirical evidence is very clear that marketplaces that have done this have just seen liquidity fleet to other marketplaces. Sweden did this in 1994 on a Friday on Monday the derivatives business moved to London and Sweden has never recovered. So again this is to me not a political issue it's just what's the empirical evidence show? And what are you trying to accomplish? If you're trying to ruin parts of the American financial system and put a tax on the middle class and on pension then you're accomplishing it. If you're trying to celebrate the greatest financial market in the world then you're not doing a good job. So at the end of the day I think obviously you can tell by my remarks it is catastrophically a bad idea. We're very vocal on that. I think the U.S. Chamber of commerce put out a great study on this very recently. And I think reasonable people I guess can differ on a lot of issues. But the empirical evidence here globally suggests that there -- that this just doesn't make any sense. So I'm very optimistic that when level-headed people look at this on both sides of the aisle they will realize that we should be celebrating our capital markets not trying to destroy them.

Your next question comes from Rich Repetto from Sandler O'Neill. Your line is open.

Yes. One last quick question. Retail priority from the CBOE? Just trying to see -- I know market makers have taken more market share of the limit orders from the ebrokers. Is this a pass through? Or how would it impact you Doug?

Yes. Look I always commend folks for trying to be innovative and responsive and whatnot. I mean -- look I mean we have -- we run a noncustomer customer business. We have institutional retail customers. I think there are a lot of folks that are unhappy about this on the institutional side because again you're in a public marketplace. You're creating a priority mechanism which seems unfair to them. I think we do a very good job servicing our retail customers. It's early days but there has not been an avalanche of orders being posted there. I mean candidly Richard will have no impact on what we do and no impact on our business. I think it's -- the CBOE give them credit. They're good people we work very closely with them. Obviously I disagree with this initiative because I don't think it makes a lot of sense. And I think they're trying to solve a problem candidly that doesn't exist. But give them credit for trying to be competitive. Ultimately it has no impact on what we do day-to-day.

There are no further questions at this time. Mr. Doug Cifu, I turn the call back over to you.

Thank you very much Jacqueline, and thank you everybody for participating today. We look forward to speaking with you again in February when we announce our year-end results. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.