Virtu’s Cifu: ‘Build Versus Buy’ is Better

Built it rather than buy it.

That’s the philosophy of Douglas Cifu, Chief Executive Office at Virtu Financial, discussing potential future acquisitions at the Piper Sandler Global Exchange & FinTech Conference. His response was to a question from panel moderator Richard Repetto, who asked that if a hypothetical fintech firm was available would Virtu pursue an acquisition.

Virtu has already purchased big name agency broker fintech firms such as Knight Capital and ITG. It recently shed ITG’s MATCHNow venue to Cboe Global Markets.

Cifu added the firm is currently building out an options trading business and fixed income market making business itself as well.

Doug Cifu, Virtu Financial

But as for future purchases, Cifu said he intends to stand pat despite having a “phenomenal” first quarter and described his philosophy as build versus buy. The company reported quarterly earnings of $2.05 per share, beating estimates from Zachs in the $1.51 per share. Adjusted net trading income for the first quarter was approximately $780 million.

“We bought Knight Capital and ITG and integrated them and migrated them to Virtu’s lower latency technology,” Cifu said. “Through these proficiencies and investing in new predictors we’ve also grown organically, all of which have set us up nicely for the future. If a firm is out there testing the market and would fit well with Virtu I might look. Just because someone has something though, I might not buy.”

Cifu explained when it comes to mergers and acquisitions, he looks at several variables, including the fact that a target firm must have something Virtu cannot build easily or efficiently. He added that Virtu has most of what it wants and he’d rather build what he doesn’t have himself.

“When we bought KCG and ITG, this shows the acquisitions were strategic. We didn’t have a block-crossing network, an EMS or cash trading business,” he said. “Now, we have plenty of our bases covered and I’m building an options business and a fixed income market making desk. I can build it. We have great strategic scale and a fixed cost plan. My predilection is to build things.”

He added Virtu continues to take cash in hand and re-invest. Furthermore, from his standpoint, purchases in the current environment were hard to envision and the firm’s goal is to prosper in both times of feast and famine.