Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 02, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | KCG HOLDINGS, INC. | |
Entity Central Index Key | 1,569,391 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Common Class A | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 86,157,599 | |
Common Class B | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues | ||||
Trading revenues, net | $ 113,829 | $ 277,677 | $ 524,649 | $ 657,222 |
Commissions and fees | 87,842 | 95,027 | 288,904 | 282,358 |
Interest, net | 677 | (1,080) | 1,061 | (1,699) |
Investment income and other, net | 6,184 | 5,412 | 59,256 | 397,193 |
Total revenues | 208,532 | 377,036 | 873,870 | 1,335,074 |
Expenses | ||||
Employee compensation and benefits | 49,006 | 121,597 | 222,684 | 337,786 |
Execution and clearance fees | 71,995 | 67,502 | 219,371 | 198,573 |
Communications and data processing | 36,733 | 35,256 | 108,766 | 103,260 |
Depreciation and amortization | 21,876 | 23,813 | 66,015 | 65,154 |
Payments for order flow | 13,845 | 17,121 | 39,590 | 47,277 |
Collateralized financing interest | 10,693 | 8,617 | 29,465 | 25,932 |
Occupancy and equipment rentals | 9,275 | 7,472 | 28,094 | 22,286 |
Debt interest expense | 9,153 | 9,958 | 27,836 | 30,266 |
Professional fees | 4,139 | 4,406 | 15,497 | 21,281 |
Business development | 994 | 1,846 | 4,073 | 6,728 |
Debt extinguishment charges | 0 | 0 | 0 | 25,006 |
Writedown of assets and other real estate related charges | 0 | 34,029 | 0 | 40,488 |
Other | 8,797 | 10,000 | 25,923 | 26,604 |
Total expenses | 236,506 | 341,617 | 787,314 | 950,641 |
(Loss) income before income taxes | (27,974) | 35,419 | 86,556 | 384,433 |
Income tax (benefit) expense | (16,760) | 13,482 | 27,051 | 132,357 |
Net (loss) income | $ (11,214) | $ 21,937 | $ 59,505 | $ 252,076 |
Basic (loss) earnings per share (in dollars per share) | $ (0.13) | $ 0.24 | $ 0.69 | $ 2.42 |
Diluted (loss) earnings per share (in dollars per share) | $ (0.13) | $ 0.24 | $ 0.67 | $ 2.36 |
Shares used in computation of basic (loss) earnings per share | 85,009 | 91,134 | 86,531 | 104,244 |
Shares used in computation of diluted (loss) earnings per share | 85,009 | 92,079 | 88,481 | 106,816 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net (loss) income | $ (11,214) | $ 21,937 | $ 59,505 | $ 252,076 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on available for sale securities, net of tax | 88 | (312) | 172 | (175) |
Cumulative translation adjustment, net of tax | 18 | (595) | (632) | (1,651) |
Comprehensive (loss) income | $ (11,108) | $ 21,030 | $ 59,045 | $ 250,250 |
CONSOLIDATED STATEMENTS OF FINA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Cash and cash equivalents | $ 505,462 | $ 581,313 |
Cash and cash equivalents segregated under federal and other regulations | 3,000 | 3,000 |
Financial instruments owned, at fair value, including securities pledged to counterparties that had the right to deliver or repledge of $470,568 at September 30, 2016 and $324,146 at December 31, 2015: | ||
Equities | 2,641,499 | 2,129,208 |
Debt securities | 251,264 | 136,387 |
Listed options | 12,190 | 178,360 |
Other financial instruments | 0 | 445 |
Total financial instruments owned, at fair value | 2,904,953 | 2,444,400 |
Collateralized agreements: | ||
Securities borrowed | 1,958,095 | 1,636,284 |
Receivable from brokers, dealers and clearing organizations | 696,495 | 681,211 |
Fixed assets and leasehold improvements, less accumulated depreciation and amortization | 135,296 | 94,858 |
Investments | 93,775 | 98,943 |
Goodwill and Intangible assets, less accumulated amortization | 100,235 | 100,471 |
Deferred tax asset, net | 151,024 | 151,225 |
Assets of businesses held for sale | 8,194 | 25,999 |
Other assets | 194,072 | 222,831 |
Total assets | 6,750,601 | 6,040,535 |
Financial instruments sold, not yet purchased, at fair value: | ||
Equities | 1,927,864 | 1,856,171 |
Debt securities | 278,303 | 105,340 |
Listed options | 16,319 | 151,893 |
Other financial instruments | 302 | 0 |
Total financial instruments sold, not yet purchased, at fair value | 2,222,788 | 2,113,404 |
Collateralized financings: | ||
Securities loaned | 647,602 | 463,377 |
Financial instruments sold under agreements to repurchase | 1,034,700 | 954,902 |
Other collateralized financings | 50,000 | 0 |
Total collateralized financings | 1,732,302 | 1,418,279 |
Payable to brokers, dealers and clearing organizations | 647,089 | 273,805 |
Payable to customers | 29,615 | 17,387 |
Accrued compensation expense | 96,087 | 154,547 |
Accrued expenses and other liabilities | 129,548 | 134,026 |
Debt | 453,524 | 484,989 |
Total liabilities | 5,310,953 | 4,596,437 |
Class A Common Stock | ||
Shares authorized: 1,000,000 at September 30, 2016 and December 31, 2015; Shares issued: 109,012 at September 30, 2016 and 106,025 at December 31, 2015; Shares outstanding: 86,213 at September 30, 2016 and 90,156 at December 31, 2015 | 1,090 | 1,060 |
Additional paid-in capital | 1,460,313 | 1,436,671 |
Retained earnings | 251,625 | 192,120 |
Treasury stock, at cost; 22,799 shares at September 30, 2016 and 15,869 shares at December 31, 2015 | (273,270) | (186,103) |
Accumulated other comprehensive (loss) income | (110) | 350 |
Total equity | 1,439,648 | 1,444,098 |
Total liabilities and equity | $ 6,750,601 | $ 6,040,535 |
CONSOLIDATED STATEMENTS OF FIN5
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Financial instruments owned, at fair value, securities pledged | $ 470,568 | $ 324,146 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 109,012,000 | 106,025,000 |
Common stock, shares outstanding | 86,213,000 | 90,156,000 |
Treasury stock, shares | 22,799,000 | 15,869,000 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Common StockClass A Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated other comprehensive income |
Beginning balance at Dec. 31, 2014 | $ 2,133 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Unrealized gain on available for sale securities, net of tax | $ (175) | |||||
Cumulative translation adjustment, net of tax | (1,651) | |||||
Net income | 252,076 | |||||
Ending balance at Sep. 30, 2015 | 307 | |||||
Beginning balance at Jun. 30, 2015 | 1,214 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Unrealized gain on available for sale securities, net of tax | (312) | |||||
Cumulative translation adjustment, net of tax | (595) | |||||
Net income | 21,937 | |||||
Ending balance at Sep. 30, 2015 | 307 | |||||
Beginning balance (in shares) at Dec. 31, 2015 | 106,025 | |||||
Beginning balance at Dec. 31, 2015 | $ 1,444,098 | $ 1,060 | $ 1,436,671 | $ 192,120 | 350 | |
Beginning balance (in shares) at Dec. 31, 2015 | (15,869) | (15,869) | ||||
Beginning balance at Dec. 31, 2015 | $ (186,103) | $ (186,103) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
KCG Class A Common Stock repurchased (in shares) | (6,930) | |||||
KCG Class A Common Stock repurchased | (87,167) | $ (87,167) | ||||
Warrants repurchased | (15,909) | (15,909) | ||||
Stock-based compensation and Options & Warrants exercised (in shares) | 2,987 | |||||
Stock-based compensation and Options & Warrants exercised | 39,581 | $ 30 | 39,551 | |||
Unrealized gain on available for sale securities, net of tax | 172 | 172 | ||||
Cumulative translation adjustment, net of tax | (632) | (632) | ||||
Net income | 59,505 | 59,505 | ||||
Ending balance (in shares) at Sep. 30, 2016 | 109,012 | |||||
Ending balance at Sep. 30, 2016 | $ 1,439,648 | $ 1,090 | 1,460,313 | 251,625 | (110) | |
Ending balance (in shares) at Sep. 30, 2016 | (22,799) | (22,799) | ||||
Ending balance at Sep. 30, 2016 | $ (273,270) | $ (273,270) | ||||
Beginning balance at Jun. 30, 2016 | (216) | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Unrealized gain on available for sale securities, net of tax | 88 | |||||
Cumulative translation adjustment, net of tax | 18 | |||||
Net income | (11,214) | |||||
Ending balance (in shares) at Sep. 30, 2016 | 109,012 | |||||
Ending balance at Sep. 30, 2016 | $ 1,439,648 | $ 1,090 | $ 1,460,313 | $ 251,625 | $ (110) | |
Ending balance (in shares) at Sep. 30, 2016 | (22,799) | (22,799) | ||||
Ending balance at Sep. 30, 2016 | $ (273,270) | $ (273,270) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income | $ 59,505 | $ 252,076 |
Adjustments to reconcile Net income to net cash provided by operating activities | ||
Realized gain on sale of KCG Hotspot | 0 | (385,026) |
Depreciation and amortization | 66,015 | 65,154 |
Stock and unit-based compensation | 25,161 | 74,949 |
Realized gain on sale of assets | (36,195) | 0 |
Realized gain on repurchase of debt and investments | (3,676) | 0 |
Unrealized gain on investments | (10,116) | (9,366) |
Deferred taxes | 0 | (25,781) |
Other | 7,512 | 51,964 |
(Increase) decrease in operating assets | ||
Cash and cash equivalents segregated under federal and other regulations | 0 | (5,039) |
Financial instruments owned, at fair value | (460,553) | (139,736) |
Securities borrowed | (320,316) | 12,550 |
Receivable from brokers, dealers and clearing organizations | (6,318) | 178,109 |
Other assets | 26,653 | 2,187 |
Increase (decrease) in operating liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 109,383 | 34,317 |
Securities loaned | 184,225 | 61,396 |
Financial instruments sold under agreements to repurchase | 79,798 | 180,176 |
Other collateralized financings | 50,000 | 0 |
Payable to brokers, dealers and clearing organizations | 367,480 | (361,012) |
Payable to customers | 11,851 | (1,318) |
Accrued compensation expense | (44,291) | 5,585 |
Accrued expenses and other liabilities | (15,112) | 42,329 |
Net cash provided by operating activities | 91,006 | 33,514 |
Cash flows from investing activities | ||
Cash received from sale of KCG Hotspot, net of cash provided | 6,552 | 360,928 |
Cash received from sale of assets | 21,220 | 0 |
Cash received from sale of investments and redemptions from investments | 52,967 | 2,523 |
Purchases of fixed assets and leasehold improvements | (81,916) | (22,657) |
Capitalization of software development costs | (25,212) | (15,786) |
Purchases of investments | (3,330) | (2,418) |
Purchase of business, net of cash acquired | (2,251) | 0 |
Net cash (used in) provided by investing activities | (31,970) | 322,590 |
Cash flows from financing activities | ||
Repurchase of 6.875% Senior Secured Notes | (30,288) | 0 |
Proceeds from issuance of 6.875% Senior Secured Notes, net | 0 | 494,810 |
Repayment of 8.25% Senior Secured Notes | 0 | (305,000) |
Repayment of convertible notes | 0 | (117,259) |
Payment of debt issuance costs | 0 | (12,645) |
Principal payments on capital lease obligations | (1,535) | (3,478) |
Cost of common stock repurchased - Tender Offer | 0 | (330,000) |
Cost of common stock repurchased | (87,167) | (33,250) |
Stock options exercised | 15 | 1,247 |
Warrants exercised | 0 | 247 |
Cost of warrants repurchased | (15,909) | 0 |
Income tax provision on stock awards exercised | 0 | 257 |
Net cash used in financing activities | (134,884) | (305,071) |
Effect of exchange rate changes on cash and cash equivalents | (3) | (1,651) |
(Decrease) Increase in cash and cash equivalents | (75,851) | 49,382 |
Cash and cash equivalents at beginning of period | 581,313 | 578,768 |
Cash and cash equivalents at end of period | 505,462 | 628,150 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 53,171 | 69,307 |
Cash paid for income taxes | 15,960 | 78,164 |
Non-cash investing activities - Contribution of fixed assets to joint venture | $ 353 | $ 4,364 |
CONSOLIDATED STATEMENTS OF CAS8
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) - Senior Secured Notes | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Mar. 13, 2015 | Mar. 10, 2015 | Jul. 01, 2013 | Jun. 05, 2013 |
6.875% Senior Secured Notes | |||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | ||
8.25% Senior Secured Notes | |||||||
Interest rate (percent) | 8.25% | 8.25% | 8.25% | 8.25% | 8.25% |
Organization and Description of
Organization and Description of the Business | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of the Business | Organization and Description of the Business KCG Holdings, Inc. (collectively with its subsidiaries, "KCG" or the "Company") is a leading independent securities firm offering clients a range of services designed to address trading needs across asset classes, product types and time zones. The Company combines advanced technology with specialized client service across market making, agency execution and trading venues and also engages in principal trading via direct-to-client and non-client exchange-based electronic market making. KCG has multiple access points to trade global equities, options, futures, fixed income, currencies and commodities via voice or automated execution. KCG was formed as a result of a strategic business combination (the “Mergers”) of Knight Capital Group, Inc.(“Knight”) and GETCO Holding Company, LLC (“GETCO”) in July 2013. As of September 30, 2016 , the Company's operating segments comprised the following: (i) Market Making; (ii) Global Execution Services; and (iii) Corporate and Other. Market Making The Market Making segment principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions. Principal trading in the Market Making segment primarily consists of direct-to-client and non-client exchange-based electronic market making. KCG is an active participant on all major global equity and futures exchanges and also trades on substantially all domestic electronic options exchanges. As a complement to electronic market making, the Company's cash trading business handles specialized orders and also transacts on the OTC Bulletin Board marketplaces operated by the OTC Markets Group Inc. and the Alternative Investment Market of the London Stock Exchange ("AIM"). Global Execution Services The Global Execution Services segment comprises agency execution services and trading venues, offering trading in global equities, options, futures and fixed income to institutions, banks and broker dealers. The Company generally earns commissions as an agent between principals for transactions; however, the Company may commit capital on behalf of clients as needed. Agency-based, execution-only trading in the segment is done primarily through a variety of access points including: (i) algorithmic trading and order routing in global equities and options; (ii) institutional sales traders executing program, block and riskless principal trades in global equities and exchange traded funds ("ETFs"); (iii) a fixed income electronic communication network ("ECN") that also offers trading applications; and (iv) an alternative trading system ("ATS") for U.S. equities. In September 2016, the Company completed the acquisition of Neonet Securities AB ("Neonet"). Neonet is an independent agency broker and execution specialist based in Stockholm, Sweden. The results of Neonet, beginning on the date of acquisition, are included in this segment. The Company does not consider this acquisition to be significant. Corporate and Other The Corporate and Other segment contains investments principally in strategic financial services-oriented opportunities; manages the deployment of capital across the organization; houses executive management functions; and maintains corporate overhead expenses and all other income and expenses that are not attributable to the other segments. The Corporate and Other segment also contains functions that support the Company’s other segments such as self-clearing services, including stock lending activities. Sales of Businesses Management from time to time conducts a strategic review of its businesses and evaluates their potential value in the marketplace relative to their current and expected returns. To the extent management and the Company's Board of Directors determine that the disposal of a business may return a higher value to stockholders, or that the business is no longer core to its strategy, the Company may divest or exit such business. In March 2015, the Company sold KCG Hotspot, the Company's former spot institutional foreign exchange ECN, to Bats Global Markets, Inc. ("Bats"). The results of KCG Hotspot, including the gain on sale, are included in the Global Execution Services segment, up through the date of its sale. In March 2016, KCG completed the sale of assets related to its retail U.S. options market making business. In May 2016, KCG completed the sale of its business as an equities designated market maker ("DMM") on the New York Stock Exchange ("NYSE") to Citadel Securities LLC (“Citadel”). The results of both the retail U.S. options market making business and the DMM business are included in the Market Making segment, up through the date of the respective sales. See Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses" for further details. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of consolidation and form of presentation The accompanying unaudited Consolidated Financial Statements, prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. These unaudited Consolidated Financial Statements include the accounts of the Company and its subsidiaries and reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. All significant intercompany transactions and balances have been eliminated. Interim period operating results may not be indicative of the operating results for a full year. Certain reclassifications have been made to the prior periods’ Consolidated Financial Statements in order to conform to the current period presentation. Such reclassifications are immaterial to both current and all previously issued financial statements taken as a whole and have no effect on previously reported consolidated net income. Cash and cash equivalents Cash and cash equivalents include money market accounts, which are payable on demand, and short-term investments with an original maturity of less than 90 days . The carrying amount of such cash equivalents approximates their fair value due to the short-term nature of these instruments. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. Cash and cash equivalents segregated under federal and other regulations The Company maintains custody of customer funds and is obligated by rules and regulations mandated by the SEC to segregate or set aside cash and/or qualified securities to satisfy these regulations, which have been promulgated to protect customer assets. The amounts recognized as Cash and cash equivalents segregated under federal and other regulations approximate fair value. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. Market making, sales, trading and execution activities Financial instruments owned and Financial instruments sold, not yet purchased relate to market making and trading activities, and include listed and other equity securities, listed equity options and fixed income securities that are recorded on a trade date basis and are reported at fair value. Such financial instruments are netted by their respective long and short positions by CUSIP/ISIN number. Trading revenues, net, which comprises trading gains, net of trading losses on such financial instruments, are also recorded on a trade date basis. Commissions, which primarily comprise commission equivalents earned on institutional client orders and volume based fees earned from providing liquidity to other trading venues, as well as related expenses, are also recorded on a trade date basis. The Company’s third party clearing agreements call for payment or receipt of interest income, net of transaction-related interest charged by such clearing brokers, for facilitating the settlement and financing of securities transactions. Interest income and interest expense which have been netted within Interest, net on the Consolidated Statements of Operations are as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Interest Income $ 3,011 $ 2,768 $ 9,015 $ 9,841 Interest Expense (2,334 ) (3,848 ) (7,954 ) (11,540 ) Interest, net $ 677 $ (1,080 ) $ 1,061 $ (1,699 ) Dividend income relating to financial instruments owned and dividend expense relating to financial instruments sold, not yet purchased, are derived primarily from the Company’s market making activities and are included as a component of Trading revenues, net on the Consolidated Statements of Operations. Trading revenues, net includes dividend income and expense as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Dividend Income $ 14,704 $ 14,879 $ 39,637 $ 45,596 Dividend Expense $ (14,521 ) $ (9,904 ) $ (35,235 ) $ (30,262 ) Payments for order flow represent payments to broker dealer clients, in the normal course of business, for directing their order flow in U.S. equities and, prior to the sale of the retail U.S. options market making business, options to the Company. Fair value of financial instruments The Company values its financial instruments using a hierarchy of fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows: • Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. • Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. • Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Changes in fair value are recognized in earnings each period for financial instruments that are carried at fair value. See Footnote 4 “Fair Value” for a description of valuation methodologies applied to the classes of financial instruments at fair value. Collateralized agreements and financings Collateralized agreements consist of securities borrowed. Collateralized financings primarily comprise securities loaned and financial instruments sold under agreements to repurchase. • Securities borrowed and securities loaned transactions are recorded at the amount of cash collateral advanced or received. Securities borrowed transactions facilitate the securities settlement process and require the Company to deposit cash or other collateral with the lender. Securities loaned transactions help finance the Company’s securities inventory whereby the Company lends stock to counterparties in exchange for the receipt of cash or other collateral from the borrower. In these transactions, the Company receives or posts cash or other collateral in an amount generally in excess of the market value of the applicable securities borrowed or loaned. The Company monitors the market value of securities borrowed or loaned on a daily basis, and obtains additional collateral or refunds excess collateral as necessary. • Financial instruments sold under agreements to repurchase and other collateralized financings are used to finance inventories of securities and other financial instruments and are recorded at their contractual amount. The Company has entered into bilateral and tri-party term and overnight repurchase and other collateralized financing agreements which bear interest at negotiated rates. The Company receives cash and makes delivery of financial instruments to a custodian who monitors the market value of these instruments on a daily basis. The market value of the instruments delivered must be equal to or in excess of the principal amount loaned under the repurchase agreements plus the agreed upon margin requirement. The custodian may request additional collateral, if appropriate. The Company’s securities borrowed, securities loaned, financial instruments sold under agreements to repurchase and other collateralized financings are recorded at amounts that approximate fair value. These items are recorded based upon their contractual terms and are not materially sensitive to shifts in interest rates because they are short-term in nature and are substantially collateralized pursuant to the terms of the underlying agreements. These items would be categorized as Level 2 in the fair value hierarchy if they were required to be recorded at fair value. Investments Investments primarily comprise noncontrolling equity ownership interests in financial services-related businesses and are held by the Company's non-broker dealer subsidiaries. These investments are accounted for under the equity method, at cost, or at fair value. The equity method of accounting is used when the Company has significant influence over the operating and financial policies of the investee. Investments are held at cost, less impairment if any, when the investment does not have a readily determined fair value, and the Company is not considered to exert significant influence over operating and financial policies of the investee. Investments that are publicly traded and where the Company does not exert significant influence on operating and financial policies are held at fair value and accounted for as available for sale securities and any unrealized gains or losses are recorded net of tax in Other comprehensive income. Investments are reviewed on an ongoing basis to determine whether the carrying values of the investments have been impaired. If the Company determines that an impairment loss on an investment has occurred due to a decline in fair value or other conditions, the investment is written down to its estimated fair value. Included in the Company's investments are assets supporting a non-qualified deferred compensation plan for certain employees. This plan provides a return to the participants based upon the performance of various investments. In order to hedge its liability under this plan, the Company generally acquires the underlying investments and holds such investments until the deferred compensation liabilities are satisfied. Changes in value of such investments are recorded in Investment income and other, net, with a corresponding charge or credit to Employee compensation and benefits on the Consolidated Statements of Operations. Deferred compensation investments primarily consist of mutual funds, which are accounted for at fair value. Goodwill and intangible assets The Company tests goodwill and intangible assets with an indefinite useful life for impairment annually or when an event occurs or circumstances change that signifies that the carrying amounts may not be recoverable. The Company amortizes intangible assets with finite lives on a straight line basis over their estimated useful lives and tests for recoverability whenever events indicate that the carrying amounts may not be recoverable. The Company capitalizes certain costs associated with the acquisition or development of internal-use software and amortizes the software over its estimated useful life of three years, commencing at the time the software is placed in service. Payable to customers Payable to customers primarily relate to amounts due on cash and margin transactions. Due to their short-term nature, such amounts approximate fair value. Repurchases of common stock The Company may repurchase shares of KCG Class A Common Stock, par value $0.01 per share ("KCG Class A Common Stock") in the open market or through privately negotiated transactions. The Company may structure such repurchases as either a purchase of treasury stock or a retirement of shares. The Company records its purchases of treasury stock, which include shares repurchased in satisfaction of tax withholding obligations upon vesting of restricted awards, at cost as a separate component of stockholders’ equity. The Company may re-issue treasury stock, at average cost, for the acquisition of new businesses and in certain other circumstances. For shares that are retired, the Company records its repurchases at cost, as a reduction in KCG Class A Common Stock for the par value of such retired shares and a reduction in Retained earnings for the balance. Repurchases of warrants As discussed in Footnote 15 "Warrants and Stock Repurchase", in connection with the Mergers, the Company issued Class A, Class B and Class C warrants to acquire shares of KCG Class A Common Stock ("Warrants"). The Company may repurchase Warrants through privately negotiated transactions. The Company records its purchases of Warrants as a reduction in Additional paid-in capital for the total cost. Repurchases of debt The Company may repurchase its 6.875% Senior Secured Notes in the open market or through privately negotiated transactions. The Company records its purchases of debt as a reduction in Debt for the par value repurchased as well as a prorated reduction of original issue discount and capitalized issuance costs. Total cost also includes accrued interest on the repurchased debt, which is included in Accrued expenses and other liabilities. The Company will record a gain to the extent that it repurchases debt at a price that is less than par value less the applicable original issue discount and capitalized issuance costs. Foreign currency translation and foreign currency forward contracts The Company's foreign subsidiaries generally use the U.S. dollar as their functional currency. The Company also has subsidiaries that utilize a functional currency other than the U.S. dollar, including its Indian subsidiary, which utilizes the Indian Rupee and, beginning in the third quarter of 2016, Neonet, which utilizes the Swedish Krona. None of these non-U.S. dollar functional currency subsidiaries are significant to the Company’s Consolidated Financial Statements. Assets and liabilities of these non-U.S. dollar functional currency subsidiaries are translated at exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the period. Gains and losses resulting from translating foreign currency financial statements into U.S. dollars are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Cumulative translation adjustment, net of tax on the Consolidated Statements of Comprehensive Income. Gains or losses resulting from foreign currency transactions are included in Investment income and other, net on the Company’s Consolidated Statements of Operations. For the three months ended September 30, 2016 and 2015, the Company recorded a gain of $0.1 million and a loss of $1.8 million , respectively, on foreign currency transactions. For the nine months ended September 30, 2016 and 2015, the Company recorded a gain of $1.0 million and a loss of $2.4 million , respectively, on foreign currency transactions. The Company seeks to reduce the impact of fluctuations in foreign exchange rates on its net investment in certain non-U.S. operations through the use of foreign currency forward contracts. For foreign currency forward contracts designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. The effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts. For qualifying net investment hedges, any gains or losses, to the extent effective, are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Cumulative translation adjustment, net of tax, on the Consolidated Statements of Comprehensive Income. The ineffective portion, if any, is recorded in Investment income and other, net on the Consolidated Statements of Operations. Stock and unit based compensation Stock and unit based compensation is primarily measured based on the grant date fair value of the awards. These costs are amortized over the requisite service period, if any. Expected forfeitures are considered in determining stock-based employee compensation expense. See Footnote 12 "Stock-Based Compensation" for further discussion. Soft dollar expense Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions and fees on the Consolidated Statements of Operations. Depreciation, amortization and occupancy Fixed assets are depreciated on a straight-line basis over their estimated useful lives of three to seven years. Leasehold improvements are being amortized on a straight-line basis, upon occupancy of the location, over the shorter of the term of the related office lease or the expected useful life of the assets. The Company reviews fixed assets and leasehold improvements for impairment, as well as their remaining useful lives whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company recognizes rent expense under operating leases with fixed rent escalations, lease incentives and free rent periods on a straight-line basis over the lease term beginning on the date the Company takes possession of or controls the use of the space, including during free rent periods. Lease loss accrual The Company’s policy is to identify excess real estate capacity and where applicable, accrue for related future costs, net of projected sub-lease income upon the date the Company ceases to use the excess real estate. Such accrual is adjusted to the extent the actual terms of sub-leased property differ from the previous assumptions used in the calculation of the accrual. Income taxes The Company is a corporation subject to U.S. corporate income tax as well as non-U.S. income taxes in the jurisdictions in which it operates. The Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and measures them using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. The Company evaluates the recoverability of future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary differences and forecasted operating earnings. Variable interest entities A variable interest entity (“VIE”) is an entity that lacks one or more of the following characteristics (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Since January 2015, the Company has owned 50% of the voting shares and 50% of the equity of a joint venture, (“JV”) which maintains microwave communication networks in the U.S. and Europe, and which is considered to be a VIE. The Company and its JV partner each pay monthly fees for the use of the microwave communication networks in connection with their respective trading activities, and the JV may sell excess bandwidth that is not utilized by the JV members to third parties. The Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; therefore it does not have a controlling financial interest in the JV and does not consolidate the JV. The Company records its interest in the JV under the equity method of accounting and records its investment in the JV within Investments and its amounts payable for communication services provided by the JV within Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The Company records its pro-rata share of the JV’s earnings or losses within Investment income and other, net and fees related to the use of communication services provided by the JV within Communications and data processing on the Consolidated Statements of Operations. The Company’s exposure to the obligations of this VIE is generally limited to its interests in the JV, which is the carrying value of the equity investment in the JV. The following table presents the Company’s nonconsolidated VIE at September 30, 2016 (in thousands): Carrying Amount Maximum Exposure to loss Asset Liability VIE's assets Equity investment $ 13,153 $ 1,206 $ 13,153 $ 27,931 Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Recently adopted accounting guidance In June 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) to resolve diverse accounting treatment for share based awards in which the terms of the award are related to a performance target that affects vesting. The ASU requires an entity to treat a performance target that could be achieved after the requisite service period as a performance condition. Additionally, compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved, and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered; if the performance target becomes probable of being achieved before the end of the requisite service period, then the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The guidance became effective for reporting periods beginning after December 15, 2015 and has been applied prospectively. The adoption of this ASU did not have an impact on the Company’s Consolidated Financial Statements. In February 2015, the FASB issued an ASU which requires entities to evaluate whether they should consolidate certain legal entities. The ASU simplifies consolidation accounting by reducing the number of consolidation models that an entity may apply. The guidance became effective for reporting periods beginning after December 15, 2015. The adoption of this ASU did not have an impact on the Company’s Consolidated Financial Statements. In April 2015, the FASB issued an ASU regarding simplification of the presentation of debt issuance costs. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the Consolidated Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The guidance became effective retrospectively for reporting periods beginning after December 15, 2015. The Company retrospectively adopted this ASU in the first quarter of 2016, and as a result, the Company reclassified deferred debt issuance costs from Other assets to a direct deduction from the carrying value of Debt on its Consolidated Statements of Financial Condition for all periods presented. The Company also reclassified its amortization of debt issuance costs from Other expense to Debt interest expense on its Consolidated Statements of Operations for all periods presented. The adoption of this ASU did not have any other impact on the Company's Consolidated Financial Statements. See Footnote 10 “Debt” for further details regarding these reclassifications. Recent accounting guidance to be adopted in future periods In May 2014, the FASB issued an ASU that updates the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued an ASU to clarify guidance on principal versus agent evaluation considerations and whether an entity reports revenue on a gross or net basis. These ASUs will be effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted for reporting periods beginning after December 15, 2016. The Company is evaluating the impact of these ASUs on its Consolidated Financial Statements. In August 2014, the FASB issued an ASU that requires an entity’s management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosure in certain circumstances. The guidance is effective for reporting periods beginning after December 15, 2016. The Company does not expect the adoption of this ASU to have an impact on its Consolidated Financial Statements. In January 2016, the FASB issued an ASU that provides entities guidance for the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted under a modified retrospective approach for certain financial liabilities as specified in this ASU. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. In February 2016, the FASB issued an ASU which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted under a modified retrospective approach. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. In March 2016, the FASB issued an ASU which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016 and early adoption is permitted. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. In August 2016, the FASB issued an ASU which clarifies the presentation and classification of certain cash receipts and cash payments in the Consolidated Statement of Cash Flows. This ASU is effective for reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. |
Assets of Businesses Held for S
Assets of Businesses Held for Sale & Sales of Businesses | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Assets of Businesses Held for Sale & Sales of Businesses | Assets of Businesses Held for Sale & Sales of Businesses In March 2015, the Company completed the sale of KCG Hotspot to Bats. The Company and Bats have agreed to share certain tax benefits, which could result in future payments to the Company of up to approximately $70.0 million in the three -year period following the close, consisting of a $50.0 million payment in 2018 and annual payments of up to $6.6 million per year (the "Annual Payments"), from 2016 up to and including 2018. The Annual Payments were contingent on KCG Hotspot achieving various levels of trading volumes through June 2015. That contingency has been removed because the trading levels were achieved. However, the remaining Annual Payments are contingent on Bats generating sufficient taxable net income to receive the tax benefits. The Company has elected the fair value option related to the receivable from Bats and considers the receivable to be a Level 2 asset in the fair value hierarchy as the fair value is derived from observable significant inputs such as contractual cash flows and market discount rates. KCG received the first annual payment of $6.6 million in March 2016. The remaining additional potential payments of $63.2 million are recorded at a fair value of $59.9 million in Other assets on the Consolidated Statement of Financial Condition as of September 30, 2016. The Company recorded a gain upon completion of the sale of $385.0 million , which is recorded as Investment income and other, net on the Consolidated Statement of Operations for the nine months ended September 30, 2015. The net gain on the sale of KCG Hotspot was $373.8 million which is net of direct costs associated with the sale which comprised professional fees of $6.7 million and compensation of $4.5 million , which are recorded in Professional fees and Employee compensation and benefits, respectively, on the Consolidated Statement of Operations for the nine months ended September 30, 2015. In accordance with the Company's strategic review of its businesses and evaluation of their potential value in the marketplace relative to their current and expected returns, KCG determined in 2015 that certain of its businesses including its DMM business, were no longer considered core to its strategy. KCG believes that the sale or divestiture of these businesses does not represent a strategic shift that will have a major effect on its operations and financial results, however, these businesses met the requirements to be considered as held for sale at December 31, 2015 and, for the assets of businesses not yet sold, continue to meet such requirements at September 30, 2016. Assets of businesses held for sale are recorded at the lower of their book value or their estimated fair value and are reported as Assets of businesses held for sale on the September 30, 2016 and December 31, 2015 Consolidated Statements of Financial Condition. See Footnote 9 "Goodwill and Intangible Assets" for further details. Included in the $26.0 million of Assets of businesses held for sale at December 31, 2015 were assets related to the Company's retail options market making business. The assets were sold to a third party in March 2016, and as a result of the sale, the Company recorded a gain of $2.9 million , which is included in Investment income and other, net on the Consolidated Statement of Operations for the nine months ended September 30, 2016. Also included in the $26.0 million of Assets of businesses held for sale at December 31, 2015 were assets related to the Company's DMM business. The DMM business was sold to Citadel in May 2016. As charges were recorded in the fourth quarter of 2015 in order to reflect the estimated fair value of this held for sale business, no gain or loss on sale was recorded in the nine months ended September 30, 2016. The Company continues to have one business that is considered to be held for sale at September 30, 2016. The assets of businesses held for sale as of September 30, 2016 and December 31, 2015 are summarized as follows (in thousands): September 30, December 31, Assets: Intangible assets, net of accumulated amortization $ 8,194 $ 25,999 Total assets of businesses held for sale $ 8,194 $ 25,999 |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value | Fair Value The Company’s financial instruments recorded at fair value have been categorized based upon a fair value hierarchy in accordance with accounting guidance, as described in Footnote 2 “Significant Accounting Policies.” The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value (in thousands): Assets and Liabilities Measured at Fair Value on a Recurring Basis September 30, 2016 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,641,499 $ — $ — $ 2,641,499 Corporate debt 179,152 — — 179,152 U.S. government obligations 72,112 — — 72,112 Listed options 12,190 — — 12,190 Total Financial instruments owned, at fair value 2,904,953 — — 2,904,953 Investment in CME Group (1) 2,093 — — 2,093 Other (2) — 62,151 6,650 68,801 Total assets held at fair value $ 2,907,046 $ 62,151 $ 6,650 $ 2,975,847 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,927,864 $ — $ — $ 1,927,864 Corporate debt 173,678 — — 173,678 U.S. government obligations 104,625 — — 104,625 Listed options 16,319 — — 16,319 Foreign currency forward contracts — 302 — 302 Total liabilities held at fair value $ 2,222,486 $ 302 $ — $ 2,222,788 (1) Investment in CME Group is included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $59.9 million receivable from Bats related to the sale of KCG Hotspot and a $6.7 million receivable from the sale of an investment, both of which are included within Other Assets, and $2.3 million of deferred compensation investments which is included within Investments on the Consolidated Statements of Financial Condition. Assets and Liabilities Measured at Fair Value on a Recurring Basis December 31, 2015 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,129,208 $ — $ — $ 2,129,208 Listed options 178,360 — — 178,360 U.S. government and Non-U.S. government obligations 41,706 — — 41,706 Corporate debt 94,681 — — 94,681 Foreign currency forward contracts — 445 — 445 Total Financial instruments owned, at fair value 2,443,955 445 — 2,444,400 Investment in CME Group (1) 1,814 — — 1,814 Other (2) — 65,732 5,789 71,521 Total assets held at fair value $ 2,445,769 $ 66,177 $ 5,789 $ 2,517,735 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,856,171 $ — $ — $ 1,856,171 Listed options 151,893 — — 151,893 U.S. government obligations 21,056 — — 21,056 Corporate debt 84,284 — — 84,284 Total liabilities held at fair value $ 2,113,404 $ — $ — $ 2,113,404 (1) Investment in CME Group is included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $64.2 million receivable from Bats related to the sale of KCG Hotspot and a $5.8 million receivable from the sale of an investment, both of which are included in Other assets, and $1.5 million of deferred compensation investments which is included within Investments on the Consolidated Statements of Financial Condition. The Company's derivative financial instruments are also held at fair value. See Footnote 5 "Derivative Financial Instruments" for further information. The Company’s equities, listed options, U.S. government and non-U.S. government obligations, corporate debt and strategic investments that are publicly traded and for which the Company does not exert significant influence on operating and financial policies are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices or broker or dealer quotations with reasonable levels of price transparency. The types of instruments that trade in markets that are not considered to be active, but are valued based on observable inputs such as quoted market prices or alternative pricing sources with reasonable levels of price transparency are generally classified within Level 2 of the fair value hierarchy. As of both September 30, 2016 and December 31, 2015, a receivable related to the sale of an investment was classified within Level 3 of the fair value hierarchy. There were no transfers of assets or liabilities held at fair value between levels of the fair value hierarchy for any periods presented. The following is a summary of changes in fair value of the Company's financial assets that have been categorized within Level 3 of the fair value hierarchy at September 30, 2016 (in thousands): Level 3 Financial Assets for the three months ended September 30, 2016 Balance at July 1, 2016 Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at September 30, 2016 Receivable from sold investment $ 6,347 $ — $ 303 $ — $ — $ — $ — $ — $ 6,650 Level 3 Financial Assets for the nine months ended September 30, 2016 Balance at January 1, 2016 Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at September 30, 2016 Receivable from sold investment $ 5,789 $ — $ 861 $ — $ — $ — $ — $ — $ 6,650 The unrealized gains of $0.3 million and $0.9 million are included within Investment income and other, net on the Consolidated Statements of Operations for the three and nine months ended September 30, 2016, respectively. The following is a description of the valuation basis, techniques and significant inputs used by the Company in valuing its Level 2 and Level 3 assets and liabilities. Foreign currency forward contracts At September 30, 2016 and December 31, 2015, the Company had foreign currency forward contracts with a notional value of 735.0 million Indian Rupees ( $10.7 million U.S. dollars) and 850.0 million Indian Rupees ( $13.0 million U.S. dollars), respectively. These forward contracts are used to hedge the Company’s investment in its Indian subsidiary. The fair value of these forward contracts were determined based upon spot foreign exchange rates and dealer quotations. Other Other primarily consists of the fair value of the Company's receivable from Bats from the sale of KCG Hotspot as more fully described in Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses". Also included in this category are deferred compensation investments which comprise investments in liquid mutual funds that the Company acquires to hedge its obligations to employees under certain non-qualified deferred compensation arrangements. These mutual fund investments can generally be redeemed at any time and are valued based upon quoted market prices. The Company has elected the fair value option related to its receivable from Bats. It considers the receivable to be a Level 2 asset in the fair value hierarchy as the fair value is derived from observable significant inputs such as contractual cash flows and market discount rates. The Company has elected the fair value option related to a receivable originating from the sale of an investment which is classified within Level 3 of the fair value hierarchy. The range of undiscounted amounts the Company may receive for this receivable is between $0 and $8.5 million . The valuation of this financial instrument was based upon the use of a model developed by Company management. Inputs into this model were based upon risk profiles of similar financial instruments in the market and reflects management’s judgment relating to the appropriate discount on the receivable as well as a financial assessment of the debtor. To the extent that valuations based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Movements in these unobservable inputs would not materially impact the Company's results of operations. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments The Company enters into derivative transactions as part of its trading activities and to manage foreign currency exposure. Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows. During the normal course of business, the Company enters into futures contracts. These financial instruments are subject to varying degrees of risks whereby the fair value of the securities underlying the financial instruments may be in excess of, or less than, the contract amount. The Company is obligated to post collateral against certain futures contracts. The Company has entered into and may continue to enter into International Swaps and Derivative Association, Inc. (“ISDA”) master netting agreements with counterparties. Master agreements provide protection in bankruptcy in certain circumstances and, where legally enforceable, enable receivables and payables with the same counterparty to be settled or otherwise eliminated by applying amounts due against all or a portion of an amount due from the counterparty or a third party. The Company may also enter into bilateral trading agreements and other customer agreements that provide for the netting of receivables and payables with a given counterparty as a single net obligation. Under the ISDA master netting agreements, the Company typically also executes credit support annexes, which provide for collateral, either in the form of cash or securities, to be posted or paid by a counterparty based on the fair value of the derivative receivable or payable based on the rates and parameters established in the credit support annex. In the event of counterparty’s default, provisions of the ISDA master agreement permit acceleration and termination of all outstanding transactions covered by the agreement such that a single amount is owed by, or to, the non-defaulting party. Any collateral posted can be applied to the net obligations, with any excess returned and the collateralized party has a right to liquidate the collateral. Any residual claim after netting is treated along with other unsecured claims in bankruptcy court. The Company is also a party to clearing agreements with various central clearing parties. Under these arrangements, the central clearing counterparty facilitates settlement between counterparties based on the net payable owed or receivable due and, with respect to daily settlement, cash is generally only required to be deposited to the extent of the net amount. In the event of default, a net termination amount is determined based on the market values of all outstanding positions and the clearing organization or clearing member provides for the liquidation and settlement of the net termination amount among all counterparties to the open derivative contracts. The following tables summarize the fair value and number of derivative instruments held at September 30, 2016 and December 31, 2015. These instruments include those classified as Financial instruments, owned at fair value, Financial instruments sold, not yet purchased at fair value, as well as futures contracts and bi-lateral over the counter swaps which are reported within Receivable from brokers, dealers and clearing organizations in the Consolidated Statements of Financial Condition. The fair value of assets/liabilities are shown gross of counterparty netting and cash collateral received and pledged. The following tables also provide information regarding 1) the extent to which, under enforceable master netting agreements, such balances are presented net in the Consolidated Statements of Financial Condition as appropriate under GAAP and 2) the extent to which other rights of setoff associated with these agreements exist and could have an effect on our financial position (in thousands, except contract amounts): September 30, 2016 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 292 1,932 $ 1,651 3,440 Forward contracts (1) Financial instruments owned, at fair value — — 302 1 Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,560 2,321 2,000 2,723 Swap contracts Receivable from brokers, dealers and clearing organizations 8 1 146 1 Listed options Financial instruments owned/sold, not yet purchased, at fair value 12,190 78,269 16,319 81,367 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 5,075 4,162 6,059 3,924 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 66,562 37,977 65,970 38,373 Gross derivative assets/liabilities, before netting $ 85,687 $ 92,447 Less: Legally enforceable master netting agreements Exchange traded (2) (72,993 ) (75,680 ) Bi-lateral over-the-counter (3) — (448 ) Net amounts per Consolidated Statement of Financial Condition (4) $ 12,694 $ 16,319 December 31, 2015 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 578 3,675 $ 955 6,586 Forward contracts (1) Financial instruments owned, at fair value 445 1 — — Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,558 4,038 1,743 3,432 Swap contracts Receivable from brokers, dealers and clearing organizations — — 281 2 Listed options Financial instruments owned/sold, not yet purchased, at fair value 178,360 360,469 151,893 390,949 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 4,265 6,195 4,037 4,891 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 35,441 22,424 35,814 24,261 Gross derivative assets/liabilities, before netting $ 220,647 $ 194,723 Less: Legally enforceable master netting agreements Exchange traded (2) (41,146 ) (42,549 ) Bi-lateral over-the-counter (3) — (281 ) Net amounts per Consolidated Statement of Financial Condition (4) $ 179,501 $ 151,893 (1) The foreign currency forward contract represents a net investment hedge and is designated as a hedging instrument. (2) Exchange traded instruments comprise futures contracts. (3) Bi-lateral over-the-counter instruments comprise swaps and forward contracts. (4) The Company has not received or pledged additional collateral under master netting agreements and or other credit support agreements that is eligible to be offset beyond what is offset in the Consolidated Statements of Financial Condition. The fair value of listed options and forward contracts in the tables above are classified as Level 1 and Level 2 in the fair value hierarchy, respectively . The fair value of futures contracts and swaps in the tables above would be classified as Level 1 and Level 2 in the fair value hierarchy, respectively, if such classification were required . The following table summarizes the gains and losses included in the Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015. Gain (Loss) Recognized Financial Statements For the three months For the nine months Location 2016 2015 2016 2015 Derivative instruments not designated as hedging instruments: Foreign currency Futures contracts Trading revenues, net $ 1,964 $ 1,868 $ 3,529 $ 2,674 Forward contracts Investment income and other, net — — — (10 ) Equity Futures contracts Trading revenues, net (5,008 ) 13,849 6,395 27,587 Swap contracts Trading revenues, net (232 ) 1,792 2,480 2,860 Listed options Trading revenues, net (557 ) 1,149 (222 ) (15,032 ) Fixed income Futures contracts Trading revenues, net 2,670 10,918 16,627 35,839 Commodity Futures contracts Trading revenues, net 9,949 14,852 31,506 39,855 $ 8,786 $ 44,428 $ 60,315 $ 93,773 Derivative instruments designated as hedging instruments: Foreign exchange - forward contract Accumulated other comprehensive income $ (197 ) $ (44 ) $ (571 ) $ (50 ) The Company has identified an error in the presentation of its previously reported derivative gains and losses for the three and nine months ended September 30, 2015 and the above disclosures have been revised to correct for the error. The error impacted the gains and losses from futures contracts in the above table but did not have any impact to the Company’s Consolidated Financial Statements. The Company evaluated the materiality of these errors in accordance with SEC Staff Accounting Bulletin No. 99, Materiality , and SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements , and concluded that this error was immaterial to the Consolidated Financial Statements for all prior periods. While the adjustments were immaterial, the Company revised its previously disclosed gains and losses from futures contracts in the above table as follows: Gain (Loss) Recognized Financial Statements For the three months For the nine months Location As Previously Reported Revised As Previously Reported Revised Derivative instruments not designated as hedging instruments: Equity Futures contracts Trading revenues, net (2,122 ) 13,849 11,616 27,587 Fixed income Futures contracts Trading revenues, net 5,256 10,918 30,177 35,839 Commodity Futures contracts Trading revenues, net 12,339 14,852 37,342 39,855 Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk As a market maker in global equities, fixed income, futures, options, commodities and currencies, the majority of the Company’s securities transactions are conducted as principal or riskless principal with broker dealers and institutional counterparties primarily located in the United States. The Company self-clears substantially all of its U.S. equity and option securities transactions. The Company clears a portion of its securities transactions through third party clearing brokers. Foreign transactions are settled pursuant to global custody and clearing agreements with major U.S. banks. Substantially all of the Company’s credit exposures are concentrated with its clearing brokers, broker dealer and institutional counterparties. The Company’s policy is to monitor the credit standing of counterparties with which it conducts business. Financial instruments sold, not yet purchased, at fair value represent obligations to purchase such securities (or underlying securities) at a future date. The Company may incur a loss if the market value of the securities subsequently increases. The Company currently has no loans outstanding to any former or current executive officer or director. |
Collateralized Transactions
Collateralized Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Collateralized Agreements [Abstract] | |
Collateralized Transactions | Collateralized Transactions The Company receives financial instruments as collateral in connection with securities borrowed and financial instruments purchased under agreements to resell. Such financial instruments generally consist of equities, corporate obligations and obligations of the U.S. government, but may also include obligations of federal agencies, foreign governments and convertible securities. In most cases the Company is permitted to deliver or repledge these financial instruments in connection with securities lending, other secured financings or for meeting settlement obligations. The table below presents financial instruments at fair value received as collateral related to Securities borrowed or Receivable from brokers, dealers and clearing organizations on the Consolidated Statements of Financial Condition that were permitted to be delivered or repledged and that were delivered or repledged by the Company as well as the fair value of financial instruments which could be further repledged by the receiving party (in thousands): September 30, December 31, Collateral permitted to be delivered or repledged $ 1,969,324 $ 1,640,145 Collateral that was delivered or repledged 1,842,751 1,570,921 Collateral permitted to be further repledged by the receiving counterparty 152,717 188,345 In order to finance securities positions, the Company also pledges financial instruments that it owns to counterparties who, in turn, are permitted to deliver or repledge them. Under these transactions, the Company pledges certain financial instruments owned to collateralize repurchase agreements and other secured financings. Repurchase agreements and other secured financings are short-term and mature within one year. Financial instruments owned and pledged to counterparties that have the right to sell or repledge such financial instruments primarily consist of equities. Financial instruments owned and pledged to counterparties that do not have the right to sell or repledge such financial instruments consist of equities, corporate obligations and obligations of the U.S. government, but may also include obligations of federal agencies, foreign governments and convertible securities. The table below presents information about assets pledged by the Company (in thousands): September 30, December 31, Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge $ 470,568 $ 324,146 Financial instruments owned, at fair value, pledged to counterparties that do not have the right to deliver or repledge 1,189,985 1,027,847 The table below presents the gross carrying value of Securities loaned and Financial instruments sold under agreements to repurchase by class of collateral pledged (in thousands): September 30, 2016 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 639,452 $ 912,099 $ 49,256 U.S. government obligations — 69,700 — Corporate debt 8,150 52,901 744 Total $ 647,602 $ 1,034,700 $ 50,000 December 31, 2015 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 451,085 $ 855,632 $ — U.S. government obligations — 54,902 — Corporate debt 12,292 44,368 — Total $ 463,377 $ 954,902 $ — The Company may enter into master netting agreements and collateral arrangements with counterparties in order to manage its exposure to credit risk associated with securities financing transactions. Such transactions are generally executed under standard industry agreements, including, but not limited to, master securities lending agreements (securities lending transactions) and master repurchase agreements (repurchase transactions). Master agreements provide protection in bankruptcy in certain circumstances and, where legally enforceable, enable receivables and payables with the same counterparty to be settled or otherwise eliminated by applying amounts due against all or a portion of an amount due from the counterparty or a third party. The Company may also enter into bilateral trading agreements and other customer agreements that provide for the netting of receivables and payables with a given counterparty as a single net obligation. In the event of counterparty’s default, provisions of the master agreement permit acceleration and termination of all outstanding transactions covered by the agreement such that a single amount is owed by, or to, the non-defaulting party. Any collateral posted can be applied to the net obligations, with any excess returned and the collateralized party has a right to liquidate the collateral. Any residual claim after netting is treated as an unsecured claim in bankruptcy court. The Company is also a party to clearing agreements with various central clearing parties. Under these arrangements, the central clearing counterparty facilitates settlement between counterparties based on the net payable owed or receivable due and, with respect to daily settlement, cash is generally only required to be deposited to the extent of the net amount. In the event of default, a net termination amount is determined based on the market values of all outstanding positions and the clearing organization or clearing member provides for the liquidation and settlement of the net termination amount among all counterparties to the open repurchase and/or securities lending transactions. The gross amounts of assets and liabilities subject to netting and gross amounts offset in the Consolidated Statements of Financial Condition were as follows (in thousands): September 30, 2016 Gross Amounts Recognized Gross Amounts Offset in the Statements of Financial Condition Net Amounts Presented in the Statements of Financial Condition Gross Amounts Not Offset in the Statement of Financial Condition Net Amount Available Collateral (1) Counterparty Netting (2) Assets Securities borrowed $ 1,958,095 $ — $ 1,958,095 $ 1,909,346 $ 7,002 $ 41,747 Receivable from brokers, dealers and clearing organizations (3) 59,980 — 59,980 59,881 22 77 Total assets $ 2,018,075 $ — $ 2,018,075 $ 1,969,227 $ 7,024 $ 41,824 Liabilities Securities loaned $ 647,602 $ — $ 647,602 $ 627,544 $ 7,002 $ 13,056 Financial instruments sold under agreements to repurchase 1,034,700 — 1,034,700 1,034,678 22 — Other collateralized financings 50,000 — 50,000 50,000 — — Total liabilities $ 1,732,302 $ — $ 1,732,302 $ 1,712,222 $ 7,024 $ 13,056 (1) Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements. (2) Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statement of Financial Condition because other netting provisions under U.S. GAAP are not met. (3) Represents financial instruments purchased under agreement to resell. December 31, 2015 Gross Amounts Recognized Gross Amounts Offset in the Statements of Financial Condition Net Amounts Presented in the Statements of Financial Condition Gross Amounts Not Offset in the Statement of Financial Condition Net Amount Available Collateral (1) Counterparty Netting (2) Assets Securities borrowed $ 1,636,284 $ — $ 1,636,284 $ 1,575,568 $ 8,277 $ 52,439 Receivable from brokers, dealers and clearing organizations (3) 65,433 — 65,433 62,580 — 2,853 Total assets $ 1,701,717 $ — $ 1,701,717 $ 1,638,148 $ 8,277 $ 55,292 Liabilities Securities loaned $ 463,377 $ — $ 463,377 $ 440,486 $ 8,277 $ 14,614 Financial instruments sold under agreements to repurchase 954,902 — 954,902 954,902 — — Total liabilities $ 1,418,279 $ — $ 1,418,279 $ 1,395,388 $ 8,277 $ 14,614 (1) Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements. (2) Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by a counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statement of Financial Condition because other netting provisions under U.S. GAAP are not met. (3) Represents financial instruments purchased under agreement to resell. See Footnote 5 "Derivative Financial Instruments" for information related to the offsetting of derivatives in the Company's Consolidated Financial Statements. Maturities of Securities loaned and Financial instruments sold under agreements to repurchase are provided in the table below (in thousands): As of September 30, 2016 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 647,602 $ — $ — $ — $ 647,602 Other collateralized financings — 50,000 — — 50,000 Financial instruments sold under agreements to repurchase 69,700 310,000 415,000 240,000 1,034,700 Total $ 717,302 $ 360,000 $ 415,000 $ 240,000 $ 1,732,302 As of December 31, 2015 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 463,377 $ — $ — $ — $ 463,377 Financial instruments sold under agreements to repurchase 54,902 635,000 150,000 115,000 954,902 Total $ 518,279 $ 635,000 $ 150,000 $ 115,000 $ 1,418,279 |
Receivable from and Payable to
Receivable from and Payable to Brokers, Dealers and Clearing Organizations | 9 Months Ended |
Sep. 30, 2016 | |
Brokers and Dealers [Abstract] | |
Receivable from and Payable to Brokers, Dealers and Clearing Organizations | Receivable from and Payable to Brokers, Dealers and Clearing Organizations Amounts receivable from and payable to brokers, dealers and clearing organizations consist of the following (in thousands): September 30, December 31, Receivable: Clearing organizations and other $ 458,972 $ 505,789 Financial instruments purchased under agreement to resell 59,980 65,433 Securities failed to deliver 177,543 109,989 Total receivable $ 696,495 $ 681,211 Payable: Clearing organizations and other $ 559,621 $ 240,985 Securities failed to receive 87,468 32,820 Total payable $ 647,089 $ 273,805 Management believes that the carrying value of amounts receivable from and payable to brokers, dealers and clearing organizations approximates fair value since they are short term in nature. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2016 | |
Investments [Abstract] | |
Investments | Investments Investments primarily comprise strategic investments and deferred compensation investments. Investments consist of the following (in thousands): September 30, December 31, Strategic investments: Investments accounted for under the equity method $ 87,099 $ 86,853 Investments held at fair value 2,093 1,814 Investments held at adjusted cost 2,293 8,746 Total strategic investments 91,485 97,413 Other investments 2,290 1,530 Total investments $ 93,775 $ 98,943 As of September 30, 2016, the aggregate market value of the Company's investment in Bats was approximately $398.7 million based on the closing stock price on the Bats BZX Exchange, Inc. on that date. In the second quarter of 2016, as part of the initial public offering of Bats, the Company sold 2.6 million shares of its investment in Bats for approximately $46.4 million after commissions. The Company recorded a pre-tax gain of $33.4 million from the sale, which is included in Investment income and other, net on the Consolidated Statements of Operations for the nine months ended September 30, 2016. Following the sale, and based on total shares outstanding of Bats (including non-voting shares) as of July 31, 2016 as reported by Bats in its most recent Quarterly Report on Form 10-Q, KCG retained an approximate 13.7% ownership stake in Bats. The Company continues to account for its investment in Bats under the equity method of accounting. In the first quarter of 2016, one of the Company's investments held at adjusted cost made a distribution to its owners, including the Company. As a result of this distribution, the investment's carrying value was adjusted and the Company recognized a pre-tax gain of $2.3 million , which is included in Investment income and other, net on the Consolidated Statements of Operations for the nine months ended September 30, 2016. For the three months ended September 30, 2016 and 2015, the Company recorded income of $3.1 million and $4.9 million , respectively, related to Investments accounted for under the equity method of accounting, which is recorded within Investment income and other, net in the Consolidated Statements of Operations. For the nine months ended September 30, 2016 and 2015, the Company recorded income of $9.9 million and $9.3 million , respectively, related to investments accounted for under the equity method. The Company's investments accounted for under the equity method are considered to be related parties. See Footnote 11 "Related Parties". |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and intangible assets with indefinite lives are assessed for impairment annually or when events indicate that the amounts may be impaired. The Company assesses goodwill for impairment at the reporting unit level. The Company’s reporting units are the components of its business segments for which discrete financial information is available and is regularly reviewed by the Company’s management. As part of the assessment for impairment, the Company considers the cash flows of the respective reporting unit and assesses the fair value of the respective reporting unit as well as the overall market value of the Company compared to its net book value. The assessment of fair value of the reporting units is principally performed using a discounted cash flow methodology with a risk-adjusted weighted average cost of equity which the Company believes to be the most reliable indicator of the fair values of its respective reporting units. The Company also assesses the fair value of each reporting unit based upon its estimated market value and assesses the Company’s overall market value based upon the market price of KCG Class A Common Stock. Intangible assets are assessed for recoverability when events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. The Company assesses intangible assets for impairment at the “asset group” level which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. As part of the assessment for impairment, the Company considers the cash flows of the respective asset group and assesses the fair value of the respective asset group. Step one of the impairment assessment for intangibles is performed using undiscounted cash flow models, which indicates whether the future cash flows of the asset group are sufficient to recover the book value of such asset group. When an asset is not considered to be recoverable, step two of the impairment assessment is performed using a discounted cash flow methodology with a risk-adjusted weighted average cost of equity to determine the fair value of the intangible asset group. In cases where amortizable intangible assets and goodwill are assessed for impairment at the same time, the amortizable intangibles are assessed for impairment prior to goodwill being assessed. During the third quarter of 2016, the Company wrote off certain trading rights that ceased being utilized in the period. The writeoff resulted in a charge of $0.7 million which was recorded within Other expense in the Consolidated Statements of Operations for the three and nine months ended September 30, 2016. No other events occurred in the nine months ended September 2016 that would indicate that the carrying amounts of the Company’s goodwill or intangible assets may not be recoverable. No events occurred in the nine months ended September 2015 that would indicate that the carrying amounts of the Company’s goodwill or intangible assets may not be recoverable. As detailed in Footnote 3 “Assets of Businesses Held for Sale & Sales of Businesses” the Company conducted a strategic review of its businesses and determined that certain of its businesses are no longer considered core to its strategy and the Company is currently seeking the opportunity to exit or divest or has already exited or divested of these businesses. The $8.2 million and $26.0 million estimated fair value of such intangibles as of September 30, 2016 and December 31, 2015, respectively are reported within Assets of businesses held for sale on the Consolidated Statements of Financial Condition. As of both September 30, 2016 and December 31, 2015, all goodwill was recorded within the Market Making segment. Intangible assets with definite useful lives are amortized over their remaining estimated useful lives, the majority of which have been determined to range from one to eight years. The weighted average remaining life of the Company’s intangible assets with definite useful lives at September 30, 2016 and December 31, 2015 was approximately two and three years, respectively. The following tables summarize the Company’s Intangible assets, net of accumulated amortization by segment and type (in thousands): September 30, 2016 (1) December 31, 2015 (1) Market Making Technology $ 39,501 $ 38,151 Trading rights 7,035 8,530 Total 46,536 46,681 Global Execution Services Technology 20,646 21,446 Customer relationships 8,306 9,389 Trade names 675 750 Total 29,627 31,585 Corporate and Other Technology 7,668 5,801 Total $ 83,831 $ 84,067 (1) Excluded from the September 30, 2016 and December 31, 2015 balance is $8.2 million and $26.0 million , respectively, of intangibles related to businesses which meet the requirements to be considered held for sale. As noted in Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses", such amounts are included in Assets of businesses held for sale. September 30, December 31, Technology (1) Gross carrying amount $ 147,538 $ 120,256 Accumulated amortization (79,723 ) (54,858 ) Net carrying amount 67,815 65,398 Trading rights (2) Gross carrying amount 7,509 9,209 Accumulated amortization (474 ) (679 ) Net carrying amount 7,035 8,530 Customer relationships (3) Gross carrying amount 13,000 13,000 Accumulated amortization (4,694 ) (3,611 ) Net carrying amount 8,306 9,389 Trade names (4) Gross carrying amount 1,000 1,000 Accumulated amortization (325 ) (250 ) Net carrying amount 675 750 Total Gross carrying amount 169,047 143,465 Accumulated amortization (85,216 ) (59,398 ) Net carrying amount $ 83,831 $ 84,067 (1) The weighted average remaining life for technology, including capitalized internal use software, was approximately two years as of both September 30, 2016 and December 31, 2015 . Excluded from the September 30, 2016 and December 31, 2015 balances are $8.2 million and $8.8 million , respectively, of technology assets related to Assets of businesses held for sale. As noted in Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses", these assets are included in Assets of businesses held for sale. (2) Trading rights provide the Company with the rights to trade on certain exchanges. The weighted average remaining life of trading rights with definite useful lives was approximately 4 and 5 years as of September 30, 2016 and December 31, 2015 , respectively. As of September 30, 2016 and December 31, 2015, $6.9 million of trading rights had indefinite useful lives. Excluded from the December 31, 2015 balance is $17.2 million of trading rights related to Assets of businesses held for sale. (3) Customer relationships relate to KCG BondPoint. The weighted average remaining life was approximately 6 and 7 years as of September 30, 2016 and December 31, 2015 , respectively. Lives may be reduced depending upon actual retention rates. (4) Trade names relate to KCG BondPoint. The weighted average remaining life was approximately 7 years as of both September 30, 2016 and December 31, 2015 . The following table summarizes the Company’s amortization expense relating to Intangible assets (in thousands): For the three months For the nine months 2016 2015 2016 2015 Amortization expense $ 8,943 $ 8,533 $ 24,810 $ 26,400 As of September 30, 2016 , the following table summarizes the Company’s estimated amortization expense for future periods (in thousands): Amortization expense For the three months ended December 31, 2016 $ 9,199 For the year ended December 31, 2017 35,366 For the year ended December 31, 2018 23,201 For the year ended December 31, 2019 5,179 For the year ended December 31, 2020 1,561 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt The carrying value and fair value of the Company's debt is as follows (in thousands): September 30, 2016 December 31, 2015 Carrying Amount Fair Value Carrying Amount Fair Value 6.875% Senior Secured Notes $ 461,657 $ 458,723 $ 495,632 $ 450,000 Deferred debt issuance costs (1) (8,133 ) — (10,643 ) — Total $ 453,524 $ 458,723 $ 484,989 $ 450,000 (1) As discussed in Footnote 2 "Significant Accounting Policies", in 2016 the Company retrospectively adopted a new ASU which requires debt issuance costs be presented as a direct deduction from the carrying amount of the debt liability. The fair value of the Company's 6.875% Senior Secured Notes is based upon the value of such debt in the secondary market. The Company's 6.875% Senior Secured Notes would be categorized as Level 2 in the fair value hierarchy if they were required to be recorded at fair value. 6.875% Senior Secured Notes On March 10, 2015, the Company entered into a purchase agreement with Jefferies LLC, as initial purchaser (the “Initial Purchaser”), pursuant to which the Company agreed to sell, and the Initial Purchaser agreed to purchase, $500.0 million aggregate principal amount of 6.875% Senior Secured Notes (the “ 6.875% Senior Secured Notes”), pursuant to an indenture dated March 13, 2015 (the “ 6.875% Indenture”), in a private offering exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). The 6.875% Senior Secured Notes were resold by the Initial Purchaser to qualified institutional buyers in reliance on Rule 144A and Regulation S under the Securities Act. The 6.875% Senior Secured Notes mature on March 15, 2020 and bear interest at a rate of 6.875% per year, payable on March 15 and September 15 of each year, beginning on September 15, 2015. The 6.875% Senior Secured Notes were issued at 98.962% with net proceeds (before fees and expenses) of $494.8 million and a yield to maturity of 7.083% . On March 13, 2015, KCG and certain subsidiary guarantors (the " 6.875% Guarantors") under the 6.875% Indenture, fully and unconditionally guaranteed on a joint and several basis the 6.875% Senior Secured Notes. The 6.875% Senior Secured Notes and the obligations under the 6.875% Indenture are currently secured by pledges of all of the equity interests in each of KCG’s and the 6.875% Guarantors’ existing and future domestic subsidiaries (but limited to 66% of the voting equity interests of controlled foreign company subsidiaries and excluding equity interests in regulated subsidiaries to the extent that such pledge would have a material adverse regulatory effect or is not permitted by applicable law) and security interests in substantially all other tangible and intangible assets of KCG and the 6.875% Guarantors, in each case subject to customary exclusions; provided, however, that if in the future KCG or any of the 6.875% Guarantors enter into certain first lien obligations (as described in the 6.875% Indenture) the collateral agent is authorized by the holders of the 6.875% Senior Secured Notes to enter into an Intercreditor Agreement pursuant to which the lien securing the 6.875% Senior Secured Notes would be contractually subordinated to the lien securing such first lien obligations, to the extent of the value of the collateral securing such obligations. The 6.875% Senior Secured Notes are effectively subordinated to any existing and future indebtedness that is secured by assets that do not constitute collateral under the 6.875% Senior Secured Notes to the extent of the value of such assets. All of the 6.875% Guarantors are wholly-owned subsidiaries of KCG. On or after March 15, 2017, KCG may redeem all or a part of the 6.875% Senior Secured Notes upon not less than 30 nor more than 60 days ’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest on the 6.875% Senior Secured Notes redeemed, to the applicable redemption date, if redeemed during the 12 -month period beginning on March 15 of the years indicated below: Year Percentage 2017 103.438 % 2018 101.719 % 2019 and thereafter 100.000 % KCG may also redeem the 6.875% Senior Secured Notes, in whole or in part, at any time prior to March 15, 2017 at a price equal to 100% of the aggregate principal amount of the 6.875% Senior Secured Notes to be redeemed, plus a contractual make-whole premium and accrued and unpaid interest. In addition, at any time on or prior to March 15, 2017, KCG may redeem up to 40% of the aggregate principal amount of the 6.875% Senior Secured Notes with the net cash proceeds of certain equity offerings, at a price equal to 106.875% of the aggregate principal amount of the 6.875% Senior Secured Notes, plus accrued and unpaid interest, if any. The 6.875% Indenture contains customary affirmative and negative covenants, including limitations on indebtedness, liens, hedging agreements, investments, loans and advances, asset sales, mergers and acquisitions, dividends, transactions with affiliates, prepayments of other indebtedness, restrictions on subsidiaries, and issuance and repurchases of capital stock. As of September 30, 2016, the Company was in compliance with these covenants. If at any time the 6.875% Senior Secured Notes are rated investment grade by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Group and no default or event of default has occurred and is continuing under the 6.875% Indenture, certain of the restrictive covenants will be suspended and will not apply to KCG or its restricted subsidiaries; provided, however, that such covenants will be reinstated if the 6.875% Senior Secured Notes subsequently cease to be rated or are no longer assigned an investment grade rating by both rating agencies. The 6.875% Senior Secured Notes and the guarantee of the 6.875% Senior Secured Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction and have no registration rights and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company has determined that the terms of the 6.875% Senior Secured Notes do not give rise to a bifurcatable derivative instrument under GAAP. The Company incurred issuance costs of approximately $12.6 million in connection with the issuance of the 6.875% Senior Secured Notes. The issuance costs are recorded, net, within Debt on the Consolidated Statements of Financial Condition and are being amortized as interest expense over the remaining term of the 6.875% Senior Secured Notes. Including issuance costs and original issue discount, the 6.875% Senior Secured Notes had an effective yield of 7.590% . Of the above mentioned costs, $11.3 million was paid to a related party. See Footnote 11 "Related Parties" for additional information relating to financing and advising activities. In the first quarter of 2016, the Company repurchased $35.0 million par value of 6.875% Senior Secured Notes in the open market for $31.2 million (including interest owed). The Company recorded a $3.7 million pre-tax gain within Investment income and other, net on the Consolidated Statements of Operations as a result of these repurchases. The gain on repurchase was net of accelerated original issue discount of $0.3 million and accelerated deferred debt issuance costs of $0.7 million . Cash Convertible Senior Subordinated Notes In March 2010, Knight issued $375.0 million aggregate principal amount of Cash Convertible Senior Subordinated Notes (the “Convertible Notes”), due on March 15, 2015 , in a private offering exempt from registration under the Securities Act. In connection with the closing of the Mergers, on July 1, 2013, KCG became a party to the indenture under which the Convertible Notes were issued. On March 16, 2015, the Convertible Notes became due and were paid off in full with a payment of $119.3 million comprising $117.3 million in principal and $2.1 million in interest. The Convertible Notes bore interest at a rate of 3.50% per year, payable semi-annually in arrears, on March 15 and September 15 of each year, commencing on September 15, 2010 . 8.25% Senior Secured Notes On June 5, 2013 GETCO Financing Escrow LLC (“Finance LLC”), a wholly-owned subsidiary of GETCO, issued 8.25% senior secured notes due 2018 in the aggregate principal amount of $305.0 million (the “ 8.25% Senior Secured Notes”) pursuant to an indenture, dated June 5, 2013 (as amended and supplemented, the " 8.25% Senior Secured Notes Indenture"). On July 1, 2013, KCG entered into a first supplemental indenture (the “First Supplemental Indenture”) pursuant to which KCG assumed all of the obligations of Finance LLC which comprised the 8.25% Senior Secured Notes plus certain escrow agent fees and expenses of $3.0 million . The 8.25% Senior Secured Notes were scheduled to mature on June 15, 2018 and bore interest at a rate of 8.25% per year, payable on June 15 and December 15 of each year, beginning on December 15, 2013. The 8.25% Senior Secured Notes Indenture provided that KCG could redeem the 8.25% Senior Secured Notes, in whole or in part, at any time prior to June 15, 2015 at a price equal to 100% of the aggregate principal amount of the 8.25% Senior Secured Notes to be redeemed, plus a make-whole premium and accrued and unpaid interest, if any. On March 13, 2015, KCG provided 30 days ’ notice that it would be calling its existing 8.25% Senior Secured Notes, effective April 13, 2015. On March 13, 2015, the Company used a portion of the gross proceeds from the 6.875% Senior Secured Notes, to deposit in an escrow account maintained by The Bank of New York Mellon, the trustee of the 8.25% Senior Secured Notes (“Bank of New York”) an amount sufficient to redeem the 8.25% Senior Secured Notes in full and accordingly satisfied and discharged the 8.25% Senior Secured Notes Indenture. The Company funded $330.2 million into an escrow account maintained by Bank of New York comprising the following: principal of $305.0 million , accrued interest for the period from December 16, 2014 to April 13, 2015 of $8.2 million , make whole premium which included 4.125% early redemption cost plus additional interest due from April 13, 2015 through June 15, 2015 totaling $16.5 million , and additional funds to cover other miscellaneous charges of $0.4 million . In the second quarter of 2015, the escrow amount of $330.2 million was released and the required amount was paid out to the 8.25% Senior Secured Notes holders to redeem the 8.25% Senior Secured Notes. Upon the release of the $330.2 million escrow account, the Company recognized charges for a make-whole premium of $16.5 million and the write off of capitalized debt issuance costs of $8.5 million which are recorded as Debt extinguishment charges in the Consolidated Statement of Operations for the nine months ended September 30, 2015. Revolving Credit Agreement On June 5, 2015, KCG Americas LLC ("KCGA"), a wholly-owned broker dealer subsidiary of KCG, as borrower, and KCG, as guarantor, entered into a credit agreement (the "KCGA Facility Agreement”) with a consortium of banks. The KCGA Facility Agreement replaced the prior KCGA credit agreement, dated July 1, 2013, which was terminated as of June 5, 2015. The KCGA Facility Agreement comprises two classes of revolving loans in a total aggregate committed amount of $355.0 million , including a swingline facility with a $50.0 million sub-limit, subject to two borrowing bases (collectively, the “KCGA Revolving Facility”): Borrowing Base A and Borrowing Base B (limited to a maximum loan amount of $115.0 million ). The KCGA Revolving Facility also provides for future increases of the revolving credit facility of up to $145.0 million to a total of $500.0 million on certain terms and conditions. Borrowings under the KCGA Revolving Facility bear interest, at the borrower's option, at a rate based on the federal funds rate (“Base Rate Loans”) or based on LIBOR (“Eurodollar Loans”), in each case plus an applicable margin. For each Base Rate Loan, the interest rate per annum is equal to the greater of the federal funds rate or an adjusted one-month LIBOR rate plus (a) for each Borrowing Base A loan, a margin of 1.50% per annum and (b) for each Borrowing Base B loan, a margin of 2.50% per annum. For each Eurodollar Loan, the interest rate per annum is equal to an adjusted LIBOR rate corresponding to an interest period of one, two or three months plus (a) for each Borrowing Base A loan, a margin of 1.50% per annum and (b) for each Borrowing Base B loan, a margin of 2.50% per annum. As of both September 30, 2016 and December 31, 2015, there were no outstanding borrowings under the KCGA Facility Agreement. The proceeds of the Borrowing Base A loans may be used solely to finance the purchase and settlement of securities. The proceeds of Borrowing Base B loans may be used solely to fund clearing deposits with the National Securities Clearing Corporation ("NSCC"). KCGA is charged a commitment fee at a rate of 0.40% per annum on the average daily amount of the unused portion of the KCGA Facility Agreement. The loans under the KCGA Facility Agreement will mature on June 5, 2017. The KCGA Revolving Facility is fully and unconditionally guaranteed on an unsecured basis by KCG and, to the extent elected by KCGA, any of its or KCG’s other subsidiaries. It is secured by first-priority pledges of and liens on certain eligible securities, subject to applicable concentration limits, in the case of Borrowing Base A loans, and by first-priority pledges of and liens on the right to the return of certain eligible NSCC margin deposits, in the case of Borrowing Base B loans. The KCGA Facility Agreement includes customary affirmative and negative covenants, including limitations on indebtedness, liens, hedging agreements, investments, loans and advances, asset sales, mergers and acquisitions, dividends, transactions with affiliates, restrictions on subsidiaries, issuance of capital stock, negative pledges and business activities. It contains financial maintenance covenants establishing a minimum total regulatory capital for KCGA, a maximum total asset to total regulatory capital ratio for KCGA, a minimum excess net capital limit for KCGA, a minimum liquidity ratio for KCGA, and a minimum tangible net worth threshold for KCGA. As of September 30, 2016, the Company and KCGA were in compliance with these covenants. The KCGA Facility Agreement also contains events of default customary for facilities of its type, including: nonpayment of principal, interest, fees and other amounts when due, inaccuracy of representations and warranties in any material respect; violation of covenants; cross-default and cross-acceleration to material indebtedness; bankruptcy and insolvency events; material judgments; ERISA events; collateral matters; certain regulatory matters; and a “change of control”; subject, where appropriate, to threshold, notice and grace period provisions. In connection with the KCGA Revolving Facility, the Company incurred issuance costs of $1.7 million which are recorded within Other assets on the Consolidated Statements of Financial Condition and are being amortized over the term of the facility. The Company recorded expenses with respect to its Debt as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Interest expense $ 8,234 $ 8,853 $ 24,885 $ 26,738 Debt extinguishment charges — — — 25,006 Amortization of debt issuance costs (1) 795 841 2,411 2,697 Commitment fee (2) 371 343 1,089 1,140 Accelerated amortization of debt issuance costs (3) — — 738 — Accelerated interest expense on repurchase of debt (3) — — 298 — Total $ 9,400 $ 10,037 $ 29,421 $ 55,581 (1) Included within Interest expense on the Consolidated Statements of Operations. (2) Included within Other expense on the Consolidated Statements of Operations. (3) In conjunction with the repurchase of debt in the open market, the Company recorded the prorated accelerated portion of its original issue discount and capitalized debt issuance costs. these costs have been netted against the gain on repurchase within Investment income and other, net on the Consolidated Statements of Operations for the nine months ended September 30, 2016. |
Related Parties
Related Parties | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties The Company interacts with one party which is the beneficial owner of more than 10 percent of KCG’s Class A Common Stock. It also has trading and other activities with certain investees for which KCG accounts for under the equity method of accounting. Each is considered a related party for all applicable periods. See Footnote 8 "Investments" for the carrying value of these investees at September 30, 2016 and December 31, 2015 and for the Company's income with respect to its equity earnings from these investees for the three and nine months ended September 30, 2016 and 2015. The Company earns revenues, incurs expenses and maintains balances with these related parties or their affiliates in the ordinary course of business. As of the date and period indicated below, the Company had the following balances and transactions with its related parties or their affiliates (in thousands): For the three months For the nine months Statements of Operations 2016 2015 2016 2015 Revenues Commissions and fees $ 8,171 $ 4,496 $ 23,246 $ 10,624 Trading revenues, net 86 1,343 1,190 5,248 Interest, net 119 399 394 756 Total revenues from related parties $ 8,376 $ 6,238 $ 24,830 $ 16,628 Expenses Execution and clearance fees (1) $ 4,132 $ (4,525 ) $ 8,577 $ (13,333 ) Communications and data processing 4,710 1,577 12,327 3,986 Payment for order flow — 274 5 2,527 Collateralized financing interest 73 99 199 346 Professional fees — — — 5,507 Other expense 71 479 125 1,756 Total expenses incurred with respect to related parties $ 8,986 $ (2,096 ) $ 21,233 $ 789 (1) Represents net volume based fees paid or received by KCG for taking or providing liquidity to related trading venues. Statements of Financial Condition September 30, December 31, Assets Securities borrowed $ 35,421 $ 10,573 Receivable from brokers, dealers and clearing organizations 4,601 1,987 Other assets 62,789 67,652 Liabilities Securities loaned $ 3,127 $ 3,844 Payable to brokers, dealers and clearing organizations 61 61 Accrued expenses and other liabilities 4,016 4,159 As noted in Footnote 8 "Investments", in the second quarter of 2016, the Company sold a portion of its investment in Bats, which it accounts for under the equity method. The Company recorded a pre-tax gain of $33.4 million from the sale, which is included in Investment income and other, net on the Consolidated Statements of Operations for the nine months ended September 30, 2016 and is not included in the table above. In March 2015, the Company completed the sale of KCG Hotspot to Bats, a related party. The Company recorded a gain on sale of $385.0 million which is included as Investment income and other, net on the Consolidated Statements of Operations for the nine months ended September 30, 2015. The Company and Bats have agreed to share certain tax benefits, which could result in future payments to the Company of up to approximately $70.0 million in the three -year period following the close. KCG received the first annual payment of $6.6 million in March 2016. The remaining additional potential payments are recorded at their estimated fair value of $59.9 million in Other assets on the September 30, 2016 Consolidated Statement of Financial Condition and in the table above. See Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses" for additional information. Additionally, for the nine months ended September 30, 2015, the Company paid one of its related parties $16.8 million in fees related to financing and advisory activities associated with the issuance of the 6.875% Senior Secured Notes and the sale of KCG Hotspot to Bats. The $16.8 million comprised $11.3 million that was capitalized as debt issuance costs and its remaining balance is included, net, within Debt on the Consolidated Statements of Financial Condition and $5.5 million that was recorded as Professional fees in the Consolidated Statement of Operations for the nine months ended September 30, 2015. These Professional fees are included in the table above, however, the $11.3 million capitalized debt issuance costs are not included in the table above as such costs are being amortized over the life of the debt. In the nine months ended September 30, 2016, the Company paid $66,000 in fees to one of its related parties for acting as broker in connection with the Company's stock buyback program. In the nine months ended September 30, 2015, the Company paid $23,000 in fees to this same related party for acting as broker in connection with the Company's stock buyback program. Such fees are recorded within Treasury stock, at cost in the Consolidated Statements of Financial Condition at both September 30, 2016 and December 31, 2015 and are not included in the above table. In the third quarter of 2015, the Company contributed microwave communication network assets to the JV, which is considered a related party. These assets were contributed at fair value and resulted in the Company recording a $4.3 million writedown of such assets. This charge is included in Writedown of assets and other real estate related charges on the Consolidated Statements of Operations for the three and nine months ended September 30, 2015. During the second quarter of 2016, the Company repurchased 1.9 million shares of KCG Class A Common Stock for $26.1 million , for an average price per share of $13.48 , and 6.6 million Warrants for $14.2 million from entities affiliated with two former directors of KCG. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation KCG Equity Incentive Plan KCG Holdings, Inc. Amended and Restated Equity Incentive Plan (the "KCG Plan") was initially assumed from Knight in connection with the Mergers, and since the Mergers, has been maintained by the Company for the purpose of granting incentive awards to officers, employees and directors of the Company. In April 2015, the Company’s Board of Directors approved and adopted an amended and restated version of the KCG Plan, the KCG Holdings, Inc. 2015 Amended and Restated Equity Incentive Plan (“the Amended 2015 Plan”), subject to approval by the KCG stockholders which was obtained on May 12, 2015 at the Company’s annual meeting of stockholders. The Amended 2015 Plan removed a legacy provision that required, subject to limited exceptions, that awards of restricted stock units ("RSUs") and restricted shares be subject to minimum three year vesting for time-based awards and minimum one year vesting for performance-based awards. Additionally, in the second quarter of 2015, the Compensation Committee of the Company’s Board of Directors (the "Compensation Committee") amended the terms of existing RSUs previously granted by the Company as a component of annual incentive compensation in respect of the 2012, 2013 and 2014 performance years (the “Outstanding Annual RSUs”) to provide for the continued vesting of such RSUs following a voluntary resignation of employment, subject to the grantee’s ongoing compliance with non-competition and non-solicitation requirements through the duration of the vesting period (the “Continued Vesting Amendment”). The RSUs granted by the Company as a component of 2015 annual incentive compensation provide for the continued vesting treatment described above, and the Company expects that future equity awards granted as a component of annual incentive compensation (“Annual Equity Awards”) will have similar terms. As of September 30, 2016, there were approximately 25.1 million shares authorized for issuance under the Amended 2015 Plan, of which approximately 13.1 million shares are available for grant (subject to adjustment as provided under the Amended 2015 Plan). The Amended 2015 Plan is administered by the Compensation Committee, and allows for the grant of stock options, stock appreciation rights ("SARs"), restricted stock, RSUs and cash-based awards (collectively, the “awards”), as defined by the Amended 2015 Plan. In addition to overall limitations on the aggregate number of awards that may be granted, the Amended 2015 Plan also limits the number of awards that may be granted to a single individual. Restricted Shares and Restricted Stock Units The Company has historically awarded RSUs to eligible officers, employees and directors as a component of annual incentive compensation, and has also made off-cycle grants of RSUs for purposes of one-time, special or retention awards ("Off-Cycle Grants"). The majority of RSUs that have been granted by the Company vest ratably over three years and are subject to accelerated vesting, or continued vesting, following the grantee’s termination of employment, in accordance with the applicable award documents and employment agreements between the Company and the grantee. As a result of implementing the Continued Vesting Amendment described above, the Outstanding Annual RSUs are no longer considered to have a service condition from an expense perspective. This amendment resulted in the acceleration of the unrecognized expense associated with such awards and the Company recorded a charge of $28.8 million in Employee compensation and benefits in the Consolidated Statements of Operations for the nine months ended September 30, 2015. Beginning in the second quarter of 2015, the Company also began to recognize in the current year the expense associated with the RSUs expected to be granted by the Company early in the following year for the current year's annual incentive compensation. The Company measures compensation expense related to Off-Cycle Grants (and previously for Outstanding Annual RSUs) based on the fair value of KCG Class A Common Stock at the date of grant. When accruing compensation expense over the duration of a performance year prior to the grant of Annual Equity Awards for that year, the Company accrues compensation expense based on the estimated value of such future awards. For example, prior to granting the RSUs that are expected to be awarded by the Company in early 2017 as a component of annual incentive compensation for the 2016 performance year, the Company will accrue compensation expense for such awards over the year ended December 31, 2016, based on the estimated value of such awards. The amount accrued during the year for Annual Equity Awards is included in Accrued compensation expense on the Consolidated Statements of Financial Condition. Compensation expense relating to RSUs, which is primarily recorded in Employee compensation and benefits, and the corresponding income tax benefit, which is recorded in Income tax (benefit) expense on the Consolidated Statements of Operations are presented in the following table (in thousands): For the three months For the nine months 2016 2015 2016 2015 Stock award compensation expense (1) $ (232 ) $ 17,906 $ 24,124 $ 72,202 Income tax benefit (88 ) 6,804 9,167 27,437 (1) Included in the nine months ended September 30, 2015 is $28.8 million of accelerated stock compensation expense related to the Outstanding Annual RSUs as a result of implementing the Continued Vesting Amendment. The following table summarizes restricted awards activity for the nine months ended September 30, 2016 (awards in thousands): Restricted Stock Units Number of Units Weighted- Average Grant date Fair Value Outstanding at December 31, 2015 6,737 $ 11.29 Granted 3,179 10.71 Vested (4,027 ) 10.98 Forfeited (206 ) 11.47 Outstanding at September 30, 2016 5,683 $ 11.18 There was $5.2 million of unamortized compensation related to unvested RSUs at September 30, 2016 that are not Annual Equity Awards. The cost of these unvested RSUs, unless a modification occurs, is expected to be recognized over a weighted average life of 1.8 years. Stock Options and Stock Appreciation Rights The Company’s policy is to grant options for the purchase of shares of KCG Class A Common Stock and SARs to purchase or receive the cash value of shares of KCG Class A Common Stock. The stock options and SARs outstanding as of the date hereof have each been granted with an exercise price not less than the market value of KCG Class A Common Stock on the grant date and generally vest ratably over a three year period and expire on the fifth or tenth anniversary of the grant date, pursuant to the terms of the applicable award agreement. Like RSUs, stock options and SARs are subject to accelerated vesting, or continued vesting following certain termination circumstances, in accordance with the applicable award agreements and employment agreements between the Company and the grantee. The Company issues new shares upon stock option exercises by its employees and directors, and may either issue new shares or provide a cash payment upon SARs exercises by its employees. The Company estimates the fair value of each stock option and SAR granted as of its respective grant date using the Black-Scholes option-pricing model. The principal assumptions utilized in valuing stock options and SARs and the methodology for estimating the inputs to such model include: 1) risk-free interest rate, the estimate of which is based on the yield of U.S. zero coupon securities with a maturity equal to the expected life of the stock option or SAR; 2) expected volatility, the estimate of which is based on several factors including implied volatility of market-traded stock options on the Company’s common stock on the grant date and the volatility of the Company’s common stock; and 3) expected option or SAR life, the estimate of which is based on internal studies of historical experience and projected exercise behavior based on different employee groups and specific stock option and SAR characteristics, including the effect of employee terminations. There were no stock options or SARs granted during the three months ended September 30, 2016. There were 2.0 million stock options granted and no SARs granted during the nine months ended September 30, 2016. There were no stock options or SARs granted during the three and nine months ended September 30, 2015. Compensation expense relating to stock options and SARs, all of which was recorded in Employee compensation and benefits, as well as the corresponding income tax benefit, which is recorded in Income tax (benefit) expense on the Consolidated Statements of Operations are as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Stock option and SAR compensation expense $ 190 $ 915 $ 538 $ 2,856 Income tax benefit 72 348 204 1,085 The following table summarizes stock option and SAR activity and stock options exercisable for the nine months ended September 30, 2016 (awards in thousands): Number of Stock Awards Weighted- Average Exercise Price Aggregate Intrinsic Value Weighted- Average Remaining Life (years) Outstanding at December 31, 2015 (1) 4,371 $ 17.36 Granted 2,059 23.35 Exercised (2 ) 8.24 Forfeited or expired (61 ) 48.38 Outstanding at September 30, 2016 (1) 6,367 $ 18.96 $ 11,818 2.58 Exercisable at September 30, 2016 4,308 $ 16.92 $ 11,818 1.66 Available for future grants at September 30, 2016 (2) 13,073 (1) Includes 1.7 million SARs. (2) Represents shares available for grant of options, SARs, RSUs and other awards under the Amended 2015 Plan. The aggregate intrinsic value is the amount by which the closing price of KCG Class A Common Stock exceeds the exercise price of the stock options or SARs, as applicable, multiplied by the number of shares underlying such award. There were 1,800 stock options exercised for the three and nine months ended September 30, 2016. There were no stock options or SARs exercised during the three and nine months ended September 30, 2015. There is $0.7 million of unamortized compensation related to unvested stock options at September 30, 2016 . The cost of these unvested awards is expected to be recognized over a weighted average life of 1.75 years. Incentive units Prior to the Mergers, GETCO awarded deferred compensation to its employees in the form of incentive units that generally vested over time. The value of these incentive units was determined at the date of grant based on the estimated enterprise value of GETCO and the amount expensed was determined based on this valuation multiplied by the percent vested. In connection with the Mergers, all outstanding unvested incentive units vested and were converted into units based on the applicable exchange ratio of GETCO units to KCG Class A Common Stock. The units are marked to the current stock price of KCG Class A Common Stock at the end of each period with the resulting change in the liability reflected as either an expense or gain included in Employee compensation and benefits on the Consolidated Statements of Operations. Given that the units vested in connection with the Mergers, the Company fully amortized the costs associated with these units as of June 30, 2013. Deferred compensation payable at September 30, 2016 and December 31, 2015 related to incentive units were $2.6 million and $2.4 million , respectively, and is included in Accrued compensation expense on the Consolidated Statements of Financial Condition. The following is a summary of the changes in the incentive units for the nine months ended September 30, 2016 (units in thousands): Vested Incentive units at December 31, 2015 30 Issued — Vested (10 ) Exercised (3 ) Canceled — Incentive units at September 30, 2016 17 Compensation expense (benefit) related to the Incentive units which are recorded within Employee compensation and benefits on the Consolidated Statements of Operations are as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Incentive units $ 253 $ (295 ) $ 499 $ (109 ) |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company and its subsidiaries will file a consolidated federal income tax return as well as combined state income tax returns in certain jurisdictions. In other jurisdictions, the Company and its subsidiaries will file separate company state and local income tax returns. The Company’s effective tax rate was a benefit of 59.9% on a pre-tax loss for the three months ended September 30, 2016, and an expense of 31.3% on pre-tax income for the nine months ended September 30, 2016. These rates differed from the federal statutory rate of 35% primarily due to benefits associated with research and development tax credits, tax deductions for domestic production activities, state and local taxes, and the effect of nondeductible expenses including certain compensation and meals and entertainment. The Company’s effective tax rate of 38.1% for the three months ended September 30, 2015 differed from the federal statutory rate of 35% primarily due to state and local taxes and the effect of nondeductible expenses including certain compensation and meals and entertainment. The Company’s effective tax rate of 34.4% for the nine months ended September 30, 2015 differed from the federal statutory rate of 35% primarily due to the reversal of a valuation allowance on certain state tax net operating losses and other deferred tax assets as a result of a change in tax status of one of the Company's subsidiaries in the second quarter of 2015, other state and local taxes and the effect of nondeductible expenses including certain compensation and meals and entertainment. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Valuation allowances recorded on the balance sheet dates are necessary in cases where management believes that it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of September 30, 2016, the Company is subject to U.S. Federal income tax examinations for the tax years 2013 through 2015, and to non-U.S. income tax examinations for the tax years 2007 through 2015. In addition, the Company is subject to state and local income tax examinations in various jurisdictions for the tax years 2007 through 2015. The final outcome of these examinations is not yet determinable. However, the Company anticipates that adjustments to the unrecognized tax benefits, if any, will not result in a material change to the results of operations or financial condition. At September 30, 2016, the Company had $4.5 million of unrecognized tax benefits, all of which would affect the Company's effective tax rate if recognized. At December 31, 2015, the Company had $3.6 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company's policy for recording interest and penalties associated with audits is to record such items as a component of income or loss before income taxes. Penalties, if any, are recorded in Other expenses and interest paid or received is recorded in Debt interest expense and Interest, net, respectively, on the Consolidated Statements of Operations. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The following table presents changes in Accumulated other comprehensive income (loss), net of tax by component for the three and nine months ended September 30, 2016 and 2015 (in thousands): Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, June 30, 2016 $ 234 $ (450 ) $ (216 ) Other comprehensive income (loss) 88 18 106 Balance September 30, 2016 $ 322 $ (432 ) $ (110 ) Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2015 $ 150 $ 200 $ 350 Other comprehensive income (loss) 172 (632 ) (460 ) Balance September 30, 2016 $ 322 $ (432 ) $ (110 ) Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance June 30, 2015 $ 489 $ 725 $ 1,214 Other comprehensive loss (4 ) (595 ) (599 ) Amount reclassified from Available-for-sale securities (308 ) — (308 ) Net current period other comprehensive loss $ (312 ) $ (595 ) $ (907 ) Balance September 30, 2015 $ 177 $ 130 $ 307 Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance December 31, 2014 $ 352 $ 1,781 $ 2,133 Other comprehensive income (loss) 133 (1,651 ) (1,518 ) Amount reclassified from Available-for-sale securities (308 ) — (308 ) Net current period other comprehensive loss $ (175 ) $ (1,651 ) $ (1,826 ) Balance September 30, 2015 $ 177 $ 130 $ 307 The following table presents the effects of reclassifications out of Accumulated Other Comprehensive Income and into the Consolidated Statements of Operations for the three and nine months ended September 30, 2015 (in thousands): Details about Accumulated Other Comprehensive Income Components Amounts Reclassified from Other Comprehensive Income Affected Line Item in the Consolidated Statement of Operations where Net Income is Presented Available-for-sale securities: Reclassification of unrealized net gains 497 Investment income and other, net Related income tax expense (189 ) Income tax (benefit) expense $ 308 Net of tax Warrants and Stock Repurchase Warrants As a portion of the consideration in the Mergers, former GETCO unitholders received, in addition to KCG Class A Common Stock, 24.3 million Class A, Class B and Class C Warrants, which were issued in accordance with the Warrant Agreement, dated July 1, 2013, between KCG and Computershare Shareowner Services LLC (the “Warrant Agreement”) and which are subject to the terms and conditions of the Warrant Agreement. The Warrant Agreement includes various anti-dilution and similar provisions that require adjustments to the exercise prices of the Class A, Class B and Class C Warrants and/or the number of shares of KCG Class A Common Stock issuable upon exercise of the Warrants upon certain events and actions taken by the Company, including the Company’s repurchase of KCG Class A Common Stock through a public tender offer. As a result of the Company’s "modified Dutch auction" tender offer ("Tender Offer") in the second quarter of 2015, the exercise price of each of the Class A, Class B and Class C Warrants was adjusted in accordance with the terms of the Warrant Agreement. All other terms of the Warrants remained the same. The adjusted exercise price for each class of Warrants and the activity for the nine months ended September 30, 2016 were as follows (Warrants in thousands): Class A Class B Class C Original Exercise Price $ 12.00 $ 13.50 $ 15.00 Adjusted Exercise Price $ 11.70 $ 13.16 $ 14.63 Initial term (years) 4 5 6 Expiration 7/1/2017 7/1/2018 7/1/2019 Total Warrants - Outstanding at December 31, 2015 7,097 7,254 7,254 21,605 Exercised (53 ) (18 ) — (71 ) Repurchased (2,677 ) (2,828 ) (2,828 ) (8,333 ) Warrants - Outstanding at September 30, 2016 4,367 4,408 4,426 13,201 During the third quarter of 2016, the Company repurchased 0.3 million Warrants for $0.7 million . During the nine months ended September 30, 2016, the Company repurchased 8.3 million Warrants for $15.9 million . Stock Repurchase As of September 30, 2016, approximately $138.5 million in authority remained under the current share repurchase program, which is subject to the restrictive covenants in the 6.875% Senior Secured Notes Indenture. See Footnote 11 "Related Parties" for additional information regarding stock and warrant repurchases. |
Warrants and Stock Repurchase
Warrants and Stock Repurchase | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Warrants and Stock Repurchase | Accumulated Other Comprehensive Income The following table presents changes in Accumulated other comprehensive income (loss), net of tax by component for the three and nine months ended September 30, 2016 and 2015 (in thousands): Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, June 30, 2016 $ 234 $ (450 ) $ (216 ) Other comprehensive income (loss) 88 18 106 Balance September 30, 2016 $ 322 $ (432 ) $ (110 ) Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2015 $ 150 $ 200 $ 350 Other comprehensive income (loss) 172 (632 ) (460 ) Balance September 30, 2016 $ 322 $ (432 ) $ (110 ) Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance June 30, 2015 $ 489 $ 725 $ 1,214 Other comprehensive loss (4 ) (595 ) (599 ) Amount reclassified from Available-for-sale securities (308 ) — (308 ) Net current period other comprehensive loss $ (312 ) $ (595 ) $ (907 ) Balance September 30, 2015 $ 177 $ 130 $ 307 Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance December 31, 2014 $ 352 $ 1,781 $ 2,133 Other comprehensive income (loss) 133 (1,651 ) (1,518 ) Amount reclassified from Available-for-sale securities (308 ) — (308 ) Net current period other comprehensive loss $ (175 ) $ (1,651 ) $ (1,826 ) Balance September 30, 2015 $ 177 $ 130 $ 307 The following table presents the effects of reclassifications out of Accumulated Other Comprehensive Income and into the Consolidated Statements of Operations for the three and nine months ended September 30, 2015 (in thousands): Details about Accumulated Other Comprehensive Income Components Amounts Reclassified from Other Comprehensive Income Affected Line Item in the Consolidated Statement of Operations where Net Income is Presented Available-for-sale securities: Reclassification of unrealized net gains 497 Investment income and other, net Related income tax expense (189 ) Income tax (benefit) expense $ 308 Net of tax Warrants and Stock Repurchase Warrants As a portion of the consideration in the Mergers, former GETCO unitholders received, in addition to KCG Class A Common Stock, 24.3 million Class A, Class B and Class C Warrants, which were issued in accordance with the Warrant Agreement, dated July 1, 2013, between KCG and Computershare Shareowner Services LLC (the “Warrant Agreement”) and which are subject to the terms and conditions of the Warrant Agreement. The Warrant Agreement includes various anti-dilution and similar provisions that require adjustments to the exercise prices of the Class A, Class B and Class C Warrants and/or the number of shares of KCG Class A Common Stock issuable upon exercise of the Warrants upon certain events and actions taken by the Company, including the Company’s repurchase of KCG Class A Common Stock through a public tender offer. As a result of the Company’s "modified Dutch auction" tender offer ("Tender Offer") in the second quarter of 2015, the exercise price of each of the Class A, Class B and Class C Warrants was adjusted in accordance with the terms of the Warrant Agreement. All other terms of the Warrants remained the same. The adjusted exercise price for each class of Warrants and the activity for the nine months ended September 30, 2016 were as follows (Warrants in thousands): Class A Class B Class C Original Exercise Price $ 12.00 $ 13.50 $ 15.00 Adjusted Exercise Price $ 11.70 $ 13.16 $ 14.63 Initial term (years) 4 5 6 Expiration 7/1/2017 7/1/2018 7/1/2019 Total Warrants - Outstanding at December 31, 2015 7,097 7,254 7,254 21,605 Exercised (53 ) (18 ) — (71 ) Repurchased (2,677 ) (2,828 ) (2,828 ) (8,333 ) Warrants - Outstanding at September 30, 2016 4,367 4,408 4,426 13,201 During the third quarter of 2016, the Company repurchased 0.3 million Warrants for $0.7 million . During the nine months ended September 30, 2016, the Company repurchased 8.3 million Warrants for $15.9 million . Stock Repurchase As of September 30, 2016, approximately $138.5 million in authority remained under the current share repurchase program, which is subject to the restrictive covenants in the 6.875% Senior Secured Notes Indenture. See Footnote 11 "Related Parties" for additional information regarding stock and warrant repurchases. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic earnings or loss per common share (“EPS”) has been calculated by dividing net income or loss by the weighted average shares of the Company's Class A Common Stock outstanding during each respective period. Diluted EPS reflects the potential reduction in EPS using the treasury stock method to reflect the impact of common stock equivalents if stock options, SARs and Warrants were exercised and restricted awards were to vest. The number of such RSUs, options, Warrants and SARs excluded from the EPS calculation was approximately 17.2 million and 27.9 million for the three months ended September 30, 2016 and 2015, respectively. The number of such RSUs, options, Warrants and SARs excluded from the EPS calculation was approximately 14.3 million and 18.3 million for the nine months ended September 30, 2016 and 2015, respectively. Such RSUs, options, Warrants and SARs were excluded from the EPS calculation as their inclusion would have an anti-dilutive impact on the EPS calculation. The computation of diluted shares can vary among periods due in part to the change in the average price of the Company's Class A Common Stock. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per share amounts): For the three months ended September 30, 2016 2015 Numerator / Denominator / shares Numerator / net income Denominator / shares (Loss) income and shares used in basic calculations $ (11,214 ) 85,009 $ 21,937 91,134 Effect of dilutive stock based awards Restricted awards — 809 Stock options and SARs — 136 Warrants — — (Loss) income and shares used in diluted calculations $ (11,214 ) 85,009 $ 21,937 92,079 Basic (loss) earnings per common share $ (0.13 ) $ 0.24 Diluted (loss) earnings per common share $ (0.13 ) $ 0.24 For the nine months ended September 30, 2016 2015 Numerator / Denominator / shares Numerator / net income Denominator / shares Income and shares used in basic calculations $ 59,505 86,531 $ 252,076 104,244 Effect of dilutive stock based awards Restricted awards 1,066 1,994 Stock options and SARs 546 390 Warrants 338 188 Income and shares used in diluted calculations $ 59,505 88,481 $ 252,076 106,816 Basic earnings per common share $ 0.69 $ 2.42 Diluted earnings per common share $ 0.67 $ 2.36 |
Significant Clients
Significant Clients | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Significant Clients | Significant Clients The Company considers significant clients to be those clients who account for 10% or more of the total U.S. equity market making dollar value traded by the Company. No clients accounted for more than 10% of the Company’s U.S. equity dollar value traded during the three and nine months ended September 30, 2016 or 2015. |
Commitments and Contingent Liab
Commitments and Contingent Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingent Liabilities | Commitments and Contingent Liabilities Legal Proceedings In the ordinary course of business, the nature of the Company’s business subjects it to claims, lawsuits, regulatory examinations or investigations and other proceedings. The Company and its subsidiaries are subject to several of these matters at the present time. Given the inherent difficulty of predicting the outcome of litigation and regulatory matters, particularly in regulatory examinations or investigations or other proceedings in which substantial or indeterminate damages or fines are sought, or where such matters are in the early stages, the Company cannot estimate losses or ranges of losses for such matters where there is only a reasonable possibility that a loss may be incurred. In addition, there are numerous factors that result in a greater degree of complexity in class-action lawsuits as compared to other types of litigation. Due to the many intricacies involved in class-action lawsuits particularly in the early stages of such matters, obtaining clarity on a reasonable estimate is difficult which may call into question its reliability. There can be no assurance that these matters will not have a material adverse effect on the Company’s results of operations in any future period, and a material judgment, fine or sanction could have a material adverse impact on the Company’s financial condition and results of operations. However, it is the opinion of management, after consultation with legal counsel that, based on information currently available, the ultimate outcome of these ordinary matters will not have a material adverse impact on the business, financial condition or operating results of the Company although they might be material to the operating results for any particular reporting period. The Company carries directors’ and officers’ liability insurance coverage for potential claims, including securities actions, against the Company, Knight and GETCO and their respective directors and officers. Other Legal and Regulatory Matters The Company owns subsidiaries including regulated entities that are subject to extensive oversight under federal, state and applicable international laws as well as self-regulatory organization ("SRO") rules. Changes in market structure and the need to remain competitive require constant changes to the Company's systems and order handling procedures. The Company makes these changes while continuously endeavoring to comply with many complex laws and rules. Compliance, surveillance and trading issues common in the securities industry are monitored by, reported to, and/or reviewed in the ordinary course of business by the Company's regulators in the U.S. and abroad. As a major order flow execution destination, the Company is named from time to time in, or is asked to respond to a number of regulatory matters brought by U.S. regulators, foreign regulators, SROs, as well as actions brought by private plaintiffs, which arise from its business activities. There has recently been an increased focus by regulators on Anti-Money Laundering and sanctions compliance by broker-dealers and similar entities, as well as an enhanced interest on suspicious activity reporting and transactions involving microcap securities. In addition, there has been an increased focus by Congress, federal and state regulators, the SROs and the media on market structure issues, and in particular, high frequency trading, best execution, internalization, ATS manner of operations, market fragmentation and complexity, colocation, access to market data feeds and remuneration arrangements, such as payment for order flow and exchange fee structures. The Company has received information requests from various authorities, including the SEC, requesting, among other items, information regarding these market structure matters, which the Company is in the process of responding. The Company is currently the subject of various regulatory reviews and investigations by federal, state and foreign regulators and SROs, including the SEC, the U.S. Department of Justice, the Financial Industry Regulatory Authority, Inc. and the Financial Conduct Authority ("FCA"). In some instances, these matters may rise to a disciplinary action and/or a civil or administrative action. For example, the Autorité des Marchés Financiers ("AMF") recently completed an investigation of GETCO’s trading activities on Euronext for the period 2010 to 2012. In a decision, dated July 8, 2016, the AMF's enforcement committee imposed a €400,000 monetary penalty on GETCO which the Company has decided not to appeal. The Company fully reserved for the monetary penalty in the second quarter of 2016 and anticipates paying the monetary penalty in the fourth quarter of 2016. Capital Leases The Company enters into capitalized lease obligations related to certain computer equipment. These obligations represent drawdowns under a revolving secured lending facility with a single lender. At September 30, 2016 , the obligations have a weighted-average interest rate of 4.40% per annum and are on varying 3 -year terms. The carrying amounts of the capital lease obligations approximate fair value and is recorded in Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The future minimum payments including interest under the capitalized leases at September 30, 2016 consist of (in thousands): Minimum Payments Three months ended December 31, 2016 $ 532 2017 620 Total $ 1,152 The total interest expense related to capital leases for the three and nine months ended September 30, 2016 and 2015 included in Debt interest expense on the Consolidated Statements Operations is as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Interest expense - Capital leases $ 15 $ 38 $ 56 $ 160 Operating Leases The Company leases office space under noncancelable operating leases. Certain office leases contain fixed dollar-based escalation clauses. Rental expense under the office leases was $6.4 million and $4.0 million for the three months ended September 30, 2016 and 2015 , respectively, and $18.9 million and $12.9 million for the nine months ended September 30, 2016 and 2015 , respectively, and is included in Occupancy and equipment rentals on the Consolidated Statements of Operations. The Company also subleases certain of its excess capacity to third parties and collects sublease income on such premises. Such income is part of lease loss accruals included within Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The Company leases certain computer and other equipment under noncancelable operating leases. As of September 30, 2016 , future minimum rental commitments under all noncancelable office, computer and equipment leases (“Gross Lease Obligations”), and sublease income were as follows (in thousands): Gross Lease Obligations Sublease Income Net Lease Obligations Three months ending December 31, 2016 $ 5,717 $ 1,452 $ 4,265 Year ending December 31, 2017 28,549 5,144 23,405 Year ending December 31, 2018 26,872 4,791 22,081 Year ending December 31, 2019 24,318 4,131 20,187 Year ending December 31, 2020 22,918 2,957 19,961 Thereafter through December 31, 2031 175,323 10,348 164,975 Total $ 283,697 $ 28,823 $ 254,874 Contract Obligations During the normal course of business, the Company collateralizes certain leases or other contractual obligations through letters of credit or segregated funds held in escrow accounts. At September 30, 2016 , the Company had provided letters of credit for $11.1 million , collateralized by cash, as a guarantee for several of its lease obligations and for a trading JV. In the ordinary course of business, KCG also has provided, and may provide in the future, unsecured guarantees with respect to the payment obligations of certain of its subsidiaries under trading, repurchase, financing and stock loan arrangements, as well as under certain leases. Guarantees The Company is a member of exchanges that trade and clear futures contracts. Associated with its memberships, the Company may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchange. Although the rules governing different exchange memberships vary, in general the Company’s guarantee obligations would arise only if the exchange had previously exhausted its resources. In addition, any such guarantee obligation would be apportioned among the other nondefaulting members of the exchange. Any potential contingent liability under these membership agreements cannot be estimated. The Company has not recorded any contingent liability in the financial statements for these agreements and management believes that any potential requirement to make payments under these agreements is remote. There was one compensation guarantee at September 30, 2016 that extended beyond December 31, 2016. There were no compensation guarantees at September 30, 2015 that extended beyond December 31, 2015. Representations and Warranties In the normal course of its operations, the Company enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company believes the risk of significant loss is minimal. Urban Financial of America, LLC, ("Urban"), the reverse mortgage origination and securitization business that was sold by KCG in November 2013, has advised KCG that it will seek indemnification from KCG for losses on certain loans that were underwritten prior to KCG’s disposition of Urban. This potential obligation relates to approximately 40 loans which have been identified as either loans pursuant to which Urban was required to provide an indemnification to the U.S. Department of Housing and Urban Development (“HUD”) in the event the loans sustained losses or as not qualifying for HUD insurance. Based on information currently available, KCG estimates that its maximum exposure to losses with respect to reimbursing Urban for any potential losses on these loans will not exceed $8.5 million . The Company has not recorded any liabilities related to these potential losses as of September 30, 2016 . The activity in the liability accounts related to the Company’s lease losses and lease terminations for its U.S. leases are recorded in Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition as follows (in thousands): For the nine months ended September 30, 2016 For the year ended December 31, 2015 Balance as of beginning of period $ 18,892 $ 5,897 Real estate charges incurred — 23,186 Payments made, net (459 ) (8,921 ) Interest accretion (3,949 ) (1,270 ) Balance as of end of period $ 14,484 $ 18,892 |
Financial instruments with Off-
Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk | Derivative Financial Instruments The Company enters into derivative transactions as part of its trading activities and to manage foreign currency exposure. Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows. During the normal course of business, the Company enters into futures contracts. These financial instruments are subject to varying degrees of risks whereby the fair value of the securities underlying the financial instruments may be in excess of, or less than, the contract amount. The Company is obligated to post collateral against certain futures contracts. The Company has entered into and may continue to enter into International Swaps and Derivative Association, Inc. (“ISDA”) master netting agreements with counterparties. Master agreements provide protection in bankruptcy in certain circumstances and, where legally enforceable, enable receivables and payables with the same counterparty to be settled or otherwise eliminated by applying amounts due against all or a portion of an amount due from the counterparty or a third party. The Company may also enter into bilateral trading agreements and other customer agreements that provide for the netting of receivables and payables with a given counterparty as a single net obligation. Under the ISDA master netting agreements, the Company typically also executes credit support annexes, which provide for collateral, either in the form of cash or securities, to be posted or paid by a counterparty based on the fair value of the derivative receivable or payable based on the rates and parameters established in the credit support annex. In the event of counterparty’s default, provisions of the ISDA master agreement permit acceleration and termination of all outstanding transactions covered by the agreement such that a single amount is owed by, or to, the non-defaulting party. Any collateral posted can be applied to the net obligations, with any excess returned and the collateralized party has a right to liquidate the collateral. Any residual claim after netting is treated along with other unsecured claims in bankruptcy court. The Company is also a party to clearing agreements with various central clearing parties. Under these arrangements, the central clearing counterparty facilitates settlement between counterparties based on the net payable owed or receivable due and, with respect to daily settlement, cash is generally only required to be deposited to the extent of the net amount. In the event of default, a net termination amount is determined based on the market values of all outstanding positions and the clearing organization or clearing member provides for the liquidation and settlement of the net termination amount among all counterparties to the open derivative contracts. The following tables summarize the fair value and number of derivative instruments held at September 30, 2016 and December 31, 2015. These instruments include those classified as Financial instruments, owned at fair value, Financial instruments sold, not yet purchased at fair value, as well as futures contracts and bi-lateral over the counter swaps which are reported within Receivable from brokers, dealers and clearing organizations in the Consolidated Statements of Financial Condition. The fair value of assets/liabilities are shown gross of counterparty netting and cash collateral received and pledged. The following tables also provide information regarding 1) the extent to which, under enforceable master netting agreements, such balances are presented net in the Consolidated Statements of Financial Condition as appropriate under GAAP and 2) the extent to which other rights of setoff associated with these agreements exist and could have an effect on our financial position (in thousands, except contract amounts): September 30, 2016 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 292 1,932 $ 1,651 3,440 Forward contracts (1) Financial instruments owned, at fair value — — 302 1 Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,560 2,321 2,000 2,723 Swap contracts Receivable from brokers, dealers and clearing organizations 8 1 146 1 Listed options Financial instruments owned/sold, not yet purchased, at fair value 12,190 78,269 16,319 81,367 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 5,075 4,162 6,059 3,924 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 66,562 37,977 65,970 38,373 Gross derivative assets/liabilities, before netting $ 85,687 $ 92,447 Less: Legally enforceable master netting agreements Exchange traded (2) (72,993 ) (75,680 ) Bi-lateral over-the-counter (3) — (448 ) Net amounts per Consolidated Statement of Financial Condition (4) $ 12,694 $ 16,319 December 31, 2015 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 578 3,675 $ 955 6,586 Forward contracts (1) Financial instruments owned, at fair value 445 1 — — Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,558 4,038 1,743 3,432 Swap contracts Receivable from brokers, dealers and clearing organizations — — 281 2 Listed options Financial instruments owned/sold, not yet purchased, at fair value 178,360 360,469 151,893 390,949 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 4,265 6,195 4,037 4,891 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 35,441 22,424 35,814 24,261 Gross derivative assets/liabilities, before netting $ 220,647 $ 194,723 Less: Legally enforceable master netting agreements Exchange traded (2) (41,146 ) (42,549 ) Bi-lateral over-the-counter (3) — (281 ) Net amounts per Consolidated Statement of Financial Condition (4) $ 179,501 $ 151,893 (1) The foreign currency forward contract represents a net investment hedge and is designated as a hedging instrument. (2) Exchange traded instruments comprise futures contracts. (3) Bi-lateral over-the-counter instruments comprise swaps and forward contracts. (4) The Company has not received or pledged additional collateral under master netting agreements and or other credit support agreements that is eligible to be offset beyond what is offset in the Consolidated Statements of Financial Condition. The fair value of listed options and forward contracts in the tables above are classified as Level 1 and Level 2 in the fair value hierarchy, respectively . The fair value of futures contracts and swaps in the tables above would be classified as Level 1 and Level 2 in the fair value hierarchy, respectively, if such classification were required . The following table summarizes the gains and losses included in the Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015. Gain (Loss) Recognized Financial Statements For the three months For the nine months Location 2016 2015 2016 2015 Derivative instruments not designated as hedging instruments: Foreign currency Futures contracts Trading revenues, net $ 1,964 $ 1,868 $ 3,529 $ 2,674 Forward contracts Investment income and other, net — — — (10 ) Equity Futures contracts Trading revenues, net (5,008 ) 13,849 6,395 27,587 Swap contracts Trading revenues, net (232 ) 1,792 2,480 2,860 Listed options Trading revenues, net (557 ) 1,149 (222 ) (15,032 ) Fixed income Futures contracts Trading revenues, net 2,670 10,918 16,627 35,839 Commodity Futures contracts Trading revenues, net 9,949 14,852 31,506 39,855 $ 8,786 $ 44,428 $ 60,315 $ 93,773 Derivative instruments designated as hedging instruments: Foreign exchange - forward contract Accumulated other comprehensive income $ (197 ) $ (44 ) $ (571 ) $ (50 ) The Company has identified an error in the presentation of its previously reported derivative gains and losses for the three and nine months ended September 30, 2015 and the above disclosures have been revised to correct for the error. The error impacted the gains and losses from futures contracts in the above table but did not have any impact to the Company’s Consolidated Financial Statements. The Company evaluated the materiality of these errors in accordance with SEC Staff Accounting Bulletin No. 99, Materiality , and SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements , and concluded that this error was immaterial to the Consolidated Financial Statements for all prior periods. While the adjustments were immaterial, the Company revised its previously disclosed gains and losses from futures contracts in the above table as follows: Gain (Loss) Recognized Financial Statements For the three months For the nine months Location As Previously Reported Revised As Previously Reported Revised Derivative instruments not designated as hedging instruments: Equity Futures contracts Trading revenues, net (2,122 ) 13,849 11,616 27,587 Fixed income Futures contracts Trading revenues, net 5,256 10,918 30,177 35,839 Commodity Futures contracts Trading revenues, net 12,339 14,852 37,342 39,855 Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk As a market maker in global equities, fixed income, futures, options, commodities and currencies, the majority of the Company’s securities transactions are conducted as principal or riskless principal with broker dealers and institutional counterparties primarily located in the United States. The Company self-clears substantially all of its U.S. equity and option securities transactions. The Company clears a portion of its securities transactions through third party clearing brokers. Foreign transactions are settled pursuant to global custody and clearing agreements with major U.S. banks. Substantially all of the Company’s credit exposures are concentrated with its clearing brokers, broker dealer and institutional counterparties. The Company’s policy is to monitor the credit standing of counterparties with which it conducts business. Financial instruments sold, not yet purchased, at fair value represent obligations to purchase such securities (or underlying securities) at a future date. The Company may incur a loss if the market value of the securities subsequently increases. The Company currently has no loans outstanding to any former or current executive officer or director. |
Business Segments
Business Segments | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Business Segments | Business Segments As of September 30, 2016 , the Company's operating segments comprised the following: (i) Market Making; (ii) Global Execution Services; and (iii) Corporate and Other. The Market Making segment principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions. Principal trading in the Market Making segment primarily consists of direct-to-client and non-client exchange-based electronic market making. KCG is an active participant on all major global equity and futures exchanges and also trades on substantially all domestic electronic options exchanges. As a complement to electronic market making, the Company's cash trading business handles specialized orders and also transacts on the OTC Bulletin Board marketplaces operated by the OTC Markets Group Inc. and the AIM. The Global Execution Services segment comprises agency execution services and trading venues, offering trading in global equities, options, futures and fixed income to institutions, banks and broker dealers. The Company generally earns commissions as an agent between principals for transactions; however, the Company may commit capital on behalf of clients as needed. Agency-based, execution-only trading in the segment is done primarily through a variety of access points including: (i) algorithmic trading and order routing in global equities and options; (ii) institutional sales traders executing program, block and riskless principal trades in global equities and ETFs; (iii) a fixed income ECN that also offers trading applications; and (iv) an ATS for U.S. equities. In September 2016, the Company completed the acquisition of Neonet. Neonet is an independent agency broker and execution specialist based in Stockholm, Sweden. The results of Neonet, beginning on the date of acquisition, are included in this segment. The Corporate and Other segment contains investments principally in strategic financial services-oriented opportunities; manages the deployment of capital across the organization; houses executive management functions; and maintains corporate overhead expenses and all other income and expenses that are not attributable to the other segments. The Corporate and Other segment also contains functions that support the Company’s other segments such as self-clearing services, including stock lending activities. The Company’s revenues, (loss) income before income taxes (“Pre-tax earnings”) and total assets by segment are summarized in the following table (in thousands): Market Making Global Execution Services Corporate and Other Consolidated Total For the three months ended September 30, 2016: Revenues $ 136,107 $ 63,713 $ 8,712 $ 208,532 Pre-tax earnings (13,776 ) (439 ) (13,759 ) (27,974 ) Total assets 5,280,491 1,060,460 409,650 6,750,601 For the three months ended September 30, 2015: Revenues $ 299,755 $ 69,713 $ 7,568 $ 377,036 Pre-tax earnings 85,419 (1,050 ) (48,951 ) 35,419 Total assets 5,125,761 798,956 925,452 6,850,169 For the nine months ended September 30, 2016: Revenues $ 606,849 $ 208,245 $ 58,776 $ 873,870 Pre-tax earnings 102,223 7,506 (23,173 ) 86,556 Total assets 5,280,491 1,060,460 409,650 6,750,601 For the nine months ended September 30, 2015: Revenues $ 716,631 $ 597,502 $ 20,941 $ 1,335,074 Pre-tax earnings 129,160 370,072 (114,799 ) 384,433 Total assets 5,125,761 798,956 925,452 6,850,169 Included in Revenues and Pre-tax earnings within Corporate and Other for the nine months ended September 30, 2016 is a $33.4 million gain from the sale of a portion of the Company's investment in Bats. Included in Revenues and Pre-tax earnings within Global Execution Services for the nine months ended September 30, 2015 are results of KCG Hotspot through March 13, 2015, the date of the sale. Also included in Revenues and Pre-tax earnings within the Global Execution Services segment for the nine months ended September 30, 2015 is a gain related to the sale of KCG Hotspot of $385.0 million and $373.8 million , respectively. Included in total assets within Corporate and Other at September 30, 2016 is $8.2 million related to Assets of businesses held for sale. See Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses" for further information. |
Significant Accounting Polici29
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of consolidation and form of presentation | Basis of consolidation and form of presentation The accompanying unaudited Consolidated Financial Statements, prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. These unaudited Consolidated Financial Statements include the accounts of the Company and its subsidiaries and reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. All significant intercompany transactions and balances have been eliminated. Interim period operating results may not be indicative of the operating results for a full year. Certain reclassifications have been made to the prior periods’ Consolidated Financial Statements in order to conform to the current period presentation. Such reclassifications are immaterial to both current and all previously issued financial statements taken as a whole and have no effect on previously reported consolidated net income. |
Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents include money market accounts, which are payable on demand, and short-term investments with an original maturity of less than 90 days . The carrying amount of such cash equivalents approximates their fair value due to the short-term nature of these instruments. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. |
Cash and cash equivalents segregated under federal and other regulations | Cash and cash equivalents segregated under federal and other regulations The Company maintains custody of customer funds and is obligated by rules and regulations mandated by the SEC to segregate or set aside cash and/or qualified securities to satisfy these regulations, which have been promulgated to protect customer assets. The amounts recognized as Cash and cash equivalents segregated under federal and other regulations approximate fair value. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. |
Market making, sales, trading and execution activities | Market making, sales, trading and execution activities Financial instruments owned and Financial instruments sold, not yet purchased relate to market making and trading activities, and include listed and other equity securities, listed equity options and fixed income securities that are recorded on a trade date basis and are reported at fair value. Such financial instruments are netted by their respective long and short positions by CUSIP/ISIN number. Trading revenues, net, which comprises trading gains, net of trading losses on such financial instruments, are also recorded on a trade date basis. Commissions, which primarily comprise commission equivalents earned on institutional client orders and volume based fees earned from providing liquidity to other trading venues, as well as related expenses, are also recorded on a trade date basis. The Company’s third party clearing agreements call for payment or receipt of interest income, net of transaction-related interest charged by such clearing brokers, for facilitating the settlement and financing of securities transactions. Payments for order flow represent payments to broker dealer clients, in the normal course of business, for directing their order flow in U.S. equities and, prior to the sale of the retail U.S. options market making business, options to the Company. |
Fair value of financial instruments | Fair value of financial instruments The Company values its financial instruments using a hierarchy of fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows: • Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. • Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. • Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Changes in fair value are recognized in earnings each period for financial instruments that are carried at fair value. |
Collateralized agreements and financings | Collateralized agreements and financings Collateralized agreements consist of securities borrowed. Collateralized financings primarily comprise securities loaned and financial instruments sold under agreements to repurchase. • Securities borrowed and securities loaned transactions are recorded at the amount of cash collateral advanced or received. Securities borrowed transactions facilitate the securities settlement process and require the Company to deposit cash or other collateral with the lender. Securities loaned transactions help finance the Company’s securities inventory whereby the Company lends stock to counterparties in exchange for the receipt of cash or other collateral from the borrower. In these transactions, the Company receives or posts cash or other collateral in an amount generally in excess of the market value of the applicable securities borrowed or loaned. The Company monitors the market value of securities borrowed or loaned on a daily basis, and obtains additional collateral or refunds excess collateral as necessary. • Financial instruments sold under agreements to repurchase and other collateralized financings are used to finance inventories of securities and other financial instruments and are recorded at their contractual amount. The Company has entered into bilateral and tri-party term and overnight repurchase and other collateralized financing agreements which bear interest at negotiated rates. The Company receives cash and makes delivery of financial instruments to a custodian who monitors the market value of these instruments on a daily basis. The market value of the instruments delivered must be equal to or in excess of the principal amount loaned under the repurchase agreements plus the agreed upon margin requirement. The custodian may request additional collateral, if appropriate. |
Securitization activities | The Company’s securities borrowed, securities loaned, financial instruments sold under agreements to repurchase and other collateralized financings are recorded at amounts that approximate fair value. These items are recorded based upon their contractual terms and are not materially sensitive to shifts in interest rates because they are short-term in nature and are substantially collateralized pursuant to the terms of the underlying agreements. These items would be categorized as Level 2 in the fair value hierarchy if they were required to be recorded at fair value. |
Investments | Investments Investments primarily comprise noncontrolling equity ownership interests in financial services-related businesses and are held by the Company's non-broker dealer subsidiaries. These investments are accounted for under the equity method, at cost, or at fair value. The equity method of accounting is used when the Company has significant influence over the operating and financial policies of the investee. Investments are held at cost, less impairment if any, when the investment does not have a readily determined fair value, and the Company is not considered to exert significant influence over operating and financial policies of the investee. Investments that are publicly traded and where the Company does not exert significant influence on operating and financial policies are held at fair value and accounted for as available for sale securities and any unrealized gains or losses are recorded net of tax in Other comprehensive income. Investments are reviewed on an ongoing basis to determine whether the carrying values of the investments have been impaired. If the Company determines that an impairment loss on an investment has occurred due to a decline in fair value or other conditions, the investment is written down to its estimated fair value. Included in the Company's investments are assets supporting a non-qualified deferred compensation plan for certain employees. This plan provides a return to the participants based upon the performance of various investments. In order to hedge its liability under this plan, the Company generally acquires the underlying investments and holds such investments until the deferred compensation liabilities are satisfied. Changes in value of such investments are recorded in Investment income and other, net, with a corresponding charge or credit to Employee compensation and benefits on the Consolidated Statements of Operations. Deferred compensation investments primarily consist of mutual funds, which are accounted for at fair value. |
Goodwill and intangible assets | Goodwill and intangible assets The Company tests goodwill and intangible assets with an indefinite useful life for impairment annually or when an event occurs or circumstances change that signifies that the carrying amounts may not be recoverable. The Company amortizes intangible assets with finite lives on a straight line basis over their estimated useful lives and tests for recoverability whenever events indicate that the carrying amounts may not be recoverable. The Company capitalizes certain costs associated with the acquisition or development of internal-use software and amortizes the software over its estimated useful life of three years, commencing at the time the software is placed in service. |
Payable to customers | Payable to customers Payable to customers primarily relate to amounts due on cash and margin transactions. Due to their short-term nature, such amounts approximate fair value. |
Repurchases of common stock | Repurchases of common stock The Company may repurchase shares of KCG Class A Common Stock, par value $0.01 per share ("KCG Class A Common Stock") in the open market or through privately negotiated transactions. The Company may structure such repurchases as either a purchase of treasury stock or a retirement of shares. The Company records its purchases of treasury stock, which include shares repurchased in satisfaction of tax withholding obligations upon vesting of restricted awards, at cost as a separate component of stockholders’ equity. The Company may re-issue treasury stock, at average cost, for the acquisition of new businesses and in certain other circumstances. For shares that are retired, the Company records its repurchases at cost, as a reduction in KCG Class A Common Stock for the par value of such retired shares and a reduction in Retained earnings for the balance. |
Repurchases of warrants | Repurchases of warrants As discussed in Footnote 15 "Warrants and Stock Repurchase", in connection with the Mergers, the Company issued Class A, Class B and Class C warrants to acquire shares of KCG Class A Common Stock ("Warrants"). The Company may repurchase Warrants through privately negotiated transactions. The Company records its purchases of Warrants as a reduction in Additional paid-in capital for the total cost. |
Repurchases of debt | Repurchases of debt The Company may repurchase its 6.875% Senior Secured Notes in the open market or through privately negotiated transactions. The Company records its purchases of debt as a reduction in Debt for the par value repurchased as well as a prorated reduction of original issue discount and capitalized issuance costs. Total cost also includes accrued interest on the repurchased debt, which is included in Accrued expenses and other liabilities. The Company will record a gain to the extent that it repurchases debt at a price that is less than par value less the applicable original issue discount |
Foreign currency translation and foreign currency forward contracts | Foreign currency translation and foreign currency forward contracts The Company's foreign subsidiaries generally use the U.S. dollar as their functional currency. The Company also has subsidiaries that utilize a functional currency other than the U.S. dollar, including its Indian subsidiary, which utilizes the Indian Rupee and, beginning in the third quarter of 2016, Neonet, which utilizes the Swedish Krona. None of these non-U.S. dollar functional currency subsidiaries are significant to the Company’s Consolidated Financial Statements. Assets and liabilities of these non-U.S. dollar functional currency subsidiaries are translated at exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the period. Gains and losses resulting from translating foreign currency financial statements into U.S. dollars are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Cumulative translation adjustment, net of tax on the Consolidated Statements of Comprehensive Income. Gains or losses resulting from foreign currency transactions are included in Investment income and other, net on the Company’s Consolidated Statements of Operations. For the three months ended September 30, 2016 and 2015, the Company recorded a gain of $0.1 million and a loss of $1.8 million , respectively, on foreign currency transactions. For the nine months ended September 30, 2016 and 2015, the Company recorded a gain of $1.0 million and a loss of $2.4 million , respectively, on foreign currency transactions. The Company seeks to reduce the impact of fluctuations in foreign exchange rates on its net investment in certain non-U.S. operations through the use of foreign currency forward contracts. For foreign currency forward contracts designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. The effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts. For qualifying net investment hedges, any gains or losses, to the extent effective, are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Cumulative translation adjustment, net of tax, on the Consolidated Statements of Comprehensive Income. The ineffective portion, if any, is recorded in Investment income and other, net on the Consolidated Statements of Operations. |
Stock and unit based compensation | Stock and unit based compensation Stock and unit based compensation is primarily measured based on the grant date fair value of the awards. These costs are amortized over the requisite service period, if any. Expected forfeitures are considered in determining stock-based employee compensation expense. |
Soft dollar expense | Soft dollar expense Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions and fees on the Consolidated Statements of Operations. |
Depreciation, amortization and occupancy | Depreciation, amortization and occupancy Fixed assets are depreciated on a straight-line basis over their estimated useful lives of three to seven years. Leasehold improvements are being amortized on a straight-line basis, upon occupancy of the location, over the shorter of the term of the related office lease or the expected useful life of the assets. The Company reviews fixed assets and leasehold improvements for impairment, as well as their remaining useful lives whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company recognizes rent expense under operating leases with fixed rent escalations, lease incentives and free rent periods on a straight-line basis over the lease term beginning on the date the Company takes possession of or controls the use of the space, including during free rent periods. |
Lease loss accrual | Lease loss accrual The Company’s policy is to identify excess real estate capacity and where applicable, accrue for related future costs, net of projected sub-lease income upon the date the Company ceases to use the excess real estate. Such accrual is adjusted to the extent the actual terms of sub-leased property differ from the previous assumptions used in the calculation of the accrual. |
Income taxes | Income taxes The Company is a corporation subject to U.S. corporate income tax as well as non-U.S. income taxes in the jurisdictions in which it operates. The Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and measures them using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. The Company evaluates the recoverability of future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary differences and forecasted operating earnings. |
Variable interest entities | Variable interest entities A variable interest entity (“VIE”) is an entity that lacks one or more of the following characteristics (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Since January 2015, the Company has owned 50% of the voting shares and 50% of the equity of a joint venture, (“JV”) which maintains microwave communication networks in the U.S. and Europe, and which is considered to be a VIE. The Company and its JV partner each pay monthly fees for the use of the microwave communication networks in connection with their respective trading activities, and the JV may sell excess bandwidth that is not utilized by the JV members to third parties. The Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; therefore it does not have a controlling financial interest in the JV and does not consolidate the JV. The Company records its interest in the JV under the equity method of accounting and records its investment in the JV within Investments and its amounts payable for communication services provided by the JV within Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The Company records its pro-rata share of the JV’s earnings or losses within Investment income and other, net and fees related to the use of communication services provided by the JV within Communications and data processing on the Consolidated Statements of Operations. The Company’s exposure to the obligations of this VIE is generally limited to its interests in the JV, which is the carrying value of the equity investment in the JV. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. |
Recently adopted accounting guidance and Recent accounting guidance to be adopted in future periods | Recently adopted accounting guidance In June 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) to resolve diverse accounting treatment for share based awards in which the terms of the award are related to a performance target that affects vesting. The ASU requires an entity to treat a performance target that could be achieved after the requisite service period as a performance condition. Additionally, compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved, and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered; if the performance target becomes probable of being achieved before the end of the requisite service period, then the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The guidance became effective for reporting periods beginning after December 15, 2015 and has been applied prospectively. The adoption of this ASU did not have an impact on the Company’s Consolidated Financial Statements. In February 2015, the FASB issued an ASU which requires entities to evaluate whether they should consolidate certain legal entities. The ASU simplifies consolidation accounting by reducing the number of consolidation models that an entity may apply. The guidance became effective for reporting periods beginning after December 15, 2015. The adoption of this ASU did not have an impact on the Company’s Consolidated Financial Statements. In April 2015, the FASB issued an ASU regarding simplification of the presentation of debt issuance costs. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the Consolidated Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The guidance became effective retrospectively for reporting periods beginning after December 15, 2015. The Company retrospectively adopted this ASU in the first quarter of 2016, and as a result, the Company reclassified deferred debt issuance costs from Other assets to a direct deduction from the carrying value of Debt on its Consolidated Statements of Financial Condition for all periods presented. The Company also reclassified its amortization of debt issuance costs from Other expense to Debt interest expense on its Consolidated Statements of Operations for all periods presented. The adoption of this ASU did not have any other impact on the Company's Consolidated Financial Statements. See Footnote 10 “Debt” for further details regarding these reclassifications. Recent accounting guidance to be adopted in future periods In May 2014, the FASB issued an ASU that updates the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued an ASU to clarify guidance on principal versus agent evaluation considerations and whether an entity reports revenue on a gross or net basis. These ASUs will be effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted for reporting periods beginning after December 15, 2016. The Company is evaluating the impact of these ASUs on its Consolidated Financial Statements. In August 2014, the FASB issued an ASU that requires an entity’s management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosure in certain circumstances. The guidance is effective for reporting periods beginning after December 15, 2016. The Company does not expect the adoption of this ASU to have an impact on its Consolidated Financial Statements. In January 2016, the FASB issued an ASU that provides entities guidance for the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted under a modified retrospective approach for certain financial liabilities as specified in this ASU. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. In February 2016, the FASB issued an ASU which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted under a modified retrospective approach. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. In March 2016, the FASB issued an ASU which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016 and early adoption is permitted. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. In August 2016, the FASB issued an ASU which clarifies the presentation and classification of certain cash receipts and cash payments in the Consolidated Statement of Cash Flows. This ASU is effective for reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements. |
Significant Accounting Polici30
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Schedule of Interest Income and Interest Expense | Interest income and interest expense which have been netted within Interest, net on the Consolidated Statements of Operations are as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Interest Income $ 3,011 $ 2,768 $ 9,015 $ 9,841 Interest Expense (2,334 ) (3,848 ) (7,954 ) (11,540 ) Interest, net $ 677 $ (1,080 ) $ 1,061 $ (1,699 ) |
Net Trading Revenue Including Dividend Income and Expense | Trading revenues, net includes dividend income and expense as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Dividend Income $ 14,704 $ 14,879 $ 39,637 $ 45,596 Dividend Expense $ (14,521 ) $ (9,904 ) $ (35,235 ) $ (30,262 ) |
Schedule of Nonconsolidated VIE | The following table presents the Company’s nonconsolidated VIE at September 30, 2016 (in thousands): Carrying Amount Maximum Exposure to loss Asset Liability VIE's assets Equity investment $ 13,153 $ 1,206 $ 13,153 $ 27,931 |
Assets of Businesses Held for31
Assets of Businesses Held for Sale & Sales of Businesses (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Summary of Assets of Businesses Held for Sale | The assets of businesses held for sale as of September 30, 2016 and December 31, 2015 are summarized as follows (in thousands): September 30, December 31, Assets: Intangible assets, net of accumulated amortization $ 8,194 $ 25,999 Total assets of businesses held for sale $ 8,194 $ 25,999 |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value (in thousands): Assets and Liabilities Measured at Fair Value on a Recurring Basis September 30, 2016 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,641,499 $ — $ — $ 2,641,499 Corporate debt 179,152 — — 179,152 U.S. government obligations 72,112 — — 72,112 Listed options 12,190 — — 12,190 Total Financial instruments owned, at fair value 2,904,953 — — 2,904,953 Investment in CME Group (1) 2,093 — — 2,093 Other (2) — 62,151 6,650 68,801 Total assets held at fair value $ 2,907,046 $ 62,151 $ 6,650 $ 2,975,847 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,927,864 $ — $ — $ 1,927,864 Corporate debt 173,678 — — 173,678 U.S. government obligations 104,625 — — 104,625 Listed options 16,319 — — 16,319 Foreign currency forward contracts — 302 — 302 Total liabilities held at fair value $ 2,222,486 $ 302 $ — $ 2,222,788 (1) Investment in CME Group is included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $59.9 million receivable from Bats related to the sale of KCG Hotspot and a $6.7 million receivable from the sale of an investment, both of which are included within Other Assets, and $2.3 million of deferred compensation investments which is included within Investments on the Consolidated Statements of Financial Condition. Assets and Liabilities Measured at Fair Value on a Recurring Basis December 31, 2015 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,129,208 $ — $ — $ 2,129,208 Listed options 178,360 — — 178,360 U.S. government and Non-U.S. government obligations 41,706 — — 41,706 Corporate debt 94,681 — — 94,681 Foreign currency forward contracts — 445 — 445 Total Financial instruments owned, at fair value 2,443,955 445 — 2,444,400 Investment in CME Group (1) 1,814 — — 1,814 Other (2) — 65,732 5,789 71,521 Total assets held at fair value $ 2,445,769 $ 66,177 $ 5,789 $ 2,517,735 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,856,171 $ — $ — $ 1,856,171 Listed options 151,893 — — 151,893 U.S. government obligations 21,056 — — 21,056 Corporate debt 84,284 — — 84,284 Total liabilities held at fair value $ 2,113,404 $ — $ — $ 2,113,404 (1) Investment in CME Group is included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $64.2 million receivable from Bats related to the sale of KCG Hotspot and a $5.8 million receivable from the sale of an investment, both of which are included in Other assets, and $1.5 million of deferred compensation investments which is included within Investments on the Consolidated Statements of Financial Condition. |
Changes in Fair Value of Financial Assets Categorized within Level 3 | The following is a summary of changes in fair value of the Company's financial assets that have been categorized within Level 3 of the fair value hierarchy at September 30, 2016 (in thousands): Level 3 Financial Assets for the three months ended September 30, 2016 Balance at July 1, 2016 Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at September 30, 2016 Receivable from sold investment $ 6,347 $ — $ 303 $ — $ — $ — $ — $ — $ 6,650 Level 3 Financial Assets for the nine months ended September 30, 2016 Balance at January 1, 2016 Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at September 30, 2016 Receivable from sold investment $ 5,789 $ — $ 861 $ — $ — $ — $ — $ — $ 6,650 |
Derivative Financial Instrume33
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of Fair Value and Derivative Instruments in Consolidated Statements of Financial Condition | The following tables summarize the fair value and number of derivative instruments held at September 30, 2016 and December 31, 2015. These instruments include those classified as Financial instruments, owned at fair value, Financial instruments sold, not yet purchased at fair value, as well as futures contracts and bi-lateral over the counter swaps which are reported within Receivable from brokers, dealers and clearing organizations in the Consolidated Statements of Financial Condition. The fair value of assets/liabilities are shown gross of counterparty netting and cash collateral received and pledged. The following tables also provide information regarding 1) the extent to which, under enforceable master netting agreements, such balances are presented net in the Consolidated Statements of Financial Condition as appropriate under GAAP and 2) the extent to which other rights of setoff associated with these agreements exist and could have an effect on our financial position (in thousands, except contract amounts): September 30, 2016 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 292 1,932 $ 1,651 3,440 Forward contracts (1) Financial instruments owned, at fair value — — 302 1 Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,560 2,321 2,000 2,723 Swap contracts Receivable from brokers, dealers and clearing organizations 8 1 146 1 Listed options Financial instruments owned/sold, not yet purchased, at fair value 12,190 78,269 16,319 81,367 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 5,075 4,162 6,059 3,924 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 66,562 37,977 65,970 38,373 Gross derivative assets/liabilities, before netting $ 85,687 $ 92,447 Less: Legally enforceable master netting agreements Exchange traded (2) (72,993 ) (75,680 ) Bi-lateral over-the-counter (3) — (448 ) Net amounts per Consolidated Statement of Financial Condition (4) $ 12,694 $ 16,319 December 31, 2015 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 578 3,675 $ 955 6,586 Forward contracts (1) Financial instruments owned, at fair value 445 1 — — Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,558 4,038 1,743 3,432 Swap contracts Receivable from brokers, dealers and clearing organizations — — 281 2 Listed options Financial instruments owned/sold, not yet purchased, at fair value 178,360 360,469 151,893 390,949 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 4,265 6,195 4,037 4,891 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 35,441 22,424 35,814 24,261 Gross derivative assets/liabilities, before netting $ 220,647 $ 194,723 Less: Legally enforceable master netting agreements Exchange traded (2) (41,146 ) (42,549 ) Bi-lateral over-the-counter (3) — (281 ) Net amounts per Consolidated Statement of Financial Condition (4) $ 179,501 $ 151,893 (1) The foreign currency forward contract represents a net investment hedge and is designated as a hedging instrument. (2) Exchange traded instruments comprise futures contracts. (3) Bi-lateral over-the-counter instruments comprise swaps and forward contracts. (4) The Company has not received or pledged additional collateral under master netting agreements and or other credit support agreements that is eligible to be offset beyond what is offset in the Consolidated Statements of Financial Condition. |
Summary of Fair Value and Derivative Instruments in Consolidated Statements of Operations | The following table summarizes the gains and losses included in the Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015. Gain (Loss) Recognized Financial Statements For the three months For the nine months Location 2016 2015 2016 2015 Derivative instruments not designated as hedging instruments: Foreign currency Futures contracts Trading revenues, net $ 1,964 $ 1,868 $ 3,529 $ 2,674 Forward contracts Investment income and other, net — — — (10 ) Equity Futures contracts Trading revenues, net (5,008 ) 13,849 6,395 27,587 Swap contracts Trading revenues, net (232 ) 1,792 2,480 2,860 Listed options Trading revenues, net (557 ) 1,149 (222 ) (15,032 ) Fixed income Futures contracts Trading revenues, net 2,670 10,918 16,627 35,839 Commodity Futures contracts Trading revenues, net 9,949 14,852 31,506 39,855 $ 8,786 $ 44,428 $ 60,315 $ 93,773 Derivative instruments designated as hedging instruments: Foreign exchange - forward contract Accumulated other comprehensive income $ (197 ) $ (44 ) $ (571 ) $ (50 ) |
Revision of Previously Disclosed Gains (Losses) on Future Contracts | The Company evaluated the materiality of these errors in accordance with SEC Staff Accounting Bulletin No. 99, Materiality , and SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements , and concluded that this error was immaterial to the Consolidated Financial Statements for all prior periods. While the adjustments were immaterial, the Company revised its previously disclosed gains and losses from futures contracts in the above table as follows: Gain (Loss) Recognized Financial Statements For the three months For the nine months Location As Previously Reported Revised As Previously Reported Revised Derivative instruments not designated as hedging instruments: Equity Futures contracts Trading revenues, net (2,122 ) 13,849 11,616 27,587 Fixed income Futures contracts Trading revenues, net 5,256 10,918 30,177 35,839 Commodity Futures contracts Trading revenues, net 12,339 14,852 37,342 39,855 |
Collateralized Transactions (Ta
Collateralized Transactions (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Collateralized Agreements [Abstract] | |
Financial Instruments at Fair Value Received as Collateral that were Permitted to be Delivered or Repledged | The table below presents financial instruments at fair value received as collateral related to Securities borrowed or Receivable from brokers, dealers and clearing organizations on the Consolidated Statements of Financial Condition that were permitted to be delivered or repledged and that were delivered or repledged by the Company as well as the fair value of financial instruments which could be further repledged by the receiving party (in thousands): September 30, December 31, Collateral permitted to be delivered or repledged $ 1,969,324 $ 1,640,145 Collateral that was delivered or repledged 1,842,751 1,570,921 Collateral permitted to be further repledged by the receiving counterparty 152,717 188,345 |
Summary of Assets Pledged | The table below presents information about assets pledged by the Company (in thousands): September 30, December 31, Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge $ 470,568 $ 324,146 Financial instruments owned, at fair value, pledged to counterparties that do not have the right to deliver or repledge 1,189,985 1,027,847 |
Gross Carrying Value of Assets Sold Under Agreements to Repurchase | The table below presents the gross carrying value of Securities loaned and Financial instruments sold under agreements to repurchase by class of collateral pledged (in thousands): September 30, 2016 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 639,452 $ 912,099 $ 49,256 U.S. government obligations — 69,700 — Corporate debt 8,150 52,901 744 Total $ 647,602 $ 1,034,700 $ 50,000 December 31, 2015 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 451,085 $ 855,632 $ — U.S. government obligations — 54,902 — Corporate debt 12,292 44,368 — Total $ 463,377 $ 954,902 $ — |
Assets Subject to Netting | The gross amounts of assets and liabilities subject to netting and gross amounts offset in the Consolidated Statements of Financial Condition were as follows (in thousands): September 30, 2016 Gross Amounts Recognized Gross Amounts Offset in the Statements of Financial Condition Net Amounts Presented in the Statements of Financial Condition Gross Amounts Not Offset in the Statement of Financial Condition Net Amount Available Collateral (1) Counterparty Netting (2) Assets Securities borrowed $ 1,958,095 $ — $ 1,958,095 $ 1,909,346 $ 7,002 $ 41,747 Receivable from brokers, dealers and clearing organizations (3) 59,980 — 59,980 59,881 22 77 Total assets $ 2,018,075 $ — $ 2,018,075 $ 1,969,227 $ 7,024 $ 41,824 Liabilities Securities loaned $ 647,602 $ — $ 647,602 $ 627,544 $ 7,002 $ 13,056 Financial instruments sold under agreements to repurchase 1,034,700 — 1,034,700 1,034,678 22 — Other collateralized financings 50,000 — 50,000 50,000 — — Total liabilities $ 1,732,302 $ — $ 1,732,302 $ 1,712,222 $ 7,024 $ 13,056 (1) Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements. (2) Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statement of Financial Condition because other netting provisions under U.S. GAAP are not met. (3) Represents financial instruments purchased under agreement to resell. December 31, 2015 Gross Amounts Recognized Gross Amounts Offset in the Statements of Financial Condition Net Amounts Presented in the Statements of Financial Condition Gross Amounts Not Offset in the Statement of Financial Condition Net Amount Available Collateral (1) Counterparty Netting (2) Assets Securities borrowed $ 1,636,284 $ — $ 1,636,284 $ 1,575,568 $ 8,277 $ 52,439 Receivable from brokers, dealers and clearing organizations (3) 65,433 — 65,433 62,580 — 2,853 Total assets $ 1,701,717 $ — $ 1,701,717 $ 1,638,148 $ 8,277 $ 55,292 Liabilities Securities loaned $ 463,377 $ — $ 463,377 $ 440,486 $ 8,277 $ 14,614 Financial instruments sold under agreements to repurchase 954,902 — 954,902 954,902 — — Total liabilities $ 1,418,279 $ — $ 1,418,279 $ 1,395,388 $ 8,277 $ 14,614 (1) Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements. (2) Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by a counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statement of Financial Condition because other netting provisions under U.S. GAAP are not met. (3) Represents financial instruments purchased under agreement to resell. |
Liabilities Subject to Netting | The gross amounts of assets and liabilities subject to netting and gross amounts offset in the Consolidated Statements of Financial Condition were as follows (in thousands): September 30, 2016 Gross Amounts Recognized Gross Amounts Offset in the Statements of Financial Condition Net Amounts Presented in the Statements of Financial Condition Gross Amounts Not Offset in the Statement of Financial Condition Net Amount Available Collateral (1) Counterparty Netting (2) Assets Securities borrowed $ 1,958,095 $ — $ 1,958,095 $ 1,909,346 $ 7,002 $ 41,747 Receivable from brokers, dealers and clearing organizations (3) 59,980 — 59,980 59,881 22 77 Total assets $ 2,018,075 $ — $ 2,018,075 $ 1,969,227 $ 7,024 $ 41,824 Liabilities Securities loaned $ 647,602 $ — $ 647,602 $ 627,544 $ 7,002 $ 13,056 Financial instruments sold under agreements to repurchase 1,034,700 — 1,034,700 1,034,678 22 — Other collateralized financings 50,000 — 50,000 50,000 — — Total liabilities $ 1,732,302 $ — $ 1,732,302 $ 1,712,222 $ 7,024 $ 13,056 (1) Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements. (2) Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statement of Financial Condition because other netting provisions under U.S. GAAP are not met. (3) Represents financial instruments purchased under agreement to resell. December 31, 2015 Gross Amounts Recognized Gross Amounts Offset in the Statements of Financial Condition Net Amounts Presented in the Statements of Financial Condition Gross Amounts Not Offset in the Statement of Financial Condition Net Amount Available Collateral (1) Counterparty Netting (2) Assets Securities borrowed $ 1,636,284 $ — $ 1,636,284 $ 1,575,568 $ 8,277 $ 52,439 Receivable from brokers, dealers and clearing organizations (3) 65,433 — 65,433 62,580 — 2,853 Total assets $ 1,701,717 $ — $ 1,701,717 $ 1,638,148 $ 8,277 $ 55,292 Liabilities Securities loaned $ 463,377 $ — $ 463,377 $ 440,486 $ 8,277 $ 14,614 Financial instruments sold under agreements to repurchase 954,902 — 954,902 954,902 — — Total liabilities $ 1,418,279 $ — $ 1,418,279 $ 1,395,388 $ 8,277 $ 14,614 (1) Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements. (2) Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement. These balances reflect additional credit risk mitigation that is available by a counterparty in the event of a counterparty's default, but which are not netted in the Consolidated Statement of Financial Condition because other netting provisions under U.S. GAAP are not met. (3) Represents financial instruments purchased under agreement to resell. |
Maturities of Assets Sold Under Repurchase Agreements | Maturities of Securities loaned and Financial instruments sold under agreements to repurchase are provided in the table below (in thousands): As of September 30, 2016 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 647,602 $ — $ — $ — $ 647,602 Other collateralized financings — 50,000 — — 50,000 Financial instruments sold under agreements to repurchase 69,700 310,000 415,000 240,000 1,034,700 Total $ 717,302 $ 360,000 $ 415,000 $ 240,000 $ 1,732,302 As of December 31, 2015 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 463,377 $ — $ — $ — $ 463,377 Financial instruments sold under agreements to repurchase 54,902 635,000 150,000 115,000 954,902 Total $ 518,279 $ 635,000 $ 150,000 $ 115,000 $ 1,418,279 |
Receivable from and Payable t35
Receivable from and Payable to Brokers, Dealers and Clearing Organizations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Brokers and Dealers [Abstract] | |
Schedule of Amounts Receivable from and Payable to Brokers, Dealers and Clearing Organizations | Amounts receivable from and payable to brokers, dealers and clearing organizations consist of the following (in thousands): September 30, December 31, Receivable: Clearing organizations and other $ 458,972 $ 505,789 Financial instruments purchased under agreement to resell 59,980 65,433 Securities failed to deliver 177,543 109,989 Total receivable $ 696,495 $ 681,211 Payable: Clearing organizations and other $ 559,621 $ 240,985 Securities failed to receive 87,468 32,820 Total payable $ 647,089 $ 273,805 |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Investments [Abstract] | |
Summary of Investments | Investments primarily comprise strategic investments and deferred compensation investments. Investments consist of the following (in thousands): September 30, December 31, Strategic investments: Investments accounted for under the equity method $ 87,099 $ 86,853 Investments held at fair value 2,093 1,814 Investments held at adjusted cost 2,293 8,746 Total strategic investments 91,485 97,413 Other investments 2,290 1,530 Total investments $ 93,775 $ 98,943 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of Intangible Assets, Net by Segment and Type | The following tables summarize the Company’s Intangible assets, net of accumulated amortization by segment and type (in thousands): September 30, 2016 (1) December 31, 2015 (1) Market Making Technology $ 39,501 $ 38,151 Trading rights 7,035 8,530 Total 46,536 46,681 Global Execution Services Technology 20,646 21,446 Customer relationships 8,306 9,389 Trade names 675 750 Total 29,627 31,585 Corporate and Other Technology 7,668 5,801 Total $ 83,831 $ 84,067 (1) Excluded from the September 30, 2016 and December 31, 2015 balance is $8.2 million and $26.0 million , respectively, of intangibles related to businesses which meet the requirements to be considered held for sale. As noted in Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses", such amounts are included in Assets of businesses held for sale. September 30, December 31, Technology (1) Gross carrying amount $ 147,538 $ 120,256 Accumulated amortization (79,723 ) (54,858 ) Net carrying amount 67,815 65,398 Trading rights (2) Gross carrying amount 7,509 9,209 Accumulated amortization (474 ) (679 ) Net carrying amount 7,035 8,530 Customer relationships (3) Gross carrying amount 13,000 13,000 Accumulated amortization (4,694 ) (3,611 ) Net carrying amount 8,306 9,389 Trade names (4) Gross carrying amount 1,000 1,000 Accumulated amortization (325 ) (250 ) Net carrying amount 675 750 Total Gross carrying amount 169,047 143,465 Accumulated amortization (85,216 ) (59,398 ) Net carrying amount $ 83,831 $ 84,067 (1) The weighted average remaining life for technology, including capitalized internal use software, was approximately two years as of both September 30, 2016 and December 31, 2015 . Excluded from the September 30, 2016 and December 31, 2015 balances are $8.2 million and $8.8 million , respectively, of technology assets related to Assets of businesses held for sale. As noted in Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses", these assets are included in Assets of businesses held for sale. (2) Trading rights provide the Company with the rights to trade on certain exchanges. The weighted average remaining life of trading rights with definite useful lives was approximately 4 and 5 years as of September 30, 2016 and December 31, 2015 , respectively. As of September 30, 2016 and December 31, 2015, $6.9 million of trading rights had indefinite useful lives. Excluded from the December 31, 2015 balance is $17.2 million of trading rights related to Assets of businesses held for sale. (3) Customer relationships relate to KCG BondPoint. The weighted average remaining life was approximately 6 and 7 years as of September 30, 2016 and December 31, 2015 , respectively. Lives may be reduced depending upon actual retention rates. (4) Trade names relate to KCG BondPoint. The weighted average remaining life was approximately 7 years as of both September 30, 2016 and December 31, 2015 . |
Summary of Amortization Expense | The following table summarizes the Company’s amortization expense relating to Intangible assets (in thousands): For the three months For the nine months 2016 2015 2016 2015 Amortization expense $ 8,943 $ 8,533 $ 24,810 $ 26,400 |
Summary of Estimated Amortization Expense for Future Periods | As of September 30, 2016 , the following table summarizes the Company’s estimated amortization expense for future periods (in thousands): Amortization expense For the three months ended December 31, 2016 $ 9,199 For the year ended December 31, 2017 35,366 For the year ended December 31, 2018 23,201 For the year ended December 31, 2019 5,179 For the year ended December 31, 2020 1,561 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Summary of Long-term Debt | The carrying value and fair value of the Company's debt is as follows (in thousands): September 30, 2016 December 31, 2015 Carrying Amount Fair Value Carrying Amount Fair Value 6.875% Senior Secured Notes $ 461,657 $ 458,723 $ 495,632 $ 450,000 Deferred debt issuance costs (1) (8,133 ) — (10,643 ) — Total $ 453,524 $ 458,723 $ 484,989 $ 450,000 (1) As discussed in Footnote 2 "Significant Accounting Policies", in 2016 the Company retrospectively adopted a new ASU which requires debt issuance costs be presented as a direct deduction from the carrying amount of the debt liability. |
Debt Instrument Redemption | KCG may redeem all or a part of the 6.875% Senior Secured Notes upon not less than 30 nor more than 60 days ’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest on the 6.875% Senior Secured Notes redeemed, to the applicable redemption date, if redeemed during the 12 -month period beginning on March 15 of the years indicated below: Year Percentage 2017 103.438 % 2018 101.719 % 2019 and thereafter 100.000 % |
Recorded Expenses with Respect to Long-term Debt | The Company recorded expenses with respect to its Debt as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Interest expense $ 8,234 $ 8,853 $ 24,885 $ 26,738 Debt extinguishment charges — — — 25,006 Amortization of debt issuance costs (1) 795 841 2,411 2,697 Commitment fee (2) 371 343 1,089 1,140 Accelerated amortization of debt issuance costs (3) — — 738 — Accelerated interest expense on repurchase of debt (3) — — 298 — Total $ 9,400 $ 10,037 $ 29,421 $ 55,581 (1) Included within Interest expense on the Consolidated Statements of Operations. (2) Included within Other expense on the Consolidated Statements of Operations. (3) In conjunction with the repurchase of debt in the open market, the Company recorded the prorated accelerated portion of its original issue discount and capitalized debt issuance costs. these costs have been netted against the gain on repurchase within Investment income and other, net on the Consolidated Statements of Operations for the nine months ended September 30, 2016. |
Related Parties (Tables)
Related Parties (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Summary of Balances and Transactions with Related Parties or Their Affiliates | As of the date and period indicated below, the Company had the following balances and transactions with its related parties or their affiliates (in thousands): For the three months For the nine months Statements of Operations 2016 2015 2016 2015 Revenues Commissions and fees $ 8,171 $ 4,496 $ 23,246 $ 10,624 Trading revenues, net 86 1,343 1,190 5,248 Interest, net 119 399 394 756 Total revenues from related parties $ 8,376 $ 6,238 $ 24,830 $ 16,628 Expenses Execution and clearance fees (1) $ 4,132 $ (4,525 ) $ 8,577 $ (13,333 ) Communications and data processing 4,710 1,577 12,327 3,986 Payment for order flow — 274 5 2,527 Collateralized financing interest 73 99 199 346 Professional fees — — — 5,507 Other expense 71 479 125 1,756 Total expenses incurred with respect to related parties $ 8,986 $ (2,096 ) $ 21,233 $ 789 (1) Represents net volume based fees paid or received by KCG for taking or providing liquidity to related trading venues. Statements of Financial Condition September 30, December 31, Assets Securities borrowed $ 35,421 $ 10,573 Receivable from brokers, dealers and clearing organizations 4,601 1,987 Other assets 62,789 67,652 Liabilities Securities loaned $ 3,127 $ 3,844 Payable to brokers, dealers and clearing organizations 61 61 Accrued expenses and other liabilities 4,016 4,159 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Compensation Expense Relating to RSUs and Summary of Changes in Incentive Units | Compensation expense relating to RSUs, which is primarily recorded in Employee compensation and benefits, and the corresponding income tax benefit, which is recorded in Income tax (benefit) expense on the Consolidated Statements of Operations are presented in the following table (in thousands): For the three months For the nine months 2016 2015 2016 2015 Stock award compensation expense (1) $ (232 ) $ 17,906 $ 24,124 $ 72,202 Income tax benefit (88 ) 6,804 9,167 27,437 (1) Included in the nine months ended September 30, 2015 is $28.8 million of accelerated stock compensation expense related to the Outstanding Annual RSUs as a result of implementing the Continued Vesting Amendment. The following is a summary of the changes in the incentive units for the nine months ended September 30, 2016 (units in thousands): Vested Incentive units at December 31, 2015 30 Issued — Vested (10 ) Exercised (3 ) Canceled — Incentive units at September 30, 2016 17 |
Summary of Restricted Awards Activity | The following table summarizes restricted awards activity for the nine months ended September 30, 2016 (awards in thousands): Restricted Stock Units Number of Units Weighted- Average Grant date Fair Value Outstanding at December 31, 2015 6,737 $ 11.29 Granted 3,179 10.71 Vested (4,027 ) 10.98 Forfeited (206 ) 11.47 Outstanding at September 30, 2016 5,683 $ 11.18 |
Compensation Expense Relating to Stock Options and SARs | Compensation expense relating to stock options and SARs, all of which was recorded in Employee compensation and benefits, as well as the corresponding income tax benefit, which is recorded in Income tax (benefit) expense on the Consolidated Statements of Operations are as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Stock option and SAR compensation expense $ 190 $ 915 $ 538 $ 2,856 Income tax benefit 72 348 204 1,085 |
Summary of Stock Option, SAR Activity and Stock Options Exercisable | The following table summarizes stock option and SAR activity and stock options exercisable for the nine months ended September 30, 2016 (awards in thousands): Number of Stock Awards Weighted- Average Exercise Price Aggregate Intrinsic Value Weighted- Average Remaining Life (years) Outstanding at December 31, 2015 (1) 4,371 $ 17.36 Granted 2,059 23.35 Exercised (2 ) 8.24 Forfeited or expired (61 ) 48.38 Outstanding at September 30, 2016 (1) 6,367 $ 18.96 $ 11,818 2.58 Exercisable at September 30, 2016 4,308 $ 16.92 $ 11,818 1.66 Available for future grants at September 30, 2016 (2) 13,073 (1) Includes 1.7 million SARs. (2) Represents shares available for grant of options, SARs, RSUs and other awards under the Amended 2015 Plan. |
Schedule of Compensation Expense (Benefit) | Compensation expense (benefit) related to the Incentive units which are recorded within Employee compensation and benefits on the Consolidated Statements of Operations are as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Incentive units $ 253 $ (295 ) $ 499 $ (109 ) |
Accumulated Other Comprehensi41
Accumulated Other Comprehensive Income (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | The following table presents changes in Accumulated other comprehensive income (loss), net of tax by component for the three and nine months ended September 30, 2016 and 2015 (in thousands): Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, June 30, 2016 $ 234 $ (450 ) $ (216 ) Other comprehensive income (loss) 88 18 106 Balance September 30, 2016 $ 322 $ (432 ) $ (110 ) Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2015 $ 150 $ 200 $ 350 Other comprehensive income (loss) 172 (632 ) (460 ) Balance September 30, 2016 $ 322 $ (432 ) $ (110 ) Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance June 30, 2015 $ 489 $ 725 $ 1,214 Other comprehensive loss (4 ) (595 ) (599 ) Amount reclassified from Available-for-sale securities (308 ) — (308 ) Net current period other comprehensive loss $ (312 ) $ (595 ) $ (907 ) Balance September 30, 2015 $ 177 $ 130 $ 307 Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance December 31, 2014 $ 352 $ 1,781 $ 2,133 Other comprehensive income (loss) 133 (1,651 ) (1,518 ) Amount reclassified from Available-for-sale securities (308 ) — (308 ) Net current period other comprehensive loss $ (175 ) $ (1,651 ) $ (1,826 ) Balance September 30, 2015 $ 177 $ 130 $ 307 |
Reclassification out of Accumulated Other Comprehensive Income | The following table presents the effects of reclassifications out of Accumulated Other Comprehensive Income and into the Consolidated Statements of Operations for the three and nine months ended September 30, 2015 (in thousands): Details about Accumulated Other Comprehensive Income Components Amounts Reclassified from Other Comprehensive Income Affected Line Item in the Consolidated Statement of Operations where Net Income is Presented Available-for-sale securities: Reclassification of unrealized net gains 497 Investment income and other, net Related income tax expense (189 ) Income tax (benefit) expense $ 308 Net of tax |
Warrants and Stock Repurchase (
Warrants and Stock Repurchase (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Adjusted Exercise Price and Activity of Warrants | The adjusted exercise price for each class of Warrants and the activity for the nine months ended September 30, 2016 were as follows (Warrants in thousands): Class A Class B Class C Original Exercise Price $ 12.00 $ 13.50 $ 15.00 Adjusted Exercise Price $ 11.70 $ 13.16 $ 14.63 Initial term (years) 4 5 6 Expiration 7/1/2017 7/1/2018 7/1/2019 Total Warrants - Outstanding at December 31, 2015 7,097 7,254 7,254 21,605 Exercised (53 ) (18 ) — (71 ) Repurchased (2,677 ) (2,828 ) (2,828 ) (8,333 ) Warrants - Outstanding at September 30, 2016 4,367 4,408 4,426 13,201 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Reconciliation of Earnings Per Share | The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per share amounts): For the three months ended September 30, 2016 2015 Numerator / Denominator / shares Numerator / net income Denominator / shares (Loss) income and shares used in basic calculations $ (11,214 ) 85,009 $ 21,937 91,134 Effect of dilutive stock based awards Restricted awards — 809 Stock options and SARs — 136 Warrants — — (Loss) income and shares used in diluted calculations $ (11,214 ) 85,009 $ 21,937 92,079 Basic (loss) earnings per common share $ (0.13 ) $ 0.24 Diluted (loss) earnings per common share $ (0.13 ) $ 0.24 For the nine months ended September 30, 2016 2015 Numerator / Denominator / shares Numerator / net income Denominator / shares Income and shares used in basic calculations $ 59,505 86,531 $ 252,076 104,244 Effect of dilutive stock based awards Restricted awards 1,066 1,994 Stock options and SARs 546 390 Warrants 338 188 Income and shares used in diluted calculations $ 59,505 88,481 $ 252,076 106,816 Basic earnings per common share $ 0.69 $ 2.42 Diluted earnings per common share $ 0.67 $ 2.36 |
Commitments and Contingent Li44
Commitments and Contingent Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Payments Under Capital Leases | The future minimum payments including interest under the capitalized leases at September 30, 2016 consist of (in thousands): Minimum Payments Three months ended December 31, 2016 $ 532 2017 620 Total $ 1,152 |
Schedule of Interest Expense, Capital Leases | The total interest expense related to capital leases for the three and nine months ended September 30, 2016 and 2015 included in Debt interest expense on the Consolidated Statements Operations is as follows (in thousands): For the three months For the nine months 2016 2015 2016 2015 Interest expense - Capital leases $ 15 $ 38 $ 56 $ 160 |
Schedule of Future Minimum Rental Commitments for Operating Leases | As of September 30, 2016 , future minimum rental commitments under all noncancelable office, computer and equipment leases (“Gross Lease Obligations”), and sublease income were as follows (in thousands): Gross Lease Obligations Sublease Income Net Lease Obligations Three months ending December 31, 2016 $ 5,717 $ 1,452 $ 4,265 Year ending December 31, 2017 28,549 5,144 23,405 Year ending December 31, 2018 26,872 4,791 22,081 Year ending December 31, 2019 24,318 4,131 20,187 Year ending December 31, 2020 22,918 2,957 19,961 Thereafter through December 31, 2031 175,323 10,348 164,975 Total $ 283,697 $ 28,823 $ 254,874 |
Activity in Liability Accounts Related to Lease Losses and Lease Terminations | The activity in the liability accounts related to the Company’s lease losses and lease terminations for its U.S. leases are recorded in Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition as follows (in thousands): For the nine months ended September 30, 2016 For the year ended December 31, 2015 Balance as of beginning of period $ 18,892 $ 5,897 Real estate charges incurred — 23,186 Payments made, net (459 ) (8,921 ) Interest accretion (3,949 ) (1,270 ) Balance as of end of period $ 14,484 $ 18,892 |
Business Segments (Tables)
Business Segments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Revenues, Pre-tax Earnings and Total Assets by Segment | The Company’s revenues, (loss) income before income taxes (“Pre-tax earnings”) and total assets by segment are summarized in the following table (in thousands): Market Making Global Execution Services Corporate and Other Consolidated Total For the three months ended September 30, 2016: Revenues $ 136,107 $ 63,713 $ 8,712 $ 208,532 Pre-tax earnings (13,776 ) (439 ) (13,759 ) (27,974 ) Total assets 5,280,491 1,060,460 409,650 6,750,601 For the three months ended September 30, 2015: Revenues $ 299,755 $ 69,713 $ 7,568 $ 377,036 Pre-tax earnings 85,419 (1,050 ) (48,951 ) 35,419 Total assets 5,125,761 798,956 925,452 6,850,169 For the nine months ended September 30, 2016: Revenues $ 606,849 $ 208,245 $ 58,776 $ 873,870 Pre-tax earnings 102,223 7,506 (23,173 ) 86,556 Total assets 5,280,491 1,060,460 409,650 6,750,601 For the nine months ended September 30, 2015: Revenues $ 716,631 $ 597,502 $ 20,941 $ 1,335,074 Pre-tax earnings 129,160 370,072 (114,799 ) 384,433 Total assets 5,125,761 798,956 925,452 6,850,169 |
Significant Accounting Polici46
Significant Accounting Policies - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Jun. 30, 2016 | Mar. 13, 2015 | Mar. 10, 2015 | |
JV | |||||||
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract] | |||||||
Ownership percentage | 50.00% | ||||||
VIE | |||||||
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract] | |||||||
Ownership percentage | 50.00% | ||||||
Minimum | |||||||
Goodwill and intangible assets | |||||||
Amortization period | 1 year | ||||||
Foreign currency translation and foreign currency forward contracts | |||||||
Fixed assets, useful life | 3 years | ||||||
Maximum | |||||||
Goodwill and intangible assets | |||||||
Amortization period | 8 years | ||||||
Foreign currency translation and foreign currency forward contracts | |||||||
Fixed assets, useful life | 7 years | ||||||
Investment Income and Other, Net | |||||||
Foreign currency translation and foreign currency forward contracts | |||||||
Gain (loss) on foreign currency transactions | $ 0.1 | $ (1.8) | $ 1 | $ (2.4) | |||
Senior Secured Notes | 6.875% Senior Secured Notes | |||||||
Repurchases of debt | |||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% |
Common Class A | |||||||
Repurchases of common stock | |||||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |||||
Software | |||||||
Goodwill and intangible assets | |||||||
Amortization period | 3 years |
Significant Accounting Polici47
Significant Accounting Policies - Schedule of Interest Income and Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Accounting Policies [Abstract] | ||||
Interest Income | $ 3,011 | $ 2,768 | $ 9,015 | $ 9,841 |
Interest Expense | (2,334) | (3,848) | (7,954) | (11,540) |
Interest, net | $ 677 | $ (1,080) | $ 1,061 | $ (1,699) |
Significant Accounting Polici48
Significant Accounting Policies - Net Trading Revenue Including Dividend Income and Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Accounting Policies [Abstract] | ||||
Dividend Income | $ 14,704 | $ 14,879 | $ 39,637 | $ 45,596 |
Dividend Expense | $ (14,521) | $ (9,904) | $ (35,235) | $ (30,262) |
Significant Accounting Polici49
Significant Accounting Policies - Nonconsolidated VIEs (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
Variable Interest Entity [Line Items] | |||
Carrying Amount, Asset | $ 13,153 | ||
Carrying Amount, Liability | 1,206 | ||
Maximum Exposure to loss | 13,153 | ||
VIE's assets | 6,750,601 | $ 6,040,535 | $ 6,850,169 |
VIE | |||
Variable Interest Entity [Line Items] | |||
VIE's assets | $ 27,931 |
Assets of Businesses Held for50
Assets of Businesses Held for Sale & Sales of Businesses - Additional Information (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Mar. 31, 2016 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2018 | Dec. 31, 2015 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Professional fees | $ 4,139 | $ 4,406 | $ 15,497 | $ 21,281 | ||||
Intangible assets, net of accumulated amortization | 8,200 | 8,200 | $ 26,000 | |||||
Gain from sale of assets to third party | 36,195 | $ 0 | ||||||
Disposal Group, Held-for-sale | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Intangible assets, net of accumulated amortization | 8,194 | 8,194 | $ 25,999 | |||||
KCG Hotspot | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Sale period | 3 years | 3 years | ||||||
Annual payments for share in tax benefits | $ 6,600 | |||||||
Gain from sale of business | $ 373,800 | |||||||
KCG Hotspot | Investment Income and Other, Net | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Gain from sale of business | 385,000 | |||||||
KCG Hotspot | Investment Income and Other, Net | Retail Options Market Making Business | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Gain from sale of assets to third party | 2,900 | |||||||
KCG Hotspot | Professional Fees | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Professional fees | 6,700 | |||||||
KCG Hotspot | Employee Compensation and Benefits | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Compensation costs | $ 4,500 | |||||||
KCG Hotspot | Other Assets | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Receivables from sale of investment | $ 59,900 | 59,900 | ||||||
KCG Hotspot | Scenario, Forecast | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Proceeds related to tax sharing arrangement | $ 50,000 | |||||||
KCG Hotspot | Maximum | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Proceeds related to tax sharing arrangement | $ 70,000 | |||||||
Annual payments for share in tax benefits | $ 6,600 | |||||||
Remaining additional payment for share in tax benefits | $ 63,200 |
Assets of Businesses Held for51
Assets of Businesses Held for Sale & Sales of Businesses - Assets of Businesses Held for Sale (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets: | ||
Intangible assets, net of accumulated amortization | $ 8,200 | $ 26,000 |
Total assets of businesses held for sale | 8,200 | 26,000 |
Disposal Group, Held-for-sale | ||
Assets: | ||
Intangible assets, net of accumulated amortization | 8,194 | 25,999 |
Total assets of businesses held for sale | $ 8,194 | $ 25,999 |
Fair Value - Additional Informa
Fair Value - Additional Information (Details) ₨ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2016INR (₨) | Sep. 30, 2016USD ($) | Dec. 31, 2015INR (₨) | Dec. 31, 2015USD ($) | |
Fair Value Disclosures [Abstract] | ||||||
Transfers of financial instruments between levels | $ 0 | $ 0 | ||||
Transfers of financial instruments between level 2 to level 1 | 0 | 0 | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Notional value of foreign currency forward | ₨ 735 | 10,700,000 | ₨ 850 | $ 13,000,000 | ||
Level 3 | Minimum | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Receivables exposure, undiscounted | 0 | |||||
Level 3 | Maximum | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Receivables exposure, undiscounted | $ 8,500,000 | |||||
Receivable from sold investment | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Unrealized gain during the period | $ 303,000 | $ 861,000 | ||||
Receivable from sold investment | Investment income and other, net | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Unrealized gain during the period | $ 300,000 | $ 900,000 |
Fair Value - Financial Assets a
Fair Value - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Total Financial instruments owned, at fair value | $ 2,904,953 | $ 2,444,400 |
Total assets held at fair value | 2,975,847 | 2,517,735 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 2,222,788 | 2,113,404 |
Total liabilities held at fair value | 2,222,788 | 2,113,404 |
KCG Hotspot | Other Assets and Investments | ||
Liabilities | ||
Receivable from BATS | 59,900 | |
Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 2,904,953 | 2,443,955 |
Total assets held at fair value | 2,907,046 | 2,445,769 |
Liabilities | ||
Total liabilities held at fair value | 2,222,486 | 2,113,404 |
Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 445 |
Total assets held at fair value | 62,151 | 66,177 |
Liabilities | ||
Total liabilities held at fair value | 302 | 0 |
Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Total assets held at fair value | 6,650 | 5,789 |
Liabilities | ||
Total liabilities held at fair value | 0 | 0 |
Equities | ||
Assets | ||
Total Financial instruments owned, at fair value | 2,641,499 | 2,129,208 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 1,927,864 | 1,856,171 |
Equities | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 2,641,499 | 2,129,208 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 1,927,864 | 1,856,171 |
Equities | Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Equities | Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Corporate debt | ||
Assets | ||
Total Financial instruments owned, at fair value | 179,152 | 94,681 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 173,678 | 84,284 |
Corporate debt | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 179,152 | 94,681 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 173,678 | 84,284 |
Corporate debt | Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Corporate debt | Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
U.S. government and Non-U.S. government obligations | ||
Assets | ||
Total Financial instruments owned, at fair value | 72,112 | 41,706 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 104,625 | 21,056 |
U.S. government and Non-U.S. government obligations | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 72,112 | 41,706 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 104,625 | 21,056 |
U.S. government and Non-U.S. government obligations | Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
U.S. government and Non-U.S. government obligations | Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Listed options | ||
Assets | ||
Total Financial instruments owned, at fair value | 12,190 | 178,360 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 16,319 | 151,893 |
Listed options | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 12,190 | 178,360 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 16,319 | 151,893 |
Listed options | Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Listed options | Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Foreign currency forward contracts | ||
Assets | ||
Total Financial instruments owned, at fair value | 445 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 302 | |
Foreign currency forward contracts | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | |
Foreign currency forward contracts | Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 445 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 302 | |
Foreign currency forward contracts | Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | |
Investment in CME Group | ||
Assets | ||
Total assets held at fair value | 2,093 | 1,814 |
Investment in CME Group | Level 1 | ||
Assets | ||
Total assets held at fair value | 2,093 | 1,814 |
Investment in CME Group | Level 2 | ||
Assets | ||
Total assets held at fair value | 0 | 0 |
Investment in CME Group | Level 3 | ||
Assets | ||
Total assets held at fair value | 0 | 0 |
Other | ||
Assets | ||
Total assets held at fair value | 68,801 | 71,521 |
Other | Other Assets and Investments | ||
Assets | ||
Total assets held at fair value | 6,700 | 5,800 |
Liabilities | ||
Deferred compensation investments | 2,300 | 1,500 |
Other | KCG Hotspot | Other Assets and Investments | ||
Liabilities | ||
Receivable from BATS | 59,900 | 64,200 |
Other | Level 1 | ||
Assets | ||
Total assets held at fair value | 0 | 0 |
Other | Level 2 | ||
Assets | ||
Total assets held at fair value | 62,151 | 65,732 |
Other | Level 3 | ||
Assets | ||
Total assets held at fair value | $ 6,650 | $ 5,789 |
Fair Value - Level 3 Financial
Fair Value - Level 3 Financial Assets (Details) - Receivable from sold investment - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016 | Sep. 30, 2016 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 6,347 | $ 5,789 |
Realized gains(losses) during period | 0 | 0 |
Unrealized gains (losses) during the period | 303 | 861 |
Purchases | 0 | 0 |
Sales | 0 | 0 |
Settlements | 0 | 0 |
Issuances | 0 | 0 |
Transfers in or (out) of Level 3 | 0 | 0 |
Balance at end of period | $ 6,650 | $ 6,650 |
Derivative Financial Instrume55
Derivative Financial Instruments - Fair Value of Derivative Instruments (Details) $ in Thousands | Sep. 30, 2016USD ($)contract | Dec. 31, 2015USD ($)contract |
Assets | ||
Fair Value | $ 85,687 | $ 220,647 |
Net amounts per Consolidated Statement of Financial Condition | 12,694 | 179,501 |
Liabilities | ||
Fair Value | 92,447 | 194,723 |
Net amounts per Consolidated Statement of Financial Condition | 16,319 | 151,893 |
Foreign currency, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 292 | $ 578 |
Contracts | contract | 1,932 | 3,675 |
Liabilities | ||
Fair Value | $ 1,651 | $ 955 |
Contracts | contract | 3,440 | 6,586 |
Foreign currency, Forward contracts | Financial instruments owned, at fair value | ||
Assets | ||
Fair Value | $ 0 | $ 445 |
Contracts | contract | 0 | 1 |
Liabilities | ||
Fair Value | $ 302 | $ 0 |
Contracts | contract | 1 | 0 |
Equity, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 1,560 | $ 1,558 |
Contracts | contract | 2,321 | 4,038 |
Liabilities | ||
Fair Value | $ 2,000 | $ 1,743 |
Contracts | contract | 2,723 | 3,432 |
Equity, Swap contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 8 | $ 0 |
Contracts | contract | 1 | 0 |
Liabilities | ||
Fair Value | $ 146 | $ 281 |
Contracts | contract | 1 | 2 |
Equity, Listed options | Financial instruments owned/sold, not yet purchased, at fair value | ||
Assets | ||
Fair Value | $ 12,190 | $ 178,360 |
Contracts | contract | 78,269 | 360,469 |
Liabilities | ||
Fair Value | $ 16,319 | $ 151,893 |
Contracts | contract | 81,367 | 390,949 |
Fixed income, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 5,075 | $ 4,265 |
Contracts | contract | 4,162 | 6,195 |
Liabilities | ||
Fair Value | $ 6,059 | $ 4,037 |
Contracts | contract | 3,924 | 4,891 |
Commodity, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 66,562 | $ 35,441 |
Contracts | contract | 37,977 | 22,424 |
Liabilities | ||
Fair Value | $ 65,970 | $ 35,814 |
Contracts | contract | 38,373 | 24,261 |
Futures contracts and listed options | Exchange traded | ||
Assets | ||
Less: Legally enforceable master netting agreements | $ (72,993) | $ (41,146) |
Liabilities | ||
Less: Legally enforceable master netting agreements | (75,680) | (42,549) |
Swaps | Bi-lateral over-the-counter | ||
Assets | ||
Less: Legally enforceable master netting agreements | 0 | 0 |
Liabilities | ||
Less: Legally enforceable master netting agreements | $ (448) | $ (281) |
Derivative Financial Instrume56
Derivative Financial Instruments - Gain (Loss) Recognized (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Derivative instruments not designated as hedging instruments | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | $ 8,786 | $ 44,428 | $ 60,315 | $ 93,773 |
Derivative instruments not designated as hedging instruments | Foreign currency, Futures contracts | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | 1,964 | 1,868 | 3,529 | 2,674 |
Derivative instruments not designated as hedging instruments | Foreign currency, Forward contracts | Investment income and other, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | 0 | 0 | 0 | (10) |
Derivative instruments not designated as hedging instruments | Equity, Futures contracts | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | (5,008) | 13,849 | 6,395 | 27,587 |
Derivative instruments not designated as hedging instruments | Equity, Swap contracts | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | (232) | 1,792 | 2,480 | 2,860 |
Derivative instruments not designated as hedging instruments | Equity, Listed options | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | (557) | 1,149 | (222) | (15,032) |
Derivative instruments not designated as hedging instruments | Fixed income, Futures contracts | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | 2,670 | 10,918 | 16,627 | 35,839 |
Derivative instruments not designated as hedging instruments | Commodity, Futures contracts | Trading revenues, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | 9,949 | 14,852 | 31,506 | 39,855 |
Derivative instruments designated as hedging instruments | Foreign currency, Forward contracts | Accumulated other comprehensive income | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | $ (197) | $ (44) | $ (571) | $ (50) |
Derivative Financial Instrume57
Derivative Financial Instruments - Restated Gain (Loss) Recognized (Details) - Derivative instruments not designated as hedging instruments - Trading revenues, net - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | $ 8,786 | $ 44,428 | $ 60,315 | $ 93,773 |
Equity Future Contracts [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | (5,008) | 13,849 | 6,395 | 27,587 |
Equity Future Contracts [Member] | As Reported | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | (2,122) | 11,616 | ||
Fixed income, Futures contracts | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | 2,670 | 10,918 | 16,627 | 35,839 |
Fixed income, Futures contracts | As Reported | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | 5,256 | 30,177 | ||
Commodity, Futures contracts | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | $ 9,949 | 14,852 | $ 31,506 | 39,855 |
Commodity, Futures contracts | As Reported | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized | $ 12,339 | $ 37,342 |
Collateralized Transactions - A
Collateralized Transactions - Additional Information (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Collateralized Agreements [Abstract] | |
Repurchase agreements and other secured financings, maturity (years) | 1 year |
Collateralized Transactions - F
Collateralized Transactions - Financial Instruments at Fair Value Received as Collateral that were Permitted to be Delivered or Repledged (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Collateralized Agreements [Abstract] | ||
Collateral permitted to be delivered or repledged | $ 1,969,324 | $ 1,640,145 |
Collateral that was delivered or repledged | 1,842,751 | 1,570,921 |
Collateral permitted to be further repledged by the receiving counterparty | $ 152,717 | $ 188,345 |
Collateralized Transactions -60
Collateralized Transactions - Assets Pledged (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Repurchase Agreement Counterparty [Line Items] | ||
Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge | $ 1,969,324 | $ 1,640,145 |
Right to deliver or repledge | ||
Repurchase Agreement Counterparty [Line Items] | ||
Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge | 470,568 | 324,146 |
Not having the right to deliver or repledge | ||
Repurchase Agreement Counterparty [Line Items] | ||
Financial instruments owned, at fair value, pledged to counterparties that do not have the right to deliver or repledge | $ 1,189,985 | $ 1,027,847 |
Collateralized Transactions -61
Collateralized Transactions - Agreements to Repurchase (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | $ 647,602 | $ 463,377 |
Financial instruments sold under agreements to repurchase | 1,034,700 | 954,902 |
Equities | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 639,452 | 451,085 |
Financial instruments sold under agreements to repurchase | 912,099 | 855,632 |
U.S. government obligations | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 0 | 0 |
Financial instruments sold under agreements to repurchase | 69,700 | 54,902 |
Corporate debt | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 8,150 | 12,292 |
Financial instruments sold under agreements to repurchase | 52,901 | 44,368 |
Other collateralized financings | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 50,000 | 0 |
Other collateralized financings | Equities | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 49,256 | 0 |
Other collateralized financings | U.S. government obligations | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 0 | 0 |
Other collateralized financings | Corporate debt | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | $ 744 | $ 0 |
Collateralized Transactions - G
Collateralized Transactions - Gross Amounts Offset (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets, Securities Borrowed | ||
Gross Amounts Recognized | $ 1,958,095 | $ 1,636,284 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 1,958,095 | 1,636,284 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,909,346 | 1,575,568 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 7,002 | 8,277 |
Net Amount | 41,747 | 52,439 |
Assets, Receivable from Brokers, Dealers and Clearing Organizations | ||
Gross Amounts Recognized | 59,980 | 65,433 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 59,980 | 65,433 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 59,881 | 62,580 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 22 | 0 |
Net Amount | 77 | 2,853 |
Total assets | ||
Gross Amounts Recognized | 2,018,075 | 1,701,717 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 2,018,075 | 1,701,717 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,969,227 | 1,638,148 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 7,024 | 8,277 |
Net Amount | 41,824 | 55,292 |
Liabilities, Securities Loaned | ||
Gross Amounts Recognized | 647,602 | 463,377 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 647,602 | 463,377 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 627,544 | 440,486 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 7,002 | 8,277 |
Net Amount | 13,056 | 14,614 |
Liabilities, Financial Instruments Sold Under Agreements to Repurchase | ||
Gross Amounts Recognized | 1,034,700 | 954,902 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 1,034,700 | 954,902 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,034,678 | 954,902 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 22 | 0 |
Net Amount | 0 | 0 |
Total liabilities | ||
Gross Amounts Recognized | 1,732,302 | 1,418,279 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 1,732,302 | 1,418,279 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,712,222 | 1,395,388 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 7,024 | 8,277 |
Net Amount | 13,056 | $ 14,614 |
Other collateralized financings | ||
Liabilities, Securities Loaned | ||
Gross Amounts Recognized | 50,000 | |
Gross Amounts Offset in the Statements of Financial Condition | 0 | |
Net Amounts Presented in the Statements of Financial Condition | 50,000 | |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 50,000 | |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 0 | |
Net Amount | $ 0 |
Collateralized Transactions - M
Collateralized Transactions - Maturities Schedule (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | $ 1,732,302 | $ 1,418,279 |
Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 717,302 | 518,279 |
0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 360,000 | 635,000 |
31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 415,000 | 150,000 |
61 - 90 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 240,000 | 115,000 |
Securities loaned | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 647,602 | 463,377 |
Securities loaned | Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 647,602 | 463,377 |
Securities loaned | 0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | 0 |
Securities loaned | 31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | 0 |
Securities loaned | 61 - 90 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | 0 |
Other collateralized financings | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 50,000 | |
Other collateralized financings | Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | |
Other collateralized financings | 0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 50,000 | |
Other collateralized financings | 31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | |
Other collateralized financings | 61 - 90 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | |
Financial instruments sold under agreements to repurchase | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 1,034,700 | 954,902 |
Financial instruments sold under agreements to repurchase | Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 69,700 | 54,902 |
Financial instruments sold under agreements to repurchase | 0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 310,000 | 635,000 |
Financial instruments sold under agreements to repurchase | 31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 415,000 | 150,000 |
Financial instruments sold under agreements to repurchase | 61 - 90 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | $ 240,000 | $ 115,000 |
Receivable from and Payable t64
Receivable from and Payable to Brokers, Dealers and Clearing Organizations (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Receivable: | ||
Clearing organizations and other | $ 458,972 | $ 505,789 |
Financial instruments purchased under agreement to resell | 59,980 | 65,433 |
Securities failed to deliver | 177,543 | 109,989 |
Total receivable | 696,495 | 681,211 |
Payable: | ||
Clearing organizations and other | 559,621 | 240,985 |
Securities failed to receive | 87,468 | 32,820 |
Total payable | $ 647,089 | $ 273,805 |
Investments - Components of Inv
Investments - Components of Investments (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Strategic investments: | ||
Investments accounted for under the equity method | $ 87,099 | $ 86,853 |
Investments held at fair value | 2,093 | 1,814 |
Investments held at adjusted cost | 2,293 | 8,746 |
Total strategic investments | 91,485 | 97,413 |
Other investments | 2,290 | 1,530 |
Total investments | $ 93,775 | $ 98,943 |
Investments - Additional Inform
Investments - Additional Information (Details) - USD ($) $ in Thousands | Jul. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Schedule of Equity Method Investments [Line Items] | ||||||
Dividend income | $ 14,704 | $ 14,879 | $ 39,637 | $ 45,596 | ||
Investment income and other, net | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Dividend income | 2,300 | |||||
Income from equity method investments | 3,100 | $ 4,900 | 9,900 | $ 9,300 | ||
BATS | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Market value of investment in BATS | $ 398,700 | 398,700 | ||||
Number of shares sold | 2,600,000 | |||||
Amount of equity method investment sold | $ 46,400 | |||||
Ownership percentage | 13.70% | |||||
BATS | Investment income and other, net | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Pre-tax gain from sale of investment | $ 33,400 |
Goodwill and Intangible Asset67
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | |
Finite-Lived Intangible Assets [Line Items] | |||
Assets held for sale | $ 8.2 | $ 8.2 | $ 26 |
Weighted average useful life | 2 years | 3 years | |
Minimum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization period | 1 year | ||
Maximum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization period | 8 years | ||
Trading rights | |||
Finite-Lived Intangible Assets [Line Items] | |||
Impairment charges | $ 0.7 | $ 0.7 | |
Amortization period | 4 years | 5 years |
Goodwill and Intangible Asset68
Goodwill and Intangible Assets - Finite-Lived Intangible Assets, Net of Accumulated Amortization (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 169,047 | $ 143,465 |
Accumulated amortization | (85,216) | (59,398) |
Net carrying amount | 83,831 | 84,067 |
Held for sale, intangibles | 8,200 | 26,000 |
Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 147,538 | 120,256 |
Accumulated amortization | (79,723) | (54,858) |
Net carrying amount | 67,815 | 65,398 |
Held for sale, intangibles | $ 8,200 | $ 8,800 |
Amortization period | 2 years | 2 years |
Trading rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 7,509 | $ 9,209 |
Accumulated amortization | (474) | (679) |
Net carrying amount | $ 7,035 | 8,530 |
Held for sale, intangibles | $ 17,200 | |
Amortization period | 4 years | 5 years |
Indefinite-lived intangible assets | $ 6,900 | $ 6,900 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 13,000 | 13,000 |
Accumulated amortization | (4,694) | (3,611) |
Net carrying amount | $ 8,306 | $ 9,389 |
Amortization period | 6 years | 7 years |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 1,000 | $ 1,000 |
Accumulated amortization | (325) | (250) |
Net carrying amount | $ 675 | $ 750 |
Amortization period | 7 years | 7 years |
Market Making | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | $ 46,536 | $ 46,681 |
Market Making | Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 39,501 | 38,151 |
Market Making | Trading rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 7,035 | 8,530 |
Global Execution Services | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 29,627 | 31,585 |
Global Execution Services | Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 20,646 | 21,446 |
Global Execution Services | Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 8,306 | 9,389 |
Global Execution Services | Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 675 | 750 |
Corporate and Other | Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | $ 7,668 | $ 5,801 |
Goodwill and Intangible Asset69
Goodwill and Intangible Assets - Summary of Amortization Expense Relating to Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 8,943 | $ 8,533 | $ 24,810 | $ 26,400 |
Goodwill and Intangible Asset70
Goodwill and Intangible Assets - Summary of Estimated Amortization Expense for Future Years (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Amortization expense | |
For the three months ended December 31, 2016 | $ 9,199 |
For the year ended December 31, 2017 | 35,366 |
For the year ended December 31, 2018 | 23,201 |
For the year ended December 31, 2019 | 5,179 |
For the year ended December 31, 2020 | $ 1,561 |
Debt - Summary of Long-Term Deb
Debt - Summary of Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Mar. 13, 2015 | Mar. 10, 2015 |
Senior Secured Notes | 6.875% Senior Secured Notes | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | |
Reported Value Measurement [Member] | ||||||
Debt Instrument [Line Items] | ||||||
6.875% Senior Secured Notes | $ 461,657 | $ 495,632 | ||||
Deferred debt issuance costs | (8,133) | (10,643) | ||||
Total | 453,524 | 484,989 | ||||
Estimate of Fair Value Measurement [Member] | ||||||
Debt Instrument [Line Items] | ||||||
6.875% Senior Secured Notes | 458,723 | 450,000 | ||||
Deferred debt issuance costs | 0 | |||||
Total | $ 458,723 | $ 450,000 |
Debt - 6.875% Senior Secured No
Debt - 6.875% Senior Secured Notes (Details) - USD ($) | Mar. 13, 2015 | Mar. 10, 2015 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Jun. 30, 2016 |
Debt Instrument [Line Items] | ||||||||
Pretax gain from repurchase of debt | $ 3,676,000 | $ 0 | ||||||
Accelerated amortization of debt issuance costs | $ 795,000 | $ 841,000 | $ 2,411,000 | 2,697,000 | ||||
Other Assets | Related Parties | ||||||||
Debt Instrument [Line Items] | ||||||||
Deferred debt costs | $ 11,300,000 | $ 11,300,000 | ||||||
Senior Secured Notes | 6.875% Senior Secured Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | |
Issuance of debt, percentage | 98.962% | |||||||
Proceeds from issuance of debt, net | $ 494,800,000 | |||||||
Yield to maturity, percentage | 7.083% | 7.59% | 7.59% | |||||
Percentage in voting equity interests of controlled foreign subsidiaries | 66.00% | |||||||
Redemption period | 12 months | |||||||
Redemption price percentage | 106.875% | |||||||
Repurchase of debt, par value amount | $ 35,000,000 | |||||||
Repurchase of debt | 31,200,000 | |||||||
Accelerated original issue discount | 300,000 | |||||||
Accelerated amortization of debt issuance costs | 700,000 | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Investment Income and Other, Net | ||||||||
Debt Instrument [Line Items] | ||||||||
Pretax gain from repurchase of debt | $ 3,700,000 | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Related Parties | ||||||||
Debt Instrument [Line Items] | ||||||||
Payment of issuance costs to related party | $ 11,300,000 | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Other Assets | ||||||||
Debt Instrument [Line Items] | ||||||||
Deferred debt costs | $ 12,600,000 | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Prior to March 15, 2017 | ||||||||
Debt Instrument [Line Items] | ||||||||
Redemption price percentage | 100.00% | |||||||
Maximum redemption percentage of principal amount | 40.00% | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Minimum | ||||||||
Debt Instrument [Line Items] | ||||||||
Redemption notice, period | 30 days | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Redemption notice, period | 60 days | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | Jefferies LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate (percent) | 6.875% | |||||||
Aggregate principal amount | $ 500,000,000 | |||||||
Senior Secured Notes | 6.875% Indenture | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate (percent) | 6.875% |
Debt - Debt Redemption (Details
Debt - Debt Redemption (Details) - Senior Secured Notes - 6.875% Senior Secured Notes | Mar. 10, 2015 |
Debt Instrument [Line Items] | |
Percentage | 106.875% |
2,017 | |
Debt Instrument [Line Items] | |
Percentage | 103.438% |
2,018 | |
Debt Instrument [Line Items] | |
Percentage | 101.719% |
2019 and thereafter | |
Debt Instrument [Line Items] | |
Percentage | 100.00% |
Debt - Cash Convertible Senior
Debt - Cash Convertible Senior Subordinated Notes (Details) - USD ($) $ in Thousands | Mar. 16, 2015 | Mar. 31, 2010 | Sep. 30, 2016 | Sep. 30, 2015 |
Debt Disclosure [Abstract] | ||||
Issue of cash convertible senior subordinated notes | $ 375,000 | |||
Payment of convertible notes | $ 119,300 | $ 0 | $ 117,259 | |
Payment of convertible notes, principal amount | 117,300 | |||
Payment of convertible notes, interest portion | $ 2,100 | |||
Notes bear interest rate per year | 3.50% |
Debt - 8.25% Senior Secured Not
Debt - 8.25% Senior Secured Notes (Details) - Senior Secured Notes - USD ($) | Mar. 13, 2015 | Mar. 10, 2015 | Jul. 01, 2013 | Jun. 05, 2013 | Jun. 15, 2015 | Sep. 30, 2015 | Apr. 13, 2015 | Sep. 30, 2015 | Sep. 30, 2016 | Jun. 30, 2016 |
8.25% Senior Secured Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Interest rate (percent) | 8.25% | 8.25% | 8.25% | 8.25% | 8.25% | 8.25% | ||||
Aggregate principal amount | $ 305,000,000 | $ 305,000,000 | ||||||||
Escrow agent fees and expenses | $ 3,000,000 | |||||||||
Redemption notice, period | 30 days | |||||||||
Funds held in escrow | $ 330,200,000 | $ 330,200,000 | $ 330,200,000 | |||||||
Accrued interest for the period | $ 8,200,000 | |||||||||
Make-whole premium percentage | 4.125% | |||||||||
Debt make-whole premium | $ 16,500,000 | 16,500,000 | 16,500,000 | |||||||
Other miscellaneous charges | $ 400,000 | |||||||||
Writedown of capitalized debt costs | $ 8,500,000 | $ 8,500,000 | ||||||||
8.25% Senior Secured Notes | Prior to June 15, 2015 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Redemption price percentage | 100.00% | |||||||||
6.875% Senior Secured Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | ||||
Redemption price percentage | 106.875% |
Debt - Revolving Credit Agreeme
Debt - Revolving Credit Agreement (Details) - KCGA | Jun. 05, 2015USD ($)debt_classborrowing_base | Sep. 30, 2016USD ($) | Dec. 31, 2015USD ($) |
Revolving Credit Facility | |||
Line of Credit Facility [Line Items] | |||
Number of debt instruments | debt_class | 2 | ||
Term credit agreement | $ 355,000,000 | $ 0 | $ 0 |
Revolving credit facility amount | 500,000,000 | ||
Increase in line of credit facility, maximum borrowing capacity | $ 145,000,000 | ||
Commitment fee percentage of average daily amount unused portion of revolving credit agreement | 0.40% | ||
Revolving Credit Facility | Other Assets | |||
Line of Credit Facility [Line Items] | |||
Debt issuance costs | $ 1,700,000 | ||
Revolving Credit Facility | Borrowing Base A | |||
Line of Credit Facility [Line Items] | |||
Percentage points added to interest rate base | 1.50% | ||
Revolving Credit Facility | Borrowing Base B | |||
Line of Credit Facility [Line Items] | |||
Percentage points added to interest rate base | 2.50% | ||
Swingline Facility | |||
Line of Credit Facility [Line Items] | |||
Revolving credit facility amount | $ 50,000,000 | ||
Number of borrowing bases | borrowing_base | 2 | ||
Swingline Facility | Borrowing Base A and Borrowing Base B | |||
Line of Credit Facility [Line Items] | |||
Revolving credit facility amount | $ 115,000,000 |
Debt - Recorded Expenses with R
Debt - Recorded Expenses with Respect to Long-term Debt (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Debt Disclosure [Abstract] | ||||
Interest expense | $ 8,234 | $ 8,853 | $ 24,885 | $ 26,738 |
Debt extinguishment charges | 0 | 0 | 0 | 25,006 |
Amortization of debt issuance costs | 795 | 841 | 2,411 | 2,697 |
Commitment fee | 371 | 343 | 1,089 | 1,140 |
Accelerated amortization of debt issuance costs | 0 | 0 | 738 | 0 |
Accelerated interest expense on repurchase of debt | 0 | 0 | 298 | 0 |
Total | $ 9,400 | $ 10,037 | $ 29,421 | $ 55,581 |
Related Parties - Additional In
Related Parties - Additional Information (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Mar. 31, 2016USD ($) | Mar. 31, 2015 | Sep. 30, 2016USD ($)beneficial_ownershares | Jun. 30, 2016USD ($)director$ / sharesshares | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)beneficial_ownershares | Sep. 30, 2015USD ($) | Mar. 13, 2015 | Mar. 10, 2015USD ($) | |
Related Party Transaction [Line Items] | |||||||||
First annual payment received from the sale | $ 6,552 | $ 360,928 | |||||||
Professional fees | $ 4,139 | $ 4,406 | 15,497 | $ 21,281 | |||||
Value of stocks repurchased | $ 87,167 | ||||||||
Warrants repurchased (in shares) | shares | 300 | 8,333 | |||||||
Warrants repurchased | $ 700 | $ 15,900 | |||||||
Senior Secured Notes | 6.875% Senior Secured Notes | |||||||||
Related Party Transaction [Line Items] | |||||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | ||
Other Assets | Senior Secured Notes | 6.875% Senior Secured Notes | |||||||||
Related Party Transaction [Line Items] | |||||||||
Deferred debt costs | $ 12,600 | ||||||||
KCG Hotspot | |||||||||
Related Party Transaction [Line Items] | |||||||||
Gain from sale of business | $ 373,800 | ||||||||
Proceeds related to tax sharing arrangement | $ 70,000 | ||||||||
Sale period | 3 years | 3 years | |||||||
First annual payment received from the sale | $ 6,600 | ||||||||
KCG Hotspot | Other Assets | |||||||||
Related Party Transaction [Line Items] | |||||||||
Additional consideration, fair value | $ 59,900 | $ 59,900 | |||||||
Investment Income and Other, Net | KCG Hotspot | |||||||||
Related Party Transaction [Line Items] | |||||||||
Gain from sale of business | $ 385,000 | ||||||||
Professional Fees | KCG Hotspot | |||||||||
Related Party Transaction [Line Items] | |||||||||
Professional fees | 6,700 | ||||||||
BATS | Investment Income and Other, Net | |||||||||
Related Party Transaction [Line Items] | |||||||||
Pre-tax gain from sale of investment | 33,400 | ||||||||
Related Parties | |||||||||
Related Party Transaction [Line Items] | |||||||||
Financing and advisory fees | 23 | 16,800 | |||||||
Professional fees | $ 0 | $ 0 | 0 | 5,507 | |||||
Related Parties | Other Assets | |||||||||
Related Party Transaction [Line Items] | |||||||||
Deferred debt costs | 11,300 | 11,300 | |||||||
Related Parties | Treasury Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Stock buyback program fees | $ 66 | ||||||||
Related Parties | Professional Fees | |||||||||
Related Party Transaction [Line Items] | |||||||||
Professional fees | $ 5,500 | ||||||||
Related Parties | Common Class A | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of beneficial owners | beneficial_owner | 1 | 1 | |||||||
Noncontrolling interest, ownership percentage by noncontrolling owners (more than) | 10.00% | 10.00% | |||||||
Affiliated Entity with Former Directors | |||||||||
Related Party Transaction [Line Items] | |||||||||
Warrants repurchased (in shares) | shares | 6,600 | ||||||||
Warrants repurchased | $ 14,200 | ||||||||
Number of directors | director | 2 | ||||||||
Affiliated Entity with Former Directors | Common Class A | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of shares repurchased | shares | 1,900 | ||||||||
Value of stocks repurchased | $ 26,100 | ||||||||
Average price per share (in dollars per share) | $ / shares | $ 13.48 | ||||||||
JV | Write-down of Assets and Other Real Estate Charges | |||||||||
Related Party Transaction [Line Items] | |||||||||
Tangible Asset Impairment Charges | $ 4,300 |
Related Parties - Summary of Ba
Related Parties - Summary of Balances and Transactions with Related Parties or Their Affiliates (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Revenues | |||||
Commissions and fees | $ 87,842 | $ 95,027 | $ 288,904 | $ 282,358 | |
Trading revenues, net | 113,829 | 277,677 | 524,649 | 657,222 | |
Expenses | |||||
Execution and clearance fees | 71,995 | 67,502 | 219,371 | 198,573 | |
Communications and data processing | 36,733 | 35,256 | 108,766 | 103,260 | |
Payment for order flow | 13,845 | 17,121 | 39,590 | 47,277 | |
Collateralized financing interest | 10,693 | 8,617 | 29,465 | 25,932 | |
Professional fees | 4,139 | 4,406 | 15,497 | 21,281 | |
Other expense | 8,797 | 10,000 | 25,923 | 26,604 | |
Assets | |||||
Securities borrowed | 1,958,095 | 1,958,095 | $ 1,636,284 | ||
Receivable from brokers, dealers and clearing organizations | 696,495 | 696,495 | 681,211 | ||
Other assets | 194,072 | 194,072 | 222,831 | ||
Liabilities | |||||
Securities loaned | 647,602 | 647,602 | 463,377 | ||
Payable to brokers, dealers and clearing organizations | 647,089 | 647,089 | 273,805 | ||
Related Parties | |||||
Revenues | |||||
Commissions and fees | 8,171 | 4,496 | 23,246 | 10,624 | |
Trading revenues, net | 86 | 1,343 | 1,190 | 5,248 | |
Interest, net | 119 | 399 | 394 | 756 | |
Total revenues from related parties | 8,376 | 6,238 | 24,830 | 16,628 | |
Expenses | |||||
Execution and clearance fees | 4,132 | (4,525) | 8,577 | (13,333) | |
Communications and data processing | 4,710 | 1,577 | 12,327 | 3,986 | |
Payment for order flow | 0 | 274 | 5 | 2,527 | |
Collateralized financing interest | 73 | 99 | 199 | 346 | |
Professional fees | 0 | 0 | 0 | 5,507 | |
Other expense | 71 | 479 | 125 | 1,756 | |
Total expenses incurred with respect to related parties | 8,986 | $ (2,096) | 21,233 | $ 789 | |
Assets | |||||
Securities borrowed | 35,421 | 35,421 | 10,573 | ||
Receivable from brokers, dealers and clearing organizations | 4,601 | 4,601 | 1,987 | ||
Other assets | 62,789 | 62,789 | 67,652 | ||
Liabilities | |||||
Securities loaned | 3,127 | 3,127 | 3,844 | ||
Payable to brokers, dealers and clearing organizations | 61 | 61 | 61 | ||
Accrued expenses and other liabilities | $ 4,016 | $ 4,016 | $ 4,159 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock options granted (in shares) | 2,000,000 | 0 | 2,000,000 | 0 | |
Number of stock options exercised (in shares) | 1,800 | 0 | 1,800 | 0 | |
RSUs | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 3 years | ||||
Accelerated amortization expense | $ 28.8 | $ 28.8 | |||
RSUs | Employee Compensation and Benefits | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Accelerated amortization expense | $ 28.8 | $ 28.8 | |||
Restricted awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unamortized compensation related to restricted awards outstanding | $ 5.2 | $ 5.2 | |||
Cost of unvested awards expected to be recognized over a weighted average life, years | 1 year 9 months 23 days | ||||
Stock options | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 3 years | ||||
Stock options | Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award expiration period | 5 years | ||||
Stock options | Maximum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award expiration period | 10 years | ||||
SARs | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
SARs granted (in shares) | 0 | 0 | 0 | 0 | |
Number of SARs exercised during period (in shares) | 0 | 0 | 0 | 0 | |
Unamortized compensation costs | $ 0.7 | $ 0.7 | |||
Award expiration period | 1 year 8 months 29 days | ||||
Incentive units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Deferred compensation payable | $ 2.6 | $ 2.6 | $ 2.4 | ||
KCG Plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares authorized for grant (in shares) | 25,100,000 | 25,100,000 | |||
Number of shares available for grant | 13,100,000 | 13,100,000 | |||
KCG Plan | Time-based awards | Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 3 years | ||||
KCG Plan | Performance-based awards | Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 1 year |
Stock-Based Compensation - Comp
Stock-Based Compensation - Compensation Expense Relating to Restricted Awards (Details) - RSUs - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock award compensation expense | $ (232) | $ 17,906 | $ 24,124 | $ 72,202 |
Income tax benefit | $ (88) | 6,804 | $ 9,167 | 27,437 |
Accelerated amortization expense | $ 28,800 | $ 28,800 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Restricted Awards Activity (Details) - RSUs shares in Thousands | 9 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Number of Units | |
Beginning Balance (in shares) | shares | 6,737 |
Granted (in shares) | shares | 3,179 |
Vested (in shares) | shares | (4,027) |
Forfeited (in shares) | shares | (206) |
Ending Balance (in shares) | shares | 5,683 |
Weighted- Average Grant date Fair Value | |
Beginning Balance (in dollars per share) | $ / shares | $ 11.29 |
Granted (in dollars per share) | $ / shares | 10.71 |
Vested (in dollars per share) | $ / shares | 10.98 |
Forfeited (in dollars per share) | $ / shares | 11.47 |
Ending Balance (in dollars per share) | $ / shares | $ 11.18 |
Stock-Based Compensation - Co83
Stock-Based Compensation - Compensation Expense Relating to Stock Options and SARs (Details) - Stock options and SARs - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock option and SAR compensation expense | $ 190 | $ 915 | $ 538 | $ 2,856 |
Income tax benefit | $ 72 | $ 348 | $ 204 | $ 1,085 |
Stock-Based Compensation - Su84
Stock-Based Compensation - Summary of Stock Option and SAR Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Number of Stock Awards | ||||
Exercised (in shares) | (1,800) | 0 | (1,800) | 0 |
Stock options and SARs | ||||
Number of Stock Awards | ||||
Beginning Balance (in shares) | 4,371,000 | |||
Granted (in shares) | 2,059,000 | |||
Exercised (in shares) | (2,000) | |||
Forfeited or expired (in shares) | (61,000) | |||
Ending Balance (in shares) | 6,367,000 | 6,367,000 | ||
Exercisable (in shares) | 4,308,000 | 4,308,000 | ||
Available for future grants (in shares) | 13,073,000 | 13,073,000 | ||
Weighted- Average Exercise Price | ||||
Beginning Balance (in dollars per share) | $ 17.36 | |||
Granted (in dollars per share) | 23.35 | |||
Exercised (in dollars per share) | 8.24 | |||
Forfeited or expired (in dollars per share) | 48.38 | |||
Ending Balance (in dollars per share) | $ 18.96 | 18.96 | ||
Exercisable (in dollars per share) | $ 16.92 | $ 16.92 | ||
Aggregate Intrinsic Value, Outstanding | $ 11,818 | $ 11,818 | ||
Aggregate Intrinsic Value, Exercisable | $ 11,818 | |||
Weighted-Average Remaining Life, Outstanding | 2 years 6 months 28 days | |||
Weighted-Average Remaining Life, Exercisable | 1 year 7 months 28 days | |||
SARs | ||||
Number of Stock Awards | ||||
Beginning Balance (in shares) | 1,700,000 | |||
Ending Balance (in shares) | 1,700,000 | 1,700,000 |
Stock-Based Compensation - Chan
Stock-Based Compensation - Change in Incentive Units (Details) - Incentive Units - Common Class A shares in Thousands | 9 Months Ended |
Sep. 30, 2016shares | |
Vested | |
Beginning balance (in shares) | 30 |
Issued (in shares) | 0 |
Vested (in shares) | (10) |
Exercised (in shares) | (3) |
Canceled (in shares) | 0 |
Ending balance (in shares) | 17 |
Stock-Based Compensation - Co86
Stock-Based Compensation - Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Incentive units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation expense (benefit) | $ 253 | $ (295) | $ 499 | $ (109) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |||||
Effective tax rate | 59.90% | 38.10% | 31.30% | 34.40% | |
Federal statutory income tax rate | 35.00% | 35.00% | 35.00% | 35.00% | |
Unrecognized tax benefits that would impact effective tax rate if recognized | $ 4.5 | $ 4.5 | $ 3.6 |
Accumulated Other Comprehensi88
Accumulated Other Comprehensive Income - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Beginning balance | $ 1,444,098 | |||
Other comprehensive loss | $ (599) | $ (1,518) | ||
Amount reclassified from Available-for-sale securities | (308) | (308) | ||
Net current period other comprehensive income (loss) | $ 106 | (907) | (460) | (1,826) |
Ending balance | 1,439,648 | 1,439,648 | ||
Total | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Beginning balance | (216) | 1,214 | 350 | 2,133 |
Ending balance | (110) | 307 | (110) | 307 |
Unrealized Gains (Losses) on Available-for-Sale Securities | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Beginning balance | 234 | 489 | 150 | 352 |
Other comprehensive loss | (4) | 133 | ||
Amount reclassified from Available-for-sale securities | (308) | (308) | ||
Net current period other comprehensive income (loss) | 88 | (312) | 172 | (175) |
Ending balance | 322 | 177 | 322 | 177 |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Beginning balance | (450) | 725 | 200 | 1,781 |
Other comprehensive loss | (595) | (1,651) | ||
Amount reclassified from Available-for-sale securities | 0 | 0 | ||
Net current period other comprehensive income (loss) | 18 | (595) | (632) | (1,651) |
Ending balance | $ (432) | $ 130 | $ (432) | $ 130 |
Accumulated Other Comprehensi89
Accumulated Other Comprehensive Income - Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Investment income and other, net | $ 6,184 | $ 5,412 | $ 59,256 | $ 397,193 |
Income tax (benefit) expense | $ 16,760 | $ (13,482) | $ (27,051) | (132,357) |
Reclassification out of Accumulated Other Comprehensive Income | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Investment income and other, net | 497 | |||
Income tax (benefit) expense | (189) | |||
Net of tax | $ 308 |
Warrants and Stock Repurchase -
Warrants and Stock Repurchase - Additional Information (Details) - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Mar. 13, 2015 | Mar. 10, 2015 | Jul. 01, 2013 | |
Class of Stock [Line Items] | ||||||||
Warrants received (in shares) | 13,201 | 13,201 | 21,605 | |||||
Warrants repurchased (in shares) | 300 | 8,333 | ||||||
Warrants repurchased | $ 0.7 | $ 15.9 | ||||||
Remaining authorized repurchase amount | $ 138.5 | $ 138.5 | ||||||
Senior Secured Notes | 6.875% Senior Secured Notes | ||||||||
Class of Stock [Line Items] | ||||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | ||
GETCO | ||||||||
Class of Stock [Line Items] | ||||||||
Warrants received (in shares) | 24,300 |
Warrants and Stock Repurchase91
Warrants and Stock Repurchase - Warrant Activity (Details) - $ / shares shares in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2016 | Jul. 01, 2013 | |
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 21,605 | ||
Exercised (in shares) | (71) | ||
Repurchased (in shares) | (300) | (8,333) | |
Warrants - Outstanding at end of period (in shares) | 13,201 | 13,201 | |
Class A | |||
Class of Warrant or Right [Line Items] | |||
Exercise Price (in dollars per share) | $ 11.70 | $ 11.70 | $ 12 |
Initial term (years) | 4 years | ||
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 7,097 | ||
Exercised (in shares) | (53) | ||
Repurchased (in shares) | (2,677) | ||
Warrants - Outstanding at end of period (in shares) | 4,367 | 4,367 | |
Class B | |||
Class of Warrant or Right [Line Items] | |||
Exercise Price (in dollars per share) | $ 13.16 | $ 13.16 | 13.50 |
Initial term (years) | 5 years | ||
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 7,254 | ||
Exercised (in shares) | (18) | ||
Repurchased (in shares) | (2,828) | ||
Warrants - Outstanding at end of period (in shares) | 4,408 | 4,408 | |
Class C | |||
Class of Warrant or Right [Line Items] | |||
Exercise Price (in dollars per share) | $ 14.63 | $ 14.63 | $ 15 |
Initial term (years) | 6 years | ||
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 7,254 | ||
Exercised (in shares) | 0 | ||
Repurchased (in shares) | (2,828) | ||
Warrants - Outstanding at end of period (in shares) | 4,426 | 4,426 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Details) - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Options excluded (in shares) | 17.2 | 27.9 | 14.3 | 18.3 |
Earnings Per Share - Reconcilia
Earnings Per Share - Reconciliation of Numerators and Denominators of Basic and Diluted Earnings Per Computations (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Numerator / net (loss) | ||||
(Loss) income and shares used in basic calculations | $ (11,214) | $ 21,937 | $ 59,505 | $ 252,076 |
Denominator / shares | ||||
(Loss) income and shares used in basic calculations (in shares) | 85,009 | 91,134 | 86,531 | 104,244 |
(Loss) income and shares used in diluted calculations (in shares) | 85,009 | 92,079 | 88,481 | 106,816 |
Basic (loss) earnings per common share (in dollars per share) | $ (0.13) | $ 0.24 | $ 0.69 | $ 2.42 |
Diluted (loss) earnings per common share (in dollars per share) | $ (0.13) | $ 0.24 | $ 0.67 | $ 2.36 |
Restricted awards | ||||
Denominator / shares | ||||
Effect of dilutive stock based awards (in shares) | 0 | 809 | 1,066 | 1,994 |
Stock options and SARs | ||||
Denominator / shares | ||||
Effect of dilutive stock based awards (in shares) | 0 | 136 | 546 | 390 |
Warrants | ||||
Denominator / shares | ||||
Effect of dilutive stock based awards (in shares) | 0 | 0 | 338 | 188 |
Commitments and Contingent Li94
Commitments and Contingent Liabilities - Additional Information (Details) € in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016USD ($)compensation_guarantee | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)compensation_guaranteeloan | Sep. 30, 2015USD ($) | Jul. 08, 2016EUR (€) | Dec. 31, 2015USD ($) | |
Loss Contingencies [Line Items] | ||||||
Compensation guarantees payable, number | compensation_guarantee | 1 | 1 | ||||
Compensation guarantees payable | $ 0 | |||||
Occupancy and Equipment Rentals | ||||||
Loss Contingencies [Line Items] | ||||||
Rental expense under the office leases | $ 6,400,000 | $ 4,000,000 | $ 18,900,000 | $ 12,900,000 | ||
Revolving Credit Facility | ||||||
Loss Contingencies [Line Items] | ||||||
Weighted average interest rate | 4.40% | 4.40% | ||||
Debt term | 3 years | |||||
Trading Activities on Euronext | ||||||
Loss Contingencies [Line Items] | ||||||
Loss contingency reserve | € | € 0.4 | |||||
Guarantee Obligation | ||||||
Loss Contingencies [Line Items] | ||||||
Letters of credit obligation | $ 11,100,000 | $ 11,100,000 | ||||
Indemnification Agreement | ||||||
Loss Contingencies [Line Items] | ||||||
Number of loans with contingent potential obligation | loan | 40 | |||||
Indemnification Agreement | Maximum | ||||||
Loss Contingencies [Line Items] | ||||||
Potential losses on loans | $ 8,500,000 | $ 8,500,000 |
Commitments and Contingent Li95
Commitments and Contingent Liabilities - Schedule of Capital Lease and Contract Obligations (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Minimum Payments | |
Three months ended December 31, 2016 | $ 532 |
2,017 | 620 |
Total | $ 1,152 |
Commitments and Contingent Li96
Commitments and Contingent Liabilities - Schedule of Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Interest expense - Capital leases | $ 15 | $ 38 | $ 56 | $ 160 |
Commitments and Contingent Li97
Commitments and Contingent Liabilities - Schedule of Future Minimum Rental Commitments (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Three months ending December 31, 2016 | $ 4,265 |
Year ending December 31, 2017 | 23,405 |
Year ending December 31, 2018 | 22,081 |
Year ending December 31, 2019 | 20,187 |
Year ending December 31, 2020 | 19,961 |
Thereafter through December 31, 2031 | 164,975 |
Total | 254,874 |
Gross Lease Obligations | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Three months ending December 31, 2016 | 5,717 |
Year ending December 31, 2017 | 28,549 |
Year ending December 31, 2018 | 26,872 |
Year ending December 31, 2019 | 24,318 |
Year ending December 31, 2020 | 22,918 |
Thereafter through December 31, 2031 | 175,323 |
Total | 283,697 |
Sublease Income | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Three months ending December 31, 2016 | 1,452 |
Year ending December 31, 2017 | 5,144 |
Year ending December 31, 2018 | 4,791 |
Year ending December 31, 2019 | 4,131 |
Year ending December 31, 2020 | 2,957 |
Thereafter through December 31, 2031 | 10,348 |
Total | $ 28,823 |
Commitments and Contingent Li98
Commitments and Contingent Liabilities - Activity in Liability Accounts Related to Lease Losses and Lease Termination (Details) - Lease Losses and Lease Termination - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Loss Contingency Accrual [Roll Forward] | ||
Balance as of beginning of period | $ 18,892 | $ 5,897 |
Real estate charges incurred | 0 | 23,186 |
Payments made, net | (459) | (8,921) |
Interest accretion | (3,949) | (1,270) |
Balance as of end of period | $ 14,484 | $ 18,892 |
Financial instruments with Of99
Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Derivatives, Fair Value [Line Items] | ||
Loans outstanding | $ 453,524,000 | $ 484,989,000 |
Executive Director or Officer | ||
Derivatives, Fair Value [Line Items] | ||
Loans outstanding | $ 0 |
Business Segments - Revenue and
Business Segments - Revenue and Pre-tax Earnings by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Segment Reporting Information [Line Items] | |||||
Revenues | $ 208,532 | $ 377,036 | $ 873,870 | $ 1,335,074 | |
Pre-tax earnings | (27,974) | 35,419 | 86,556 | 384,433 | |
Total assets | 6,750,601 | 6,850,169 | 6,750,601 | 6,850,169 | $ 6,040,535 |
Market Making | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 136,107 | 299,755 | 606,849 | 716,631 | |
Pre-tax earnings | (13,776) | 85,419 | 102,223 | 129,160 | |
Total assets | 5,280,491 | 5,125,761 | 5,280,491 | 5,125,761 | |
Global Execution Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 63,713 | 69,713 | 208,245 | 597,502 | |
Pre-tax earnings | (439) | (1,050) | 7,506 | 370,072 | |
Total assets | 1,060,460 | 798,956 | 1,060,460 | 798,956 | |
Corporate and Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 8,712 | 7,568 | 58,776 | 20,941 | |
Pre-tax earnings | (13,759) | (48,951) | (23,173) | (114,799) | |
Total assets | $ 409,650 | $ 925,452 | $ 409,650 | $ 925,452 |
Business Segments - Additional
Business Segments - Additional Information (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Segment Reporting Information [Line Items] | |||
Total assets of businesses held for sale | $ 8.2 | $ 26 | |
KCG Hotspot | |||
Segment Reporting Information [Line Items] | |||
Gain from sale of business | $ 373.8 | ||
Corporate and Other | Businesses Held for Sale | |||
Segment Reporting Information [Line Items] | |||
Total assets of businesses held for sale | 8.2 | ||
Corporate and Other | BATS | |||
Segment Reporting Information [Line Items] | |||
Gain from sale of portion of investment | $ 33.4 | ||
Global Execution Services | Revenues | KCG Hotspot | |||
Segment Reporting Information [Line Items] | |||
Gain from sale of business | 385 | ||
Global Execution Services | Pre-tax Earnings | KCG Hotspot | |||
Segment Reporting Information [Line Items] | |||
Gain from sale of business | $ 373.8 |