Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 04, 2017 | |
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 | Mar. 31, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
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 | 67,630,780 | |
Common Class B | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Trading revenues, net | $ 154,307 | $ 223,938 |
Commissions and fees | 93,589 | 106,101 |
Interest, net | 821 | 117 |
Investment income and other, net | 6,656 | 15,268 |
Total revenues | 255,373 | 345,424 |
Expenses | ||
Employee compensation and benefits | 66,003 | 97,586 |
Execution and clearance fees | 72,795 | 73,634 |
Communications and data processing | 39,020 | 35,657 |
Depreciation and amortization | 19,038 | 21,905 |
Payments for order flow | 17,121 | 12,655 |
Collateralized financing interest | 11,761 | 9,163 |
Debt interest expense | 9,330 | 9,492 |
Occupancy and equipment rentals | 6,760 | 8,990 |
Professional fees | 4,544 | 6,057 |
Business development | 1,208 | 1,119 |
Other | 8,197 | 9,201 |
Total expenses | 255,777 | 285,459 |
(Loss) income before income taxes | (404) | 59,965 |
Income tax (benefit) expense | (3,616) | 22,800 |
Net income | $ 3,212 | $ 37,165 |
Basic earnings per share (in dollars per share) | $ 0.05 | $ 0.42 |
Diluted earnings per share (in dollars per share) | $ 0.05 | $ 0.41 |
Shares used in computation of basic earnings per share | 66,306 | 88,458 |
Shares used in computation of diluted earnings per share | 67,642 | 89,605 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 3,212 | $ 37,165 |
Other comprehensive income (loss): | ||
Unrealized gain on available for sale securities, net of tax | 170 | 68 |
Reclassification of realized gain from Other comprehensive income, net of tax | (2,956) | 0 |
Cumulative translation adjustment, net of tax | 437 | (133) |
Comprehensive income | $ 863 | $ 37,100 |
CONSOLIDATED STATEMENTS OF FINA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and cash equivalents | $ 669,869 | $ 632,234 |
Cash and cash equivalents segregated under federal and other regulations | 3,600 | 3,000 |
Financial instruments owned, at fair value, including securities pledged to counterparties that had the right to deliver or repledge of $368,736 at March 31, 2017 and $314,720 at December 31, 2016: | ||
Equities | 2,179,211 | 2,343,033 |
Debt securities | 128,932 | 177,698 |
Listed options | 12,299 | 19,100 |
Other financial instruments | 0 | 30 |
Total financial instruments owned, at fair value | 2,320,442 | 2,539,861 |
Collateralized agreements: | ||
Securities borrowed | 1,594,442 | 1,688,222 |
Receivable from brokers, dealers and clearing organizations | 801,678 | 832,785 |
Fixed assets and leasehold improvements, less accumulated depreciation and amortization | 159,595 | 151,645 |
Investments | 24,716 | 30,979 |
Goodwill and Intangible assets, less accumulated amortization | 106,851 | 100,338 |
Deferred tax asset, net | 109,877 | 109,861 |
Assets of business held for sale | 0 | 8,194 |
Other assets | 192,359 | 164,168 |
Total assets | 5,983,429 | 6,261,287 |
Financial instruments sold, not yet purchased, at fair value: | ||
Equities | 1,694,374 | 1,821,957 |
Debt securities | 177,168 | 211,222 |
Listed options | 35,835 | 12,961 |
Other financial instruments | 598 | 0 |
Total financial instruments sold, not yet purchased, at fair value | 1,907,975 | 2,046,140 |
Collateralized financings: | ||
Securities loaned | 459,533 | 372,631 |
Financial instruments sold under agreements to repurchase | 952,584 | 1,027,775 |
Other collateralized financings | 50,000 | 100,000 |
Total collateralized financings | 1,462,117 | 1,500,406 |
Payable to brokers, dealers and clearing organizations | 495,253 | 518,900 |
Payable to customers | 52,315 | 23,580 |
Accrued compensation expense | 36,695 | 132,406 |
Accrued expenses and other liabilities | 163,343 | 156,828 |
Income taxes payable | 63,236 | 71,391 |
Debt | 455,183 | 454,353 |
Total liabilities | 4,636,117 | 4,904,004 |
Class A Common Stock | ||
Shares authorized: 1,000,000 at March 31, 2017 and December 31, 2016; Shares issued: 91,810 at March 31, 2017 and 90,309 at December 31, 2016; Shares outstanding: 66,665 at March 31, 2017 and 67,192 at December 31, 2016 | 918 | 903 |
Additional paid-in capital | 1,457,412 | 1,439,412 |
Retained earnings | 195,276 | 192,064 |
Treasury stock, at cost; 25,145 shares at March 31, 2017 and 23,116 shares at December 31, 2016 | (306,192) | (277,343) |
Accumulated other comprehensive (loss) income | (102) | 2,247 |
Total equity | 1,347,312 | 1,357,283 |
Total liabilities and equity | $ 5,983,429 | $ 6,261,287 |
CONSOLIDATED STATEMENTS OF FIN5
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Financial instruments owned, at fair value, securities pledged | $ 368,736 | $ 314,720 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 91,810,000 | 90,309,000 |
Common stock, shares outstanding | 66,665,000 | 67,192,000 |
Treasury stock, shares | 25,145,000 | 23,116,000 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Class A Common Stock | Common StockClass A Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated other comprehensive (loss) income |
Beginning balance at Dec. 31, 2015 | $ 350 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
KCG Class A Common Stock repurchased (in shares) | (1,800) | ||||||
KCG Class A Common Stock repurchased | $ (20,500) | ||||||
Unrealized gain on available for sale securities, net of tax | $ 68 | ||||||
Reclassification of realized gain from Other comprehensive income, net of tax | 0 | ||||||
Cumulative translation adjustment, net of tax | (133) | ||||||
Net income | 37,165 | ||||||
Ending balance at Mar. 31, 2016 | 285 | ||||||
Beginning balance (in shares) at Dec. 31, 2016 | 90,309 | ||||||
Beginning balance at Dec. 31, 2016 | $ 1,357,283 | $ 903 | $ 1,439,412 | $ 192,064 | 2,247 | ||
Beginning balance (in shares) at Dec. 31, 2016 | (23,116) | (23,116) | |||||
Beginning balance at Dec. 31, 2016 | $ (277,343) | $ (277,343) | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
KCG Class A Common Stock repurchased (in shares) | (900) | (2,029) | |||||
KCG Class A Common Stock repurchased | (28,849) | $ (13,300) | $ (28,849) | ||||
Stock-based compensation and Options & Warrants exercised (in shares) | 1,501 | ||||||
Stock-based compensation and Options & Warrants exercised | 18,015 | $ 15 | 18,000 | ||||
Unrealized gain on available for sale securities, net of tax | 170 | 170 | |||||
Reclassification of realized gain from Other comprehensive income, net of tax | (2,956) | (2,956) | |||||
Cumulative translation adjustment, net of tax | 437 | 437 | |||||
Net income | 3,212 | 3,212 | |||||
Ending balance (in shares) at Mar. 31, 2017 | 91,810 | ||||||
Ending balance at Mar. 31, 2017 | $ 1,347,312 | $ 918 | $ 1,457,412 | $ 195,276 | $ (102) | ||
Ending balance (in shares) at Mar. 31, 2017 | (25,145) | (25,145) | |||||
Ending balance at Mar. 31, 2017 | $ (306,192) | $ (306,192) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities | ||
Net income | $ 3,212 | $ 37,165 |
Adjustments to reconcile Net income to net cash provided by operating activities | ||
Depreciation and amortization | 19,038 | 21,905 |
Stock and unit-based compensation | 2,997 | 17,110 |
Realized gain on sale of assets and investments | (4,834) | (2,798) |
Realized gain on repurchase of debt | 0 | (3,676) |
Unrealized gain on investments | (117) | (4,847) |
Other | 618 | 2,750 |
(Increase) decrease in operating assets | ||
Cash and cash equivalents segregated under federal and other regulations | (600) | 0 |
Financial instruments owned, at fair value | 219,419 | (92,151) |
Securities borrowed | 93,780 | (45,605) |
Receivable from brokers, dealers and clearing organizations | 31,107 | 25,130 |
Other assets | (34,821) | 13,150 |
Increase (decrease) in operating liabilities | ||
Financial instruments sold, not yet purchased, at fair value | (138,165) | (57,943) |
Securities loaned | 86,901 | 63,981 |
Financial instruments sold under agreements to repurchase | (75,191) | (45,599) |
Other collateralized financing | (50,000) | 0 |
Payable to brokers, dealers and clearing organizations | (23,648) | 300,855 |
Payable to customers | 28,735 | (5,747) |
Accrued compensation expense | (77,207) | (81,994) |
Accrued expenses and other liabilities | 276 | (9,357) |
Income taxes payable | (8,155) | 0 |
Net cash provided by operating activities | 73,345 | 132,329 |
Cash flows from investing activities | ||
Cash received from sale of KCG Hotspot | 6,492 | 6,552 |
Cash received from sale of assets | 0 | 4,970 |
Cash received from sale of investments and redemptions from investments | 7,404 | 6,534 |
Purchases of fixed assets and leasehold improvements | (21,776) | (12,677) |
Capitalization of software development costs | (17,725) | (9,013) |
Purchases of investments | (869) | (770) |
Net cash used in investing activities | (26,474) | (4,404) |
Cash flows from financing activities | ||
Repurchase of 6.875% Senior Secured Notes | 0 | (30,288) |
Borrowings under capital lease obligations | 12,257 | 0 |
Principal payments on capital lease obligations | (568) | (507) |
Cost of common stock repurchased | (28,849) | (30,667) |
Stock options exercised | 2,775 | 0 |
Warrants exercised | 4,144 | 0 |
Cost of warrants repurchased | 0 | (967) |
Net cash used in financing activities | (10,241) | (62,429) |
Effect of exchange rate changes on cash and cash equivalents | 1,005 | 261 |
Increase in cash and cash equivalents | 37,635 | 65,757 |
Cash and cash equivalents at beginning of period | 632,234 | 581,313 |
Cash and cash equivalents at end of period | 669,869 | 647,070 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 31,891 | 27,884 |
Cash paid for income taxes | 1,535 | 9,955 |
Non-cash investing activities - Compensation capitalized for internal use software that will be paid in a subsequent period | 186 | 0 |
Non-cash investing activities - Compensation capitalized for internal use software that will be paid in a subsequent period | 1,762 | 0 |
Non-cash financing activities - Warrants repurchased via GA Swap | $ 2,929 | $ 0 |
CONSOLIDATED STATEMENTS OF CAS8
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 10, 2015 |
Senior Secured Notes | 6.875% Senior Secured Notes | ||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% |
Organization and Description of
Organization and Description of the Business | 3 Months Ended |
Mar. 31, 2017 | |
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 exchange-based electronic market making. KCG has multiple access points to trade global equities, options, fixed income, currencies and commodities via voice or automated execution. KCG was formed as a result of a strategic business combination (the “2013 Mergers”) of Knight Capital Group, Inc.(“Knight”) and GETCO Holding Company, LLC (“GETCO”) in July 2013. Pending Merger with Virtu On April 20, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Virtu Financial, Inc., a Delaware corporation (“Virtu”) and Orchestra Merger Sub, Inc., a Delaware corporation and indirect wholly owned subsidiary of Virtu (“Merger Sub”). The Merger Agreement provides for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Virtu. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Class A common stock of the Company, par value $0.01 per share ("KCG Class A Common Stock"), issued and outstanding immediately prior to the Effective Time (other than (i) Shares owned by Virtu, Merger Sub, any affiliate of Virtu or Merger Sub, or the Company, in each case immediately prior to the Effective Time, and (ii) Shares held by stockholders who have not voted in favor of the Merger and who have properly and validly perfected their statutory rights of appraisal in respect of such Shares in accordance with Section 262 of the Delaware General Corporation Law) will be canceled and converted into the right to receive $20.00 in cash without interest (the “Merger Consideration”), subject to applicable tax withholding. In accordance with the Merger Agreement, all unvested stock-based compensation awards that are outstanding as of immediately prior to the Effective Time shall accelerate and become fully vested and exercisable effective immediately prior to, and contingent upon, the Effective Time. The respective obligations of the Company, Virtu and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the Merger Agreement by the Company’s stockholders, the receipt of certain required governmental approvals, the absence of any legal prohibitions, the accuracy of the representations and warranties (subject to customary materiality qualifiers) and compliance by the other party with its obligations under the Merger Agreement (subject to customary materiality qualifiers). The consummation of the Merger is not subject to a financing condition. Concurrently with the execution of the Merger Agreement, Virtu entered into a voting agreement with Jefferies LLC (“Jefferies”), a stockholder of the Company, which requires Jefferies to, among other things, vote all of its shares of KCG Class A Common Stock in favor of adoption of the Merger Agreement. The Company expects the Merger to close in the third quarter of 2017. As of March 31, 2017 , 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. The Company engages in principal trading in the Market Making segment direct to clients as well as in a supplemental capacity on exchanges, electronic communications networks (“ECNs”) and alternative trading systems (“ATSs”). The Company 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 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-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers. The Company earns commissions as an agent on behalf of clients as well as between principals to transactions; in addition, the Company will 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 ECN that also offers trading applications; and (iv) an 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 the Company's investments, principally in strategic trading-related 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 Company's 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 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 information. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
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, 2016. 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. 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 ended March 31, 2017 2016 Interest Income $ 3,978 $ 3,107 Interest Expense (3,157 ) (2,990 ) Interest, net $ 821 $ 117 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 ended March 31, 2017 2016 Dividend Income $ 10,360 $ 11,921 Dividend Expense $ (9,329 ) $ (9,148 ) 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 trading-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 accounted for under the equity method or held at cost 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. Specific events and changes that could adversely affect the Company’s assessment of its Goodwill, which is all related to its Market Making reporting unit, include the following factors that are significant inputs into its fair value calculations of its reporting units and drive the Company's revenue and expense assumptions: • the inability to manage trading strategy performance and grow revenues and earnings; • changes in market structure, legislative, regulatory or financial reporting rules, including the increased focus by Congress, federal and state regulators, the self-regulatory organizations and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems, market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and exchange fee structures; • future changes to the Company’s organizational structure and management; • the Company’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by the Company’s customers and potential customers; • the Company’s ability to keep up with technological changes; • the Company’s ability to effectively identify and manage market risk, operational and technology risk, cybersecurity risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; • the effects of increased competition and the Company’s ability to maintain and expand market share; • changes in discount and growth rates used by the Company in its fair value models; and • the Company's ability to manage its costs. 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 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 Repurchases", in connection with the 2013 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 the total cost of its purchases of Warrants as a reduction in Additional paid-in capital. 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. Such gains are included within Investment income and other, net on the Consolidated Statements of Operations. 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, comprising 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 (loss) 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 March 31, 2017 and 2016, the Company recorded gains of $0.2 million and $0.4 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 (loss) 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. In October 2016, the Company invested in another JV with nine other parties. Each party owns 10% of the voting shares and 10% of the equity of this JV, which is building microwave communication networks in the U.S. and Asia, and which is considered to be a VIE. The Company and all of its JV partners each pay monthly fees for the funding of the construction of the microwave communication networks. When completed, this JV may sell excess bandwidth that is not utilized by its joint venture members to third parties. In each of the JVs, 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 JVs and does not consolidate the JVs. The Company records its interest in the JVs under the equity method of accounting and records its investment in the JVs within Investments and its amounts payable for communication services provided by the JVs within Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The Company records its pro-rata share of the JVs earnings or losses within Investment income and other, net and fees related to the use of communication services provided by the JVs within Communications and data processing on the Consolidated Statements of Operations. The Company’s exposure to the obligations of these VIEs is generally limited to its interests in each respective JV, which is the carrying value of the equity investment in each JV. The following table presents the Company’s nonconsolidated VIEs at March 31, 2017 (in thousands): Carrying Amount Maximum Exposure to loss Asset Liability VIEs' assets Equity investment $ 15,543 $ 314 $ 15,543 $ 41,569 The following table presents the Company’s nonconsolidated VIE at December 31, 2016 (in thousands): Carrying Amount Maximum Exposure to loss Asset Liability VIE's assets Equity investment $ 14,822 $ 500 $ 14,822 $ 36,715 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 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 and classification on the statement of cash flows. The Company adopted this ASU prospectively as of January 1, 2017. Following the adoption of this ASU: • the Company records all excess tax benefits and tax deficiencies as an income tax benefit or expense in the Consolidated Statements of Operations in the period in which they are realized. Previously such excess tax benefits and deficiencies were recorded within Additional paid-in capital on the Consolidated Statements of Financial Condition, although in certain circumstances tax deficiencies could have been recognized as income tax expense. • excess tax benefits and tax deficiencies are classified in operating activities, specifically within changes in Accrued expenses and other liabilities, in the Consolidated Statements of Cash Flows. Prior to the adoption of this ASU, the Company reported excess tax benefits and tax deficiencies as a financing activity on its Consolidated Statements of Cash Flows. • the Company no longer includes any assumed proceeds of any windfall tax benefits when applying the treasury stock method for computing diluted EPS. This may result in higher diluted shares outstanding for EPS calculations. • the Company elected to continue to estimate its forfeiture rate on grant date. Therefore, a cumulative effect adjustment was not necessary upon adoption of this ASU. 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 has not yet determined its transition approach. Because the guidance does not apply to revenue associated with securities trading activities that are accounted for under other GAAP, the Company does not expect the guidance to have a material impact on its Consolidated Statements of Operations most closely associated with financial instruments, including Trading revenues, net, Commissions and fees, and Interest, net. The Company’s implementation efforts include the identification of revenue within the scope of the guidance and the evaluation of certain revenue contracts. The Company’s evaluation of the impact of the new guidance on its Consolidated Financial Statements is ongoing, and it continues to evaluate the timing of recognition for various revenues, including soft dollar related activity, which may be impacted depending on the features of the client arrangements and the presentation of certain contract costs (whether presented gross or offset against revenues). 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 does not expect the adoption of this ASU to have an impact 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 August 2016, the FASB issued an ASU which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. In November 2016, the FASB issued an ASU which requires that cash segregated for regulatory and other purposes, generally described as restricted cash or restricted cash equivalents, be included in cash and cash equivalents disclosed in the statements of cash flows. The guidance is effective for all reporting periods beginning after December 15, 2017. Early adoption is permitted and must be applied retrospectively to all periods presented within the statement of cash flows. The Company does not expect the adoption of this ASU to have an impact on its Consolidated Financial Statements. In January 2017, the FASB issued an ASU which simplifies the accounting for goodwill impairments. This ASU eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by reducing the goodwill balance by the difference between the carrying value and the reporting unit’s fair value. The impairment charge would be limited to the carrying value of goodwill. This ASU is effective for annual and interim impairment tests for periods beginning after December 15, 2021. Early adoption is allowed for annual and interim impairment tests occurring after January 1, 2017. The Company does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. In January 2017, the FASB issued an ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for reporting periods beginning after December 15, 2017. The Company does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. |
Assets of Business Held for Sal
Assets of Business Held for Sale & Sales of Businesses | 3 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Assets of Business Held for Sale & Sales of Businesses | Assets of Business Held for Sale & Sales of Businesses In March 2015, the Company sold its spot institutional foreign exchange ECN, KCG Hotspot, to Bats Global Markets, Inc. ("Bats"). As part of the sale, 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. On March 1, 2017, Bats merged with CBOE Holdings, Inc. (“CBOE”) (the “Bats Merger”). The remaining Annual Payments are contingent on CBOE 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 and second Annual Payments of $6.6 million and $6.5 million in March 2016 and 2017, respectively. The remaining additional potential payments of $56.8 million are recorded at a fair value of $54.1 million in Other assets on the Consolidated Statement of Financial Condition as of March 31, 2017. 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 and retail options market making businesses, were no longer considered core to its strategy. 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 business held for sale on the Consolidated Statements of Financial Condition. Included in the $8.2 million of Assets of business held for sale at December 31, 2016 were assets related to a technology platform. At March 31, 2017, the Company determined that this business was no longer held for sale and as a result, reclassified the assets back to intangible assets on the Consolidated Statements of Financial Condition. The Company does not have any businesses that are considered to be held for sale at March 31, 2017. See Footnote 9 "Goodwill and Intangible Assets" for further details. Assets related to the Company's retail options market making business, which were sold to a third party in March 2016 resulted in a gain of $2.9 million , which is included in Investment income and other, net on the Consolidated Statement of Operations for the three months ended March 31, 2016. The DMM business was sold to Citadel in May 2016. As charges were recorded in the fourth quarter of 2015 to reflect the estimated fair value of this held for sale business, no gain or loss on sale was recorded in 2016. The assets of businesses held for sale as December 31, 2016 are summarized as follows (in thousands): December 31, Assets: Intangible assets, net of accumulated amortization $ 8,194 Total assets of businesses held for sale $ 8,194 |
Fair Value
Fair Value | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,179,211 $ — $ — $ 2,179,211 Corporate debt 91,314 — — 91,314 U.S. government and Non-U.S. government obligations 37,618 — — 37,618 Listed options 12,299 — — 12,299 Total Financial instruments owned, at fair value 2,320,442 — — 2,320,442 Investments (1) 2,379 2,234 — 4,613 Other (2) — 54,142 2,838 56,980 Total assets held at fair value $ 2,322,821 $ 56,376 $ 2,838 $ 2,382,035 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,694,374 $ — $ — $ 1,694,374 Corporate debt 85,926 — — 85,926 U.S. government and Non-U.S. government obligations 91,242 — — 91,242 Listed options 35,835 — — 35,835 Foreign currency forward contracts — 598 — 598 Total liabilities held at fair value $ 1,907,377 $ 598 $ — $ 1,907,975 (1) Investments comprise $2.4 million of Level 1 investments in CME Group and $2.2 million of Level 2 investments primarily related to deferred compensation investments, all of which are included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $54.1 million receivable from Bats related to the sale of KCG Hotspot and a $2.8 million receivable from the sale of an investment, both of which are included within Other Assets on the Consolidated Statements of Financial Condition. Assets and Liabilities Measured at Fair Value on a Recurring Basis December 31, 2016 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,343,033 $ — $ — $ 2,343,033 Corporate debt 127,237 — — 127,237 U.S. government and Non-U.S. government obligations 50,461 — — 50,461 Listed options 19,100 — — 19,100 Foreign currency forward contracts — 30 — 30 Total Financial instruments owned, at fair value 2,539,831 30 — 2,539,861 Investments (1) 9,198 2,286 — 11,484 Other (2) — 60,538 2,846 63,384 Total assets held at fair value $ 2,549,029 $ 62,854 $ 2,846 $ 2,614,729 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,821,957 $ — $ — $ 1,821,957 Listed options 12,961 — — 12,961 U.S. government obligations 87,661 — — 87,661 Corporate debt 123,561 — — 123,561 Total liabilities held at fair value $ 2,046,140 $ — $ — $ 2,046,140 (1) Investments comprise $9.2 million of Level 1 investments in CME Group and Bats and also includes $2.3 million of Level 2 investments primarily related to deferred compensation investments, all of which are included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $60.5 million receivable from Bats related to the sale of KCG Hotspot and a $2.8 million receivable from the sale of an investment, both of which are included in Other assets 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 March 31, 2017 and December 31, 2016, 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 March 31, 2017 and December 31, 2016 (in thousands): Level 3 Financial Assets as of March 31, 2017 Balance at January 1, 2017 Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at March 31, 2017 Receivable from sold investment $ 2,846 $ — $ (8 ) $ — $ — $ — $ — $ — $ 2,838 Level 3 Financial Assets as of December 31, 2016 Balance at January Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at December 31, 2016 Receivable from sold investment $ 5,789 $ — $ 980 $ — $ — $ (3,923 ) $ — $ — $ 2,846 Unrealized gains or losses are included within Investment income and other, net on the Consolidated Statements of Operations. 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 March 31, 2017 and December 31, 2016, the Company had a foreign currency forward contract with a notional value of 735.0 million Indian Rupees ( $11.3 million ). This forward contract is 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. Investments Investments primarily include 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. Other Other primarily consists of the fair value of the Company's receivable from Bats/CBOE from the sale of KCG Hotspot as more fully described in Footnote 3 "Assets of Business Held for Sale & Sales of Businesses". The Company has elected the fair value option related to its receivable from Bats/CBOE. 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. As of March 31, 2017, the range of undiscounted amounts the Company may receive for this receivable is between $0 and $4.6 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 | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and December 31, 2016. 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 on 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 on 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 the Company's financial position (in thousands, except contract amounts): March 31, 2017 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 163 364 $ 240 438 Forward contracts (1) Financial instruments owned, at fair value — — 598 1 Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,594 7,047 2,978 7,326 Swap contracts Receivable from brokers, dealers and clearing organizations — — 195 2 Listed options Financial instruments owned/sold, not yet purchased, at fair value 12,299 75,294 35,835 76,347 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 2,545 4,234 5,678 4,038 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 45,889 23,531 45,697 25,762 Gross derivative assets/liabilities, before netting $ 62,490 $ 91,221 Less: Legally enforceable master netting agreements Exchange traded (3) (49,841 ) (54,593 ) Bi-lateral over-the-counter (4) — (195 ) Net amounts per Consolidated Statement of Financial Condition (5) $ 12,649 $ 36,433 December 31, 2016 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 360 1,285 $ 1,663 6,495 Forward contracts (1) Financial instruments owned, at fair value 30 1 — — Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,451 2,056 1,644 2,944 Swap contracts Receivable from brokers, dealers and clearing organizations 16 1 154 1 Listed options Financial instruments owned/sold, not yet purchased, at fair value 19,100 85,797 12,961 90,063 Forward contracts (2) Accrued expenses and other liabilities — — 1,599 1 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 4,627 8,590 5,541 5,165 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 86,393 31,800 86,100 31,906 Gross derivative assets/liabilities, before netting $ 111,977 $ 109,662 Less: Legally enforceable master netting agreements Exchange traded (3) (92,572 ) (94,948 ) Bi-lateral over-the-counter (4) — (154 ) Net amounts per Consolidated Statement of Financial Condition (5) $ 19,405 $ 14,560 (1) The foreign currency forward contract represents a net investment hedge and is designated as a hedging instrument. (2) The equity forward contract represents a liability to deliver shares of Bats common stock to General Atlantic as described in Footnote 8 "Investments". (3) Exchange traded instruments comprise futures contracts. (4) Bi-lateral over-the-counter instruments comprise swaps and forward contracts. (5) 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 are classified as Level 1 and Level 2 in the fair value hierarchy, respectively. The following table summarizes the gains and losses included in the Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016. Gain (Loss) Recognized Financial Statements For the three months ended March 31, Location 2017 2016 Derivative instruments not designated as hedging instruments: Foreign currency Futures contracts Trading revenues, net $ 2,712 $ 312 Equity Futures contracts Trading revenues, net (7,998 ) 8,922 Swap contracts Trading revenues, net (795 ) 1,886 Listed options Trading revenues, net (24 ) 3,871 Fixed income Futures contracts Trading revenues, net (118 ) 6,833 Commodity Futures contracts Trading revenues, net 3,750 6,966 $ (2,473 ) $ 28,790 Derivative instruments designated as hedging instruments: Foreign exchange - forward contract Accumulated other comprehensive (loss) income $ (389 ) $ (149 ) 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 | 3 Months Ended |
Mar. 31, 2017 | |
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): March 31, December 31, Collateral permitted to be delivered or repledged $ 1,623,886 $ 1,634,979 Collateral that was delivered or repledged 1,577,554 1,550,755 Collateral permitted to be further repledged by the receiving counterparty 151,534 41,730 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): March 31, December 31, Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge $ 368,736 $ 314,720 Financial instruments owned, at fair value, pledged to counterparties that do not have the right to deliver or repledge 1,204,165 1,291,979 The table below presents the gross carrying value of Securities loaned, Financial instruments sold under agreements to repurchase and other collateralized financings by class of collateral pledged (in thousands): March 31, 2017 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 459,533 $ 940,000 $ 50,000 U.S. government obligations — 12,584 — Total $ 459,533 $ 952,584 $ 50,000 December 31, 2016 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 369,168 $ 989,812 $ 76,176 U.S. government obligations — 12,775 — Corporate debt 3,463 25,188 23,824 Total $ 372,631 $ 1,027,775 $ 100,000 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 a 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): March 31, 2017 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 $ 1,594,442 $ — $ 1,594,442 $ 1,537,957 $ 6,225 $ 50,260 Receivable from brokers, dealers and clearing organizations (3) 13,735 — 13,735 13,717 2 16 Total assets $ 1,608,177 $ — $ 1,608,177 $ 1,551,674 $ 6,227 $ 50,276 Liabilities Securities loaned $ 459,533 $ — $ 459,533 $ 446,050 $ 6,225 $ 7,258 Financial instruments sold under agreements to repurchase 952,584 — 952,584 952,582 2 — Other collateralized financings 50,000 — 50,000 50,000 — — Total liabilities $ 1,462,117 $ — $ 1,462,117 $ 1,448,632 $ 6,227 $ 7,258 (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, 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 $ 1,688,222 $ — $ 1,688,222 $ 1,623,281 $ 4,581 $ 60,360 Receivable from brokers, dealers and clearing organizations (3) 21,832 — 21,832 21,797 — 35 Total assets $ 1,710,054 $ — $ 1,710,054 $ 1,645,078 $ 4,581 $ 60,395 Liabilities Securities loaned $ 372,631 $ — $ 372,631 $ 358,023 $ 4,581 $ 10,027 Financial instruments sold under agreements to repurchase 1,027,775 — 1,027,775 1,027,775 — — Other collateralized financings 100,000 — 100,000 100,000 — — Total liabilities $ 1,500,406 $ — $ 1,500,406 $ 1,485,798 $ 4,581 $ 10,027 (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, Financial instruments sold under agreements to repurchase and other collateralized financings are provided in the table below (in thousands): As of March 31, 2017 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 459,533 $ — $ — $ — $ 459,533 Financial instruments sold under agreements to repurchase 12,584 335,000 365,000 240,000 952,584 Other collateralized financings — 50,000 — — 50,000 Total $ 472,117 $ 385,000 $ 365,000 $ 240,000 $ 1,462,117 As of December 31, 2016 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 372,631 $ — $ — $ — $ 372,631 Other — 100,000 — — 100,000 Financial instruments sold under agreements to repurchase 12,775 410,000 465,000 140,000 1,027,775 Total $ 385,406 $ 510,000 $ 465,000 $ 140,000 $ 1,500,406 |
Receivable from and Payable to
Receivable from and Payable to Brokers, Dealers and Clearing Organizations | 3 Months Ended |
Mar. 31, 2017 | |
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): March 31, December 31, Receivable: Clearing organizations and other $ 575,544 $ 619,425 Financial instruments purchased under agreement to resell 13,735 21,832 Securities failed to deliver 212,399 191,528 Total receivable $ 801,678 $ 832,785 Payable: Clearing organizations and other $ 433,164 $ 458,341 Securities failed to receive 62,089 60,559 Total payable $ 495,253 $ 518,900 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 | 3 Months Ended |
Mar. 31, 2017 | |
Investments [Abstract] | |
Investments | Investments Investments primarily comprise strategic investments and deferred compensation investments. Investments consist of the following (in thousands): March 31, December 31, Strategic investments: Investments accounted for under the equity method $ 17,313 $ 16,707 Investments held at fair value 2,379 9,198 Investments held at cost, less impairment 2,790 2,789 Total strategic investments 22,482 28,694 Other investments 2,234 2,285 Total investments $ 24,716 $ 30,979 For the three months ended March 31, 2017 and 2016, the Company recorded income of approximately $48 thousand and $4.8 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. The Company's investments accounted for under the equity method are considered to be related parties. See Footnote 11 "Related Parties". In the first quarter of 2016, one of the Company's investments held at adjusted cost, less impairment made a distribution to its owners, including the Company. As a result of this distribution, the Company adjusted the investment's carrying value and 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 three months ended March 31, 2016. Investments held at fair value are accounted for as available for sale securities and any unrealized gains or losses are recorded net of tax in Other comprehensive (loss) income. Bats/General Atlantic Transactions In the fourth quarter 2016, the Company sold approximately 2.0 million shares of common stock of Bats in the open market (“open market transactions”) and sold an additional 2.2 million shares of common stock of Bats in a block sale ("block sale"). In November 2016 KCG entered into a purchase agreement with GA-GTCO Interholdco, LLC (“General Atlantic” or “GA”) to exchange approximately 8.9 million shares of its Bats common stock for i) GA’s 18.7 million shares of KCG Class A Common Stock and, ii) 8.1 million Warrants (the “Swap Transaction”). The Company’s 6.875% Indenture (as defined below) contains covenants that limit the Company’s ability to repurchase shares of KCG Class A Common Stock and Warrants. Substantially all of the exchange was completed in November 2016, however as a result of these limitations, and as contemplated in the agreement with GA, the Company could not finalize the repurchase of approximately 1.1 million Warrants, and therefore retained approximately 94,000 common shares of Bats at December 31, 2016. The $2.9 million value of these remaining Bats shares was recorded as a receivable from GA within Other assets and a related $2.9 million liability to GA was recorded within Accrued expenses and other liabilities on the Company’s December 31, 2016 Consolidated Statement of Financial Condition. The exchange was completed in January 2017. Pursuant to the terms of the Swap Transaction, the Company paid transaction fees of $2.9 million to Jefferies LLC, comprising half due from the Company and the other half on behalf of GA. The settlement of the portion paid by the Company on behalf of GA was completed by KCG retaining Bats common stock with a fair value of $1.4 million at the time of the Swap Transaction, or approximately 46,000 shares of the aforementioned 94,000 shares of Bats shares owed to GA. The remaining 48,000 shares owed to GA were considered to be a derivative for financial reporting purposes as of December 31, 2016. See Footnote 5 "Derivative Financial Instruments". As a result of the open market transactions, block sale and Swap Transaction, the Company sold approximately 13.0 million shares of Bats, and the Company’s total holdings were reduced to approximately 206,000 shares or less than 0.5% of total shares of Bats common stock outstanding. The Company believes that it no longer has significant influence over Bats, and as a result, in November 2016, the Company ceased to account for its remaining interest in Bats under the equity method. The approximately 206,000 shares of Bats remaining as an investment had a fair value of $6.9 million at December 31, 2016 and were classified as available-for-sale securities (“AFS”), which was recorded within Investments on the Company’s Consolidated Statements of Financial Condition as of December 31, 2016. In the first quarter of 2017, the Company sold its remaining shares of Bats and recorded a pre-tax gain of $4.8 million which is included in Investment income and other, net on the Consolidated Statements of Operations for the three months ended March 31, 2017. As of March 31, 2017, the Company does not own any shares of Bats. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2017 | |
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. No events occurred in the three months ended March 31, 2017 or 2016 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 Business Held for Sale & Sales of Businesses”, in late 2015, the Company conducted a strategic review of its businesses and determined that one of its businesses was no longer considered core to its strategy and the Company sought the opportunity to exit or divest this business. The estimated fair value of intangibles related to a business held for sale of $8.2 million as of December 31, 2016 was reported within Assets of business held for sale on the Consolidated Statements of Financial Condition. These intangibles, which comprise a technology platform, have been reclassified to Intangible Assets as of March 31, 2017 as it has been determined that such assets of the business will not be sold. As of both March 31, 2017 and December 31, 2016, $16.4 million of 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 six years. The weighted average remaining life of the Company’s intangible assets with definite useful lives at both March 31, 2017 and December 31, 2016 was approximately two years. The following tables summarize the Company’s Intangible assets, net of accumulated amortization by segment and type (in thousands): March 31, 2017 December 31, 2016 Market Making Technology $ 38,759 $ 39,536 Trading rights 7,028 7,027 Total 45,787 46,563 Global Execution Services Technology 20,033 20,694 Customer relationships 7,583 7,944 Trade names 625 650 Total 28,241 29,288 Corporate and Other Technology (1) 16,418 8,084 Total $ 90,446 $ 83,935 (1) Excluded from the December 31, 2016 balance is $8.2 million of intangibles related to a business which met the requirements to be considered held for sale. As noted above and in Footnote 3 "Assets of Business Held for Sale & Sales of Businesses", such amounts were included in Assets of business held for sale at December 31, 2016, however, such intangibles were no longer considered to be held for sale at March 31, 2017 and are therefore included above at March 31, 2017. March 31, December 31, Technology (1) Gross carrying amount $ 183,567 $ 157,188 Accumulated amortization (108,347 ) (88,874 ) Net carrying amount 75,220 68,314 Trading rights (2) Gross carrying amount 7,509 7,509 Accumulated amortization (491 ) (482 ) Net carrying amount 7,018 7,027 Customer relationships (3) Gross carrying amount 13,000 13,000 Accumulated amortization (5,417 ) (5,056 ) Net carrying amount 7,583 7,944 Trade names (4) Gross carrying amount 1,000 1,000 Accumulated amortization (375 ) (350 ) Net carrying amount 625 650 Total Gross carrying amount 205,076 178,697 Accumulated amortization (114,630 ) (94,762 ) Net carrying amount $ 90,446 $ 83,935 (1) The weighted average remaining life for technology, including capitalized internal use software, was approximately two years as of both March 31, 2017 and December 31, 2016 . Excluded from the December 31, 2016 balance is $8.2 million of technology assets related to Assets of businesses held for sale. As noted above and in Footnote 3 "Assets of Business Held for Sale & Sales of Businesses", these assets are included in Assets of businesses held for sale at December 31, 2016. (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 3 and 4 years as of March 31, 2017 and December 31, 2016 , respectively. As of March 31, 2017 and December 31, 2016, $6.9 million of trading rights had indefinite useful lives. (3) Customer relationships relate to KCG BondPoint. The weighted average remaining life was approximately 5 and 6 years as of March 31, 2017 and December 31, 2016 , respectively. Lives may be reduced depending upon actual retention rates. (4) Trade names relate to KCG BondPoint. The weighted average remaining life was approximately 6 and 7 years as of March 31, 2017 and December 31, 2016 , respectively. The following table summarizes the Company’s amortization expense relating to Intangible assets (in thousands): For the three months ended March 31, 2017 2016 Amortization expense $ 10,109 $ 7,559 As of March 31, 2017 , the following table summarizes the Company’s estimated amortization expense for future periods (in thousands): Amortization expense For the nine months ended December 31, 2017 $ 33,654 For the year ended December 31, 2018 32,749 For the year ended December 31, 2019 12,708 For the year ended December 31, 2020 2,009 For the year ended December 31, 2021 1,544 |
Debt
Debt | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Debt | Debt 6.875% Senior Secured Notes The carrying value and fair value of the Company's debt is as follows (in thousands): March 31, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value 6.875% Senior Secured Notes, $465.0 million par $ 462,141 $ 480,113 $ 461,899 $ 466,628 Debt issuance costs (6,958 ) — (7,546 ) — Total $ 455,183 $ 480,113 $ 454,353 $ 466,628 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. 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 % 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 March 31, 2017, 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 debt issuance costs of $0.7 million . 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 March 31, 2017 and December 31, 2016, 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 March 31, 2017, 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 as interest expense over the term of the facility. The Company recorded expenses with respect to its Debt as follows (in thousands): For the three months ended March 31, 2017 2016 Interest expense $ 8,234 $ 8,417 Amortization of debt issuance costs (1) 795 821 Commitment fee (2) 354 359 Accelerated amortization of debt issuance costs (3) — 738 Accelerated interest expense on repurchase of debt (3) — 298 Total $ 9,383 $ 10,633 (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 accelerated a prorated 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 three months ended March 31, 2016. |
Related Parties
Related Parties | 3 Months Ended |
Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties The Company interacts with Jefferies LLC, who is the beneficial owner of more than 10 percent of the outstanding KCG Class A Common Stock. The Company also has trading and other activities with certain investees for which it accounts for under the equity method of accounting or accounted for under the equity method at any time during the relevant accounting period. Each is considered a related party for the applicable periods. See Footnote 8 "Investments" for the carrying value of these investees at March 31, 2017 and December 31, 2016 and for the Company's income with respect to its equity earnings from these investees for the three months ended March 31, 2017 and 2016. As noted in Footnote 8 "Investments", in 2016, the Company sold substantially all of its investment in Bats, which it accounted for under the equity method. As a result of the sales, Bats is no longer accounted for under the equity method, and beginning in 2017, Bats is no longer considered a related party. 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 ended March 31, Statements of Operations 2017 2016 Revenues Commissions and fees $ 1,868 $ 6,663 Trading revenues, net 791 477 Interest, net 119 103 Total revenues from related parties $ 2,778 $ 7,243 Expenses Execution and clearance fees (1) $ 313 $ 880 Communications and data processing 5,610 3,206 Payment for order flow — 5 Collateralized financing interest 86 78 Other expense — 5 Total expenses incurred with respect to related parties $ 6,009 $ 4,174 (1) Represents net volume based fees paid or received by KCG for taking or providing liquidity to related trading venues. Volume based fees will vary period to period based on usage. Statements of Financial Condition March 31, December 31, Assets Securities borrowed $ 17,754 $ 5,293 Receivable from brokers, dealers and clearing organizations 2,134 2,106 Other assets 16 62,906 Liabilities Securities loaned $ 2,063 $ 2,594 Payable to brokers, dealers and clearing organizations 45 188 Accrued expenses and other liabilities 122 3,708 In the three months ended March 31, 2017 and 2016, the Company paid $19,000 and $36,000 , respectively, in fees to Jefferies LLC 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 March 31, 2017 and December 31, 2016 and are not included in the above table. See Footnote 15 "Warrants and Stock Repurchase" for additional information on stock repurchases. See Footnote 1 “Organization and Description of the Business” for further information regarding the Merger. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation KCG Equity Incentive Plan The KCG Holdings, Inc. 2015 Amended and Restated Equity Incentive Plan (the "Amended 2015 Plan") is maintained by the Company for the purpose of granting incentive awards to officers, employees and directors of the Company. As of March 31, 2017, there were approximately 23.2 million shares authorized for issuance under the Amended 2015 Plan, of which approximately 13.6 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 of the Company's Board of Directors, 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 ("Annual Equity Awards"), 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. RSUs granted as Annual Equity Awards 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. As such, the Annual Equity Awards are considered not to have a service condition from an expense perspective. The Company recognizes 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 in the current year. The Company measures compensation expense related to Off-Cycle Grants 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 2018 as a component of annual incentive compensation for the 2017 performance year, the Company will accrue compensation expense for such awards over the year ended December 31, 2017, 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 ended March 31, 2017 2016 Stock award compensation expense $ 2,438 $ 17,053 Income tax benefit 926 6,480 The following table summarizes restricted awards activity for the three months ended March 31, 2017 (awards in thousands): Restricted Stock Units Number of Units Weighted- Average Grant date Fair Value Outstanding at December 31, 2016 5,563 $ 11.25 Granted 800 14.27 Vested (2,634 ) 11.19 Forfeited (72 ) 12.10 Outstanding at March 31, 2017 3,657 $ 11.93 There was $5.6 million of unamortized compensation related to unvested RSUs at March 31, 2017 that are related to Off-Cycle Grants. The cost of these unvested RSUs is expected to be recognized over a weighted average life of 1.6 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 March 31, 2017 or 2016. 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) expense, which is recorded in Income tax expense on the Consolidated Statements of Operations are as follows (in thousands): For the three months ended March 31, 2017 2016 Stock option and SAR compensation expense $ 122 $ 134 Income tax benefit 46 51 The following table summarizes stock option and SAR activity and stock options exercisable for the three months ended March 31, 2017 (awards in thousands): Number of Stock Awards Weighted- Average Exercise Price Aggregate Intrinsic Value Weighted- Average Remaining Life (years) Outstanding at December 31, 2016 (1) 6,298 $ 18.88 Granted — — Exercised (337 ) 8.24 Forfeited or expired (94 ) 53.56 Outstanding at March 31, 2017 (1) 5,867 $ 19.03 $ 14,269 2.23 Exercisable at March 31, 2017 4,492 $ 17.75 $ 14,269 1.69 Available for future grants at March 31, 2017 (2) 13,630 (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. The total intrinsic value and cash received from stock options exercised during the three months ended March 31, 2017 is $2.2 million and $2.8 million , respectively. There were no stock options or SARs exercised during the three months ended March 31, 2016. There is $0.5 million of unamortized compensation related to unvested stock options at March 31, 2017 . The cost of these unvested awards is expected to be recognized over a weighted average life of 1.25 years. Incentive units Prior to the 2013 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 2013 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 benefit included in Employee compensation and benefits on the Consolidated Statements of Operations. Given that the units vested in connection with the 2013 Mergers, the Company fully amortized the costs associated with these units as of June 30, 2013. Deferred compensation payable at March 31, 2017 and December 31, 2016 related to incentive units were $2.7 million and $2.3 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 three months ended March 31, 2017 (units in thousands): Vested Incentive units at December 31, 2016 16 Issued — Vested (1 ) Exercised — Canceled — Incentive units at March 31, 2017 15 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 ended March 31, 2017 2016 Incentive units $ 437 $ (77 ) |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
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 894% on a pre-tax loss for the three months ended March 31, 2017. This rate differed from the federal statutory rate of 35% primarily due to the recognition of $3.5 million of excess tax benefits for stock based compensation awards that vested or were exercised in the first quarter of 2017, offset, in part, by state and local taxes, and the effect of nondeductible expenses. The Company’s effective tax rate of 38.0% for the three months ended March 31, 2016 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. As noted in footnote 2 "Significant Accounting Policies", effective January 1, 2017, the Company adopted a new ASU that requires excess tax benefits or deficiencies to be recorded as income tax benefit or expense in the period in which they are realized. 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 March 31, 2017, the Company is subject to U.S. Federal income tax examinations for the tax years 2013 through 2016, and to non-U.S. income tax examinations for the tax years 2007 through 2016. In addition, the Company is subject to state and local income tax examinations in various jurisdictions for the tax years 2007 through 2016. 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 March 31, 2017, the Company had $5.3 million of unrecognized tax benefits, all of which would affect the Company's effective tax rate if recognized. At December 31, 2016, the Company had $5.1 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 | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The following table presents changes in Accumulated other comprehensive (loss) income, net of tax by component for the three months ended March 31, 2017 and 2016 (in thousands): Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2016 $ 3,286 $ (1,039 ) $ 2,247 Other comprehensive income 170 437 607 Amount reclassified from Available-for-sale securities, net of tax (2,956 ) — (2,956 ) Balance March 31, 2017 $ 500 $ (602 ) $ (102 ) Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2015 $ 150 $ 200 $ 350 Other comprehensive income (loss) 68 (133 ) (65 ) Balance March 31, 2016 $ 218 $ 67 $ 285 The following table presents the effects of reclassifications out of Accumulated Other Comprehensive (Loss) Income and into the Consolidated Statements of Operations for the three months ended March 31, 2017 (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 4,767 Investment income and other, net Related income tax expense (1,811 ) Income tax (benefit) expense $ 2,956 Net of tax The reclassification is a result of the Company's sale of its remaining shares of Bats, which was accounted for as an available for sale security prior to its sale. See Footnote 8 "Investments" for additional information on the reclassification. |
Warrants and Stock Repurchases
Warrants and Stock Repurchases | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Warrants and Stock Repurchases | Warrants and Stock Repurchases Warrants As a portion of the consideration in the 2013 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 three months ended March 31, 2017 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, 2016 2,026 2,069 2,087 6,182 Exercised (545 ) (44 ) (44 ) (633 ) Repurchased (359 ) (359 ) (359 ) (1,077 ) Warrants - Outstanding at March 31, 2017 1,122 1,666 1,684 4,472 The Company repurchased, from GA, 1.1 million Warrants for $2.9 million in the first quarter of 2017. During the first quarter of 2016, the Company repurchased 1.5 million Warrants for $1.0 million . See Footnote 8 "Investments" and Footnote 11 "Related Parties" for more information on warrant repurchases from related parties and not under the Company's Board approved program. Stock Repurchases During the first quarter of 2017, the Company repurchased 0.9 million shares of KCG Class A Common Stock for $13.3 million under the Company's Board approved program. As of March 31, 2017, approximately $136.8 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. During the first quarter of 2016, the Company repurchased 1.8 million shares of KCG Class A Common Stock for $20.5 million . |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2017 | |
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 KCG 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 3.8 million and 23.8 million for the three months ended March 31, 2017 and 2016, 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 KCG Class A Common Stock. See Footnote 2 "Significant Accounting Policies" for more information related to a recently adopted ASU affecting the impact of excess tax benefits in calculating diluted EPS. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three months ended March 31, 2017 and 2016 (in thousands, except per share amounts): For the three months ended March 31, 2017 2016 Numerator / Denominator / shares Numerator / net income Denominator / shares Income and shares used in basic calculations $ 3,212 66,306 $ 37,165 88,458 Effect of dilutive stock based awards Restricted awards and warrants 800 992 Stock options and SARs 536 155 Income and shares used in diluted calculations $ 3,212 67,642 $ 37,165 89,605 Basic earnings per common share $ 0.05 $ 0.42 Diluted earnings per common share $ 0.05 $ 0.41 |
Significant Clients
Significant Clients | 3 Months Ended |
Mar. 31, 2017 | |
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 months ended March 31, 2017 and 2016. |
Commitments and Contingent Liab
Commitments and Contingent Liabilities | 3 Months Ended |
Mar. 31, 2017 | |
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 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, 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 decided not to appeal. The Company fully reserved for the monetary penalty in the second quarter of 2016 and anticipates paying the fine later in 2017. 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 March 31, 2017 , the obligations have a weighted-average interest rate of 4.42% 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 March 31, 2017 consist of (in thousands): Minimum Payments Nine months ending December 31, 2017 $ 5,625 Year ending December 31, 2018 7,272 Year ending December 31, 2019 7,272 Year ending December 31, 2020 1,103 Total $ 21,272 The total interest expense related to capital leases for the three months ended March 31, 2017 and 2016 included in Debt interest expense on the Consolidated Statements Operations is as follows (in thousands): For the three months ended March 31, 2017 2016 Interest expense - Capital leases $ 24 $ 24 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 $4.7 million and $6.1 million for the three months ended March 31, 2017 and 2016, 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 March 31, 2017 , 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 Nine months ending December 31, 2017 $ 22,057 $ 4,573 $ 17,484 Year ending December 31, 2018 27,978 5,850 22,128 Year ending December 31, 2019 25,031 5,229 19,802 Year ending December 31, 2020 23,310 4,056 19,254 Year ending December 31, 2021 22,771 4,039 18,732 Thereafter through December 31, 2031 154,234 10,096 144,138 Total $ 275,381 $ 33,843 $ 241,538 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 March 31, 2017 , the Company had provided letters of credit for $10.2 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 were no compensation guarantees at March 31, 2017 or December 31, 2016 that extended beyond the respective year end. 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, 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 $10.1 million . The Company has not recorded any liabilities related to these potential losses as of March 31, 2017 . 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 three months ended March 31, 2017 For the year ended December 31, 2016 Balance as of beginning of period $ 14,251 $ 18,892 Real estate charges incurred — 390 Payments made, net (1,566 ) (3,750 ) Other charges 884 (1,281 ) Balance as of end of period $ 13,569 $ 14,251 |
Financial instruments with Off-
Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and December 31, 2016. 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 on 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 on 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 the Company's financial position (in thousands, except contract amounts): March 31, 2017 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 163 364 $ 240 438 Forward contracts (1) Financial instruments owned, at fair value — — 598 1 Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,594 7,047 2,978 7,326 Swap contracts Receivable from brokers, dealers and clearing organizations — — 195 2 Listed options Financial instruments owned/sold, not yet purchased, at fair value 12,299 75,294 35,835 76,347 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 2,545 4,234 5,678 4,038 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 45,889 23,531 45,697 25,762 Gross derivative assets/liabilities, before netting $ 62,490 $ 91,221 Less: Legally enforceable master netting agreements Exchange traded (3) (49,841 ) (54,593 ) Bi-lateral over-the-counter (4) — (195 ) Net amounts per Consolidated Statement of Financial Condition (5) $ 12,649 $ 36,433 December 31, 2016 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 360 1,285 $ 1,663 6,495 Forward contracts (1) Financial instruments owned, at fair value 30 1 — — Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,451 2,056 1,644 2,944 Swap contracts Receivable from brokers, dealers and clearing organizations 16 1 154 1 Listed options Financial instruments owned/sold, not yet purchased, at fair value 19,100 85,797 12,961 90,063 Forward contracts (2) Accrued expenses and other liabilities — — 1,599 1 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 4,627 8,590 5,541 5,165 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 86,393 31,800 86,100 31,906 Gross derivative assets/liabilities, before netting $ 111,977 $ 109,662 Less: Legally enforceable master netting agreements Exchange traded (3) (92,572 ) (94,948 ) Bi-lateral over-the-counter (4) — (154 ) Net amounts per Consolidated Statement of Financial Condition (5) $ 19,405 $ 14,560 (1) The foreign currency forward contract represents a net investment hedge and is designated as a hedging instrument. (2) The equity forward contract represents a liability to deliver shares of Bats common stock to General Atlantic as described in Footnote 8 "Investments". (3) Exchange traded instruments comprise futures contracts. (4) Bi-lateral over-the-counter instruments comprise swaps and forward contracts. (5) 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 are classified as Level 1 and Level 2 in the fair value hierarchy, respectively. The following table summarizes the gains and losses included in the Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016. Gain (Loss) Recognized Financial Statements For the three months ended March 31, Location 2017 2016 Derivative instruments not designated as hedging instruments: Foreign currency Futures contracts Trading revenues, net $ 2,712 $ 312 Equity Futures contracts Trading revenues, net (7,998 ) 8,922 Swap contracts Trading revenues, net (795 ) 1,886 Listed options Trading revenues, net (24 ) 3,871 Fixed income Futures contracts Trading revenues, net (118 ) 6,833 Commodity Futures contracts Trading revenues, net 3,750 6,966 $ (2,473 ) $ 28,790 Derivative instruments designated as hedging instruments: Foreign exchange - forward contract Accumulated other comprehensive (loss) income $ (389 ) $ (149 ) 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 | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Business Segments | Business Segments As of March 31, 2017 , 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. The Company engages in principal trading in the Market Making segment direct to clients as well as in a supplemental capacity on exchanges, ECNs and ATSs. The Company 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 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. Results for the Company's former retail U.S. options market making business and DMM business are included in Market Making segment up to the date of its sale in 2016. The Global Execution Services segment comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers. The Company earns commissions as an agent on behalf of clients as well as between principals to transactions; in addition, the Company will 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 the Company's investments, principally in strategic trading-related 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 Company's 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, income (loss) 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 (1) Consolidated Total For the three months ended March 31, 2017: Revenues $ 174,656 $ 70,756 $ 9,961 $ 255,373 Pre-tax earnings 18,023 1,994 (20,421 ) (404 ) Total assets 5,255,849 1,001,933 (274,353 ) 5,983,429 For the three months ended March 31, 2016: Revenues $ 258,918 $ 76,394 $ 10,112 $ 345,424 Pre-tax earnings 75,489 6,261 (21,785 ) 59,965 Total assets 4,999,201 1,020,306 176,791 6,196,298 (1) Amounts shown in the Corporate and Other segment include eliminations of income statement and balance sheet items included in the Company's other segments. Included in total assets within Market Making and Corporate and Other at March 31, 2016 is $16.4 million and $8.1 million , respectively, related to Assets of businesses held for sale. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events As noted in Footnote 1, "Organization and Description of Business", on April 20, 2017, the Company announced that it has reached a definitive agreement for Virtu to acquire all outstanding shares of KCG’s Class A Common Stock for $20.00 per share in cash (the “Merger Consideration”). In addition, at the Effective Time, (i) each stock option of the Company that is outstanding and unexercised immediately before the Effective Time will be cancelled in consideration for the right to receive a cash payment equal to the excess, if any, of the Merger Consideration over the exercise price of such stock option; (ii) each stock appreciation right of the Company that is outstanding and unexercised immediately before the Effective Time will be canceled in consideration for the right to receive a cash payment equal to the excess, if any, of the Merger Consideration over the exercise price of such stock appreciation right; (iii) each restricted share unit of the Company will become fully vested (contingent upon the closing of the Merger) and cancelled and converted into the right to receive the Merger Consideration; and (iv) the right of each holder of a warrant of the Company that is outstanding immediately before the Effective Time to receive shares of KCG Class A Common Stock upon exercise of each such warrant will be converted into the right to receive, upon exercise of each such warrant, a cash payment equal to the excess, if any, of the Merger Consideration over the exercise price of such warrant. The transaction is expected to be completed in the third quarter of 2017, subject to the approval by KCG’s and Virtu’s stockholders, customary regulatory approvals and the satisfaction of customary closing conditions. |
Significant Accounting Polici30
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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, 2016. 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. |
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 | 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. 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. |
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 trading-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 accounted for under the equity method or held at cost 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. Specific events and changes that could adversely affect the Company’s assessment of its Goodwill, which is all related to its Market Making reporting unit, include the following factors that are significant inputs into its fair value calculations of its reporting units and drive the Company's revenue and expense assumptions: • the inability to manage trading strategy performance and grow revenues and earnings; • changes in market structure, legislative, regulatory or financial reporting rules, including the increased focus by Congress, federal and state regulators, the self-regulatory organizations and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems, market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and exchange fee structures; • future changes to the Company’s organizational structure and management; • the Company’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by the Company’s customers and potential customers; • the Company’s ability to keep up with technological changes; • the Company’s ability to effectively identify and manage market risk, operational and technology risk, cybersecurity risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; • the effects of increased competition and the Company’s ability to maintain and expand market share; • changes in discount and growth rates used by the Company in its fair value models; and • the Company's ability to manage its costs. 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 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 Repurchases", in connection with the 2013 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 the total cost of its purchases of Warrants as a reduction in Additional paid-in capital |
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 and capitalized issuance costs. |
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, comprising 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 (loss) 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 March 31, 2017 and 2016, the Company recorded gains of $0.2 million and $0.4 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 (loss) 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. In October 2016, the Company invested in another JV with nine other parties. Each party owns 10% of the voting shares and 10% of the equity of this JV, which is building microwave communication networks in the U.S. and Asia, and which is considered to be a VIE. The Company and all of its JV partners each pay monthly fees for the funding of the construction of the microwave communication networks. When completed, this JV may sell excess bandwidth that is not utilized by its joint venture members to third parties. In each of the JVs, 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 JVs and does not consolidate the JVs. The Company records its interest in the JVs under the equity method of accounting and records its investment in the JVs within Investments and its amounts payable for communication services provided by the JVs within Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The Company records its pro-rata share of the JVs earnings or losses within Investment income and other, net and fees related to the use of communication services provided by the JVs within Communications and data processing on the Consolidated Statements of Operations. The Company’s exposure to the obligations of these VIEs is generally limited to its interests in each respective JV, which is the carrying value of the equity investment in each 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 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 and classification on the statement of cash flows. The Company adopted this ASU prospectively as of January 1, 2017. Following the adoption of this ASU: • the Company records all excess tax benefits and tax deficiencies as an income tax benefit or expense in the Consolidated Statements of Operations in the period in which they are realized. Previously such excess tax benefits and deficiencies were recorded within Additional paid-in capital on the Consolidated Statements of Financial Condition, although in certain circumstances tax deficiencies could have been recognized as income tax expense. • excess tax benefits and tax deficiencies are classified in operating activities, specifically within changes in Accrued expenses and other liabilities, in the Consolidated Statements of Cash Flows. Prior to the adoption of this ASU, the Company reported excess tax benefits and tax deficiencies as a financing activity on its Consolidated Statements of Cash Flows. • the Company no longer includes any assumed proceeds of any windfall tax benefits when applying the treasury stock method for computing diluted EPS. This may result in higher diluted shares outstanding for EPS calculations. • the Company elected to continue to estimate its forfeiture rate on grant date. Therefore, a cumulative effect adjustment was not necessary upon adoption of this ASU. 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 has not yet determined its transition approach. Because the guidance does not apply to revenue associated with securities trading activities that are accounted for under other GAAP, the Company does not expect the guidance to have a material impact on its Consolidated Statements of Operations most closely associated with financial instruments, including Trading revenues, net, Commissions and fees, and Interest, net. The Company’s implementation efforts include the identification of revenue within the scope of the guidance and the evaluation of certain revenue contracts. The Company’s evaluation of the impact of the new guidance on its Consolidated Financial Statements is ongoing, and it continues to evaluate the timing of recognition for various revenues, including soft dollar related activity, which may be impacted depending on the features of the client arrangements and the presentation of certain contract costs (whether presented gross or offset against revenues). 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 does not expect the adoption of this ASU to have an impact 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 August 2016, the FASB issued an ASU which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. In November 2016, the FASB issued an ASU which requires that cash segregated for regulatory and other purposes, generally described as restricted cash or restricted cash equivalents, be included in cash and cash equivalents disclosed in the statements of cash flows. The guidance is effective for all reporting periods beginning after December 15, 2017. Early adoption is permitted and must be applied retrospectively to all periods presented within the statement of cash flows. The Company does not expect the adoption of this ASU to have an impact on its Consolidated Financial Statements. In January 2017, the FASB issued an ASU which simplifies the accounting for goodwill impairments. This ASU eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by reducing the goodwill balance by the difference between the carrying value and the reporting unit’s fair value. The impairment charge would be limited to the carrying value of goodwill. This ASU is effective for annual and interim impairment tests for periods beginning after December 15, 2021. Early adoption is allowed for annual and interim impairment tests occurring after January 1, 2017. The Company does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. In January 2017, the FASB issued an ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for reporting periods beginning after December 15, 2017. The Company does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. |
Significant Accounting Polici31
Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 ended March 31, 2017 2016 Interest Income $ 3,978 $ 3,107 Interest Expense (3,157 ) (2,990 ) Interest, net $ 821 $ 117 |
Net Trading Revenue Including Dividend Income and Expense | Trading revenues, net includes dividend income and expense as follows (in thousands): For the three months ended March 31, 2017 2016 Dividend Income $ 10,360 $ 11,921 Dividend Expense $ (9,329 ) $ (9,148 ) |
Schedule of Nonconsolidated VIE | The following table presents the Company’s nonconsolidated VIEs at March 31, 2017 (in thousands): Carrying Amount Maximum Exposure to loss Asset Liability VIEs' assets Equity investment $ 15,543 $ 314 $ 15,543 $ 41,569 The following table presents the Company’s nonconsolidated VIE at December 31, 2016 (in thousands): Carrying Amount Maximum Exposure to loss Asset Liability VIE's assets Equity investment $ 14,822 $ 500 $ 14,822 $ 36,715 |
Assets of Business Held for S32
Assets of Business Held for Sale & Sales of Businesses (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Summary of Assets of Businesses Held for Sale | The assets of businesses held for sale as December 31, 2016 are summarized as follows (in thousands): December 31, Assets: Intangible assets, net of accumulated amortization $ 8,194 Total assets of businesses held for sale $ 8,194 |
Fair Value (Tables)
Fair Value (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,179,211 $ — $ — $ 2,179,211 Corporate debt 91,314 — — 91,314 U.S. government and Non-U.S. government obligations 37,618 — — 37,618 Listed options 12,299 — — 12,299 Total Financial instruments owned, at fair value 2,320,442 — — 2,320,442 Investments (1) 2,379 2,234 — 4,613 Other (2) — 54,142 2,838 56,980 Total assets held at fair value $ 2,322,821 $ 56,376 $ 2,838 $ 2,382,035 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,694,374 $ — $ — $ 1,694,374 Corporate debt 85,926 — — 85,926 U.S. government and Non-U.S. government obligations 91,242 — — 91,242 Listed options 35,835 — — 35,835 Foreign currency forward contracts — 598 — 598 Total liabilities held at fair value $ 1,907,377 $ 598 $ — $ 1,907,975 (1) Investments comprise $2.4 million of Level 1 investments in CME Group and $2.2 million of Level 2 investments primarily related to deferred compensation investments, all of which are included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $54.1 million receivable from Bats related to the sale of KCG Hotspot and a $2.8 million receivable from the sale of an investment, both of which are included within Other Assets on the Consolidated Statements of Financial Condition. Assets and Liabilities Measured at Fair Value on a Recurring Basis December 31, 2016 Level 1 Level 2 Level 3 Total Assets Financial instruments owned, at fair value: Equities $ 2,343,033 $ — $ — $ 2,343,033 Corporate debt 127,237 — — 127,237 U.S. government and Non-U.S. government obligations 50,461 — — 50,461 Listed options 19,100 — — 19,100 Foreign currency forward contracts — 30 — 30 Total Financial instruments owned, at fair value 2,539,831 30 — 2,539,861 Investments (1) 9,198 2,286 — 11,484 Other (2) — 60,538 2,846 63,384 Total assets held at fair value $ 2,549,029 $ 62,854 $ 2,846 $ 2,614,729 Liabilities Financial instruments sold, not yet purchased, at fair value: Equities $ 1,821,957 $ — $ — $ 1,821,957 Listed options 12,961 — — 12,961 U.S. government obligations 87,661 — — 87,661 Corporate debt 123,561 — — 123,561 Total liabilities held at fair value $ 2,046,140 $ — $ — $ 2,046,140 (1) Investments comprise $9.2 million of Level 1 investments in CME Group and Bats and also includes $2.3 million of Level 2 investments primarily related to deferred compensation investments, all of which are included within Investments on the Consolidated Statements of Financial Condition. See Footnote 8 "Investments" for additional information. (2) Other primarily consists of a $60.5 million receivable from Bats related to the sale of KCG Hotspot and a $2.8 million receivable from the sale of an investment, both of which are included in Other assets 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 March 31, 2017 and December 31, 2016 (in thousands): Level 3 Financial Assets as of March 31, 2017 Balance at January 1, 2017 Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at March 31, 2017 Receivable from sold investment $ 2,846 $ — $ (8 ) $ — $ — $ — $ — $ — $ 2,838 Level 3 Financial Assets as of December 31, 2016 Balance at January Realized gains(losses) during period Unrealized gains (losses) during the period Purchases Sales Settlements Issuances Transfers in or (out) of Level 3 Balance at December 31, 2016 Receivable from sold investment $ 5,789 $ — $ 980 $ — $ — $ (3,923 ) $ — $ — $ 2,846 |
Derivative Financial Instrume34
Derivative Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and December 31, 2016. 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 on 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 on 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 the Company's financial position (in thousands, except contract amounts): March 31, 2017 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 163 364 $ 240 438 Forward contracts (1) Financial instruments owned, at fair value — — 598 1 Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,594 7,047 2,978 7,326 Swap contracts Receivable from brokers, dealers and clearing organizations — — 195 2 Listed options Financial instruments owned/sold, not yet purchased, at fair value 12,299 75,294 35,835 76,347 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 2,545 4,234 5,678 4,038 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 45,889 23,531 45,697 25,762 Gross derivative assets/liabilities, before netting $ 62,490 $ 91,221 Less: Legally enforceable master netting agreements Exchange traded (3) (49,841 ) (54,593 ) Bi-lateral over-the-counter (4) — (195 ) Net amounts per Consolidated Statement of Financial Condition (5) $ 12,649 $ 36,433 December 31, 2016 Financial Statements Assets Liabilities Location Fair Value Contracts Fair Value Contracts Foreign currency Futures contracts Receivable from brokers, dealers and clearing organizations $ 360 1,285 $ 1,663 6,495 Forward contracts (1) Financial instruments owned, at fair value 30 1 — — Equity Futures contracts Receivable from brokers, dealers and clearing organizations 1,451 2,056 1,644 2,944 Swap contracts Receivable from brokers, dealers and clearing organizations 16 1 154 1 Listed options Financial instruments owned/sold, not yet purchased, at fair value 19,100 85,797 12,961 90,063 Forward contracts (2) Accrued expenses and other liabilities — — 1,599 1 Fixed income Futures contracts Receivable from brokers, dealers and clearing organizations 4,627 8,590 5,541 5,165 Commodity Futures contracts Receivable from brokers, dealers and clearing organizations 86,393 31,800 86,100 31,906 Gross derivative assets/liabilities, before netting $ 111,977 $ 109,662 Less: Legally enforceable master netting agreements Exchange traded (3) (92,572 ) (94,948 ) Bi-lateral over-the-counter (4) — (154 ) Net amounts per Consolidated Statement of Financial Condition (5) $ 19,405 $ 14,560 (1) The foreign currency forward contract represents a net investment hedge and is designated as a hedging instrument. (2) The equity forward contract represents a liability to deliver shares of Bats common stock to General Atlantic as described in Footnote 8 "Investments". (3) Exchange traded instruments comprise futures contracts. (4) Bi-lateral over-the-counter instruments comprise swaps and forward contracts. (5) 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 months ended March 31, 2017 and 2016. Gain (Loss) Recognized Financial Statements For the three months ended March 31, Location 2017 2016 Derivative instruments not designated as hedging instruments: Foreign currency Futures contracts Trading revenues, net $ 2,712 $ 312 Equity Futures contracts Trading revenues, net (7,998 ) 8,922 Swap contracts Trading revenues, net (795 ) 1,886 Listed options Trading revenues, net (24 ) 3,871 Fixed income Futures contracts Trading revenues, net (118 ) 6,833 Commodity Futures contracts Trading revenues, net 3,750 6,966 $ (2,473 ) $ 28,790 Derivative instruments designated as hedging instruments: Foreign exchange - forward contract Accumulated other comprehensive (loss) income $ (389 ) $ (149 ) |
Collateralized Transactions (Ta
Collateralized Transactions (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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): March 31, December 31, Collateral permitted to be delivered or repledged $ 1,623,886 $ 1,634,979 Collateral that was delivered or repledged 1,577,554 1,550,755 Collateral permitted to be further repledged by the receiving counterparty 151,534 41,730 |
Summary of Assets Pledged | The table below presents information about assets pledged by the Company (in thousands): March 31, December 31, Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge $ 368,736 $ 314,720 Financial instruments owned, at fair value, pledged to counterparties that do not have the right to deliver or repledge 1,204,165 1,291,979 |
Gross Carrying Value of Assets Sold Under Agreements to Repurchase | The table below presents the gross carrying value of Securities loaned, Financial instruments sold under agreements to repurchase and other collateralized financings by class of collateral pledged (in thousands): March 31, 2017 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 459,533 $ 940,000 $ 50,000 U.S. government obligations — 12,584 — Total $ 459,533 $ 952,584 $ 50,000 December 31, 2016 Financial instruments sold under agreements to repurchase Other collateralized financings Asset Class Securities Loaned Equities $ 369,168 $ 989,812 $ 76,176 U.S. government obligations — 12,775 — Corporate debt 3,463 25,188 23,824 Total $ 372,631 $ 1,027,775 $ 100,000 |
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): March 31, 2017 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 $ 1,594,442 $ — $ 1,594,442 $ 1,537,957 $ 6,225 $ 50,260 Receivable from brokers, dealers and clearing organizations (3) 13,735 — 13,735 13,717 2 16 Total assets $ 1,608,177 $ — $ 1,608,177 $ 1,551,674 $ 6,227 $ 50,276 Liabilities Securities loaned $ 459,533 $ — $ 459,533 $ 446,050 $ 6,225 $ 7,258 Financial instruments sold under agreements to repurchase 952,584 — 952,584 952,582 2 — Other collateralized financings 50,000 — 50,000 50,000 — — Total liabilities $ 1,462,117 $ — $ 1,462,117 $ 1,448,632 $ 6,227 $ 7,258 (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, 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 $ 1,688,222 $ — $ 1,688,222 $ 1,623,281 $ 4,581 $ 60,360 Receivable from brokers, dealers and clearing organizations (3) 21,832 — 21,832 21,797 — 35 Total assets $ 1,710,054 $ — $ 1,710,054 $ 1,645,078 $ 4,581 $ 60,395 Liabilities Securities loaned $ 372,631 $ — $ 372,631 $ 358,023 $ 4,581 $ 10,027 Financial instruments sold under agreements to repurchase 1,027,775 — 1,027,775 1,027,775 — — Other collateralized financings 100,000 — 100,000 100,000 — — Total liabilities $ 1,500,406 $ — $ 1,500,406 $ 1,485,798 $ 4,581 $ 10,027 (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): March 31, 2017 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 $ 1,594,442 $ — $ 1,594,442 $ 1,537,957 $ 6,225 $ 50,260 Receivable from brokers, dealers and clearing organizations (3) 13,735 — 13,735 13,717 2 16 Total assets $ 1,608,177 $ — $ 1,608,177 $ 1,551,674 $ 6,227 $ 50,276 Liabilities Securities loaned $ 459,533 $ — $ 459,533 $ 446,050 $ 6,225 $ 7,258 Financial instruments sold under agreements to repurchase 952,584 — 952,584 952,582 2 — Other collateralized financings 50,000 — 50,000 50,000 — — Total liabilities $ 1,462,117 $ — $ 1,462,117 $ 1,448,632 $ 6,227 $ 7,258 (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, 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 $ 1,688,222 $ — $ 1,688,222 $ 1,623,281 $ 4,581 $ 60,360 Receivable from brokers, dealers and clearing organizations (3) 21,832 — 21,832 21,797 — 35 Total assets $ 1,710,054 $ — $ 1,710,054 $ 1,645,078 $ 4,581 $ 60,395 Liabilities Securities loaned $ 372,631 $ — $ 372,631 $ 358,023 $ 4,581 $ 10,027 Financial instruments sold under agreements to repurchase 1,027,775 — 1,027,775 1,027,775 — — Other collateralized financings 100,000 — 100,000 100,000 — — Total liabilities $ 1,500,406 $ — $ 1,500,406 $ 1,485,798 $ 4,581 $ 10,027 (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, Financial instruments sold under agreements to repurchase and other collateralized financings are provided in the table below (in thousands): As of March 31, 2017 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 459,533 $ — $ — $ — $ 459,533 Financial instruments sold under agreements to repurchase 12,584 335,000 365,000 240,000 952,584 Other collateralized financings — 50,000 — — 50,000 Total $ 472,117 $ 385,000 $ 365,000 $ 240,000 $ 1,462,117 As of December 31, 2016 Overnight 0 - 30 days 31 - 60 days 61 - 90 days Total Securities loaned $ 372,631 $ — $ — $ — $ 372,631 Other — 100,000 — — 100,000 Financial instruments sold under agreements to repurchase 12,775 410,000 465,000 140,000 1,027,775 Total $ 385,406 $ 510,000 $ 465,000 $ 140,000 $ 1,500,406 |
Receivable from and Payable t36
Receivable from and Payable to Brokers, Dealers and Clearing Organizations (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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): March 31, December 31, Receivable: Clearing organizations and other $ 575,544 $ 619,425 Financial instruments purchased under agreement to resell 13,735 21,832 Securities failed to deliver 212,399 191,528 Total receivable $ 801,678 $ 832,785 Payable: Clearing organizations and other $ 433,164 $ 458,341 Securities failed to receive 62,089 60,559 Total payable $ 495,253 $ 518,900 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Investments [Abstract] | |
Summary of Investments | Investments primarily comprise strategic investments and deferred compensation investments. Investments consist of the following (in thousands): March 31, December 31, Strategic investments: Investments accounted for under the equity method $ 17,313 $ 16,707 Investments held at fair value 2,379 9,198 Investments held at cost, less impairment 2,790 2,789 Total strategic investments 22,482 28,694 Other investments 2,234 2,285 Total investments $ 24,716 $ 30,979 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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): March 31, 2017 December 31, 2016 Market Making Technology $ 38,759 $ 39,536 Trading rights 7,028 7,027 Total 45,787 46,563 Global Execution Services Technology 20,033 20,694 Customer relationships 7,583 7,944 Trade names 625 650 Total 28,241 29,288 Corporate and Other Technology (1) 16,418 8,084 Total $ 90,446 $ 83,935 (1) Excluded from the December 31, 2016 balance is $8.2 million of intangibles related to a business which met the requirements to be considered held for sale. As noted above and in Footnote 3 "Assets of Business Held for Sale & Sales of Businesses", such amounts were included in Assets of business held for sale at December 31, 2016, however, such intangibles were no longer considered to be held for sale at March 31, 2017 and are therefore included above at March 31, 2017. March 31, December 31, Technology (1) Gross carrying amount $ 183,567 $ 157,188 Accumulated amortization (108,347 ) (88,874 ) Net carrying amount 75,220 68,314 Trading rights (2) Gross carrying amount 7,509 7,509 Accumulated amortization (491 ) (482 ) Net carrying amount 7,018 7,027 Customer relationships (3) Gross carrying amount 13,000 13,000 Accumulated amortization (5,417 ) (5,056 ) Net carrying amount 7,583 7,944 Trade names (4) Gross carrying amount 1,000 1,000 Accumulated amortization (375 ) (350 ) Net carrying amount 625 650 Total Gross carrying amount 205,076 178,697 Accumulated amortization (114,630 ) (94,762 ) Net carrying amount $ 90,446 $ 83,935 (1) The weighted average remaining life for technology, including capitalized internal use software, was approximately two years as of both March 31, 2017 and December 31, 2016 . Excluded from the December 31, 2016 balance is $8.2 million of technology assets related to Assets of businesses held for sale. As noted above and in Footnote 3 "Assets of Business Held for Sale & Sales of Businesses", these assets are included in Assets of businesses held for sale at December 31, 2016. (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 3 and 4 years as of March 31, 2017 and December 31, 2016 , respectively. As of March 31, 2017 and December 31, 2016, $6.9 million of trading rights had indefinite useful lives. (3) Customer relationships relate to KCG BondPoint. The weighted average remaining life was approximately 5 and 6 years as of March 31, 2017 and December 31, 2016 , respectively. Lives may be reduced depending upon actual retention rates. (4) Trade names relate to KCG BondPoint. The weighted average remaining life was approximately 6 and 7 years as of March 31, 2017 and December 31, 2016 , respectively. |
Summary of Amortization Expense | The following table summarizes the Company’s amortization expense relating to Intangible assets (in thousands): For the three months ended March 31, 2017 2016 Amortization expense $ 10,109 $ 7,559 |
Summary of Estimated Amortization Expense for Future Periods | As of March 31, 2017 , the following table summarizes the Company’s estimated amortization expense for future periods (in thousands): Amortization expense For the nine months ended December 31, 2017 $ 33,654 For the year ended December 31, 2018 32,749 For the year ended December 31, 2019 12,708 For the year ended December 31, 2020 2,009 For the year ended December 31, 2021 1,544 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Summary of Long-term Debt | The carrying value and fair value of the Company's debt is as follows (in thousands): March 31, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value 6.875% Senior Secured Notes, $465.0 million par $ 462,141 $ 480,113 $ 461,899 $ 466,628 Debt issuance costs (6,958 ) — (7,546 ) — Total $ 455,183 $ 480,113 $ 454,353 $ 466,628 |
Debt Instrument Redemption | 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 % |
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 ended March 31, 2017 2016 Interest expense $ 8,234 $ 8,417 Amortization of debt issuance costs (1) 795 821 Commitment fee (2) 354 359 Accelerated amortization of debt issuance costs (3) — 738 Accelerated interest expense on repurchase of debt (3) — 298 Total $ 9,383 $ 10,633 (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 accelerated a prorated 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 three months ended March 31, 2016. |
Related Parties (Tables)
Related Parties (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 ended March 31, Statements of Operations 2017 2016 Revenues Commissions and fees $ 1,868 $ 6,663 Trading revenues, net 791 477 Interest, net 119 103 Total revenues from related parties $ 2,778 $ 7,243 Expenses Execution and clearance fees (1) $ 313 $ 880 Communications and data processing 5,610 3,206 Payment for order flow — 5 Collateralized financing interest 86 78 Other expense — 5 Total expenses incurred with respect to related parties $ 6,009 $ 4,174 (1) Represents net volume based fees paid or received by KCG for taking or providing liquidity to related trading venues. Volume based fees will vary period to period based on usage. Statements of Financial Condition March 31, December 31, Assets Securities borrowed $ 17,754 $ 5,293 Receivable from brokers, dealers and clearing organizations 2,134 2,106 Other assets 16 62,906 Liabilities Securities loaned $ 2,063 $ 2,594 Payable to brokers, dealers and clearing organizations 45 188 Accrued expenses and other liabilities 122 3,708 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 ended March 31, 2017 2016 Stock award compensation expense $ 2,438 $ 17,053 Income tax benefit 926 6,480 The following is a summary of the changes in the incentive units for the three months ended March 31, 2017 (units in thousands): Vested Incentive units at December 31, 2016 16 Issued — Vested (1 ) Exercised — Canceled — Incentive units at March 31, 2017 15 |
Summary of Restricted Awards Activity | The following table summarizes restricted awards activity for the three months ended March 31, 2017 (awards in thousands): Restricted Stock Units Number of Units Weighted- Average Grant date Fair Value Outstanding at December 31, 2016 5,563 $ 11.25 Granted 800 14.27 Vested (2,634 ) 11.19 Forfeited (72 ) 12.10 Outstanding at March 31, 2017 3,657 $ 11.93 |
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) expense, which is recorded in Income tax expense on the Consolidated Statements of Operations are as follows (in thousands): For the three months ended March 31, 2017 2016 Stock option and SAR compensation expense $ 122 $ 134 Income tax benefit 46 51 |
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 three months ended March 31, 2017 (awards in thousands): Number of Stock Awards Weighted- Average Exercise Price Aggregate Intrinsic Value Weighted- Average Remaining Life (years) Outstanding at December 31, 2016 (1) 6,298 $ 18.88 Granted — — Exercised (337 ) 8.24 Forfeited or expired (94 ) 53.56 Outstanding at March 31, 2017 (1) 5,867 $ 19.03 $ 14,269 2.23 Exercisable at March 31, 2017 4,492 $ 17.75 $ 14,269 1.69 Available for future grants at March 31, 2017 (2) 13,630 (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 ended March 31, 2017 2016 Incentive units $ 437 $ (77 ) |
Accumulated Other Comprehensi42
Accumulated Other Comprehensive Income (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | The following table presents changes in Accumulated other comprehensive (loss) income, net of tax by component for the three months ended March 31, 2017 and 2016 (in thousands): Unrealized Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2016 $ 3,286 $ (1,039 ) $ 2,247 Other comprehensive income 170 437 607 Amount reclassified from Available-for-sale securities, net of tax (2,956 ) — (2,956 ) Balance March 31, 2017 $ 500 $ (602 ) $ (102 ) Unrealized Gains on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance, December 31, 2015 $ 150 $ 200 $ 350 Other comprehensive income (loss) 68 (133 ) (65 ) Balance March 31, 2016 $ 218 $ 67 $ 285 |
Reclassification out of Accumulated Other Comprehensive Income | The following table presents the effects of reclassifications out of Accumulated Other Comprehensive (Loss) Income and into the Consolidated Statements of Operations for the three months ended March 31, 2017 (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 4,767 Investment income and other, net Related income tax expense (1,811 ) Income tax (benefit) expense $ 2,956 Net of tax |
Warrants and Stock Repurchases
Warrants and Stock Repurchases (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Adjusted Exercise Price and Activity of Warrants | The adjusted exercise price for each class of Warrants and the activity for the three months ended March 31, 2017 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, 2016 2,026 2,069 2,087 6,182 Exercised (545 ) (44 ) (44 ) (633 ) Repurchased (359 ) (359 ) (359 ) (1,077 ) Warrants - Outstanding at March 31, 2017 1,122 1,666 1,684 4,472 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 months ended March 31, 2017 and 2016 (in thousands, except per share amounts): For the three months ended March 31, 2017 2016 Numerator / Denominator / shares Numerator / net income Denominator / shares Income and shares used in basic calculations $ 3,212 66,306 $ 37,165 88,458 Effect of dilutive stock based awards Restricted awards and warrants 800 992 Stock options and SARs 536 155 Income and shares used in diluted calculations $ 3,212 67,642 $ 37,165 89,605 Basic earnings per common share $ 0.05 $ 0.42 Diluted earnings per common share $ 0.05 $ 0.41 |
Commitments and Contingent Li45
Commitments and Contingent Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Payments Under Capital Leases | The future minimum payments including interest under the capitalized leases at March 31, 2017 consist of (in thousands): Minimum Payments Nine months ending December 31, 2017 $ 5,625 Year ending December 31, 2018 7,272 Year ending December 31, 2019 7,272 Year ending December 31, 2020 1,103 Total $ 21,272 |
Schedule of Interest Expense, Capital Leases | The total interest expense related to capital leases for the three months ended March 31, 2017 and 2016 included in Debt interest expense on the Consolidated Statements Operations is as follows (in thousands): For the three months ended March 31, 2017 2016 Interest expense - Capital leases $ 24 $ 24 |
Schedule of Future Minimum Rental Commitments for Operating Leases | As of March 31, 2017 , 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 Nine months ending December 31, 2017 $ 22,057 $ 4,573 $ 17,484 Year ending December 31, 2018 27,978 5,850 22,128 Year ending December 31, 2019 25,031 5,229 19,802 Year ending December 31, 2020 23,310 4,056 19,254 Year ending December 31, 2021 22,771 4,039 18,732 Thereafter through December 31, 2031 154,234 10,096 144,138 Total $ 275,381 $ 33,843 $ 241,538 |
Activity in Liability Account Related to Office Space Consolidation | 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 three months ended March 31, 2017 For the year ended December 31, 2016 Balance as of beginning of period $ 14,251 $ 18,892 Real estate charges incurred — 390 Payments made, net (1,566 ) (3,750 ) Other charges 884 (1,281 ) Balance as of end of period $ 13,569 $ 14,251 |
Business Segments (Tables)
Business Segments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Revenues, Pre-tax Earnings and Total Assets by Segment | The Company’s revenues, income (loss) 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 (1) Consolidated Total For the three months ended March 31, 2017: Revenues $ 174,656 $ 70,756 $ 9,961 $ 255,373 Pre-tax earnings 18,023 1,994 (20,421 ) (404 ) Total assets 5,255,849 1,001,933 (274,353 ) 5,983,429 For the three months ended March 31, 2016: Revenues $ 258,918 $ 76,394 $ 10,112 $ 345,424 Pre-tax earnings 75,489 6,261 (21,785 ) 59,965 Total assets 4,999,201 1,020,306 176,791 6,196,298 (1) Amounts shown in the Corporate and Other segment include eliminations of income statement and balance sheet items included in the Company's other segments. |
Organization and Description 47
Organization and Description of the Business (Details) - Agreement and Plan of Merger with Virtu Financial, Inc. - Subsequent Event | Apr. 20, 2017$ / shares |
Class of Stock [Line Items] | |
Cash exercise price of right (in usd per share) | $ 20 |
Common Class A | |
Class of Stock [Line Items] | |
Par value per share (in usd per share) | $ 0.01 |
Significant Accounting Polici48
Significant Accounting Policies - Additional Information (Details) $ in Millions | 1 Months Ended | 3 Months Ended | |||
Oct. 31, 2016investee | Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016 | Mar. 10, 2015 | |
JV | |||||
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract] | |||||
Ownership percentage | 10.00% | 50.00% | |||
VIE | |||||
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract] | |||||
Ownership percentage | 10.00% | 50.00% | |||
Number of other parties | investee | 9 | ||||
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 | 6 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 | $ | $ 0.2 | $ 0.4 | |||
Senior Secured Notes | 6.875% Senior Secured Notes | |||||
Repurchases of debt | |||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | |
Software | |||||
Goodwill and intangible assets | |||||
Amortization period | 3 years |
Significant Accounting Polici49
Significant Accounting Policies - Schedule of Interest Income and Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accounting Policies [Abstract] | ||
Interest Income | $ 3,978 | $ 3,107 |
Interest Expense | (3,157) | (2,990) |
Interest, net | $ 821 | $ 117 |
Significant Accounting Polici50
Significant Accounting Policies - Net Trading Revenue Including Dividend Income and Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accounting Policies [Abstract] | ||
Dividend Income | $ 10,360 | $ 11,921 |
Dividend Expense | $ (9,329) | $ (9,148) |
Significant Accounting Polici51
Significant Accounting Policies - Nonconsolidated VIEs (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 |
Variable Interest Entity [Line Items] | |||
Carrying Amount, Asset | $ 15,543 | $ 14,822 | |
Carrying Amount, Liability | 314 | 500 | |
Maximum Exposure to loss | 15,543 | 14,822 | |
VIEs' assets | 5,983,429 | 6,261,287 | $ 6,196,298 |
VIE | |||
Variable Interest Entity [Line Items] | |||
VIEs' assets | $ 41,569 | $ 36,715 |
Assets of Business Held for S52
Assets of Business Held for Sale & Sales of Businesses - Additional Information (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2016 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Intangible assets, net of accumulated amortization | $ 8,200 | ||||||
Gain from sale of assets to third party | $ 4,834 | $ 2,798 | |||||
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 | ||||||
KCG Hotspot | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Sale period | 3 years | ||||||
Annual payments for share in tax benefits | $ 6,500 | $ 6,600 | |||||
KCG Hotspot | Investment Income and Other, Net | Retail Options Market Making Business | Disposal Group, Disposed of by Sale | |||||||
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 | Other Assets | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Receivables from sale of investment | $ 54,100 | 54,100 | |||||
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 | $ 56,800 |
Assets of Business Held for S53
Assets of Business Held for Sale & Sales of Businesses - Assets of Businesses Held for Sale (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Assets: | |
Intangible assets, net of accumulated amortization | $ 8,200 |
Total assets of businesses held for sale | 8,200 |
Disposal Group, Held-for-sale | |
Assets: | |
Intangible assets, net of accumulated amortization | 8,194 |
Total assets of businesses held for sale | $ 8,194 |
Fair Value - Additional Informa
Fair Value - Additional Information (Details) ₨ in Millions | Mar. 31, 2017INR (₨) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
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 | 11,300,000 | |
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 | $ 4,600,000 |
Fair Value - Financial Assets a
Fair Value - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Assets | ||
Total Financial instruments owned, at fair value | $ 2,320,442 | $ 2,539,861 |
Total assets held at fair value | 2,382,035 | 2,614,729 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 1,907,975 | 2,046,140 |
Total liabilities held at fair value | 1,907,975 | 2,046,140 |
Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 2,320,442 | 2,539,831 |
Total assets held at fair value | 2,322,821 | 2,549,029 |
Liabilities | ||
Total liabilities held at fair value | 1,907,377 | 2,046,140 |
Level 2 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 30 |
Total assets held at fair value | 56,376 | 62,854 |
Liabilities | ||
Total liabilities held at fair value | 598 | 0 |
Investments | 2,200 | 2,300 |
Level 3 | ||
Assets | ||
Total Financial instruments owned, at fair value | 0 | 0 |
Total assets held at fair value | 2,838 | 2,846 |
Liabilities | ||
Total liabilities held at fair value | 0 | 0 |
Equities | ||
Assets | ||
Total Financial instruments owned, at fair value | 2,179,211 | 2,343,033 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 1,694,374 | 1,821,957 |
Equities | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 2,179,211 | 2,343,033 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 1,694,374 | 1,821,957 |
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 | 91,314 | 127,237 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 85,926 | 123,561 |
Corporate debt | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 91,314 | 127,237 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 85,926 | 123,561 |
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 | |
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 | 37,618 | 50,461 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 91,242 | 87,661 |
U.S. government and Non-U.S. government obligations | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 37,618 | 50,461 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 91,242 | 87,661 |
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 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 0 | 0 |
Listed options | ||
Assets | ||
Total Financial instruments owned, at fair value | 12,299 | 19,100 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 35,835 | 12,961 |
Listed options | Level 1 | ||
Assets | ||
Total Financial instruments owned, at fair value | 12,299 | 19,100 |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 35,835 | 12,961 |
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 | 30 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 598 | |
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 | 30 | |
Liabilities | ||
Financial instruments sold, not yet purchased, at fair value | 598 | |
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 | |
Investments | ||
Assets | ||
Total assets held at fair value | 4,613 | 11,484 |
Investments | Level 1 | ||
Assets | ||
Total assets held at fair value | 2,379 | 9,198 |
Liabilities | ||
Investments | 2,400 | |
Investments | Level 2 | ||
Assets | ||
Total assets held at fair value | 2,234 | 2,286 |
Investments | Level 3 | ||
Assets | ||
Total assets held at fair value | 0 | 0 |
CME Group and BATS | Level 1 | ||
Liabilities | ||
Investments | 9,200 | |
Other | ||
Assets | ||
Total assets held at fair value | 56,980 | 63,384 |
Other | Other Assets and Investments | ||
Assets | ||
Total assets held at fair value | 2,800 | 2,800 |
Other | KCG Hotspot | Other Assets and Investments | ||
Liabilities | ||
Receivable from BATS | 54,100 | 60,500 |
Other | Level 1 | ||
Assets | ||
Total assets held at fair value | 0 | 0 |
Other | Level 2 | ||
Assets | ||
Total assets held at fair value | 54,142 | 60,538 |
Other | Level 3 | ||
Assets | ||
Total assets held at fair value | $ 2,838 | $ 2,846 |
Fair Value - Level 3 Financial
Fair Value - Level 3 Financial Assets (Details) - Receivable from sold investment - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 2,846 | $ 5,789 |
Realized gains(losses) during period | 0 | 0 |
Unrealized gains (losses) during the period | (8) | 980 |
Purchases | 0 | 0 |
Sales | 0 | 0 |
Settlements | 0 | (3,923) |
Issuances | 0 | 0 |
Transfers in or (out) of Level 3 | 0 | 0 |
Balance at end of period | $ 2,838 | $ 2,846 |
Derivative Financial Instrume57
Derivative Financial Instruments - Fair Value of Derivative Instruments (Details) $ in Thousands | Mar. 31, 2017USD ($)contract | Dec. 31, 2016USD ($)contract |
Assets | ||
Fair Value | $ 62,490 | $ 111,977 |
Net amounts per Consolidated Statement of Financial Condition | 12,649 | 19,405 |
Liabilities | ||
Fair Value | 91,221 | 109,662 |
Net amounts per Consolidated Statement of Financial Condition | 36,433 | 14,560 |
Foreign currency, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 163 | $ 360 |
Contracts | contract | 364 | 1,285 |
Liabilities | ||
Fair Value | $ 240 | $ 1,663 |
Contracts | contract | 438 | 6,495 |
Foreign currency, Forward contracts | Financial instruments owned, at fair value | ||
Assets | ||
Fair Value | $ 0 | $ 30 |
Contracts | contract | 0 | 1 |
Liabilities | ||
Fair Value | $ 598 | $ 0 |
Contracts | contract | 1 | 0 |
Equity, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 1,594 | $ 1,451 |
Contracts | contract | 7,047 | 2,056 |
Liabilities | ||
Fair Value | $ 2,978 | $ 1,644 |
Contracts | contract | 7,326 | 2,944 |
Equity, Swap contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 0 | $ 16 |
Contracts | contract | 0 | 1 |
Liabilities | ||
Fair Value | $ 195 | $ 154 |
Contracts | contract | 2 | 1 |
Equity, Listed options | Financial instruments owned/sold, not yet purchased, at fair value | ||
Assets | ||
Fair Value | $ 12,299 | $ 19,100 |
Contracts | contract | 75,294 | 85,797 |
Liabilities | ||
Fair Value | $ 35,835 | $ 12,961 |
Contracts | contract | 76,347 | 90,063 |
Equity, Forward contracts | Accrued expenses and other liabilities | ||
Assets | ||
Fair Value | $ 0 | |
Contracts | contract | 0 | |
Liabilities | ||
Fair Value | $ 1,599 | |
Contracts | contract | 1 | |
Fixed income, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 2,545 | $ 4,627 |
Contracts | contract | 4,234 | 8,590 |
Liabilities | ||
Fair Value | $ 5,678 | $ 5,541 |
Contracts | contract | 4,038 | 5,165 |
Commodity, Futures contracts | Receivable from brokers, dealers and clearing organizations | ||
Assets | ||
Fair Value | $ 45,889 | $ 86,393 |
Contracts | contract | 23,531 | 31,800 |
Liabilities | ||
Fair Value | $ 45,697 | $ 86,100 |
Contracts | contract | 25,762 | 31,906 |
Futures contracts and listed options | Exchange traded | ||
Assets | ||
Less: Legally enforceable master netting agreements | $ (49,841) | $ (92,572) |
Liabilities | ||
Less: Legally enforceable master netting agreements | (54,593) | (94,948) |
Swaps | Bi-lateral over-the-counter | ||
Assets | ||
Less: Legally enforceable master netting agreements | 0 | 0 |
Liabilities | ||
Less: Legally enforceable master netting agreements | $ (195) | $ (154) |
Derivative Financial Instrume58
Derivative Financial Instruments - Gain (Loss) Recognized (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Derivative instruments not designated as hedging instruments | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | $ (2,473) | $ 28,790 |
Derivative instruments not designated as hedging instruments | Foreign currency, Futures contracts | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | 2,712 | 312 |
Derivative instruments not designated as hedging instruments | Equity, Futures contracts | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | (7,998) | 8,922 |
Derivative instruments not designated as hedging instruments | Equity, Swap contracts | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | (795) | 1,886 |
Derivative instruments not designated as hedging instruments | Equity, Listed options | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | (24) | 3,871 |
Derivative instruments not designated as hedging instruments | Fixed income, Futures contracts | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | (118) | 6,833 |
Derivative instruments not designated as hedging instruments | Commodity, Futures contracts | Trading revenues, net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | 3,750 | 6,966 |
Derivative instruments designated as hedging instruments | Foreign currency, Forward contracts | Accumulated other comprehensive (loss) income | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized | $ (389) | $ (149) |
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 | Mar. 31, 2017 | Dec. 31, 2016 |
Collateralized Agreements [Abstract] | ||
Collateral permitted to be delivered or repledged | $ 1,623,886 | $ 1,634,979 |
Collateral that was delivered or repledged | 1,577,554 | 1,550,755 |
Collateral permitted to be further repledged by the receiving counterparty | $ 151,534 | $ 41,730 |
Collateralized Transactions - A
Collateralized Transactions - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2017 | |
Collateralized Agreements [Abstract] | |
Repurchase agreements and other secured financings, maturity (years) | 1 year |
Collateralized Transactions -61
Collateralized Transactions - Assets Pledged (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Repurchase Agreement Counterparty [Line Items] | ||
Financial instruments owned, at fair value, pledged to counterparties that have the right to deliver or repledge | $ 1,623,886 | $ 1,634,979 |
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 | 368,736 | 314,720 |
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 | $ 1,204,165 | $ 1,291,979 |
Collateralized Transactions -62
Collateralized Transactions - Agreements to Repurchase (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | $ 459,533 | $ 372,631 |
Financial instruments sold under agreements to repurchase | 952,584 | 1,027,775 |
Equities | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 459,533 | 369,168 |
Financial instruments sold under agreements to repurchase | 940,000 | 989,812 |
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 | 12,584 | 12,775 |
Corporate debt | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 3,463 | |
Financial instruments sold under agreements to repurchase | 25,188 | |
Other collateralized financings | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 50,000 | 100,000 |
Other collateralized financings | Equities | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Securities Loaned | 50,000 | 76,176 |
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 | $ 23,824 |
Collateralized Transactions - G
Collateralized Transactions - Gross Amounts Offset (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Assets, Securities Borrowed | ||
Gross Amounts Recognized | $ 1,594,442 | $ 1,688,222 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 1,594,442 | 1,688,222 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,537,957 | 1,623,281 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 6,225 | 4,581 |
Net Amount | 50,260 | 60,360 |
Assets, Receivable from Brokers, Dealers and Clearing Organizations | ||
Gross Amounts Recognized | 13,735 | 21,832 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 13,735 | 21,832 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 13,717 | 21,797 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 2 | 0 |
Net Amount | 16 | 35 |
Total assets | ||
Gross Amounts Recognized | 1,608,177 | 1,710,054 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 1,608,177 | 1,710,054 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,551,674 | 1,645,078 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 6,227 | 4,581 |
Net Amount | 50,276 | 60,395 |
Liabilities, Securities Loaned | ||
Gross Amounts Recognized | 459,533 | 372,631 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 459,533 | 372,631 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 446,050 | 358,023 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 6,225 | 4,581 |
Net Amount | 7,258 | 10,027 |
Liabilities, Financial Instruments Sold Under Agreements to Repurchase | ||
Gross Amounts Recognized | 952,584 | 1,027,775 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 952,584 | 1,027,775 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 952,582 | 1,027,775 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 2 | 0 |
Net Amount | 0 | 0 |
Total liabilities | ||
Gross Amounts Recognized | 1,462,117 | 1,500,406 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 1,462,117 | 1,500,406 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 1,448,632 | 1,485,798 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 6,227 | 4,581 |
Net Amount | 7,258 | 10,027 |
Other collateralized financings | ||
Liabilities, Securities Loaned | ||
Gross Amounts Recognized | 50,000 | 100,000 |
Gross Amounts Offset in the Statements of Financial Condition | 0 | 0 |
Net Amounts Presented in the Statements of Financial Condition | 50,000 | 100,000 |
Gross Amounts Not Offset in the Statement of Financial Condition, Available Collateral | 50,000 | 100,000 |
Gross Amounts Not Offset in the Statement of Financial Condition, Counterparty Netting | 0 | 0 |
Net Amount | $ 0 | $ 0 |
Collateralized Transactions - M
Collateralized Transactions - Maturities Schedule (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | $ 1,462,117 | $ 1,500,406 |
Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 472,117 | 385,406 |
0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 385,000 | 510,000 |
31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 365,000 | 465,000 |
61 - 90 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 240,000 | 140,000 |
Securities loaned | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 459,533 | 372,631 |
Securities loaned | Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 459,533 | 372,631 |
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 |
Financial instruments sold under agreements to repurchase | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 952,584 | 1,027,775 |
Financial instruments sold under agreements to repurchase | Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 12,584 | 12,775 |
Financial instruments sold under agreements to repurchase | 0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 335,000 | 410,000 |
Financial instruments sold under agreements to repurchase | 31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 365,000 | 465,000 |
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 | 140,000 |
Other collateralized financings | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 50,000 | 100,000 |
Other collateralized financings | Overnight | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | 0 |
Other collateralized financings | 0 - 30 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 50,000 | 100,000 |
Other collateralized financings | 31 - 60 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | 0 | 0 |
Other collateralized financings | 61 - 90 days | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Assets sold under agreements to repurchase | $ 0 | $ 0 |
Receivable from and Payable t65
Receivable from and Payable to Brokers, Dealers and Clearing Organizations (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Receivable: | ||
Clearing organizations and other | $ 575,544 | $ 619,425 |
Financial instruments purchased under agreement to resell | 13,735 | 21,832 |
Securities failed to deliver | 212,399 | 191,528 |
Total receivable | 801,678 | 832,785 |
Payable: | ||
Clearing organizations and other | 433,164 | 458,341 |
Securities failed to receive | 62,089 | 60,559 |
Total payable | $ 495,253 | $ 518,900 |
Investments - Components of Inv
Investments - Components of Investments (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Strategic investments: | ||
Investments accounted for under the equity method | $ 17,313 | $ 16,707 |
Investments held at fair value | 2,379 | 9,198 |
Investments held at cost, less impairment | 2,790 | 2,789 |
Total strategic investments | 22,482 | 28,694 |
Other investments | 2,234 | 2,285 |
Total investments | $ 24,716 | $ 30,979 |
Investments - Additional Inform
Investments - Additional Information (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | ||||
Dec. 31, 2016 | Nov. 30, 2016 | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 10, 2015 | |
Schedule of Equity Method Investments [Line Items] | ||||||
Dividend income | $ 10,360 | $ 11,921 | ||||
Warrants received (in shares) | 6,182,000 | 4,472,000 | 6,182,000 | |||
Investments held at fair value | $ 9,198 | $ 2,379 | $ 9,198 | |||
Investment income and other, net | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Income from equity method investments | 48 | 4,800 | ||||
Dividend income | $ 2,300 | |||||
BATS | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Number of shares sold | 13,000,000 | |||||
Remaining shares owned | 206,000 | 206,000 | ||||
Ownership percentage | 0.50% | |||||
Investments held at fair value | $ 6,900 | $ 6,900 | ||||
Pre-tax gain from sale of investment | $ 4,800 | |||||
Open Market Transactions | BATS | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Number of shares sold | 2,000,000 | |||||
Block Sale | BATS | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Number of shares sold | 2,200,000 | |||||
Swap Transaction | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Warrants received (in shares) | 8,100,000 | |||||
Warrants retained (in shares) | 1,100,000 | |||||
Portion of transaction costs (in shares) | 46,000 | |||||
Swap Transaction | BATS | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Number of shares exchanged in transaction | 8,900,000 | |||||
Number of shares retained in transaction | 94,000 | 94,000 | ||||
Receivable included in other assets | $ 2,900 | $ 2,900 | ||||
Liability included in accrued expenses and other liabilities | $ 2,900 | $ 2,900 | ||||
Fair value of portion of transaction costs | $ 1,400 | |||||
Number of shares treated as derivatives | 48,000 | 48,000 | ||||
General Atlantic | Common Class A | Swap Transaction | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Number of shares exchanged in transaction | 18,700,000 | |||||
Senior Secured Notes | 6.875% Senior Secured Notes | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | |
Jefferies LLC | Swap Transaction | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Payments of stock issuance costs | $ 2,900 |
Goodwill and Intangible Asset68
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||
Assets held for sale | $ 8.2 | |
Weighted average useful life | 2 years | 2 years |
Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization period | 1 year | |
Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization period | 6 years | |
Market Making | ||
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 16.4 | $ 16.4 |
Goodwill and Intangible Asset69
Goodwill and Intangible Assets - Finite-Lived Intangible Assets, Net of Accumulated Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 205,076 | $ 178,697 |
Accumulated amortization | (114,630) | (94,762) |
Net carrying amount | 90,446 | 83,935 |
Held for sale, intangibles | 8,200 | |
Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 183,567 | 157,188 |
Accumulated amortization | (108,347) | (88,874) |
Net carrying amount | $ 75,220 | 68,314 |
Held for sale, intangibles | $ 8,200 | |
Amortization period | 2 years | 2 years |
Trading rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 7,509 | $ 7,509 |
Accumulated amortization | (491) | (482) |
Net carrying amount | $ 7,018 | $ 7,027 |
Amortization period | 3 years | 4 years |
Indefinite-lived intangible assets | $ 6,900 | |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 13,000 | $ 13,000 |
Accumulated amortization | (5,417) | (5,056) |
Net carrying amount | $ 7,583 | $ 7,944 |
Amortization period | 5 years | 6 years |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 1,000 | $ 1,000 |
Accumulated amortization | (375) | (350) |
Net carrying amount | $ 625 | $ 650 |
Amortization period | 6 years | 7 years |
Market Making | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | $ 45,787 | $ 46,563 |
Market Making | Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 38,759 | 39,536 |
Market Making | Trading rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 7,028 | 7,027 |
Global Execution Services | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 28,241 | 29,288 |
Global Execution Services | Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 20,033 | 20,694 |
Global Execution Services | Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 7,583 | 7,944 |
Global Execution Services | Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | 625 | 650 |
Corporate and Other | Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Net carrying amount | $ 16,418 | $ 8,084 |
Goodwill and Intangible Asset70
Goodwill and Intangible Assets - Summary of Amortization Expense Relating to Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 10,109 | $ 7,559 |
Goodwill and Intangible Asset71
Goodwill and Intangible Assets - Summary of Estimated Amortization Expense for Future Years (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Amortization expense | |
For the nine months ended December 31, 2017 | $ 33,654 |
For the year ended December 31, 2018 | 32,749 |
For the year ended December 31, 2019 | 12,708 |
For the year ended December 31, 2020 | 2,009 |
For the year ended December 31, 2021 | $ 1,544 |
Debt - Summary of Long-Term Deb
Debt - Summary of Long-Term Debt (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | 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% |
Aggregate principal amount | $ 465,000,000 | |||
Reported Value Measurement | ||||
Debt Instrument [Line Items] | ||||
6.875% Senior Secured Notes, $465.0 million par | 462,141,000 | $ 461,899,000 | ||
Deferred debt issuance costs | (6,958,000) | (7,546,000) | ||
Total | 455,183,000 | 454,353,000 | ||
Estimate of Fair Value Measurement | ||||
Debt Instrument [Line Items] | ||||
6.875% Senior Secured Notes, $465.0 million par | 480,113,000 | 466,628,000 | ||
Deferred debt issuance costs | 0 | 0 | ||
Total | $ 480,113,000 | $ 466,628,000 |
Debt - 6.875% Senior Secured No
Debt - 6.875% Senior Secured Notes (Details) - USD ($) | Mar. 13, 2015 | Mar. 10, 2015 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Debt Instrument [Line Items] | |||||
Pretax gain from repurchase of debt | $ 0 | $ 3,676,000 | |||
Accelerated amortization of debt issuance costs | $ 795,000 | $ 821,000 | |||
Senior Secured Notes | 6.875% Senior Secured Notes | |||||
Debt Instrument [Line Items] | |||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | |
Aggregate principal amount | $ 465,000,000 | ||||
Issuance of debt, percentage | 98.962% | ||||
Proceeds from issuance of debt, net | $ 494,800,000 | ||||
Yield to maturity, percentage | 7.083% | 7.59% | |||
Percentage in voting equity interests of controlled foreign subsidiaries | 66.00% | ||||
Redemption period | 12 months | ||||
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 | 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 |
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 - Revolving Credit Agreeme
Debt - Revolving Credit Agreement (Details) - KCGA | Jun. 05, 2015USD ($)debt_classborrowing_base | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
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 | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Debt Disclosure [Abstract] | ||
Interest expense | $ 8,234 | $ 8,417 |
Amortization of debt issuance costs | 795 | 821 |
Commitment fee | 354 | 359 |
Accelerated amortization of debt issuance costs | 0 | 738 |
Accelerated interest expense on repurchase of debt | 0 | 298 |
Total | $ 9,383 | $ 10,633 |
Related Parties - Additional In
Related Parties - Additional Information (Details) - Related Parties - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Treasury Stock | ||
Related Party Transaction [Line Items] | ||
Stock buyback program fees | $ 19 | $ 36 |
Common Class A | ||
Related Party Transaction [Line Items] | ||
Noncontrolling interest, ownership percentage by noncontrolling owners (more than) | 10.00% |
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 | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Revenues | |||
Commissions and fees | $ 93,589 | $ 106,101 | |
Trading revenues, net | 154,307 | 223,938 | |
Expenses | |||
Execution and clearance fees | 72,795 | 73,634 | |
Communications and data processing | 39,020 | 35,657 | |
Payment for order flow | 17,121 | 12,655 | |
Collateralized financing interest | 11,761 | 9,163 | |
Other expense | 8,197 | 9,201 | |
Assets | |||
Securities borrowed | 1,594,442 | $ 1,688,222 | |
Receivable from brokers, dealers and clearing organizations | 801,678 | 832,785 | |
Other assets | 192,359 | 164,168 | |
Liabilities | |||
Securities loaned | 459,533 | 372,631 | |
Payable to brokers, dealers and clearing organizations | 495,253 | 518,900 | |
Related Parties | |||
Revenues | |||
Commissions and fees | 1,868 | 6,663 | |
Trading revenues, net | 791 | 477 | |
Interest, net | 119 | 103 | |
Total revenues from related parties | 2,778 | 7,243 | |
Expenses | |||
Execution and clearance fees | 313 | 880 | |
Communications and data processing | 5,610 | 3,206 | |
Payment for order flow | 0 | 5 | |
Collateralized financing interest | 86 | 78 | |
Other expense | 0 | 5 | |
Total expenses incurred with respect to related parties | 6,009 | $ 4,174 | |
Assets | |||
Securities borrowed | 17,754 | 5,293 | |
Receivable from brokers, dealers and clearing organizations | 2,134 | 2,106 | |
Other assets | 16 | 62,906 | |
Liabilities | |||
Securities loaned | 2,063 | 2,594 | |
Payable to brokers, dealers and clearing organizations | 45 | 188 | |
Accrued expenses and other liabilities | $ 122 | $ 3,708 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total intrinsic value of options exercised | $ 2,200 | ||
Stock options exercised | $ 2,775 | $ 0 | |
RSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 3 years | ||
Restricted awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unamortized compensation related to restricted awards outstanding | $ 5,600 | ||
Cost of unvested awards expected to be recognized over a weighted average life, years | 1 year 7 months 9 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 | |
Unamortized compensation costs | $ 500 | ||
Award expiration period | 1 year 3 months | ||
Stock options and SARs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total intrinsic value of options exercised | $ 14,269 | ||
Stock options exercised | $ 2,800 | ||
Incentive units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Deferred compensation payable | $ 2,700 | $ 2,300 | |
KCG Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares authorized for grant (in shares) | 23,200,000 | ||
Number of shares available for grant | 13,600,000 |
Stock-Based Compensation - Comp
Stock-Based Compensation - Compensation Expense Relating to Restricted Awards (Details) - RSUs - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock award compensation expense | $ 2,438 | $ 17,053 |
Income tax benefit | $ 926 | $ 6,480 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Restricted Awards Activity (Details) - RSUs shares in Thousands | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Units | |
Beginning Balance (in shares) | shares | 5,563 |
Granted (in shares) | shares | 800 |
Vested (in shares) | shares | (2,634) |
Forfeited (in shares) | shares | (72) |
Ending Balance (in shares) | shares | 3,657 |
Weighted- Average Grant date Fair Value | |
Beginning Balance (in dollars per share) | $ / shares | $ 11.25 |
Granted (in dollars per share) | $ / shares | 14.27 |
Vested (in dollars per share) | $ / shares | 11.19 |
Forfeited (in dollars per share) | $ / shares | 12.10 |
Ending Balance (in dollars per share) | $ / shares | $ 11.93 |
Stock-Based Compensation - Co82
Stock-Based Compensation - Compensation Expense Relating to Stock Options and SARs (Details) - Stock options and SARs - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock option and SAR compensation expense | $ 122 | $ 134 |
Income tax benefit | $ 46 | $ 51 |
Stock-Based Compensation - Su83
Stock-Based Compensation - Summary of Stock Option and SAR Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($)$ / sharesshares | |
Weighted- Average Exercise Price | |
Aggregate Intrinsic Value, Exercisable | $ | $ 2,200 |
Stock options and SARs | |
Number of Stock Awards | |
Beginning Balance (in shares) | 6,298 |
Granted (in shares) | 0 |
Exercised (in shares) | (337) |
Forfeited or expired (in shares) | (94) |
Ending Balance (in shares) | 5,867 |
Exercisable (in shares) | 4,492 |
Available for future grants (in shares) | 13,630 |
Weighted- Average Exercise Price | |
Beginning Balance (in dollars per share) | $ / shares | $ 18.88 |
Granted (in dollars per share) | $ / shares | 0 |
Exercised (in dollars per share) | $ / shares | 8.24 |
Forfeited or expired (in dollars per share) | $ / shares | 53.56 |
Ending Balance (in dollars per share) | $ / shares | 19.03 |
Exercisable (in dollars per share) | $ / shares | $ 17.75 |
Aggregate Intrinsic Value, Outstanding | $ | $ 14,269 |
Aggregate Intrinsic Value, Exercisable | $ | $ 14,269 |
Weighted-Average Remaining Life, Outstanding | 2 years 2 months 24 days |
Weighted-Average Remaining Life, Exercisable | 1 year 8 months 10 days |
SARs | |
Number of Stock Awards | |
Beginning Balance (in shares) | 1,700 |
Stock-Based Compensation - Chan
Stock-Based Compensation - Change in Incentive Units (Details) - Incentive Units - Common Class A shares in Thousands | 3 Months Ended |
Mar. 31, 2017shares | |
Vested | |
Beginning balance (in shares) | 16 |
Issued (in shares) | 0 |
Vested (in shares) | (1) |
Exercised (in shares) | 0 |
Canceled (in shares) | 0 |
Ending balance (in shares) | 15 |
Stock-Based Compensation - Co85
Stock-Based Compensation - Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Incentive units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense (benefit) | $ 437 | $ (77) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |||
Effective tax rate (percent) | 894.00% | 38.00% | |
Federal statutory income tax rate (percent) | 35.00% | 35.00% | |
Excess tax benefits for stock based compensation awards | $ 3.5 | ||
Unrecognized tax benefits that would impact effective tax rate if recognized | $ 5.3 | $ 5.1 |
Accumulated Other Comprehensi87
Accumulated Other Comprehensive Income - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Beginning balance | $ 1,357,283 | |
Ending balance | 1,347,312 | |
Total | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Beginning balance | 2,247 | $ 350 |
Other comprehensive income (loss) | 607 | (65) |
Amount reclassified from Available-for-sale securities, net of tax | (2,956) | |
Ending balance | (102) | 285 |
Unrealized Gains (Losses) on Available-for-Sale Securities | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Beginning balance | 3,286 | 150 |
Other comprehensive income (loss) | 170 | 68 |
Amount reclassified from Available-for-sale securities, net of tax | (2,956) | |
Ending balance | 500 | 218 |
Foreign Currency Translation Adjustments | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Beginning balance | (1,039) | 200 |
Other comprehensive income (loss) | 437 | (133) |
Amount reclassified from Available-for-sale securities, net of tax | 0 | |
Ending balance | $ (602) | $ 67 |
Accumulated Other Comprehensi88
Accumulated Other Comprehensive Income - Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Investment income and other, net | $ 6,656 | $ 15,268 |
Income tax (benefit) expense | 3,616 | $ (22,800) |
Unrealized Gains (Losses) on Available-for-Sale Securities | Reclassification out of Accumulated Other Comprehensive Income | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Investment income and other, net | 4,767 | |
Income tax (benefit) expense | (1,811) | |
Net of tax | $ 2,956 |
Warrants and Stock Repurchase89
Warrants and Stock Repurchases - Additional Information (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Mar. 10, 2015 | Jul. 01, 2013 | |
Class of Stock [Line Items] | |||||
Warrants received (in shares) | 4,472 | 6,182 | |||
Warrants repurchased (in shares) | 1,077 | 1,500 | |||
Warrants repurchased | $ 2,900 | $ 1,000 | |||
KCG Class A Common Stock repurchased | 28,849 | ||||
Remaining authorized repurchase amount | $ 136,800 | ||||
Senior Secured Notes | 6.875% Senior Secured Notes | |||||
Class of Stock [Line Items] | |||||
Interest rate (percent) | 6.875% | 6.875% | 6.875% | 6.875% | |
GETCO | |||||
Class of Stock [Line Items] | |||||
Warrants received (in shares) | 24,300 | ||||
Common Class A | |||||
Class of Stock [Line Items] | |||||
KCG Class A Common Stock repurchased (in shares) | 900 | 1,800 | |||
KCG Class A Common Stock repurchased | $ 13,300 | $ 20,500 |
Warrants and Stock Repurchase90
Warrants and Stock Repurchases - Warrant Activity (Details) - $ / shares shares in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Jul. 01, 2013 | |
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 6,182 | ||
Exercised (in shares) | (633) | ||
Repurchased (in shares) | (1,077) | (1,500) | |
Warrants - Outstanding at end of period (in shares) | 4,472 | ||
Class A | |||
Class of Warrant or Right [Line Items] | |||
Exercise Price (in dollars per share) | $ 11.70 | $ 12 | |
Initial term (years) | 4 years | ||
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 2,026 | ||
Exercised (in shares) | (545) | ||
Repurchased (in shares) | (359) | ||
Warrants - Outstanding at end of period (in shares) | 1,122 | ||
Class B | |||
Class of Warrant or Right [Line Items] | |||
Exercise Price (in dollars per share) | $ 13.16 | 13.50 | |
Initial term (years) | 5 years | ||
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 2,069 | ||
Exercised (in shares) | (44) | ||
Repurchased (in shares) | (359) | ||
Warrants - Outstanding at end of period (in shares) | 1,666 | ||
Class C | |||
Class of Warrant or Right [Line Items] | |||
Exercise Price (in dollars per share) | $ 14.63 | $ 15 | |
Initial term (years) | 6 years | ||
Class of Warrant or Right [Roll Forward] | |||
Warrants - Outstanding at beginning of period (in shares) | 2,087 | ||
Exercised (in shares) | (44) | ||
Repurchased (in shares) | (359) | ||
Warrants - Outstanding at end of period (in shares) | 1,684 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Abstract] | ||
Options excluded (in shares) | 3.8 | 23.8 |
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 | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator / net income | ||
Income and shares used in basic calculations | $ 3,212 | $ 37,165 |
Denominator / shares | ||
Income and shares used in basic calculations (in shares) | 66,306 | 88,458 |
Income and shares used in diluted calculations (in shares) | 67,642 | 89,605 |
Basic earnings per share (in dollars per share) | $ 0.05 | $ 0.42 |
Diluted earnings per share (in dollars per share) | $ 0.05 | $ 0.41 |
Restricted awards | ||
Denominator / shares | ||
Effect of dilutive stock based awards (in shares) | 800 | 992 |
Stock options and SARs | ||
Denominator / shares | ||
Effect of dilutive stock based awards (in shares) | 536 | 155 |
Commitments and Contingent Li93
Commitments and Contingent Liabilities - Additional Information (Details) | 3 Months Ended | ||
Mar. 31, 2017USD ($)loan | Mar. 31, 2016USD ($) | Jul. 08, 2016EUR (€) | |
Occupancy and Equipment Rentals | |||
Loss Contingencies [Line Items] | |||
Rental expense under the office leases | $ 4,700,000 | $ 6,100,000 | |
Revolving Credit Facility | |||
Loss Contingencies [Line Items] | |||
Weighted average interest rate | 4.42% | ||
Debt term | 3 years | ||
Trading Activities on Euronext | |||
Loss Contingencies [Line Items] | |||
Loss contingency reserve | € | € 400,000 | ||
Guarantee Obligation | |||
Loss Contingencies [Line Items] | |||
Letters of credit obligation | $ 10,200,000 | ||
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 | $ 10,100,000 |
Commitments and Contingent Li94
Commitments and Contingent Liabilities - Schedule of Capital Lease and Contract Obligations (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Minimum Payments | |
Nine months ending December 31, 2017 | $ 5,625 |
Year ending December 31, 2018 | 7,272 |
Year ending December 31, 2019 | 7,272 |
Year ending December 31, 2020 | 1,103 |
Total | $ 21,272 |
Commitments and Contingent Li95
Commitments and Contingent Liabilities - Schedule of Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Interest expense - Capital leases | $ 24 | $ 24 |
Commitments and Contingent Li96
Commitments and Contingent Liabilities - Schedule of Future Minimum Rental Commitments (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Nine months ending December 31, 2017 | $ 17,484 |
Year ending December 31, 2018 | 22,128 |
Year ending December 31, 2019 | 19,802 |
Year ending December 31, 2020 | 19,254 |
Year ending December 31, 2021 | 18,732 |
Thereafter through December 31, 2031 | 144,138 |
Total | 241,538 |
Gross Lease Obligations | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Nine months ending December 31, 2017 | 22,057 |
Year ending December 31, 2018 | 27,978 |
Year ending December 31, 2019 | 25,031 |
Year ending December 31, 2020 | 23,310 |
Year ending December 31, 2021 | 22,771 |
Thereafter through December 31, 2031 | 154,234 |
Total | 275,381 |
Sublease Income | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Nine months ending December 31, 2017 | 4,573 |
Year ending December 31, 2018 | 5,850 |
Year ending December 31, 2019 | 5,229 |
Year ending December 31, 2020 | 4,056 |
Year ending December 31, 2021 | 4,039 |
Thereafter through December 31, 2031 | 10,096 |
Total | $ 33,843 |
Commitments and Contingent Li97
Commitments and Contingent Liabilities - Activity in Liability Account Related to Office Space Consolidation (Details) - Office Space Consolidation - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Restructuring Reserve [Roll Forward] | ||
Balance as of beginning of period | $ 14,251 | $ 18,892 |
Real estate charges incurred | 0 | 390 |
Payments made, net | (1,566) | (3,750) |
Interest accretion | 884 | (1,281) |
Balance as of end of period | $ 13,569 | $ 14,251 |
Financial instruments with Of98
Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Derivatives, Fair Value [Line Items] | ||
Loans outstanding | $ 455,183,000 | $ 454,353,000 |
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 | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Revenues | $ 255,373 | $ 345,424 | |
Pre-tax earnings | (404) | 59,965 | |
Total assets | 5,983,429 | 6,196,298 | $ 6,261,287 |
Market Making | |||
Segment Reporting Information [Line Items] | |||
Revenues | 174,656 | 258,918 | |
Pre-tax earnings | 18,023 | 75,489 | |
Total assets | 5,255,849 | 4,999,201 | |
Global Execution Services | |||
Segment Reporting Information [Line Items] | |||
Revenues | 70,756 | 76,394 | |
Pre-tax earnings | 1,994 | 6,261 | |
Total assets | 1,001,933 | 1,020,306 | |
Corporate and Other | |||
Segment Reporting Information [Line Items] | |||
Revenues | 9,961 | 10,112 | |
Pre-tax earnings | (20,421) | (21,785) | |
Total assets | $ (274,353) | $ 176,791 |
Business Segments - Additional
Business Segments - Additional Information (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Mar. 31, 2016 |
Segment Reporting Information [Line Items] | ||
Total assets of businesses held for sale | $ 8.2 | |
Market Making | Businesses Held for Sale | ||
Segment Reporting Information [Line Items] | ||
Total assets of businesses held for sale | $ 16.4 | |
Corporate and Other | Businesses Held for Sale | ||
Segment Reporting Information [Line Items] | ||
Total assets of businesses held for sale | $ 8.1 |
Subsequent Events (Details)
Subsequent Events (Details) | Apr. 20, 2017$ / shares |
Agreement and Plan of Merger with Virtu Financial, Inc. | Subsequent Event | |
Subsequent Event [Line Items] | |
Cash exercise price of right (in usd per share) | $ 20 |