Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 13, 2016 | |
Entity Registrant Name | Virtu Financial, Inc. | |
Entity Central Index Key | 1,592,386 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Class A | ||
Entity Common Stock, Shares Outstanding | 38,235,856 | |
Class C | ||
Entity Common Stock, Shares Outstanding | 20,922,855 | |
Class D | ||
Entity Common Stock, Shares Outstanding | 79,610,490 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Condition - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Assets | ||
Cash and cash equivalents | $ 148,514 | $ 163,235 |
Securities borrowed | 654,065 | 453,296 |
Securities purchased under agreements to resell | 14,981 | |
Receivables from broker dealers and clearing organizations | 629,911 | 476,536 |
Trading assets, at fair value: | ||
Financial instruments owned | 1,276,022 | 1,038,039 |
Financial instruments owned and pledged | 247,652 | 259,175 |
Property, equipment and capitalized software (net of accumulated depreciation of $103,418 and $98,595 as of March 31, 2016 and December 31, 2015, respectively) | 33,017 | 37,501 |
Goodwill | 715,379 | 715,379 |
Intangibles (net of accumulated amortization) | 1,150 | 1,203 |
Deferred tax asset | 191,238 | 193,740 |
Other assets ($6,250 and $5,984, at fair value, as of March 31, 2016 and December 31, 2015, respectively) | 38,421 | 38,845 |
Total assets | 3,935,369 | 3,391,930 |
Liabilities | ||
Short term borrowings | 32,000 | 45,000 |
Securities loaned | 690,672 | 524,603 |
Payables to broker dealers and clearing organizations | 435,958 | 486,604 |
Trading liabilities, at fair value: | ||
Financial instruments sold, not yet purchased | 1,411,609 | 979,090 |
Tax receivable agreement obligations | 218,399 | 218,399 |
Accounts payable and accrued expenses and other liabilities | 89,364 | 86,775 |
Senior secured credit facility | 492,782 | 493,589 |
Total liabilities | 3,370,784 | 2,834,060 |
Stockholders' Equity | ||
Treasury stock, at cost, 169,649 and 169,649 shares at March 31, 2016 and December 31, 2015, respectively | (3,819) | (3,819) |
Additional paid-in capital | 134,385 | 130,902 |
Retained Earnings | 4,495 | 3,525 |
Accumulated other comprehensive income | 800 | 99 |
Total stockholders' equity | 135,862 | 130,708 |
Noncontrolling interest | 428,723 | 427,162 |
Total equity | 564,585 | 557,870 |
Total liabilities and equity | 3,935,369 | 3,391,930 |
Class D | ||
Stockholders' Equity | ||
Common stock value | $ 1 | $ 1 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Accumulated depreciation (in dollars) | $ 103,418 | $ 98,595 |
Other assets, fair value (in dollars) | $ 6,250 | $ 5,984 |
Treasury stock shares | 169,649 | 169,649 |
Class A | ||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock shares issued | 38,379,858 | 38,379,858 |
Common stock shares outstanding | 38,210,209 | 38,210,209 |
Class B | ||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock shares authorized | 175,000,000 | 175,000,000 |
Common stock shares issued | 0 | 0 |
Common stock shares outstanding | 0 | 0 |
Class C | ||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock shares authorized | 90,000,000 | 90,000,000 |
Common stock shares issued | 20,976,598 | 20,976,598 |
Common stock shares outstanding | 20,922,855 | 20,976,598 |
Class D | ||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock shares authorized | 175,000,000 | 175,000,000 |
Common stock shares issued | 79,610,490 | 79,610,490 |
Common stock shares outstanding | 79,610,490 | 79,610,490 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues: | ||
Trading income, net | $ 186,289 | $ 213,930 |
Interest and dividends income | 4,268 | 5,182 |
Technology services | 2,081 | 2,416 |
Total revenue | 192,638 | 221,528 |
Operating Expenses: | ||
Brokerage, exchange and clearance fees, net | 59,725 | 61,138 |
Communication and data processing | 17,722 | 17,943 |
Employee compensation and payroll taxes | 22,557 | 26,900 |
Interest and dividends expense | 13,537 | 9,566 |
Operations and administrative | 4,919 | 8,491 |
Depreciation and amortization | 7,727 | 9,663 |
Amortization of purchased intangibles and acquired capitalized software | 53 | 53 |
Charges related to share-based compensation at IPO | 595 | |
Financing interest expense on senior secured credit facility | 7,101 | 7,602 |
Total operating expenses | 133,936 | 141,356 |
Income before income taxes and noncontrolling interest | 58,702 | 80,172 |
Provision for income taxes | 7,346 | 2,728 |
Net income | 51,356 | 77,444 |
Noncontrolling interest | (41,008) | |
Net income available for common stockholders | $ 10,348 | |
Earnings per share | ||
Basic (in dollars per share) | $ 0.27 | |
Diluted (in dollars per share) | $ 0.26 | |
Weighted average common shares outstanding | ||
Basic (in shares) | 38,210,209 | |
Diluted (in shares) | 38,489,489 | |
Comprehensive income | ||
Net income | $ 51,356 | 77,444 |
Other comprehensive income (loss) | ||
Foreign exchange translation adjustment, net of taxes | 2,494 | (4,633) |
Comprehensive income | 53,850 | $ 72,811 |
Less: Comprehensive income attributable to non-controlling interests | (42,801) | |
Comprehensive income attributable to common stockholders | $ 11,049 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Equity - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands | Common StockClass A | Common StockClass C | Common StockClass D | Treasury Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Stockholders'/ Members' Equity | Noncontrolling Interest | Total |
Balance at Dec. 31, 2015 | $ 1 | $ (3,819) | $ 130,902 | $ 3,525 | $ 99 | $ 130,708 | $ 427,162 | $ 557,870 | ||
Balance (in shares) at Dec. 31, 2015 | 38,379,858 | 20,976,598 | 79,610,490 | |||||||
Treasury stock at Dec. 31, 2015 | $ (3,819) | |||||||||
Treasury stock (in shares) at Dec. 31, 2015 | (169,649) | |||||||||
Increase (decrease) in stockholder's/members' equity | ||||||||||
Share based compensation | 3,483 | 3,483 | $ 3,483 | |||||||
Share based compensation (in shares) | (53,743) | |||||||||
Net income | 10,348 | 10,348 | 41,008 | 51,356 | ||||||
Foreign exchange translation adjustment | 701 | 701 | 1,793 | 2,494 | ||||||
Distribution from Virtu Financial to non-controlling interest | (41,240) | (41,240) | ||||||||
Dividends | (9,378) | (9,378) | (9,378) | |||||||
Balance at Mar. 31, 2016 | $ 1 | $ (3,819) | $ 134,385 | $ 4,495 | $ 800 | $ 135,862 | $ 428,723 | 564,585 | ||
Balance (in shares) at Mar. 31, 2016 | 38,379,858 | 20,922,855 | 79,610,490 | |||||||
Treasury stock at Mar. 31, 2016 | $ (3,819) | |||||||||
Treasury stock (in shares) at Mar. 31, 2016 | (169,649) |
Condesed Consolidated Statement
Condesed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities | ||
Net Income | $ 51,356 | $ 77,444 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 7,727 | 9,663 |
Amortization of purchased intangibles and acquired capitalized software | 53 | 53 |
Amortization of debt issuance costs and deferred financing fees | 468 | 376 |
Termination of office leases | 292 | 2,729 |
Share based compensation | 3,102 | 5,375 |
Equipment writeoff | 428 | |
Deferred taxes | 2,530 | 713 |
Other | (3) | (501) |
Changes in operating assets and liabilities: | ||
Securities borrowed | (200,769) | (206,150) |
Securities purchased under agreements to resell | 14,981 | 31,191 |
Receivables from broker dealers and clearing organizations | (153,375) | (73,529) |
Trading assets, at fair value | (226,460) | (532,799) |
Other Assets | 652 | (11,189) |
Securities loaned | 166,069 | 459,035 |
Securities sold under agreements to repurchase | 8,967 | |
Payables to broker dealers and clearing organizations | (50,646) | 39,882 |
Trading liabilities, at fair value | 432,519 | 254,646 |
Accounts payable and accrued expenses and other liabilities | 2,544 | 16,347 |
Net cash provided by operating activities | 51,468 | 82,253 |
Cash flows from investing activities | ||
Development of capitalized software | (2,003) | (2,251) |
Acquisition of property and equipment | (1,287) | (4,065) |
Net cash used in investing activities | (3,290) | (6,316) |
Cash flows from financing activities | ||
Distribution to members | (80,000) | |
Distribution from Virtu Financial to non-controlling interest | (41,240) | |
Dividends | (9,378) | |
Payments on repurchase of non-voting common interest | (500) | (597) |
Repayment of senior secured credit facility | (1,275) | |
Repayment of short term borrowings | (13,000) | |
Net cash used in financing activities | (65,393) | (80,597) |
Effect of exchange rate changes on Cash and cash equivalents | 2,494 | (4,633) |
Net decrease in Cash and cash equivalents | (14,721) | (9,293) |
Cash and cash equivalents, beginning of period | 163,235 | 75,864 |
Cash and cash equivalents, end of period | 148,514 | 66,571 |
Supplementary disclosure of cash flow information | ||
Cash paid for interest | 13,786 | 14,015 |
Cash paid for taxes | 1,527 | |
Non-cash investing activities | ||
Compensation to developers subject to capitalization of software (of which $678 and $478 were capitalized for March 31, 2016 and 2015, respectively) | $ 1,842 | $ 1,278 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Condensed Consolidated Statements of Cash Flows | ||
Compensation to software developers capitalized | $ 678 | $ 478 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Organization and Basis of Presentation | |
Organization and Basis of Presentation | 1. Organization and Basis of Presentation Organization The accompanying condensed consolidated financial statements include the accounts and operations of Virtu Financial, Inc. (“VFI”, or, collectively with its wholly owned or controlled subsidiaries, the “Company”) beginning with its initial public offering (“IPO”) in April of 2015, along with the historical accounts and operations of Virtu Financial LLC (“Virtu Financial”) prior to the Company’s IPO. VFI is a Delaware corporation whose primary asset is its ownership of approximately 28.1% of the membership interests of Virtu Financial, which it acquired pursuant to and subsequent to certain reorganization transactions (the “Reorganization Transactions”) consummated in connection with its IPO. The Company is the sole managing member of Virtu Financial and operates and controls all of the businesses and affairs of Virtu Financial and, through Virtu Financial and its subsidiaries (the “Group”), continues to conduct the business now conducted by such subsidiaries. Virtu Financial was formed as a Delaware limited liability company on April 8, 2011 in connection with a corporate reorganization and acquisition of the outstanding equity interests of Madison Tyler Holdings, LLC (“MTH”), an electronic trading firm and market maker. In connection with the reorganization, the members of Virtu Financial’s predecessor entity, Virtu Financial Operating LLC (“VFO”), a Delaware limited liability company formed on March 19, 2008, exchanged their interests in VFO for interests in Virtu Financial and the members of MTH exchanged their interests in MTH for cash and/or interests in Virtu Financial. Virtu Financial’s principal subsidiaries include Virtu Financial BD LLC (“VFBD”), a self-clearing U.S. broker-dealer, Virtu Financial Capital Markets LLC (“VFCM”), a U.S. broker-dealer, which self-clears its proprietary transactions and introduces the accounts of its affiliates and non-affiliated broker-dealers on an agency basis to other clearing firms that clear and settle transactions in those accounts; and which is also a designated market maker on the New York Stock Exchange (“NYSE”) and the NYSE MKT (formerly NYSE Amex), Virtu Financial Global Markets LLC (“VFGM”), a U.S. trading entity focused on futures and currencies, Virtu Financial Ireland Limited (“VFIL”), formed in Ireland, Virtu Financial Asia Pty Ltd (“VFAP”), formed in Australia, and Virtu Financial Singapore Pte. Ltd. (“VFSing”), formed in Singapore, each of which are trading entities focused on asset classes in their respective geographic regions. The Company is a technology-enabled market maker and liquidity provider. The Company has developed a single, proprietary, multi-asset, multi-currency technology platform through which it provides quotations to buyers and sellers in equities, commodities, currencies, options, fixed income and other securities on numerous exchanges, markets and liquidity pools in numerous countries around the world. The Company is managed and operated as one business. Accordingly, the Company operates under one reportable segment. Basis of Presentation The condensed consolidated financial statements are presented in U.S. dollars and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding financial reporting with respect to Form 10-Q and accounting standards generally accepted in the United States of America (“U.S. GAAP”) promulgated in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC” or the “Codification”). The condensed consolidated financial statements of the Company include its equity interests in Virtu Financial and its subsidiaries. The Company operates and controls all business and affairs of Virtu Financial and its operating subsidiaries indirectly through its equity interest in Virtu Financial. The condensed consolidated financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2015 (the “2015 10-K”), which was filed on March 25, 2016. The accompanying December 31, 2015 unaudited condensed consolidated statements of financial condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP for annual financial statement purposes. The accompanying condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The operating results for interim periods are not necessarily indicative of the operating results for any future interim or annual period. Principles of Consolidation, including Noncontrolling Interests The condensed consolidated financial statements include the accounts of the Company and its majority and wholly owned subsidiaries. As sole managing member of Virtu Financial, the Company exerts control over the Group’s operations. In accordance with ASC 810, Consolidation, the Company consolidates Virtu Financial and its subsidiaries’ financial statements and records the interests in Virtu Financial that the Company does not own as noncontrolling interests. All intercompany accounts and transactions have been eliminated in consolidation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Use of Estimates The Company's condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which require management to make estimates and assumptions regarding measurements including the fair value of trading assets and liabilities, goodwill and intangibles, compensation accruals, capitalized software, income tax, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ materially from those estimates. Earnings Per Share Earnings per share (“EPS”) is calculated on both a basic and diluted basis. Basic EPS excludes dilution and is calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing the net income available for common stockholders by the diluted weighted average shares outstanding for that period. Diluted EPS includes the determinants of the basic EPS and, in addition, reflects the dilutive effect of shares of common stock estimated to be distributed in the future under the Company’s share based compensation plans, with no adjustments to net income available for common stockholders for dilutive potential common shares. The Company grants restricted stock units (“RSUs”), which entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. As a result, the unvested RSUs meet the definition of a participating security requiring the application of the two-class method. Under the two-class method, earnings available to common sharholders, including both distributed and undistributed, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted EPS to be more dilutive than the calculation using the treasury stock method. Cash and Cash Equivalents The Company considers cash equivalents as highly liquid investments with original maturities of less than three months when acquired. The Company maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. Securities Borrowed and Securities Loaned The Company conducts securities borrowing and lending activities with external counterparties. In connection with these transactions, the Company receives or posts collateral. These transactions are collateralized by cash or securities. In accordance with substantially all of its stock borrow agreements, the Company is permitted to sell or repledge the securities received. Securities borrowed or loaned are recorded based on the amount of cash collateral advanced or received. The initial collateral advanced or received generally approximates or is greater than 102% of the fair value of the underlying securities borrowed or loaned. The Company monitors the fair value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Receivables and payables with the same counterparty are not offset in the condensed consolidated statements of financial condition. For these transactions, the interest received or paid by the Company is recorded gross on an accrual basis under interest and dividends income or interest and dividends expense in the condensed consolidated statements of comprehensive income. Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase In a repurchase agreement, securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at contract value, plus accrued interest, which approximates fair value. It is the Company's policy that its custodian takes possession of the underlying collateral securities with a fair value approximately equal to the principal amount of the repurchase transaction, including accrued interest. For reverse repurchase agreements, the Company typically requires delivery of collateral with a fair value approximately equal to the carrying value of the relevant assets in the condensed consolidated statements of financial condition. To ensure that the fair value of the underlying collateral remains sufficient, the collateral is valued daily with additional collateral obtained or excess collateral returned, as permitted under contractual provisions. The Company does not net securities purchased under agreements to resell transactions with securities sold under agreements to repurchase transactions entered into with the same counterparty. For these transactions, the interest received or paid by the Company is recorded gross on an accrual basis under interest and dividends income or interest and dividends expense in the condensed consolidated statements of comprehensive income. Receivables from/Payables to Broker-dealers and Clearing Organizations Amounts receivable from broker-dealers and clearing organizations may be restricted to the extent that they serve as deposits for securities sold, not yet purchased. At March 31, 2016 and December 31, 2015 , receivables from and payables to broker-dealers and clearing organizations primarily represent amounts due for unsettled trades, open equity in futures transactions, securities failed to deliver or failed to receive, deposits with clearing organizations or exchanges and balances due from or due to prime brokers in relation to the Company’s trading. The Company presents its balances, including outstanding principal balances on all credit facilities, on a net-by-counterparty basis within receivable from and payable to broker-dealers and clearing organizations when the criteria for offsetting are met. In the normal course of business, substantially all of the Company’s securities transactions, money balances, and security positions are transacted with several brokers. The Company is subject to credit risk to the extent any broker with whom it conducts business is unable to fulfill contractual obligations on its behalf. The Company monitors the financial condition of such brokers and does not anticipate any losses from these counterparties. Financial Instruments Owned Including Those Pledged as Collateral and Financial Instruments Sold, Not Yet Purchased The Company carries financial instruments owned, including those pledged as collateral, and financial instruments sold, not yet purchased at fair value. Gains and losses arising from financial instrument transactions are recorded net on a trade-date basis in trading income, net, in the condensed consolidated statements of comprehensive income. Fair Value Measurements The Company’s assets and liabilities have been categorized based upon a fair value hierarchy in accordance with ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The recognition of “block discounts” for large holdings of unrestricted financial instruments where quoted prices are readily and regularly available in an active market is prohibited. ASC 820-10 requires a three level hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each financial instrument is based on the assessment of the transparency and reliability of the inputs used in the valuation of such financial instruments at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories based on inputs: Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 — Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Transfers in or out of levels are recognized based on the beginning fair value of the period in which they occurred. There were no transfers of financial instruments between levels during the three months ended March 31, 2016 and 2015 . Derivative Instruments Derivative instruments used for trading purposes, including economic hedges of trading instruments, are carried at fair value. Fair values for exchange-traded derivatives, principally futures, are based on quoted market prices. Fair values for over-the-counter derivative instruments, principally forward contracts, are based on the values of the underlying financial instruments within the contract. The underlying derivative instruments are currencies which are actively traded. The Company presents its derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met. Derivative instruments used for economic hedging purposes include futures, forward contracts, and options. Unrealized gains or losses on these derivative instruments are recognized currently in the condensed consolidated statements of comprehensive income as trading income, net. The Company does not apply hedge accounting as defined in ASC 815, Derivatives and Hedging , and accordingly unrealized gains or losses on these derivative instruments are recognized currently in the condensed consolidated statements of comprehensive income as trading income, net. Property and Equipment Property and equipment are carried at cost, less accumulated depreciation, except for the assets acquired in connection with the acquisition of MTH which were recorded at fair value on the date of acquisition. Depreciation is provided using the straight-line method over estimated useful lives of the underlying asset. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that appreciably extend the useful life of the assets are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. Furniture, fixtures, and equipment are depreciated over three to seven years. Leasehold improvements are amortized over the lesser of the length of the lease term or seven years. Capitalized Software The Company accounts for the costs of computer software developed or obtained for internal use in accordance with ASC 350-40, Internal-Use Software . The Company capitalizes costs of materials, consultants, and payroll and payroll related costs for employees incurred in developing internal-use software. Costs incurred during the preliminary project and post-implementation stages are charged to expense. Management’s judgment is required in determining the point at which various projects enter the stages at which costs may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. The Company’s capitalized software development costs excluding the charges recognized in relation to the IPO disclosed below were approximately $2.6 million and $2.7 million for the three months ended March 31, 2016 and 2015 , respectively. The related amortization expense was approximately $2.4 million and $2. 5 million for the three months ended March 31, 2016 and 2015 , respectively. Additionally, in connection with charges related to share based compensation recognized upon the IPO (Note 14), the Company capitalized and amortized costs for employees in developing internal-use software, which were included within charges related to share based compensation at IPO in the condensed consolidated statements of comprehensive income. The Company capitalized charges related to IPO share based compensation of approximately $0. 02 million for the three months ended March 31, 2016. Amortization expense associated with IPO related share based compensation that was capitalized was approximately $0.3 million for the three months ended March 31, 2016. Capitalized software development costs and related accumulated amortization are included in property, equipment and capitalized software in the accompanying condensed consolidated statements of financial condition and are amortized over a period of 1.4 to 2.5 years, which represents the estimated useful lives of the underlying software. Goodwill Goodwill represents the excess of the purchase price over the underlying net tangible and intangible assets of the Company’s acquisitions. Goodwill is not amortized but is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company operates as one operating segment, which is the Company’s only reporting unit. The goodwill impairment test is a two-step process. The first step is used to identify potential impairment and compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed. The second step is used to measure the amount of impairment loss, if any, and compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess. The Company tests goodwill for impairment on an annual basis on July 1 and on an interim basis when certain events or circumstances exist. In the impairment test as of July 1, 2015, the primary valuation method used to estimate the fair value of the Company’s reporting unit was the market capitalization approach based on the market price of its Class A Common Stock, which the Company’s management believes to be an appropriate indicator of its fair value. Based on the results of the impairment tests performed, no goodwill impairment was recognized during the three months ended March 31, 2016 and 2015 , respectively. Intangible Assets The Company amortizes finite-lived intangible assets over their estimated useful lives. Finite-lived intangible assets are tested for impairment annually or when impairment indicators are present, and if impaired, written down to fair value. Exchange Memberships and Stock Exchange memberships are recorded at cost or, if any other than temporary impairment in value has occurred, at a value that reflects management’s estimate of fair value, in accordance with ASC 940-340, Financial Services — Broker and Dealers. Exchange stock includes shares that entitle the Company to certain trading privileges. The shares are marked to market with the corresponding gain or loss recorded under operations and administrative in the condensed consolidated statements of comprehensive income. The Company’s exchange memberships and stock are included in other assets in the condensed consolidated statements of financial condition. Trading Income Trading income is comprised of changes in the fair value of trading assets and liabilities (i.e., unrealized gains and losses) and realized gains and losses on trading assets and liabilities. Trading gains and losses on financial instruments owned and financial instruments sold, not yet purchased are recorded on the trade date and reported on a net basis in the condensed consolidated statements of comprehensive income. Interest and Dividends Income/Interest and Dividends Expense Interest income and interest expense are accrued in accordance with contractual rates. Interest income consists of interest earned on collateralized financing arrangements and on cash held by brokers. Interest expense includes interest expense from collateralized transactions, margin and related lines of credit. Dividends on financial instruments owned including those pledged as collateral and financial instruments sold, not yet purchased are recorded on the ex-dividend date and interest is recognized on the accrual basis. Technology Services Technology services revenues consist of fees earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and provision of associated management and hosting services. These fees include both upfront and annual recurring fees. Revenue from technology services is recognized once persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue is recognized ratably over the contractual service period. Rebates Rebates consist of volume discounts, credits or payments received from exchanges or other market places related to the placement and/or removal of liquidity from the order flow in the marketplace. Rebates are recorded on an accrual basis and included net within brokerage, exchange and clearance fees in the accompanying condensed consolidated statements of comprehensive income. Income Taxes Subsequent to consummation of the Reorganization Transactions and the IPO, the Company is subject to U.S. federal, state and local income taxes on its taxable income. The Company's subsidiaries are subject to income taxes in the respective jurisdictions (including foreign jurisdictions) in which they operate. Prior to the consummation of the Reorganization Transactions and the IPO, no provision for United States federal, state and local income tax was required, as Virtu Financial is a limited liability company and is treated as a pass-through entity for United States federal, state, and local income tax purposes. The provision for income tax is comprised of current tax and deferred tax. Current tax represents the tax on current year tax returns, using tax rates enacted at the balance sheet date. The deferred tax assets are recognized in full and then reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be recognized. The Company recognizes the tax benefit from an uncertain tax position, in accordance with ASC 740, Income Taxes only if it is more likely than not that the tax position will be sustained on examination by the applicable taxing authority, including resolution of the appeals or litigation processes, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position are measured based on the largest benefit for each such position that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Many factors are considered when evaluating and estimating the tax positions and tax benefits. Such estimates involve interpretations of regulations, rulings, case law, etc. and are inherently complex. The Company’s estimates may require periodic adjustments and may not accurately anticipate actual outcomes as resolution of income tax treatments in individual jurisdictions typically would not be known for several years after completion of any fiscal year. The Company has determined that there are no uncertain tax positions that would have a material impact on the Company’s financial position as of March 31, 2016 and December 31, 2015 or the results of operations or cash flows for the three months ended March 31, 2016 and 2015 . Comprehensive Income and Foreign Currency Translation The Company’s operating results are reported in the condensed consolidated statements of comprehensive income pursuant to Accounting Standards Update 2011-05, Comprehensive Income. Comprehensive income consists of two components: net income and other comprehensive income (“OCI”). OCI is comprised of revenues, expenses, gains and losses that are reported in the comprehensive income section of the condensed consolidated statements of comprehensive income, but are excluded from reported net income. The Company’s OCI is comprised of foreign currency translation adjustments. Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at period-end exchange rates, and revenues and expenses are translated at weighted average exchange rates for the period. Gains and losses resulting from translating foreign currency financial statements, net of related tax effects, are reflected in accumulated other comprehensive income, a separate component of stockholders’ equity. Share-Based Compensation The Company accounts for share-based compensation transactions with employees under the provisions of ASC 718, Compensation: Stock Compensation. Share-based compensation transactions with employees are measured based on the fair value of equity instruments issued. The fair value of awards issued for compensation prior to the Reorganization Transactions and the IPO was determined by management, with the assistance of an independent third party valuation firm, using a projected annual forfeiture rate, where applicable, on the date of grant. Share-based awards issued for compensation in connection with or subsequent to the Reorganization Transaction and the IPO pursuant to the VFI 2015 Management Incentive Plan (the “2015 Management Incentive Plan”) were in the form of stock options, Class A common stock and restricted stock units. The fair value of the stock option grants is determined through the application of the Black-Scholes-Merton model. The fair value of the Class A common stock and restricted stock units are determined based on the volume weighted average price for the three days preceding the grant, and with respect to the restricted stock units, a projected annual forfeiture rate. The fair value of share-based awards granted to employees is expensed based on the vesting conditions and are recognized on a straight line basis over the vesting period . The Company records as treasury stock shares repurchased from its employees for the purpose of settling tax liabilities incurred upon the issuance of common stock, the vesting of restricted stock units or the exercise of stock options. Recent Accounting Pronouncements Revenue - In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 defers the effective date of ASU No. 2014-09 by one year for public companies. ASU 2015-14 applies to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has not yet determined the potential effects of the adoption of ASU 2014-09 and ASU 2015-14 on its condensed consolidated financial statements. Repurchase Agreements - In June 2014, the FASB released ASU No. 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The amendment changes the accounting for repurchase financing transactions and for repurchase-to-maturity transactions to secured borrowing accounting. The accounting changes were effective for the Company beginning in the first quarter of 2015. The effect of the accounting changes on transactions outstanding as of the effective date is required to be presented as a cumulative effect adjustment to retained earnings as of January 1, 2015. The amendment also requires additional disclosures for repurchase agreements and securities lending transactions regarding the class of collateral pledged and the remaining contractual maturity of the agreements, as well as a discussion on the potential risks associated with the agreements and the related collateral pledged, as well as how those risks are managed. Additional disclosures are required for repurchase agreements, securities lending transactions, sales with a total return swap, and other similar transfers of financial assets that are accounted for as a sale. The Company adopted this ASU during the year ended December 31, 2015. This ASU did not have an impact on the Company’s condensed consolidated financial statements except for the additional disclosures described in Note 9. Compensation - In June 2014, the Emerging Issues Task Force (the “EITF”) of the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendment requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015 (fiscal year 2016 for the Company). The Company adopted this ASU during the year ended December 31, 2015. This ASU did not have an impact on the Company’s condensed consolidated financial statements. Going Concern — In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance will explicitly require management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016 (fiscal year 2017 for the Company). Earlier adoption is permitted. The Company will implement this new standard on the required effective date. This ASU is not expected to have an impact on the Company’s condensed consolidated financial statements. Hybrid Financial Instruments — In November 2014, the EITF of the FASB issued ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity. The ASU requires that for hybrid financial instruments issued in the form of a share, an entity should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. An entity should use judgment based on an evaluation of all the relevant terms and features, and should consider the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted this ASU during the year ended December 31, 2015. This ASU did not have an impact on the Company’s condensed consolidated financial statements. Debt Issuance Costs — In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as a deferred charge asset. The ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015 (fiscal year 2016 for the Company), and interim periods within those fiscal years. Early adoption of the amendment is permitted and the Company has elected to early adopt this ASU effective as of March 31 , 2015. The new guidance was applied on a retrospective basis, wherein the historical condensed consolidated statements of financial condition have been adjusted to reflect the period-specific effects of applying the new guidance. In August 2015, the FASB issued ASU 2015-15, Interest – Presentation and Subsequent Measurement of Debit Issuance Costs Associated with Line-of-Credit Arrangement. The ASU stated that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company reports debt issuance cost related to the senior secured credit facility as a direct deduction from the carrying amount of debt liability. Refer to Note 8 for additional information regarding the impact of ASU 2015-03 and ASU 2015-15 on the Company’s condensed consolidated financial statements. Financ ial Assets and Liabilities — In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities . The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities and is effective for annual reporting periods (including interim periods) beginning after December 15, 2017. Early adoption of the ASU is not permitted, e xcept for the amendments relating to the presentation of the change in the instrument-specific credit risk relating to a liability that an entity has elected to measure at fair value . The Company is currently evaluating the potential effects of the adoption of ASU 2016-01 on its condensed consolidated financial statements. Leases — In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new ASU, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. The liability will be equal to the present value of lease payments. The asset, referred to as a “right-of-use asset” will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. New quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater information regarding the extent of revenue and expense recognized and expected to be recognized from existing contracts. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the potential effects of the adoption of ASU 2016-02 on the Company’s condensed consolidated financial statements. Compensation – Stock Compensation — In March 2016, FASB issued ASU |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings per Share | |
Earnings per share | 3. Earnings per Share Historical earnings per share information is not applicable for reporting periods prior to the consummation of the Reorganization Transactions and the IPO because the ownership structure of the Company did not include a common unit of ownership. Net income available for common stockholders is based on the Company’s approximate 28.1% interest in Virtu Financial. Basic earnings per share are calculated utilizing net income available for common stockholders from the three months ended March 31, 2016 divided by the weighted average number of shares of common stock outstanding during the same period: (in thousands, except for share or per share data) March 31, 2016 Basic earnings per share: Net income available for common stockholders $ Less: Dividends and undistributed earnings allocated to participating securities Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ Weighted average shares of common stock outstanding: Class A Basic Earnings per share $ Diluted earnings per share are calculated utilizing net income available for common stockholders, divided by the weighted average total number of shares of common stock outstanding during the three months ended, March 31, 2016 including additional shares of common stock issued and issuable pursuant to the 2015 Management Incentive Plan (Note 13). (in thousands, except for share or per share data) March 31, 2016 Diluted earnings per share: Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ Weighted average shares of common stock outstanding: Class A Issued and outstanding Issuable pursuant to 2015 Management Incentive Plan Diluted Earnings per share $ |
Tax Receivable Agreements
Tax Receivable Agreements | 3 Months Ended |
Mar. 31, 2016 | |
Tax Receivable Agreements | |
Tax Receivable Agreements | 4. Tax Receivable Agreements In connection with the IPO and the Reorganization Transactions , the Company entered into tax receivable agreements to make payments to certain Virtu Members, as defined in Note 13, that are generally equal to 85% of the applicable cash tax savings, if any, that we actually realize as a result of favorable tax attributes that were and will continue to be available to us as a result of the Reorganization Transactions, exchanges of membership interests for Class A common stock or Class B common stock and payments made under the tax receivable agreements. Payments will occur only after the filing of the U.S. federal and state income tax returns and realization of the cash tax savings from the favorable tax attributes. The first payment is due 120 days after the filing of the Company’s tax return for the year ended December 31, 2015, which was due March 15, 2016, but the due date has been extended until September 15, 2016. Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts. As a result of (i) the purchase of equity interests in Virtu Financial from certain Virtu Members in connection with the Reorganization Transactions, (ii) the purchase of non-voting common interest units in Virtu Financial (the “Virtu Financial Units”) (along with the corresponding shares of our Class C common stock) from certain of the Virtu Members in connection with the IPO, (iii) the purchase of Virtu Financial Units (along with the corresponding shares of our Class C common stock) and the exchange of Virtu Financial Units (along with the corresponding shares of our Class C common stock) for shares of our Class A common stock in connection with the Secondary Offering, the Company recorded a deferred tax asset of $196.5 million associated with the increase in tax basis that results from such events. Payments to certain Virtu Members in respect of the purchases are expected to aggregate to approximately $ 218.4 million, ranging from approximately $8.1 million to $16.8 million per year over the next 15 years. The Company recorded a corresponding reduction to additional paid-in capital of approximately $21.9 million for the difference between the tax receivable agreements liability and the related deferred tax asset. At March 31, 2016 , the Company’s remaining deferred tax asset and the payment liability pursuant to the tax receivable agreements were approximately $183.2 million and $218.4 million, respectively. The amounts recorded as of March 31, 2016 reflect the current estimates and are subject to change after the filing of the Company’s U.S. federal and state income tax returns for the year ended December 31, 2015. For the tax receivable agreements discussed above, the cash savings realized by the Company are computed by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been (i) no increase to the tax basis of the assets of Virtu Financial as a result of the purchase or exchange of Virtu Financial units, (ii) no tax benefit from the tax basis in the intangible assets of Virtu Financial on the date of the IPO and (iii) no tax benefit as a result of the Net Operating Losses (“NOLs”) and other tax attributes at Virtu Financial. Subsequent adjustments of the tax receivable agreements obligations due to certain events (e.g., changes to the expected realization of NOLs or changes in tax rates) will be recognized within operating expenses in the condensed consolidated statements of comprehensive income. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 5. Goodwill and Intangible Assets There were no changes in the carrying amount of goodwill and no goodwill impairment was recognized in the three months ended March 31, 2016 and 2015 . Acquired intangible assets consisted of the following as of March 31, 2016 and December 31, 2015 : As of March 31, 2016 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ $ $ — to 2.5 ETF issuer relationships 9 ETF buyer relationships 9 $ $ $ As of December 31, 2015 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ $ $ — to 2.5 ETF issuer relationships 9 ETF buyer relationships 9 $ $ $ Amortization expense relating to finite-lived intangible assets was approximately $0.05 million and $0.05 million for the three months ended March 31, 2016 and 2015 , respectively. This is included in amortization of purchased intangibles and acquired capitalized software in the accompanying condensed consolidated statements of comprehensive income. |
Receivables from_Payables to Br
Receivables from/Payables to Broker-Dealers and Clearing Organizations | 3 Months Ended |
Mar. 31, 2016 | |
Receivables from/Payables to Broker-Dealers and Clearing Organizations | |
Receivables from/Payables to Broker-Dealers and Clearing Organizations | 6. Receivables from/Payables to Broker-Dealers and Clearing Organizations The following is a summary of receivables from and payables to brokers-dealers and clearing organizations at March 31, 2016 and December 31, 2015 : March 31, December 31, (in thousands) 2016 2015 Assets Due from prime brokers $ $ Deposits with clearing organizations Net equity with futures commission merchants Unsettled trades with clearing organization Securities failed to deliver Total receivables from broker-dealers and clearing organizations $ $ Liabilities Due to prime brokers $ $ Net equity with futures commission merchants Unsettled trades with clearing organization Securities failed to receive — Total payables to broker-dealers and clearing organizations $ $ Included as a deduction from “Due from prime brokers” and “Net equity with futures commission merchants” is the outstanding principal balance on all of the Company’s short-term credit facilities of approximately $223.7 million and $219.1 million as of March 31, 2016 and December 31, 2015 , respectively. The loan proceeds from the credit facilities are available only to meet the initial margin requirements associated with the Company’s ordinary course futures and other trading positions, which are held in the Company’s trading accounts with an affiliate of the respective financial institutions. The credit facilities are fully collateralized by the Company’s trading accounts and deposit accounts with these financial institutions. “Securities failed to deliver” and “Securities failed to receive” include amounts with a clearing organization and other broker-dealers. |
Collateralized Transactions
Collateralized Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Collateralized Transactions | |
Collateralized Transactions | 7. Collateralized Transactions The Company is permitted to sell or repledge securities received as collateral and use these securities to secure repurchase agreements, enter into securities lending transactions or deliver these securities to counterparties or clearing organizations to cover short positions. At March 31, 2016 and December 31, 2015 , substantially all of the securities received as collateral have been repledged. The fair value of the collateralized transactions at March 31, 2016 and December 31, 2015 are summarized as follows: March 31, December 31, (in thousands) 2016 2015 Securities received as collateral: Securities borrowed $ $ Securities purchased under agreements to resell — $ $ In the normal course of business, the Company pledges qualified securities with clearing organizations to satisfy daily margin and clearing fund requirements. Financial instruments owned and pledged, where the counterparty has the right to repledge, at March 31, 2016 and December 31, 2015 consisted of the following: March 31, December 31, (in thousands) 2016 2015 Equities $ $ Exchange traded notes $ $ |
Borrowings
Borrowings | 3 Months Ended |
Mar. 31, 2016 | |
Borrowings | |
Borrowings | 8. Borrowings Broker-Dealer Credit Facilities The Company is a party to two secured credit facilities with the same financial institution to finance overnight securities positions purchased as part of its ordinary course broker-dealer market making activities. One of the facilities (the “Uncommitted Facility”), is provided on an uncommitted basis and is available for borrowings by the Company's broker-dealer subsidiaries up to a maximum amount of $125.0 million. In connection with this credit facility, the Company has entered into demand promissory notes dated February 20, 2013. The loans provided under the Uncommitted Facility are collateralized by the Company's broker-dealer trading and deposit accounts with the same financial institution and, bear interest at a rate set by the financial institution on a daily basis ( 1.26 % at March 31, 2016 and 1.25 % at December 31, 2015 ). The Company is party to another facility (the "Committed Facility") with the same financial institution dated July 22, 2013 and subsequently amended on March 26, 2014, July 21, 2014 and April 24, 2015, which is provided on a committed basis and is available for borrowings by one of the Company's broker-dealer subsidiaries up to a maximum of the lesser of $75.0 million or an amount determined based on agreed advance rates for pledged securities. The Committed Facility is subject to certain financial covenants, including a minimum tangible net worth, a maximum total assets to equity ratio, and a minimum excess net capital, each as defined. The Committed Facility bears interest at a rate per annum at the Company's election equal to either an adjusted LIBOR rate or base rate , plus a margin of 1.25% per annum, and has a term of 364 days. As of March 31, 2016 and December 31, 2015 , the Company had $32.0 million and $45.0 outstanding principal balance on the Uncommitted Facility, respectively. As of March 31, 2016 and December 31, 2015, the Company did not have any outstanding principal balance on or the Committed Facility. Interest expense for the three months ended March 31, 2016 and 2015 was approximately $0.3 million and $0.1 million, respectively. Interest expense is included within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income. Short-Term Credit Facilities The Company maintains short term credit facilities with various prime brokers and other financial institutions from which it receives execution or clearing services. The proceeds of these facilities are used to meet margin requirements associated with the products traded by the Company in the ordinary course, and amounts borrowed are collateralized by the Company’s trading accounts with the applicable financial institution. The aggregate amount available for borrowing under these facilities was $483 million and $478 million, the outstanding principal was $223.7 million and $219.1 million as of March 31, 2016 and December 31, 2015, respectively, which were included within receivables from broker-dealers and clearing organizations within the condensed consolidated statements of financial condition. Borrowings bore interest at a weighted average interest rate of 2.63% and 2.48% per annum, as March 31, 2016 and December 31, 2015 , respectively. Interest expense in relation to the facilities for the three months ended March 31, 2016 and 2015 was approximately $1.7 million and $1.3 million, respectively. Interest expense is recorded within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income. Senior Secured Credit Facility On July 8, 2011, Virtu Financial, its wholly owned subsidiary, VFH Parent LLC (“VFH”), and each of its unregulated domestic subsidiaries entered into the credit agreement (the “Credit Agreement”) among VFH, Virtu Financial, Credit Suisse AG, as administrative agent, and the other parties thereto. The credit facility funded a portion of the MTH acquisition with a term loan in the amount of $320.0 million to VFH. The credit facility was issued at a discount of 2.0% or $313.6 million, net of $6.4 million discount. The credit facility was initially subject to quarterly principal payments beginning on December 31, 2011 with the unpaid principal payable on maturity on July 8, 2016. Under the terms of the loan, VFH is subject to certain financial covenants, including a total net leverage ratio and an interest coverage ratio, as defined in the Credit Agreement. VFH is also subject to contingent principal payments based on excess cash flow, as defined in the Credit Agreement, and certain other triggering events. Borrowings are collateralized by substantially all the assets of the Company, other than the equity interests in and assets of its registered broker-dealer, regulated and foreign subsidiaries, but including 100% of the non-voting stock and 65% of the voting stock of Virtu Financial’s or its domestic subsidiaries’ direct foreign subsidiaries. The Credit Agreement was amended on February 5, 2013, May 1, 2013 and November 8, 2013. The amendments resulted in a decreased interest rate, changes in certain operating covenants, and an increase in principal amount outstanding by $150.0 million on May 1, 2013 and $106.7 million on November 8, 2013, respectively. Additionally, the amendments reduced the annual minimum principal payments from 15% of the original principal amount to approximately 1% of the outstanding principal amount as of November 8, 2013, which was $510.0 million. The terms of the amended credit facility are otherwise substantially similar to the original credit facility, except as set forth below. Term loans outstanding under the Credit Agreement bear interest at a rate per annum at the Company's election equal to either (i) the greatest of (a) the prime rate in effect, (b) the federal funds effective rate (as defined in the Credit Agreement) plus 0.5% (c) the adjusted LIBOR rate (as defined in the Credit Agreement) for a Eurodollar borrowing with an interest period of one month plus 1% , and (d) 2.25% plus, in each case, 3.0% , or (ii) the greater of (x) the adjusted LIBOR rate for the interest period in effect and (y) 1.25% , plus 4.0% . Pursuant to the Amendment (as defined below), each incremental spread was reduced by 0.50% upon the consummation of the Company’s IPO. The rate at March 31, 2016 was 5.25% . Aggregate future required minimum principal payments based on the terms of this loan at March 31, 2016 were as follows: (in thousands) 2016 $ 2017 2018 2019 and thereafter Total maturities of long-term debt $ Net carrying amount of deferred financing fees capitalized in connection with the financing were approximately $4.3 million and $4.7 million, respectively, as of March 31, 2016 and December 31, 2015 , which are included as a deduction to senior secured credit facility in the accompanying condensed consolidated statements of financial condition. Amortization expense related to the deferred financing fees was approximately $0.4 million and $0.3 million for the three months ended March 31, 2016 and 2015 , respectively. Amortization expense is included within financing interest expense on senior secured credit facility in the accompanying condensed consolidated statements of comprehensive income. The net carrying amounts of debt discount were approximately of $1.4 million and $1.5 million, as of March 31, 2016 and December 31, 2015 , respectively. The accreted expenses were approximately $0.1 million and $0.1 million for the three months ended March 31, 2016 and 2015 , respectively. The accretion is included within financing interest expense on senior secured credit facility in the accompanying condensed consolidated statements of comprehensive income. The below table contains a reconciliation of the senior secured credit facility outstanding principal amount to the senior secured credit facility recorded in the condensed consolidated statements of financial position: March 31, December 31, (in thousands) 2016 2015 Senior secured credit facility outstanding principal $ $ Deferred financing fees Discount on senior secured credit facility Senior secured credit facility $ $ On April 15, 2015, the Company, Virtu Financial, and each unregulated domestic subsidiary of Virtu Financial, entered into an amendment agreement to the Credit Agreement, which provided for a revolving credit facility with aggregate commitments by revolving lenders of $100.0 million, available upon the consummation of the IPO and the payment of relevant fees and expenses. The revolving credit facility is secured pari passu with the term loans outstanding under the Credit Agreement and is subject to the same financial covenants and negative covenants. Borrowings under the revolving facility bear interest, at the Company’s election, at either (i) the greatest of (a) the prime rate in effect, (b) the federal funds effective rate plus 0.5% , and (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1% and (d) 2.25% , plus, in each case, 2.0% , or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 1.25% , plus , in each case, 3.0% . The Company will also pay a commitment fee of 0.50% per annum on the average daily unused portion of the facility. As of March 31, 2016 and December 31, 2015 , the Company did not have any outstanding principal balance on the revolving credit facility. Interest expense in relation to this facility for the three months ended March 31, 2016 was $0.1 million. The net carrying amounts for the deferred financing fees capitalized in connection with the revolving credit facility were approximately $0.6 million as of March 31, 2016 , which was included as a deduction to senior secured credit facility in the accompanying condensed consolidated statements of financial condition. Amortization expenses related to the deferred financing fees in connection with the revolving credit facility were approximately $0.1 million for the three months ended March 31, 2016 . |
Financial Assets and Liabilitie
Financial Assets and Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Financial Assets and Liabilities | |
Financial Assets and Liabilities | 9. Financial Assets and Liabilities At March 31, 2016 and December 31, 2015 , substantially all of Company's financial assets and liabilities, except for the senior secured credit facility and certain exchange memberships, were carried at fair value based on published market prices and are marked to market daily or were short-term in nature and were carried at amounts that approximate fair value. The Company determined that the carrying value of the Company's senior secured credit facility approximates fair value as of March 31, 2016 and December 31, 2015 based on the quoted over-the-counter market prices provided by the issuer of the senior secured credit facility, which would be categorized as Level 2. The fair value of equities, U.S. government obligations and exchange traded notes is estimated using recently executed transactions and market price quotations in active markets and are categorized as Level 1 with the exception of inactively traded equities which are categorized as Level 2. Fair value of the Company's derivative contracts is based on the indicative prices obtained from the banks that are counterparties to these contracts, as well as management's own analyses. The indicative prices have been independently validated through the Company's risk management systems, which are designed to check prices with information independently obtained from exchanges and venues where such financial instruments are listed or to compare prices of similar instruments with similar maturities for listed financial futures in foreign exchange. At March 31, 2016 and December 31, 2015 , the Company's derivative contracts and non-U.S. government obligations have been categorized as Level 2. Transfers in or out of levels are recognized based on the beginning fair value of the period in which they occurred. There were no transfers of financial instruments between levels during the three months ended March 31, 2016 and 2015 . Fair value measurements for those items measured on a recurring basis are summarized below as of March 31, 2016 : March 31, 2016 Quoted Prices Significant in Active Other Significant Counterparty Markets for Observable Unobservable and Cash Identical Assets Inputs Inputs Collateral Total Fair (in thousands) (Level 1) (Level 2) (Level 3) Netting Value Assets Financial instruments owned, at fair value: Equity securities $ $ $ — $ — $ U.S. and Non-U.S. government obligations — — — Exchange traded notes — — — Interest rate swaps — — — Currency forwards — — Options — — — $ $ $ — $ $ Financial instruments owned, pledged as collateral: Equity securities $ $ — $ — $ — $ Exchange traded notes — — — $ $ — $ — $ — $ Other Assets Exchange stock $ $ — $ — $ — $ $ $ — $ — $ — $ Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ $ $ — $ — $ Exchange traded notes — — — Interest rate swaps — — — Currency forwards — — Options — — — $ $ $ — $ $ Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2015 : December 31, 2015 Quoted Prices in Active Significant Markets for Other Significant Counterparty Identical Observable Unobservable and Cash Assets Inputs Inputs Collateral Total Fair (in thousands) (Level 1) (Level 2) (Level 3) Netting Value Assets Financial instruments owned, at fair value: Equity securities $ $ $ — $ — $ U.S. and non-U.S. government obligations — — — Exchange traded notes — — — Interest rate swaps — — — Currency forwards — — Options — — — $ $ $ — $ $ Financial instruments owned, pledged as collateral: Equity securities $ $ — $ — $ — $ Exchange traded notes — — — $ $ — $ — $ — $ Other Assets Exchange stock $ $ — $ — $ — $ $ $ — $ — $ — $ Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ $ $ — $ — $ U.S. and non-U.S. government obligations — — — Exchange traded notes — — — Currency forwards — — — Options — — — Interest rate swaps — — — $ $ $ — $ $ The Company does not net securities borrowed and securities loaned, or securities purchased under agreements to resell and securities sold under agreements to repurchase. These financial instruments are presented on a gross basis in the condensed consolidated statements of financial condition. In the tables below, the amounts of financial instruments owned that are not offset in the condensed consolidated statements of financial condition, but could be netted against financial liabilities with specific counterparties under legally enforceable master netting agreements in the event of default, are presented to provide financial statement readers with the Company’s estimate of its net exposure to counterparties for these financial instruments. The following tables set forth the gross and net presentation of certain financial assets and financial liabilities as of March 31, 2016 and December 31, 2015 , pursuant to the requirements of ASU 2011-11 and ASU 2013-01. March 31, 2016 Net Amounts of Gross Amounts Assets Presented Offset in the in the Gross Amounts Not Offset In the Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral (in thousands) Assets Financial Condition Financial Condition Instruments Received Net Amount Offsetting of Financial Assets: Securities borrowed $ $ — $ $ $ $ Trading assets, at fair value: Currency forwards — — Options — — Interest rate swaps — — — Total $ $ $ $ $ $ Net Amounts of Gross Amounts Assets Presented Offset in the in the Gross Amounts Not Offset In the Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral Assets Financial Condition Financial Condition Instruments Received Net Amount Offsetting of Financial Liabilities: Securities loaned $ $ — $ $ $ — $ Trading liabilities, at fair value: Currency forwards — — Options — — Interest rate swaps — — Total $ $ $ $ $ $ December 31, 2015 Net Amounts of Gross Amounts Assets Presented Offset in the in the Gross Amounts Not Offset In the Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral (in thousands) Assets Financial Condition Financial Condition Instruments Received Net Amount Offsetting of Financial Assets: Securities borrowed $ $ — $ $ $ $ Securities purchased under agreements to resell — — — Trading assets, at fair value: Currency forwards — — Options — — Interest rate swaps — — — Total $ $ $ $ $ $ Net Amounts of Liabilities Gross Amounts Presented Offset in the in the Gross Amounts Not Offset In the Condensed Condensed Condensed Consolidated Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral (in thousands) Liabilities Financial Condition Financial Condition Instruments Pledged Net Amount Offsetting of Financial Liabilities: Securities loaned $ $ — $ $ $ — $ Trading liabilities, at fair value: Currency forwards — — — — Options — — Interest rate swaps — — Total $ $ $ $ $ $ Excluded from the fair value and offsetting tables above is net unsettled value on long and short futures contracts in the amounts of $39.0 million and $(8.1) million, which are included within receivables from broker-dealers and clearing organizations as of March 31, 2016 and December 31, 2015 , respectively, and $102.0 million and $46.4 million, which are included within payables to broker-dealers and clearing organizations as of March 31, 2016 and December 31, 2015 , respectively, and would be categorized as Level 1. The following table presents gross obligations for securities lending transactions by remaining contractual maturity and the class of collateral pledged. March 31, 2016 Remaining Contractual Maturity Overnight and Less than 30 - 90 Over 90 (in thousands) Continuous 30 days days Days Total Securities lending transactions: Equity securities $ $ — $ — $ — $ Total $ $ — $ — $ — $ |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments | |
Derivative Instruments | 10. Derivative Instruments The fair value of the Company's derivative instruments on a gross basis consisted of the following at March 31, 2016 and December 31, 2015 : (in thousands) March 31, 2016 December 31, 2015 Derivatives Assets Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Receivables from broker dealers and clearing organizations $ $ $ $ Commodity futures Receivables from broker dealers and clearing organizations Currency futures Receivables from broker dealers and clearing organizations Fixed income futures Receivables from broker dealers and clearing organizations Options Financial instruments owned Currency forwards Financial instruments owned Interest rate swaps Financial instruments owned Derivatives Liabilities Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Payables to broker dealers and clearing organizations $ $ $ $ Commodity futures Payables to broker dealers and clearing organizations Currency futures Payables to broker dealers and clearing organizations Fixed income futures Payables to broker dealers and clearing organizations — — Options Financial instruments sold, not yet purchased Currency forwards Financial instruments sold, not yet purchased Interest rate swaps Financial instruments sold, not yet purchased Amounts included in receivables from and payables to broker-dealers and clearing organizations represent variation margin on long and short futures contracts. The following table summarizes the net gain from derivative instruments not designated as hedging instruments under ASC 815, which are recorded in trading income, net in the accompanying condensed consolidated statements of comprehensive income for the three months ended March 31, 2016 and 2015 . For the Three Months Ended March 31, (in thousands) 2016 2015 Futures $ $ Currency forwards Options Interest rate swaps $ $ |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Taxes | |
Income Taxes | 11. Income Taxes Prior to the consummation of the Reorganization Transactions and the IPO, the Company’s business was historically operated through a limited liability company that is treated as a partnership for U.S. federal income tax purposes, and as such most of its income is not subject to U.S. federal and certain state income taxes. Subsequent to consummation of the Reorganization Transactions and the IPO, the Company is subject to U.S. federal, state and local income tax at the rate applicable to corporations less the rate attributable to the noncontrolling interest in Virtu Financial. These noncontrolling interests are subject to U.S. taxation as partnerships. Accordingly, for the quarter ended March 31, 2016, the income attributable to these noncontrolling interests is reported in the condensed consolidated statements of comprehensive income, but the related U.S. income tax expense attributable to these noncontrolling interests is not reported by the Company as it is the obligation of the individual partners. The Company’s provision for income taxes and effective tax rate were $7.3 million and 12.5% for the three months ended March 31, 2016. Income tax expense is also affected by the differing effective tax rates in foreign, state and local jurisdictions where certain of the Company’s subsidiaries are subject to corporate taxation. Deferred income taxes arise primarily due to the amortization of the deferred tax assets recognized in connection with the IPO (Note 4 and Note 13), differences in the valuation of financial assets and liabilities, and in connection with other temporary differences arising from the deductibility of compensation and depreciation expenses in different time periods for book and income tax return purposes. There are no expiration dates on the deferred tax assets. The provisions of ASC 740 require that carrying amounts of deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically with appropriate consideration given to all positive and negative evidence related to the realization of the deferred tax assets. A valuation allowance against deferred tax assets at the balance sheet date is not considered necessary because it is more likely than not the deferred tax asset will be fully realized. There are no unrecognized tax benefits as of March 31, 2016 and December 31, 2015 . The Company is subject to taxation in U.S. federal, state, local and foreign jurisdictions. As of March 31, 2016, the Company’s tax years for 2012 through 2015 and 2009 through 2015 are subject to examination by U.S. and non-U.S. tax authorities, respectively. |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 3 Months Ended |
Mar. 31, 2016 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | 12. Commitments, Contingencies and Guarantees Litigation The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. The Company has also been, is currently, and may in the future be, the subject of one or more regulatory or self-regulatory organization enforcement actions, including but not limited to targeted and routine regulatory inquiries and investigations involving Regulation NMS, Regulation SHO, capital requirements and other domestic and foreign securities rules and regulations which may from time to time result in the imposition of penalties or fines. The Company has also been the subject of requests for information and documents from the SEC and the State of New York Office of the Attorney General (“NYAG”). Certain of these matters may result, or have resulted, in adverse judgments, settlements, fines, penalties, injunctions or other relief, and the Company’s business or reputation could be negatively impacted if it were determined that disciplinary or other enforcement actions were required. The ultimate effect on the Company from the pending proceedings and claims, if any, is presently unknown. Where available information indicates that it is probable a liability had been incurred at the date of the condensed consolidated financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income. In addition, in December 2015 the enforcement committee of the Autorité des marchés financiers (“AMF”) fined the Company’s European subsidiary in the amount of €5.0 million (approximately $5.4 million) based on its allegations that the subsidiary of MTH engaged in price manipulation and violations of the AMF General Regulation and Euronext Market Rules. In accordance with the foregoing, the Company has accrued an estimated loss of €5.0 million (approximately $5.4 million) in relation to the fine imposed by the AMF. The Company’s management believes that the relevant trading engaged in by the subsidiary of MTH was conducted in accordance with applicable French law and regulations and the Company is pursuing its rights of appeal. Subject to the foregoing, based on information currently available, management believes it is not probable that the resolution of any known matters will result in a material adverse effect on the Company’s financial position, although they might be material for the Company’s results of operations or cash flows for any particular reporting period. Indemnification Arrangements Consistent with standard business practices in the normal course of business, the Company has provided general indemnifications to its managers, officers, employees, and agents against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred by such persons under certain circumstances as more fully disclosed in its operating agreement. The overall maximum amount of the obligations (if any) cannot reasonably be estimated as it will depend on the facts and circumstances that give rise to any future claims. |
Capital Structure
Capital Structure | 3 Months Ended |
Mar. 31, 2016 | |
Capital Structure | |
Capital Structure | 13. Capital Structure The Company has four classes of authorized common stock. The Class A common stock and the Class C common stock have one vote per share. The Class B common stock and the Class D common stock have 10 votes per share. Shares of the Company’s common stock generally vote together as a single class on all matters submitted to a vote of the Company’s stockholders. Initial Public Offering and Reorganization Transactions Prior to the IPO, the Company’s business was conducted through Virtu Financial and its subsidiaries. In a series of transactions that occurred in connection with the IPO, (i) the Company became the sole managing member of Virtu Financial and acquired Virtu Financial units, (ii) certain direct or indirect equityholders of Virtu Financial acquired shares of the Company’s Class A common stock and (iii) certain direct or indirect equityholders of Virtu Financial had their interests reclassified into Virtu Financial units and acquired shares of the Company’s Class C common stock or, in the case of the TJMT Holdings LLC (the “Founder Member”) only, shares of the Company’s Class D common stock (collectively, the "Virtu Members"). On April 21, 2015, the Company completed its IPO of 19,012,112 shares of its Class A common stock, par value $0.00001 per share, including 2,479,840 shares of Class A common stock sold in connection with the full exercise of the option to purchase additional shares granted to the underwriters, at a price to the public of $19.00 per share. The shares began trading on NASDAQ on April 16, 2015 under the ticker symbol “VIRT” and the offering was closed on April 21, 2015. In connection with the Reorganization Transactions, the Company sold 16,532,272 shares of Class A common stock. The Company used its net proceeds from its IPO to purchase shares of Class A common stock from an affiliate of Silver Lake Partners, purchase Virtu Financial Units and corresponding shares of Class C common stock from certain Virtu Members, and for working capital and general corporate purposes. 2015 Management Incentive Plan The Company’s Board of Directors and stockholders adopted the 2015 Management Incentive Plan, which became effective upon consummation of the IPO. The 2015 Management Incentive Plan provides for the grant of stock options, restricted stock units, and other awards based on an aggregate of 12,000,000 shares of Class A common stock, subject to additional sublimits, including limits on the total option grant to any one participant in a single year and the total performance award to any one participant in a single year. Secondary Offering In November 2015, an offering (the “Secondary Offering”) of 6,473,371 shares of the Company’s Class A common stock was completed by the Company and certain selling stockholders affiliated with Silver Lake Partners, one of the Virtu Members. The selling stockholders sold 6,075,837 shares of Class A common stock and the Company sold 397,534 shares of Class A common stock at a price to the public of $22.15 per share. The selling stockholders received all of the net proceeds from the sale of shares of Class A common stock by them in the offering. The Company used its net proceeds from the offering to purchase common units in Virtu Financial (and paired shares of Class C common stock) from one of its non-executive employees at a net price equal to the price paid by the underwriters for shares of its Class A common stock. As a result of the completion of the IPO, the Reorganization Transactions and the Secondary Offering, the Company holds approximately 28.1% interest in Virtu Financial at March 31, 2016. Distributions in Connection with the IPO On January 13, 2016, Virtu Financial made a cash distribution of $5.0 million to certain of the holders of its outstanding equity interests prior to the consummation of the Reorganization Transactions (such holders, the “Virtu Financial Pre-IPO Members”), which was funded from cash on hand. The total amount of cash distributions made to Virtu Financial Pre-IPO Members was $20.0 million since the completion of the IPO. Additionally, Virtu Financial intends to make further cash distributions of up to $30.0 million to the Virtu Financial Pre-IPO Members. The Company expects that these further distributions will be funded from cash on hand and excess cash held as clearing deposits with broker-dealers and clearing organizations. |
Share-based Compensation
Share-based Compensation | 3 Months Ended |
Mar. 31, 2016 | |
Share-based Compensation | |
Share-based Compensation | 14. Share-based Compensation Share-based compensation prior to the Company’s Reorganization completed on April 15, 2015 and IPO commenced on April 16, 2015 Class A-2 profits interests were issued to Employee Holdco LLC (“Employee Holdco”), a holding company which holds the interests on behalf of certain key employees or stakeholders. During the three months ended March 31, 2016 and 2015 , the Company recorded expense relating to non-voting common interest units, which were originally granted as Class A-2 profits interests and were reclassified into non-voting common interest units in connection with the Reorganization Transactions. The non-voting common interest units are subject to the same vesting requirements as the prior Class A-2 profits interests, which were either fully vested upon issuance or vested over a period of up to four years, and in each case are subject to repurchase provisions upon certain termination events. These awards were accounted for as equity awards and were measured at the date of grant. The Company recognized compensation expense of $0.4 million and $0.4 million for the three months ended March 31, 2016 and 2015 , respectively, related to the vesting of non-voting common interest units (formerly Class A-2 profits interests). As of March 31, 2016 , total unrecognized share-based compensation expense related to unvested non-voting common interest units (formerly Class A-2 profits interests), was $1.7 million, and this amount is expected to be recognized over a weighted average period of 1. 4 years. Activity in the non-voting common interest units (formerly Class A-2 profits interests) is as follows: Weighted Weighted Average Number of Average Fair Remaining Interests Value Life Outstanding December 31, 2014 $ Interests granted Interests repurchased — Outstanding March 31, 2015 $ On July 8, 2011, 2,625,000 Class A-2 capital interests were contributed by Class A-2 members to Virtu East MIP LLC (“East MIP”). East MIP issued Class A interests to the members who contributed the Class A-2 capital interests, and Class B interests (“East MIP Class B interests”) to certain key employees. Additionally, Class B interests were issued to Employee Holdco on behalf of certain key employees and stakeholders on July 8, 2011, and on subsequent dates. East MIP Class B interests and Class B interests were each subject to time based vesting over four years and only fully vested upon the consummation of a qualifying capital transaction by the Company, including an IPO. In connection with the Reorganization Transactions, East MIP was liquidated and a portion of the Class A-2 capital interests held by East MIP were contributed to Virtu Employee Holdco on behalf of holders of East MIP Class B Interests (or, in the case of certain employees located outside the United States, contributed to a trust whose trustee is one of the Company’s subsidiaries), which Class A-2 capital interests were subsequently reclassified into non-voting common interest units. The Company recognized $0.3 million compensation expense in respect of non-voting common interest units (formerly Class B interests) vested for the three months ended March 31, 2016 . The compensation expense related to non-voting common interest units (formerly Class B interests) was included within charges related to share based compensation at IPO in the condensed consolidated statements of comprehensive income. As of March 31, 2016 , total unrecognized share-based compensation expense related to unvested non-voting common interest units (formerly Class B interests) was $1.8 million and this amount is expected to be recognized over a weighted average period of 1.8 years. Additionally, in connection with the compensation charges related to non-voting common interest units (formerly Class B interests) mentioned above, the Company capitalized $0.1 million for the three months ended March 31, 2016 . The amortization costs related to these capitalized compensation charges and previously capitalized compensation charges related to East MIP Class B interests and Class B interests were approximately $0.3 million for the three months ended March 31, 2016 . The costs attributable to employees incurred in development of software for internal use were included within charges related to share based compensation at IPO in the condensed consolidated statements of comprehensive income. The fair value of the Class A-2 profit, Class B and East MIP Class B interest was estimated by the Company using an option pricing methodology based on expected volatility, risk-free rates and expected life. Expected volatility is calculated based on companies in the same peer group as the Company. The weighted-average assumptions used by the Company in estimating the grant date fair values of Class A-2 profits, Class B and East MIP Class B interests for the three months ended March 31, 2016 and 2015 are summarized below: Three Months Ended March 31, 2016 2015 Expected life (in years) Weighted average risk free interest rate % % Expected stock price volatility % % Expected dividend yield — — In connection with Reorganization Transactions, all Class A-2 profits interests, Class B and East MIP Class B interests were reclassified into non-voting common interest units. As of March 31, 2016 and December 31, 2015, there were 15,340,683 and 15,394,426 non-voting common interest units outstanding, respectively, and 53,743 non-voting common interest units and corresponding Class C common stock were forfeited or repurchased during the three months ended March 31, 2016. Share-based compensation after the Company’s Reorganization completed on April 15, 2015 and IPO commenced on April 16, 2015 Pursuant to 2015 Management Incentive Plan as described above (Note 13) and in connection with the IPO, non-qualified stock options to purchase shares of Class A Common Stock were granted, each of which vests in equal annual installments over a period of the four years from grant date and expires not later than 10 years from the date of grant. The following table summarizes activity related to stock options for the three months ended March 31, 2016: Options Outstanding Options Exercisable Weighted Average Weighted Average Weighted Average Number of Exercise Price Remaining Number of Exercise Price Options Per Share Contractual Life Options Per Share At December 31, 2015 $ — $ — Granted — — — — — Exercised — — — — — Forfeited or expired — — — — At March 31, 2016 $ — $ — The fair value of the stock option grants was determined through the application of the Black-Scholes-Merton model with the following assumptions: Three Months Ended March 31, 2016 Expected life (in years) Weighted average risk free interest rate % Expected stock price volatility % Expected dividend yield % Weighted average fair value at grant date $ The expected life has been determined based on an average of vesting and contractual period. The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The expected stock price volatility was determined based on historical volatilities of comparable companies. The expected dividend yield was determined based on estimated future dividend payments divided by the IPO stock price. The Company recognized $1.2 million of compensation expense in relation to the stock options for the three months ended March 31, 2016. As of March 31, 2016 , total unrecognized share-based compensation expense related to unvested stock options was $ 19.2 million, and this amount is to be recognized over a weighted average period of 3.1 years. Class A common stock and Restricted Stock Units Pursuant to the 2015 Management Incentive Plan as described above in Note 13, subsequent to the IPO, 576,693 shares of immediately vested Class A common stock and 984,466 restricted stock units were granted, which vest over a period of up to 4 years. The fair value of the Class A common stock and restricted stock units was determined based on a volume weighted average price will be recognized on a straight line basis over the vesting period. The Company accrued compensation expense of $3.4 million and $5.5 million for the three months ended March 31, 2016 and March 31, 2015, respectively, related to Class A common stock expected to be granted as part of year-end compensation. The following table summarizes activity related to the restricted stock units for the three months ended March 31, 2016: Weighted Number of Average Fair Shares Value At December 31, 2015 $ Granted — — Forfeited Vested — — At March 31, 2016 $ The Company recognized $1.6 million of compensation expense in relation to the restricted stock units for the three months ended March 31, 2016. As of March 31, 2016, total unrecognized share-based compensation expense related to unvested restricted stock units was $17.2 million, and this amount is to be recognized over a weighted period of 2.8 years. |
Regulatory Requirement
Regulatory Requirement | 3 Months Ended |
Mar. 31, 2016 | |
Regulatory Requirement | |
Regulatory Requirement | 15. Regulatory Requirement As of March 31, 2016 , two subsidiaries of the Company are subject to the SEC Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital of $1.0 million for each of the two broker-dealer subsidiaries. At March 31, 2016 , the subsidiaries had net capital of approximately $40.6 million and $9.3 million, which was approximately $39.6 million and $8.3 million in excess of its required net capital of $1.0 million and $1.0 million, respectively. At December 31, 2015 , the subsidiaries had net capital of approximately $64.2 million and $8.5 million, which was approximately $63.2 million and $7.5 million in excess of its required net capital of $1.0 million and $1.0 million, respectively. Pursuant to NYSE and NYSE MKT (formerly NYSE Amex) rules, the Company was required to maintain $1.9 million and $ 1.9 million of capital in connection with the operation of the Company's Designated Market Maker (“DMM”) business as of March 31, 2016 and December 31, 2015 , respectively. The required amount is determined under the exchange rules as the greater of $1 million or 15% of the market value of 60 trading units for each symbol in which the Company is registered as the DMM. |
Geographic Information
Geographic Information | 3 Months Ended |
Mar. 31, 2016 | |
Geographic Information | |
Geographic Information | 16. Geographic Information The Company operates its business in the U.S. and internationally, primarily in Europe and Asia. Significant transactions and balances between geographic regions occur primarily as a result of certain Company’s subsidiaries incurring operating expenses such as employee compensation, communications and data processing and other overhead costs, for the purpose of providing execution, clearing and other support services to affiliates. Charges for transactions between regions are designed to approximate full costs. Intra-region income and expenses and related balances have been eliminated in the geographic information presented below to accurately reflect the external business conducted in each geographical region. The revenues are attributed to countries based on the locations of the subsidiaries. The following table presents total revenues by geographic area for the three months ended March 31, 2016 and 2015 : For the Three Months Ended March 31, (in thousands) 2016 2015 Revenues: United States $ $ Australia Ireland Singapore China — Total revenues $ $ |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions | |
Related Party Transactions | 17. Related Party Transactions As of March 31, 2016 , and December 31, 2015 , the Company had a payable of $0.06 million and $0.2 million to its affiliates, respectively, which are included in accounts payable and accrued expenses and other liabilities in condensed consolidated statements of financial condition. In the ordinary course of business, the Company purchases and leases computer equipment and maintenance and support from affiliates of Dell Inc. (“Dell”). Silver Lake and its affiliates have a significant ownership interest in Dell. During the three months ended March 31, 2016 and 2015 , the Company paid $0.9 million and $0.7 million, respectively, to Dell for these purchases and leases. Additionally, the Company entered into a sublease arrangement with an affiliate of the Company’s Founder and Executive Chairman for office space no longer used by the Company in 2015, which was subsequently terminated as of March 31, 2016. The Company received approximately $0.1 million pursuant to the agreement. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events | |
Subsequent Events | 18. Subsequent Events The Company has evaluated subsequent events for adjustment to or disclosure in its condensed consolidated financial statements through the date of the report, and has not identified any recordable or disclosable events, not otherwise reported in these condensed consolidated financial statements or the notes thereto, except for the following: Virtu Financial made distributions to its members, including the Company, in the amount of $40.0 million from April 1, 2016 to May 13, 2016. The Company’s Board of Directors declared a dividend of $ 0.24 per share of Class A common stock and Class B common stock and restricted stock unit, payable on June 15, 2016 to holders of record as of the close of business on June 1, 2016. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Use of Estimates | Use of Estimates The Company's condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which require management to make estimates and assumptions regarding measurements including the fair value of trading assets and liabilities, goodwill and intangibles, compensation accruals, capitalized software, income tax, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ materially from those estimates. |
Earnings Per Share | Earnings Per Share Earnings per share (“EPS”) is calculated on both a basic and diluted basis. Basic EPS excludes dilution and is calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing the net income available for common stockholders by the diluted weighted average shares outstanding for that period. Diluted EPS includes the determinants of the basic EPS and, in addition, reflects the dilutive effect of shares of common stock estimated to be distributed in the future under the Company’s share based compensation plans, with no adjustments to net income available for common stockholders for dilutive potential common shares. The Company grants restricted stock units (“RSUs”), which entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. As a result, the unvested RSUs meet the definition of a participating security requiring the application of the two-class method. Under the two-class method, earnings available to common sharholders, including both distributed and undistributed, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted EPS to be more dilutive than the calculation using the treasury stock method. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers cash equivalents as highly liquid investments with original maturities of less than three months when acquired. The Company maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. |
Securities Borrowed and Securities Loaned | Securities Borrowed and Securities Loaned The Company conducts securities borrowing and lending activities with external counterparties. In connection with these transactions, the Company receives or posts collateral. These transactions are collateralized by cash or securities. In accordance with substantially all of its stock borrow agreements, the Company is permitted to sell or repledge the securities received. Securities borrowed or loaned are recorded based on the amount of cash collateral advanced or received. The initial collateral advanced or received generally approximates or is greater than 102% of the fair value of the underlying securities borrowed or loaned. The Company monitors the fair value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Receivables and payables with the same counterparty are not offset in the condensed consolidated statements of financial condition. For these transactions, the interest received or paid by the Company is recorded gross on an accrual basis under interest and dividends income or interest and dividends expense in the condensed consolidated statements of comprehensive income. |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase | Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase In a repurchase agreement, securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at contract value, plus accrued interest, which approximates fair value. It is the Company's policy that its custodian takes possession of the underlying collateral securities with a fair value approximately equal to the principal amount of the repurchase transaction, including accrued interest. For reverse repurchase agreements, the Company typically requires delivery of collateral with a fair value approximately equal to the carrying value of the relevant assets in the condensed consolidated statements of financial condition. To ensure that the fair value of the underlying collateral remains sufficient, the collateral is valued daily with additional collateral obtained or excess collateral returned, as permitted under contractual provisions. The Company does not net securities purchased under agreements to resell transactions with securities sold under agreements to repurchase transactions entered into with the same counterparty. For these transactions, the interest received or paid by the Company is recorded gross on an accrual basis under interest and dividends income or interest and dividends expense in the condensed consolidated statements of comprehensive income. |
Receivables from/Payables to Broker-dealers and Clearing Organizations | Receivables from/Payables to Broker-dealers and Clearing Organizations Amounts receivable from broker-dealers and clearing organizations may be restricted to the extent that they serve as deposits for securities sold, not yet purchased. At March 31, 2016 and December 31, 2015 , receivables from and payables to broker-dealers and clearing organizations primarily represent amounts due for unsettled trades, open equity in futures transactions, securities failed to deliver or failed to receive, deposits with clearing organizations or exchanges and balances due from or due to prime brokers in relation to the Company’s trading. The Company presents its balances, including outstanding principal balances on all credit facilities, on a net-by-counterparty basis within receivable from and payable to broker-dealers and clearing organizations when the criteria for offsetting are met. In the normal course of business, substantially all of the Company’s securities transactions, money balances, and security positions are transacted with several brokers. The Company is subject to credit risk to the extent any broker with whom it conducts business is unable to fulfill contractual obligations on its behalf. The Company monitors the financial condition of such brokers and does not anticipate any losses from these counterparties. |
Financial Instruments Owned Including Those Pledged as Collateral and Financial Instruments Sold, Not Yet Purchased | Financial Instruments Owned Including Those Pledged as Collateral and Financial Instruments Sold, Not Yet Purchased The Company carries financial instruments owned, including those pledged as collateral, and financial instruments sold, not yet purchased at fair value. Gains and losses arising from financial instrument transactions are recorded net on a trade-date basis in trading income, net, in the condensed consolidated statements of comprehensive income. |
Fair Value Measurements | Fair Value Measurements The Company’s assets and liabilities have been categorized based upon a fair value hierarchy in accordance with ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The recognition of “block discounts” for large holdings of unrestricted financial instruments where quoted prices are readily and regularly available in an active market is prohibited. ASC 820-10 requires a three level hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each financial instrument is based on the assessment of the transparency and reliability of the inputs used in the valuation of such financial instruments at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories based on inputs: Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 — Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Transfers in or out of levels are recognized based on the beginning fair value of the period in which they occurred. There were no transfers of financial instruments between levels during the three months ended March 31, 2016 and 2015 . |
Derivative Instruments | Derivative Instruments Derivative instruments used for trading purposes, including economic hedges of trading instruments, are carried at fair value. Fair values for exchange-traded derivatives, principally futures, are based on quoted market prices. Fair values for over-the-counter derivative instruments, principally forward contracts, are based on the values of the underlying financial instruments within the contract. The underlying derivative instruments are currencies which are actively traded. The Company presents its derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met. Derivative instruments used for economic hedging purposes include futures, forward contracts, and options. Unrealized gains or losses on these derivative instruments are recognized currently in the condensed consolidated statements of comprehensive income as trading income, net. The Company does not apply hedge accounting as defined in ASC 815, Derivatives and Hedging , and accordingly unrealized gains or losses on these derivative instruments are recognized currently in the condensed consolidated statements of comprehensive income as trading income, net. |
Property and Equipment | Property and Equipment Property and equipment are carried at cost, less accumulated depreciation, except for the assets acquired in connection with the acquisition of MTH which were recorded at fair value on the date of acquisition. Depreciation is provided using the straight-line method over estimated useful lives of the underlying asset. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that appreciably extend the useful life of the assets are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. Furniture, fixtures, and equipment are depreciated over three to seven years. Leasehold improvements are amortized over the lesser of the length of the lease term or seven years. |
Capitalized Software | Capitalized Software The Company accounts for the costs of computer software developed or obtained for internal use in accordance with ASC 350-40, Internal-Use Software . The Company capitalizes costs of materials, consultants, and payroll and payroll related costs for employees incurred in developing internal-use software. Costs incurred during the preliminary project and post-implementation stages are charged to expense. Management’s judgment is required in determining the point at which various projects enter the stages at which costs may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. The Company’s capitalized software development costs excluding the charges recognized in relation to the IPO disclosed below were approximately $2.6 million and $2.7 million for the three months ended March 31, 2016 and 2015 , respectively. The related amortization expense was approximately $2.4 million and $2. 5 million for the three months ended March 31, 2016 and 2015 , respectively. Additionally, in connection with charges related to share based compensation recognized upon the IPO (Note 14), the Company capitalized and amortized costs for employees in developing internal-use software, which were included within charges related to share based compensation at IPO in the condensed consolidated statements of comprehensive income. The Company capitalized charges related to IPO share based compensation of approximately $0. 02 million for the three months ended March 31, 2016. Amortization expense associated with IPO related share based compensation that was capitalized was approximately $0.3 million for the three months ended March 31, 2016. Capitalized software development costs and related accumulated amortization are included in property, equipment and capitalized software in the accompanying condensed consolidated statements of financial condition and are amortized over a period of 1.4 to 2.5 years, which represents the estimated useful lives of the underlying software. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the underlying net tangible and intangible assets of the Company’s acquisitions. Goodwill is not amortized but is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company operates as one operating segment, which is the Company’s only reporting unit. The goodwill impairment test is a two-step process. The first step is used to identify potential impairment and compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed. The second step is used to measure the amount of impairment loss, if any, and compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess. The Company tests goodwill for impairment on an annual basis on July 1 and on an interim basis when certain events or circumstances exist. In the impairment test as of July 1, 2015, the primary valuation method used to estimate the fair value of the Company’s reporting unit was the market capitalization approach based on the market price of its Class A Common Stock, which the Company’s management believes to be an appropriate indicator of its fair value. Based on the results of the impairment tests performed, no goodwill impairment was recognized during the three months ended March 31, 2016 and 2015 , respectively. |
Intangible Assets | Intangible Assets The Company amortizes finite-lived intangible assets over their estimated useful lives. Finite-lived intangible assets are tested for impairment annually or when impairment indicators are present, and if impaired, written down to fair value. |
Exchange Memberships and Stock | Exchange Memberships and Stock Exchange memberships are recorded at cost or, if any other than temporary impairment in value has occurred, at a value that reflects management’s estimate of fair value, in accordance with ASC 940-340, Financial Services — Broker and Dealers. Exchange stock includes shares that entitle the Company to certain trading privileges. The shares are marked to market with the corresponding gain or loss recorded under operations and administrative in the condensed consolidated statements of comprehensive income. The Company’s exchange memberships and stock are included in other assets in the condensed consolidated statements of financial condition. |
Trading Income | Trading Income Trading income is comprised of changes in the fair value of trading assets and liabilities (i.e., unrealized gains and losses) and realized gains and losses on trading assets and liabilities. Trading gains and losses on financial instruments owned and financial instruments sold, not yet purchased are recorded on the trade date and reported on a net basis in the condensed consolidated statements of comprehensive income. |
Interest and Dividends Income/Interest and Dividends Expense | Interest and Dividends Income/Interest and Dividends Expense Interest income and interest expense are accrued in accordance with contractual rates. Interest income consists of interest earned on collateralized financing arrangements and on cash held by brokers. Interest expense includes interest expense from collateralized transactions, margin and related lines of credit. Dividends on financial instruments owned including those pledged as collateral and financial instruments sold, not yet purchased are recorded on the ex-dividend date and interest is recognized on the accrual basis. |
Technology Services | Technology Services Technology services revenues consist of fees earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and provision of associated management and hosting services. These fees include both upfront and annual recurring fees. Revenue from technology services is recognized once persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue is recognized ratably over the contractual service period. |
Rebates | Rebates Rebates consist of volume discounts, credits or payments received from exchanges or other market places related to the placement and/or removal of liquidity from the order flow in the marketplace. Rebates are recorded on an accrual basis and included net within brokerage, exchange and clearance fees in the accompanying condensed consolidated statements of comprehensive income. |
Income Taxes | Income Taxes Subsequent to consummation of the Reorganization Transactions and the IPO, the Company is subject to U.S. federal, state and local income taxes on its taxable income. The Company's subsidiaries are subject to income taxes in the respective jurisdictions (including foreign jurisdictions) in which they operate. Prior to the consummation of the Reorganization Transactions and the IPO, no provision for United States federal, state and local income tax was required, as Virtu Financial is a limited liability company and is treated as a pass-through entity for United States federal, state, and local income tax purposes. The provision for income tax is comprised of current tax and deferred tax. Current tax represents the tax on current year tax returns, using tax rates enacted at the balance sheet date. The deferred tax assets are recognized in full and then reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be recognized. The Company recognizes the tax benefit from an uncertain tax position, in accordance with ASC 740, Income Taxes only if it is more likely than not that the tax position will be sustained on examination by the applicable taxing authority, including resolution of the appeals or litigation processes, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position are measured based on the largest benefit for each such position that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Many factors are considered when evaluating and estimating the tax positions and tax benefits. Such estimates involve interpretations of regulations, rulings, case law, etc. and are inherently complex. The Company’s estimates may require periodic adjustments and may not accurately anticipate actual outcomes as resolution of income tax treatments in individual jurisdictions typically would not be known for several years after completion of any fiscal year. The Company has determined that there are no uncertain tax positions that would have a material impact on the Company’s financial position as of March 31, 2016 and December 31, 2015 or the results of operations or cash flows for the three months ended March 31, 2016 and 2015 . |
Comprehensive Income and Foreign Currency Translation | Comprehensive Income and Foreign Currency Translation The Company’s operating results are reported in the condensed consolidated statements of comprehensive income pursuant to Accounting Standards Update 2011-05, Comprehensive Income. Comprehensive income consists of two components: net income and other comprehensive income (“OCI”). OCI is comprised of revenues, expenses, gains and losses that are reported in the comprehensive income section of the condensed consolidated statements of comprehensive income, but are excluded from reported net income. The Company’s OCI is comprised of foreign currency translation adjustments. Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at period-end exchange rates, and revenues and expenses are translated at weighted average exchange rates for the period. Gains and losses resulting from translating foreign currency financial statements, net of related tax effects, are reflected in accumulated other comprehensive income, a separate component of stockholders’ equity. |
Share-Based Compensation | Share-Based Compensation The Company accounts for share-based compensation transactions with employees under the provisions of ASC 718, Compensation: Stock Compensation. Share-based compensation transactions with employees are measured based on the fair value of equity instruments issued. The fair value of awards issued for compensation prior to the Reorganization Transactions and the IPO was determined by management, with the assistance of an independent third party valuation firm, using a projected annual forfeiture rate, where applicable, on the date of grant. Share-based awards issued for compensation in connection with or subsequent to the Reorganization Transaction and the IPO pursuant to the VFI 2015 Management Incentive Plan (the “2015 Management Incentive Plan”) were in the form of stock options, Class A common stock and restricted stock units. The fair value of the stock option grants is determined through the application of the Black-Scholes-Merton model. The fair value of the Class A common stock and restricted stock units are determined based on the volume weighted average price for the three days preceding the grant, and with respect to the restricted stock units, a projected annual forfeiture rate. The fair value of share-based awards granted to employees is expensed based on the vesting conditions and are recognized on a straight line basis over the vesting period . The Company records as treasury stock shares repurchased from its employees for the purpose of settling tax liabilities incurred upon the issuance of common stock, the vesting of restricted stock units or the exercise of stock options. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Revenue - In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 defers the effective date of ASU No. 2014-09 by one year for public companies. ASU 2015-14 applies to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has not yet determined the potential effects of the adoption of ASU 2014-09 and ASU 2015-14 on its condensed consolidated financial statements. Repurchase Agreements - In June 2014, the FASB released ASU No. 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The amendment changes the accounting for repurchase financing transactions and for repurchase-to-maturity transactions to secured borrowing accounting. The accounting changes were effective for the Company beginning in the first quarter of 2015. The effect of the accounting changes on transactions outstanding as of the effective date is required to be presented as a cumulative effect adjustment to retained earnings as of January 1, 2015. The amendment also requires additional disclosures for repurchase agreements and securities lending transactions regarding the class of collateral pledged and the remaining contractual maturity of the agreements, as well as a discussion on the potential risks associated with the agreements and the related collateral pledged, as well as how those risks are managed. Additional disclosures are required for repurchase agreements, securities lending transactions, sales with a total return swap, and other similar transfers of financial assets that are accounted for as a sale. The Company adopted this ASU during the year ended December 31, 2015. This ASU did not have an impact on the Company’s condensed consolidated financial statements except for the additional disclosures described in Note 9. Compensation - In June 2014, the Emerging Issues Task Force (the “EITF”) of the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendment requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015 (fiscal year 2016 for the Company). The Company adopted this ASU during the year ended December 31, 2015. This ASU did not have an impact on the Company’s condensed consolidated financial statements. Going Concern — In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance will explicitly require management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016 (fiscal year 2017 for the Company). Earlier adoption is permitted. The Company will implement this new standard on the required effective date. This ASU is not expected to have an impact on the Company’s condensed consolidated financial statements. Hybrid Financial Instruments — In November 2014, the EITF of the FASB issued ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity. The ASU requires that for hybrid financial instruments issued in the form of a share, an entity should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. An entity should use judgment based on an evaluation of all the relevant terms and features, and should consider the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted this ASU during the year ended December 31, 2015. This ASU did not have an impact on the Company’s condensed consolidated financial statements. Debt Issuance Costs — In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as a deferred charge asset. The ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015 (fiscal year 2016 for the Company), and interim periods within those fiscal years. Early adoption of the amendment is permitted and the Company has elected to early adopt this ASU effective as of March 31 , 2015. The new guidance was applied on a retrospective basis, wherein the historical condensed consolidated statements of financial condition have been adjusted to reflect the period-specific effects of applying the new guidance. In August 2015, the FASB issued ASU 2015-15, Interest – Presentation and Subsequent Measurement of Debit Issuance Costs Associated with Line-of-Credit Arrangement. The ASU stated that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company reports debt issuance cost related to the senior secured credit facility as a direct deduction from the carrying amount of debt liability. Refer to Note 8 for additional information regarding the impact of ASU 2015-03 and ASU 2015-15 on the Company’s condensed consolidated financial statements. Financ ial Assets and Liabilities — In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities . The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities and is effective for annual reporting periods (including interim periods) beginning after December 15, 2017. Early adoption of the ASU is not permitted, e xcept for the amendments relating to the presentation of the change in the instrument-specific credit risk relating to a liability that an entity has elected to measure at fair value . The Company is currently evaluating the potential effects of the adoption of ASU 2016-01 on its condensed consolidated financial statements. Leases — In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new ASU, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. The liability will be equal to the present value of lease payments. The asset, referred to as a “right-of-use asset” will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. New quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater information regarding the extent of revenue and expense recognized and expected to be recognized from existing contracts. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the potential effects of the adoption of ASU 2016-02 on the Company’s condensed consolidated financial statements. Compensation – Stock Compensation — In March 2016, FASB issued ASU 2016-09, Employee Share-Based Payment Accounting Improvements. The ASU makes a number of changes to accounting for share based payment programs, including the following principal changes: providing that all excess tax benefits and tax deficiencies arising from share-based payment programs should be recognized as income tax expense or benefit in the income statement; allowing companies to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (as is provided under current GAAP) or account for forfeitures when they occur; and providing that partial cash settlement of an award for tax-withholding purposes would not result, by itself, in liability classification of the award provided the amount withheld does not exceed the maximum statutory tax rate (as opposed to the current requirement which specifies the minimum statutory tax rate) for an employee in the applicable jurisdictions. The ASU also provides guidance on the classification of various items related to share based payment programs in the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the potential effects of adoption of ASU 2016-09 on the Company’s condensed consolidated financial statements |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings per Share | |
Schedule of basic earnings per share | (in thousands, except for share or per share data) March 31, 2016 Basic earnings per share: Net income available for common stockholders $ Less: Dividends and undistributed earnings allocated to participating securities Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ Weighted average shares of common stock outstanding: Class A Basic Earnings per share $ |
Schedule of diluted earnings per share | (in thousands, except for share or per share data) March 31, 2016 Diluted earnings per share: Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ Weighted average shares of common stock outstanding: Class A Issued and outstanding Issuable pursuant to 2015 Management Incentive Plan Diluted Earnings per share $ |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets | |
Schedule of acquired intangible assets | As of March 31, 2016 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ $ $ — to 2.5 ETF issuer relationships 9 ETF buyer relationships 9 $ $ $ As of December 31, 2015 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ $ $ — to 2.5 ETF issuer relationships 9 ETF buyer relationships 9 $ $ $ |
Receivables from_Payables to 29
Receivables from/Payables to Broker-Dealers and Clearing Organizations (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Receivables from/Payables to Broker-Dealers and Clearing Organizations | |
Summary of receivables from and payables to brokers-dealers and clearing organizations | March 31, December 31, (in thousands) 2016 2015 Assets Due from prime brokers $ $ Deposits with clearing organizations Net equity with futures commission merchants Unsettled trades with clearing organization Securities failed to deliver Total receivables from broker-dealers and clearing organizations $ $ Liabilities Due to prime brokers $ $ Net equity with futures commission merchants Unsettled trades with clearing organization Securities failed to receive — Total payables to broker-dealers and clearing organizations $ $ |
Collateralized Transactions (Ta
Collateralized Transactions (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Collateralized Transactions | |
Summary of the fair value of collateralized transactions | March 31, December 31, (in thousands) 2016 2015 Securities received as collateral: Securities borrowed $ $ Securities purchased under agreements to resell — $ $ |
Schedule of financial instruments owned and pledged, where counterparty has right to repledge | March 31, December 31, (in thousands) 2016 2015 Equities $ $ Exchange traded notes $ $ |
Borrowings (Tables)
Borrowings (Tables) - Senior Secured Credit Facility | 3 Months Ended |
Mar. 31, 2016 | |
Schedule of aggregate future required principal payments based on terms of loan | Aggregate future required minimum principal payments based on the terms of this loan at March 31, 2016 were as follows: (in thousands) 2016 $ 2017 2018 2019 and thereafter Total maturities of long-term debt $ |
Schedule of reconciliation of the senior secured credit facility | March 31, December 31, (in thousands) 2016 2015 Senior secured credit facility outstanding principal $ $ Deferred financing fees Discount on senior secured credit facility Senior secured credit facility $ $ |
Financial Assets and Liabilit32
Financial Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Financial Assets and Liabilities | |
Summary of fair value measurements measured on a recurring basis | Fair value measurements for those items measured on a recurring basis are summarized below as of March 31, 2016 : March 31, 2016 Quoted Prices Significant in Active Other Significant Counterparty Markets for Observable Unobservable and Cash Identical Assets Inputs Inputs Collateral Total Fair (in thousands) (Level 1) (Level 2) (Level 3) Netting Value Assets Financial instruments owned, at fair value: Equity securities $ $ $ — $ — $ U.S. and Non-U.S. government obligations — — — Exchange traded notes — — — Interest rate swaps — — — Currency forwards — — Options — — — $ $ $ — $ $ Financial instruments owned, pledged as collateral: Equity securities $ $ — $ — $ — $ Exchange traded notes — — — $ $ — $ — $ — $ Other Assets Exchange stock $ $ — $ — $ — $ $ $ — $ — $ — $ Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ $ $ — $ — $ Exchange traded notes — — — Interest rate swaps — — — Currency forwards — — Options — — — $ $ $ — $ $ Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2015 : December 31, 2015 Quoted Prices in Active Significant Markets for Other Significant Counterparty Identical Observable Unobservable and Cash Assets Inputs Inputs Collateral Total Fair (in thousands) (Level 1) (Level 2) (Level 3) Netting Value Assets Financial instruments owned, at fair value: Equity securities $ $ $ — $ — $ U.S. and non-U.S. government obligations — — — Exchange traded notes — — — Interest rate swaps — — — Currency forwards — — Options — — — $ $ $ — $ $ Financial instruments owned, pledged as collateral: Equity securities $ $ — $ — $ — $ Exchange traded notes — — — $ $ — $ — $ — $ Other Assets Exchange stock $ $ — $ — $ — $ $ $ — $ — $ — $ Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ $ $ — $ — $ U.S. and non-U.S. government obligations — — — Exchange traded notes — — — Currency forwards — — — Options — — — Interest rate swaps — — — $ $ $ — $ $ |
Summary of netting of certain financial assets and financial liabilities | March 31, 2016 Net Amounts of Gross Amounts Assets Presented Offset in the in the Gross Amounts Not Offset In the Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral (in thousands) Assets Financial Condition Financial Condition Instruments Received Net Amount Offsetting of Financial Assets: Securities borrowed $ $ — $ $ $ $ Trading assets, at fair value: Currency forwards — — Options — — Interest rate swaps — — — Total $ $ $ $ $ $ Net Amounts of Gross Amounts Assets Presented Offset in the in the Gross Amounts Not Offset In the Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral Assets Financial Condition Financial Condition Instruments Received Net Amount Offsetting of Financial Liabilities: Securities loaned $ $ — $ $ $ — $ Trading liabilities, at fair value: Currency forwards — — Options — — Interest rate swaps — — Total $ $ $ $ $ $ December 31, 2015 Net Amounts of Gross Amounts Assets Presented Offset in the in the Gross Amounts Not Offset In the Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral (in thousands) Assets Financial Condition Financial Condition Instruments Received Net Amount Offsetting of Financial Assets: Securities borrowed $ $ — $ $ $ $ Securities purchased under agreements to resell — — — Trading assets, at fair value: Currency forwards — — Options — — Interest rate swaps — — — Total $ $ $ $ $ $ Net Amounts of Liabilities Gross Amounts Presented Offset in the in the Gross Amounts Not Offset In the Condensed Condensed Condensed Consolidated Gross Amounts Consolidated Consolidated Statement of Financial Condition of Recognized Statement of Statement of Financial Cash Collateral (in thousands) Liabilities Financial Condition Financial Condition Instruments Pledged Net Amount Offsetting of Financial Liabilities: Securities loaned $ $ — $ $ $ — $ Trading liabilities, at fair value: Currency forwards — — — — Options — — Interest rate swaps — — Total $ $ $ $ $ $ |
Summary of gross obligations for repurchase agreement and securities borrowed transactions by remaining contractual maturity and class of collateral pledged | March 31, 2016 Remaining Contractual Maturity Overnight and Less than 30 - 90 Over 90 (in thousands) Continuous 30 days days Days Total Securities lending transactions: Equity securities $ $ — $ — $ — $ Total $ $ — $ — $ — $ |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments | |
Schedule of fair value of derivative instruments on a gross basis | (in thousands) March 31, 2016 December 31, 2015 Derivatives Assets Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Receivables from broker dealers and clearing organizations $ $ $ $ Commodity futures Receivables from broker dealers and clearing organizations Currency futures Receivables from broker dealers and clearing organizations Fixed income futures Receivables from broker dealers and clearing organizations Options Financial instruments owned Currency forwards Financial instruments owned Interest rate swaps Financial instruments owned Derivatives Liabilities Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Payables to broker dealers and clearing organizations $ $ $ $ Commodity futures Payables to broker dealers and clearing organizations Currency futures Payables to broker dealers and clearing organizations Fixed income futures Payables to broker dealers and clearing organizations — — Options Financial instruments sold, not yet purchased Currency forwards Financial instruments sold, not yet purchased Interest rate swaps Financial instruments sold, not yet purchased |
Schedule of net gain from derivative instruments not designated as hedging instruments | For the Three Months Ended March 31, (in thousands) 2016 2015 Futures $ $ Currency forwards Options Interest rate swaps $ $ |
Share-based Compensation (Table
Share-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Non-voting common interest units (formerly Class A 2 profits interests) | |
Schedule of activity | Weighted Weighted Average Number of Average Fair Remaining Interests Value Life Outstanding December 31, 2014 $ Interests granted Interests repurchased — Outstanding March 31, 2015 $ |
East MIP | Class A-2 profits interests and Class B interests | |
Schedule of weighted-average assumptions used in estimating the grant date fair values | Three Months Ended March 31, 2016 2015 Expected life (in years) Weighted average risk free interest rate % % Expected stock price volatility % % Expected dividend yield — — |
Non-qualified stock options | |
Schedule of activity | Options Outstanding Options Exercisable Weighted Average Weighted Average Weighted Average Number of Exercise Price Remaining Number of Exercise Price Options Per Share Contractual Life Options Per Share At December 31, 2015 $ — $ — Granted — — — — — Exercised — — — — — Forfeited or expired — — — — At March 31, 2016 $ — $ — |
Schedule of weighted-average assumptions used in estimating the grant date fair values | Three Months Ended March 31, 2016 Expected life (in years) Weighted average risk free interest rate % Expected stock price volatility % Expected dividend yield % Weighted average fair value at grant date $ |
Restricted stock units | |
Schedule of activity related to restricted stock units | Weighted Number of Average Fair Shares Value At December 31, 2015 $ Granted — — Forfeited Vested — — At March 31, 2016 $ |
Geographic Information (Tables)
Geographic Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Geographic Information | |
Schedule of total revenues by geographic area | For the Three Months Ended March 31, (in thousands) 2016 2015 Revenues: United States $ $ Australia Ireland Singapore China — Total revenues $ $ |
Organization and Basis of Pre36
Organization and Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2016segmentitem | |
Number of businesses Company is managed and operated as | item | 1 |
Number of reportable segments | segment | 1 |
Virtu Financial | |
Ownership interest (as a percent) | 28.10% |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Property and Equipment and Capitalized Software | ||
Amortization expense related to share based compensation | $ 2,400 | $ 2,500 |
Securities Borrowed and Securities Loaned | ||
Minimum initial collateral advanced or received expressed as a percentage of fair value of the underlying securities borrowed or loaned | 102.00% | |
Fair Value Measurements | ||
Transfers of financial instruments between levels | $ 0 | $ 0 |
Class B interests | East MIP | ||
Property and Equipment and Capitalized Software | ||
Amortization expense related to share based compensation | 300 | |
Capitalized software development costs recognized upon the IPO | $ 20 | |
Furniture, fixtures and equipment | Minimum | ||
Property and Equipment and Capitalized Software | ||
Estimated useful lives | 3 years | |
Furniture, fixtures and equipment | Maximum | ||
Property and Equipment and Capitalized Software | ||
Estimated useful lives | 7 years | |
Leasehold improvements | ||
Property and Equipment and Capitalized Software | ||
Estimated useful lives | 7 years | |
Capitalized software | Minimum | ||
Property and Equipment and Capitalized Software | ||
Estimated useful lives | 1 year 4 months 24 days | |
Capitalized software | Maximum | ||
Property and Equipment and Capitalized Software | ||
Estimated useful lives | 2 years 6 months |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Goodwil and Income Taxes (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016USD ($)item | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Goodwill | |||
Number of operating segments | item | 1 | ||
Goodwill impairment | $ 0 | $ 0 | |
Income Taxes | |||
Uncertain tax positions | $ 0 | $ 0 |
Earnings Per Share - Basic (Det
Earnings Per Share - Basic (Details) $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($)$ / sharesshares | |
Basic earnings per share | |
Net income available for common stockholders | $ 10,348 |
Less: Dividends and undistributed earnings allocated to participating securities | (221) |
Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities | $ 10,127 |
Weighted average shares of common stock outstanding | |
Outstanding | shares | 38,210,209 |
Basic Earnings per share | $ / shares | $ 0.27 |
Class A | |
Weighted average shares of common stock outstanding | |
Outstanding | shares | 38,210,209 |
Basic Earnings per share | $ / shares | $ 0.27 |
Virtu Financial | |
Weighted average shares of common stock outstanding | |
Ownership interest (as a percent) | 28.10% |
Earnings Per Share - Diluted (D
Earnings Per Share - Diluted (Details) $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($)$ / sharesshares | |
Diluted earnings per share | |
Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities | $ | $ 10,127 |
Weighted average shares of common stock outstanding | |
Issued and outstanding | 38,210,209 |
Weighted average number of shares of common stock outstanding | 38,489,489 |
Diluted Earnings per share | $ / shares | $ 0.26 |
Class A | |
Weighted average shares of common stock outstanding | |
Issued and outstanding | 38,210,209 |
2015 Management Incentive Plan | Class A | |
Weighted average shares of common stock outstanding | |
Issuable pursuant to 2015 Management Incentive Plan | 279,280 |
Tax Receivable Agreements (Deta
Tax Receivable Agreements (Details) $ in Thousands | Apr. 15, 2015USD ($) | Dec. 31, 2015USD ($) | Mar. 31, 2016USD ($) |
Tax Receivable Agreements | |||
Payment on applicable cash tax savings (as a percent) | 85 | ||
First payment due after filing of company's tax return | 120 days | ||
Deferred tax assets related to exchange of units | $ 196,500 | ||
Payments to Virtu Post-IPO Members and Investor Post-IPO Stockholders | 218,400 | ||
Minimum tax receivable agreement obligation over the agreed period | 8,100 | ||
Maximum tax receivable agreement obligation over the agreed period | $ 16,800 | ||
Period over which the obligations are to be settled | 15 years | ||
Reduction of paid-in capital for the difference between TRA liability and related deferred tax asset. | $ 21,900 | ||
Deferred tax assets | $ 183,200 | ||
Tax receivable agreement obligations | $ 218,399 | $ 218,399 |
Goodwill and Intangible Asset42
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Goodwill and Intangible Assets | ||
Changes in carrying amount of goodwill | $ 0 | $ 0 |
Goodwill impairment | $ 0 | $ 0 |
Goodwill and Intangible Asset43
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Acquired intangible assets | |||
Gross Carrying Amount | $ 111,900 | $ 111,900 | |
Accumulated Amortization | 110,750 | 110,697 | |
Net Carrying Amount | 1,150 | 1,203 | |
Amortization expense relating to finite-lived intangible assets | 53 | $ 53 | |
Purchased technology | |||
Acquired intangible assets | |||
Gross Carrying Amount | 110,000 | 110,000 | |
Accumulated Amortization | $ 110,000 | $ 110,000 | |
Purchased technology | Minimum | |||
Acquired intangible assets | |||
Useful Lives | 1 year 4 months 24 days | 1 year 4 months 24 days | |
Purchased technology | Maximum | |||
Acquired intangible assets | |||
Useful Lives | 2 years 6 months | 2 years 6 months | |
ETF issuer relationships | |||
Acquired intangible assets | |||
Gross Carrying Amount | $ 950 | $ 950 | |
Accumulated Amortization | 375 | 349 | |
Net Carrying Amount | $ 575 | $ 601 | |
Useful Lives | 9 years | 9 years | |
ETF buyer relationships | |||
Acquired intangible assets | |||
Gross Carrying Amount | $ 950 | $ 950 | |
Accumulated Amortization | 375 | 348 | |
Net Carrying Amount | $ 575 | $ 602 | |
Useful Lives | 9 years | 9 years |
Receivables from_Payables to 44
Receivables from/Payables to Broker-Dealers and Clearing Organizations (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Assets | ||
Due from prime brokers | $ 173,054 | $ 101,372 |
Deposits with clearing organizations | 25,862 | 31,908 |
Net equity with futures commission merchants | 182,496 | 174,615 |
Unsettled trades with clearing organization | 153,937 | 102,890 |
Securities failed to deliver | 94,562 | 65,751 |
Total receivables from broker-dealers and clearing organizations | 629,911 | 476,536 |
Liabilities | ||
Due to prime brokers | 338,617 | 294,691 |
Net equity with futures commission merchants | 45,762 | 46,537 |
Unsettled trades with clearing organization | 51,572 | 145,376 |
Securities failed to receive | 7 | |
Total payables to broker-dealers and clearing organizations | 435,958 | 486,604 |
Outstanding principal balance | $ 223,700 | $ 219,100 |
Collateralized Transactions (De
Collateralized Transactions (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Financial instruments owned and pledged | ||
Financial instruments owned and pledged, where counterparty has right to repledge | $ 247,652 | $ 259,175 |
Securities received as collateral: | ||
Securities borrowed | 639,071 | 437,220 |
Securities purchased under agreements to resell | 14,985 | |
Total amounts related to collateralized transactions | 639,071 | 452,205 |
Equity securities | ||
Financial instruments owned and pledged | ||
Financial instruments owned and pledged, where counterparty has right to repledge | 244,868 | 232,731 |
Exchange traded notes | ||
Financial instruments owned and pledged | ||
Financial instruments owned and pledged, where counterparty has right to repledge | $ 2,784 | $ 26,444 |
Borrowings - Broker-Dealer Cred
Borrowings - Broker-Dealer Credit Facilities (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2016USD ($)item | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | Apr. 24, 2015USD ($) | |
Credit Facilities | ||||
Interest expense | $ 7,101 | $ 7,602 | ||
Broker-Dealer Credit Facilities | ||||
Credit Facilities | ||||
Number of secured credit facilities | item | 2 | |||
Broker-Dealer Credit Facility on an uncommitted basis | ||||
Credit Facilities | ||||
Maximum borrowing capacity | $ 125,000 | |||
Interest rate (as a percent) | 1.26% | 1.25% | ||
Interest expense | $ 300 | $ 100 | ||
Outstanding principal balance | $ 32,000 | $ 45,000 | ||
Broker-Dealer Credit Facility on committed basis | ||||
Credit Facilities | ||||
Maximum borrowing capacity | $ 75,000 | |||
Credit facility term | 364 days | |||
Outstanding principal balance | $ 0 | $ 0 | ||
Broker-Dealer Credit Facility on committed basis | LIBOR rate | ||||
Credit Facilities | ||||
Interest rate margin (as a percent) | 1.25% | |||
Broker-Dealer Credit Facility on committed basis | Base rate | ||||
Credit Facilities | ||||
Interest rate margin (as a percent) | 1.25% |
Borrowings - Short-Term Credit
Borrowings - Short-Term Credit Facilities (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Short-Term Credit Facilities | |||
Interest expense | $ 7,101 | $ 7,602 | |
Short-Term Credit Facilities | |||
Short-Term Credit Facilities | |||
Maximum borrowing capacity | 483,000 | $ 478,000 | |
Outstanding principal balance | $ 223,700 | $ 219,100 | |
Weighted average interest rate | 2.63% | 2.48% | |
Interest expense | $ 1,700 | $ 1,300 |
Borrowings - Senior Secured Cre
Borrowings - Senior Secured Credit Facility (Details) - USD ($) | Apr. 15, 2015 | Nov. 08, 2013 | May. 01, 2013 | Jul. 08, 2011 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 |
Credit Facilities | |||||||
Interest expense | $ 7,101,000 | $ 7,602,000 | |||||
Reconciliation of senior secured credit facility | |||||||
Senior secured credit facility | 492,782,000 | $ 493,589,000 | |||||
Senior Secured Credit Facility | |||||||
Credit Facilities | |||||||
Face amount | $ 320,000,000 | ||||||
Discount (as a percent) | 2.00% | ||||||
Issued amount | $ 313,600,000 | ||||||
Discount | $ 6,400,000 | $ 1,401,000 | 1,498,000 | ||||
Percentage of the non-voting stock of the entity's domestic subsidiaries' direct foreign subsidiaries collateralized | 100.00% | ||||||
Percentage of the voting stock of the entity's domestic subsidiaries' direct foreign subsidiaries as collateral | 65.00% | ||||||
Increase in principal amount outstanding | $ 106,700,000 | $ 150,000,000 | |||||
Minimum principal payments as a percentage of original principal amount | 15.00% | ||||||
Minimum principal payments as a percentage of outstanding principal amount | 1.00% | ||||||
Outstanding principal amount | $ 510,000,000 | $ 498,525,000 | |||||
Reduction in incremental spread upon consummation of qualifying initial public offering (as a percent) | 0.50% | ||||||
Interest rate (as a percent) | 5.25% | ||||||
Reconciliation of senior secured credit facility | |||||||
Senior secured credit facility outstanding principal | $ 498,525,000 | 499,800,000 | |||||
Deferred financing fees | (4,342,000) | (4,713,000) | |||||
Discount | $ (6,400,000) | (1,401,000) | (1,498,000) | ||||
Senior secured credit facility | 492,782,000 | 493,589,000 | |||||
Aggregate future required minimum principal payments based on the terms of loan | |||||||
2,016 | 3,825,000 | ||||||
2,017 | 5,100,000 | ||||||
2,018 | 5,100,000 | ||||||
2019 and thereafter | 484,500,000 | ||||||
Total maturities of long-term debt | $ 510,000,000 | 498,525,000 | |||||
Amortization expense related to the deferred financing fees | 400,000 | 300,000 | |||||
Accretion related to the net carrying amount of debt discount | $ 100,000 | $ 100,000 | |||||
Senior Secured Credit Facility | Prime rate | |||||||
Credit Facilities | |||||||
Additional interest margin added to fixed and variable rates (as a percent) | 3.00% | ||||||
Senior Secured Credit Facility | Federal funds effective rate | |||||||
Credit Facilities | |||||||
Additional interest margin added to fixed and variable rates (as a percent) | 3.00% | ||||||
Senior Secured Credit Facility | Eurodollar | |||||||
Credit Facilities | |||||||
Additional interest margin added to fixed and variable rates (as a percent) | 3.00% | ||||||
Senior Secured Credit Facility | First option | |||||||
Credit Facilities | |||||||
Fixed interest rate base (as a percent) | 2.25% | ||||||
Senior Secured Credit Facility | First option | Federal funds effective rate | |||||||
Credit Facilities | |||||||
Interest rate added to variable rate (as a percent) | 0.50% | ||||||
Senior Secured Credit Facility | First option | Eurodollar | |||||||
Credit Facilities | |||||||
Interest rate added to variable rate (as a percent) | 1.00% | ||||||
Senior Secured Credit Facility | Second option | |||||||
Credit Facilities | |||||||
Fixed interest rate base (as a percent) | 1.25% | ||||||
Senior Secured Credit Facility | LIBOR rate | |||||||
Credit Facilities | |||||||
Additional interest margin added to fixed and variable rates (as a percent) | 4.00% | ||||||
Revolving credit facility | |||||||
Credit Facilities | |||||||
Maximum borrowing capacity | $ 100,000,000 | ||||||
Commitment fee (as a percent) | 0.50% | ||||||
Outstanding principal balance | $ 0 | $ 0 | |||||
Interest expense | 100,000 | ||||||
Reconciliation of senior secured credit facility | |||||||
Deferred financing fees | (600,000) | ||||||
Aggregate future required minimum principal payments based on the terms of loan | |||||||
Amortization expense related to the deferred financing fees | $ 100,000 | ||||||
Revolving credit facility | Federal funds effective rate | |||||||
Credit Facilities | |||||||
Interest rate added to variable rate (as a percent) | 0.50% | ||||||
Additional interest margin added to fixed and variable rates (as a percent) | 3.00% | ||||||
Revolving credit facility | Eurodollar | |||||||
Credit Facilities | |||||||
Interest rate added to variable rate (as a percent) | 1.00% | ||||||
Revolving credit facility | First option | |||||||
Credit Facilities | |||||||
Fixed interest rate base (as a percent) | 2.25% | ||||||
Additional interest margin added to fixed and variable rates (as a percent) | 2.00% | ||||||
Revolving credit facility | Second option | |||||||
Credit Facilities | |||||||
Fixed interest rate base (as a percent) | 1.25% | ||||||
Additional interest margin added to fixed and variable rates (as a percent) | 3.00% |
Financial Assets and Liabilit49
Financial Assets and Liabilities - Measured on a Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2015 |
Fair value measurements measured on a recurring basis | |||
Transfers of financial assets between levels | $ 0 | $ 0 | |
Assets | |||
Financial instruments owned, at fair value | 1,276,022 | $ 1,038,039 | |
Financial instruments owned, pledged as collateral | 247,652 | 259,175 | |
Other assets: exchange stock | 6,250 | 5,984 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,411,609 | 979,090 | |
Equity securities | |||
Assets | |||
Financial instruments owned, pledged as collateral | 244,868 | 232,731 | |
Exchange traded notes | |||
Assets | |||
Financial instruments owned, pledged as collateral | 2,784 | 26,444 | |
Fair value measurements measured on a recurring basis | Total Fair Value | |||
Assets | |||
Financial instruments owned, at fair value | 1,276,022 | 1,038,039 | |
Financial instruments owned, pledged as collateral | 247,652 | 259,175 | |
Other assets: exchange stock | 6,250 | 5,984 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,411,609 | 979,090 | |
Fair value measurements measured on a recurring basis | Total Fair Value | Interest rate swaps | |||
Assets | |||
Financial instruments owned, at fair value | 351 | 311 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 357 | 163 | |
Fair value measurements measured on a recurring basis | Total Fair Value | Currency forwards | |||
Assets | |||
Financial instruments owned, at fair value | 3,047 | 9,580 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 5,088 | 319 | |
Fair value measurements measured on a recurring basis | Total Fair Value | Options | |||
Assets | |||
Financial instruments owned, at fair value | 220 | 168 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 211 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Equity securities | |||
Assets | |||
Financial instruments owned, at fair value | 1,224,827 | 948,091 | |
Financial instruments owned, pledged as collateral | 244,868 | 232,731 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,375,346 | 936,851 | |
Fair value measurements measured on a recurring basis | Total Fair Value | US and non-US government obligations | |||
Assets | |||
Financial instruments owned, at fair value | 8,238 | 10,513 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 3,996 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Exchange traded notes | |||
Assets | |||
Financial instruments owned, at fair value | 39,339 | 69,376 | |
Financial instruments owned, pledged as collateral | 2,784 | 26,444 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 30,607 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Exchange stock | |||
Assets | |||
Other assets: exchange stock | 6,250 | 5,984 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 37,761 | ||
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Assets | |||
Financial instruments owned, at fair value | 1,227,129 | 985,224 | |
Financial instruments owned, pledged as collateral | 247,652 | 259,175 | |
Other assets: exchange stock | 6,250 | 5,984 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,401,564 | 976,828 | |
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities | |||
Assets | |||
Financial instruments owned, at fair value | 1,187,790 | 915,848 | |
Financial instruments owned, pledged as collateral | 244,868 | 232,731 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,370,957 | 935,071 | |
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | US and non-US government obligations | |||
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 3,996 | ||
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Exchange traded notes | |||
Assets | |||
Financial instruments owned, at fair value | 39,339 | 69,376 | |
Financial instruments owned, pledged as collateral | 2,784 | 26,444 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 30,607 | ||
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Exchange stock | |||
Assets | |||
Other assets: exchange stock | 6,250 | 5,984 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 37,761 | ||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | |||
Assets | |||
Financial instruments owned, at fair value | 1,444,566 | 838,670 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,462,924 | 748,276 | |
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Interest rate swaps | |||
Assets | |||
Financial instruments owned, at fair value | 351 | 311 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 357 | 163 | |
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Currency forwards | |||
Assets | |||
Financial instruments owned, at fair value | 1,398,720 | 795,435 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 1,457,967 | 319 | |
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Options | |||
Assets | |||
Financial instruments owned, at fair value | 220 | 168 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 211 | 746,014 | |
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Equity securities | |||
Assets | |||
Financial instruments owned, at fair value | 37,037 | 32,243 | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | 4,389 | 1,780 | |
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | US and non-US government obligations | |||
Assets | |||
Financial instruments owned, at fair value | 8,238 | 10,513 | |
Fair value measurements measured on a recurring basis | Counterparty and Cash Collateral Netting | |||
Assets | |||
Financial instruments owned, at fair value | (1,395,673) | (785,855) | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | (1,452,879) | (746,014) | |
Fair value measurements measured on a recurring basis | Counterparty and Cash Collateral Netting | Currency forwards | |||
Assets | |||
Financial instruments owned, at fair value | (1,395,673) | (785,855) | |
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | $ (1,452,879) | ||
Fair value measurements measured on a recurring basis | Counterparty and Cash Collateral Netting | Options | |||
Liabilities | |||
Financial instruments sold, not yet purchased, at fair value | $ (746,014) |
Financial Assets and Liabilit50
Financial Assets and Liabilities - Netting of Certain Financial Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Securities borrowed | ||
Gross Amounts of Recognized Assets | $ 654,065 | $ 453,296 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 654,065 | 453,296 |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | (645,643) | (443,659) |
Cash collateral received | (2,633) | (281) |
Net Amount | 5,789 | 9,356 |
Securities purchased under agreements to resell | ||
Gross Amounts of Recognized Assets | 14,981 | |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 14,981 | |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | (14,981) | |
Total | ||
Gross Amounts of Recognized Assets | 2,053,356 | 1,264,191 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (1,395,673) | (785,855) |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 657,683 | 478,336 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (646,204) | (459,090) |
Cash collateral received | (2,633) | (281) |
Net Amount | 8,846 | 18,965 |
Currency forwards | ||
Trading assets, at fair value | ||
Gross Amounts of Recognized Assets | 1,398,720 | 795,435 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (1,395,673) | (785,855) |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 3,047 | 9,580 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Net Amount | 3,047 | 9,580 |
Options | ||
Trading assets, at fair value | ||
Gross Amounts of Recognized Assets | 220 | 168 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 220 | 168 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (210) | (139) |
Net Amount | 10 | 29 |
Interest rate swaps | ||
Securities purchased under agreements to resell | ||
Gross Amounts of Recognized Assets | 311 | |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 311 | |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | $ (311) | |
Trading assets, at fair value | ||
Gross Amounts of Recognized Assets | 351 | |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 351 | |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | $ (351) |
Financial Assets and Liabilit51
Financial Assets and Liabilities - Netting of Certain Financial Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Securities loaned | ||
Gross Amounts of Recognized Liabilities | $ 690,672 | $ 524,603 |
Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition | 690,672 | 524,603 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (685,313) | (521,407) |
Net Amount | 5,359 | 3,196 |
Total | ||
Gross Amounts of Recognized Liabilities | 2,149,207 | 1,271,099 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (1,452,879) | (746,014) |
Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition | 696,328 | 525,085 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (685,874) | (521,857) |
Cash collateral received | (7) | (32) |
Net Amount | 10,447 | 3,196 |
Receivables from broker dealers and clearing organizations | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Net variation margin on long and short futures contracts | 39,000 | (8,100) |
Payables to broker dealers and clearing organizations | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Net variation margin on long and short futures contracts | 102,000 | 46,400 |
Currency forwards | ||
Trading liabilities, at fair value: | ||
Gross Amounts of Recognized Assets | 1,457,967 | 746,014 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (1,452,879) | (746,014) |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 5,088 | |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Net Amount | 5,088 | |
Options | ||
Trading liabilities, at fair value: | ||
Gross Amounts of Recognized Assets | 211 | 163 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 211 | 163 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (210) | (139) |
Cash collateral received | (1) | (24) |
Interest rate swaps | ||
Trading liabilities, at fair value: | ||
Gross Amounts of Recognized Assets | 357 | 319 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 357 | 319 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (351) | (311) |
Cash collateral received | $ (6) | $ (8) |
Financial Assets and Liabilit52
Financial Assets and Liabilities - Gross Obligations For Securities Lending Transactions (Details) $ in Thousands | Mar. 31, 2016USD ($) |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for securities lending transactions | $ 690,672 |
Overnight and Continuous | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for securities lending transactions | 690,672 |
Equity securities | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for securities lending transactions | 690,672 |
Equity securities | Overnight and Continuous | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for securities lending transactions | $ 690,672 |
Derivative Instruments - Fair V
Derivative Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Equities futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | $ (569) | $ (1,017) |
Derivatives Assets, Notional | 294,910 | 617,398 |
Equities futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | (3,151) | 202 |
Derivatives Liabilities, Notional | 369,368 | 75,428 |
Commodity futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | (17) | (8,431) |
Derivatives Assets, Notional | 146,063 | 18,635,531 |
Commodity futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | 110,272 | 585 |
Derivatives Liabilities, Notional | 19,325,868 | 25,932 |
Currency futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 39,140 | 1,358 |
Derivatives Assets, Notional | 3,362,827 | 3,059,575 |
Currency futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | (5,606) | (12,475) |
Derivatives Liabilities, Notional | 1,806,592 | 2,570,005 |
Fixed Income futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 22 | 30 |
Derivatives Assets, Notional | 91,167 | 232,473 |
Fixed Income futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | (6) | |
Derivatives Liabilities, Notional | 104,997 | |
Options | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 220 | 168 |
Derivatives Liabilities, Fair Value | 211 | 163 |
Options | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 220 | 168 |
Derivatives Assets, Notional | 8,112 | 24,453 |
Options | Financial instruments sold, not yet purchased | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | 211 | 163 |
Derivatives Liabilities, Notional | 8,140 | 1 |
Currency forwards | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 1,398,720 | 795,435 |
Derivatives Liabilities, Fair Value | 1,457,967 | 746,014 |
Currency forwards | Financial instruments owned | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 1,398,720 | 795,435 |
Derivatives Assets, Notional | 77,896,379 | 69,614,513 |
Currency forwards | Financial instruments sold, not yet purchased | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | 1,457,967 | 746,014 |
Derivatives Liabilities, Notional | 80,537,570 | 71,019,047 |
Interest rate swaps | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 351 | |
Derivatives Liabilities, Fair Value | 357 | 319 |
Interest rate swaps | Financial instruments owned | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 351 | 311 |
Derivatives Assets, Notional | 82,010 | 82,010 |
Interest rate swaps | Financial instruments sold, not yet purchased | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | 357 | 319 |
Derivatives Liabilities, Notional | $ 82,010 | $ 82,010 |
Derivative Instruments - Gain F
Derivative Instruments - Gain From Derivative Instruments (Details) - Not designated as hedging instruments - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Gain impact of derivative instruments not designated as hedging instruments | ||
Gain impact that derivative instruments not designated as hedging instruments had on results of operations | $ 307,983 | $ 1,162,272 |
Futures | ||
Gain impact of derivative instruments not designated as hedging instruments | ||
Gain impact that derivative instruments not designated as hedging instruments had on results of operations | 308,480 | 1,180,483 |
Currency forwards | ||
Gain impact of derivative instruments not designated as hedging instruments | ||
Gain impact that derivative instruments not designated as hedging instruments had on results of operations | (425) | (16,431) |
Options | ||
Gain impact of derivative instruments not designated as hedging instruments | ||
Gain impact that derivative instruments not designated as hedging instruments had on results of operations | (74) | (1,784) |
Interest rate swaps | ||
Gain impact of derivative instruments not designated as hedging instruments | ||
Gain impact that derivative instruments not designated as hedging instruments had on results of operations | $ 2 | $ 4 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Income taxes | |||
Effective tax rate (as a percent) | 12.50% | ||
Provision for income taxes | $ 7,346 | $ 2,728 | |
Unrecognized Tax Benefits | $ 0 | $ 0 |
Commitments, Contingencies an56
Commitments, Contingencies and Guarantees - Employee Retention Plan and Litigation (Details) - Dec. 31, 2015 - Unfavorable regulatory action € in Millions, $ in Millions | EUR (€) | USD ($) |
Litigation | ||
Amount of fine | € 5 | $ 5.4 |
Accrual for estimated loss | € 5 | $ 5.4 |
Capital Structure (Details)
Capital Structure (Details) $ / shares in Units, $ in Thousands | Jan. 13, 2016USD ($) | Apr. 21, 2015$ / sharesshares | Mar. 31, 2016USD ($)Voteitem$ / sharesshares | Jan. 31, 2016USD ($) | Mar. 31, 2016Vote$ / sharesshares | Dec. 31, 2015$ / sharesshares | Nov. 30, 2015$ / sharesshares | Apr. 15, 2015shares |
Number of classes of common stock | item | 4 | |||||||
Number of votes provided to holders on all matters | Vote | 10 | 10 | ||||||
Payments of dividends | $ | $ 9,378 | |||||||
Maximum | ||||||||
Remaining dividends payable | $ | $ 30,000 | |||||||
Virtu Financial | ||||||||
Ownership interest (as a percent) | 28.10% | 28.10% | ||||||
Virtu Financial | ||||||||
Payments of dividends | $ | $ 5,000 | $ 20,000 | ||||||
Non-qualified stock options | ||||||||
Options outstanding (in shares) | 8,369,000 | 8,369,000 | 8,994,000 | |||||
Non-qualified stock options | 2015 Management Incentive Plan | ||||||||
Vesting period | 4 years | |||||||
Expiration period | 10 years | |||||||
Restricted stock units | 2015 Management Incentive Plan | ||||||||
Vesting period | 4 years | |||||||
Granted (in shares) | 984,466 | |||||||
Class A | ||||||||
Number of shares of stock issued | 19,012,112 | |||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||
Common stock sold in connection with full exercise of the option to purchase additional shares granted to underwriters (in shares) | 2,479,840 | |||||||
Common stock sold in connection with full exercise of the option to purchase additional shares granted to underwriters, at a price to public (in dollars per share) | $ / shares | $ 19 | |||||||
Common stock shares issued | 38,379,858 | 38,379,858 | 38,379,858 | 16,532,272 | ||||
Common stock, outstanding | 38,210,209 | 38,210,209 | 38,210,209 | |||||
Common stock offered for sale (in shares) | 397,534 | |||||||
Class A | 2015 Management Incentive Plan | ||||||||
Number of shares of stock authorized | 12,000,000 | |||||||
Class A | Silver Lake Post-IPO | ||||||||
Common stock offered for sale (in shares) | 6,075,837 | |||||||
Class A | Virtu Financial Inc And Silver Lake Partners | ||||||||
Common stock offered for sale (in shares) | 6,473,371 | |||||||
Price of stock (in dollars per share) | $ / shares | $ 22.15 | |||||||
Class B | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||||
Common stock shares issued | 0 | 0 | 0 | |||||
Common stock, outstanding | 0 | 0 | 0 | |||||
Class C | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||||
Common stock shares issued | 20,976,598 | 20,976,598 | 20,976,598 | |||||
Common stock, outstanding | 20,922,855 | 20,922,855 | 20,976,598 | |||||
Class D | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||||
Common stock shares issued | 79,610,490 | 79,610,490 | 79,610,490 | |||||
Common stock, outstanding | 79,610,490 | 79,610,490 | 79,610,490 |
Share-based Compensation (Detai
Share-based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 21, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Share-based Compensation. | ||||||
Capitalized software development costs | $ 2.6 | $ 2.7 | ||||
Amortization expense related to share based compensation | $ 2.4 | 2.5 | ||||
Non-voting common interest units outstanding | 15,340,683 | 15,340,683 | 15,394,426 | |||
Number of non-voting common interest units forfeited or repurchased | 53,743 | |||||
Class A | ||||||
Share-based Compensation. | ||||||
Expense recognized | $ 3.4 | $ 5.5 | ||||
2015 Management Incentive Plan | Class A | ||||||
Share-based Compensation. | ||||||
Granted (in shares) | 576,693 | |||||
Class A-2 profits interests and Class B interests | East MIP | ||||||
Weighted-average assumptions used in estimating grant date fair values | ||||||
Expected life (in years) | 2 years 8 months 12 days | 6 months | ||||
Weighted average risk free interest rate (as a percent) | 0.72% | 0.12% | ||||
Expected stock price volatility (as a percent) | 47.00% | 25.00% | ||||
Class A-2 profits interests | Maximum | ||||||
Share-based Compensation. | ||||||
Vesting period | 4 years | 4 years | ||||
Class B interests | East MIP | ||||||
Share-based Compensation. | ||||||
Amortization expense related to share based compensation | $ 0.3 | |||||
Class B interests | East MIP | Time based vesting | ||||||
Share-based Compensation. | ||||||
Vesting period | 4 years | 4 years | ||||
Non-voting common interest units (ormerly Class B interests) | ||||||
Share-based Compensation. | ||||||
Additional expense recognized | $ 0.3 | |||||
Unrecognized share-based compensation expense | $ 1.8 | $ 1.8 | ||||
Weighted average period for compensation expense expected to be recognized | 1 year 9 months 18 days | |||||
Capitalized software development costs | $ 0.1 | |||||
Non-voting common interest units (formerly Class A 2 profits interests) | ||||||
Share-based Compensation. | ||||||
Expense recognized | 0.4 | $ 0.4 | ||||
Unrecognized share-based compensation expense | $ 1.7 | $ 1.7 | ||||
Weighted average period for compensation expense expected to be recognized | 1 year 4 months 24 days | |||||
Activity | ||||||
Outstanding (in shares) | 6,069,007 | 6,069,007 | ||||
Granted (in shares) | 6,418 | |||||
Repurchased (in shares) | (13,495) | |||||
Outstanding (in shares) | 6,061,930 | 6,069,007 | ||||
Weighted Average Fair Value | ||||||
Outstanding (in dollars per share) | $ 6.82 | $ 6.82 | ||||
Granted (in dollars per share) | 7.52 | |||||
Forfeited (in dollars per share) | 7.17 | |||||
Outstanding (in dollars per share) | $ 6.82 | $ 6.82 | ||||
Weighted Average Remaining Life, outstanding | ||||||
Weighted Average Remaining Life | 2 years 3 months 7 days | 2 years 6 months 15 days | ||||
Weighted average remaining contractual life, granted | 3 years | |||||
Non-qualified stock options | ||||||
Share-based Compensation. | ||||||
Expense recognized | $ 1.2 | |||||
Outstanding (in shares) | 8,994,000 | |||||
Forfeited or expired (in shares) | (625,000) | |||||
Outstanding (in shares) | 8,369,000 | 8,369,000 | 8,994,000 | |||
Weighted Average Exercise Price Per Share | ||||||
Outstanding (in dollars per share) | $ 19 | |||||
Outstanding (in dollars per share) | $ 19 | $ 19 | $ 19 | |||
Weighted Average Remaining Life, outstanding | ||||||
Weighted Average Remaining Life | 9 years 18 days | 9 years 3 months 15 days | ||||
Non-qualified stock options | 2015 Management Incentive Plan | ||||||
Share-based Compensation. | ||||||
Vesting period | 4 years | |||||
Expiration period | 10 years | |||||
Unrecognized share-based compensation expense | $ 19.2 | $ 19.2 | ||||
Weighted average period for compensation expense expected to be recognized | 3 years 1 month 6 days | |||||
Weighted-average assumptions used in estimating grant date fair values | ||||||
Expected life (in years) | 6 years 3 months | |||||
Weighted average risk free interest rate (as a percent) | 1.52% | |||||
Expected stock price volatility (as a percent) | 30.00% | |||||
Expected dividend yield (as a percent) | 5.05% | |||||
Weighted Average Fair Value | ||||||
Granted (in dollars per share) | $ 3.02 | |||||
Restricted stock units | ||||||
Share-based Compensation. | ||||||
Expense recognized | $ 1.6 | |||||
Unrecognized share-based compensation expense | $ 17.2 | $ 17.2 | ||||
Weighted average period for compensation expense expected to be recognized | 2 years 9 months 18 days | |||||
Activity | ||||||
Outstanding (in shares) | 984,466 | |||||
Forfeited (in shares) | (115,869) | |||||
Outstanding (in shares) | 868,597 | 868,597 | 984,466 | |||
Weighted Average Fair Value | ||||||
Outstanding (in dollars per share) | $ 22.32 | |||||
Forfeited (in dollars per share) | 22.51 | |||||
Outstanding (in dollars per share) | $ 22.30 | $ 22.30 | $ 22.32 | |||
Restricted stock units | 2015 Management Incentive Plan | ||||||
Share-based Compensation. | ||||||
Vesting period | 4 years | |||||
Activity | ||||||
Granted (in shares) | 984,466 |
Regulatory Requirement (Details
Regulatory Requirement (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2016USD ($)item | Dec. 31, 2015USD ($) | |
Regulatory Requirement | ||
Number of broker-dealer subsidiaries | item | 2 | |
Broker Dealer Subsidiary One | ||
Regulatory Requirement | ||
Minimum net capital required to be maintained by broker-dealer subsidiaries | $ 1 | $ 1 |
Net capital | 40.6 | 64.2 |
Excess net capital over the required net capital | 39.6 | 63.2 |
Broker Dealer Subsidiary Two | ||
Regulatory Requirement | ||
Minimum net capital required to be maintained by broker-dealer subsidiaries | 1 | 1 |
Net capital | 9.3 | 8.5 |
Excess net capital over the required net capital | 8.3 | 7.5 |
VFCM | ||
Regulatory Requirement | ||
Minimum capital required to be maintained in connection with the operation of the Company's DMM business | 1.9 | $ 1.9 |
Required amount under exchange rules | $ 1 | |
Required amount under exchange rules as percentage of market value | 15.00% | |
Number of trading units whose market value is considered to calculate required net capital under exchange act | item | 60 |
Geographic Information (Details
Geographic Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Total revenues by geographic area | ||
Revenues | $ 192,638 | $ 221,528 |
United States | ||
Total revenues by geographic area | ||
Revenues | 123,819 | 150,960 |
Australia | ||
Total revenues by geographic area | ||
Revenues | 6 | 42 |
Ireland | ||
Total revenues by geographic area | ||
Revenues | 43,127 | 46,129 |
Singapore | ||
Total revenues by geographic area | ||
Revenues | 25,554 | $ 24,397 |
China | ||
Total revenues by geographic area | ||
Revenues | $ 132 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Related Party Transactions | |||
Payable to affiliates | $ 60 | $ 200 | |
Dell | |||
Related Party Transactions | |||
Payments for purchases | 900 | $ 700 | |
Affiliate Of Founder And Executive Chairman | |||
Related Party Transactions | |||
Sublease revenue | $ 100 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 15, 2016 | Jan. 13, 2016 | May. 13, 2016 | Mar. 31, 2016 | Jan. 31, 2016 |
Subsequent events | |||||
Payments of dividends | $ 9,378 | ||||
Virtu Financial | |||||
Subsequent events | |||||
Payments of dividends | $ 5,000 | $ 20,000 | |||
Subsequent Events. | Virtu Financial | |||||
Subsequent events | |||||
Payments of dividends | $ 40,000 | ||||
Subsequent Events. | Class A | |||||
Subsequent events | |||||
Dividends declared (in dollars per share) | $ 0.24 |