Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 09, 2017 | |
Entity Registrant Name | Virtu Financial, Inc. | |
Entity Central Index Key | 1,592,386 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Class A | ||
Entity Common Stock, Shares Outstanding | 89,256,963 | |
Class C | ||
Entity Common Stock, Shares Outstanding | 18,344,223 | |
Class D | ||
Entity Common Stock, Shares Outstanding | 79,610,490 |
Consolidated Statements of Fina
Consolidated Statements of Financial Condition - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and cash equivalents | $ 557,990 | $ 181,415 |
Cash and securities segregated under federal and other regulations | 3,000 | |
Securities borrowed | 1,525,403 | 220,005 |
Securities purchased under agreements to resell | 8,249 | |
Receivables from broker dealers and clearing organizations | 980,518 | 448,728 |
Trading assets, at fair value: | ||
Financial instruments owned | 2,203,248 | 1,683,999 |
Financial instruments owned and pledged | 699,152 | 143,883 |
Property, equipment and capitalized software (net of accumulated depreciation of $118,671 and $113,184 as of September 30, 2017 and December 31, 2016, respectively) | 144,686 | 29,660 |
Goodwill | 859,598 | 715,379 |
Intangibles (net of accumulated amortization) | 152,748 | 992 |
Deferred tax asset | 224,804 | 193,859 |
Other assets (98,837 and $36,480, at fair value, as of September 30, 2017 and December 31, 2016, respectively) | 379,949 | 74,470 |
Total assets | 7,739,345 | 3,692,390 |
Liabilities | ||
Short term borrowings | 15,000 | 25,000 |
Securities loaned | 582,915 | 222,203 |
Securities sold under agreements to repurchase | 620,887 | |
Payables to broker dealers and clearing organizations | 839,067 | 695,978 |
Payables to customers | 25,550 | |
Trading liabilities, at fair value: | ||
Financial instruments sold, not yet purchased | 2,535,891 | 1,349,155 |
Tax receivable agreement obligations | 232,552 | 231,404 |
Accounts payable and accrued expenses and other liabilities | 287,327 | 69,281 |
Long-term borrowings | 1,434,629 | 564,957 |
Total liabilities | 6,573,818 | 3,157,978 |
Stockholders' Equity | ||
Treasury stock, at cost, 461,392 and 453,066 shares at September 30, 2017 and December 31, 2016, respectively | (8,505) | (8,358) |
Additional paid-in capital | 900,586 | 155,536 |
Accumulated deficit | (51,304) | (1,254) |
Accumulated other comprehensive income (loss) | 2,596 | (252) |
Total stockholders' equity | 843,375 | 145,673 |
Noncontrolling interest | 322,152 | 388,739 |
Total equity | 1,165,527 | 534,412 |
Total liabilities and equity | 7,739,345 | 3,692,390 |
Class D | ||
Stockholders' Equity | ||
Common stock value | 1 | $ 1 |
Class A | ||
Stockholders' Equity | ||
Common stock value | $ 1 |
Consolidated Statements of Fin3
Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accumulated depreciation (in dollars) | $ 118,671 | $ 113,184 |
Fair value of other assets (in dollars) | $ 98,837 | $ 36,480 |
Treasury stock shares | 461,392 | 453,066 |
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 | 89,718,355 | 40,436,580 |
Common stock shares outstanding | 89,256,963 | 39,983,514 |
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 | 18,344,223 | 19,810,707 |
Common stock shares outstanding | 18,344,223 | 19,810,707 |
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 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||||
Trading income, net | $ 203,907 | $ 156,706 | $ 479,644 | $ 509,542 |
Interest and dividends income | 20,430 | 5,271 | 30,933 | 14,961 |
Commissions, net and technology services | 43,351 | 2,931 | 49,237 | 7,224 |
Other, net | 3,598 | (102) | 3,647 | (102) |
Total revenue | 271,286 | 164,806 | 563,461 | 531,625 |
Operating Expenses: | ||||
Brokerage, exchange and clearance fees, net | 64,584 | 52,118 | 170,253 | 167,416 |
Communication and data processing | 45,998 | 17,903 | 83,190 | 53,578 |
Employee compensation and payroll taxes | 72,341 | 20,816 | 111,053 | 64,182 |
Payments for order flow | 12,071 | 12,071 | ||
Interest and dividends expense | 31,242 | 15,615 | 58,456 | 43,249 |
Operations and administrative | 24,183 | 5,543 | 38,107 | 16,198 |
Depreciation and amortization | 15,602 | 7,158 | 29,157 | 22,685 |
Amortization of purchased intangibles and acquired capitalized software | 6,440 | 53 | 6,546 | 159 |
Debt issue costs related to debt refinancing | 4,869 | 9,351 | ||
Transaction advisory fees and expenses | 15,677 | 24,188 | 155 | |
Reserve for legal matter | (2,176) | |||
Charges related to share-based compensation at IPO | 181 | 333 | 545 | 1,444 |
Financing interest expense on long-term borrowings | 24,593 | 7,393 | 40,141 | 21,569 |
Total operating expenses | 317,781 | 126,932 | 580,882 | 390,635 |
Income (loss) before income taxes and noncontrolling interest | (46,495) | 37,874 | (17,421) | 140,990 |
Provision for (benefit from) income taxes | (6,505) | 4,851 | (2,918) | 17,325 |
Net income (loss) | (39,990) | 33,023 | (14,503) | 123,665 |
Noncontrolling interest | 26,472 | (25,997) | 6,466 | (97,913) |
Net income (loss) available for common stockholders | $ (13,518) | $ 7,026 | $ (8,037) | $ 25,752 |
Earnings (loss) per share | ||||
Basic (in dollars per share) | $ (0.17) | $ 0.18 | $ (0.17) | $ 0.66 |
Diluted (in dollars per share) | $ (0.17) | $ 0.18 | $ (0.17) | $ 0.66 |
Weighted average common shares outstanding | ||||
Basic (in shares) | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Diluted (in shares) | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Comprehensive income | ||||
Net income (loss) | $ (39,990) | $ 33,023 | $ (14,503) | $ 123,665 |
Other comprehensive income (loss) | ||||
Foreign currency translation adjustment, net of taxes | 2,558 | 519 | 8,300 | 1,783 |
Comprehensive income (loss) | (37,432) | 33,542 | (6,203) | 125,448 |
Less: Comprehensive income (loss) attributable to non-controlling interests | 25,122 | (26,370) | 1,014 | (99,195) |
Comprehensive income (loss) attributable to common stockholders | $ (12,310) | $ 7,172 | $ (5,189) | $ 26,253 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Changes in Equity - USD ($) | 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' Equity | Noncontrolling Interest | Class A | Class C | Class D | Total |
Balance at Dec. 31, 2015 | $ 1,000 | $ (3,819,000) | $ 130,902,000 | $ 3,525,000 | $ 99,000 | $ 130,708,000 | $ 427,162,000 | $ 557,870,000 | |||||
Balance (in shares) at Dec. 31, 2015 | 38,379,858 | 20,976,598 | 79,610,490 | (169,649) | |||||||||
Increase (decrease) in stockholder's/members' equity | |||||||||||||
Share based compensation | 24,893,000 | 24,893,000 | 24,893,000 | ||||||||||
Share based compensation (in shares) | 953,054 | (58,070) | |||||||||||
Repurchase of common stock | (98,000) | (98,000) | (98,000) | ||||||||||
Repurchase of common stock (in shares) | (4,153) | ||||||||||||
Treasury stock purchases | $ (4,539,000) | (4,539,000) | (4,539,000) | ||||||||||
Treasury stock purchases (in shares) | (283,417) | ||||||||||||
Net income (loss) | 32,980,000 | 32,980,000 | 125,360,000 | 158,340,000 | |||||||||
Foreign exchange translation adjustment | (351,000) | (351,000) | (814,000) | (1,165,000) | |||||||||
Distribution from Virtu Financial to non-controlling interest | (162,969,000) | (162,969,000) | |||||||||||
Dividends | (37,759,000) | (37,759,000) | (37,759,000) | ||||||||||
Issuance of common stock | 16,677,000 | 16,677,000 | 16,677,000 | ||||||||||
Issuance of common stock (in shares) | 1,103,668 | ||||||||||||
Repurchase of units and corresponding number of common stock in connection with secondary offering | (17,383,000) | (17,383,000) | (17,383,000) | ||||||||||
Repurchase of units and corresponding number of common stock in connection with secondary offering (in shares) | (1,103,668) | ||||||||||||
Issuance of tax receivable agreements in connection with secondary offering | 545,000 | 545,000 | 545,000 | ||||||||||
Balance at Dec. 31, 2016 | $ 1,000 | $ (8,358,000) | 155,536,000 | (1,254,000) | (252,000) | 145,673,000 | 388,739,000 | 534,412,000 | |||||
Balance (in shares) at Dec. 31, 2016 | 40,436,580 | 19,810,707 | 79,610,490 | (453,066) | 39,983,514 | 19,810,707 | 79,610,490 | ||||||
Increase (decrease) in stockholder's/members' equity | |||||||||||||
Share based compensation | $ 58,536 | 12,314,000 | 12,314,000 | 12,314,000 | |||||||||
Share based compensation (in shares) | (34,019) | ||||||||||||
Repurchase of common stock | (4,592,000) | (4,592,000) | (4,592,000) | ||||||||||
Repurchase of common stock (in shares) | (286,150) | ||||||||||||
Treasury stock purchases | $ (147,000) | (147,000) | (147,000) | ||||||||||
Treasury stock purchases (in shares) | (8,326) | ||||||||||||
Net income (loss) | (8,037,000) | (8,037,000) | (6,466,000) | (14,503,000) | |||||||||
Foreign exchange translation adjustment | 2,848,000 | 2,848,000 | 5,452,000 | 8,300,000 | |||||||||
Distribution from Virtu Financial to non-controlling interest | (65,573,000) | (65,573,000) | |||||||||||
Dividends | (42,013,000) | (42,013,000) | (42,013,000) | ||||||||||
Issuance of common stock | $ 1,000 | 735,973,000 | 735,974,000 | 735,974,000 | |||||||||
Issuance of common stock (in shares) | 48,076,924 | ||||||||||||
Issuance of common stock in connection with employee exchanges (in shares) | 1,146,315 | ||||||||||||
Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges (in shares) | (1,146,315) | ||||||||||||
Issuance of tax receivable agreements in connection with employee exchange | 1,355,000 | 1,355,000 | 1,355,000 | ||||||||||
Balance at Sep. 30, 2017 | $ 1,000 | $ 1,000 | $ (8,505,000) | $ 900,586,000 | $ (51,304,000) | $ 2,596,000 | $ 843,375,000 | $ 322,152,000 | $ 1,165,527,000 | ||||
Balance (in shares) at Sep. 30, 2017 | 89,718,355 | 18,344,223 | 79,610,490 | (461,392) | 89,256,963 | 18,344,223 | 79,610,490 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Cash flows from operating activities | |||||
Net Income | $ (39,990) | $ 33,023 | $ (14,503) | $ 123,665 | $ 158,340 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 15,602 | 7,158 | 29,157 | 22,685 | |
Amortization of purchased intangibles and acquired capitalized software | 6,440 | 53 | 6,546 | 159 | |
Debt issue cost related to debt refinancing | 9,351 | ||||
Amortization of debt issuance costs and deferred financing fees | 3,470 | 1,396 | |||
Share based compensation | 10,924 | 9,440 | |||
Reserve for legal matter | (2,176) | ||||
Equipment writeoff | 1,335 | 428 | |||
Deferred taxes | 1,489 | 9,345 | |||
Other | (444) | (1,267) | |||
Changes in operating assets and liabilities: | |||||
Securities borrowed | 101,046 | 58,484 | |||
Securities purchased under agreements to resell | 8,645 | 14,981 | |||
Receivables from broker dealers and clearing organizations | 21,241 | (36,756) | |||
Trading assets, at fair value | 1,020,821 | (142,754) | |||
Other Assets | 26,248 | 1,705 | |||
Securities loaned | 194,523 | (42,656) | |||
Securities sold under agreements to repurchase | (220,719) | ||||
Payables to broker dealers and clearing organizations | (393,564) | (181,348) | |||
Payables to customers | 7,967 | ||||
Trading liabilities, at fair value | (569,911) | 339,469 | |||
Accounts payable and accrued expenses and other liabilities | (25,675) | 10,166 | |||
Net cash provided by operating activities | 215,771 | 187,142 | |||
Cash flows from investing activities | |||||
Development of capitalized software | (7,929) | (6,044) | |||
Acquisition of property and equipment | (13,932) | (8,933) | |||
Investment in SBI Japannext | (38,754) | ||||
Acquisition of KCG Holdings described in Note 3 | (799,303) | ||||
Acquisition of Teza Technologies | (5,594) | ||||
Proceeds from sale of DMM business | 300 | ||||
Net cash used in investing activities | (826,458) | (53,731) | |||
Cash flows from financing activities | |||||
Distribution from Virtu Financial to non-controlling interest | (65,573) | (123,867) | |||
Dividends | (42,013) | (28,117) | |||
Purchase of treasury stock | (147) | ||||
Short-term borrowings, net | (10,000) | (27,400) | |||
Payments on repurchase of non-voting common interest | (6,092) | (1,500) | |||
Proceeds from long-term borrowings | 1,115,036 | 33,078 | |||
Repayment of senior secured credit facility | (206,473) | (3,825) | |||
Repayment of KCG Notes | (480,987) | ||||
Tax receivable agreement obligations | (7,045) | ||||
Debt issuance costs | (52,528) | (93) | |||
Issuance of common stock, net of offering costs | 735,973 | 16,677 | |||
Repurchase of Virtu Financial Units and corresponding number of Class A and C Common Stock | (17,383) | ||||
Net cash provided by (used in) financing activities | 980,151 | (152,430) | |||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 8,300 | 1,783 | |||
Increase (decrease) in cash, cash equivalents, and restricted cash | 377,764 | (17,236) | |||
Cash, cash equivalents, and restricted cash, beginning of period | 181,415 | 163,235 | 163,235 | ||
Cash, cash equivalents, and restricted cash, end of period | $ 559,179 | $ 145,999 | 559,179 | 145,999 | $ 181,415 |
Supplementary disclosure of cash flow information | |||||
Cash paid for interest | 59,524 | 43,827 | |||
Cash paid for taxes | 5,744 | 15,008 | |||
Non-cash investing activities | |||||
Share based compensation of developers relating to software capitalized | $ 1,448 | $ 5,187 |
Organization and Basis of Prese
Organization and Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
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 interest in Virtu Financial, which it acquired pursuant to and subsequent to certain reorganization transactions (the “Reorganization Transactions”) consummated in connection with its IPO. As of September 30, 2017, VFI owned approximately 48.0% of the membership interests of Virtu Financial. 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. The Company is a leading financial firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients. The Company has broad diversification, in combination with our proprietary technology platform and low-cost structure, which enables the Company to facilitate risk transfer between global capital markets participants by supplying competitive liquidity and execution services while at the same time earning attractive margins and returns. 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. On July 20, 2017 (the “Closing Date”), the Company completed the all-cash acquisition (the “Acquisition”) of KCG Holdings, Inc. (“KCG”). Pursuant to the terms of the Agreement and Plan of Merger, dated as of April 20, 2017 (the “Merger Agreement”), by and among the Company, Orchestra Merger Sub, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of the Company (“Merger Sub”), and KCG, Merger Sub merged with and into KCG (the “Merger”), with KCG surviving the Merger as a wholly owned subsidiary of the Company. The transaction will extend Virtu’s scaled operating model to KCG’s wholesale market making businesses and broaden the distribution of Virtu’s technology and execution services to KCG’s extensive institutional client base. The Company expects to migrate trading of the combined company onto a single, proven technology, risk management, and analytics platform. See Note 3 “Merger of Virtu Financial, Inc.and KCG Holdings Inc.” for further details. Virtu Financial’s principal subsidiaries include Virtu Financial BD LLC (“VFBD”) and Virtu Americas LLC (“VAL”), which are self-clearing U.S. broker-dealers, 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; Virtu Financial Global Markets LLC (“VFGM”), a U.S. trading entity focused on futures and currencies; and 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. Following the Acquisition, Virtu Financial’s principal subsidiaries also include VAL. In September 2017, the Company completed the sale of its designated market maker (“DMM”) on the NYSE American. The results of the NYSE American DMM business are included in the Market Making segment, up through the date of its sale. On October 24, 2017, the Company announced it has entered into a definitive agreement to sell its fixed income trading venue, BondPoint, to Intercontinental Exchange. See Note 19 "Subsequent Events" for further details. Prior to the Acquisition, the Company was managed and operated as one business, and, accordingly, operated under one reportable segment. As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii) Execution Services; and (iii) Corporate. See Note 17 for a further discussion of the Company’s segments. Market Making The Market Making segment principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions. The Company engages in principal trading in the Market Making segment directly to clients as well as in a supplemental capacity on exchanges, electronic communications networks (“ECNs”) and alternative trading systems (“ATSs”). The Company is an active participant on all major global equity and futures exchanges and also trades on substantially all domestic electronic options exchanges. As a complement to electronic market making, the cash trading business handles specialized orders and also transacts on the OTC Bulletin Board marketplaces operated by the OTC Markets Group Inc. and the Alternative Investment Market of the London Stock Exchange ("AIM"). Execution Services The Execution Services segment comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers as well as technology services revenues. The Company earns commissions and commission equivalents as an agent on behalf of clients as well as between principals to transactions; in addition, the Company will commit capital on behalf of clients as needed. Agency-based, execution-only trading in the segment is done primarily through a variety of access points including: (i) algorithmic trading and order routing in global equities and options; (ii) institutional sales traders executing program, block and riskless principal trades in global equities and exchange traded funds ("ETFs"); (iii) a fixed income ECN that also offers trading applications; and (iv) an ATS for U.S. equities. Technology licensing fees are earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and the provision of associated management and hosting services. Corporate The Corporate segment contains the Company's investments, principally in strategic trading-related opportunities and maintains corporate overhead expenses and all other income and expenses that are not attributable to the Company's other segments. Basis of Consolidation and Form of Presentation These 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, 2016 (the “2016 10-K”), as amended, which was filed on March 13, 2017. The accompanying December 31, 2016 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 that 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. 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. As discussed in Note 3 “Merger of Virtu Financial, Inc.and KCG Holdings Inc.”, the Company is accounting for the acquisition of KCG under the acquisition method of accounting. Under the acquisition method of accounting, the assets and liabilities of KCG, as of July 20, 2017, were recorded at their respective fair values and added to the carrying value of the Company's existing assets and liabilities. The reported financial condition and results of operations of the Company for the periods following the Acquisition reflect KCG's and the Company's balances and reflect the impact of purchase accounting adjustments. As the Company is the accounting acquirer, the financial results for the three and nine months ended September 30, 2017 comprise the results of the Company for the entire applicable period and the results of KCG from Closing Date through September 30, 2017. All periods prior to the Closing Date comprise solely the results of the Company. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
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 (loss) 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. 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 shareholders, including both distributed and undistributed earnings, 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 include money market accounts, which are payable on demand, and short-term investments with an original maturity of less than 90 days. The carrying amount of such cash equivalents approximates their fair value due to the short-term nature of these instruments. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. The Company maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. Cash and securities segregated under federal and other regulations Effective upon the acquisition of KCG, the Company maintains custody of customer funds and is obligated by rules and regulations mandated by the SEC to segregate or set aside cash and/or qualified securities to satisfy these regulations, which have been promulgated to protect customer assets. The amounts recognized as Cash and securities segregated under federal and other regulations approximate fair value. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. 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 cash 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. Interest received or paid by the Company for these transactions 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 (loss). 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. The Company has also entered into bilateral and tri-party term and overnight repurchase and other collateralized financing agreements which bear interest at negotiated rates. The Company receives cash and makes delivery of financial instruments to a custodian who monitors the market value of these instruments on a daily basis. The market value of the instruments delivered must be equal to or in excess of the principal amount loaned under the repurchase agreements plus the agreed upon margin requirement. The custodian may request additional collateral, if appropriate. Interest received or paid by the Company for these transactions 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 (loss). 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 September 30, 2017 and December 31, 2016, receivables from and payables to broker-dealers and clearing organizations primarily represented 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 receivables 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 and Financial instruments sold, not yet purchased relate to market making and trading activities, and include listed and other equity securities, listed equity options and fixed income securities. The Company records 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 (loss). Fair Value Measurements Fair value is defines 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. The Company categorizes its financial instruments into 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; or 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. Fair Value Option The fair value option election allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are recorded in other, net in the condensed consolidated statements of comprehensive income (loss). The decision to elect the fair value option is determined on an instrument by instrument basis must be applied to an entire instrument and is irrevocable once elected. Derivative Instruments Derivative instruments are used for trading purposes, including economic hedges of trading instruments, which are carried at fair value, include futures, forward contracts, and options. Unrealized gains or losses on these derivative instruments are recognized currently within trading income, net in the condensed consolidated statement of comprehensive income (loss). 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 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. Property, Equipment and Occupancy Property and equipment are carried at cost, less accumulated depreciation, except for the assets acquired in connection with the acquisitions of MTH and KCG, which were recorded at fair value on the respective dates of the acquisitions. Depreciation is provided using the straight-line method over estimated useful lives of the underlying assets. 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 life of the improvement or the term of the lease. The Company recognizes rent expense under operating leases with fixed rent escalations, lease incentives and free rent periods on a straight-line basis over the lease term beginning on the date the Company takes possession of or controls the use of the space, including during free rent periods. Lease Loss Accrual The Company’s policy is to identify excess real estate capacity and where applicable, accrue for related future costs, net of projected sub-lease income upon the date the Company ceases to use the excess real estate, which is recorded under operating and administrative in the condensed consolidated statements of comprehensive income (loss). Such accrual is adjusted to the extent the actual terms of sub-leased property differ from the previous assumptions used in the calculation of the accrual. Capitalized 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. 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 3 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 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, 2017, 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. 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, they are 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. Exchange memberships acquired in connection with the Acquisition were recorded at their fair value on the date of acquisition. Exchange stock includes shares that entitle the Company to certain trading privileges. Exchange Stock is marked to market with the corresponding gain or loss recorded under operating and administrative in the condensed consolidated statements of comprehensive income (loss). The Company’s exchange memberships and stock are included in other assets in the condensed consolidated statements of financial condition. Trading Income, net 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 (loss). Commissions, net and Technology Services Commissions, net, which primarily comprise commissions and commission equivalents earned on institutional client orders, are recorded on a trade date basis. Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions and technology services in the condensed consolidated statements of comprehensive income (loss). Technology services revenues consist of technology licensing fees and agency commission fees. Technology licensing fees are earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and the 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. Soft Dollar Expense Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within commissions and technology services in the condensed consolidated statements of comprehensive income (loss). 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 an accrual basis. Brokerage, Exchange and Clearance Fees, Net Brokerage, exchange and clearance fees, net, comprise the costs of executing and clearing trades and are recorded on a trade date basis. 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 (loss). Payments for Order Flow Payments for order flow represent payments to broker-dealer clients, in the normal course of business, for directing their order flow in U.S. equities to the Company. Payments for order flow are recorded on a trade-date basis in the condensed consolidated statements of comprehensive income (loss). Payable to customers Payable to customers arises primarily from securities transactions and includes amounts due on receive versus payment (“RVP”) or deliver versus payment (“DVP”) transactions. Due to their short-term nature, such amounts approximate fair value. 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 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 had $8.0 million of unrecognized tax benefits as of September 30, 2017 from the KCG acquisition. 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 December 31, 2016. As a result of the acquisition of KCG, the Company acquired a deferred tax asset of $31.5 million relating to non-U.S. net operating losses. A full valuation allowance was also recorded against this deferred tax asset at September 30, 2017 as it is more likely than not that this deferred tax asset will not be realized. No valuation allowance against deferred taxes was recorded at December 31, 2016 because at that point it was estimated to be more likely than not that the deferred tax asset recorded as of that date would be fully realized. Comprehensive Income (Loss) and Foreign Currency Translation Comprehensive income (loss) consists of two components: net income (loss) and other comprehensive income (loss) (“OCI”). OCI is comprised of revenues, expenses, gains and losses that are reported in the comprehensive income (loss) section of the condensed consolidated statements of comprehensive income, but are excluded from reported net income (loss). 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 (loss), a separate component of stockholders’ equity. The Company's foreign subsidiaries generally use the U.S. dollar as their functional currency. The Company also has subsidiaries that utilize a functional currency other than the U.S. dollar, primarily comprising its Irish subsidiaries, which utilizes the Euro as the functional currency. Assets and liabilities of non-U.S. dollar functional currency subsidiaries are translated at exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the period. Gains and losses resulting from translating foreign currency financial statements into U.S. dollars are included in Accumulated other comprehensive (loss) income on the condensed consolidated statements of financial condition and cumulative translation adjustment, net of tax on the condensed consolidated statements of comprehensive income (loss). The Company may seek to reduce the impact of fluctuations in foreign exchange rates on its net investment in certain non-U.S. operations through the use of foreign currency forward contracts. For foreign currency forward contracts designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. The effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts. For qualifying net investment hedges, any gains or losses, to the extent effective, are included in Accumulated other comprehensive (loss) income on the condensed consolidated statements of financial condition and Cumulative translation adjustment, net of tax, on the condensed consolidated statements of comprehensive income (loss). The ineffective portion, if any, is recorded in Investment income and other, net on the condensed consolidated statements of operations. Share-Based Compensation 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 (“RSUs”). 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 RSUs are determined based on the volume weighted average price for the three days preceding the grant, and with respect to the RSUs, 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 RSUs or the exercise of stock options. Variable Interest Entities A variable interest entity (“VIE”) is an entity that lacks one or more of the following characteristics (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. In October 2016, the Company invested in a joint venture (“JV”) with nine other parties. One of the parties was KCG. Upon the Merger, KCG was required to relinquish their ownership in the JV. As of September 30, 2017, each of the remaining parties owns approximately 11% of the voting shares and 11% of the equity of this JV, which is building microwave communication networks in the U.S. and Asia, and which is considered to be a VIE. The Company and all of its JV partners each pay monthly fees for the funding of the construction of the microwave communication networks. When completed, this JV may sell excess bandwidth that is not utilized by its joint venture members to third parties. As a result of the Acquisition, the Company owns 50% of the voting shares and 50% of the equity of a JV which maintains microwave communication networks in the U.S. and Europe, and which is considered to be a VIE. The Company and its JV partner each pay monthly fees for the use of the microwave communication networks in connection with their respective trading activities, and the JV may sell excess bandwidth that is not utilized by the JV members to third parties. In each of the JVs, the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; therefore it does not have a controlling financial interest in the JV and does not consolidate the JVs. The Company records its interest in each JV under the equity method of accounting and records its investment in the JVs within Other assets and its amounts payable for communication services provided by the JV within Accrued expenses and other liabilities on the condensed consolidated statements of financial condition. The Company records its pro-rata share of the JVs earnings or losses within Other, net and fees related to the use of communication services provided by the JVs within Communications and data processing on the condensed consolidated statements of comprehensive income (loss). The Company’s exposure to the obligations of these VIE is generally limited to its interests in each respective JV, which is the carrying value of the equity investment in each JV. The following table presents the Company’s nonconsolidated VIE at September 30, 2017: Maximum Carrying Amount Exposure to (in thousands) Asset Liability loss VIE's assets Equity investment $ 15,925 $ — $ 15,925 $ 40,925 Recent Accounting Pronouncements Revenue - In May 2014, the FASB issued Accounting Standard Update (“ASU”) 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 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . ASU 2015-14 defers the effective date of ASU 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. In December 2016, FASB issued ASU 2016-20 Technical Correction and Improvement (Topic 606): Revenue from Contracts with Customers , which amends the guidance in ASU 2014-09. The effective date and transition requirements for the ASU are the same as ASU 2014-09. The Company is expected to adopt the revenue recognition guidance on January 1, 2018 by applying the full retrospective method. Because the guidance does not apply to revenue associated with securities trading activities that are accounted for under other GAAP, the Company does not expect the guidance to have a material impact on its condensed consolidated statements of comprehensive income (loss) most closely associated with financial instruments, including Trading revenues, net, Commissions and technology services, and Interest and dividends income. The Company |
Merger of Virtu Financial, Inc.
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. | 9 Months Ended |
Sep. 30, 2017 | |
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. | |
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. | 3. Merger of Virtu Financial, Inc. and KCG Holdings, Inc. Background As of the Closing Date of the Acquisition, each of KCG’s issued and outstanding shares of Class A common stock, par value $0.01 per share were cancelled and extinguished and converted into the right to receive $20.00 in cash, without interest, less any applicable withholding taxes. The acquisition of KCG is being accounted for as a business combination, subject to the provisions of ASC 805, Business Combinations. As discussed in further detail in Note 9 “Borrowings”, on June 30, 2017, Virtu Financial and VFH entered into a fourth amended and restated credit agreement (the “Fourth Amended and Restated Credit Agreement”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, sole lead arranger and bookrunner, which amended and restated in its entirety the existing Credit Agreement. The Fourth Amended and Restated Credit Agreement provided for a $540.0 million first lien secured term loan, drawn in its entirety on June 30, 2017, and continued VFH’s existing $100.0 million first lien senior secured revolving credit facility. Also on June 30, 2017, Orchestra Borrower LLC (the “Escrow Issuer”), a wholly owned subsidiary of the Company, entered into an escrow credit agreement (the “Escrow Credit Agreement”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, sole lead arranger and bookrunner, which provided for a $610.0 million term loan (the “Escrow Term Loan”), the proceeds of which were deposited into escrow pending the closing of the Acquisition. Upon the closing of the Acquisition, the proceeds of the Escrow Term Loan were released to fund in part the Acquisition consideration, the obligations of the Escrow Issuer in respect of the Escrow Term Loan were assumed by VFH Parent and the Escrow Term Loan was deemed to be outstanding under the Fourth Amended and Restated Credit Agreement and the Escrow Credit Agreement and related credit documents automatically terminated and were superseded by the provisions of the Fourth Amended and Restated Credit Agreement. In addition, the revolving credit facility under the Fourth Amended and Restated Credit Agreement terminated. On June 16, 2017, the Escrow Issuer and Orchestra Co-Issuer, Inc. (the “Co-Issuer”) completed the offering of $500 million aggregate principal amount of 6.750% Senior Secured Second Lien Notes due 2022 (the “Notes”). The Notes were issued under an Indenture, dated June 16, 2017 (the “Indenture”), among the Escrow Issuer, the Co-Issuer and U.S. Bank National Association, as trustee and collateral agent. The Notes mature on June 15, 2022. Interest on the Notes accrues at 6.750% per annum, payable every six months through maturity on each June 15 and December 15, beginning on December 15, 2017. On July 20, 2017, VFH assumed all of the obligations of the Escrow Issuer under the Indenture and the Notes. The Notes are guaranteed by Virtu Financial and each of Virtu Financial’s wholly-owned domestic restricted subsidiaries that guarantees the Fourth Amended and Restated Credit Agreement, including KCG and certain of its subsidiaries and the Escrow Issuer. We refer to VFH and the Co-Issuer together as, the “Issuers.” On the Closing Date, the Escrow Credit Agreement and related credit documents automatically ceased to be of force or effect and were superseded by the provisions of the Fourth Amended and Restated Credit Agreement and the first lien senior secured revolving credit facility matured. A total of $1,119.4 million restricted cash in escrow was released to the Company. On the Closing Date, and in connection with the financing of the Acquisition, the Company issued to Aranda Investments Pte. Ltd. (“Aranda”), an affiliate of Temasek Holdings (Private) Limited (“Temasek”), 6,346,155 shares of the Company’s Class A common stock, pursuant to the investment agreement with Aranda (as amended, the “Aranda Investment Agreement”) in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act for an aggregate purchase price of approximately $99.0 million. On August 10, 2017, the Company issued an additional 1,666,666 shares of its Class A common stock for an aggregate purchase price of $26.0 million (collectively, the “Temasek Investment”). On the Closing Date, and in connection with the financing of the Acquisition, the Company issued to North Island Holdings I, LP (“NIH”) 39,725,979 shares of the Company’s Class A pursuant to the investment agreement with NIH (as amended, the “NIH Investment Agreement”) in a private placement exempt from the registration requirements of the Securities Act pursuant to Section 4(a) (2) of the Securities Act for an aggregate purchase price of approximately $613.5 million. On August 10, 2017 the Company issued an additional 338,124 shares of its Class A common stock for an aggregate purchase price of $5.2 million (collectively, the “NIH Investment”). In connection with the Temasek Investment and NIH Investment, the Company incurred approximately $7.8 million in fees which were recorded as a reduction to additional paid-in capital. On July 21, 2017, the outstanding 6.875% Senior Secured Notes due 2020 issued by KCG were redeemed at a redemption price equal to 103.438% of the principal amount, plus accrued and unpaid interest, pursuant to the indenture, dated as of March 13, 2015 (as amended, restated, supplemented or otherwise modified), by and among KCG, the subsidiary guarantors party thereto and The Bank of New York Mellon, as trustee and collateral agent. In accordance with the terms of the Fourth Amended and Restated Credit Agreement, VFH made voluntary prepayments of principal under the Term Loan Facility in the amount of $100.0 million each, on August 8, 2017 and September 29, 2017, respectively. The outstanding principal amount under the Term Loan Facility was $950.0 million as of September 30, 2017. Accounting treatment of the Acquisition The Acquisition is accounted for as a purchase of KCG by the Company. Under the acquisition method of accounting, the assets and liabilities of KCG, as of July 20, 2017, were recorded at their respective fair values and added to the carrying value of the Company's existing assets and liabilities. These fair values were determined with the assistance of third party valuation professionals. The reported financial condition and results of operations of the Company for the periods following the Merger reflect KCG's and the Company's balances and reflect the impact of purchase accounting adjustments. As the Company is the accounting acquirer, the financial results for the three and nine months ended September 30, 2017 comprise the results of the Company for the entire applicable period and the results of KCG from Closing Date through September 30, 2017. All periods prior to 2017 comprise solely the results of the Company. Certain former KCG management employees were terminated upon the Merger, and as a result were paid an aggregate of $6.4 million pursuant to their existing employment contracts. This amount has been recognized as an expense by the Company and is included in Employee compensation and payroll taxes in the condensed consolidated statements of comprehensive income (loss) for the three and nine month periods ending September 30, 2017. The Company also expects to make annual incentive compensation payments to former KCG employees who became employees of the Company following the Merger, and accrued related compensation expense of approximately $23.0 million during the three and nine months ended September 30, 2017, which is included in Employee compensation and payroll taxes in the condensed consolidated statements of comprehensive income (loss). Purchase price and goodwill The aggregate cash purchase price of $1.40 billion was determined as the sum of the fair value, at $20.00 per share, of KCG shares and warrants outstanding to former KCG stockholders at closing and the fair value of KCG employee stock based awards that were outstanding, and which vested at the Closing Date. The purchase price has been allocated to the assets acquired and liabilities assumed using their estimated fair values at July 20, 2017, the closing date of the Acquisition. The Company has not yet completed all of its analyses to finalize the allocation of the purchase price to the KCG acquired assets and liabilities. The allocation of the purchase price may be modified over the measurement period, as more information is obtained about the fair values of assets acquired and liabilities assumed. The Company has engaged third party specialists for the purchase price allocation. The amounts in the table below represent the allocation of the purchase price and are subject to revision during the remainder of the measurement period, a period not to exceed twelve months from the Acquisition date. Adjustments to the provisional values during the measurement period will be recorded in the reporting period in which the adjustment amounts are determined. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Acquisition date: (in thousands) Cash and equivalents $ 592,993 Cash and securities segregated under federal regulations 3,000 Securities borrowed 1,406,444 Securities purchased under agreements to resell 16,894 Receivables from broker dealers and clearing organizations 553,031 Financial instruments owned, at fair value 2,095,339 Property, equipment and capitalized software (net) 112,204 Intangibles 156,300 Deferred taxes 22,928 Other assets 331,820 Total Assets $ 5,290,953 Securities loaned $ 166,189 Securities sold under agreements to repurchase 841,606 Payables to broker dealers and clearing organizations 536,653 Payables to customers 17,583 Financial instruments sold, not yet purchased, at fair value 1,756,647 Accounts payable and accrued expenses and other liabilities 239,004 Debt 480,987 Total Liabilities $ 4,038,669 Total identified assets acquired, net of assumed liabilities $ 1,252,284 Goodwill $ 143,012 Total Purchase Price $ 1,395,296 Amounts preliminarily allocated to intangible assets, the amortization period and goodwill were as follows Amortization Amount Years Technology $ 67,800 1-6 years Customer relationships 77,100 13 - 17 years Trade names 5,000 10 years Exchange memberships 6,400 Indefinite Intangible assets $ 156,300 Goodwill 143,012 Total $ 299,312 Of the total Goodwill of $143.0 million, $107.2 million has been assigned to the Market Making segment and $35.8 million has been assigned to the Execution Services segment. Such goodwill is attributable to the expansion of products offerings and expected synergies of the combined workforce, products and technologies of the Company and KCG. Tax treatment of the Merger The Company believes that the Acquisition will be treated as a tax-free transaction as described in Section 351 of the Internal Revenue Code, and both KCG and the Company have received tax opinions from external legal counsel to that effect. KCG’s tax basis in its assets and liabilities therefore generally carries over to the Company following the Acquisition. None of the goodwill is expected to be deductible for tax purposes. The Company recorded net deferred tax assets of $22.9 million with respect to recording KCG’s assets and liabilities under the purchase method of accounting as described above as well as recording the value of other tax attributes acquired as a result of the Acquisition, as described in Note 12. Pro forma results Included in the Company’s results for the three months ended September 30, 2017 are results from the business acquired as a result of the Acquisition, from the date of Acquisition, July 20, 2017 through September 30, 2017 as follows: (in thousands) Revenues $ 149,327 Income (loss) before income taxes (12,578) The financial information in the table below summarizes the combined pro forma results of operations of the Company and KCG, based on adding the pre-tax historical results of KCG and the Company, and adjusting primarily for amortization of intangibles created in the Acquisition, debt raised in conjunction with the Acquisition and nonrecurring costs associated with the Acquisition, which comprise advisory and other professional fees incurred by Virtu and KCG of $24.2 and $22.5 million, respectively. The pro forma data assumes all of KCG’s issued and outstanding shares of Class A common stock, par value $0.01 per share were cancelled and extinguished and converted into the right to receive $20.00 in cash, without interest, less any applicable withholding taxes on January 1, 2016 and does not include adjustments to reflect the Company's operating costs or expected differences in the way funds generated by the Company are invested. This pro forma financial information is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information, including, without limitation, preliminary purchase accounting adjustments. The pro forma financial information does not reflect any synergies or operating cost reductions that may be achieved from the combined operations. The pro forma financial information combines the historical results for the Company and KCG for the three and nine month periods ended September 30, 2017 and 2016 (in millions, except per share amounts): For the Three Months Ended For the Nine Months Ended (in thousands, except per share amounts) 2017 2016 2017 2016 Revenue $ 304,020 $ 373,338 $ 1,068,164 $ 1,401,819 Net income (loss) (82,520) 1,783 (117,169) 163,146 Net income (loss) attributable to common stockholders (30,432) 658 (43,210) 60,165 Diluted earnings (loss) per share $ $ $ $ |
Earnings per Share
Earnings per Share | 9 Months Ended |
Sep. 30, 2017 | |
Earnings per Share | |
Earnings per share | 4. Earnings per Share Net income (loss) available for common stockholders is based on the Company’s weighted average interest in Virtu Financial during the periods presented below. The below table contains a reconciliation of net income (loss) before noncontrolling interest to net income (loss) available for common stockholders: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2017 2016 2017 2016 Income (loss) before income taxes and noncontrolling interest $ (46,495) $ 37,874 $ (17,421) $ 140,990 Provision for (benefit from) income taxes (6,505) 4,851 (2,918) 17,325 Net income (loss) (39,990) 33,023 (14,503) 123,665 Noncontrolling interest 26,472 (25,997) 6,466 (97,913) Net income (loss) available for common stockholders $ (13,518) $ 7,026 $ (8,037) $ 25,752 The calculation of basic and diluted earnings per share is presented below: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except for share or per share data) 2017 2016 2017 2016 Basic earnings per share: Net income (loss) available for common stockholders $ (13,518) $ 7,026 $ (8,037) $ 25,752 Less: Dividends and undistributed earnings allocated to participating securities (314) (191) (997) (612) Net income (loss) available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ (13,832) 6,835 $ (9,034) 25,140 Weighted average shares of common stock outstanding: Class A 79,199,142 38,351,465 53,520,346 38,264,139 Basic Earnings per share $ (0.17) $ 0.18 $ (0.17) $ 0.66 Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except for share or per share data) 2017 2016 2017 2016 Diluted earnings per share: Net income (loss) available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ (13,832) $ 6,835 $ (9,034) $ 25,140 Weighted average shares of common stock outstanding: Class A Issued and outstanding 79,199,142 38,351,465 53,520,346 38,264,139 Issuable pursuant to 2015 Management Incentive Plan(1) — — — — 79,199,142 38,351,465 53,520,346 38,264,139 Diluted Earnings per share $ (0.17) $ 0.18 $ (0.17) $ 0.66 (1) The dilutive impact of unexercised stock options excludes from the computation of EPS 1,578,617 and 1,151,260 options for the three months ended September 30, 2017 and 2016, respectively, and 1,704,307 and 383,294 options for the nine months ended September 30, 2017 and 2016, respectively, because inclusion of the options would have been anti-dilutive. |
Tax Receivable Agreements
Tax Receivable Agreements | 9 Months Ended |
Sep. 30, 2017 | |
Tax Receivable Agreements | |
Tax Receivable Agreements | 5. 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 14, that are generally equal to 85% of the applicable cash tax savings, if any, that the Company actually realizes as a result of favorable tax attributes that were and will continue to be available to the Company 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 was 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 was extended until September 15, 2016. Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts. The Company made its first payment of $7.0 million in February 2017. 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 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 Class C common stock) and the exchange of Virtu Financial Units (along with the corresponding shares of Class C common stock) for shares of Class A common stock in connection with the Secondary Offerings, the Company recorded a deferred tax asset of $218.4 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 $238.6 million, ranging from approximately $0.4 million to $21.4 million per year over the next 15 years. The corresponding deduction to additional paid-in capital was approximately $20.2 million for the difference between the tax receivable agreements liability and the related deferred tax asset. In connection with the February 2017, May 2017, and August 2017 employee exchanges (as described in Note 14), the Company recorded an additional deferred tax asset of $9.5 million and payment liability pursuant to the tax receivable agreements of $8.2 million, with the $1.3 million difference recorded as an increase to additional paid-in capital. The amounts recorded as of September 30, 2017 are based on estimates available at the respective dates and may be subject to change after the filing of the Company’s U.S. federal and state income tax returns for the years in which tax savings were realized. At September 30, 2017 and December 31, 2016, the Company’s remaining deferred tax assets were approximately $191.3 million and $185.6 million, respectively, and the Company’s payment liabilities pursuant to the tax receivable agreements were approximately $232.6 million and $231.4 million, respectively. Approximately $22.1 million of the Company’s deferred tax assets at September 30, 2017 are a result of the Acquisition as described in Note 3. 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 of 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 (loss). |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 6. Goodwill and Intangible Assets Prior to the Acquisition, the Company was managed and operated as one business, and accordingly, operated under one reportable segment. As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii) Execution Services; and (iii) Corporate. The Company allocated goodwill to the new reporting units using a relative fair value approach. In addition, the Company performed an assessment of potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment was indicated. The following table presents the details of goodwill by segment: Market Execution (in thousands) Making Services Corporate Total Balance as of December 31, 2016 $ 657,985 $ 57,394 $ — $ 715,379 Additions 108,276 35,943 — 144,219 Balance as of September 30, 2017 $ 766,261 $ 93,337 $ — $ 859,598 On May 3, 2017, the Company completed the acquisition of certain legal entities that owned select strategic telecommunications assets from Teza Technologies. The total purchase price incurred was $5.6 million, of which $1.2 million was recorded as goodwill, and $1.9 million was recorded as intangible assets. This acquisition was accounted for as a business combination. The acquisition related disclosures required by ASC 805 Business Combinations were finalized as of September 30, 2017, a decrease of $1.9 million in goodwill and an increase of $1.9 million in intangible assets were recorded as adjustments to preliminary analysis during the three months ended September 30, 2017. As described in Note 3 “Merger of Virtu Financial, Inc. and KCG Holdings, Inc.”, on July 20, 2017 the Company completed the acquisition of KCG. The aggregate cash purchase price of $1.40 billion has been allocated to the assets acquired and liabilities assumed using their estimated fair values at the Closing Date of the Acquisition. The Company has allocated $143.0 million and $156.3 million to goodwill and identified intangible assets, respectively This Acquisition was accounted for as a business combination. The Company recorded provisional amounts based upon its best estimate of the value as a result of preliminary analysis. As of September 30, 2017 and December 31, 2016, the Company’s total amount of goodwill recorded was $859.6 million and $715.4 million, respectively. No goodwill impairment was recognized in the three and nine months ended September 30, 2017 and 2016. Acquired intangible assets consisted of the following: As of September 30, 2017 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ 110,000 $ 110,000 $ — 1.4 to 2.5 ETF issuer relationships 950 533 417 9 ETF buyer relationships 950 533 417 9 Leases 1,800 247 1,553 3 FCC licenses 200 12 188 7 Technology 67,800 5,001 62,799 to 6 Customer relationships 77,100 1,027 76,073 to 17 Trade names 5,000 98 4,902 10 Exchange memberships 6,400 — 6,400 Indefinite $ 270,200 $ 117,451 $ 152,749 As of December 31, 2016 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ 110,000 $ 110,000 $ — 1.4 to 2.5 ETF issuer relationships 950 454 496 9 ETF buyer relationships 950 454 496 9 $ 111,900 $ 110,908 $ 992 Amortization expense relating to finite-lived intangible assets was approximately $6.4 million and $0.05 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $6.5 million and $0.16 million for the nine months ended September 30, 2017 and 2016, respectively. This is included in amortization of purchased intangibles and acquired capitalized software in the accompanying condensed consolidated statements of comprehensive income (loss). |
Receivables from_Payables to Br
Receivables from/Payables to Broker-Dealers and Clearing Organizations | 9 Months Ended |
Sep. 30, 2017 | |
Receivables from/Payables to Broker-Dealers and Clearing Organizations | |
Receivables from/Payables to Broker-Dealers and Clearing Organizations | 7. 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 September 30, 2017 and December 31, 2016: (in thousands) 2017 2016 Assets Due from prime brokers $ 196,487 $ 91,476 Deposits with clearing organizations 156,127 21,995 Net equity with futures commission merchants 187,424 213,030 Unsettled trades with clearing organization 191,212 44,312 Securities failed to deliver 231,135 77,915 Commissions and fees 18,133 — Total receivables from broker-dealers and clearing organizations $ 980,518 $ 448,728 Liabilities Due to prime brokers $ 409,323 $ 227,335 Net equity with futures commission merchants 42,634 38,838 Unsettled trades with clearing organization 318,207 429,800 Securities failed to receive 66,194 5 Commissions and fees 2,709 — Total payables to broker-dealers and clearing organizations $ 839,067 $ 695,978 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 (described in Note 9) of approximately $159.1 million and $309.1 million as of September 30, 2017 and December 31, 2016, 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 | 9 Months Ended |
Sep. 30, 2017 | |
Collateralized Transactions | |
Collateralized Transactions | 8. 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 September 30, 2017 and December 31, 2016, substantially all of the securities received as collateral have been repledged. The fair value of the collateralized transactions at September 30, 2017 and December 31, 2016 are summarized as follows: (in thousands) 2017 2016 Securities received as collateral: Securities borrowed $ 1,479,107 $ 213,203 Securities purchased under agreements to resell 8,196 — $ 1,487,303 $ 213,203 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 September 30, 2017 and December 31, 2016 consisted of the following: (in thousands) 2017 2016 Equities $ 692,130 $ 128,202 Exchange traded notes 7,022 15,681 $ 699,152 $ 143,883 |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2017 | |
Borrowings | |
Borrowings | 9. Borrowings Outstanding borrowings and financing capacity or unused available capacity under the Company’s borrowing arrangements were as follows: At September 30, 2017 At December 31, 2016 Financing Borrowing Financing Borrowing (in thousands) Available Outstanding Available Outstanding Broker-dealer credit facilities: Uncommitted facility $ $ $ $ Committed facility — — — $ $ $ $ Short-Term Credit Facilities: Short-term credit facilities (1) $ $ $ $ $ $ $ $ _____________________________________ (1) Outstanding borrowings were included with receivable from broker-dealers and clearing organization within the consolidated statements of financial condition. At September 30, 2017 At December 31, 2016 Maturity Unused Available Borrowing Unused Available Borrowing (in thousands) Date Capacity Outstanding Capacity Outstanding Long-term borrowings: Senior secured credit facility December 2021 $ n/a $ $ n/a $ Senior secured Second Lien Notes June 2022 n/a n/a n/a Revolving credit facility April 2018 — — — SBI bonds January 2020 n/a n/a $ $ $ $ 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 2.16% at September 30, 2017 and 1.66% at December 31, 2016). The Company was 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, April 24, 2015, and July 18, 2016, 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 was terminated as of September 30, 2017. Interest expense for the three months ended September 30, 2017 and 2016 was approximately $0.4 million and $0.3 million, respectively, and for the nine months ended September 30, 2017 and 2016 was approximately $1.4 million and $0.8 million, respectively. Interest expense is included within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income (loss). 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. Borrowings bore interest at a weighted average interest rate of 3.56% and 3.12% per annum, as September 30, 2017 and December 31, 2016, respectively. Interest expense in relation to the facilities for the three months ended September 30, 2017 and 2016 was approximately $1.4 million and $1.8 million, respectively, and for the nine months ended September 30, 2017 and 2016 was $4.8 million and $5.0 million, respectively. Interest expense is recorded within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income (loss). Long-Term Borrowings 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 Agreement was amended on February 5, 2013, May 1, 2013, November 8, 2013 and October 27, 2016. On June 30, 2017, Virtu Financial and VFH entered into a fourth amended and restated credit agreement (the “Fourth Amended and Restated Credit Agreement”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, sole lead arranger and bookrunner, which amended and restated in its entirety the existing Credit Agreement. The Fourth Amended and Restated Credit Agreement provided for a $540.0 million first lien secured term loan, drawn in its entirety on June 30, 2017, and continued VFH’s existing $100.0 million first lien senior secured revolving credit facility. Also on June 30, 2017, Orchestra Borrower LLC (the “Escrow Issuer”), a wholly owned subsidiary of the Company, entered into an escrow credit agreement (the “Escrow Credit Agreement”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, sole lead arranger and bookrunner, which provided for the $610.0 million term loan (the “Escrow Term Loan”), the proceeds of which were deposited into escrow pending the closing of the Acquisition. Upon the closing of the Acquisition, the proceeds of the Escrow Term Loan were released to fund in part the Acquisition consideration, the obligations of the Escrow Issuer in respect of the Escrow Term Loan were assumed by VFH Parent and the Escrow Term Loan was deemed to be outstanding under the Fourth Amended and Restated Credit Agreement and the Escrow Credit Agreement and related credit documents automatically terminated and were superseded by the provisions of the Fourth Amended and Restated Credit Agreement, In addition, the revolving credit facility under the Fourth Amended and Restated Credit Agreement terminated. Under the Fourth Amended and Restated Credit Agreement, the $1,150.0 million aggregate principal amount of first lien senior secured term loans, including the Escrow Term Loan (the “Term Loan Facility”), was scheduled to mature on December 30, 2021 and will require scheduled annual amortization payments on each of the first four anniversaries of the Closing Date in an amount equal to the sum of 7.5% of the original aggregate principal amount of the term loan issued under the Fourth Amended and Restated Credit Agreement and 7.5% of the aggregate principal amount of the Escrow Term Loan outstanding on the Closing Date. During the three months ended September 30, 2017, $200.0 million was repaid under the Fourth Amended and Restated Credit Agreement. As of September 30, 2017, $950.0 million was outstanding under the Fourth Amended and Restated Credit Agreement. All obligations under the Term Loan Facility are unconditionally guaranteed by Virtu Financial and VFH’s existing direct and indirect wholly-owned domestic restricted subsidiaries (including, KCG and its wholly-owned domestic restricted subsidiaries), subject to certain exceptions, including exceptions for our broker dealer subsidiaries and certain immaterial subsidiaries. The Term Loan Facility and related guarantees are secured by first-priority perfected liens, subject to certain exceptions, on substantially all of VFH’s and the guarantors’ existing and future assets, including substantially all material personal property and a pledge of the capital stock of VFH, the guarantors (other than Virtu Financial) and the direct domestic subsidiaries of VFH and the guarantors and 100% of the non-voting capital stock and up to 65% of the voting capital stock of foreign subsidiaries that are directly owned by VFH or any of the guarantors. Amounts outstanding under the Fourth Amended and Restated Credit Agreement bear interest as follows: · in the case of the term loans, at VFH’s option, at either (a) the greatest of (i) the prime rate in effect, (ii) the NYFRB rate plus 0.50%, (iii) the adjusted LIBOR rate for a Eurodollar borrowing with a one month interest period plus 1.00%, and (iv) 2.00% plus, in each case, 2.75% per annum; or (b) the greater of (i) the adjusted LIBOR rate for the interest period then in effect and (ii) 1.00% plus, in each case, 3.75% per annum; and · in the case of revolving loans, at VFH’s option, at either (a) the greatest of (i) the prime rate in effect, (ii) the NYFRB rate plus 0.50%, (iii) the adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1.00%, and (iv) 1.00% plus, in each case, 2.00% per annum; or (b) the greater of (i) the adjusted LIBOR rate for the interest period then in effect and (ii) zero plus, in each case, 3.00% per annum. Under the Fourth Amended and Restated Credit Agreement, we must comply on a quarterly basis with: · a maximum total leverage ratio of 5.00 to 1.0 with a step-down to (i) 4.25 to 1.0 from and after the fiscal quarter ending March 31, 2019, (ii) 3.50 to 1.0 from and after the fiscal quarter ending March 31, 2020 and (iii) 3.25 to 1.0 from the fiscal quarter ending March 31, 2021 and thereafter; and · a minimum interest coverage ratio of 2.75 to 1.0, stepping up to 3.00 to 1.0 from and after the fiscal quarter ending March 31, 2019. The Fourth Amended and Restated Credit Agreement contains certain customary affirmative covenants. The negative covenants in the Fourth Amended and Restated Credit Agreement include, among other things, limitations on our ability to do the following, subject to certain exceptions: (i) incur additional debt; (ii) create liens on certain assets; (iii) make certain loans or investments (including acquisitions); (iv) pay dividends on or make distributions in respect of our capital stock or make other restricted junior payments; (v) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; (vi) sell or otherwise dispose of assets, including equity interests in our subsidiaries; (vii) enter into certain transactions with our affiliates; (viii) enter into swaps, forwards and similar agreements; (ix) enter into sale-leaseback transactions; (x) restrict liens and subsidiary dividends; (xi) change our fiscal year; and (xii) modify the terms of certain debt agreements. The Fourth Amended and Restated Credit Agreement contains certain customary events of default, including relating to a change of control. If an event of default occurs and is continuing, the lenders under the Fourth Amended and Restated Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Fourth Amended and Restated Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Fourth Amended and Restated Credit Agreement. In connection with the refinancing and the $200 million debt repayment, the Company accelerated certain unamortized financing costs incurred in connection with the credit facility that were scheduled to be amortized over the term of the loan, including original issue discount and underwriting and legal fees. During the three and nine months ended September 2017, the Company recorded $4.9 million and $9.4 million, respectively, in such costs which is included within debt issue cost related to debt refinancing in the condensed consolidated statements of comprehensive income. Senior Secured Second Lien Notes On June 16, 2017, the Escrow Issuer and Orchestra Co-Issuer, Inc. (the “Co-Issuer”) completed the offering of $500 million aggregate principal amount of 6.750% Senior Secured Second Lien Notes due 2022 (the “Notes”). The Notes were issued under an Indenture, dated June 16, 2017 (the “Indenture”), among the Escrow Issuer, the Co-Issuer and U.S. Bank National Associations, as trustee and collateral agent. The Notes mature on June 15, 2022. Interest on the Notes accrues at 6.750% per annum, payable every six months through maturity on each June 15 and December 15, beginning on December 15, 2017. On July 20, 2017, VFH assumed all of the obligations of the Escrow Issuer under the Indenture and the Notes. The Notes are guaranteed by Virtu Financial and each of Virtu Financial’s wholly-owned domestic restricted subsidiaries that guarantees the Fourth Amended and Restated Credit Agreement, including KCG and certain of its subsidiaries and the Escrow Issuer. We refer to VFH and the Co-Issuer together as, the “Issuers.” The Notes and the related guarantees are secured by second-priority perfected liens on substantially all of the Issuers’ and guarantors’ existing and future assets, subject to certain exceptions, including all material personal property, a pledge of the capital stock of the Issuers, the guarantors (other than Virtu Financial) and the direct subsidiaries of the Issuers and the guarantors and up to 65.0% of the voting capital stock of any now-owned or later-acquired foreign subsidiaries that are directly owned by the Issuers or any of the guarantors, which assets will also secure obligations under the Fourth Amended and Restated Credit Agreement on a first-priority basis. Prior to June 15, 2019, the Company may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to (but not including) the date of redemption, plus an applicable “make whole” premium (calculated based upon the yield of certain U.S. treasury securities plus 0.50%). Prior to June 15, 2019, the Company may redeem up to 35% of the aggregate principal amount of the Notes at a redemption price equal to 106.750% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the date of redemption with the net cash proceeds from certain equity offerings. Upon the occurrence of specified change of control events as defined in the indenture governing the Notes, the Company must offer to repurchase the Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date. On or after June 15, 2019, the Company may redeem some or all of the Notes, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to (but not including) the date of redemption, if redeemed during the 12-month period beginning on June 15 of the years indicated below: Period Percentage 2019 103.375% 2020 101.688% 2021 and thereafter 100.000% The Indenture imposes certain limitations on the Company’s ability to (i) incur or guarantee additional indebtedness or issue preferred stock; (ii) pay dividends, make certain investments and make repayments on indebtedness that is subordinated in right of payment to the Notes and make other “restricted payments”; (iii) create liens on their assets to secure debt; (iv) enter into transactions with affiliates; (v) merge, consolidate or amalgamate with another company; (vi) transfer and sell assets; and (vii) permit restrictions on the payment of dividends by Virtu Financial’s subsidiaries. The Indenture also contains customary events of default, including, among others, payment defaults related to the failure to pay principal or interest on Notes, covenant defaults, final maturity default or cross-acceleration with respect to material indebtedness and certain bankruptcy events. The gross proceeds from the Notes were deposited into a segregated escrow account with an escrow agent. The proceeds were released from escrow as of the Closing Date and were used to finance, in part, the Acquisition, and to repay certain indebtedness of the Company and KCG. (See Note 3 for more details). SBI Bonds On July 25, 2016, VFH issued Japanese Yen Bonds (collectively the “SBI Bonds”) in the aggregate principal amount of ¥3.5 billion ($31.1 million at issuance date) to SBI Life Insurance Co., Ltd. and SBI Insurance Co., Ltd. The proceeds from the SBI Bonds were used to partially fund the investment in SBI Japannext Co., Ltd (as described in Note 10). The SBI Bonds were issued bearing interest at the rate per annum of 4.0% until their scheduled maturity on January 6, 2020. Following the consummation of the Refinancing Transaction and in accordance with the terms and conditions of the SBI Bonds, the rate per annum was increased to 5.0% as of October 2016. The SBI Bonds are guaranteed by Virtu Financial. The SBI Bonds are subject to fluctuations on the Japanese Yen currency rates relative to the Company’s reporting currency (U.S. Dollar) with the changes reflected in other, net in the condensed consolidated statements of comprehensive income (loss). The principal balance was ¥3.5 billion $31.1 million) as of September 30, 2017 and the Company recorded a loss of $0.05 million and $1.5 million due to the change in currency rates during the nine months ended September 30, 2017 and 2016, respectively, and recorded a loss of $0.001 million and $1.5 million during the three months ended September 30, 2017 and 2016, respectively. Aggregate future required minimum principal payments based on the terms of the long-term borrowings at September 30, 2017 were as follows: (in thousands) 2017 $ — 2018 — 2019 — 2020 and thereafter 1,481,108 Total principal of long-term borrowings $ 1,481,108 The below table contains a reconciliation of the long term borrowings principal amount to the secured credit facility recorded in the condensed consolidated statements of financial condition: At September 30, At December 31, (in thousands) 2017 2016 Senior secured first lien term loan outstanding principal $ 950,000 $ 540,000 Senior secured second lien notes outstanding principal 500,000 — SBI Bonds outstanding principal 31,108 29,925 Net deferred financing fees (45,237) (4,012) Net discount on senior secured credit facility (1,242) (956) Long-term borrowings $ 1,434,629 $ 564,957 |
Financial Assets and Liabilitie
Financial Assets and Liabilities | 9 Months Ended |
Sep. 30, 2017 | |
Financial Assets and Liabilities | |
Financial Assets and Liabilities | 10. Financial Assets and Liabilities At September 30, 2017 and December 31, 2016, substantially all of the Company’s financial assets and liabilities, except for the long-term borrowings, short-term borrowings, securities borrowed and loaned, and certain exchange memberships, which would all be categorized as Level 2, 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 long-term borrowings approximates fair value as of September 30, 2017 and December 31, 2016 based on the recent transaction date of the SBI Bonds and the quoted over-the-counter market prices provided by the issuer of the senior secured credit facility, and would be categorized as Level 2. As of March 31, 2017, the Company began pricing certain financial instruments held for trading at fair value based on theoretical prices which can differ from quoted market prices. The theoretical prices reflect price adjustments primarily caused by the fact that the Company continuously prices its financial instruments based on all available information. This information includes prices for identical and near-identical positions, as well as the prices for securities underlying the Company’s positions, on other exchanges that are open after the exchange on which the financial instruments is traded closes. The Company’s middle office department validates that all price adjustments can be substantiated with market inputs and checks the theoretical prices independently. Consequently, such financial instruments are classified as Level 2. The Company concluded that this is a change in accounting estimate and no retrospective adjustments were necessary. The fair value of equities, options, on-the-run 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 and certain financial instruments noted in the preceding paragraph which are categorized as Level 2. Fair value of the Company’s derivative contracts is based on the indicative prices obtained from broadly distributed bank and broker dealers, 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 September 30, 2017 and December 31, 2016, the Company’s corporate bonds, derivative contracts and other U.S. and non-U.S. government obligations have been categorized as Level 2. As described later in this footnote, the Company has a minority investment in SBI Japannext Co., Ltd, a proprietary trading system based in Tokyo (“SBI Japannext”). The Company elected the fair value option to account for this equity investment because it believes that fair value is the most relevant measurement attribute for this investment, as well as to reduce operational and accounting complexity. This investment has been categorized as Level 3. The valuation process involved for Level 3 measurements is completed on a quarterly basis. The Company employs two valuation methodologies when determining the fair value of investments categorized as Level 3, market comparable analysis and discounted cash flow analysis. The market comparable analysis considers key financial inputs, recent public and private transactions and other available measures. The discounted cash flow analysis incorporates significant assumptions and judgments and the estimates of key inputs used in this methodology include the discount rate for the investment and assumed inputs used to calculate terminal values, such as price/earnings multiples. Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method and the ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected holding period. There were no transfers of financial instruments between levels during the three months and nine months ended September 30, 2017 and 2016. Fair value measurements for those items measured on a recurring basis are summarized below as of September 30, 2017: September 30, 2017 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 $ 591,928 $ 1,434,092 $ — $ — $ 2,026,020 U.S. and Non-U.S. government obligations 2,783 21,002 — — 23,785 Corporate Bonds — 83,532 — — 83,532 Exchange traded notes 4,553 53,081 — — 57,634 Currency forwards — 3,459,340 — (3,458,283) 1,057 Options 11,220 — — — 11,220 $ 610,484 $ 5,051,047 $ — $ (3,458,283) $ 2,203,248 Financial instruments owned, pledged as collateral: Equity securities $ 413,860 $ 278,270 $ — $ — $ 692,130 Exchange traded notes 520 6,502 — — 7,022 $ 414,380 $ 284,772 $ — $ — $ 699,152 Other Assets Equity investment $ — $ — $ 37,263 $ — $ 37,263 Exchange stock 3,211 — — — 3,211 Other(1) — 55,363 3,000 — 58,363 $ 3,211 $ 55,363 $ 40,263 $ — $ 98,837 Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ 895,116 $ 1,470,863 $ — $ — $ 2,365,979 U.S. and Non-U.S. government obligations 10,375 14,975 — — 25,350 Corporate Bonds — 83,535 — 83,535 Exchange traded notes 355 50,327 — — 50,682 Currency forwards — 3,492,928 — (3,492,847) 81 Options 10,264 — — — 10,264 $ 916,110 $ 5,112,628 $ — $ (3,492,847) $ 2,535,891 (1) Other primarily consists of a $55.4 million receivable from Bats related to the sale of KCG Hotspot and $3.0 million receivable from the sale of an investment. Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2016: December 31, 2016 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 $ 1,597,049 $ 31,988 $ — $ — $ 1,629,037 Non-U.S. government obligations — 10,765 — — 10,765 Exchange traded notes 37,034 — — — 37,034 Currency forwards — 1,147,261 — (1,140,239) 7,022 Options — 141 — — 141 $ 1,634,083 $ 1,190,155 $ — $ (1,140,239) $ 1,683,999 Financial instruments owned, pledged as collateral: Equity securities $ 128,202 $ — $ — $ — $ 128,202 Exchange traded notes 15,681 — — — 15,681 $ 143,883 $ — $ — $ — $ 143,883 Other Assets Equity investment $ — $ — $ 36,031 $ — $ 36,031 Exchange stock 449 — — — 449 $ 449 $ — $ 36,031 $ — $ 36,480 Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ 1,323,693 $ 6,638 $ — $ — $ 1,330,331 Exchange traded notes 18,744 — — — 18,744 Currency forwards — 1,009,038 — (1,009,038) — Options — 80 — — 80 $ 1,342,437 $ 1,015,756 $ — $ (1,009,038) $ 1,349,155 Investment in SBI Japannext Co., Ltd. On July 27, 2016, the Company purchased an additional minority interest (29.4%) in SBI Japannext for $38.8 million in cash (“SBI Investment”). In connection with the SBI Investment, VFH issued bonds to certain affiliates of SBI Japannext and used the proceeds to finance the transaction (see Note 9). As of September 30, 2017, the Company determined the fair value of the SBI Investment using the discounted cash flow method, an income approach, with the discount rate of 15.9% applied to the cash flow forecasts. The Company also used a market approach based on 19x average price/earnings multiples of comparable companies to corroborate the income approach. The fair value of the SBI Investment at December 31, 2016 was determined to approximate the purchase price paid for the SBI Investment, adjusted for the changes in the Japanese Yen currency rate, given the proximity to the transaction date and lack of significant events subsequent to the transaction date. The fair value measurement is highly sensitive to significant changes in the unobservable inputs and significant increases (decreases) in discount rate or decreases (increases) in price/earnings multiples would result in a significantly lower (higher) fair value measurement. Changes in the fair value of the SBI Investment are reflected in other, net in the condensed consolidated statements of comprehensive income (loss). Receivable from Bats Global Markets, Inc. (“Bats”) In March 2015, KCG sold KCG Hotspot, an institutional spot foreign exchange ECN, to Bats, which is now a subsidiary of CBOE Holdings, Inc. KCG and Bats agreed to share certain tax benefits, which as of September 30, 2017 comprise a $50.0 million payment and an annual payment of up to $6.6 million, both of which are due in April 2018. The $6.8 million annual payment is contingent on Bats (and CBOE) generating sufficient taxable net income to receive the tax benefits. The Company has elected the fair value option related to the receivable from Bats and considers the receivable to be a Level 2 asset in the fair value hierarchy as the fair value is derived from observable significant inputs such as contractual cash flows and market discount rates. The remaining additional potential payments of $56.8 million are recorded at a fair value of $55.4 million in Other assets on the condensed consolidated statements of financial condition as of September 30, 2017. The following presents the changes in Level 3 financial instruments measured at fair value on a recurring basis: Nine Months Ended September 30, 2017 Change in Net Unrealized Gains / (Losses) on Investments Balance at Total Realized Net Transfers Balance at still held at December 31, and Unrealized into (out of) September 30, September 30, (in thousands) 2016 Purchases Gains / (Losses) Level 3 2017 2017 Assets Other assets: Equity investment $ 36,031 $ — $ 1,232 $ — $ 37,263 $ 1,232 Other — 3,000 — — 3,000 — Total $ 36,031 $ 3,000 $ 1,232 $ — $ 40,263 $ 1,232 Offsetting of Financial Assets and Liabilities 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 September 30, 2017 and December 31, 2016. September 30, 2017 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 $ 1,525,403 $ — $ 1,525,403 $ (1,480,267) $ (844) $ 44,292 Securities purchased under agreements to resell 8,249 — 8,249 (8,188) — 61 Trading assets, at fair value: — Currency forwards 3,459,340 (3,458,283) 1,057 — — 1,057 Options 11,220 — 11,220 (505) — 10,715 Total $ 5,004,212 $ (3,458,283) $ 1,545,929 $ (1,488,960) $ (844) $ 56,125 Net Amounts of Gross Amounts Liabilities 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 Liabilities Financial Condition Financial Condition Instruments Pledged Net Amount Offsetting of Financial Liabilities: Securities loaned $ 582,915 $ — $ 582,915 $ (574,885) $ — $ 8,030 Securities sold under agreements to repurchase 620,887 — 620,887 (620,887) — — Trading liabilities, at fair value: — Currency forwards 3,492,928 (3,492,847) 81 — — 81 Options 10,264 — 10,264 (505) — 9,759 Total $ 4,706,994 $ (3,492,847) $ 1,214,147 $ (1,196,277) $ — $ 17,870 December 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 $ 220,005 $ — $ 220,005 $ (216,778) $ (248) $ 2,979 Trading assets, at fair value: Currency forwards 1,147,261 (1,140,239) 7,022 — — 7,022 Options 141 — 141 (80) (13) 48 Total $ 1,367,407 $ (1,140,239) $ 227,168 $ (216,858) $ (261) $ 10,049 Net Amounts of Liabilities Gross Amounts Presented Gross Amounts Not Offset In the Offset in the in the Consolidated 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 $ 222,203 $ — $ 222,203 $ (221,792) $ — $ 411 Trading liabilities, at fair value: Currency forwards 1,009,038 (1,009,038) — — — — Options 80 — 80 (80) — — Total $ 1,231,321 $ (1,009,038) $ 222,283 $ (221,872) $ — $ 411 Excluded from the fair value and offsetting tables above is net unsettled fair value on long and short futures contracts in the amounts of $89.3 million and $18.0 million, which are included within receivables from broker-dealers and clearing organizations as of September 30, 2017 and December 31, 2016, respectively, and $(50.4) million and $(3.5) million, which are included within payables to broker-dealers and clearing organizations as of September 30, 2017 and December 31, 2016, 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. September 30, 2017 Remaining Contractual Maturity Overnight and Less than 30 - 60 61 - 90 (in thousands) Continuous 30 days days Days Total Repurchase agreements: Equity securities $ — $ 205,000 $ 175,000 $ 240,000 $ 620,000 U.S. and Non-U.S. government obligations 887 — — — 887 Total $ 887 $ 205,000 $ 175,000 $ 240,000 $ 620,887 Securities lending transactions: Equity securities $ 582,915 $ — $ — $ — $ 582,915 Total $ 582,915 $ — $ — $ — $ 582,915 |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments | |
Derivative Instruments | 11. Derivative Instruments The fair value of the Company’s derivative instruments on a gross basis consisted of the following at September 30, 2017 and December 31, 2016: (in thousands) September 30, 2017 December 31, 2016 Derivatives Assets Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Receivables from broker dealers and clearing organizations $ (2,729) $ 951,330 $ 2,403 $ 1,461,286 Commodity futures Receivables from broker dealers and clearing organizations 50,258 18,078,494 13,964 3,918,778 Currency futures Receivables from broker dealers and clearing organizations 41,826 3,789,287 1,591 3,264,093 Fixed income futures Receivables from broker dealers and clearing organizations (54) 32,723 31 5,730 Options Financial instruments owned 11,220 141 6,844 Currency forwards Financial instruments owned 3,459,340 1,147,261 94,192,414 Derivatives Liabilities Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Payables to broker dealers and clearing organizations $ (731) $ 107,774 $ (43) $ 62,417 Commodity futures Payables to broker dealers and clearing organizations (35,301) 724,829 2,842 22,616,170 Currency futures Payables to broker dealers and clearing organizations (14,425) 2,988,821 (6,282) 1,137,908 Treasury futures Payables to broker dealers and clearing organizations 11 7,906 — — Options Financial instruments sold, not yet purchased 10,264 1,108,920 80 4,486 Currency forwards Financial instruments sold, not yet purchased 3,492,928 159,585,203 1,009,038 85,874,684 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 (loss) for the three and nine months ended September 30, 2017 and 2016. For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2017 2016 2017 2016 Futures $ 35,097 $ 197,650 $ 249,274 $ 618,245 Currency forwards 8,950 (52,796) 3,135 (37,076) Options 21,120 (65) 21,119 (411) Others 125 (2) 125 2 $ 65,292 $ 144,787 $ 273,653 $ 580,760 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes | |
Income Taxes | 12. Income Taxes Subsequent to the 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 three and nine months ended September 30, 2017 and 2016, the income attributable to these noncontrolling interests is reported in the condensed consolidated statements of comprehensive income (loss), 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 provisions for (benefit from) income taxes and effective tax rates were $(6.5) million and 14.0% and $4.9 million and 12.8% for the three months ended September 30, 2017 and 2016, respectively, and $(2.9) million and 16.7% and $17.3 million and 12.3% for the nine months ended September 30, 2017 and 2016, respectively. 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. Included in Other assets on the condensed consolidated statements of financial condition at September 30, 2017 and December 31, 2016 are current income tax receivables of $125.8 million and $5.8 million, respectively. The balance at September 30, 2017 primarily comprises the income tax benefit of KCG net operating losses that were generated prior to the Acquisition and that are eligible to be carried back by the Company. Deferred income taxes arise primarily due to the amortization of the deferred tax assets recognized in connection with the IPO (see Note 5 and Note 14) and the KCG Acquisition (Note 3), 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. As a result of the Acquisition of KCG, the Company recorded a deferred tax asset of $31.5 million relating to non-U.S. net operating losses. A full valuation allowance was also recorded against this deferred tax asset at the Closing date and at September 30, 2017 as it is more likely than not that this deferred tax asset will not be realized. No valuation allowance against the remaining deferred taxes was recorded as of September 30, 2017 or December 31, 2016 because it is more likely than not that these deferred tax assets will be fully realized. The Company is subject to taxation in U.S. federal, state, local and foreign jurisdictions. As of September 30, 2017, the Company’s tax years for 2013 through 2016 and 2010 through 2017 are subject to examination by U.S. and non-U.S. tax authorities, respectively. As a result of the acquisition of KCG, the Company has assumed any KCG tax exposures. KCG is currently subject to U.S. Federal income tax examinations for the tax years 2013 through 2016, and to non-U.S. income tax examinations for the tax years 2007 through 2016. In addition, the Company is subject to state and local income tax examinations in various jurisdictions for the tax years 2007 through 2016. The final outcome of these examinations is not yet determinable. However, the Company anticipates that adjustments to the unrecognized tax benefits, if any, will not result in a material change to the results of operations or financial condition. The Company had $8.0 million of unrecognized tax benefits as of September 30, 2017 as a result of acquiring KCG, and no unrecognized tax benefits as of December 31, 2016. |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 9 Months Ended |
Sep. 30, 2017 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | 13. 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, Regulation SCI, best execution, handling of retail order flow, use of market data feeds, 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, censures, 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. Subject to the foregoing, based on information currently available, at present 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. 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 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. In May 2017, the fine was reduced to €3.0 million (approximately $3.5 million), subject to an incremental charge of €0.3 million and accordingly the Company reduced its accrual to €3.3 million (approximately $3.9 million), with the benefit recorded under operations and administrative expense in the statement of comprehensive income (loss), and the Company continues to pursue its rights to appeal. Additionally, in July 2016, a subsidiary of KCG was fined €400,000 by the AMF’s enforcement committee. KCG fully reserved for the monetary penalty in the second quarter of 2016. In addition, in connection with the Acquisition of KCG, on June 2, 2017, a putative stockholder of KCG filed a complaint in the Delaware Chancery Court concerning the Acquisition of KCG, as well a motion for a preliminary injunction and a motion for expedited proceedings. The case is captioned Greenway v. KCG Holdings, Inc., et al., Case No. 2017-0421-JTL (the “Greenway Action”), and is brought on behalf of a putative class of KCG stockholders against KCG, the members of KCG’s board of directors, Virtu, Orchestra Merger Sub, Inc. (“Merger Sub”), and Jefferies LLC (“Jefferies”). Among other things, the complaint alleged that, prior to the time that the KCG board approved the Acquisition of KCG and the voting agreement between Jefferies and Virtu on April 20, 2017, Virtu became an “interested stockholder” under, and subject to the restriction on business combinations set forth in, Section 203 of the Delaware General Corporate Law as a result of an “agreement”, “arrangement” or “understanding” with Jefferies. The complaint also alleges that the KCG board members breached their fiduciary duties in connection with the Acquisition of KCG and that Jefferies, Virtu and Merger Sub aided and abetted those alleged breaches of duty by the KCG board members. On June 28, 2017, KCG issued an amended proxy statement and scheduled a KCG stockholder vote on the Acquisition of KCG under Section 203 of the DGCL, which was approved and which defendants contend moots claims asserted by the plaintiff in the Greenway Action. On June 30, 2017, the Delaware Chancery Court entered a stipulation and order providing for the withdrawal of the plaintiff’s motion for preliminary injunction. The Greenway Action remains pending and the plaintiff may attempt to pursue monetary damages related to the claims set forth in the complaint and/or attempt to assert new or different claims through an amended complaint. No amount of damages is stated in the complaint. Virtu intends to defend vigorously against the claims alleged in the Greenway Action. Indemnification Arrangements Consistent with standard business practices in the normal course of business, the Company has provided general indemnifications to its managers, officers, directors, 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 | 9 Months Ended |
Sep. 30, 2017 | |
Capital Structure | |
Capital Structure | 14. 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 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. Amended and Restated 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 and was subsequently amended and restated following receipt of approval from the Company’s stockholders on June 30, 2017. The Amended and Restated 2015 Management Incentive Plan provides for the grant of stock options, restricted stock units, and other awards based on an aggregate of 16,000,000 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 Offerings In November 2015, the Company and certain selling stockholders affiliated with Silver Lake Partners completed a public offering (the “November 2015 Secondary Offering”) of 6,473,371 shares of the Company’s Class A common stock. 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 November 2015 Secondary Offering. The Company used its net proceeds from the offering to purchase Virtu Financial Units (together with corresponding 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. Following the November 2015 Secondary Offering, Silver Lake Partners no longer holds any equity interest in the Company. In September 2016, the Company completed a public offering (the “September 2016 Secondary Offering,” collectively with the November 2015 Secondary Offering, the “Secondary Offerings”) of 1,103,668 shares of the Company’s Class A common stock. The Company sold 1,103,668 shares of Class A common stock at a price to the public of $15.75 per share. The Company used the net proceeds from the September 2016 Secondary Offering to purchase Virtu Financial Units (together with corresponding shares of Class C common stock) from certain employees at a net price equal to the price paid by the underwriters for shares of its Class A common stock, which was the price at which the shares were offered to the public less underwriting discounts and commissions of $0.10 per share. Acquisition of KCG On the Closing Date and in connection with the financing of the Acquisition, the Company issued 6,346,155 shares of the Company’s Class A common stock to Aranda for an aggregate purchase price of approximately $99.0 million and 39,725,979 shares of the Company Class A Common Stock to NIH for an aggregate purchase price of approximately $613.5 million. On August 10 2017, the Company issued an additional 1,666,666 shares of its Class A Common Stock for an aggregate purchase price of $26.0 million and an additional 338,124 shares of its Class A Common Stock for an aggregate purchase price of $5.2 million. See Note 3 for additional details. Employee Exchange In February, May and August 2017, pursuant to the exchange agreement by and among the Company, Virtu Financial and holders of Virtu Financial common units, certain current and former employees elected to exchange 683,762, 307,544, and 155,009 units, respectively, in Virtu Financial held on their behalf by Virtu Financial Employee Holdco LLC (“Employee Holdco”) on a one-for-one basis for shares of Class A common stock. As a result of the completion of the IPO, the Reorganization Transactions, the Secondary Offerings, employee exchange, and the share issuance in connection with the Acquisition, the Company holds approximately 48.0% interest in Virtu Financial at September 30, 2017. |
Share-based Compensation
Share-based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Share-based Compensation | |
Share-based Compensation | 15. 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, a holding company that holds the interests on behalf of certain key employees or stakeholders. During the three and nine months ended September 30, 2017 and 2016, 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 fair value at the date of grant. The Company recognized compensation expense related to the vesting of non-voting common interest units (formerly Class A-2 profits interests) of $0.1 million and $0.4 million for the three months ended September 30, 2017 and 2016, respectively, and recognized $0.5 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, total unrecognized share-based compensation expense related to unvested non-voting common interest units (formerly Class A-2 profits interests), was $0.1 million, and this amount is expected to be recognized over a weighted average period of 0.1 years. 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 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 compensation expense in respect of non-voting common interest units (formerly Class B interests) vested of $0.2 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and recognized $0.5 million and $0.7 million for the nine months ended September 30, 2017 and 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 (loss). As of September 30, 2017 and December 31, 2016, total unrecognized share-based compensation expense related to unvested non-voting common interest units (formerly Class B interests) was $0.2 million and $0.8 million, respectively, and this amount is expected to be recognized over a weighted average period of 0.3 years and 1.0 years, respectively. Additionally, in connection with the compensation charges related to non-voting common interest units (formerly Class B interests) mentioned above, the Company capitalized $0.01 million and $0.03 million for the three months ended September 30, 2017 and 2016, respectively, and $0.02 million and $0.06 million for the nine months ended September 30, 2017 and 2016, respectively. 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 $0.02 million and $0.1 million for the three months ended September 30, 2017 and 2016, respectively, and were approximately $0.06 million and $0.7 million for the nine months ended September 30, 2017 and 2016, respectively. 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 (loss). 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. In connection with the 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 September 30, 2017 and December 31, 2016, there were 12,765,051 and 14,231,535 non-voting common interest units outstanding, respectively. There were 429,668 and 1,100,668 non-voting common interest units and corresponding Class C common stock exchanged into Class A common stock, forfeited or repurchased during the three months ended September 30, 2017 and 2016, respectively; and 1,466,484 and 1,162,891 non-voting common interest units and corresponding Class C common stock were exchanged into Class A common stock, forfeited or repurchased during the nine months ended September 30, 2017 and 2016, respectively. Share-based compensation after the Company’s Reorganization completed on April 15, 2015 and IPO completed on April 16, 2015 Pursuant to 2015 Management Incentive Plan as described above (Note 14) 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 nine months ended September 30, 2017 and 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 8,994,000 $ 19.00 9.29 — $ — Granted — — — — — Exercised — — — — — Forfeited or expired (645,000) — — — — At September 30, 2016 8,349,000 $ 19.00 8.55 2,087,250 $ — At December 31, 2016 8,234,000 $ 19.00 8.29 2,058,500 $ 19.00 Granted — — — — — Exercised — — — — — Forfeited or expired (401,000) — — — — At September 30, 2017 7,833,000 $ 19.00 7.55 3,916,500 $ 19.00 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 $1.4 million and $1.5 million of compensation expense in relation to the stock options for the three months ended September 30, 2017 and 2016, respectively, and $4.2 million and $4.2 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, total unrecognized share-based compensation expense related to unvested stock options was $9.1 million and $14.2 million, and these amounts are to be recognized over a weighted average period of 1.6 years and 2.3 years, respectively. Class A common stock and Restricted Stock Units Pursuant to the 2015 Management Incentive Plan as described above (Note 13), subsequent to the IPO, shares of immediately vested Class A common stock and RSUs were granted, the latter which vest over a period of up to 4 years. The fair value of the Class A common stock and RSUs was determined based on a volume weighted average price and is being recognized on a straight-line basis over the vesting period. The Company accrued compensation expense of $0 and $2.9 million for the three months ended September 30, 2017 and 2016, respectively, and accrued $9.4 million and $8.7 million for the nine months ended September 30, 2017 and 2016, 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 RSUs for the nine months ended September 30, 2017 and 2016: Weighted Number of Average Fair Shares Value At December 31, 2015 984,466 $ 22.32 Granted 35,095 17.81 Forfeited (115,869) 22.51 Vested (49,088) 20.11 At September 30, 2016 854,604 $ 22.22 At December 31, 2016 1,573,441 $ 18.28 Granted 34,825 17.95 Forfeited (212,729) 18.46 Vested (58,536) 19.22 At September 30, 2017 1,337,001 $ 18.21 The Company recognized $2.2 million and $1.6 million of compensation expense in relation to the RSUs for the three months ended September 30, 2017 and 2016, respectively, and $7.1 million and $8.7 million of compensation expense in relation to the RSUs for nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, total unrecognized share-based compensation expense related to unvested RSUs was $17.2 million and $28.5 million, respectively, and this amount is to be recognized over a weighted average period of 1.8 years and 2.6 years, respectively. |
Regulatory Requirement
Regulatory Requirement | 9 Months Ended |
Sep. 30, 2017 | |
Regulatory Requirement | |
Regulatory Requirement | 16. Regulatory Requirement As of September 30, 2017, three broker-dealer 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 three broker-dealer subsidiaries. At September 30, 2017, the subsidiaries had net capital of approximately $368,1 million, $48.3 million and $11.6 million, which was approximately $367.1 million, $47.3 million and $10.6 million in excess of the required net capital of $1.0 million required for each of the three subsidiaries. At December 31, 2016, prior to the KCG Acquisition, the Company’s subsidiaries had net capital of approximately $74.5 million and $10.8 million, which was approximately $73.5 million and $9.8 million in excess of the required net capital of $1.0 million and $1.0 million, respectively. Pursuant to NYSE and NYSE MKT (formerly NYSE Amex) rules, one of the broker-dealer subsidiaries was required to maintain $1.9 million of capital in connection with the operation of its DMM business as of December 31, 2016. 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 broker-dealer subsidiary is registered as the DMM. The Company sold its DMM assets in September 2017. |
Geographic Information and Busi
Geographic Information and Business Segments | 9 Months Ended |
Sep. 30, 2017 | |
Geographic Information and Business Segments | |
Geographic Information and Business Segments | 17. Geographic Information and Business Segments 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 and nine months ended September 30, 2017 and 2016 : For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2017 2016 2017 2016 Revenues: United States $ 218,042 $ 109,324 $ 399,361 $ 341,458 Ireland 17,874 31,936 79,129 112,481 United Kingdom 10,485 — 10,485 — Sweden 2,118 — 2,118 — Singapore 22,601 23,505 72,210 77,363 India 178 — 178 — Australia (2) 1 1 7 China (10) 40 (21) 316 Total revenues $ 271,286 $ 164,806 $ 563,461 $ 531,625 Prior to the Acquisition, the Company was managed and operated as one business, and, accordingly, operated under one reportable segment. As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii) Execution Services; and (iii) Corporate. The Market Making segment principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions. The Company engages in principal trading in the Market Making segment direct to clients as well as in a supplemental capacity on exchanges, electronic communications networks (“ECNs”) and alternative trading systems (“ATSs”). The Company is an active participant on all major global equity and futures exchanges and also trades on substantially all domestic electronic options exchanges. As a complement to electronic market making, the cash trading business handles specialized orders and also transacts on the OTC Bulletin Board marketplaces operated by the OTC Markets Group Inc. and the Alternative Investment Market of the London Stock Exchange ("AIM"). The Execution Services segment comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers as well as technology services revenues. The Company earns commissions and commission equivalents as an agent on behalf of clients as well as between principals to transactions; in addition, the Company will commit capital on behalf of clients as needed. Agency-based, execution-only trading in the segment is done primarily through a variety of access points including: (i) algorithmic trading and order routing in global equities and options; (ii) institutional sales traders executing program, block and riskless principal trades in global equities and exchange traded funds ("ETFs"); (iii) a fixed income ECN that also offers trading applications; and (iv) an ATS for U.S. equities. Technology licensing fees are earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and the provision of associated management and hosting services. The Corporate segment contains the Company's investments, principally in strategic trading-related opportunities and maintains corporate overhead expenses and all other income and expenses that are not attributable to the Company's other segments. Management evaluates the performance of its segments on a pre-tax basis. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. The Company’s total revenues and income (loss) before income taxes and noncontrolling interest (“Pre-tax earnings”) by segment are summarized in the following table: Market Execution Corporate Consolidated (in thousands) Making Services (1) Total For the three months ended September 30, 2017: Total revenue $ 228,582 $ 39,077 $ 3,627 $ 271,286 Income (loss) before income taxes and noncontrolling interest (19,322) (6,017) (21,156) (46,495) For the three months ended September 30, 2016: Total revenue $ 161,977 $ 2,931 $ (102) $ 164,806 Income (loss) before income taxes and noncontrolling interest 36,888 1,608 (622) 37,874 (1) Amounts shown in the Corporate segment include eliminations of income statement and balance sheet items included in the Company's other segments. For the nine months ended September 30, 2017: Total revenue $ 514,823 $ 44,964 $ 3,674 $ 563,461 Income (loss) before income taxes and noncontrolling interest 17,241 (4,913) (29,749) (17,421) For the nine months ended September 30, 2016: Total revenue $ 524,503 $ 7,224 $ (102) $ 531,625 Income (loss) before income taxes and noncontrolling interest 138,572 3,196 (778) 140,990 |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions | |
Related Party Transactions | 18. Related Party Transactions As of September 30, 2017, and December 31, 2016, the Company had a payable of $0.1 million and $0.2 million to its related parties, 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”). Temasek Holdings (Private) Limited and its affiliates have a significant ownership interest in Dell. During the three months ended September 30, 2017 and 2016, the Company paid $0.5 million and $0.6 million, respectively, and during the nine months ended September 30, 2017 and 2016, the Company paid $1.9 million and $2.1 million, respectively, to Dell for these purchases and leases. In the ordinary course of business, the Company purchases network connections services from affiliates of Level 3 Communications (“Level 3”). Temasek Holdings (Private) Limited and its affiliates have a significant ownership interest in Level 3. During the three months ended September 30, 2017 and 2016, the Company paid $0.5 million and $0.7 million, respectively, and during the nine months ended September 30, 2017 and 2016, the Company paid $1.6 million and $1.9 million, respectively, to Level 3 for these services. In the ordinary course of business, the Company makes payments to two microwave communication networks JVs (See Note 2). The Company makes payments to one JV for the funding of the construction of the microwave communication networks and makes payments to the other JV for the use of the microwave communication networks in connection with the Company’s trading activities, which are recorded within Communications and data processing on the condensed consolidated statements of comprehensive income (loss). The Company made payments of $3.9 million and $4.2 million to these JVs for the three months and nine ended September 30, 2017, respectively. The Company made no such payments during the three months or nine ended September 30, 2016. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events. | |
Subsequent Events | 19. 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: On October 24, 2017, Virtu Financial entered into an Asset Purchase Agreement with Intercontinental Exchange, Inc. ("ICE") pursuant to which Virtu Financial agreed to sell specified assets and assign specified liabilities constituting the Company's BondPoint division and fixed income venue ("BondPoint"). BondPoint is a provider of electronic fixed income trading solutions for the buy-side and sell-side offering access to centralized liquidity and automated trade execution services. The purchase price payable by ICE for BondPoint as the closing of the transaction is $400.0 million in cash, subject to a customary adjustment for working capital of BondPoint. The consummation of the transaction is subject to the satisfaction of customary closing conditions and receipt of certain regulatory clearances, including from the Financial Industry Regulatory Authority, Inc., and the Municipal Securities Rulemaking Board and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. On October 24, 2017, Joseph J. Grano Jr. was appointed as a Class II director of the Board of Directors of the Company. On November 3, 2017, a subsidiary of the Company entered into a definitive agreement to sell select infrastructure and telecommunications assets for a purchase price of $4.2 million in cash subject to a customary adjustment for working capital. The consummation of the transaction is subject to customary closing conditions including applicable regulatory approvals. On November 4, 2017, the Company’s broker dealer subsidiaries entered into a committed broker dealer revolving credit facility (the “Broker Dealer Revolving Facility”) with a syndicate of lenders with a total aggregate committed amount of $500.0 million, subject to two borrowing bases, the proceeds of which may be used to finance the purchase and settlement of securities and to fund certain clearing deposits. The Broker Dealer Revolving Facility is fully and unconditionally guaranteed by Virtu Financial and certain other affiliates and is secured by pledges of eligible securities and deposits. 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 on November 7, 2017, payable on December 15, 2017 to holders of record as of the close of business on December 1, 2017. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
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 (loss) 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. 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 shareholders, including both distributed and undistributed earnings, 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 Cash and cash equivalents include money market accounts, which are payable on demand, and short-term investments with an original maturity of less than 90 days. The carrying amount of such cash equivalents approximates their fair value due to the short-term nature of these instruments. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. The Company maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. |
Cash and cash equivalents segregated under federal and other regulations | Cash and securities segregated under federal and other regulations Effective upon the acquisition of KCG, the Company maintains custody of customer funds and is obligated by rules and regulations mandated by the SEC to segregate or set aside cash and/or qualified securities to satisfy these regulations, which have been promulgated to protect customer assets. The amounts recognized as Cash and securities segregated under federal and other regulations approximate fair value. These assets would be categorized as Level 1 in the fair value hierarchy if they were required to be recorded at fair value. |
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 cash 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. Interest received or paid by the Company for these transactions 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 (loss). |
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. The Company has also entered into bilateral and tri-party term and overnight repurchase and other collateralized financing agreements which bear interest at negotiated rates. The Company receives cash and makes delivery of financial instruments to a custodian who monitors the market value of these instruments on a daily basis. The market value of the instruments delivered must be equal to or in excess of the principal amount loaned under the repurchase agreements plus the agreed upon margin requirement. The custodian may request additional collateral, if appropriate. Interest received or paid by the Company for these transactions 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 (loss). |
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 September 30, 2017 and December 31, 2016, receivables from and payables to broker-dealers and clearing organizations primarily represented 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 receivables 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 Financial instruments owned and Financial instruments sold, not yet purchased relate to market making and trading activities, and include listed and other equity securities, listed equity options and fixed income securities. The Company records 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 (loss). |
Fair Value Measurements | Fair Value Measurements Fair value is defines 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. The Company categorizes its financial instruments into 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; or 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. |
Fair Value Option | Fair Value Option The fair value option election allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are recorded in other, net in the condensed consolidated statements of comprehensive income (loss). The decision to elect the fair value option is determined on an instrument by instrument basis must be applied to an entire instrument and is irrevocable once elected. |
Derivative Instruments | Derivative Instruments Derivative instruments are used for trading purposes, including economic hedges of trading instruments, which are carried at fair value, include futures, forward contracts, and options. Unrealized gains or losses on these derivative instruments are recognized currently within trading income, net in the condensed consolidated statement of comprehensive income (loss). 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 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. |
Property, Equipment and Occupancy | Property, Equipment and Occupancy Property and equipment are carried at cost, less accumulated depreciation, except for the assets acquired in connection with the acquisitions of MTH and KCG, which were recorded at fair value on the respective dates of the acquisitions. Depreciation is provided using the straight-line method over estimated useful lives of the underlying assets. 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 life of the improvement or the term of the lease. The Company recognizes rent expense under operating leases with fixed rent escalations, lease incentives and free rent periods on a straight-line basis over the lease term beginning on the date the Company takes possession of or controls the use of the space, including during free rent periods. |
Lease Loss Accrual | Lease Loss Accrual The Company’s policy is to identify excess real estate capacity and where applicable, accrue for related future costs, net of projected sub-lease income upon the date the Company ceases to use the excess real estate, which is recorded under operating and administrative in the condensed consolidated statements of comprehensive income (loss). Such accrual is adjusted to the extent the actual terms of sub-leased property differ from the previous assumptions used in the calculation of the accrual. |
Capitalized Software | Capitalized 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. 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 3 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 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, 2017, 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. |
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, they are 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. Exchange memberships acquired in connection with the Acquisition were recorded at their fair value on the date of acquisition. Exchange stock includes shares that entitle the Company to certain trading privileges. Exchange Stock is marked to market with the corresponding gain or loss recorded under operating and administrative in the condensed consolidated statements of comprehensive income (loss). The Company’s exchange memberships and stock are included in other assets in the condensed consolidated statements of financial condition. |
Trading Income | Trading Income, net 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 (loss). |
Commissions, net and Technology Services | Commissions, net and Technology Services Commissions, net, which primarily comprise commissions and commission equivalents earned on institutional client orders, are recorded on a trade date basis. Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions and technology services in the condensed consolidated statements of comprehensive income (loss). Technology services revenues consist of technology licensing fees and agency commission fees. Technology licensing fees are earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and the 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. |
Soft Dollar Expense | Soft Dollar Expense Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties. As the Company acts as an agent in these transactions, it records such expenses on a net basis within commissions and technology services in the condensed consolidated statements of comprehensive income (loss). |
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 an accrual basis. |
Brokerage, Exchange and Clearance Fees, Net | Brokerage, Exchange and Clearance Fees, Net Brokerage, exchange and clearance fees, net, comprise the costs of executing and clearing trades and are recorded on a trade date basis. 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 (loss). |
Payments for Order Flow | Payments for Order Flow Payments for order flow represent payments to broker-dealer clients, in the normal course of business, for directing their order flow in U.S. equities to the Company. Payments for order flow are recorded on a trade-date basis in the condensed consolidated statements of comprehensive income (loss). |
Payable to customers | Payable to customers Payable to customers arises primarily from securities transactions and includes amounts due on receive versus payment (“RVP”) or deliver versus payment (“DVP”) transactions. Due to their short-term nature, such amounts approximate fair value. |
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 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 had $8.0 million of unrecognized tax benefits as of September 30, 2017 from the KCG acquisition. 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 December 31, 2016. As a result of the acquisition of KCG, the Company acquired a deferred tax asset of $31.5 million relating to non-U.S. net operating losses. A full valuation allowance was also recorded against this deferred tax asset at September 30, 2017 as it is more likely than not that this deferred tax asset will not be realized. No valuation allowance against deferred taxes was recorded at December 31, 2016 because at that point it was estimated to be more likely than not that the deferred tax asset recorded as of that date would be fully realized. |
Comprehensive Income (Loss) and Foreign Currency Translation | Comprehensive Income (Loss) and Foreign Currency Translation Comprehensive income (loss) consists of two components: net income (loss) and other comprehensive income (loss) (“OCI”). OCI is comprised of revenues, expenses, gains and losses that are reported in the comprehensive income (loss) section of the condensed consolidated statements of comprehensive income, but are excluded from reported net income (loss). 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 (loss), a separate component of stockholders’ equity. The Company's foreign subsidiaries generally use the U.S. dollar as their functional currency. The Company also has subsidiaries that utilize a functional currency other than the U.S. dollar, primarily comprising its Irish subsidiaries, which utilizes the Euro as the functional currency. Assets and liabilities of non-U.S. dollar functional currency subsidiaries are translated at exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the period. Gains and losses resulting from translating foreign currency financial statements into U.S. dollars are included in Accumulated other comprehensive (loss) income on the condensed consolidated statements of financial condition and cumulative translation adjustment, net of tax on the condensed consolidated statements of comprehensive income (loss). The Company may seek to reduce the impact of fluctuations in foreign exchange rates on its net investment in certain non-U.S. operations through the use of foreign currency forward contracts. For foreign currency forward contracts designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. The effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts. For qualifying net investment hedges, any gains or losses, to the extent effective, are included in Accumulated other comprehensive (loss) income on the condensed consolidated statements of financial condition and Cumulative translation adjustment, net of tax, on the condensed consolidated statements of comprehensive income (loss). The ineffective portion, if any, is recorded in Investment income and other, net on the condensed consolidated statements of operations. |
Share-Based Compensation | Share-Based Compensation 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 (“RSUs”). 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 RSUs are determined based on the volume weighted average price for the three days preceding the grant, and with respect to the RSUs, 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 RSUs or the exercise of stock options. |
Variable Interest Entity | Variable Interest Entities A variable interest entity (“VIE”) is an entity that lacks one or more of the following characteristics (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. In October 2016, the Company invested in a joint venture (“JV”) with nine other parties. One of the parties was KCG. Upon the Merger, KCG was required to relinquish their ownership in the JV. As of September 30, 2017, each of the remaining parties owns approximately 11% of the voting shares and 11% of the equity of this JV, which is building microwave communication networks in the U.S. and Asia, and which is considered to be a VIE. The Company and all of its JV partners each pay monthly fees for the funding of the construction of the microwave communication networks. When completed, this JV may sell excess bandwidth that is not utilized by its joint venture members to third parties. As a result of the Acquisition, the Company owns 50% of the voting shares and 50% of the equity of a JV which maintains microwave communication networks in the U.S. and Europe, and which is considered to be a VIE. The Company and its JV partner each pay monthly fees for the use of the microwave communication networks in connection with their respective trading activities, and the JV may sell excess bandwidth that is not utilized by the JV members to third parties. In each of the JVs, the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; therefore it does not have a controlling financial interest in the JV and does not consolidate the JVs. The Company records its interest in each JV under the equity method of accounting and records its investment in the JVs within Other assets and its amounts payable for communication services provided by the JV within Accrued expenses and other liabilities on the condensed consolidated statements of financial condition. The Company records its pro-rata share of the JVs earnings or losses within Other, net and fees related to the use of communication services provided by the JVs within Communications and data processing on the condensed consolidated statements of comprehensive income (loss). The Company’s exposure to the obligations of these VIE is generally limited to its interests in each respective JV, which is the carrying value of the equity investment in each JV. The following table presents the Company’s nonconsolidated VIE at September 30, 2017: Maximum Carrying Amount Exposure to (in thousands) Asset Liability loss VIE's assets Equity investment $ 15,925 $ — $ 15,925 $ 40,925 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Revenue - In May 2014, the FASB issued Accounting Standard Update (“ASU”) 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 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . ASU 2015-14 defers the effective date of ASU 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. In December 2016, FASB issued ASU 2016-20 Technical Correction and Improvement (Topic 606): Revenue from Contracts with Customers , which amends the guidance in ASU 2014-09. The effective date and transition requirements for the ASU are the same as ASU 2014-09. The Company is expected to adopt the revenue recognition guidance on January 1, 2018 by applying the full retrospective method. Because the guidance does not apply to revenue associated with securities trading activities that are accounted for under other GAAP, the Company does not expect the guidance to have a material impact on its condensed consolidated statements of comprehensive income (loss) most closely associated with financial instruments, including Trading revenues, net, Commissions and technology services, and Interest and dividends income. The Company’s implementation efforts include the identification of revenue within the scope of the guidance and the evaluation of certain revenue contracts. The Company’s evaluation of the impact of the new guidance on its condensed consolidated financial statements is ongoing, and it continues to evaluate the timing of recognition for various revenues, including soft dollar related activity, which may be impacted depending on the features of the client arrangements and the presentation of certain contract costs (whether presented gross or offset against revenues). Also, the Company will identify performance obligations under ASC Topic 606 related to its technology licensing agreements. The timing of revenue recognition may be accelerated under the new standard, however the net impact is estimated to be immaterial based on contracts in place as of September 30, 2017. Financial 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 ASU 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 ASU 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, but does not expect it to have a material impact on its condensed consolidated financial statements, as it does not currently classify any equity securities as available for sale, and it does not apply the fair value option to its own debt issuances. 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 anticipates adopting this ASU on January 1, 2019. The Company is not anticipating recognizing lease assets and lease liabilities for leases with a term of twelve months or less. As of September 30, 2017, the Company has not yet identified any significant changes in the timing of operating leases recognition when considering this ASU, but the Company’s implementation efforts are ongoing and such assessments may change prior to the January 1, 2019, anticipated implementation date. Upon adoption of this ASU, the Company expects to report increased assets and liabilities on its condensed consolidated statement of financial condition as a result of recognizing right-of-use assets and lease liabilities related to certain equipment under noncancelable operating lease agreements, which currently are not reflected in its condensed consolidated statement of financial condition. Statement of Cash Flows – In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU intended to reduce diversity in practice how certain transactions are classified in the statement of cash flows by mandating classification of certain activities. The ASU is effective for annual periods beginning after December 15, 2017, 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 2016-15 on the Company’s condensed consolidated financial statements. Income Taxes – In October 2016, FASB issued ASU 2016-16, Income Taxes (Topic 749): Intra-Entity Transfers of Assets Other Than Inventory . The ASU requires the reporting entity to recognize the tax expense from the sale of an asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of the transactions are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The ASU is effective for annual periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the potential effects of adoption of ASU 2016-16 on the Company’s condensed consolidated financial statements. Restricted cash – In November 2016, FASB issued ASU 2016-18, Statement of Cash Flow (Topic 230): Restricted Cash, which is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalent in the statements. The statement requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has elected to early adopt this ASU effective as June 30, 2017. Accounting Changes – In January 2017, FASB issued ASU 2017-03, Accounting Changes and Error Correction (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323), which amends SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC update). The SEC staff view is that a registrant should evaluate the impact of new accounting standards that have not yet been adopted to determine the appropriate financial disclosures on the potential material effects, especially on new standards on revenue recognition, leases, and financial instruments – credit losses. If a registrant cannot reasonably estimate the impact that adoption of the ASUs, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. Additional qualitative disclosures should include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Furthermore, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The Company adopted this ASU on January 1, 2017, and appropriate disclosures have been included in this Note for each recently issued accounting standard. Goodwill - In January, 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment . To simplify the subsequent measurement of goodwill, this ASU eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This ASU is effective for public entities in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements. Business Combinations - In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, to amend the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for reporting periods beginning after December 15, 2017. The impact of this ASU will depend on the nature of the Company’s activities after adoption and the Company does not expect the adoption of this ASU to have a significant impact on its condensed consolidated financial statements. The Company is currently evaluating the potential effects of adoption of ASU 2017-01 on the Company’s condensed consolidated financial statements. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Tables) not used | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of nonconsolidated VIE | The following table presents the Company’s nonconsolidated VIE at September 30, 2017: Maximum Carrying Amount Exposure to (in thousands) Asset Liability loss VIE's assets Equity investment $ 15,925 $ — $ 15,925 $ 40,925 |
Merger of Virtu Financial, In28
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. | |
Summary of the estimated fair values of the assets acquired and liabilities assumed | (in thousands) Cash and equivalents $ 592,993 Cash and securities segregated under federal regulations 3,000 Securities borrowed 1,406,444 Securities purchased under agreements to resell 16,894 Receivables from broker dealers and clearing organizations 553,031 Financial instruments owned, at fair value 2,095,339 Property, equipment and capitalized software (net) 112,204 Intangibles 156,300 Deferred taxes 22,928 Other assets 331,820 Total Assets $ 5,290,953 Securities loaned $ 166,189 Securities sold under agreements to repurchase 841,606 Payables to broker dealers and clearing organizations 536,653 Payables to customers 17,583 Financial instruments sold, not yet purchased, at fair value 1,756,647 Accounts payable and accrued expenses and other liabilities 239,004 Debt 480,987 Total Liabilities $ 4,038,669 Total identified assets acquired, net of assumed liabilities $ 1,252,284 Goodwill $ 143,012 Total Purchase Price $ 1,395,296 |
Schedule of Preliminary allocation of intangible assets, amortization period and goodwill | Amortization Amount Years Technology $ 67,800 1-6 years Customer relationships 77,100 13 - 17 years Trade names 5,000 10 years Exchange memberships 6,400 Indefinite Intangible assets $ 156,300 Goodwill 143,012 Total $ 299,312 |
Schedule of Proforma Pro forma results | Included in the Company’s results for the three months ended September 30, 2017 are results from the business acquired as a result of the Acquisition, from the date of Acquisition, July 20, 2017 through September 30, 2017 as follows: (in thousands) Revenues $ 149,327 Income (loss) before income taxes (12,578) |
Schedule of Proforma Financial Information with Combined Historical Results | For the Three Months Ended For the Nine Months Ended (in thousands, except per share amounts) 2017 2016 2017 2016 Revenue $ 304,020 $ 373,338 $ 1,068,164 $ 1,401,819 Net income (loss) (82,520) 1,783 (117,169) 163,146 Net income (loss) attributable to common stockholders (30,432) 658 (43,210) 60,165 Diluted earnings (loss) per share $ $ $ $ |
Earnings per Share (Tables)
Earnings per Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings per Share | |
Schedule of reconciliation of net income before noncontrolling interest to net income available for common stockholders | Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2017 2016 2017 2016 Income (loss) before income taxes and noncontrolling interest $ (46,495) $ 37,874 $ (17,421) $ 140,990 Provision for (benefit from) income taxes (6,505) 4,851 (2,918) 17,325 Net income (loss) (39,990) 33,023 (14,503) 123,665 Noncontrolling interest 26,472 (25,997) 6,466 (97,913) Net income (loss) available for common stockholders $ (13,518) $ 7,026 $ (8,037) $ 25,752 |
Schedule of basic earnings per share | Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except for share or per share data) 2017 2016 2017 2016 Basic earnings per share: Net income (loss) available for common stockholders $ (13,518) $ 7,026 $ (8,037) $ 25,752 Less: Dividends and undistributed earnings allocated to participating securities (314) (191) (997) (612) Net income (loss) available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ (13,832) 6,835 $ (9,034) 25,140 Weighted average shares of common stock outstanding: Class A 79,199,142 38,351,465 53,520,346 38,264,139 Basic Earnings per share $ (0.17) $ 0.18 $ (0.17) $ 0.66 |
Schedule of diluted earnings per share | Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except for share or per share data) 2017 2016 2017 2016 Diluted earnings per share: Net income (loss) available for common stockholders, net of dividends and undistributed earnings allocated to participating securities $ (13,832) $ 6,835 $ (9,034) $ 25,140 Weighted average shares of common stock outstanding: Class A Issued and outstanding 79,199,142 38,351,465 53,520,346 38,264,139 Issuable pursuant to 2015 Management Incentive Plan(1) — — — — 79,199,142 38,351,465 53,520,346 38,264,139 Diluted Earnings per share $ (0.17) $ 0.18 $ (0.17) $ 0.66 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets | |
Schedule of goodwill by segment | Market Execution (in thousands) Making Services Corporate Total Balance as of December 31, 2016 $ 657,985 $ 57,394 $ — $ 715,379 Additions 108,276 35,943 — 144,219 Balance as of September 30, 2017 $ 766,261 $ 93,337 $ — $ 859,598 |
Schedule of acquired intangible assets | As of September 30, 2017 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ 110,000 $ 110,000 $ — 1.4 to 2.5 ETF issuer relationships 950 533 417 9 ETF buyer relationships 950 533 417 9 Leases 1,800 247 1,553 3 FCC licenses 200 12 188 7 Technology 67,800 5,001 62,799 to 6 Customer relationships 77,100 1,027 76,073 to 17 Trade names 5,000 98 4,902 10 Exchange memberships 6,400 — 6,400 Indefinite $ 270,200 $ 117,451 $ 152,749 As of December 31, 2016 Gross Carrying Accumulated Net Carrying Useful Lives (in thousands) Amount Amortization Amount (Years) Purchased technology $ 110,000 $ 110,000 $ — 1.4 to 2.5 ETF issuer relationships 950 454 496 9 ETF buyer relationships 950 454 496 9 $ 111,900 $ 110,908 $ 992 |
Receivables from_Payables to 31
Receivables from/Payables to Broker-Dealers and Clearing Organizations (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Receivables from/Payables to Broker-Dealers and Clearing Organizations | |
Summary of receivables from and payables to brokers-dealers and clearing organizations | (in thousands) 2017 2016 Assets Due from prime brokers $ 196,487 $ 91,476 Deposits with clearing organizations 156,127 21,995 Net equity with futures commission merchants 187,424 213,030 Unsettled trades with clearing organization 191,212 44,312 Securities failed to deliver 231,135 77,915 Commissions and fees 18,133 — Total receivables from broker-dealers and clearing organizations $ 980,518 $ 448,728 Liabilities Due to prime brokers $ 409,323 $ 227,335 Net equity with futures commission merchants 42,634 38,838 Unsettled trades with clearing organization 318,207 429,800 Securities failed to receive 66,194 5 Commissions and fees 2,709 — Total payables to broker-dealers and clearing organizations $ 839,067 $ 695,978 |
Collateralized Transactions (Ta
Collateralized Transactions (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Collateralized Transactions | |
Summary of the fair value of collateralized transactions | (in thousands) 2017 2016 Securities received as collateral: Securities borrowed $ 1,479,107 $ 213,203 Securities purchased under agreements to resell 8,196 — $ 1,487,303 $ 213,203 |
Schedule of financial instruments owned and pledged, where counterparty has right to repledge | (in thousands) 2017 2016 Equities $ 692,130 $ 128,202 Exchange traded notes 7,022 15,681 $ 699,152 $ 143,883 |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Outstanding borrowings and financing capacity or unused available capacity under the Company’s borrowing arrangements | At September 30, 2017 At December 31, 2016 Financing Borrowing Financing Borrowing (in thousands) Available Outstanding Available Outstanding Broker-dealer credit facilities: Uncommitted facility $ $ $ $ Committed facility — — — $ $ $ $ Short-Term Credit Facilities: Short-term credit facilities (1) $ $ $ $ $ $ $ $ _____________________________________ (1) Outstanding borrowings were included with receivable from broker-dealers and clearing organization within the consolidated statements of financial condition. At September 30, 2017 At December 31, 2016 Maturity Unused Available Borrowing Unused Available Borrowing (in thousands) Date Capacity Outstanding Capacity Outstanding Long-term borrowings: Senior secured credit facility December 2021 $ n/a $ $ n/a $ Senior secured Second Lien Notes June 2022 n/a n/a n/a Revolving credit facility April 2018 — — — SBI bonds January 2020 n/a n/a $ $ $ $ |
Schedule of redemption prices of notes | On or after June 15, 2019, the Company may redeem some or all of the Notes, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to (but not including) the date of redemption, if redeemed during the 12-month period beginning on June 15 of the years indicated below: Period Percentage 2019 103.375% 2020 101.688% 2021 and thereafter 100.000% |
Schedule of aggregate future required principal payments based on terms of loan | (in thousands) 2017 $ — 2018 — 2019 — 2020 and thereafter 1,481,108 Total principal of long-term borrowings $ 1,481,108 |
Senior Secured Credit Facility | |
Schedule of reconciliation of the senior secured credit facility | At September 30, At December 31, (in thousands) 2017 2016 Senior secured first lien term loan outstanding principal $ 950,000 $ 540,000 Senior secured second lien notes outstanding principal 500,000 — SBI Bonds outstanding principal 31,108 29,925 Net deferred financing fees (45,237) (4,012) Net discount on senior secured credit facility (1,242) (956) Long-term borrowings $ 1,434,629 $ 564,957 |
Financial Assets and Liabilit34
Financial Assets and Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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 September 30, 2017: September 30, 2017 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 $ 591,928 $ 1,434,092 $ — $ — $ 2,026,020 U.S. and Non-U.S. government obligations 2,783 21,002 — — 23,785 Corporate Bonds — 83,532 — — 83,532 Exchange traded notes 4,553 53,081 — — 57,634 Currency forwards — 3,459,340 — (3,458,283) 1,057 Options 11,220 — — — 11,220 $ 610,484 $ 5,051,047 $ — $ (3,458,283) $ 2,203,248 Financial instruments owned, pledged as collateral: Equity securities $ 413,860 $ 278,270 $ — $ — $ 692,130 Exchange traded notes 520 6,502 — — 7,022 $ 414,380 $ 284,772 $ — $ — $ 699,152 Other Assets Equity investment $ — $ — $ 37,263 $ — $ 37,263 Exchange stock 3,211 — — — 3,211 Other(1) — 55,363 3,000 — 58,363 $ 3,211 $ 55,363 $ 40,263 $ — $ 98,837 Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ 895,116 $ 1,470,863 $ — $ — $ 2,365,979 U.S. and Non-U.S. government obligations 10,375 14,975 — — 25,350 Corporate Bonds — 83,535 — 83,535 Exchange traded notes 355 50,327 — — 50,682 Currency forwards — 3,492,928 — (3,492,847) 81 Options 10,264 — — — 10,264 $ 916,110 $ 5,112,628 $ — $ (3,492,847) $ 2,535,891 (1) Other primarily consists of a $55.4 million receivable from Bats related to the sale of KCG Hotspot and $3.0 million receivable from the sale of an investment. Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2016: December 31, 2016 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 $ 1,597,049 $ 31,988 $ — $ — $ 1,629,037 Non-U.S. government obligations — 10,765 — — 10,765 Exchange traded notes 37,034 — — — 37,034 Currency forwards — 1,147,261 — (1,140,239) 7,022 Options — 141 — — 141 $ 1,634,083 $ 1,190,155 $ — $ (1,140,239) $ 1,683,999 Financial instruments owned, pledged as collateral: Equity securities $ 128,202 $ — $ — $ — $ 128,202 Exchange traded notes 15,681 — — — 15,681 $ 143,883 $ — $ — $ — $ 143,883 Other Assets Equity investment $ — $ — $ 36,031 $ — $ 36,031 Exchange stock 449 — — — 449 $ 449 $ — $ 36,031 $ — $ 36,480 Liabilities Financial instruments sold, not yet purchased, at fair value: Equity securities $ 1,323,693 $ 6,638 $ — $ — $ 1,330,331 Exchange traded notes 18,744 — — — 18,744 Currency forwards — 1,009,038 — (1,009,038) — Options — 80 — — 80 $ 1,342,437 $ 1,015,756 $ — $ (1,009,038) $ 1,349,155 |
Summary of changes in Level 3 financial instruments measured at fair value on a recurring basis | Nine Months Ended September 30, 2017 Change in Net Unrealized Gains / (Losses) on Investments Balance at Total Realized Net Transfers Balance at still held at December 31, and Unrealized into (out of) September 30, September 30, (in thousands) 2016 Purchases Gains / (Losses) Level 3 2017 2017 Assets Other assets: Equity investment $ 36,031 $ — $ 1,232 $ — $ 37,263 $ 1,232 Other — 3,000 — — 3,000 — Total $ 36,031 $ 3,000 $ 1,232 $ — $ 40,263 $ 1,232 |
Summary of netting of certain financial assets and financial liabilities | September 30, 2017 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 $ 1,525,403 $ — $ 1,525,403 $ (1,480,267) $ (844) $ 44,292 Securities purchased under agreements to resell 8,249 — 8,249 (8,188) — 61 Trading assets, at fair value: — Currency forwards 3,459,340 (3,458,283) 1,057 — — 1,057 Options 11,220 — 11,220 (505) — 10,715 Total $ 5,004,212 $ (3,458,283) $ 1,545,929 $ (1,488,960) $ (844) $ 56,125 Net Amounts of Gross Amounts Liabilities 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 Liabilities Financial Condition Financial Condition Instruments Pledged Net Amount Offsetting of Financial Liabilities: Securities loaned $ 582,915 $ — $ 582,915 $ (574,885) $ — $ 8,030 Securities sold under agreements to repurchase 620,887 — 620,887 (620,887) — — Trading liabilities, at fair value: — Currency forwards 3,492,928 (3,492,847) 81 — — 81 Options 10,264 — 10,264 (505) — 9,759 Total $ 4,706,994 $ (3,492,847) $ 1,214,147 $ (1,196,277) $ — $ 17,870 December 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 $ 220,005 $ — $ 220,005 $ (216,778) $ (248) $ 2,979 Trading assets, at fair value: Currency forwards 1,147,261 (1,140,239) 7,022 — — 7,022 Options 141 — 141 (80) (13) 48 Total $ 1,367,407 $ (1,140,239) $ 227,168 $ (216,858) $ (261) $ 10,049 Net Amounts of Liabilities Gross Amounts Presented Gross Amounts Not Offset In the Offset in the in the Consolidated 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 $ 222,203 $ — $ 222,203 $ (221,792) $ — $ 411 Trading liabilities, at fair value: Currency forwards 1,009,038 (1,009,038) — — — — Options 80 — 80 (80) — — Total $ 1,231,321 $ (1,009,038) $ 222,283 $ (221,872) $ — $ 411 |
Summary of gross obligations for repurchase agreement and securities borrowed transactions by remaining contractual maturity and class of collateral pledged | September 30, 2017 Remaining Contractual Maturity Overnight and Less than 30 - 60 61 - 90 (in thousands) Continuous 30 days days Days Total Repurchase agreements: Equity securities $ — $ 205,000 $ 175,000 $ 240,000 $ 620,000 U.S. and Non-U.S. government obligations 887 — — — 887 Total $ 887 $ 205,000 $ 175,000 $ 240,000 $ 620,887 Securities lending transactions: Equity securities $ 582,915 $ — $ — $ — $ 582,915 Total $ 582,915 $ — $ — $ — $ 582,915 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments | |
Schedule of fair value of derivative instruments on a gross basis | (in thousands) September 30, 2017 December 31, 2016 Derivatives Assets Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Receivables from broker dealers and clearing organizations $ (2,729) $ 951,330 $ 2,403 $ 1,461,286 Commodity futures Receivables from broker dealers and clearing organizations 50,258 18,078,494 13,964 3,918,778 Currency futures Receivables from broker dealers and clearing organizations 41,826 3,789,287 1,591 3,264,093 Fixed income futures Receivables from broker dealers and clearing organizations (54) 32,723 31 5,730 Options Financial instruments owned 11,220 141 6,844 Currency forwards Financial instruments owned 3,459,340 1,147,261 94,192,414 Derivatives Liabilities Balance Sheet Classification Fair Value Notional Fair Value Notional Equities futures Payables to broker dealers and clearing organizations $ (731) $ 107,774 $ (43) $ 62,417 Commodity futures Payables to broker dealers and clearing organizations (35,301) 724,829 2,842 22,616,170 Currency futures Payables to broker dealers and clearing organizations (14,425) 2,988,821 (6,282) 1,137,908 Treasury futures Payables to broker dealers and clearing organizations 11 7,906 — — Options Financial instruments sold, not yet purchased 10,264 1,108,920 80 4,486 Currency forwards Financial instruments sold, not yet purchased 3,492,928 159,585,203 1,009,038 85,874,684 |
Schedule of net gain from derivative instruments not designated as hedging instruments | For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2017 2016 2017 2016 Futures $ 35,097 $ 197,650 $ 249,274 $ 618,245 Currency forwards 8,950 (52,796) 3,135 (37,076) Options 21,120 (65) 21,119 (411) Others 125 (2) 125 2 $ 65,292 $ 144,787 $ 273,653 $ 580,760 |
Share-based Compensation (Table
Share-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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 8,994,000 $ 19.00 9.29 — $ — Granted — — — — — Exercised — — — — — Forfeited or expired (645,000) — — — — At September 30, 2016 8,349,000 $ 19.00 8.55 2,087,250 $ — At December 31, 2016 8,234,000 $ 19.00 8.29 2,058,500 $ 19.00 Granted — — — — — Exercised — — — — — Forfeited or expired (401,000) — — — — At September 30, 2017 7,833,000 $ 19.00 7.55 3,916,500 $ 19.00 |
Restricted stock units | |
Schedule of activity related to restricted stock units | Weighted Number of Average Fair Shares Value At December 31, 2015 984,466 $ 22.32 Granted 35,095 17.81 Forfeited (115,869) 22.51 Vested (49,088) 20.11 At September 30, 2016 854,604 $ 22.22 At December 31, 2016 1,573,441 $ 18.28 Granted 34,825 17.95 Forfeited (212,729) 18.46 Vested (58,536) 19.22 At September 30, 2017 1,337,001 $ 18.21 |
Geographic Information and Bu37
Geographic Information and Business Segments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Geographic Information and Business Segments | |
Schedule of total revenues by geographic area | For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2017 2016 2017 2016 Revenues: United States $ 218,042 $ 109,324 $ 399,361 $ 341,458 Ireland 17,874 31,936 79,129 112,481 United Kingdom 10,485 — 10,485 — Sweden 2,118 — 2,118 — Singapore 22,601 23,505 72,210 77,363 India 178 — 178 — Australia (2) 1 1 7 China (10) 40 (21) 316 Total revenues $ 271,286 $ 164,806 $ 563,461 $ 531,625 |
Schedule of revenues, income (loss) before income taxes (“Pre-tax earnings”) and total assets by segment | Market Execution Corporate Consolidated (in thousands) Making Services (1) Total For the three months ended September 30, 2017: Total revenue $ 228,582 $ 39,077 $ 3,627 $ 271,286 Income (loss) before income taxes and noncontrolling interest (19,322) (6,017) (21,156) (46,495) For the three months ended September 30, 2016: Total revenue $ 161,977 $ 2,931 $ (102) $ 164,806 Income (loss) before income taxes and noncontrolling interest 36,888 1,608 (622) 37,874 (1) Amounts shown in the Corporate segment include eliminations of income statement and balance sheet items included in the Company's other segments. For the nine months ended September 30, 2017: Total revenue $ 514,823 $ 44,964 $ 3,674 $ 563,461 Income (loss) before income taxes and noncontrolling interest 17,241 (4,913) (29,749) (17,421) For the nine months ended September 30, 2016: Total revenue $ 524,503 $ 7,224 $ (102) $ 531,625 Income (loss) before income taxes and noncontrolling interest 138,572 3,196 (778) 140,990 |
Organization and Basis of Pre38
Organization and Basis of Presentation (Details) | 3 Months Ended | 7 Months Ended | |
Sep. 30, 2017segment | Jul. 19, 2017item | Jul. 19, 2017segment | |
Number of businesses Company is managed and operated as | 1 | 1 | |
Number of reportable segments | 1 | ||
Number of operating segments | 3 | ||
Virtu Financial | |||
Ownership interest (as a percent) | 48.00% |
Summary of Significant Accoun39
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
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% | |||
Class B interests | East MIP | ||||
Property and Equipment and Capitalized Software | ||||
Amortization expense related to share based compensation | $ 20 | $ 100 | $ 60 | $ 700 |
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 | |||
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 | 3 years |
Summary of Significant Accoun40
Summary of Significant Accounting Policies - Goodwill, Income Taxes and VIE (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Oct. 31, 2016item | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Jul. 20, 2017USD ($) | Dec. 31, 2016USD ($) | |
Goodwill | |||||||
Goodwill impairment | $ 0 | $ 0 | $ 0 | $ 0 | |||
Income Taxes | |||||||
Uncertain tax positions | 0 | 0 | $ 0 | ||||
Deferred tax asset | 224,804 | 224,804 | $ 193,859 | ||||
Variable Interest Entity | |||||||
Carrying amount asset | 15,925 | 15,925 | |||||
Maximum exposure to loss | 15,925 | 15,925 | |||||
VIE's assets | $ 40,925 | $ 40,925 | |||||
Share-Based Compensation | |||||||
Number of days prior to the grant that common stock and restricted stock units fair value is determined based on | 3 days | ||||||
JV building microwave communication networks in US and Asia | |||||||
Variable Interest Entity | |||||||
Number of other investors in JV | item | 9 | ||||||
Ownership of voting shares of JV held be each investor (as a percent) | 11 | 11 | |||||
Ownership of equity of JV held be each investor (as a percent) | 11 | 11 | |||||
JV building microwave communication networks in US and Europe | |||||||
Variable Interest Entity | |||||||
Ownership of voting shares (as a percent) | 50.00% | 50.00% | |||||
Ownership interest (as a percent) | 50.00% | 50.00% | |||||
KCG | |||||||
Income Taxes | |||||||
Unrecognized tax benefits | $ 8,000 | $ 8,000 | |||||
Deferred tax asset | $ 31,500 | $ 31,500 | $ 22,900 |
Merger of Virtu Financial, In41
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 10, 2017 | Aug. 08, 2017 | Jul. 21, 2017 | Jul. 20, 2017 | Jun. 16, 2017 | Apr. 21, 2015 | Apr. 15, 2015 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 |
Business Acquisition [Line Items] | |||||||||||||
Aggregate purchase price | $ 613,500 | ||||||||||||
Employee compensation expense | $ 6,400 | $ 6,400 | |||||||||||
Annual incentive compensation payments | 23,000 | $ 23,000 | |||||||||||
Temasek Investment | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Stock issuance fees | $ 7,800 | ||||||||||||
NIH Investment Agreement | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Number of shares of stock issued | 338,124 | ||||||||||||
Aggregate purchase price | $ 5,200 | ||||||||||||
Senior Secured Credit Facility | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Face amount | $ 540,000 | ||||||||||||
Senior Secured Credit Facility Fourth Amendment | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Release of escrow balance | $ 1,119,400 | ||||||||||||
Escrow Credit Facility | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Face amount | 610,000 | ||||||||||||
Senior Secured Second Lien Notes | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Face amount | $ 500,000 | ||||||||||||
Interest rate (as a percent) | 6.75% | ||||||||||||
Interest period | 6 months | ||||||||||||
Redemption price as a percentage of the principal amount | 100.00% | ||||||||||||
Term Loan | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Outstanding principal balance | $ 950,000 | $ 950,000 | |||||||||||
Voluntary prepayment of principal | $ 100,000 | ||||||||||||
Senior Secured Notes Due 2020 | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Interest rate (as a percent) | 6.875% | ||||||||||||
Redemption price as a percentage of the principal amount | 103.438% | ||||||||||||
Class A | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Common stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||||||||
Number of shares of stock issued | 19,012,112 | 16,532,272 | |||||||||||
Employee compensation expense | $ 0 | $ 2,900 | $ 9,400 | $ 8,700 | |||||||||
Class A | Temasek Investment | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Number of shares of stock issued | 1,666,666 | ||||||||||||
Aggregate purchase price | $ 26,000 | ||||||||||||
VFH | Senior Secured Credit Facility | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Face amount | $ 100,000 | ||||||||||||
KCG | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Common stock, par value | $ 0.01 | ||||||||||||
Right to receive cash | $ 20 | ||||||||||||
Cash purchase price | $ 1,400 | ||||||||||||
Fair value ( in dollars per share) | $ 20 | ||||||||||||
Purchase price revision measurement period | 12 years | ||||||||||||
KCG | NIH Investment Agreement | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Number of shares of stock issued | 39,725,979 | ||||||||||||
Aggregate purchase price | $ 613,500 | ||||||||||||
KCG | Class A | Aranda | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Number of shares of stock issued | 6,346,155 | ||||||||||||
Aggregate purchase price | $ 99,000 | ||||||||||||
KCG | Class A | Temasek Investment | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Number of shares of stock issued | 1,666,666 | ||||||||||||
Aggregate purchase price | $ 26,000 | ||||||||||||
KCG | Class A | NIH Investment Agreement | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Number of shares of stock issued | 338,124 | 39,725,979 | |||||||||||
Aggregate purchase price | $ 5,200 |
Merger of Virtu Financial, In42
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. - Estimated fair values of the assets acquired and liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Jul. 20, 2017 | Dec. 31, 2016 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 859,598 | $ 715,379 | |
KCG | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||
Cash and equivalents | $ 592,993 | ||
Cash and securities segregated under federal regs | 3,000 | ||
Securities borrowed | 1,406,444 | ||
Securities purchased under agreements to resell | 16,894 | ||
Receivables from broker dealers and clearing organizations | 553,031 | ||
Financial instruments owned, at fair value | 2,095,339 | ||
Property, equipment and capitalized software (net) | 112,204 | ||
Intangibles | 156,300 | ||
Deferred taxes | 22,928 | ||
Other assets | 331,820 | ||
Total Assets | 5,290,953 | ||
Securities loaned | 166,189 | ||
Securities sold under agreements to repurchase | 841,606 | ||
Payables to broker dealers and clearing organizations | 536,653 | ||
Payables to customers | 17,583 | ||
Financial instruments sold, not yet purchased, at fair value | 1,756,647 | ||
Accounts payable and accrued expenses and other liabilities | 239,004 | ||
Debt | 480,987 | ||
Total Liabilities | 4,038,669 | ||
Total identified assets acquired, net of assumed liabilities | 1,252,284 | ||
Goodwill | 143,012 | ||
Total Purchase Price | $ 1,395,296 |
Merger of Virtu Financial, In43
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. - Intangible assets (Details) - USD ($) $ in Thousands | Jul. 20, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | $ 152,748 | $ 992 | |
Goodwill | 859,598 | 715,379 | |
Deferred tax asset | 224,804 | 193,859 | |
Customer relationships | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | 76,073 | ||
Trade names | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | 4,902 | ||
Amortization Years | 10 years | ||
KCG | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | $ 156,300 | ||
Goodwill | 143,012 | ||
Total | 299,312 | ||
Goodwill deductible for tax purposes | 0 | ||
Deferred tax asset | 22,900 | $ 31,500 | |
KCG | Technology. | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | 67,800 | ||
KCG | Customer relationships | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | 77,100 | ||
KCG | Trade names | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | 5,000 | ||
KCG | Exchange memberships | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Intangible assets | $ 6,400 | ||
Minimum | KCG | Technology. | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Amortization Years | 1 year | ||
Minimum | KCG | Customer relationships | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Amortization Years | 13 years | ||
Maximum | KCG | Technology. | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Amortization Years | 6 years | ||
Maximum | KCG | Customer relationships | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Amortization Years | 17 years | ||
Market Making | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Goodwill | $ 107,200 | $ 766,261 | 657,985 |
Execution Services | |||
Amounts preliminarily allocated to intangible assets, the amortization period and goodwill | |||
Goodwill | $ 35,800 | $ 93,337 | $ 57,394 |
Merger of Virtu Financial, In44
Merger of Virtu Financial, Inc. and KCG Holdings, Inc. - Pro forma results (Details) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Business Acquisition, Pro Forma Information [Abstract] | |||||||
Revenues | $ 271,286,000 | $ 164,806,000 | $ 563,461,000 | $ 531,625,000 | |||
Net income (loss) | (39,990,000) | 33,023,000 | (14,503,000) | 123,665,000 | $ 158,340,000 | ||
Net income (loss) attributable to common stockholders | $ (13,518,000) | $ 7,026,000 | $ (8,037,000) | $ 25,752,000 | |||
Diluted (in dollars per share) | $ (0.17) | $ 0.18 | $ (0.17) | $ 0.66 | |||
Pro Forma | |||||||
Business Acquisition, Pro Forma Information [Abstract] | |||||||
Revenues | $ 304,020,000 | $ 373,338,000 | $ 1,068,164,000 | $ 1,401,819,000 | |||
Net income (loss) | (82,520,000) | 1,783,000 | (117,169,000) | 163,146,000 | |||
Net income (loss) attributable to common stockholders | $ (30,432) | $ 658 | $ (43,210) | $ 60,165 | |||
Diluted (in dollars per share) | $ (0.35) | $ 0.01 | $ (0.48) | $ 0.67 | |||
VFH | |||||||
Business Acquisition, Pro Forma Information [Abstract] | |||||||
Advisory and other professional fees | $ 24,200,000 | ||||||
KCG | |||||||
Business Acquisition, Pro Forma Information [Abstract] | |||||||
Revenues | $ 149,327,000 | ||||||
Income (loss) before income taxes | $ (12,578,000) | ||||||
Advisory and other professional fees | $ 22,500,000 |
Earnings Per Share - Reconcilia
Earnings Per Share - Reconciliation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Reconciliation of net income before minority interest to net income available for common stockholders | |||||
Income before income taxes and non-controlling interest | $ (46,495) | $ 37,874 | $ (17,421) | $ 140,990 | |
Provision for (benefit from) income taxes | (6,505) | 4,851 | (2,918) | 17,325 | |
Net income (loss) | (39,990) | 33,023 | (14,503) | 123,665 | $ 158,340 |
Noncontrolling interest | 26,472 | (25,997) | 6,466 | (97,913) | |
Net income available for common stockholders | $ (13,518) | $ 7,026 | $ (8,037) | $ 25,752 |
Earnings Per Share - Basic (Det
Earnings Per Share - Basic (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Basic earnings per share | ||||
Net income available for common stockholders | $ (13,518) | $ 7,026 | $ (8,037) | $ 25,752 |
Less: Dividends and undistributed earnings allocated to participating securities | (314) | (191) | (997) | (612) |
Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities | $ (13,832) | $ 6,835 | $ (9,034) | $ 25,140 |
Weighted average shares of common stock outstanding | ||||
Outstanding | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Basic Earnings per share | $ (0.17) | $ 0.18 | $ (0.17) | $ 0.66 |
Class A | ||||
Weighted average shares of common stock outstanding | ||||
Outstanding | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Basic Earnings per share | $ (0.17) | $ 0.18 | $ (0.17) | $ 0.66 |
Virtu Financial | ||||
Weighted average shares of common stock outstanding | ||||
Ownership interest (as a percent) | 48.00% | 48.00% |
Earnings Per Share - Diluted (D
Earnings Per Share - Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Diluted earnings per share | ||||
Net income available for common stockholders, net of dividends and undistributed earnings allocated to participating securities | $ (13,832) | $ 6,835 | $ (9,034) | $ 25,140 |
Weighted average shares of common stock outstanding | ||||
Issued and outstanding | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Weighted average number of shares of common stock outstanding | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Diluted Earnings per share | $ (0.17) | $ 0.18 | $ (0.17) | $ 0.66 |
Anti-dilutive shares excluded from computation of EPS | 1,578,617 | 1,151,260 | 1,704,307 | 383,294 |
Class A | ||||
Weighted average shares of common stock outstanding | ||||
Issued and outstanding | 79,199,142 | 38,351,465 | 53,520,346 | 38,264,139 |
Tax Receivable Agreements (Deta
Tax Receivable Agreements (Details) - USD ($) $ in Thousands | Apr. 15, 2015 | Feb. 28, 2017 | Dec. 31, 2015 | Sep. 30, 2017 | Dec. 31, 2016 |
Payment on applicable cash tax savings (as a percent) | 85.00% | ||||
First payment due after filing of company's tax return | 120 days | ||||
First payment made | $ 7,000 | ||||
Deferred tax assets related to exchange of units | $ 218,400 | ||||
Payments to certain Virtu Members | 238,600 | ||||
Minimum tax receivable agreement obligation over the agreed period | 400 | ||||
Maximum tax receivable agreement obligation over the agreed period | $ 21,400 | ||||
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. | $ 20,200 | ||||
Deferred tax asset recorded in connection with a stock offering | 9,500 | ||||
Amount of payment liability pursuant to tax receivable agreements | 8,200 | ||||
Increase in additional paid-in capital related to tax receivable agreements | $ 1,300 | ||||
Deferred tax assets | $ 191,300 | $ 185,600 | |||
Tax receivable agreement obligations | 232,552 | $ 231,404 | |||
KCG | |||||
Deferred tax assets | $ 22,100 |
Goodwill and Intangible Asset49
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | May 03, 2017USD ($) | Sep. 30, 2017USD ($)segment | Sep. 30, 2016USD ($) | Jul. 19, 2017item | Jul. 19, 2017segment | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Jul. 20, 2017USD ($) | May 03, 2017USD ($) |
Changes in goodwill | |||||||||
Number of businesses Company is managed and operated as | 1 | 1 | |||||||
Number of reportable segments | segment | 1 | ||||||||
Number of operating segments | segment | 3 | ||||||||
Balance at the beginning of the period | $ 715,379 | ||||||||
Additions | 144,219 | ||||||||
Balance at the end of the period | $ 859,598 | 859,598 | |||||||
Purchase price | 5,594 | ||||||||
Goodwill | 859,598 | 715,379 | |||||||
Goodwill impairment | 0 | $ 0 | 0 | $ 0 | |||||
Teza Technologies strategic telecommunications assets | |||||||||
Changes in goodwill | |||||||||
Balance at the end of the period | $ 1,200 | ||||||||
Purchase price | 5,600 | ||||||||
Goodwill | $ 1,200 | $ 1,200 | |||||||
Intangibles | $ 1,900 | ||||||||
Decrease in goodwill | 1,900 | ||||||||
Increase in intangible assets | 1,900 | ||||||||
KCG | |||||||||
Changes in goodwill | |||||||||
Goodwill | $ 143,012 | ||||||||
Intangibles | 156,300 | ||||||||
Market Making | |||||||||
Changes in goodwill | |||||||||
Balance at the beginning of the period | 657,985 | ||||||||
Additions | 108,276 | ||||||||
Balance at the end of the period | 766,261 | 766,261 | |||||||
Goodwill | 766,261 | 657,985 | 107,200 | ||||||
Execution Services | |||||||||
Changes in goodwill | |||||||||
Balance at the beginning of the period | 57,394 | ||||||||
Additions | 35,943 | ||||||||
Balance at the end of the period | 93,337 | 93,337 | |||||||
Goodwill | $ 93,337 | $ 57,394 | $ 35,800 |
Goodwill and Intangible Asset50
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Acquired intangible assets | |||||
Gross Carrying Amount | $ 111,900 | ||||
Accumulated Amortization | $ 117,451 | $ 117,451 | 110,908 | ||
Net Carrying Amount | 152,748 | 152,748 | 992 | ||
Gross Carrying Amount | 270,200 | 270,200 | |||
Net Carrying Amount | 152,749 | 152,749 | |||
Amortization expense relating to finite-lived intangible assets | 6,440 | $ 53 | 6,546 | $ 159 | |
Exchange memberships | |||||
Acquired intangible assets | |||||
Indefinite-lived intangibles | 6,400 | 6,400 | |||
Purchased technology | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 110,000 | 110,000 | 110,000 | ||
Accumulated Amortization | 110,000 | $ 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 | $ 950 | ||
Accumulated Amortization | 533 | 533 | 454 | ||
Net Carrying Amount | 417 | $ 417 | $ 496 | ||
Useful Lives | 9 years | 9 years | |||
ETF buyer relationships | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 950 | $ 950 | $ 950 | ||
Accumulated Amortization | 533 | 533 | 454 | ||
Net Carrying Amount | 417 | $ 417 | $ 496 | ||
Useful Lives | 9 years | 9 years | |||
Leases | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 1,800 | $ 1,800 | |||
Accumulated Amortization | 247 | 247 | |||
Net Carrying Amount | 1,553 | $ 1,553 | |||
Useful Lives | 3 years | ||||
FCC licenses | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 200 | $ 200 | |||
Accumulated Amortization | 12 | 12 | |||
Net Carrying Amount | 188 | $ 188 | |||
Useful Lives | 7 years | ||||
Technology | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 67,800 | $ 67,800 | |||
Accumulated Amortization | 5,001 | 5,001 | |||
Net Carrying Amount | 62,799 | $ 62,799 | |||
Technology | Minimum | |||||
Acquired intangible assets | |||||
Useful Lives | 1 year | ||||
Technology | Maximum | |||||
Acquired intangible assets | |||||
Useful Lives | 6 years | ||||
Customer relationships | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 77,100 | $ 77,100 | |||
Accumulated Amortization | 1,027 | 1,027 | |||
Net Carrying Amount | 76,073 | $ 76,073 | |||
Customer relationships | Minimum | |||||
Acquired intangible assets | |||||
Useful Lives | 13 years | ||||
Customer relationships | Maximum | |||||
Acquired intangible assets | |||||
Useful Lives | 17 years | ||||
Trade names | |||||
Acquired intangible assets | |||||
Gross Carrying Amount | 5,000 | $ 5,000 | |||
Accumulated Amortization | 98 | 98 | |||
Net Carrying Amount | $ 4,902 | $ 4,902 | |||
Useful Lives | 10 years |
Receivables from_Payables to 51
Receivables from/Payables to Broker-Dealers and Clearing Organizations (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Due from prime brokers | $ 196,487 | $ 91,476 |
Deposits with clearing organizations | 156,127 | 21,995 |
Net equity with futures commission merchants | 187,424 | 213,030 |
Unsettled trades with clearing organization | 191,212 | 44,312 |
Securities failed to deliver | 231,135 | 77,915 |
Commissions and fees | 18,133 | |
Total receivables from broker-dealers and clearing organizations | 980,518 | 448,728 |
Liabilities | ||
Due to prime brokers | 409,323 | 227,335 |
Net equity with futures commission merchants | 42,634 | 38,838 |
Unsettled trades with clearing organization | 318,207 | 429,800 |
Securities failed to receive | 66,194 | 5 |
Commissions and fees | 2,709 | |
Total payables to broker-dealers and clearing organizations | 839,067 | 695,978 |
Outstanding principal balance | $ 159,100 | $ 309,100 |
Collateralized Transactions (De
Collateralized Transactions (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Financial instruments owned and pledged | ||
Financial instruments owned and pledged, where counterparty has right to repledge | $ 699,152 | $ 143,883 |
Securities received as collateral: | ||
Securities borrowed | 1,479,107 | 213,203 |
Securities purchased under agreements to resell | 8,196 | |
Total amounts related to collateralized transactions | 1,487,303 | 213,203 |
Equity securities | ||
Financial instruments owned and pledged | ||
Financial instruments owned and pledged, where counterparty has right to repledge | 692,130 | 128,202 |
Exchange traded notes | ||
Financial instruments owned and pledged | ||
Financial instruments owned and pledged, where counterparty has right to repledge | $ 7,022 | $ 15,681 |
Borrowings - Broker-Dealer Cred
Borrowings - Broker-Dealer Credit Facilities (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($)subsidiaryitem | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)subsidiaryitem | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Long-Term Borrowings | |||||
Borrowing Outstanding | $ 1,481,108 | $ 1,481,108 | |||
Borrowing Outstanding, net | $ 1,434,629 | $ 1,434,629 | $ 564,957 | ||
Number of broker-dealer subsidiaries | item | 3 | 3 | |||
Unused Available Capacity | $ 0 | $ 0 | 100,000 | ||
Interest expense | 24,593 | $ 7,393 | 40,141 | $ 21,569 | |
Broker-Dealer Credit Facilities | |||||
Long-Term Borrowings | |||||
Financing Available | 125,000 | 125,000 | 200,000 | ||
Borrowing Outstanding | $ 15,000 | $ 15,000 | 25,000 | ||
Number of secured credit facilities | item | 2 | 2 | |||
Broker-Dealer Credit Facility on an uncommitted basis | |||||
Long-Term Borrowings | |||||
Financing Available | $ 125,000 | $ 125,000 | 125,000 | ||
Borrowing Outstanding | $ 15,000 | $ 15,000 | $ 25,000 | ||
Number of secured credit facilities | item | 1 | 1 | |||
Maximum borrowing capacity | $ 125,000 | $ 125,000 | |||
Interest rate (as a percent) | 2.16% | 2.16% | 1.66% | ||
Interest expense | $ 400 | 300 | $ 1,400 | 800 | |
Broker-Dealer Credit Facility on committed basis | |||||
Long-Term Borrowings | |||||
Financing Available | $ 75,000 | ||||
Number of broker-dealer subsidiaries the committed facility is available to | subsidiary | 1 | 1 | |||
Maximum borrowing capacity | $ 75,000 | $ 75,000 | |||
Short-Term Credit Facilities | |||||
Long-Term Borrowings | |||||
Financing Available | 543,000 | 543,000 | 493,000 | ||
Borrowing Outstanding | 159,128 | 159,128 | 309,086 | ||
Interest expense | 1,400 | $ 1,800 | 4,800 | $ 5,000 | |
Total Short-term credit facilities | |||||
Long-Term Borrowings | |||||
Financing Available | 543,000 | 543,000 | 493,000 | ||
Borrowing Outstanding | 159,128 | 159,128 | 309,086 | ||
Revolving credit facility | |||||
Long-Term Borrowings | |||||
Unused Available Capacity | 100,000 | ||||
Senior Secured Second Lien Notes | |||||
Long-Term Borrowings | |||||
Borrowing Outstanding | 500,000 | 500,000 | |||
Borrowing Outstanding, net | 475,485 | 475,485 | |||
SBI Bonds | |||||
Long-Term Borrowings | |||||
Borrowing Outstanding | 31,108 | 31,108 | 29,925 | ||
Borrowing Outstanding, net | $ 31,055 | $ 31,055 | $ 29,853 |
Borrowings - Short-Term Credit
Borrowings - Short-Term Credit Facilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Short-Term Credit Facilities | |||||
Interest expense | $ 24,593 | $ 7,393 | $ 40,141 | $ 21,569 | |
Short-Term Credit Facilities | |||||
Short-Term Credit Facilities | |||||
Weighted average interest rate | 3.56% | 3.56% | 3.12% | ||
Interest expense | $ 1,400 | $ 1,800 | $ 4,800 | $ 5,000 |
Borrowings - Long-Term Borrowin
Borrowings - Long-Term Borrowings (Details) $ in Thousands, ¥ in Billions | Jun. 16, 2017USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017JPY (¥) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($)item | Dec. 31, 2016USD ($) | Oct. 31, 2016 | Jul. 25, 2016JPY (¥) | Jul. 25, 2016USD ($) |
Long-Term Borrowings | ||||||||||||
Loss due to change in currency rates | $ 1 | $ 1,500 | ||||||||||
Repayments of long-term debt | $ 206,473 | $ 3,825 | ||||||||||
Discount | $ 1,242 | $ 956 | ||||||||||
Debt Issue Cost Related To Debt Refinancing | 4,869 | 9,351 | ||||||||||
Outstanding principal amount | 1,481,108 | |||||||||||
Interest expense | 24,593 | $ 7,393 | $ 40,141 | 21,569 | ||||||||
Deferred financing fees | 45,237 | 4,012 | ||||||||||
Reconciliation of senior secured credit facility | ||||||||||||
Outstanding principal | 1,481,108 | |||||||||||
Net deferred financing fees | (45,237) | (4,012) | ||||||||||
Discount | (1,242) | (956) | ||||||||||
Long term borrowings | 1,434,629 | 564,957 | ||||||||||
Aggregate future required minimum principal payments based on the terms of loan | ||||||||||||
2020 and thereafter | 1,481,108 | |||||||||||
Total principal of long-term borrowings | 1,481,108 | |||||||||||
Prior to June 15, 2019 scenario two | ||||||||||||
Long-Term Borrowings | ||||||||||||
Redemption price as a percentage of the principal amount | 106.75% | |||||||||||
Prior to June 15, 2019 scenario two | Maximum | ||||||||||||
Long-Term Borrowings | ||||||||||||
Percentage of principal amount that may be redeemed | 35.00% | |||||||||||
Change of control events | ||||||||||||
Long-Term Borrowings | ||||||||||||
Percentage of principal amount that may be redeemed | 101.00% | |||||||||||
12-month period beginning June 15, 2019 | ||||||||||||
Long-Term Borrowings | ||||||||||||
Redemption price as a percentage of the principal amount | 103.375% | |||||||||||
12-month period beginning June 15, 2020 | ||||||||||||
Long-Term Borrowings | ||||||||||||
Redemption price as a percentage of the principal amount | 101.688% | |||||||||||
12-month periods beginning June 15, 2021 and thereafter | ||||||||||||
Long-Term Borrowings | ||||||||||||
Redemption price as a percentage of the principal amount | 100.00% | |||||||||||
Term Loan | ||||||||||||
Long-Term Borrowings | ||||||||||||
Outstanding principal balance | 950,000 | |||||||||||
Broker-Dealer Credit Facility on committed basis | ||||||||||||
Long-Term Borrowings | ||||||||||||
Maximum borrowing capacity | 75,000 | |||||||||||
Senior Secured Second Lien Notes | ||||||||||||
Long-Term Borrowings | ||||||||||||
Face amount | $ 500,000 | |||||||||||
Interest rate (as a percent) | 6.75% | |||||||||||
Percentage of the voting stock of the entity's domestic subsidiaries' direct foreign subsidiaries as collateral | 65.00% | |||||||||||
Redemption price as a percentage of the principal amount | 100.00% | |||||||||||
Spread above US treasury securities yield as a make whole premium | 0.50% | |||||||||||
Outstanding principal amount | 500,000 | |||||||||||
Interest period | 6 months | |||||||||||
Reconciliation of senior secured credit facility | ||||||||||||
Outstanding principal | 500,000 | |||||||||||
Long term borrowings | 475,485 | |||||||||||
Aggregate future required minimum principal payments based on the terms of loan | ||||||||||||
Total principal of long-term borrowings | 500,000 | |||||||||||
Escrow Credit Facility | ||||||||||||
Long-Term Borrowings | ||||||||||||
Face amount | $ 610,000 | |||||||||||
Annual amortization obligation as a percentage of original principal amount | 7.50% | |||||||||||
Senior Secured Credit Facility | ||||||||||||
Long-Term Borrowings | ||||||||||||
Face amount | $ 540,000 | |||||||||||
Outstanding principal amount | 950,000 | 540,000 | ||||||||||
Reconciliation of senior secured credit facility | ||||||||||||
Outstanding principal | 950,000 | 540,000 | ||||||||||
Long term borrowings | 928,089 | 535,104 | ||||||||||
Aggregate future required minimum principal payments based on the terms of loan | ||||||||||||
Total principal of long-term borrowings | 950,000 | 540,000 | ||||||||||
Senior Secured Credit Facility Fourth Amendment | ||||||||||||
Long-Term Borrowings | ||||||||||||
Repayments of long-term debt | 200,000 | |||||||||||
Number of anniversaries of closing of the acquisition | item | 4 | |||||||||||
Annual amortization obligation as a percentage of original principal amount | 7.50% | |||||||||||
Outstanding principal amount | 950,000 | $ 1,150,000 | ||||||||||
Reconciliation of senior secured credit facility | ||||||||||||
Outstanding principal | 950,000 | 1,150,000 | ||||||||||
Aggregate future required minimum principal payments based on the terms of loan | ||||||||||||
Total principal of long-term borrowings | 950,000 | 1,150,000 | ||||||||||
Amortization expense related to the deferred financing fees | $ 4,900 | $ 9,400 | ||||||||||
Senior Secured Credit Facility Fourth Amendment | Maximum | ||||||||||||
Long-Term Borrowings | ||||||||||||
Leverage ratio | 5.00% | |||||||||||
interest coverage ratio | 3.00% | |||||||||||
Senior Secured Credit Facility Fourth Amendment | Minimum | ||||||||||||
Long-Term Borrowings | ||||||||||||
interest coverage ratio | 2.75% | |||||||||||
Senior Secured Credit Facility Fourth Amendment | From and after the fiscal quarter ending March 31, 2019 | ||||||||||||
Long-Term Borrowings | ||||||||||||
Leverage ratio | 4.25% | |||||||||||
Senior Secured Credit Facility Fourth Amendment | From and after the fiscal quarter ending March 31, 2020 | ||||||||||||
Long-Term Borrowings | ||||||||||||
Leverage ratio | 3.50% | |||||||||||
Senior Secured Credit Facility Fourth Amendment | From the fiscal quarter ending March 31,2021 and thereafter | ||||||||||||
Long-Term Borrowings | ||||||||||||
Leverage ratio | 3.25% | |||||||||||
SBI Bonds | ||||||||||||
Long-Term Borrowings | ||||||||||||
Loss due to change in currency rates | $ 50 | $ 1,500 | ||||||||||
Outstanding principal amount | 31,108 | 29,925 | ||||||||||
Reconciliation of senior secured credit facility | ||||||||||||
Outstanding principal | 31,108 | 29,925 | ||||||||||
Long term borrowings | 31,055 | 29,853 | ||||||||||
Aggregate future required minimum principal payments based on the terms of loan | ||||||||||||
Total principal of long-term borrowings | $ 31,108 | $ 29,925 | ||||||||||
VFH | ||||||||||||
Long-Term Borrowings | ||||||||||||
Percentage of the non-voting stock of the entity's domestic subsidiaries' direct foreign subsidiaries collateralized | 100.00% | |||||||||||
VFH | Maximum | ||||||||||||
Long-Term Borrowings | ||||||||||||
Percentage of the voting stock of the entity's domestic subsidiaries' direct foreign subsidiaries as collateral | 65.00% | |||||||||||
VFH | Senior Secured Credit Facility | ||||||||||||
Long-Term Borrowings | ||||||||||||
Face amount | $ 100,000 | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Term Loan | Prime rate | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate (as a percent) | 2.75% | 2.75% | ||||||||||
Interest rate added to variable rate (as a percent) | 2.00% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Term Loan | Federal funds effective rate | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate added to variable rate (as a percent) | 0.50% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Term Loan | Eurodollar | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate added to variable rate (as a percent) | 1.00% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Term Loan | LIBOR rate | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate (as a percent) | 3.75% | 3.75% | ||||||||||
Interest rate added to variable rate (as a percent) | 1.00% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Revolving credit facility | Prime rate | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate (as a percent) | 2.00% | 2.00% | ||||||||||
Interest rate added to variable rate (as a percent) | 1.00% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Revolving credit facility | Federal funds effective rate | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate added to variable rate (as a percent) | 0.50% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Revolving credit facility | Eurodollar | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate added to variable rate (as a percent) | 1.00% | |||||||||||
VFH | Senior Secured Credit Facility Fourth Amendment | Revolving credit facility | LIBOR rate | ||||||||||||
Long-Term Borrowings | ||||||||||||
Interest rate (as a percent) | 3.00% | 3.00% | ||||||||||
Interest rate added to variable rate (as a percent) | 0.00% | |||||||||||
VFH | SBI Bonds | ||||||||||||
Long-Term Borrowings | ||||||||||||
Face amount | ¥ 3.5 | $ (31,100) | ¥ 3.5 | $ 31,100 | ||||||||
Interest rate (as a percent) | 5.00% | 4.00% | 4.00% |
Financial Assets and Liabilit56
Financial Assets and Liabilities - Measured on a Recurring Basis (Details) $ in Thousands | Jul. 27, 2016USD ($) | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) |
Fair value measurements measured on a recurring basis | ||||
Transfers of financial assets between levels | $ 0 | $ 0 | ||
Assets | ||||
Financial instruments owned, at fair value | 2,203,248 | $ 1,683,999 | ||
Financial instruments owned, pledged as collateral | 699,152 | 143,883 | ||
Other assets | 98,837 | 36,480 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 2,535,891 | 1,349,155 | ||
Equity method investment | ||||
Payment for minority interest | $ 38,754 | |||
Payment receivable | 50,000 | |||
Annual payment receivable | 6,800 | |||
Remaining additional potential payments | 56,800 | |||
Fair value of remaining additional potential payments | $ 55,400 | |||
SBI | ||||
Equity method investment | ||||
Ownership interest (as a percent) | 29.40% | |||
Payment for minority interest | $ 38,800 | |||
Discount rate applied to cash flow forecasts to determine initial fair value of equity method investment. | 15.90% | |||
Market approach average price/earnings multiples of comparable companies to corroborate the income approach | item | 19 | |||
Maximum | ||||
Equity method investment | ||||
Annual payment receivable | $ 6,600 | |||
Equity securities | ||||
Assets | ||||
Financial instruments owned, pledged as collateral | 692,130 | 128,202 | ||
Exchange traded notes | ||||
Assets | ||||
Financial instruments owned, pledged as collateral | 7,022 | 15,681 | ||
Other | ||||
Equity method investment | ||||
Fair value of remaining additional potential payments | 55,400 | |||
Fair value of a receivable from the sale of an investment | 3,000 | |||
Fair value measurements measured on a recurring basis | ||||
Assets | ||||
Financial instruments owned, at fair value, counterparty and cash collateral netting | (3,458,283) | (1,140,239) | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value, counterparty and cash collateral netting | (3,492,847) | (1,009,038) | ||
Fair value measurements measured on a recurring basis | Currency forwards | ||||
Assets | ||||
Financial instruments owned, at fair value, counterparty and cash collateral netting | (3,458,283) | (1,140,239) | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value, counterparty and cash collateral netting | (3,492,847) | (1,009,038) | ||
Fair value measurements measured on a recurring basis | Total Fair Value | ||||
Assets | ||||
Financial instruments owned, at fair value | 2,203,248 | 1,683,999 | ||
Financial instruments owned, pledged as collateral | 699,152 | 143,883 | ||
Other assets | 98,837 | 36,480 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 2,535,891 | 1,349,155 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Currency forwards | ||||
Assets | ||||
Financial instruments owned, at fair value | 1,057 | 7,022 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 81 | |||
Fair value measurements measured on a recurring basis | Total Fair Value | Options | ||||
Assets | ||||
Financial instruments owned, at fair value | 11,220 | 141 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 10,264 | 80 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Equity securities | ||||
Assets | ||||
Financial instruments owned, at fair value | 2,026,020 | 1,629,037 | ||
Financial instruments owned, pledged as collateral | 692,130 | 128,202 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 2,365,979 | 1,330,331 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | US and non-US government obligations | ||||
Assets | ||||
Financial instruments owned, at fair value | 23,785 | 10,765 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 25,350 | |||
Fair value measurements measured on a recurring basis | Total Fair Value | Corporate Bonds | ||||
Assets | ||||
Financial instruments owned, at fair value | 83,532 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 83,535 | |||
Fair value measurements measured on a recurring basis | Total Fair Value | Exchange traded notes | ||||
Assets | ||||
Financial instruments owned, at fair value | 57,634 | 37,034 | ||
Financial instruments owned, pledged as collateral | 7,022 | 15,681 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 50,682 | 18,744 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Exchange stock | ||||
Assets | ||||
Other assets | 3,211 | 449 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Equity investment | ||||
Assets | ||||
Other assets | 37,263 | 36,031 | ||
Fair value measurements measured on a recurring basis | Total Fair Value | Other | ||||
Assets | ||||
Other assets | 58,363 | |||
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 | 610,484 | 1,634,083 | ||
Financial instruments owned, pledged as collateral | 414,380 | 143,883 | ||
Other assets | 3,211 | 449 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 916,110 | 1,342,437 | ||
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Options | ||||
Assets | ||||
Financial instruments owned, at fair value | 11,220 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 10,264 | |||
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 | 591,928 | 1,597,049 | ||
Financial instruments owned, pledged as collateral | 413,860 | 128,202 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 895,116 | 1,323,693 | ||
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | US and non-US government obligations | ||||
Assets | ||||
Financial instruments owned, at fair value | 2,783 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 10,375 | |||
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 | 4,553 | 37,034 | ||
Financial instruments owned, pledged as collateral | 520 | 15,681 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 355 | 18,744 | ||
Fair value measurements measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Exchange stock | ||||
Assets | ||||
Other assets | 3,211 | 449 | ||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | ||||
Assets | ||||
Financial instruments owned, at fair value | 5,051,047 | 1,190,155 | ||
Financial instruments owned, pledged as collateral | 284,772 | |||
Other assets | 55,363 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 5,112,628 | 1,015,756 | ||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Currency forwards | ||||
Assets | ||||
Financial instruments owned, at fair value | 3,459,340 | 1,147,261 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 3,492,928 | 1,009,038 | ||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Options | ||||
Assets | ||||
Financial instruments owned, at fair value | 141 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 80 | |||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Equity securities | ||||
Assets | ||||
Financial instruments owned, at fair value | 1,434,092 | 31,988 | ||
Financial instruments owned, pledged as collateral | 278,270 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 1,470,863 | 6,638 | ||
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 | 21,002 | 10,765 | ||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 14,975 | |||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Corporate Bonds | ||||
Assets | ||||
Financial instruments owned, at fair value | 83,532 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 83,535 | |||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Exchange traded notes | ||||
Assets | ||||
Financial instruments owned, at fair value | 53,081 | |||
Financial instruments owned, pledged as collateral | 6,502 | |||
Liabilities | ||||
Financial instruments sold, not yet purchased, at fair value | 50,327 | |||
Fair value measurements measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Other | ||||
Assets | ||||
Other assets | 55,363 | |||
Fair value measurements measured on a recurring basis | Significant Unobservable Inputs (Level 3) | ||||
Assets | ||||
Other assets | 40,263 | 36,031 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning Balance | 36,031 | |||
Purchases | 3,000 | |||
Total Realized and Unrealized Gains / (Losses) | 1,232 | |||
Ending Balance | 40,263 | 36,031 | ||
Change in Net Unrealized Gains / (Losses) On Investments Held | 1,232 | |||
Fair value measurements measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Equity investment | ||||
Assets | ||||
Other assets | 37,263 | 36,031 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning Balance | 36,031 | |||
Total Realized and Unrealized Gains / (Losses) | 1,232 | |||
Ending Balance | 37,263 | $ 36,031 | ||
Change in Net Unrealized Gains / (Losses) On Investments Held | 1,232 | |||
Fair value measurements measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Other | ||||
Assets | ||||
Other assets | 3,000 | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Purchases | 3,000 | |||
Ending Balance | $ 3,000 |
Financial Assets and Liabilit57
Financial Assets and Liabilities - Netting of Certain Financial Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Securities borrowed | ||
Gross Amounts of Recognized Assets | $ 1,525,403 | $ 220,005 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 1,525,403 | 220,005 |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | (1,480,267) | (216,778) |
Cash collateral received | (844) | (248) |
Net Amount | 44,292 | 2,979 |
Securities purchased under agreements to resell | ||
Gross Amounts of Recognized Assets | 8,249 | |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 8,249 | |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | (8,188) | |
Net Amount | 61 | |
Total | ||
Gross Amounts of Recognized Assets | 5,004,212 | 1,367,407 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (3,458,283) | (1,140,239) |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 1,545,929 | 227,168 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (1,488,960) | (216,858) |
Cash collateral received | (844) | (261) |
Net Amount | 56,125 | 10,049 |
Currency forwards | ||
Trading assets, at fair value | ||
Gross Amounts of Recognized Assets | 3,459,340 | 1,147,261 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (3,458,283) | (1,140,239) |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 1,057 | 7,022 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Net Amount | 1,057 | 7,022 |
Options | ||
Trading assets, at fair value | ||
Gross Amounts of Recognized Assets | 11,220 | 141 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 11,220 | 141 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (505) | (80) |
Cash collateral received | (13) | |
Net Amount | $ 10,715 | $ 48 |
Financial Assets and Liabilit58
Financial Assets and Liabilities - Netting of Certain Financial Liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Securities loaned | ||
Gross Amounts of Recognized Liabilities | $ 582,915 | $ 222,203 |
Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition | 582,915 | 222,203 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (574,885) | (221,792) |
Net Amount | 8,030 | 411 |
Securities sold under agreements to repurchase | ||
Gross Amounts of Recognized Liabilities | 620,887 | |
Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition | 620,887 | |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (620,887) | |
Total | ||
Gross Amounts of Recognized Liabilities | 4,706,994 | 1,231,321 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (3,492,847) | (1,009,038) |
Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition | 1,214,147 | 222,283 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (1,196,277) | (221,872) |
Net Amount | 17,870 | 411 |
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 | 89,300 | 18,000 |
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 | (50,400) | (3,500) |
Currency forwards | ||
Trading liabilities, at fair value: | ||
Gross Amounts of Recognized Liabilities | 3,492,928 | 1,009,038 |
Gross Amounts Offset in the Consolidated Statement of Financial Condition | (3,492,847) | (1,009,038) |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 81 | |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Net Amount | 81 | |
Options | ||
Trading liabilities, at fair value: | ||
Gross Amounts of Recognized Liabilities | 10,264 | 80 |
Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition | 10,264 | 80 |
Gross Amounts Not Offset in the Consolidated Statement of Financial Condition | ||
Financial instruments | (505) | $ (80) |
Net Amount | $ 9,759 |
Financial Assets and Liabilit59
Financial Assets and Liabilities - Gross Obligations For Securities Lending Transactions (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | $ 620,887 |
Remaining contractual maturity for securities lending transactions | 582,915 |
Overnight and Continuous | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 887 |
Remaining contractual maturity for securities lending transactions | 582,915 |
Less than 30 Days | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 205,000 |
30 To 60 Days | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 175,000 |
61 To 90 Days | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 240,000 |
Equity securities | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 620,000 |
Remaining contractual maturity for securities lending transactions | 582,915 |
Equity securities | Overnight and Continuous | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for securities lending transactions | 582,915 |
Equity securities | Less than 30 Days | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 205,000 |
Equity securities | 30 To 60 Days | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 175,000 |
Equity securities | 61 To 90 Days | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 240,000 |
US and non-US government obligations | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | 887 |
US and non-US government obligations | Overnight and Continuous | |
Fair value measurements measured on a recurring basis | |
Remaining contractual maturity for repurchase agreements | $ 887 |
Derivative Instruments - Fair V
Derivative Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Equities futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | $ (2,729) | $ 2,403 |
Derivatives Assets, Notional | 951,330 | 1,461,286 |
Equities futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | (731) | (43) |
Derivatives Liabilities, Notional | 107,774 | 62,417 |
Commodity futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 50,258 | 13,964 |
Derivatives Assets, Notional | 18,078,494 | 3,918,778 |
Commodity futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | (35,301) | 2,842 |
Derivatives Liabilities, Notional | 724,829 | 22,616,170 |
Currency futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 41,826 | 1,591 |
Derivatives Assets, Notional | 3,789,287 | 3,264,093 |
Currency futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | (14,425) | (6,282) |
Derivatives Liabilities, Notional | 2,988,821 | 1,137,908 |
Fixed Income futures | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | (54) | 31 |
Derivatives Assets, Notional | 32,723 | 5,730 |
Currency forwards | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 3,459,340 | 1,147,261 |
Derivatives Liabilities, Fair Value | 3,492,928 | 1,009,038 |
Currency forwards | Financial instruments owned | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 3,459,340 | 1,147,261 |
Derivatives Assets, Notional | 159,559,280 | 94,192,414 |
Currency forwards | Financial instruments sold, not yet purchased | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | 3,492,928 | 1,009,038 |
Derivatives Liabilities, Notional | 159,585,203 | 85,874,684 |
Options | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 11,220 | 141 |
Derivatives Liabilities, Fair Value | 10,264 | 80 |
Derivatives Liabilities, Notional | 1,108,920 | 4,486 |
Options | Receivables from broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Assets, Fair Value | 11,220 | 141 |
Derivatives Assets, Notional | 1,122,415 | $ 6,844 |
Treasury futures | Payables to broker dealers and clearing organizations | ||
Fair value of derivative instruments on a gross basis | ||
Derivatives Liabilities, Fair Value | 11 | |
Derivatives Liabilities, Notional | $ 7,906 |
Derivative Instruments - Gain F
Derivative Instruments - Gain From Derivative Instruments (Details) - Not designated as hedging instruments - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
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 | $ 65,292 | $ 144,787 | $ 273,653 | $ 580,760 |
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 | 35,097 | 197,650 | 249,274 | 618,245 |
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 | 8,950 | (52,796) | 3,135 | (37,076) |
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 | 21,120 | (65) | 21,119 | (411) |
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 | $ 125 | $ (2) | $ 125 | $ 2 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Jul. 20, 2017 | Dec. 31, 2016 | |
Income taxes | ||||||
Provision for (benefit from) income taxes | $ (6,505) | $ 4,851 | $ (2,918) | $ 17,325 | ||
Effective tax rate (as a percent) | 14.00% | 12.80% | 16.70% | 12.30% | ||
Current income taxes receivable | $ 125,800 | $ 125,800 | $ 5,800 | |||
Deferred tax asset | 224,804 | 224,804 | $ 193,859 | |||
KCG | ||||||
Income taxes | ||||||
Deferred tax asset | 31,500 | 31,500 | $ 22,900 | |||
Unrecognized tax benefits | $ 8,000 | $ 8,000 |
Commitments, Contingencies an63
Commitments, Contingencies and Guarantees - Employee Retention Plan and Litigation (Details) - Unfavorable regulatory action $ in Millions | 1 Months Ended | ||||
May 31, 2017EUR (€) | May 31, 2017USD ($) | Jul. 31, 2016EUR (€) | Dec. 31, 2015EUR (€) | Dec. 31, 2015USD ($) | |
Litigation | |||||
Amount of fine | € 3,000,000 | $ 3.5 | € 5,000,000 | $ 5.4 | |
Accrual for estimated loss | 3,300,000 | $ 3.9 | € 5,000,000 | $ 5.4 | |
Incremental charge | € 300,000 | ||||
Subsidiary of KCG | |||||
Litigation | |||||
Amount of fine | € 400,000 |
Capital Structure (Details)
Capital Structure (Details) $ / shares in Units, $ in Millions | Aug. 10, 2017USD ($)shares | Jul. 20, 2017USD ($)$ / sharesshares | Apr. 21, 2015$ / sharesshares | Apr. 15, 2015shares | Aug. 31, 2017shares | May 31, 2017shares | Feb. 28, 2017shares | Sep. 30, 2016$ / sharesshares | Sep. 30, 2017Voteitem$ / shares | Dec. 31, 2016$ / shares | Nov. 30, 2015item$ / sharesshares |
Aggregate purchase price | $ | $ 613.5 | ||||||||||
Number of classes of common stock | item | 4 | ||||||||||
Number of votes | Vote | 10 | ||||||||||
Common stock offered for sale (in shares) | 397,534 | ||||||||||
Commission deducted from the price at which shares were offered to the public (in dollars per share) | $ / shares | $ 0.10 | ||||||||||
2015 Management Incentive Plan | |||||||||||
Number of shares of stock authorized | 16,000,000 | ||||||||||
Virtu Financial | |||||||||||
Ownership interest (as a percent) | 48.00% | ||||||||||
VFH | |||||||||||
Issuance of common stock in connection with employee exchanges (in shares) | 155,009 | 307,544 | 683,762 | ||||||||
Common stock exchange ratio | 1 | ||||||||||
Silver Lake Post-IPO | |||||||||||
Common stock offered for sale (in shares) | 6,075,837 | ||||||||||
Class A | |||||||||||
Number of shares of stock issued | 19,012,112 | 16,532,272 | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 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 offered for sale (in shares) | 1,103,668 | ||||||||||
Price of stock (in dollars per share) | $ / shares | $ 15.75 | ||||||||||
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 | |||||||||
Class C | |||||||||||
Common stock, par value (in dollars per share) | $ / shares | 0.00001 | 0.00001 | |||||||||
Class D | |||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | |||||||||
Class A common stock and Class C common stock | |||||||||||
Number of votes | Vote | 1 | ||||||||||
Number Of Non Executive Employees | item | 1 | ||||||||||
Temasek Investment | |||||||||||
Other offering costs | $ | $ 7.8 | ||||||||||
Temasek Investment | Class A | |||||||||||
Number of shares of stock issued | 1,666,666 | ||||||||||
Aggregate purchase price | $ | $ 26 | ||||||||||
NIH Investment Agreement | |||||||||||
Number of shares of stock issued | 338,124 | ||||||||||
Aggregate purchase price | $ | $ 5.2 | ||||||||||
KCG | |||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | ||||||||||
KCG | Aranda | Class A | |||||||||||
Number of shares of stock issued | 6,346,155 | ||||||||||
Aggregate purchase price | $ | $ 99 | ||||||||||
KCG | Temasek Investment | Class A | |||||||||||
Number of shares of stock issued | 1,666,666 | ||||||||||
Aggregate purchase price | $ | $ 26 | ||||||||||
KCG | NIH Investment Agreement | |||||||||||
Number of shares of stock issued | 39,725,979 | ||||||||||
Aggregate purchase price | $ | $ 613.5 | ||||||||||
KCG | NIH Investment Agreement | Class A | |||||||||||
Number of shares of stock issued | 338,124 | 39,725,979 | |||||||||
Aggregate purchase price | $ | $ 5.2 |
Share-based Compensation (Detai
Share-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 22, 2015 | Apr. 21, 2015 | Jul. 08, 2011 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Share-based Compensation. | |||||||||
Expense recognized | $ 6,400 | $ 6,400 | |||||||
Number of Class A-2 capital interests contributed by Class A-2 members to Virtu East MIP LLC | 2,625,000 | ||||||||
Non-voting common interest units outstanding | 12,765,051 | 12,765,051 | 14,231,535 | ||||||
Number of non-voting common interest units forfeited or repurchased | 1,466,484 | 1,162,891 | |||||||
Weighted Average Remaining Life, outstanding | |||||||||
Options Exercisable, Weighted Average Exercise Price (in dollars per share) | $ 19 | ||||||||
Class A | |||||||||
Share-based Compensation. | |||||||||
Expense recognized | $ 0 | $ 2,900 | $ 9,400 | $ 8,700 | |||||
Number of non-voting common interest units forfeited or repurchased | 1,100,668 | ||||||||
Class C | |||||||||
Share-based Compensation. | |||||||||
Number of non-voting common interest units forfeited or repurchased | 429,668 | ||||||||
2015 Management Incentive Plan | Class A | Maximum | |||||||||
Share-based Compensation. | |||||||||
Vesting period | 4 years | ||||||||
Class A-2 profits interests | |||||||||
Share-based Compensation. | |||||||||
Expense recognized | $ 100 | $ 400 | 500 | $ 1,100 | |||||
Unrecognized share-based compensation expense | $ 100 | $ 100 | |||||||
Weighted average period for compensation expense expected to be recognized | 1 month 6 days | ||||||||
Class A-2 profits interests | Maximum | |||||||||
Share-based Compensation. | |||||||||
Vesting period | 4 years | 4 years | 4 years | 4 years | |||||
Class A-2 profits interests | East MIP | Time based vesting | |||||||||
Share-based Compensation. | |||||||||
Vesting period | 4 years | ||||||||
Class B interests | East MIP | |||||||||
Share-based Compensation. | |||||||||
Amortization expense related to share based compensation | $ 20 | $ 100 | $ 60 | $ 700 | |||||
Non-voting common interest units (formerly Class B interests) | East MIP | |||||||||
Share-based Compensation. | |||||||||
Expense recognized | 200 | 200 | 500 | 700 | |||||
Unrecognized share-based compensation expense | 200 | $ 200 | $ 800 | ||||||
Weighted average period for compensation expense expected to be recognized | 3 months 18 days | 1 year | |||||||
Capitalized software development costs | 10 | 30 | $ 20 | 60 | |||||
Non-qualified stock options | |||||||||
Share-based Compensation. | |||||||||
Expense recognized | 4,200 | $ 4,200 | |||||||
Non-qualified stock options | 2015 Management Incentive Plan | |||||||||
Share-based Compensation. | |||||||||
Vesting period | 4 years | ||||||||
Expense recognized | 1,400 | $ 1,500 | |||||||
Unrecognized share-based compensation expense | $ 9,100 | $ 9,100 | $ 14,200 | ||||||
Weighted average period for compensation expense expected to be recognized | 1 year 7 months 6 days | 2 years 3 months 18 days | |||||||
Forfeited or repurchased (in shares) | 401,000 | 645,000 | |||||||
Outstanding (in shares) | 8,234,000 | 8,994,000 | 8,994,000 | ||||||
Forfeited or expired (in shares) | (401,000) | (645,000) | |||||||
Outstanding (in shares) | 7,833,000 | 8,349,000 | 7,833,000 | 8,349,000 | 8,234,000 | 8,994,000 | |||
Weighted Average Exercise Price Per Share | |||||||||
Outstanding (in dollars per share) | $ 19 | $ 19 | $ 19 | ||||||
Outstanding (in dollars per share) | $ 19 | $ 19 | $ 19 | $ 19 | $ 19 | $ 19 | |||
Weighted Average Remaining Life, outstanding | |||||||||
Weighted Average Remaining Life | 7 years 6 months 18 days | 8 years 6 months 18 days | 8 years 3 months 15 days | 9 years 3 months 15 days | |||||
Options Exercisable, Number of Options (in shares) | 3,916,500 | 2,087,250 | 3,916,500 | 2,087,250 | 2,058,500 | ||||
Options Exercisable, Weighted Average Exercise Price (in dollars per share) | $ 19 | $ 19 | |||||||
Non-qualified stock options | 2015 Management Incentive Plan | Maximum | |||||||||
Share-based Compensation. | |||||||||
Expiration period | 10 years | ||||||||
Restricted stock units | |||||||||
Share-based Compensation. | |||||||||
Expense recognized | $ 2,200 | $ 1,600 | $ 7,100 | $ 8,700 | |||||
Unrecognized share-based compensation expense | $ 17,200 | $ 17,200 | $ 28,500 | ||||||
Weighted average period for compensation expense expected to be recognized | 1 year 9 months 18 days | 2 years 7 months 6 days | |||||||
Activity | |||||||||
Outstanding (in shares) | 1,573,441 | 984,466 | 984,466 | ||||||
Granted (in shares) | 34,825 | 35,095 | |||||||
Forfeited (in shares) | (212,729) | (115,869) | |||||||
Vested (in shares) | (58,536) | (49,088) | |||||||
Outstanding (in shares) | 1,337,001 | 854,604 | 1,337,001 | 854,604 | 1,573,441 | 984,466 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||||||||
Outstanding (in dollars per share) | $ 18.28 | ||||||||
Granted (in dollars per share) | $ 17.81 | ||||||||
Forfeited (in dollars per share) | 22.51 | ||||||||
Vested (in dollars per share) | 20.11 | ||||||||
Outstanding (in dollars per share) | $ 22.22 | 22.22 | $ 18.28 | ||||||
Weighted Average Fair Value | |||||||||
Outstanding (in dollars per share) | $ 22.32 | $ 22.32 | |||||||
Granted (in dollars per share) | 17.95 | ||||||||
Forfeited (in dollars per share) | 18.46 | ||||||||
Vested (in dollars per share) | 19.22 | ||||||||
Outstanding (in dollars per share) | $ 18.21 | $ 18.21 | $ 22.32 |
Regulatory Requirement (Details
Regulatory Requirement (Details) $ in Millions | 9 Months Ended | |
Sep. 30, 2017USD ($)item | Dec. 31, 2016USD ($) | |
Regulatory Requirement | ||
Number of broker-dealer subsidiaries | item | 3 | |
Net capital | $ 3,681 | |
Number of broker-dealer subsidiaries required to maintain capital in connection with the operation of DMM business | item | 1 | |
Broker Dealer Subsidiary One | ||
Regulatory Requirement | ||
Minimum net capital required to be maintained by broker-dealer subsidiaries | $ 1 | $ 1 |
Net capital | 48.3 | 74.5 |
Excess net capital over the required net capital | 47.3 | 73.5 |
Broker Dealer Subsidiary Two | ||
Regulatory Requirement | ||
Minimum net capital required to be maintained by broker-dealer subsidiaries | 1 | |
Net capital | 11.6 | 10.8 |
Excess net capital over the required net capital | 10.6 | 9.8 |
Broker Dealer Subsidiary Three | ||
Regulatory Requirement | ||
Excess net capital over the required net capital | 367.1 | |
VFCM | ||
Regulatory Requirement | ||
Minimum capital required to be maintained in connection with the operation of the Company's DMM business | $ 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 and Bu67
Geographic Information and Business Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Total revenues by geographic area | ||||
Revenues | $ 271,286 | $ 164,806 | $ 563,461 | $ 531,625 |
United States | ||||
Total revenues by geographic area | ||||
Revenues | 218,042 | 109,324 | 399,361 | 341,458 |
Ireland | ||||
Total revenues by geographic area | ||||
Revenues | 17,874 | 31,936 | 79,129 | 112,481 |
United Kingdom | ||||
Total revenues by geographic area | ||||
Revenues | 10,485 | 10,485 | ||
Sweden | ||||
Total revenues by geographic area | ||||
Revenues | 2,118 | 2,118 | ||
Singapore | ||||
Total revenues by geographic area | ||||
Revenues | 22,601 | 23,505 | 72,210 | 77,363 |
India | ||||
Total revenues by geographic area | ||||
Revenues | 178 | 178 | ||
Australia | ||||
Total revenues by geographic area | ||||
Revenues | (2) | 1 | 1 | 7 |
China | ||||
Total revenues by geographic area | ||||
Revenues | $ (10) | $ 40 | $ (21) | $ 316 |
Geographic Information and Bu68
Geographic Information and Business Segments - Segments(Details) $ in Thousands | 3 Months Ended | 7 Months Ended | 9 Months Ended | ||||
Sep. 30, 2017USD ($)segment | Sep. 30, 2016USD ($) | Jul. 19, 2017item | Jul. 19, 2017segment | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Segment reporting | |||||||
Number of businesses Company is managed and operated as | 1 | 1 | |||||
Number of reportable segments | segment | 1 | ||||||
Number of operating segments | segment | 3 | ||||||
Revenues | $ 271,286 | $ 164,806 | $ 563,461 | $ 531,625 | |||
Pre-tax earnings | (46,495) | 37,874 | (17,421) | 140,990 | |||
Total assets | 7,739,345 | 7,739,345 | $ 3,692,390 | ||||
Market Making | |||||||
Segment reporting | |||||||
Revenues | 228,582 | 161,977 | 514,823 | 524,503 | |||
Pre-tax earnings | (19,322) | 36,888 | 17,241 | 138,572 | |||
Execution Services | |||||||
Segment reporting | |||||||
Revenues | 39,077 | 2,931 | 44,964 | 7,224 | |||
Pre-tax earnings | (6,017) | 1,608 | (4,913) | 3,196 | |||
Corporate | |||||||
Segment reporting | |||||||
Revenues | 3,627 | (102) | 3,674 | (102) | |||
Pre-tax earnings | $ (21,156) | $ (622) | $ (29,749) | $ (778) |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Related Party Transactions | |||||
Payable to affiliates | $ 100 | $ 100 | $ 200 | ||
Dell | |||||
Related Party Transactions | |||||
Payments for purchases | 500 | $ 600 | 1,900 | $ 2,100 | |
Level 3 | |||||
Related Party Transactions | |||||
Payments for purchases | $ 500 | 700 | $ 1,600 | 1,900 | |
Two microwave communication network JVs | |||||
Related Party Transactions | |||||
Number of microwave communication network JVs the Company makes payments to | item | 2 | 2 | |||
Payments to related party | $ 3,900 | $ 0 | $ 4,200 | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Events | Nov. 07, 2017$ / shares | Nov. 04, 2017USD ($)item | Nov. 03, 2017USD ($) | Oct. 24, 2017USD ($) |
BondPoint | Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | ||||
Subsequent events | ||||
Purchase price receivable | $ 400,000,000 | |||
Select infrastructure and telecommunications assets | Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | ||||
Subsequent events | ||||
Purchase price receivable | $ 4,200,000 | |||
Broker Dealer Revolving Facility on a committed basis | ||||
Subsequent events | ||||
Financing Available | $ 500,000,000 | |||
Number of borrowing bases | item | 2 | |||
Class A | ||||
Subsequent events | ||||
Dividends declared (in dollars per share) | $ / shares | $ 0.24 |