BGC PARTNERS, INC., 10-Q filed on 8/6/2021
Quarterly Report
v3.21.2
Cover - shares
6 Months Ended
Jun. 30, 2021
Aug. 04, 2021
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2021  
Document Transition Report false  
Entity File Number 0-28191  
Entity Registrant Name BGC Partners, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 13-4063515  
Entity Address, Address Line One 499 Park Avenue  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10022  
City Area Code 212  
Local Phone Number 610-2200  
Title of 12(b) Security Class A Common Stock, $0.01 par value  
Trading Symbol BGCP  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
Entity Central Index Key 0001094831  
Current Fiscal Year End Date --12-31  
Class A Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   339,697,821
Class B Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   45,884,380
v3.21.2
Condensed Consolidated Statements of Financial Condition - USD ($)
$ in Thousands
Jun. 30, 2021
Dec. 31, 2020
Assets    
Cash and cash equivalents $ 420,302 $ 593,646
Cash segregated under regulatory requirements 36,365 257,031
Securities owned 49,222 58,572
Marketable securities 360 349
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers 1,455,333 304,022
Accrued commissions and other receivables, net 338,313 739,009
Loans, forgivable loans and other receivables from employees and partners, net 370,800 408,142
Fixed assets, net 204,531 214,782
Investments 33,400 38,008
Goodwill 487,434 556,211
Other intangible assets, net 219,291 287,157
Receivables from related parties 7,890 11,953
Other assets 461,379 480,418
Assets held for sale 1,048,859 0
Total assets 5,133,479 3,949,300
Liabilities, Redeemable Partnership Interest, and Equity    
Short-term borrowings 5,997 3,849
Accrued compensation 187,166 220,726
Payables to broker-dealers, clearing organizations, customers and related broker-dealers 1,305,743 179,716
Payables to related parties 79,920 36,252
Accounts payable, accrued and other liabilities 652,366 1,363,919
Notes payable and other borrowings 1,243,248 1,315,935
Liabilities held for sale 850,112 0
Total liabilities 4,324,552 3,120,397
Commitments, contingencies and guarantees (Note 20)
Redeemable partnership interest 19,582 20,674
Stockholders’ equity:    
Additional paid-in capital 2,367,458 2,354,492
Treasury stock, at cost: 68,119 and 50,527 shares of Class A common stock at June 30, 2021 and December 31, 2020, respectively (406,701) (315,313)
Retained deficit (1,211,870) (1,265,504)
Accumulated other comprehensive income (loss) (30,605) (28,930)
Total stockholders’ equity 722,910 748,939
Noncontrolling interest in subsidiaries 66,435 59,290
Total equity 789,345 808,229
Total liabilities, redeemable partnership interest, and equity 5,133,479 3,949,300
Class A Common Stock    
Stockholders’ equity:    
Common stock value 4,169 3,735
Class B Common Stock    
Stockholders’ equity:    
Common stock value $ 459 $ 459
v3.21.2
Condensed Consolidated Statements of Financial Condition (Parenthetical) - $ / shares
Jun. 30, 2021
Dec. 31, 2020
Class A Common Stock    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 750,000,000 750,000,000
Common stock, shares issued (in shares) 416,914,000 373,545,000
Common stock, shares outstanding (in shares) 348,795,000 323,018,000
Treasury stock, at cost (in shares) 68,119,000 50,527,000
Class B Common Stock    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 150,000,000 150,000,000
Common stock, shares issued (in shares) 45,884,000 45,884,000
Common stock, shares outstanding (in shares) 45,884,000 45,884,000
v3.21.2
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Revenues:        
Commissions $ 389,768 $ 382,640 $ 824,988 $ 838,495
Principal transactions 81,997 99,453 180,760 212,764
Fees from related parties 4,245 6,562 8,030 12,083
Data, software and post-trade 21,602 20,139 43,588 39,537
Interest and dividend income 11,455 6,536 14,493 10,697
Other revenues 3,383 3,758 8,167 8,679
Total revenues 512,450 519,088 1,080,026 1,122,255
Expenses:        
Compensation and employee benefits 270,427 283,616 578,589 628,544
Equity-based compensation and allocations of net income to limited partnership units and FPUs 58,290 27,819 91,785 70,023
Total compensation and employee benefits 328,717 311,435 670,374 698,567
Occupancy and equipment 46,900 47,247 95,033 98,321
Fees to related parties 4,452 5,194 9,743 10,629
Professional and consulting fees 17,820 19,805 33,960 39,761
Communications 30,774 30,524 60,578 61,045
Selling and promotion 8,616 6,634 16,104 25,333
Commissions and floor brokerage 14,308 13,520 32,237 32,797
Interest expense 18,680 17,625 36,533 35,131
Other expenses 23,688 21,480 39,777 39,011
Total expenses 493,955 473,464 994,339 1,040,595
Other income (losses), net:        
Gains (losses) on divestitures and sale of investments (32) 0 (32) 0
Gains (losses) on equity method investments 1,323 1,119 2,789 2,142
Other income (loss) 1,864 1,129 7,270 (4,886)
Total other income (losses), net 3,155 2,248 10,027 (2,744)
Income (loss) from operations before income taxes 21,650 47,872 95,714 78,916
Provision (benefit) for income taxes (1,191) 8,599 13,748 19,474
Consolidated net income (loss) 22,841 39,273 81,966 59,442
Less: Net income (loss) attributable to noncontrolling interest in subsidiaries 4,672 11,354 20,706 17,849
Net income (loss) available to common stockholders 18,169 27,919 61,260 41,593
Basic earnings (loss) per share        
Net income (loss) available to common stockholders $ 18,169 $ 27,919 $ 61,260 $ 41,593
Basic earnings (loss) per share (in dollars per share) $ 0.05 $ 0.08 $ 0.16 $ 0.12
Basic weighted-average shares of common stock outstanding (in shares) 384,902 360,614 379,639 359,308
Fully diluted earnings (loss) per share        
Net income (loss) for fully diluted shares $ 26,023 $ 40,173 $ 88,271 $ 59,498
Fully diluted earnings (loss) per share (in shares) $ 0.05 $ 0.07 $ 0.16 $ 0.11
Fully diluted weighted-average shares of common stock outstanding (in shares) 563,923 546,123 560,210 542,390
v3.21.2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Statement of Comprehensive Income [Abstract]        
Consolidated net income (loss) $ 22,841 $ 39,273 $ 81,966 $ 59,442
Other comprehensive income (loss), net of tax:        
Foreign currency translation adjustments 2,139 2,794 (1,897) (16,565)
Benefit plans (279) (6,914) (197) 2,236
Total other comprehensive income (loss), net of tax 1,860 (4,120) (2,094) (14,329)
Comprehensive income (loss) 24,701 35,153 79,872 45,113
Less: Comprehensive income (loss) attributable to noncontrolling interest in subsidiaries, net of tax 4,853 9,722 20,287 16,988
Comprehensive income (loss) attributable to common stockholders $ 19,848 $ 25,431 $ 59,585 $ 28,125
v3.21.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:    
Consolidated net income (loss) $ 81,966 $ 59,442
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:    
Fixed asset depreciation and intangible asset amortization 42,910 41,842
Employee loan amortization and reserves on employee loans 34,687 31,633
Equity-based compensation and allocations of net income to limited partnership units and FPUs 91,785 70,023
Deferred compensation expense 289 404
Losses (gains) on equity method investments (2,855) (2,142)
Realized losses (gains) on marketable securities 0 (289)
Unrealized losses (gains) on marketable securities (10) 2
Loss (gains) on other investments 87 46
Amortization of discount (premium) on notes payable 1,967 2,307
Impairment of fixed assets, intangible assets and investments 3,265 7,632
Deferred tax provision (benefit) (4,401) 2,622
Change in estimated acquisition earn-out payables 1,939 (369)
Forfeitures of Class A common stock (330) 0
Other (1,934) 108
Consolidated net income (loss), adjusted for non-cash and non-operating items 249,365 213,261
Decrease (increase) in operating assets:    
Securities owned 9,730 (1,255)
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers (1,151,410) (546,351)
Accrued commissions receivable, net (160,613) 50,660
Loans, forgivable loans and other receivables from employees and partners, net (12,400) (78,661)
Receivables from related parties 3,216 2,714
Other assets (9,955) 2,116
Increase (decrease) in operating liabilities:    
Securities loaned 0 (13,902)
Accrued compensation (16,971) 23,877
Payables to broker-dealers, clearing organizations, customers and related broker-dealers 1,126,168 541,339
Payables to related parties 42,593 (42,522)
Accounts payable, accrued and other liabilities 118,592 (78,249)
Net cash provided by (used in) operating activities 198,315 73,027
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of fixed assets (5,912) (20,058)
Capitalization of software development costs (23,895) (28,274)
Purchase of equity method investments (625) (613)
Proceeds from equity method investments 5,318 1,650
Payments for acquisitions, net of cash and restricted cash acquired 0 (7,871)
Proceeds from sale of marketable securities 0 14,237
Purchase of assets 0 (2,000)
Net cash provided by (used in) investing activities (25,114) (42,929)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayments of long-term debt and collateralized borrowings (263,102) (81,850)
Issuance of long-term debt and collateralized borrowings, net of deferred issuance costs 188,449 227,828
Earnings distributions to limited partnership interests and other noncontrolling interests (34,714) (42,726)
Redemption and repurchase of limited partnership interests (39,240) (6,561)
Dividends to stockholders (7,626) (53,210)
Repurchase of Class A common stock (107,783) 0
Proceeds from sale of Cantor Units in BGC Holdings 5,145 0
Short term borrowings, net of repayments 1,999 0
Payments on acquisition earn-outs (8,139) (8,407)
Net cash provided by (used in) financing activities (265,011) 35,074
Effect of exchange rate changes on Cash and cash equivalents and Cash segregated under regulatory requirements 478 (14,286)
Net increase (decrease) in Cash and cash equivalents, and Cash segregated under regulatory requirements including Cash and Cash segregated under regulatory requirements classified within Assets held for sale (91,332) 50,886
Less: Net increase (decrease) in cash classified within Assets held for sale (302,678) 0
Net increase (decrease) in Cash and cash equivalents, and Cash segregated under regulatory requirements (394,010) 50,886
Cash and cash equivalents and Cash segregated under regulatory requirements at beginning of period 850,677 636,114
Cash and cash equivalents and Cash segregated under regulatory requirements at end of period 456,667 687,000
Supplemental cash information:    
Cash paid during the period for taxes 21,334 19,667
Cash paid during the period for interest 35,352 32,537
Supplemental non-cash information:    
Issuance of Class A common stock upon exchange of limited partnership interests 132,907 6,750
Issuance of Class A and contingent Class A common stock and limited partnership interests for acquisitions 513 1,399
ROU assets and liabilities $ 0 $ 11,326
v3.21.2
Condensed Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Cantor
Smith Mack
Additional Paid-in Capital
Additional Paid-in Capital
Cantor
Additional Paid-in Capital
Smith Mack
Treasury Stock
Retained Deficit
Retained Deficit
Cumulative Effect, Period of Adoption, Adjustment
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)
Cumulative Effect, Period of Adoption, Adjustment
Noncontrolling Interest in Subsidiaries
Noncontrolling Interest in Subsidiaries
Cumulative Effect, Period of Adoption, Adjustment
Noncontrolling Interest in Subsidiaries
Cantor
Noncontrolling Interest in Subsidiaries
Smith Mack
Class A Common Stock
Common Stock
Class A Common Stock
Common Stock
Smith Mack
Class B Common Stock
Common Stock
Beginning Balance at Dec. 31, 2019 $ 724,968 $ (1,300)     $ 2,272,103     $ (315,308) $ (1,253,089) $ (883) $ (33,102) $ 50,321 $ (417)     $ 3,584   $ 459
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                      
Consolidated net income (loss) 59,442               41,593       17,849            
Other comprehensive income (loss), net of tax (14,329)                   (13,468)   (861)            
Equity-based compensation 5,817       3,930               1,879       8    
Dividends to common stockholders (53,210)               (53,210)                    
Earnings distributions to limited partnership interests and other noncontrolling interests (25,143)                       (25,143)            
Grant of exchangeability and redemption of limited partnership interests 38,755       26,125               12,589       41    
Issuance of Class A common stock (net of costs) 4,995     $ 1,399 4,922   $ 1,221           71     $ 175 2 $ 3  
Redemption of FPUs $ (2)                       (2)            
Contributions of capital to and from Cantor for equity-based compensation     $ 1,305     $ 764                 $ 541        
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201613Member                                    
Other $ 63       64               (1)            
Ending Balance at Jun. 30, 2020 742,760       2,309,129     (315,308) (1,265,589)   (46,570)   57,001       3,638   459
Beginning Balance at Mar. 31, 2020 696,324       2,293,221     (315,308) (1,289,931)   (44,082)   48,349       3,616   459
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                      
Consolidated net income (loss) 39,273               27,919       11,354            
Other comprehensive income (loss), net of tax (4,120)                   (2,488)   (1,632)            
Equity-based compensation 3,111       2,097               1,013       1    
Dividends to common stockholders (3,577)               (3,577)                    
Earnings distributions to limited partnership interests and other noncontrolling interests (6,943)                       (6,943)            
Grant of exchangeability and redemption of limited partnership interests 13,957       9,096               4,841       20    
Issuance of Class A common stock (net of costs) 4,702     0 4,690   42           11     (42) 1 0  
Redemption of FPUs (2)                       (2)            
Contributions of capital to and from Cantor for equity-based compensation     87     35                 52        
Other (52)       (52)               0            
Ending Balance at Jun. 30, 2020 742,760       2,309,129     (315,308) (1,265,589)   (46,570)   57,001       3,638   459
Beginning Balance at Dec. 31, 2020 808,229       2,354,492     (315,313) (1,265,504)   (28,930)   59,290       3,735   459
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                      
Consolidated net income (loss) 81,966               61,260       20,706            
Other comprehensive income (loss), net of tax (2,094)                   (1,675)   (419)            
Equity-based compensation 6,659       4,564               2,078       17    
Dividends to common stockholders (7,626)               (7,626)                    
Earnings distributions to limited partnership interests and other noncontrolling interests (11,405)                       (11,405)            
Grant of exchangeability and redemption of limited partnership interests 42,784     513 17,740   4,037           24,638     (3,532) 406 8  
Issuance of Class A common stock (net of costs) 673       662               8       3    
Redemption of FPUs (127)                       (127)            
Repurchase of Class A common stock (107,783)             (90,972)         (16,811)            
Forfeiture of Class A common stock, 83,765 shares (330)       137     (416)         (51)            
Contributions of capital to and from Cantor for equity-based compensation     (26,290)     (14,143)                 (12,147)        
Cantor purchase of Cantor units from BGC Holdings upon redemption of FPUs, 2,768,060 units 5,145                       5,145            
Other (969)       (31)               (938)            
Ending Balance at Jun. 30, 2021 789,345       2,367,458     (406,701) (1,211,870)   (30,605)   66,435       4,169   459
Beginning Balance at Mar. 31, 2021 870,422       2,365,750     (318,864) (1,226,187)   (32,284)   77,690       3,858   459
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                      
Consolidated net income (loss) 22,841               18,169       4,672            
Other comprehensive income (loss), net of tax 1,860                   1,679   181            
Equity-based compensation 2,487       1,722               762       3    
Dividends to common stockholders (3,852)               (3,852)                    
Earnings distributions to limited partnership interests and other noncontrolling interests (4,958)                       (4,958)            
Grant of exchangeability and redemption of limited partnership interests 31,948     $ 488 11,736   $ 2,820           19,910     $ (2,338) 302 $ 6  
Issuance of Class A common stock (net of costs) 130       126               4       0    
Redemption of FPUs (108)                       (108)            
Repurchase of Class A common stock (103,386)             (87,421)         (15,965)            
Forfeiture of Class A common stock, 83,765 shares (330)       137     (416)         (51)            
Contributions of capital to and from Cantor for equity-based compensation     $ (27,171)     $ (14,746)                 $ (12,425)        
Other (1,026)       (87)               (939)            
Ending Balance at Jun. 30, 2021 $ 789,345       $ 2,367,458     $ (406,701) $ (1,211,870)   $ (30,605)   $ 66,435       $ 4,169   $ 459
v3.21.2
Condensed Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Equity-based compensation (in shares) 360,422 103,167    
Grant of exchangeability and redemption of limited partnership interests, issuance of shares (in shares) 30,155,970 1,968,788 40,586,915 4,074,189
Repurchase of Class A common stock (in shares)     17,507,000  
Forfeiture of Class A Common Stock (in shares) 84,000 0 84,000 0
Cantor purchase of Cantor units from BGC Holdings upon redemption of FPUs (in shares)     2,768,060  
Dividends declared per share of common stock (in dollars per share) $ 0.01 $ 0.01 $ 0.02 $ 0.15
Dividends declared and paid per share of common stock (in dollars per share) $ 0.01 $ 0.01 $ 0.02 $ 0.15
Partnership Units        
Redemption of FPUs (in shares) 44,496 1,250    
Class A Common Stock        
Equity-based compensation (in shares)     1,727,516 799,674
Grant of exchangeability and redemption of limited partnership interests, issuance of shares (in shares) 30,156,000 1,969,000 40,587,000 4,074,000
Issuance of Class A common stock (net of costs) (in shares) 3,542 176,920 265,915 248,583
Repurchase of Class A common stock (in shares) 16,542,535 0 17,507,006 0
Forfeiture of Class A Common Stock (in shares) 83,765 0 83,765 0
Issuance of Class A common stock and RSUs for acquisitions (in shares) 537,000 15,000 787,000 285,000
Class A Common Stock | Partnership Units        
Redemption of FPUs (in shares)     661,704 1,250
Class A Common Stock | Smith Mack        
Issuance of Class A common stock and RSUs for acquisitions (in shares) 536,893 14,939 787,468 285,435
v3.21.2
Organization and Basis of Presentation
6 Months Ended
Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Basis of Presentation Organization and Basis of Presentation
Business Overview
BGC Partners, Inc. is a leading global brokerage and financial technology company servicing the global financial markets. Through the Company’s financial service brands, including BGC, GFI, Sunrise Brokers, Besso, Ed Broking, Poten & Partners, RP Martin, Fenics, Corant, and Corant Global, among others, the Company specializes in the brokerage of a broad range of products, including fixed income such as government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit derivatives. The Company also brokers products across FX, equity derivatives and cash equities, energy and commodities, shipping, insurance, and futures and options. The Company’s businesses also provide a wide variety of services, including trade execution, brokerage services, clearing, compression and other post-trade services, information, and other back-office services to a broad assortment of financial and non-financial institutions.
BGC Partners’ integrated platform is designed to provide flexibility to customers with regard to price discovery, execution and processing of transactions, and enables them to use Voice, Hybrid, or in many markets, Fully Electronic brokerage services in connection with transactions executed either OTC or through an exchange. Through the Company’s Fenics group of electronic brands, BGC Partners offers a number of market infrastructure and connectivity services, Fully Electronic marketplaces, and the Fully Electronic brokerage of certain products that also may trade via Voice and Hybrid execution. The full suite of Fenics offerings include Fully Electronic brokerage, market data and related information services, trade compression and other post-trade services, analytics related to financial instruments and markets, and other financial technology solutions. Fenics brands operate under the names Fenics, BGC Trader, CreditMatch, Fenics Market Data, BGC Market Data, kACE2, EMBonds, Capitalab, Swaptioniser, CBID and Lucera.
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, Sunrise Brokers, Corant, Corant Global, Besso, Ed Broking, Poten & Partners, RP Martin, kACE2, EMBonds, Capitalab, Swaptioniser, CBID, Aqua and Lucera are trademarks/service marks, and/or registered trademarks/service marks of BGC Partners, Inc. and/or its affiliates.
The Company’s customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds, governments, corporations, and investment firms. BGC Partners has dozens of offices globally in major markets including New York and London, as well as in Bahrain, Beijing, Bermuda, Bogotá, Brisbane, Buenos Aires, Chicago, Copenhagen, Dubai, Dublin, Frankfurt, Geneva, Hong Kong, Houston, Istanbul, Johannesburg, Madrid, Melbourne, Mexico City, Miami, Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tel Aviv, Tokyo, Toronto, and Zurich.
The Company previously offered real estate services through its publicly traded subsidiary, Newmark (NASDAQ: NMRK). On November 30, 2018, BGC completed the Spin-Off, with shares of Newmark Class A common stock distributed to the holders of shares of BGC Class A common stock (including directors and executive officers of BGC Partners) of record as of the close of business on the Record Date and shares of Newmark Class B common stock distributed to the holders of shares of BGC Partners Class B common stock (consisting of Cantor and CFGM) of record as of the close of business on the Record Date. The Spin-Off was effective as of 12:01 a.m., New York City time, on the Distribution Date. Following the Spin-Off and the BGC Holdings Distribution, BGC ceased to be a controlling stockholder of Newmark, and BGC and its subsidiaries no longer held any shares of Newmark common stock or other equity interests in Newmark or its subsidiaries. Therefore, the Company no longer consolidates Newmark with its financial results. Cantor continues to control Newmark and its subsidiaries following the Spin-Off and the BGC Holdings Distribution. See Note 1—“Organization and Basis of Presentation” to the Company’s consolidated financial statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K as of December 31, 2020, for further information regarding the transactions related to the IPO and Spin-Off of Newmark.
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC and in conformity with U.S. GAAP. The Company’s unaudited condensed consolidated financial statements include the Company’s accounts and all subsidiaries in which the Company has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to previously reported amounts to conform to the current presentation.
During the year ended December 31, 2020, the Company changed the line item formerly known as “Interest income” to “Interest and dividend income” in the Company’s unaudited condensed consolidated statements of operation. The change did
not result in any reclassification of revenue, had no impact on the Company’s “Total revenues” and is viewed only as a name change to better reflect the underlying activity.
The unaudited condensed consolidated financial statements contain all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the unaudited condensed consolidated statements of financial condition, the unaudited condensed consolidated statements of operations, the unaudited condensed consolidated statements of comprehensive income (loss), the unaudited condensed consolidated statements of cash flows and the unaudited condensed consolidated statements of changes in equity of the Company for the periods presented.
Assets and Liabilities Held for Sale
The Company classifies disposal groups to be sold as held for sale in the period in which all held for sale criteria in ASC 360, Property, Plant, and Equipment are met.
The respective disposal group classified as held for sale and the assets and liabilities included in the group, are carried at the lower of cost or the fair value less costs to sell on the Company’s unaudited condensed consolidated statements of financial condition. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met, and any gains on the sale of the disposal group are not recognized until the transaction has completed. The fair value of the disposal group less any costs to sell is reassessed each reporting period it remains classified as held for sale. Any subsequent changes in fair value, where the cost was previously deemed to be greater than the fair value of the disposal group less costs to sell, are reported as an adjustment to the carrying value of the disposal group, except if the adjusted carrying amounts of the long-lived assets and liabilities exceed the carrying values at the time they were initially classified as held for sale.
Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation and amortization of long-lived assets included in the disposal group. BGC reports long-lived assets and the assets and liabilities of the disposal group in the line items Assets held for sale and Liabilities held for sale, respectively, in its unaudited condensed consolidated statements of financial condition.
Refer to Note 4—“Assets and Liabilities Held for Sale” for detailed information on the held for sale activities reported in the Company's unaudited condensed consolidated statements of financial condition as of June 30, 2021.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to recognize an ROU asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. Accounting guidance for lessors is mostly unchanged. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. The amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other issues. In addition, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which provided an additional (and optional) transition method to adopt the new leases standard. Under the new transition method, a reporting entity would initially apply the new lease requirements at the effective date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption; continue to report comparative periods presented in the financial statements in the period of adoption in accordance with legacy U.S. GAAP (i.e., ASC 840, Leases); and provide the required disclosures under ASC 840 for all periods presented under legacy U.S. GAAP. Further, ASU No. 2018-11 contains a practical expedient that allows lessors to avoid separating lease and associated non-lease components within a contract if certain criteria are met. In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors, to clarify guidance for lessors on sales taxes and other similar taxes collected from lessees, certain lessor costs and recognition of variable payments for contracts with lease and non-lease components. In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842), Codification Improvements, to clarify certain application and transitional disclosure aspects of the new leases standard. The amendments address determination of the fair value of the underlying asset by lessors that are not manufacturers or dealers and clarify interim period transition disclosure requirements, among other issues. The guidance in ASUs No. 2016-02, 2018-10, 2018-11 and 2018-20 was effective beginning January 1, 2019, with early adoption permitted; whereas the guidance in ASU No. 2019-01 was effective beginning January 1, 2020, with early adoption permitted. The Company adopted the abovementioned standards on January 1, 2019 using the effective date as the date of initial application. Therefore, pursuant to this transition method financial information was not updated and the disclosures required under the new leases standards were not provided for dates and periods before January 1, 2019. The guidance provides a number of optional practical expedients to be utilized by lessees upon transition. Accordingly, BGC elected the “package of practical expedients,” which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. BGC did not elect the use-of-hindsight
or the practical expedient pertaining to land easements, with the latter not being applicable to the Company. The standard also provides practical expedients for an entity’s ongoing accounting as a lessee. BGC elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets and lease liabilities, and this includes not recognizing ROU assets and lease liabilities for existing short-term leases of those assets upon transition. The Company also elected the practical expedient to not separate lease and non-lease components for all of leases other than leases of real estate. As a result upon adoption, acting primarily as a lessee, BGC recognized a $192.4 million ROU asset and a $206.0 million lease liability on its unaudited condensed consolidated statements of financial condition for its real estate and equipment operating leases. The adoption of the guidance did not have a material impact on the Company’s unaudited condensed consolidated statements of operations, unaudited condensed consolidated statements of changes in equity and unaudited condensed consolidated statements of cash flows. See Note 25—“Leases” for additional information on the Company’s leasing arrangements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance intends to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. Based on concerns about the sustainability of LIBOR, in 2017, a committee convened by the Federal Reserve Board and the Federal Reserve Bank of New York identified a broad Treasury repurchase agreement (repo) financing rate referred to as the SOFR as its preferred alternative reference rate. The guidance in ASU No. 2018-16 adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes. The amendments in this ASU were required to be adopted concurrently with the guidance in ASU No. 2017-12. The guidance became effective for the Company on January 1, 2019 and was required to be applied on a prospective and modified retrospective basis. The adoption of this guidance did not have a material impact on BGC’s unaudited condensed consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, Income StatementReporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance helps organizations address certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act by providing an option to reclassify these stranded tax effects to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The standard became effective for BGC on January 1, 2019. The guidance was required to be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted the guidance starting on January 1, 2019. The adoption of the standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The guidance largely aligns the accounting for share-based payment awards issued to employees and nonemployees, whereby the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The standard became effective for the Company on January 1, 2019. The ASU was required to be applied on a prospective basis to all new awards granted after the date of adoption. In addition, any liability-classified awards that were not settled and equity-classified awards for which a measurement date had not been established by the adoption date were remeasured at fair value as of the adoption date with a cumulative effect adjustment to opening retained earnings in the year of adoption. BGC adopted this standard on its effective date. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In July 2019, the FASB issued ASU No. 2019-07, Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates. The guidance clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with already effective SEC final rules, thereby eliminating redundancies and making the codification easier to apply. This ASU was effective upon issuance, and it did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, which requires financial assets that are measured at amortized cost to be presented, net of an allowance for credit losses, at the amount expected to be collected over their estimated life. Expected credit losses for newly recognized financial assets, as well as changes to credit losses during the period, are recognized in earnings. For certain PCD assets, the initial allowance for expected credit losses is recorded as an increase to the purchase price. Expected credit losses, including losses on off-balance-sheet exposures such as lending commitments, are measured based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The new standard became effective for the Company beginning January 1, 2020, under a modified retrospective approach, and early adoption was permitted. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, to clarify that operating lease receivables accounted for under ASC 842, Leases, are not in the scope of the new credit losses guidance, and, instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU makes changes to the guidance introduced or amended by ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments. See below for the description of the amendments stipulated in ASU No. 2019-04. In addition, in May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. The amendments in this ASU allow entities, upon adoption of ASU No. 2016-13, to irrevocably elect the fair value option for financial instruments that were previously carried at amortized cost and are eligible for the fair value option under ASC 825-10, Financial Instruments: Overall. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments in this ASU require entities to include certain expected recoveries of the amortized cost basis previously written off, or expected to be written off, in the allowance for credit losses for PCD assets; provide transition relief related to troubled debt restructurings; allow entities to exclude accrued interest amounts from certain required disclosures; and clarify the requirements for applying the collateral maintenance practical expedient. The amendments in ASUs No. 2018-19, 2019-04, 2019-05 and 2019-11 were required to be adopted concurrently with the guidance in ASU No. 2016-13. BGC adopted the standards on their required effective date beginning January 1, 2020. The primary effect of adoption related to the increase in the allowances for credit losses for Accrued commissions receivable, and Loans, forgivable loans and other receivables from employees and partners. As a result, on a pre-tax basis, the Company recognized a decrease in assets and noncontrolling interest in subsidiaries, and an increase in retained deficit, of approximately $1.9 million, $0.6 million, and $1.3 million, respectively, as of January 1, 2020. The tax effect of the impact of the adoption was an increase in assets and noncontrolling interest in subsidiaries, and a decrease in retained deficit of approximately $0.6 million, $0.2 million, and $0.4 million, respectively.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the ASU, goodwill impairment testing is performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted the standard on its required effective date beginning January 1, 2020, and the guidance was applied on a prospective basis starting with the goodwill impairment test during the year ended December 31, 2020. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The guidance is part of the FASB’s disclosure framework project, whose objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements. The ASU eliminates, amends and adds certain disclosure requirements for fair value measurements. The FASB concluded that these changes improve the overall usefulness of the footnote disclosures for financial statement users and reduce costs for preparers. Certain disclosures are required to be applied prospectively and other disclosures need to be adopted retrospectively in the period of adoption. As permitted by the transition guidance in the ASU, the Company early adopted, eliminated and modified disclosure requirements as of September 30, 2018. The early adoption of this guidance did not have an impact on the Company’s unaudited condensed consolidated financial statements. The additional disclosure requirements were adopted by BGC beginning January 1, 2020, and the adoption of these fair value measurement disclosures did not have an impact on the Company’s unaudited condensed consolidated financial statements. See Note 13“Fair Value of Financial Assets and Liabilities” for additional information.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The guidance on the accounting for implementation, setup, and other upfront costs (collectively referred to as implementation costs) applies to entities that are a customer in a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred
to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the guidance in this ASU. BGC adopted the standard on its effective date beginning January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The guidance was issued in response to stakeholders’ observations that Topic 810, Consolidation, could be improved in the areas of applying the variable interest entity guidance to private companies under common control and in considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. BGC adopted the standard on its effective date beginning January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU amends guidance introduced or amended by ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, and ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments to ASU No. 2016-13 clarify the scope of the credit losses standard and address guidance related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other issues. With respect to amendments to ASU No. 2017-12, the guidance addresses partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, along with other issues. The clarifying guidance pertaining to ASU No. 2016-01 requires an entity to remeasure an equity security without a readily determinable fair value accounted for under the measurement alternative at fair value in accordance with guidance in ASC 820, Fair Value Measurement; specifies that equity securities without a readily determinable fair value denominated in nonfunctional currency must be remeasured at historical exchange rates; and provides fair value measurement disclosure guidance. BGC adopted the standard on the required effective date beginning January 1, 2020. The adoption of the hedge accounting and the recognition and measurement guidance amendments did not have a material impact on the Company’s unaudited condensed consolidated financial statements. See above for the impact of adoption of the amendments related to the credit losses standard.
In November 2019, the FASB issued ASU No. 2019-08, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer. The ASU simplifies and increases comparability of accounting for nonemployee share-based payments, specifically those made to customers. Under the guidance, such awards will be accounted for as a reduction of the transaction price in revenue, but should be measured and classified following the stock compensation guidance in ASC 718, Compensation—Stock Compensation. BGC adopted the standard on the required effective date beginning January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU is part of the FASB’s simplification initiative, and it is expected to reduce cost and complexity related to accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. BGC adopted the standard on the required effective date beginning January 1, 2021 on a prospective basis. The adoption of the standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). These amendments improve previous guidance by reducing diversity in practice and increasing comparability of the accounting for the interactions between these codification topics as they pertain to certain equity securities, investments under the equity method of accounting and forward contracts or purchased options to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option. BGC adopted the standard on the required effective date beginning January 1, 2021 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU makes narrow-scope amendments related to various aspects pertaining to financial instruments and related disclosures by clarifying or improving the Codification. For the most part, the guidance was effective upon issuance, and the adoption of the standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements. The standard amends the Codification by moving existing disclosure requirements to (or adding appropriate references in) the relevant disclosure sections. The ASU also clarifies various provisions of the Codification by amending and adding new headings, cross-referencing, and refining or correcting terminology. BGC adopted the standard on the required effective date beginning January 1, 2021 and was applied using a modified retrospective method of transition. The adoption of this guidance did not have an impact on the Company’s unaudited condensed consolidated financial statements.
New Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, and borrowings) necessitated by reference rate reform as entities transition away from LIBOR and other interbank offered rates to alternative reference rates. This ASU also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional and only available in certain situations. The ASU is effective upon issuance and generally can be applied through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this standard are elective and principally apply to entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (referred to as the “discounting transition”). The standard expands the scope of ASC 848, Reference Rate Reform and allows entities to elect optional expedients to derivative contracts impacted by the discounting transition. Similar to ASU No. 2020-04, provisions of this ASU are effective upon issuance and generally can be applied through December 31, 2022. Management is evaluating and planning for adoption of the new guidance, including forming a cross-functional LIBOR transition team to determine the Company’s transition plan and facilitate an orderly transition to alternative reference rates, and continuing its assessment on the Company’s unaudited condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The standard is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The ASU also enhances information transparency by making targeted improvements to the related disclosures guidance. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The new standard will become effective for the Company beginning January 1, 2022, can be applied using either a modified retrospective or a fully retrospective method of transition and early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company’s unaudited condensed consolidated financial statements.
v3.21.2
Limited Partnership Interests in BGC Holdings and Newmark Holdings
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Limited Partnership Interests in BGC Holdings and Newmark Holdings Limited Partnership Interests in BGC Holdings and Newmark Holdings
BGC Partners is a holding company with no direct operations and conducts substantially all of its operations through its operating subsidiaries. Virtually all of the Company’s consolidated net assets and net income are those of consolidated variable interest entities. BGC Holdings is a consolidated subsidiary of the Company for which the Company is the general partner. The Company and BGC Holdings jointly own BGC U.S. OpCo and BGC Global OpCo, the two operating partnerships. In addition, Newmark Holdings is a consolidated subsidiary of Newmark for which Newmark is the general partner. Newmark and Newmark Holdings jointly own Newmark OpCo, the operating partnership. Listed below are the limited partnership interests in BGC Holdings and Newmark Holdings. The FPUs, LPUs and limited partnership interests held by Cantor, each as described below, collectively represent all of the limited partnership interests in BGC Holdings and Newmark Holdings.
As a result of the Separation, limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings, whereby each holder of BGC Holdings limited partnership interests at that time who held a BGC Holdings limited partnership interest received a corresponding Newmark Holdings limited partnership interest, determined by the Contribution Ratio, which was equal to a BGC Holdings limited partnership interest multiplied by one divided by 2.2, divided by the Exchange Ratio. Initially, the Exchange Ratio equaled one, so that each Newmark Holdings limited partnership interest was exchangeable for one share of Newmark Class A common stock. For reinvestment, acquisition or other purposes, Newmark may determine on a quarterly basis to distribute to its stockholders a smaller percentage than Newmark Holdings distributes to its equity holders (excluding tax distributions from Newmark Holdings) of cash that it received from Newmark OpCo. In such circumstances, the Separation and Distribution Agreement provides that the Exchange Ratio will be reduced to reflect the amount of additional cash retained by Newmark as a result of the distribution of such smaller percentage, after the payment of taxes. The Exchange Ratio as of June 30, 2021 equaled 0.9403.
Founding/Working Partner Units
Founding/Working Partners have FPUs in BGC Holdings and Newmark Holdings. The Company accounts for FPUs outside of permanent capital, as “Redeemable partnership interest,” in the Company’s unaudited condensed consolidated statements of financial condition. This classification is applicable to Founding/Working Partner units because these units are redeemable upon termination of a partner, including a termination of employment, which can be at the option of the partner and not within the control of the issuer.
FPUs are held by limited partners who are employees and generally receive quarterly allocations of net income. Upon termination of employment or otherwise ceasing to provide substantive services, the FPUs are generally redeemed, and the unit holders are no longer entitled to participate in the quarterly allocations of net income. Since these allocations of net income are cash distributed on a quarterly basis and are contingent upon services being provided by the unit holder, they are reflected as a component of compensation expense under “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the Company’s unaudited condensed consolidated statements of operations.
Limited Partnership Units
Certain BGC employees hold LPUs in BGC Holdings and Newmark Holdings (e.g., REUs, RPUs, PSUs, and PSIs). Prior to the Separation, certain employees of both BGC and Newmark received LPUs in BGC Holdings. As a result of the Separation, these employees were distributed LPUs in Newmark Holdings equal to a BGC Holdings LPU multiplied by the Contribution Ratio. Subsequent to the Separation, BGC employees are only granted LPUs in BGC Holdings, and Newmark employees are only granted LPUs in Newmark Holdings.
Generally, LPUs receive quarterly allocations of net income, which are cash distributed and generally are contingent upon services being provided by the unit holder. As prescribed in U.S. GAAP guidance, following the Spin-Off, the quarterly allocations of net income on BGC Holdings and Newmark Holdings LPUs held by BGC employees are reflected as a component of compensation expense under “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the Company’s unaudited condensed consolidated statements of operations, and the quarterly allocations of net income on BGC Holdings LPUs held by Newmark employees are reflected as a component of “Net income (loss) attributable to noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of operations. From time to time, the Company also issues BGC LPUs as part of the consideration for acquisitions.
Certain of these LPUs in BGC Holdings and Newmark Holdings, such as REUs, entitle the holders to receive post-termination payments equal to the notional amount of the units in four equal yearly installments after the holder’s termination. These LPUs held by BGC employees are accounted for as post-termination liability awards, and in accordance with U.S. GAAP guidance, the Company records compensation expense for the awards based on the change in value at each reporting date in the Company’s unaudited condensed consolidated statements of operations as part of “Equity-based compensation and allocations of net income to limited partnership units and FPUs.”
The Company has also awarded certain Preferred Units. Each quarter, the net profits of BGC Holdings and Newmark Holdings are allocated to such units at a rate of either 0.6875% (which is 2.75% per calendar year) or such other amount as set forth in the award documentation. These allocations are deducted before the calculation and distribution of the quarterly partnership distribution for the remaining partnership interests and are generally contingent upon services being provided by the unit holder. The Preferred Units are not entitled to participate in partnership distributions other than with respect to the Preferred Distribution. Preferred Units may not be made exchangeable into Class A common stock, and are only entitled to the Preferred Distribution; accordingly they are not included in the fully diluted share count. The quarterly allocations of net income on Preferred Units are reflected the same as those of the LPUs described above in the Company’s unaudited condensed consolidated statements of operations. After deduction of the Preferred Distribution, the remaining partnership units generally receive quarterly allocations of net income based on their weighted-average pro rata share of economic ownership of the operating subsidiaries. Preferred Units are granted in connection with the grant of certain LPUs, such as PSUs, that may be granted exchangeability or redeemed in connection with the issuance of shares of common stock to cover the withholding taxes owed by the unit holder, rather than issuing the gross amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes.
Cantor Units
Cantor holds limited partnership interests in BGC Holdings. Cantor units are reflected as a component of “Noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of financial condition. Cantor receives allocations of net income (loss), which are cash distributed on a quarterly basis and are reflected as a component of “Net income (loss) attributable to noncontrolling interest in subsidiaries” in the Company’s unaudited condensed
consolidated statements of operations. Cantor units in BGC Holdings are generally exchangeable for up to 23.6 million shares of BGC Class B common stock.
General
Certain of the limited partnership interests, described above, have been granted exchangeability into shares of BGC or Newmark Class A common stock, and additional limited partnership interests may become exchangeable into shares of BGC or Newmark Class A common stock. In addition, certain limited partnership interests have been granted the right to exchange into a partnership unit with a capital account, such as HDUs. HDUs have a stated capital account which is initially based on the closing trading price of Class A common stock at the time the HDU is granted. HDUs participate in quarterly partnership distributions and are generally not exchangeable into shares of Class A common stock.
Subsequent to the Spin-Off, limited partnership interests in BGC Holdings held by a partner or Cantor may become exchangeable for BGC Class A or BGC Class B common stock on a one-for-one basis, and limited partnership interests in Newmark Holdings held by a partner or Cantor may become exchangeable for a number of shares of Newmark Class A or Newmark Class B common stock equal to the number of limited partnership interests multiplied by the then-current Exchange Ratio. Because limited partnership interests are included in the Company’s fully diluted share count, if dilutive, any exchange of limited partnership interests into shares of BGC Class A or BGC Class B common stock would not impact the fully diluted number of shares and units outstanding. Because these limited partnership interests generally receive quarterly allocations of net income, such exchange would have no significant impact on the cash flows or equity of the Company.
Each quarter, net income (loss) is allocated between the limited partnership interests and the Company’s common stockholders. In quarterly periods in which the Company has a net loss, the loss allocation for FPUs, LPUs and Cantor units in BGC Holdings is allocated to Cantor and reflected as a component of “Net income (loss) attributable to noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of operations. In subsequent quarters in which the Company has net income, the initial allocation of income to the limited partnership interests in BGC Holdings is to Cantor and is recorded as “Net income (loss) attributable to noncontrolling interests in subsidiaries,” to recover any losses taken in earlier quarters, with the remaining income allocated to the limited partnership interests. This income (loss) allocation process has no impact on the net income (loss) allocated to common stockholders.
v3.21.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting PoliciesFor a detailed discussion about the Company’s significant accounting policies, see Note 3—“Summary of Significant Accounting Policies,” in its consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020. During the six months ended June 30, 2021, there were no significant changes made to the Company’s significant accounting policies.
v3.21.2
Assets and Liabilities Held For Sale
6 Months Ended
Jun. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Assets and Liabilities Held For Sale Assets and Liabilities Held For Sale
On May 26, 2021, the Company entered into an agreement to sell its Insurance brokerage business to The Ardonagh Group, subject to receipt of the required regulatory approvals and satisfaction of other closing conditions and approval, for $500 million of cash consideration, subject to adjustments for working capital and other certain closing adjustments. As of June 30, 2021, the Company’s Insurance brokerage business met the criteria to be classified as held for sale. As the business has met this criteria, the Company is required to record the respective assets and liabilities at the lower of carrying value or fair value less any costs to sell, and present the related assets and liabilities as separate line items in the unaudited condensed consolidated statements of financial condition.
The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in the Company’s unaudited condensed consolidated statements of financial condition as of June 30, 2021:
June 30, 2021
Accrued commissions and other receivables, net$561,074 
Cash segregated under regulatory requirements274,107 
Goodwill69,725 
Other intangible assets, net56,031 
Other assets33,290 
Cash and cash equivalents28,571 
Loans, forgivable loans and other receivables from employees and partners, net14,496 
Fixed assets, net8,606 
Other2,959 
Total assets held for sale$1,048,859 
Accounts payable, accrued and other liabilities$839,872 
Accrued compensation10,233 
Other
Total liabilities held for sale$850,112 
No impairment charge was recorded for the three and six months ended June 30, 2021 as the carrying amount of the net assets was less than the fair value less costs to sell. Fair value was determined based on the sales price in the sales and purchase agreement. Further, the sale of the business did not represent a strategic shift that would have a major effect on operations and financial results and was, therefore, not classified as discontinued operations.
v3.21.2
Acquisitions
6 Months Ended
Jun. 30, 2021
Business Combinations [Abstract]  
Acquisitions Acquisitions
Algomi
On March 6, 2020, the Company completed the acquisition of Algomi, a software company operating under a SaaS model that provides technology to bond market participants to improve their workflow and liquidity by data aggregation, pre-trade information analysis, and execution facilitation.
Other Acquisitions
During the year ended December 31, 2020, the Company completed several smaller acquisitions. The aggregate consideration paid for these acquisitions was not material to the Company’s unaudited condensed consolidated financial statements. There were no acquisitions completed by the Company for the six months ended June 30, 2021.
Total Consideration
The total consideration for acquisitions during the year ended December 31, 2020 was approximately $9.6 million in total fair value which was paid in cash. The excess of the consideration over the fair value of the net assets acquired has been recorded as goodwill of approximately $2.8 million.
The results of operations of the Company’s acquisitions have been included in the Company’s unaudited condensed consolidated financial statements subsequent to their respective dates of acquisition. The Company has made preliminary allocations of the consideration to the assets acquired and liabilities assumed as of the acquisition dates, and expects to finalize its analysis with respect to acquisitions within the first year after the completion of the respective transaction. Therefore, adjustments to preliminary allocations may occur.
v3.21.2
Earnings Per Share
6 Months Ended
Jun. 30, 2021
Earnings Per Share [Abstract]  
Earnings Per Share Earnings Per ShareU.S. GAAP guidance establishes standards for computing and presenting EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding and contingent shares for which all necessary conditions have been satisfied except for the passage of time. Net income (loss) is allocated to the Company’s outstanding common stock, FPUs, LPUs and Cantor units (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings”).
Basic Earnings Per Share:
The following is the calculation of the Company’s basic EPS (in thousands, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Basic earnings (loss) per share:
Net income (loss) available to common stockholders$18,169 $27,919 $61,260 $41,593 
Basic weighted-average shares of common stock outstanding384,902 360,614 379,639 359,308 
Basic earnings (loss) per share$0.05 $0.08 $0.16 $0.12 
Fully Diluted Earnings Per Share:
Fully diluted EPS is calculated utilizing net income (loss) available to common stockholders plus net income allocations to the limited partnership interests as the numerator. The denominator comprises the Company’s weighted-average number of outstanding BGC shares of common stock, including contingent shares of BGC common stock, and, if dilutive, the weighted-average number of limited partnership interests, including contingent units of BGC Holdings, and other contracts to issue shares of BGC common stock, including RSUs. The limited partnership interests generally are potentially exchangeable into shares of BGC Class A common stock (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings”) and are entitled to their pro-rata share of earnings after the deduction for the Preferred Distribution; as a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive.
The following is the calculation of the Company’s fully diluted EPS (in thousands, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Fully diluted earnings (loss) per share
Net income (loss) available to common stockholders$18,169 $27,919 $61,260 $41,593 
Allocations of net income (loss) to limited partnership interests, net of tax7,854 12,254 27,011 17,905 
Net income (loss) for fully diluted shares$26,023 $40,173 $88,271 $59,498 
Weighted-average shares:
Common stock outstanding384,902 360,614 379,639 359,308 
Partnership units¹173,606 184,122 175,849 181,257 
RSUs (Treasury stock method)4,141 174 3,475 549 
Other1,274 1,213 1,247 1,276 
Fully diluted weighted-average shares of common stock outstanding563,923 546,123 560,210 542,390 
Fully diluted earnings (loss) per share$0.05 $0.07 $0.16 $0.11 
__________________________
1Partnership units collectively include FPUs, LPUs, and Cantor units (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings” for more information).
For the three and six months ended June 30, 2021, 31 thousand and 55 thousand of potentially dilutive securities, respectively, were excluded from the computation of fully diluted EPS because their effect would have been anti-dilutive. Anti-dilutive securities for both the three and six months ended June 30, 2021, comprised RSUs. For the three and six months ended June 30, 2020, 2.6 million and 0.4 million of potentially dilutive securities, respectively, were excluded from the computation of fully diluted EPS because their effect would have been anti-dilutive. Anti-dilutive securities for both the three and six months ended June 30, 2020, comprised RSUs.
As of June 30, 2021 and 2020, approximately 31.4 million and 26.7 million shares, respectively, of contingent shares of BGC Class A common stock, N units, RSUs, and LPUs were excluded from the fully diluted EPS computations because the conditions for issuance had not been met by the end of the respective periods.
v3.21.2
Stock Transactions and Unit Redemptions
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Stock Transactions and Unit Redemptions Stock Transactions and Unit Redemptions
Class A Common Stock
Changes in shares of BGC Class A common stock outstanding were as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Shares outstanding at beginning of period334,364 311,059 323,018 307,915 
Share issuances:
Redemptions/exchanges of limited partnership interests¹30,156 1,969 40,587 4,074 
Vesting of RSUs360 103 1,728 800 
Acquisitions537 15 787 285 
Other issuances of BGC Class A common stock177 266 249 
Restricted stock forfeitures(84)— (84)— 
Treasury stock repurchases(16,543)— (17,507)— 
Shares outstanding at end of period348,795 313,323 348,795 313,323 
__________________________
1.Included in redemptions/exchanges of limited partnership interests for the three months ended June 30, 2021 and 2020 are 13.8 million shares of BGC Class A common stock granted in connection with the cancellation of 14.6 million LPUs, and 0.7 million shares of BGC Class A common stock granted in connection with the cancellation of 0.6 million LPUs, respectively. Included in redemptions/exchanges of limited partnership interests for the six months ended June 30, 2021 and 2020 are 15.4 million shares of BGC Class A common stock granted in connection with the cancellation of 16.3 million LPUs, and 2.1 million shares of BGC Class A common stock granted in connection with the cancellation of 2.1 million LPUs, respectively. Because LPUs are included in the Company’s fully diluted share count, if dilutive, redemptions/exchanges in connection with the issuance of BGC Class A common stock would not impact the fully diluted number of shares outstanding.
Class B Common Stock
The Company did not issue any shares of BGC Class B common stock during the three and six months ended June 30, 2021 and 2020. As of June 30, 2021 and December 31, 2020, there were 45.9 million shares of BGC Class B common stock outstanding.
CEO Program
On March 9, 2018, the Company entered into the March 2018 Sales Agreement, pursuant to which the Company may offer and sell up to an aggregate of $300.0 million of shares of BGC Class A common stock under the CEO Program. Proceeds from shares of BGC Class A common stock sold under the March 2018 Sales Agreement may be used for the repurchase of shares and the redemptions of limited partnership interests in BGC Holdings, as well as for general corporate purposes, including acquisitions and the repayment of debt. CF&Co is a wholly-owned subsidiary of Cantor and an affiliate of the Company. Under the March 2018 Sales Agreement, the Company has agreed to pay CF&Co 2% of the gross proceeds from the sale of shares. The Company did not sell any shares under the March 2018 Sales Agreement during the three and six months ended June 30, 2021. As of June 30, 2021, the Company had sold 17.6 million shares of BGC Class A common stock (or $210.8 million) under the March 2018 Sales Agreement. For additional information on the Company’s CEO Program sales agreements, see Note 14—“Related Party Transactions.” On March 8, 2021, we filed a replacement CEO Program shelf registration statement on Form S-3, which has not yet been declared effective, with respect to the issuance and sale of up to an aggregate of $300.0 million of shares of BGC Class A common stock (inclusive of the $89.2 million of shares remaining for sale under the current CEO Program) from time to time on a delayed or continuous basis.
Unit Redemptions and Share Repurchase Program
The Company’s Board and Audit Committee have authorized repurchases of BGC Class A common stock and redemptions of limited partnership interests or other equity interests in the Company’s subsidiaries. On August 1, 2018, the Company’s Board and Audit Committee increased the BGC Partners share repurchase and unit redemption authorization to $300.0 million, which may include purchases from Cantor, its partners or employees or other affiliated persons or entities. As of June 30, 2021, the Company had $114.6 million remaining from its share repurchase and unit redemption authorization. From time to time, the Company may actively continue to repurchase shares and/or redeem units.
The table below represents the units redeemed and/or shares repurchased for cash and does not include units redeemed/cancelled in connection with the grant of shares of BGC Class A common stock nor the limited partnership interests exchanged for shares of BGC Class A common stock. The gross unit redemptions and share repurchases of BGC Class A common stock during the three and six months ended June 30, 2021 were as follows (in thousands, except for weighted-average price data):
PeriodTotal Number
of Units
Redeemed
or Shares
Repurchased
Weighted-Average Price
Paid per Unit
or Share
Approximate
Dollar Value
of Units and
Shares That May
Yet Be Redeemed/
Purchased
Under the Program
Redemptions1,2
January 1, 2021—March 31, 202120 $4.40 
April 1, 2021—June 30, 20214,715 5.82 
Total Redemptions4,735 $5.82 
Repurchases3,4
January 1, 2021—March 31, 2021965 $4.56 
April 1, 2021—April 30, 20215.29 
May 1, 2021—May 31, 20211,018 5.59 
June 1, 2021—June 30, 202115,522 6.29 
Total Repurchases17,507 $6.16 
Total Redemptions and Repurchases22,242 $6.08 $114,584 
__________________________
1.During the three months ended June 30, 2021, the Company redeemed 4.7 million LPUs at an aggregate redemption price of $27.3 million for a weighted-average price of $5.84 per unit. During the three months ended June 30, 2021, the Company redeemed 44 thousand FPUs at an aggregate redemption price of $181 thousand for a weighted-average price of $4.06 per unit. During the three months ended June 30, 2020, the Company redeemed 0.1 million LPUs at an aggregate redemption price of $0.3 million for a weighted-average price of $3.05 per unit. During the three months ended June 30, 2020, the Company redeemed 1 thousand FPUs at an aggregate redemption price of $4 thousand for an average price of $3.07 per unit. The table above does not include units redeemed/cancelled in connection with the grant of 13.8 million and 0.7 million shares of BGC Class A common stock during the three months ended June 30, 2021 and 2020, respectively, nor the limited partnership interests exchanged for 16.8 million and 1.3 million shares of BGC Class A common stock during the three months ended June 30, 2021 and 2020, respectively.
2.During the six months ended June 30, 2021, the Company redeemed 4.7 million LPUs at an aggregate redemption price of $27.3 million for an average price of $5.83 per unit. During the six months ended June 30, 2021, the Company redeemed 51 thousand FPUs at an aggregate redemption price of $209 thousand for an average price of $4.11 per unit. During the six months ended June 30, 2020, the Company redeemed 0.3 million LPUs at an aggregate redemption price of $1.3 million for an average price of $3.92 per unit. During the six months ended June 30, 2020, the Company redeemed 1 thousand FPUs at an aggregate redemption price of $4 thousand for an average price of $3.07 per unit. The table above does not include units redeemed/cancelled in connection with the grant of 15.4 million and 2.1 million shares of BGC Class A common stock during the six months ended June 30, 2021 and 2020, respectively, nor the limited partnership interests exchanged for 25.9 million and 1.8 million shares of BGC Class A common stock during the six months ended June 30, 2021 and 2020, respectively.
3.During the three months ended June 30, 2021, the Company repurchased 16.5 million shares of BGC Class A common stock at an aggregate price of $103.4 million for a weighted-average price of $6.25 per share. The Company did not repurchase any shares of BGC Class A common stock during the three months ended June 30, 2020.
4.During the six months ended June 30, 2021, the Company repurchased 17.5 million shares of BGC Class A common stock at an aggregate price of $107.8 million for a weighted-average price of $6.16 per share. The Company did not repurchase any shares of BGC Class A common stock during the six months ended June 30, 2020.
Redeemable Partnership Interest
The changes in the carrying amount of FPUs were as follows (in thousands):
Six Months Ended June 30,
20212020
Balance at beginning of period$20,674 $23,638 
Consolidated net income allocated to FPUs958 255 
Earnings distributions(520)— 
FPUs exchanged(509)(470)
FPUs redeemed(1,021)(80)
Balance at end of period$19,582 $23,343 
v3.21.2
Securities Owned
6 Months Ended
Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
Securities Owned Securities OwnedSecurities owned primarily consist of unencumbered U.S. Treasury bills held for liquidity purposes. Total Securities owned were $49.2 million and $58.6 million as of June 30, 2021 and December 31, 2020, respectively. For additional information, see Note 13—“Fair Value of Financial Assets and Liabilities.”
v3.21.2
Collateralized Transactions
6 Months Ended
Jun. 30, 2021
Brokers and Dealers [Abstract]  
Collateralized Transactions Collateralized Transactions
Repurchase Agreements
Securities sold under Repurchase Agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be repurchased, including accrued interest. As of both June 30, 2021 and December 31, 2020, Cantor had not facilitated any Repurchase Agreements between the Company and Cantor for the purpose of financing fails.
Securities Loaned
As of both June 30, 2021 and December 31, 2020, the Company did not have any Securities loaned transactions with Cantor.
v3.21.2
Marketable Securities
6 Months Ended
Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities Marketable Securities
Marketable securities consist of the Company’s ownership of equity securities carried at fair value in accordance with ASU 2016-01. The securities had a fair value of $0.4 million and $0.3 million as of June 30, 2021 and December 31, 2020, respectively.
These marketable securities are measured at fair value, with any changes in fair value recognized in earnings and included in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations. The Company recognized realized and unrealized net gains of $21 thousand and $33 thousand for the three months ended June 30, 2021 and 2020, respectively, related to sales of shares and the mark-to-market adjustments on shares and any related hedging transactions, when applicable. The Company recognized realized and unrealized net gains of $10 thousand and $0.3 million for the six months ended June 30, 2021 and 2020, respectively, related to sales of shares and the mark-to-market adjustments on shares and any related hedging transactions, when applicable.
During the six months ended June 30, 2021, the Company did not sell any marketable securities. During the six months ended June 30, 2020, the Company sold marketable securities with a fair value of $14.2 million, at the time of sale. The Company did not purchase any marketable securities during the six months ended June 30, 2021 and 2020.
v3.21.2
Receivables from and Payables to Broker-Dealers, Clearing Organizations, Customers and Related Broker-Dealers
6 Months Ended
Jun. 30, 2021
Brokers and Dealers [Abstract]  
Receivables from and Payables to Broker-Dealers, Clearing Organizations, Customers and Related Broker-Dealers Receivables from and Payables to Broker-Dealers, Clearing Organizations, Customers and Related Broker-DealersReceivables from and payables to broker-dealers, clearing organizations, customers and related broker-dealers primarily represent amounts due for undelivered securities, cash held at clearing organizations and exchanges to facilitate settlement and clearance of matched principal transactions, spreads on matched principal transactions that have not yet been remitted from/to clearing organizations and exchanges and amounts related to open derivative contracts (see Note 12
—“Derivatives”). As of June 30, 2021 and December 31, 2020, Receivables from and payables to broker-dealers, clearing organizations, customers and related broker-dealers consisted of the following (in thousands):
June 30, 2021December 31, 2020
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to deliver$1,285,423 $158,976 
Receivables from clearing organizations136,547 126,879 
Other receivables from broker-dealers and customers17,211 14,237 
Net pending trades10,909 2,999 
Open derivative contracts¹5,243 931 
Total$1,455,333 $304,022 
Payables to broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to receive$1,142,236 $154,050 
Payables to clearing organizations133,892 12,373 
Other payables to broker-dealers and customers23,194 11,833 
Open derivative contracts²6,421 1,460 
Total$1,305,743 $179,716 
__________________________
1.Excludes $310 thousand of Receivables from broker-dealers, clearing organizations, customers and related broker-dealers classified as Assets held for sale as of June 30, 2021.
2.Excludes $7 thousand of Payables to broker-dealers, clearing organizations, customers and related broker-dealers classified as Liabilities held for sale as of June 30, 2021.
A portion of these receivables and payables are with Cantor. See Note 14—“Related Party Transactions,” for additional information related to these receivables and payables.
Substantially all open fails to deliver, open fails to receive and pending trade transactions as of June 30, 2021 have subsequently settled at the contracted amounts.
v3.21.2
Derivatives
6 Months Ended
Jun. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Derivatives
In the normal course of operations, the Company enters into derivative contracts. These derivative contracts primarily consist of FX swaps, FX/commodities options, futures and forwards. The Company enters into derivative contracts to facilitate client transactions, hedge principal positions and facilitate hedging activities of affiliated companies. Derivative contracts can be exchange-traded or OTC. Exchange-traded derivatives typically fall within Level 1 or Level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values exchange-traded derivatives using their closing prices. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. For OTC derivatives that trade in liquid markets, such as forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.
The Company does not designate any derivative contracts as hedges for accounting purposes. U.S. GAAP guidance requires that an entity recognize all derivative contracts as either assets or liabilities in the unaudited condensed consolidated statements of financial condition and measure those instruments at fair value. The fair value of all derivative contracts is recorded on a net-by-counterparty basis where a legal right to offset exists under an enforceable netting agreement. Derivative contracts are recorded as part of “Receivables from broker-dealers, clearing organizations, customers and related broker-dealers” and “Payables to broker-dealers, clearing organizations, customers and related broker-dealers” in the Company’s unaudited condensed consolidated statements of financial condition.
The fair value of derivative contracts, computed in accordance with the Company’s netting policy, is set forth below (in thousands):
June 30, 2021December 31, 2020
Derivative contractAssetsLiabilities
Notional
Amounts1
AssetsLiabilities
Notional
Amounts1
FX/commodities options$— $— $— $74 $— $4,844 
Forwards2
690 653 216,829 295 215 302,141 
FX swaps4,553 4,551 610,762 562 319 513,588 
Futures— 1,217 18,307,688 — 926 6,113,220 
Total$5,243 $6,421 $19,135,279 $931 $1,460 $6,933,793 
__________________________
1Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of the Company’s derivative activity, and do not represent anticipated losses.
2Excludes $30 thousand derivative assets and $7 thousand derivative liabilities classified as Assets held for sale and Liabilities held for sale, respectively, as of June 30, 2021.
Certain of the Company’s FX swaps are with Cantor. See Note 14—“Related Party Transactions,” for additional information related to these transactions.
The replacement costs of contracts in a gain position were $5.2 million and $0.9 million, as of June 30, 2021 and December 31, 2020, respectively.
The following tables present information about the offsetting of derivative instruments (in thousands):
June 30, 2021
Gross
Amounts
Gross
Amounts
Offset
Net Amounts
Presented
in the
Statements
of Financial
Condition1
Assets
Forwards2
$948 $(258)$690 
FX swaps5,729 (1,176)4,553 
Futures75,703 (75,703)— 
Total derivative assets$82,380 $(77,137)$5,243 
Liabilities
FX swaps5,727 (1,176)4,551 
Forwards2
911 (258)653 
Futures76,920 (75,703)1,217 
Total derivative liabilities$83,558 $(77,137)$6,421 
December 31, 2020
Gross
Amounts
Gross
Amounts
Offset
Net Amounts
Presented
in the
Statements
of Financial
Condition1
Assets
FX/commodities options$74 $— $74 
Forwards338 (43)295 
FX swaps583 (21)562 
Futures41,257 (41,257)— 
Total derivative assets$42,252 $(41,321)$931 
Liabilities
FX swaps$340 $(21)$319 
Forwards258 (43)215 
Futures42,183 (41,257)926 
Total derivative liabilities$42,781 $(41,321)$1,460 
__________________________
1There were no additional balances in gross amounts not offset as of June 30, 2021 and December 31, 2020.
2Excludes $30 thousand derivative assets and $7 thousand derivative liabilities classified as Assets held for sale and Liabilities held for sale, respectively, as of June 30, 2021.
The change in fair value of derivative contracts is reported as part of “Principal transactions” in the Company’s unaudited condensed consolidated statements of operations. The change in fair value of equity options related to marketable securities is included as part of “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.
The table below summarizes gains and (losses) on derivative contracts (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
Derivative contract2021202020212020
Futures$3,321 $2,724 $7,155 $5,488 
FX/commodities options78 143 164 198 
Forwards(63)116 (28)(1,152)
FX swaps140 89 138 325 
Gains$3,476 $3,072 $7,429 $4,859 
v3.21.2
Fair Value of Financial Assets and Liabilities
6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities Fair Value of Financial Assets and Liabilities
Fair Value Measurements on a Recurring Basis
U.S. GAAP guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 measurements—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 measurements—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 measurements—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
As required by U.S. GAAP guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under U.S. GAAP guidance (in thousands):
Assets at Fair Value at June 30, 2021
Level 1Level 2Level 3Netting and
Collateral
Total
Marketable securities$360 $— $— $— $360 
Government debt47,959 — — — 47,959 
Securities owned—Equities110 — — — 110 
Forwards1
— 948 — (258)690 
FX swaps— 5,729 — (1,176)4,553 
Futures— 75,703 — (75,703)— 
Corporate bonds— 1,153 — — 1,153 
Total$48,429 $83,533 $— $(77,137)$54,825 
Liabilities at Fair Value at June 30, 2021
Level 1Level 2Level 3Netting and
Collateral
Total
FX swaps$— $5,727 $— $(1,176)$4,551 
Forwards1
— 911 — (258)653 
Futures— 76,920 — (75,703)1,217 
Contingent consideration— — 32,975 — 32,975 
Total$— $83,558 $32,975 $(77,137)$39,396 
1.Excludes $30 thousand derivative assets and $7 thousand derivative liabilities classified as Assets held for sale and Liabilities held for sale, respectively, as of June 30, 2021.
Assets at Fair Value at December 31, 2020
Level 1Level 2Level 3Netting and
Collateral
Total
Marketable securities$349 $— $— $— $349 
Government debt57,918 — — — 57,918 
Securities owned—Equities75 — — — 75 
FX/commodities options74 — — — 74 
Forwards— 338 — (43)295 
FX swaps— 583 — (21)562 
Futures— 41,257 — (41,257)— 
Corporate bonds—