Edgar Filing: BGC Partners, Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-28191

BGC Partners, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-4063515
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

499 Park Avenue, New York, NY		10022
(Address of principal executive offices)		(Zip Code)

(212) 610-2200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

On August 2, 2011, the registrant had 88,245,112 shares of Class A common stock, $0.01 par value, and 34,848,107 shares of Class B common stock, $0.01 par value, outstanding.

BGC PARTNERS, INC.

TABLE OF CONTENTS


		Page

PART I—FINANCIAL INFORMATION

ITEM 1	Financial Statements (unaudited)		5

	Condensed Consolidated Statements of Financial Condition—At June 30, 2011 and December 31, 2010		5

	Condensed Consolidated Statements of Operations—For the Three and Six Months Ended June 30, 2011 and June 30, 2010		6

	Condensed Consolidated Statements of Cash Flows—For the Six Months Ended June 30, 2011 and June 30, 2010		7

	Condensed Consolidated Statements of Changes in Equity—For the Year Ended December 31, 2010		9

	Condensed Consolidated Statements of Changes in Equity—For the Six Months Ended June 30, 2011		10

	Notes to Condensed Consolidated Financial Statements		11

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		62

ITEM 4	Controls and Procedures		63

PART II—OTHER INFORMATION

ITEM 1	Legal Proceedings		64

ITEM 1A	Risk Factors		64

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds		69

ITEM 3	Defaults Upon Senior Securities		69

ITEM 4	[Removed and Reserved]		69

ITEM 5	Other Information		69

ITEM 6	Exhibits		69

SIGNATURES			71

SPECIAL NOTE ON FORWARD-LOOKING INFORMATION

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements.

Our actual results and the outcome and timing of certain events may differ significantly from the expectations discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to:

•

pricing and commissions and market position with respect to any of our products and services and those of our competitors;

•

the effect of industry concentration and reorganization, reduction of customers and consolidation;

•

liquidity, regulatory and clearing capital requirements and the impact of credit market events;

•

market conditions, including trading volume and volatility, and potential deterioration of the equity and debt capital markets;

•

our relationships with Cantor Fitzgerald, L.P. (“Cantor”) and its affiliates, including Cantor Fitzgerald & Co. (“CF&Co”), any related conflicts of interest, competition for and retention of brokers and other managers and key employees, support for liquidity and capital and other relationships, including Cantor’s holding of our 8.75% convertible notes, CF&Co’s acting as our sales agent under our controlled equity or other future offerings, and CF&Co’s acting as our financial advisor in connection with one or more business combination or other transactions;

•

economic or geopolitical conditions or uncertainties;

•

extensive regulation of our businesses, changes in regulations relating to the financial services and other industries, and risks relating to compliance matters, including regulatory examinations, inspections, investigations and enforcement actions, and any resulting costs, fines, penalties, sanctions, enhanced oversight, increased financial and capital requirements, and changes to or restrictions or limitations on specific activities, operations, compensatory arrangements, and growth opportunities, including acquisitions, hiring, and new business, products, or services;

•

factors related to specific transactions or series of transactions, including credit, performance and unmatched principal risk, counterparty failure, and the impact of fraud and unauthorized trading;

•

costs and expenses of developing, maintaining and protecting our intellectual property, as well as employment and other litigation and their related costs, including judgments or settlements paid or received;

•

certain financial risks, including the possibility of future losses and negative cash flows from operations, potential liquidity and other risks relating to our ability to obtain financing or refinancing of existing debt on terms acceptable to us, if at all, and risks of the resulting leverage, including potentially causing a reduction in our credit ratings and/or the associated outlooks given by the rating agencies to those credit ratings, as well as interest and currency rate fluctuations;

•

our ability to enter new markets or develop new products, trading desks, marketplaces or services and to induce customers to use these products, trading desks, marketplaces or services and to secure and maintain market share;

•

our ability to enter into marketing and strategic alliances and business combination or other transactions in the financial services and other industries, including acquisitions, dispositions, reorganizations, partnering opportunities and joint ventures, and the integration of any completed transaction;

•

our ability to hire and retain personnel;

•

our ability to expand the use of technology for hybrid and fully electronic trading;

•

our ability to effectively manage any growth that may be achieved, while ensuring compliance with all applicable regulatory requirements;

•

our ability to identify and remediate any material weaknesses in our internal controls that could affect our ability to prepare financial statements and reports in a timely manner, control our policies, procedures, operations and assets, and assess and manage our operational, regulatory, and financial risks;

•

the effectiveness of our risk management policies and procedures, and the impact of unexpected market moves and similar events;

•

the fact that the prices at which shares of our Class A common stock are sold in one or more of our controlled equity offerings or in other offerings or other transactions may vary significantly, and purchasers of shares in such offerings or transactions, as well as existing stockholders, may suffer significant dilution if the price they paid for their shares is higher than the price paid by other purchasers in such offerings or transactions;

•

our ability to meet expectations with respect to payments of dividends and distributions and repurchases of shares of our Class A common stock and purchases of limited partnership interests of BGC Holdings, L.P. (“BGC Holdings”), or other equity interests in our subsidiaries, including from Cantor, our executive officers, other employees, partners, and others, and the net proceeds to be realized by us from offerings of our shares of Class A common stock;

•

the effect on the market for and trading price of our Class A common stock of various offerings and other transactions, including our controlled equity and other offerings of our Class A common stock and convertible securities, our repurchase of shares of our Class A common stock and purchases of BGC Holdings limited partnership interests or other equity interests in our subsidiaries, our payment of dividends on our Class A common stock and distributions on BGC Holdings limited partnership interests, convertible arbitrage, hedging, and other transactions engaged in by holders of our 4.50% convertible notes and counterparties to our capped call transactions, and resales of shares of our Class A common stock acquired from us or Cantor, including pursuant to our employee benefit plans, conversion of our 8.75% convertible notes and 4.50% convertible notes, and distributions from Cantor pursuant to Cantor’s distribution rights obligations; and

•

the risk factors described in our latest Annual Report on Form 10-K and any updates to those risk factors or new risk factors contained in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”).

The foregoing risks and uncertainties, as well as those risks and uncertainties set forth in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the forward-looking statements. Information in this Form 10-Q is given as of the date of filing the Form 10-Q with the SEC, and future events or circumstances could differ significantly from such information. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

WHERE YOU CAN FIND MORE INFORMATION

Our Internet website address is www.bgcpartners.com. Through our Internet website, we make available, free of charge, the following documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: our Annual Reports on Form 10-K; our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; Forms 3, 4 and 5 and Schedules 13D filed on behalf of Cantor, our directors and our executive officers; and amendments to those documents. In addition, our Internet website is the primary location for press releases regarding our business, including our quarterly and year-end financial results.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except per share data)

(unaudited)


	June 30, 2011			December 31, 2010
Assets
Cash and cash equivalents	$	286,239		$	364,104
Cash segregated under regulatory requirements		3,610			2,398
Loan receivables from related parties		980			980
Securities owned		12,831			11,096
Marketable securities		2,276			4,600
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers		839,575			474,269
Accrued commissions receivable, net		180,348			132,885
Loans, forgivable loans and other receivables from employees and partners		176,574			151,328
Fixed assets, net		132,336			133,428
Investments		22,982			25,107
Goodwill		83,564			82,853
Other intangible assets, net		12,456			13,603
Receivables from related parties		6,573			4,958
Other assets		69,064			68,705

Total assets	$	1,829,408		$	1,470,314

Liabilities, Redeemable Partnership Interest, and Equity
Accrued compensation	$	153,653		$	155,538
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		779,453			429,477
Payables to related parties		7,686			10,262
Accounts payable, accrued and other liabilities		246,608			256,023
Deferred revenue		3,610			4,714
Notes payable and collateralized borrowings		186,490			189,258

Total liabilities		1,377,500			1,045,272
Redeemable partnership interest		94,723			93,186
Equity
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 500,000 shares authorized; 103,906 and 88,192 shares issued at June 30, 2011 and December 31, 2010, respectively; and 85,955 and 70,256 shares outstanding at June 30, 2011 and December 31, 2010, respectively		1,039			881
Class B common stock, par value $0.01 per share; 100,000 shares authorized; 34,848 and 25,848 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively, convertible into Class A common stock		348			258
Additional paid-in capital		423,167			366,827
Contingent Class A common stock		3,171			3,171
Treasury stock, at cost: 17,951 and 17,936 shares of Class A common stock at June 30, 2011 and December 31, 2010, respectively		(109,753	)		(109,627	)
Retained deficit		(39,422	)		(23,616	)
Accumulated other comprehensive income (loss)		278			(977	)

Total stockholders’ equity		278,828			236,917

Noncontrolling interest in subsidiaries		78,357			94,939

Total equity		357,185			331,856

Total liabilities, redeemable partnership interest, and equity	$	1,829,408		$	1,470,314

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues:
Commissions	$	239,132		$	213,863		$	483,846		$	435,896
Principal transactions		102,007			99,606			200,116			202,734
Fees from related parties		16,206			16,436			31,641			32,362
Market data		4,598			4,444			9,174			8,831
Software solutions		2,257			1,760			4,390			3,512
Interest income		954			781			2,360			1,453
Other revenues		803			506			1,114			1,508
Losses on equity investments		(1,399	)		(1,692	)		(3,060	)		(3,441	)

Total revenues		364,558			335,704			729,581			682,855
Expenses:
Compensation and employee benefits		218,729			207,558			427,698			479,246
Allocations of net income to limited partnership units and founding/working partner units		9,237			5,163			18,437			5,163

Total compensation and employee benefits		227,966			212,721			446,135			484,409
Occupancy and equipment		35,740			28,249			65,026			56,377
Fees to related parties		3,018			3,338			5,619			7,372
Professional and consulting fees		15,211			10,016			28,552			20,085
Communications		21,801			18,468			43,131			37,536
Selling and promotion		19,443			16,227			39,629			32,144
Commissions and floor brokerage		6,932			4,916			13,027			9,803
Interest expense		4,768			3,596			9,163			6,507
Other expenses		6,199			20,652			31,280			25,041

Total expenses		341,078			318,183			681,562			679,274
Income from operations before income taxes		23,480			17,521			48,019			3,581
Provision for income taxes		6,031			4,710			13,432			1,723

Consolidated net income	$	17,449		$	12,811		$	34,587		$	1,858

Less: Net income (loss) attributable to noncontrolling interest in subsidiaries		7,785			5,413			16,257			(1,329	)

Net income available to common stockholders	$	9,664		$	7,398		$	18,330		$	3,187

Per share data:
Basic earnings per share
Net income available to common stockholders	$	9,664		$	7,398		$	18,330		$	3,187

Basic earnings per share	$	0.09		$	0.09		$	0.17		$	0.04

Basic weighted-average shares of common stock outstanding		112,644			84,473			105,027			83,667

Fully diluted earnings per share
Net income for fully diluted shares	$	21,160		$	19,567		$	41,995		$	8,632

Fully diluted earnings per share	$	0.09		$	0.09		$	0.17		$	0.04

Fully diluted weighted-average shares of common stock outstanding		244,110			226,495			240,703			224,949

Dividends declared per share of common stock	$	0.17		$	0.14		$	0.31		$	0.20

Dividends declared and paid per share of common stock	$	0.17		$	0.14		$	0.31		$	0.20

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	34,587		$	1,858
Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities:
Allocations of net income to limited partnership units and founding/working partner units		18,437			5,163
Fixed asset depreciation and intangible asset amortization		24,092			25,537
Employee loan amortization		16,213			18,545
Stock-based compensation		41,979			14,069
Sublease provision adjustment		4,244			—
Losses on equity investments		3,060			3,441
Deferred tax expense (benefit)		2,259			(3,521	)
Recognition of deferred revenue		(1,105	)		(2,466	)
Other		1,678			834
(Increase) decrease in operating assets:
Cash segregated under regulatory requirements		(1,212	)		(347	)
Securities borrowed		—			(32,926	)
Securities owned		(1,495	)		922
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers		(364,560	)		(183,265	)
Accrued commissions receivable, net		(45,888	)		(36,890	)
Receivables from related parties		(2,449	)		1,619
Loans, forgivable loans and other receivables from employees and partners		(40,817	)		(20,066	)
Other assets		1,053			3,816
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased		—			(11	)
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		345,929			202,766
Accrued compensation		(18,494	)		44,526
Deferred revenue		—			914
Accounts payable, accrued and other liabilities		(19,067	)		(19,342	)
Payables to related parties		(2,576	)		(56,066	)

Net cash used in operating activities	$	(4,132	)	$	(30,890	)

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2011			2010
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	$	(15,127	)	$	(19,610	)
Purchases of marketable securities		—			(3,002	)
Capitalization of software development costs		(6,937	)		(8,344	)
Capitalization of trademarks, patent defense and registration costs		(468	)		(440	)
Investment in unconsolidated entities		(884	)		(862	)

Net cash used in investing activities		(23,416	)		(32,258	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Collateralized borrowings, net		(2,768	)		(2,914	)
Long-term borrowings		—			(150,000	)
Issuance of convertible notes		—			150,000
Repurchase of Class A common stock		(126	)		(17,371	)
Proceeds from offering of Class A common stock, net		13,590			17,792
Redemption of limited partnership interests		(468	)		(28,901	)
Proceeds from exercise of stock options		8,195			—
Tax impact on exercise/delivery of equity awards		2,760			—
Cancellation of restricted stock units in satisfaction of withholding tax requirements		(1,362	)		(1,725	)
Earnings distributions to limited partnership interests in BGC Holdings		(43,283	)		(8,122	)
Dividends to stockholders		(34,136	)		(16,625	)

Net cash used in financing activities		(57,598	)		(57,866	)
Effect of exchange rate changes on cash		7,281			(6,877	)
Net decrease in cash and cash equivalents		(77,865	)		(127,891	)
Cash and cash equivalents at beginning of period		364,104			469,301

Cash and cash equivalents at end of period	$	286,239		$	341,410

Supplemental cash information:
Cash paid during the period for taxes	$	16,694		$	16,144

Cash paid during the period for interest	$	10,794		$	5,172

Supplemental non-cash information:
Conversion of Class B common stock into Class A common stock	$	—		$	6

Issuance of Class A common stock upon exchange of Cantor units	$	8,407		$	—

Issuance of Class B common stock upon exchange of Cantor units	$	8,407		$	—

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Year Ended December 31, 2010

(in thousands, except share amounts)

(unaudited)


	BGC Partners, Inc. Stockholders
	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital			Contingent Class A Common Stock		Treasury Stock			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest in Subsidiaries			Total
Balance, January 1, 2010	$	707	$	264		$	292,881		$	—	$	(89,756	)	$	(2,171	)	$	(36	)	$	132,189		$	334,078
Comprehensive income:
Consolidated net income		—		—			—			—		—			21,162			—			24,210			45,372
Other comprehensive income (loss), net of tax
Change in cumulative translation adjustment		—		—			—			—		—			—			(709	)		(440	)		(1,149	)
Unrealized loss on securities available for sale		—		—			—			—		—			—			(232	)		(105	)		(337	)

Comprehensive income (loss)		—		—			—			—		—			21,162			(941	)		23,665			43,886
Stock-based compensation		8		—			7,724			—		—			—			—			—			7,732
Grant of exchangeability to limited partnership units		—		—			—			—		—			—			—			28,721			28,721
Capital contribution by founding/working partners to cover 2009 Charity Day		—		—			7,403			—		—			—			—			—			7,403
Dividends to stockholders		—		—			—			—		—			(42,606	)		—			—			(42,606	)
Earnings distributions to limited partnership interests		—		—			—			—		—			—			—			(45,192	)		(45,192	)
Issuance of Class A common stock upon exchange of founding/working partner units, 5,153,877 shares		52		—			10,644			—		—			—			—			5,627			16,323
Cantor purchase of Cantor units from BGC Holdings upon redemption of founding/working partner units, 2,353,520 units		—		—			—			—		—			—			—			8,031			8,031
Cantor exchange of Cantor units for Class A common stock, 3,700,000 units		37		—			6,144			—		—			—			—			(6,181	)		—
Re-allocation of equity due to additional investment by founding/working partners		—		—			—			—		—			—			—			(21,681	)		(21,681	)
Proceeds from exercise of stock options, net of tax		—		—			463			—		—			—			—			—			463
Redemption of founding/working partner units, 3,998,225 units		—		—			—			—		—			—			—			(10,292	)		(10,292	)
Repurchase of Class A common stock, 3,399,015 shares		—		—			—			—		(19,871	)		—			—			—			(19,871	)
Issuance of Class A common stock (net of costs) upon exchange of limited partnership units, 4,523,505 shares		45		—			26,439			—		—			—			—			(26,255	)		229
Issuance of Class A common stock (net of costs), 2,594,117 shares		26		—			15,134			—		—			—			—			—			15,160
Issuance of contingent Class A common stock and limited partnership units for acquisitions		—		—			—			3,171		—			—			—			3,566			6,737
Conversion of Class B common stock to Class A common stock, 600,000 shares		6		(6	)		—			—		—			—			—			—			—
Other		—		—			(5	)		—		—			(1	)		—			2,741			2,735

Balance, December 31, 2010	$	881	$	258		$	366,827		$	3,171	$	(109,627	)	$	(23,616	)	$	(977	)	$	94,939		$	331,856

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

For the Six Months Ended June 30, 2011

(in thousands, except share amounts)

(unaudited)


	BGC Partners, Inc. Stockholders
	Class A Common Stock		Class B Common Stock		Additional Paid-in Capital			Contingent Class A Common Stock		Treasury Stock			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest in Subsidiaries			Total
Balance, January 1, 2011	$	881	$	258	$	366,827		$	3,171	$	(109,627	)	$	(23,616	)	$	(977	)	$	94,939		$	331,856
Comprehensive income:
Consolidated net income		—		—		—			—		—			18,330			—			16,257			34,587
Other comprehensive income (loss), net of tax
Change in cumulative translation adjustment		—		—		—			—		—			—			2,969			1,038			4,007
Unrealized loss on securities available for sale		—		—		—			—		—			—			(1,714	)		(595	)		(2,309	)

Comprehensive income		—		—		—			—		—			18,330			1,255			16,700			36,285
Stock-based compensation		15		—		3,271			—		—			—			—			—			3,286
Dividends to stockholders		—		—		—			—		—			(34,136	)		—			—			(34,136	)
Grant of exchangeability to limited partnership units		—		—		—			—		—			—			—			34,043			34,043
Earnings distributions to limited partnership interests		—		—		—			—		—			—			—			(35,482	)		(35,482	)
Issuance of Class A common stock upon exchange of founding/working partner units, 605,910 shares		6		—		1,568			—		—			—			—			133			1,707
Issuance of Class A common stock upon exchange of limited partnership units, 1,342,085 shares		13		—		10,589			—		—			—			—			(10,507	)		95
Issuance of Class A common stock (net of costs), 1,646,451 shares		16		—		13,574			—		—			—			—			—			13,590
Issuance of Class A common stock upon exchange of Cantor units, 9,000,000 units		90		—		8,317			—		—			—			—			(8,407	)		—
Issuance of Class B common stock upon exchange of Cantor units, 9,000,000 units		—		90		8,317			—		—			—			—			(8,407	)		—
Redemption of founding/working partner units		—		—		(226	)		—		—			—			—			(9	)		(235	)
Repurchase of Class A common stock, 14,445 shares		—		—		—			—		(126	)		—			—			—			(126	)
Re-allocation of equity due to additional investment by founding/working partners		—		—		—			—		—			—			—			(4,322	)		(4,322	)
Proceeds from exercise of stock options, net of tax		16		—		8,179			—		—			—			—			—			8,195
Excess tax benefit on exercise/delivery of equity awards		—		—		2,760			—		—			—			—			—			2,760
Other		2		—		(9	)		—		—			—			—			(324	)		(331	)

Balance, June 30, 2011	$	1,039	$	348	$	423,167		$	3,171	$	(109,753	)	$	(39,422	)	$	278		$	78,357		$	357,185

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.

BGC PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Basis of Presentation

BGC Partners, Inc. (together with its subsidiaries, “BGC Partners,” “BGC” or the “Company”) is a leading global brokerage company servicing the wholesale financial markets, specializing in the brokering of a broad range of financial products globally, including fixed income securities, interest rate swaps, foreign exchange, equities, equity derivatives, credit derivatives, commodities, futures, structured products and other instruments. BGC Partners also provides a full range of services, including trade execution, broker-dealer services, clearing, processing, information, and other back-office services to a broad range of financial and non-financial institutions. Through its eSpeed and BGC Trader™ brands, BGC Partners also offers financial technology solutions and market data and analytics related to select financial instruments and markets. The Company’s customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds, governments and investment firms. The Company’s 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, where available, fully electronic brokerage services in connection with transactions executed either over-the-counter (“OTC”) or through an exchange. BGC Partners has offices in New York and London, as well as in Aspen, Beijing, Chicago, Copenhagen, Dubai, Garden City (New York), Hong Kong, Istanbul, Johannesburg, Mexico City, Moscow, Nyon, Paris, Rio de Janeiro, São Paulo, Sarasota, Seoul, Singapore, Sydney, Tokyo, Toronto, West Palm Beach and Zurich.

The Company’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosure normally included in the financial statements prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”) have been condensed or omitted from this report as is permitted by SEC rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2010 in the Company’s Annual Report on Form 10-K.

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 condensed consolidated statements of financial condition, the condensed consolidated statements of operations, the condensed consolidated statements of cash flows, and the condensed consolidated statements of changes in equity of the Company for the periods presented. The results of operations for the 2011 interim periods are not necessarily indicative of results to be expected for the entire fiscal year, which will end on December 31, 2011.

Recently Adopted Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (the “FASB”) issued guidance that addresses the effects of eliminating the Qualified Special Purpose Entity (“QSPE”) concept from existing accounting guidance and clarifies and amends certain key provisions, including the transparency of an enterprise’s involvement with variable interest entities (“VIEs”). This FASB guidance became effective with the first reporting period that began after November 15, 2009 and was adopted by the Company on January 1, 2010. The adoption of this FASB guidance did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

In January 2010, the FASB issued guidance on Fair Value Measurements and Disclosures – Improving Disclosures about Fair Value Measurements. This guidance was effective for interim and annual reporting periods ending after December 15, 2009 except for the disclosures about the roll-forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 31, 2010 and for interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements, and the adoption of this guidance with respect to disclosures of the roll forward of activity in Level 3 fair value measurements is not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

In December 2010, the FASB issued guidance that modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity shall consider whether there are any adverse qualitative factors indicating that impairment may exist. This FASB guidance became effective with the first reporting period that began after December 15, 2010 and was adopted by the Company on January 1, 2011. The adoption of this FASB guidance did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

New Accounting Pronouncements

In April 2011, the FASB issued guidance on Transfers and Servicing – Reconsideration of Effective Control for Repurchase Agreements. This guidance changes the assessment of effective control by eliminating the collateral maintenance requirement. This FASB guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this FASB guidance is not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

In April 2011, the FASB issued guidance on Receivables – A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. This guidance clarifies which loan modifications constitute troubled debt restructurings for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. In evaluating whether a loan modification constitutes a troubled debt restructuring, a creditor must conclude (i) that the restructuring constitutes a concession and (ii) that the debtor is experiencing financial difficulties. This FASB guidance is effective for interim and annual periods beginning on or after June 15, 2011. The adoption of this FASB guidance is not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

In May 2011, the FASB issued guidance on Fair Value Measurement – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This guidance expands the disclosure requirements around fair value measurements categorized in Level 3 of the fair value hierarchy. It also clarifies and expands upon existing requirements for fair value measurements of financial assets and liabilities as well as instruments classified in stockholders’ equity. This FASB guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this FASB guidance is not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

In June 2011, the FASB issued guidance on Comprehensive Income – Presentation of Comprehensive Income. This guidance requires (i) presentation of other comprehensive income either in a continuous statement of comprehensive income or in a separate statement presented consecutively with the statement of net income and (ii) presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements. This FASB guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this FASB guidance is not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

2. Limited Partnership Interests in BGC Holdings

BGC Holdings, L.P. (“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 Partners, L.P. (“BGC US”) and BGC Global Holdings L.P. (“BGC Global”), the two operating partnerships. Listed below are the limited partnership interests in BGC Holdings. The founding/working partner units, limited partnership units and Cantor units, each as defined below, collectively represent all of the “limited partnership interests in BGC Holdings.”

Founding/Working Partner Units

Founding/working partners have a limited partnership interest in BGC Holdings. The Company accounts for founding/working partner units outside of permanent capital, as “Redeemable partnership interest,” in the accompanying unaudited condensed consolidated statements of financial condition. This classification is applicable to founding/working partner units because founding/working partner units are redeemable upon termination of a partner, which includes the termination of employment, which can be at the option of the partner and not within the control of the issuer.

Founding/working partner units are held by limited partners who are employees and generally receive quarterly allocations of net income based on their weighted-average pro rata share of economic ownership of the operating subsidiaries. Upon termination of employment or otherwise ceasing to provide substantive services, the founding/working partner units are redeemed, and the unit holders are no longer entitled to participate in the quarterly cash distributed 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 separate component of compensation expense under “Allocations of net income to limited partnership units and founding/working partner units” in the Company’s unaudited condensed consolidated statements of operations.

Limited Partnership Units

REUs, RPUs, PSUs and PSIs are limited partnership interests in BGC Holdings (the “limited partnership units”) that are generally held by employees. Generally, such units receive quarterly allocations of net income based on their weighted-average pro rata share of economic ownership of the operating subsidiaries. These allocations are cash distributed on a quarterly basis and are generally contingent upon services being provided by the unit holders. As prescribed in FASB guidance, the quarterly allocations of net income on such limited partnership units are reflected as a separate component of compensation expense under “Allocations of net income to limited partnership units and founding/working partner units” in the accompanying unaudited condensed consolidated statements of operations.

Certain of these limited partnership units 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 limited partnership units are accounted for as liability awards, and in accordance with FASB guidance the Company records compensation expense for the liability awards based on the change in fair value at each reporting date.

Cantor Units

Cantor’s limited partnership interest (“Cantor units”) in BGC Holdings as a result of its contribution of the BGC Division is 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 based on its weighted-average pro rata share of economic ownership of the operating subsidiaries for each quarterly period. This allocation is reflected as a component of “Net income (loss) attributable to noncontrolling interest in subsidiaries” in the accompanying unaudited condensed consolidated statements of operations. In quarterly periods in which the Company has a net loss, the amount reflected as a component of “Net income (loss) attributable to noncontrolling interest in subsidiaries” represents the loss allocation for founding/working partner units, limited partnership units and Cantor units.

General

Certain of the limited partnership interests, described above, have been granted exchangeability into Class A common stock on a one-for-one basis (subject to adjustment); additional limited partnership interests may become exchangeable into Class A common stock on a one for-one basis (subject to adjustment). As all limited partnership interests are already included in fully diluted share count, any exchange of limited partnership interests into Class A common shares would be non-dilutive. Because these interests generally receive quarterly allocations of net income, such exchange would have no significant impact on the cash flows or equity of the Company.

3. Earnings Per Share

FASB guidance on Earnings Per Share (“EPS”) establishes standards for computing and presenting EPS. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average shares of common stock outstanding. Net income is allocated to each of the economic ownership classes described above in Note 2 — “Limited Partnership Interests in BGC Holdings,” and the Company’s outstanding common stock, based on each class’s pro rata economic ownership.

The Company’s earnings for the three and six months ended June 30, 2011 and 2010 were allocated as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Net income available to common stockholders	$	9,664	$	7,398	$	18,330	$	3,187
Allocation of net income to limited partnership interests in BGC Holdings	$	16,047	$	10,051	$	33,805	$	3,237

The following is the calculation of the Company’s basic earnings per share (in thousands, except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Basic earnings per share:
Net income available to common stockholders	$	9,664	$	7,398	$	18,330	$	3,187

Basic weighted-average shares of common stock outstanding		112,644		84,473		105,027		83,667

Basic earnings per share	$	0.09	$	0.09	$	0.17	$	0.04

Fully diluted earnings per share is calculated utilizing net income available for common stockholders plus net income allocations to the limited partnership interests in BGC Holdings, as well as adjustments related to the interest expense on the 8.75% convertible notes (as defined below) (if applicable) (see Note 13 — “Notes Payable and Collateralized Borrowings”) and expense related to dividend equivalents for certain restricted stock units (“RSUs”), as the numerator. The denominator is comprised of the Company’s weighted-average outstanding shares of common stock, the weighted-average number of limited partnership interests, and the potential dilution that could occur if securities or other contracts to issue shares of common stock, including convertible notes, stock options, RSUs and warrants were exercised, resulting in the issuance of shares of common stock that would then share in earnings in the Company’s net income available to common stockholders. The limited partnership interests are potentially exchangeable into shares of Class A common stock; as a result, they are included in the fully diluted EPS computation to the extent that the effect would not be anti-dilutive.

The following is the calculation of the Company’s fully diluted earnings per share (in thousands, except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Fully diluted earnings per share:
Net income available to common stockholders	$	9,664	$	7,398	$	18,330	$	3,187
Allocation of net income to limited partnership interests in BGC Holdings, net of tax		11,055		11,924		23,224		5,109
Dividend equivalent expense on RSUs, net of tax		441		245		441		336

Net income for fully diluted shares	$	21,160	$	19,567	$	41,995	$	8,632

Weighted-average shares:
Common stock outstanding		112,644		84,473		105,027		83,667
Limited partnership interests in BGC Holdings		129,461		138,879		133,372		138,060
RSUs (Treasury stock method)		1,768		3,143		1,979		3,222
Other		237		—		325		—

Fully diluted weighted-average shares of common stock outstanding		244,110		226,495		240,703		224,949

Fully diluted earnings per share	$	0.09	$	0.09	$	0.17	$	0.04

For the three months ended June 30, 2011 and 2010, approximately 27.6 million and 33.5 million shares underlying stock options, RSUs, the 8.75% convertible notes and warrants were not included in the computation of fully diluted earnings per share because their effect would have been anti-dilutive.

Additionally, for the three months ended June 30, 2011, approximately 0.5 million contingently issuable shares of contingent Class A common stock were excluded from the computation of fully diluted earnings per share because the conditions for issuance had not been met by the end of the period. For the three months ended June 30, 2010, there were no contingently issuable shares of contingent Class A common stock excluded from the computation of fully diluted earnings per share.

Unit Redemptions and Stock Repurchase Program

During the three months ended June 30, 2011, the Company, as part of its global redemption and compensation restructuring program (see Note 14 — “Compensation,” for more information), redeemed 827,160 limited partnership units for cash at an average price of $7.88 per unit and 17,538 founding/working partner units for cash at an average price of $8.99 per unit.

During the six months ended June 30, 2011, the Company, as part of its global redemption and compensation restructuring program, redeemed 1,190,929 limited partnership units. During the six months ended June 30, 2011, the Company also redeemed 289,896 founding/working partner units. The limited partnership units and founding/working partner units were redeemed at an average effective price paid by the Company of approximately $8.13 per unit.

During the three months ended June 30, 2010, the Company, as part of its global redemption and compensation restructuring program, redeemed approximately 2.0 million limited partnership units at an average price of $5.61. During the six months ended June 30, 2010, the Company, as part of its redemption and compensation restructuring program, redeemed approximately 4.4 million limited partnership units at an average price of $6.01. For the three months ending June 30, 2010, the Company redeemed approximately 0.9 million founding/working partner units at an average price of $5.61. For the six months ending June 30, 2010, the Company redeemed approximately 3.1 million founding/working partner units for an average price of $5.89.

During the six months ended June 30, 2011, the Company repurchased 14,445 shares of Class A common stock at an aggregate purchase price of approximately $126 thousand for an average price of $8.74 per share.

During the six months ended June 30, 2010, the Company repurchased 2,927,633 shares of Class A common stock at an aggregate purchase price of approximately $17.4 million for an average price of $5.93 per share.

On May 4, 2010, the Company’s Board of Directors authorized an $85.0 million increase in the BGC Partners stock repurchase and unit redemption authorization, bringing the total amount available for future repurchases of Class A common stock and redemptions of limited partnership interests to $100.0 million. At June 30, 2011, the Company had approximately $59.2 million remaining from its repurchase and redemption authorization, and from time to time, the Company may actively continue to repurchase shares or redeem units.

Unit redemption and share repurchase activity for the six months ended June 30, 2011 was as follows:


Period	Total Number of Units Redeemed or Shares Repurchased		Average Price Paid per Share or Unit		Approximate Dollar Value of Units and Shares That May Yet Be Redeemed/Purchased Under the Plan
Redemptions
January 1, 2011 – March 31, 2011		195,904	$	9.11	$	65,965,929
April 1, 2011 – April 30, 2011		63,715	$	8.99
May 1, 2011 – May 31, 2011		103,160	$	8.81
June 1, 2011 – June 30, 2011		677,823	$	7.67

Total Redemptions		1,040,602	$	8.13

Repurchases
January 1, 2011 – March 31, 2011		6,454	$	8.50
April 1, 2011 – April 30, 2011		7,991	$	8.94
May 1, 2011 – May 31, 2011		—		—
June 1, 2011 – June 30, 2011		—		—

Total Repurchases		14,445	$	8.74

Total Redemptions and Repurchases		1,055,047	$	8.14	$	59,216,028

Stock Issuances

During the year ended December 31, 2010, the Company entered into two controlled equity offering sales agreements with CF&Co pursuant to which the Company may offer and sell up to an aggregate of 11,000,000 shares of Class A common stock from time to time through CF&Co, as the Company’s sales agent under these agreements. CF&Co is a wholly-owned subsidiary of Cantor and an affiliate of the Company. Under these agreements, the Company has agreed to pay CF&Co 2% of the gross proceeds from the sale of shares.

During the three months ended June 30, 2011, the Company issued 944,891 shares of its Class A common stock related to exchanges and redemptions of limited partnership units as well as for general corporate purposes. Substantially all of these issuances were for the exchange and redemption of limited partnership units as part of the global redemption and compensation restructuring program. The issuances related to these exchanges and redemptions did not change the amount of fully diluted shares outstanding.

During the year ended December 31, 2010, the Company issued 7,117,622 shares of its Class A common stock related to exchanges and redemptions of limited partnership units as well as for general corporate purposes. These issuances included 4,523,505 shares issued for the exchange and redemption of limited partnership units as part of the global redemption and compensation restructuring program. The issuances related to these exchanges and redemptions did not change the amount of fully diluted shares outstanding. These issuances also included 2,594,117 shares of Class A common stock issued for general corporate purposes.

During the three months ended June 30, 2011 and 2010, the Company issued an aggregate of 166,155 shares and 1,180,423 shares, respectively, of Class A common stock to founding/working partners of BGC Holdings upon exchange of their exchangeable founding/working partner units. During the six months ended June 30, 2011 and 2010, the Company issued an aggregate of 605,910 shares and 2,614,234 shares, respectively, of Class A common stock to founding/working partners of BGC Holdings upon exchange of their exchangeable founding/working partner units. These issuances did not change the amount of fully diluted shares outstanding.

On May 5, 2011, the Company issued 9,000,000 shares of Class A common stock to Cantor upon Cantor’s exchange of 9,000,000 Cantor units. Substantially all of these shares have been included on a registration statement for resale by various partner distributees and charitable organizations which may receive donations from Cantor. In addition, on May 6, 2011, the Company issued 9,000,000 shares of Class B common stock of the Company to Cantor upon Cantor’s exchange of 9,000,000 Cantor units. All of these shares are restricted securities. These issuances did not change the fully diluted number of shares outstanding.

On May 6, 2011, the Company issued an aggregate of 301,306 shares of Class A common stock to partners of BGC Holdings upon exchange of 160,151 exchangeable limited partnership units and 141,155 exchangeable founding/working partner units. These issuances did not change the fully diluted number of shares outstanding.

On May 9, 2011, the Company issued and donated an aggregate of 443,686 shares of Class A common stock to the Cantor Fitzgerald Relief Fund (the “Relief Fund”) in connection with the Company’s annual Charity Day. These shares have been included in the registration statement for resale by the Relief Fund. Additionally, on May 16, 2011, the Company issued an aggregate of 11,111 shares of Class A common stock to a former partner.

In addition, during the three months ended June 30, 2011 and 2010, the Company issued 1,040,713 and 439,117 shares of Class A common stock, respectively, related to vesting of RSUs and the exercise of stock options. During the six months ended June 30, 2011 and 2010, respectively, the Company issued 3,119,983 and 729,420 shares of Class A common stock related to the vesting of RSUs and the exercise of stock options.

4. Securities Owned

Securities owned primarily consist of short-term investments in government debt.

Total securities owned were $12.8 million and $11.1 million as of June 30, 2011 and December 31, 2010, respectively. Securities owned consisted of the following (in thousands):


	June 30, 2011		December 31, 2010
Government debt	$	12,005	$	11,009
Equities		826		87

Total	$	12,831	$	11,096

As of June 30, 2011, the Company did not pledge any of the securities owned to satisfy deposit requirements at various exchanges or clearing organizations.

5. Marketable Securities

Marketable securities consist of the Company’s ownership of various investments. The investments, which had a fair value of $2.3 million as of June 30, 2011 and $4.6 million as of December 31, 2010, are classified as available-for-sale and accordingly recorded at fair value. Unrealized gains or losses are included as part of “Accumulated other comprehensive income (loss)” in the accompanying unaudited condensed consolidated statements of financial condition.

6. 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-dealers primarily represent amounts due for undelivered securities, amounts related to open derivative contracts, cash held at clearing organizations and exchanges to facilitate settlement and clearance of matched principal transactions, and spreads on matched principal transactions that have not yet been remitted from/to clearing organizations and exchanges. The receivables from and payables to broker-dealers, clearing organizations, customers and related broker-dealers consisted of the following (in thousands):


	June 30, 2011		December 31, 2010
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to deliver	$	780,404	$	415,520
Receivables from clearing organizations		32,747		48,345
Other receivables from broker-dealers and customers		24,797		6,948
Open derivative contracts		1,627		1,573
Net pending trades		—		1,883

Total	$	839,575	$	474,269

Payables to broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to receive	$	754,364	$	423,829
Other payables to broker-dealers and customers		22,166		3,449
Net pending trades		2,553		—
Open derivative contracts		370		944
Payables to clearing organizations		—		1,255

Total	$	779,453	$	429,477

A portion of these receivables and payables are with Cantor. See Note 9 — “Related Party Transactions,” for additional information related to these receivables and payables. Substantially all open fails to deliver and fails to receive transactions as of June 30, 2011 have subsequently settled at the contracted amounts.

7. Derivatives

The Company has entered into OTC derivative contracts. These derivative contracts primarily consist of interest rate and foreign exchange swaps. The Company enters into derivative contracts to facilitate client transactions, to hedge principal positions and to facilitate hedging activities of affiliated companies. Open derivative contracts are recognized at the fair value of the related assets and liabilities as part of “Receivables from and Payables to broker-dealers, clearing organizations, customers and related broker-dealers” in the accompanying unaudited condensed consolidated statements of financial condition.

The fair values of derivative contracts are determined from quoted market prices or other public price sources. The Company does not designate any derivative contracts as hedges for accounting purposes. The change in fair value of derivative contracts is reported as part of “Principal transactions” in the accompanying unaudited condensed consolidated statements of operations.

The fair value of derivative financial instruments, computed in accordance with the Company’s netting policy, is set forth below (in thousands):


	June 30, 2011				December 31, 2010
	Assets		Liabilities		Assets		Liabilities
Interest rate swaps	$	1,627	$	—	$	1,573	$	—
Foreign exchange swaps		—		370		—		944

	$	1,627	$	370	$	1,573	$	944

The notional amounts of the interest rate swaps transactions at June 30, 2011 and December 31, 2010 were $1.6 billion and $1.8 billion, respectively. These represent matched customer transactions settled through and guaranteed by a central clearing organization.

All of the Company’s foreign exchange swaps are with Cantor. The notional amounts of the foreign exchange swap transactions at June 30, 2011 and December 31, 2010 were $271.7 million and $128.8 million, respectively.

The replacement cost of contracts in a gain position at June 30, 2011 was $1.6 million from various counterparties. These counterparties are not rated by a credit rating organization.

8. Fair Value of Financial Assets and Liabilities

The following tables set forth by level, within the fair value hierarchy, financial assets and liabilities, including marketable securities and those pledged as collateral, accounted for at fair value under FASB guidance as of June 30, 2011 and December 31, 2010 (in thousands):


	Assets at Fair Value at June 30, 2011 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Interest rate swaps	$	—	$	1,627	$	—	$	—	$	1,627
Government debt		12,005		—		—		—		12,005
Securities owned – Equities		826		—		—		—		826
Marketable securities		2,276		—		—		—		2,276

Total	$	15,107	$	1,627	$	—	$	—	$	16,734


	Liabilities at Fair Value at June 30, 2011 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Foreign exchange swaps	$	—	$	370	$	—	$	—	$	370

Total	$	—	$	370	$	—	$	—	$	370


	Assets at Fair Value at December 31, 2010 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Interest rate swaps	$	—	$	1,573	$	—	$	—	$	1,573
Government debt		11,009		—		—		—		11,009
Securities owned – Equities		87		—		—		—		87
Marketable securities		4,600		—		—		—		4,600

Total	$	15,696	$	1,573	$	—	$	—	$	17,269


	Liabilities at Fair Value at December 31, 2010 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Foreign exchange swaps	$	—	$	944	$	—	$	—	$	944

Total	$	—	$	944	$	—	$	—	$	944

(1)	As required by FASB guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

9. Related Party Transactions

Service Agreements

Throughout Europe and Asia, the Company provides Cantor with administrative services, technology services and other support for which it charges Cantor based on the cost of providing such services plus a mark-up, generally 7.5%. In the UK, the Company provides these services to Cantor through Tower Bridge International Services L.P. (“Tower Bridge”). The Company owns 52% of Tower Bridge and consolidates it, and Cantor owns 48%. Cantor’s interest in Tower Bridge is reflected as a component of “Noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of financial condition, and the portion of Tower Bridge’s income attributable to Cantor is included as part of “Net income (loss) attributable to noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of operations. In the United States (“U.S.”), the Company provides Cantor with technology services for which it charges Cantor based on the cost of providing such services.

The Company, together with other leading financial institutions, formed ELX Futures, L.P. (“ELX”), a limited partnership that has established a fully-electronic futures exchange. ELX is 26.3% owned by the Company and is accounted for under the equity method of accounting. During the six months ended June 30, 2011, the Company made no cash contributions to ELX. The Company has entered into a technology services agreement with ELX pursuant to which the Company provides software technology licenses, monthly maintenance support and other technology services as requested by ELX.

For the three months ended June 30, 2011 and 2010, the Company recognized related party revenues of $16.2 million and $16.4 million, respectively, for the services provided to Cantor and ELX. For the six months ended June 30, 2011 and 2010, the Company recognized related party revenues pursuant to these agreements of $31.6 million and $32.4 million, respectively. These revenues are included as part of “Fees from related parties” in the Company’s unaudited condensed consolidated statements of operations. In the U.S., Cantor and its affiliates provide the Company with administrative services and other support for which Cantor charges the Company based on the cost of providing such services. In connection with the services Cantor provides, the Company and Cantor entered into an employee lease agreement whereby certain employees of Cantor are deemed leased employees of the Company.

For the three months ended June 30, 2011 and 2010, the Company was charged $10.0 million and $8.5 million, respectively, for the services provided by Cantor and its affiliates, of which $7.0 million and $5.2 million, respectively, were to cover compensation to leased employees for the three months ended June 30, 2011 and 2010. For the six months ended June 30, 2011 and 2010, the Company was charged $17.2 million and $17.5 million, respectively, for the services provided by Cantor and its affiliates, of which $11.6 million and $10.1 million, respectively, were to cover compensation to leased employees for the six months ended June 30, 2011 and 2010. The fees paid to Cantor for administrative and support services, other than those to cover the compensation costs of leased employees, are included as part of “Fees to related parties” in the Company’s unaudited condensed consolidated statements of operations. The fees paid to Cantor to cover the compensation costs of leased employees are included as part of “Compensation and employee benefits” in the Company’s unaudited condensed consolidated statements of operations.

As of June 30, 2011 and 2010, Cantor’s share of the net income in Tower Bridge was $0.9 million and $0.6 million, respectively. Cantor’s noncontrolling interest is included as part of “Noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of financial condition.

Clearing Agreement

The Company receives certain clearing services (“Clearing Services”) from Cantor in Europe and the U.S. pursuant to its clearing agreement (“Clearing Agreement”). These Clearing Services are provided in exchange for payment by the Company of third-party clearing costs and allocated costs. The costs associated with these payments are included as part of “Fees to related parties” in the Company’s unaudited condensed consolidated statements of operations.

The Company intends to continue this relationship with Cantor. Accordingly, the Company expects that Cantor will continue to post clearing capital on our behalf, and the Company will continue to be required to post clearing capital with Cantor as requested under the Clearing Agreement. As of June 30, 2011, no amounts have been requested by Cantor pursuant to the Clearing Agreement.

Debt Guaranty Agreements

On April 1, 2008, in connection with the Note Purchase Agreement, which authorized the issue and sale of $150.0 million principal amount of the Company’s Senior Notes which matured on April 1, 2010, Cantor provided a guaranty of payment and performance on the Senior Notes. Cantor charged the Company an amount equal to 2.31% of the outstanding principal amount of the Senior Notes for the provision of the guaranty. The fees paid to Cantor for the guaranty are included as part of “Fees to related parties” in the Company’s unaudited condensed consolidated statements of operations.

This guaranty agreement expired as the Senior Notes matured on April 1, 2010. Therefore, for the three months ended June 30, 2011 and 2010, as well as the six months ended June 30, 2011, the Company did not recognize any expense in relation to this guaranty agreement. For the six months ended June 30, 2010, the Company recognized expense of approximately $0.9 million in relation to this guaranty agreement.

Receivables from and Payables to Related Broker-Dealers

Amounts due from or to Cantor and Freedom International Brokerage are for open derivative contracts and/or transactional revenues under a technology and services agreement with Freedom International Brokerage. These are included as part of “Receivables from and payables to broker-dealers, clearing organizations, customers and related broker-dealers” or “Payables to broker-dealers, clearing organizations, customers and related broker-dealers” in the Company’s unaudited condensed consolidated statements of financial condition. As of June 30, 2011 and December 31, 2010, the Company had receivables from Cantor and Freedom International Brokerage of $3.6 million and $3.7 million, respectively. As of June 30, 2011 and December 31, 2010, the Company had $0.4 and $0.9 million, respectively, in payables to Cantor related to open derivative contracts.

Loans, Forgivable Loans, and Other Receivables from Employees and Partners

The Company has entered into various agreements with certain of its employees and partners whereby these individuals receive loans which may be either wholly or in part repaid from the distribution earnings that the individual receives on some or all of their limited partnership interests or may be forgiven over a period of time. The forgivable portion of these loans is recognized as compensation expense over the life of the loan. From time to time, the Company may also enter into agreements with employees and partners to grant bonus and salary advances or other types of loans. These advances and loans are repayable in the timeframes outlined in the underlying agreements.

As of June 30, 2011 and December 31, 2010, the aggregate balance of these employee loans was $176.6 million and $151.3 million, respectively, and is included as “Loans, forgivable loans and other receivables from employees and partners” in the Company’s unaudited condensed consolidated statements of financial condition. Compensation expense for the above mentioned employee loans for the three months ended June 30, 2011 and 2010, was $7.3 million and $5.9 million, respectively. Compensation expense for the six months ended June 30, 2011 and 2010 was $16.2 million and $18.5 million, respectively. The compensation expense related to these employee loans is included as part of “Compensation and employee benefits” in the unaudited condensed consolidated statements of operations.

Convertible Notes

On April 1, 2010, BGC Holdings issued an aggregate of $150.0 million principal amount of 8.75% Convertible Senior Notes due 2015 (the “8.75% convertible notes”) to Cantor in a private placement transaction. The Company used the proceeds of the 8.75% convertible notes to repay at maturity $150.0 million aggregate principal amount of Senior Notes due April 1, 2010. The Company recorded interest expense related to the convertible notes in the amount of $3.3 million and $3.3 million for the three months ended June 30, 2011 and 2010, respectively. The Company recorded interest expense in the amount of $6.6 million and $3.3 million for the six months ended June 30, 2011 and 2010, respectively. See Note 13 — “Notes Payable and Collateralized Borrowings,” for more information.

Newmark Acquisition

On April 28, 2011, the Company announced that it had entered into an agreement to acquire Newmark, the real estate advisory firm which operates as Newmark Knight Frank in the U.S. and which is associated with London-based Knight Frank. The transaction encompasses approximately 425 Newmark brokers and includes Newmark’s New York business as well as a majority interest in other domestic offices and certain of its affiliates. The purchase price will consist of cash, stock and assumption of debt. Upon acquisition, certain of Newmark’s management and brokers are expected to become partners in the Company following the closing. CF&Co, an affiliate of Cantor, acted as an adviser in connection with this transaction.

Controlled Equity Offerings/Payment of Commissions to CF&Co

As discussed in Note 3 — “Earnings Per Share,” during 2010, the Company entered into two controlled equity offering agreements with CF&Co, as the Company’s sales agent. For the three months ended June 30, 2011 and 2010, the Company was charged approximately $0.1 million and $0.4 million, respectively and for the six months ended June 30, 2011 and 2010, the Company was charged approximately $0.4 million and $0.4 million, respectively, for services provided by CF&Co related to these agreements. These expenses are included as part of “Professional and consulting fees” in the Company’s unaudited condensed consolidated statements of operations.

Cantor Purchase of Cantor Units upon Redemption of Founding/Working Partner Units from BGC Holdings

Cantor has the right to purchase Cantor units from BGC Holdings upon redemption of nonexchangeable founding/working partner units redeemed by BGC Holdings upon termination or bankruptcy of the founding/working partner. Any such Cantor units purchased by Cantor are exchangeable for shares of Class B common stock or, at Cantor’s election or if there are no additional authorized but unissued shares of Class B common stock, shares of Class A common stock, in each case on a one-for-one basis (subject to customary anti-dilution adjustments). As of June 30, 2011, BGC Holdings had the right to redeem an aggregate of 343,655 nonexchangeable founding/working partner units and Cantor will have the right to buy the equivalent number of Cantor units on terms yet to be determined.

Other Transactions

The Company is authorized to enter into loans, investments or other credit support arrangements for Aqua Securities L.P. (“Aqua”), an alternative electronic trading platform which offers new pools of block liquidity to the global equities markets, of up to $5.0 million in the aggregate; such arrangements would be proportionally and on the same terms as similar arrangements between Aqua and Cantor. A $2.0 million increase in this amount was authorized on November 1, 2010. Aqua is 51% owned by Cantor and 49% owned by the Company. Aqua is accounted for under the equity method of accounting. During the six months ended June 30, 2011 and 2010, the Company made $0.9 million and $1.3 million, respectively, in cash contributions to Aqua. These contributions are recorded as part of “Investments” in the Company’s unaudited condensed consolidated statements of financial condition.

The Company is authorized to enter into short-term arrangements with Cantor to cover any failed U.S. Treasury securities transactions and to share equally any net income resulting from such transactions, as well as any similar clearing and settlement issues. As of June 30, 2011, the Company had not entered into any arrangements to cover any failed U.S. Treasury transactions.

The Company is authorized to enter into an indemnity agreement with Cantor with respect to the guarantee by Cantor of any liabilities associated with our application for a brokering license in China.

To more effectively manage the Company’s exposure to changes in foreign exchange rates, the Company and Cantor agreed to jointly manage the exposure. As a result, the Company is authorized to divide the quarterly allocation of any profit or loss relating to foreign exchange currency hedging between Cantor and the Company. The amount allocated to each party is based on the total net exposure for the Company and Cantor. The ratio of gross exposures of Cantor and the Company will be utilized to determine the shares of profit or loss allocated to each for the period. During the six months ended June 30, 2011, the Company recognized its share of foreign exchange loss of $0.2 million. This loss is included as part of “Other expenses” in the unaudited condensed consolidated statements of operations.

During the year ended December 31, 2010, Cantor converted 600,000 shares of its Class B common stock into 600,000 shares of Class A common stock. This conversion did not change the amount of fully diluted shares outstanding.

During the year ended December 31, 2010, Cantor exchanged 3,700,000 Cantor units for 3,700,000 shares of Class A common stock. This exchange did not change the amount of fully diluted shares outstanding.

On July 2, 2010, the Company filed a resale Registration Statement on Form S-3 (the “Resale Registration Statement”) with respect to 3,500,000 shares of Class A common stock that may be sold by Cantor for the account of certain retained and founding/working partners and/or by such retained and founding/working partners, as distributees of shares of Class A common stock from Cantor, from time to time on a delayed or continuous basis.

On September 3, 2010, the Company filed Amendment No. 1 to the Resale Registration Statement to update the number of shares that may be sold under the Resale Registration Statement to 3,646,055, excluding 53,945 of the distribution rights shares distributed to Stephen M. Merkel, the Company’s Executive Vice President, General Counsel & Secretary, and repurchased by the Company, but including 200,000 shares contributed by Cantor to The Cantor Fitzgerald Relief Fund (the “Relief Fund”). On October 1, 2010, the Company filed Amendment No. 2 to the Resale Registration Statement, updating the number of shares that may be sold under the Resale Registration Statement to 3,494,891, including 61,817 shares that could be sold by the Relief Fund after the Relief Fund sold 138,183 shares to Mr. Lutnick and his accounts. The Resale Registration Statement was declared effective by the SEC on October 12, 2010. On November 22, 2010, the Company filed a prospectus supplement to the Resale Registration Statement primarily to include the names of additional selling stockholders and revise other information, as appropriate. The prospectus supplement to the Resale Registration Statement included 48,149 shares for the Relief Fund and reflected the Relief Fund’s sale of an additional 13,668 shares to Mr. Lutnick and his accounts on November 3, 2010. The primary purposes of the Resale Registration Statement are to enable retained and founding/working partners to resell certain distribution rights shares which they have a right to acquire from Cantor and to enable the Relief Fund to sell certain shares of Class A common stock donated to it by Cantor. The Company is bearing all of the expenses of the Resale Registration Statement and sale of the shares, except selling stockholders are paying their own commissions for the sale of their shares. While Cantor is nominally listed as a selling stockholder, it has not and will not sell any shares for its own account under the Resale Registration Statement.

On August 2, 2010, the Company was authorized to engage CF&Co and its affiliates to act as financial advisor in connection with one or more third-party business combination transactions with or involving one or more targets as requested by the Company on behalf of its affiliates from time to time on specified terms, conditions and fees. In addition, on September 3, 2010 the Company filed a registration statement on Form S-4 (the “Form S-4 Registration Statement”), which was declared effective by the SEC on October 12, 2010, for the offer and sale of up to 20,000,000 shares of Class A common stock from time to time in connection with business combination transactions, including acquisitions of other businesses, assets, properties or securities. In addition to shares of Class A common stock, the Company may offer other consideration in connection with such business combination transactions, including, but not limited to, cash, notes or other evidences of indebtedness, BGC Holdings units that may be exchangeable for shares of the Company’s Class A common stock offered and sold on the Form S-4 Registration Statement, assumption of liabilities or a combination of these types of consideration. The Form S-4 Registration Statement states that the Company may pay finders’, investment banking or financial advisory fees to broker-dealers, including, but not limited to, CF&Co and its affiliates, from time to time in connection with certain business combination transactions, and, in some cases, the Company may issue shares of the Company’s Class A common stock offered pursuant to the Form S-4 Registration Statement in full or partial payment of such fees.

On August 19, 2010, the Company completed the acquisition of Mint Partners (see Note 12 — “Goodwill and Other Intangible Assets, Net”). In connection with this acquisition, the Company paid an advisory fee of $0.7 million to CF&Co. This fee was recorded as part of “Professional and consulting fees” in the consolidated statements of operations.

During 2010, two founding/working partners of BGC Holdings offered to donate shares of Class A common stock, receivable pursuant to the separation and merger, to the Relief Fund. These donations were in connection with the Company’s 2009 Charity Day. The aggregate 1,157,902 shares of Class A common stock donated by the founding/working partners consisted of the following: (i) a donation by one partner of 303,951 shares on April 26, 2010, 400,000 shares on August 12, 2010 and 150,000 shares on December 17, 2010, which shares were issued by the Company upon exchange of founding/working partner units that the partner received in connection with the separation and merger and (ii) a donation of 303,951 shares by a second partner on April 26, 2010 which were issued by the Company upon exchange of founding/working partner units that the partner received in connection with the separation and merger. These donations cover approximately $7.4 million of the final net proceeds raised by the employees of the Company on their 2009 Charity Day which represents the non-cash settlement of a portion of the Company’s liability. On April 26, 2010, the Company repurchased, at a price of $6.58 per share from the Relief Fund, such 607,902 shares of the Company’s Class A common stock. On August 12, 2010, the Company repurchased, at a price of $5.29 per share from the Relief Fund, such 400,000 shares of the Company’s Class A common stock.

On May 9, 2011, the Company issued and donated an aggregate of 443,686 shares of Class A common stock to the Relief Fund in connection with the Company’s annual Charity Day.

On February 17, 2011, Howard W. Lutnick, the Company’s Chief Executive Officer, exercised an employee stock option with respect to 1,500,000 shares of Class A common stock at an exercise price of $5.10 per share. The exercise price was paid in cash from Mr. Lutnick’s personal funds.

During the three months ended June 30, 2011, two other executive officers of the Company exercised employee stock options with respect to 45,657 shares of Class A common stock at an average exercise price of $5.10 per share. During the six months ended June 30, 2011, other executive officers of the Company exercised employee stock options with respect to 91,314 shares of Class A common stock at an average exercise price of $5.10 per share. A portion of these shares were withheld to pay the option exercise price and the applicable tax obligations. The executives sold 6,454 of these shares to the Company at an average price of $8.50 per share.

On April 19, 2011, the Company repurchased 7,991 shares of Class A common stock, at an average price of $8.94 per share, from one of the Company’s directors.

On June 21, 2011, the Company filed a resale registration statement on Form S-3 with respect to 9,440,317 shares of Class A common stock that may be sold from time to time on a delayed continuous basis by (i) Cantor for the account of certain retained and founding/working partners, and/or by such retained and founding/working partners, as distributees of shares of Class A common stock from Cantor, (ii) charitable organizations that receive donations of shares from Cantor, and (iii) the Relief Fund with respect to the shares donated by the Company to it in connection with the Company’s Charity Day.

10. Investments

The Company’s investments consisted of the following (in thousands):


	June 30, 2011		December 31, 2010
Equity method investments	$	22,982	$	25,107

The Company’s share of losses related to its investments was $1.4 million and $1.7 million for the three months ended June 30, 2011 and 2010, respectively. The Company’s share of losses related to its investments was $3.1 million and $3.4 million for the six months ended June 30, 2011 and 2010, respectively. The Company’s share of the losses is recorded under the caption “Losses on equity investments” in the accompanying unaudited condensed consolidated statements of operations.

11. Fixed Assets, Net

Fixed assets, net consisted of the following (in thousands):


	June 30, 2011		December 31, 2010
Computer and communications equipment	$	190,933	$	183,075
Software, including software development costs		128,295		118,448
Leasehold improvements and other fixed assets		106,367		102,344

		425,595		403,867
Less: accumulated depreciation and amortization		293,259		270,439

Fixed assets, net	$	132,336	$	133,428

Depreciation expense was $8.3 million and $8.9 million for each of the three months ended June 30, 2011 and 2010, respectively. Depreciation expense was $16.7 million and $17.2 million for the six months ended June 30, 2011 and 2010, respectively. Depreciation is included as part of “Occupancy and equipment” in the accompanying unaudited condensed consolidated statements of operations.

In accordance with FASB guidance, the Company capitalizes qualifying computer software development costs incurred during the application development stage and amortizes them over their estimated useful life of three years on a straight-line basis. For the three months ended June 30, 2011 and 2010, software development costs totaling $3.6 million and $4.1 million, respectively, were capitalized. For the six months ended June 30, 2011 and 2010, software development costs totaling $6.9 million and $8.3 million, respectively, were capitalized. Amortization of software development costs totaled $2.7 million and $3.1 million for the three months ended June 30, 2011 and 2010, respectively and $5.6 million and $6.3 million for the six months ended June 30, 2011 and 2010, respectively. Amortization of software development costs is included as part of “Occupancy and equipment” in the unaudited condensed consolidated statements of operations.

Impairment charges of $0.3 million and $0.0 were recorded for the three months ended June 30, 2011 and 2010, respectively, and $0.3 million and $0.0 for the six months ended June 30, 2011 and 2010, respectively, related to the evaluation of capitalized software projects for future benefit and for fixed assets no longer in service. Impairment charges related to capitalized software and fixed assets are recorded under the caption “Occupancy and equipment” in the accompanying unaudited condensed consolidated statements of operations.

12. Goodwill and Other Intangible Assets, Net

In August 2010, the Company completed the acquisition of various assets and businesses of Mint Partners and Mint Equities (“Mint Partners”), a British financial institution and interdealer broker with offices in London, Dubai and New York. The total purchase price of Mint Partners was $11.2 million. The excess purchase price over the fair value of the tangible assets acquired and the liabilities assumed of $8.0 million has been recorded as goodwill. The acquisition price includes shares with an approximate fair value of $3.2 million and REUs with an approximate fair value of $3.6 million that may be issued contingent on certain revenue targets being met.

The results of operations of Mint Partners have been included in the Company’s unaudited condensed consolidated financial statements subsequent to the date of the acquisition.

Goodwill is not amortized and is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with FASB guidance on Goodwill and Other Intangible Assets.

The changes in the carrying amount of goodwill for the six months ended June 30, 2011 were as follows (in thousands):


	Goodwill
Balance at December 31, 2010	$	82,853
Cumulative translation adjustment		711

Balance at June 30, 2011	$	83,564

Other intangible assets consisted of the following (in thousands):


	June 30, 2011			December 31, 2010
Definite life intangible assets:
Patents	$	37,699		$	37,278
Customer base/relationships		15,786			15,603
Internally developed software		5,722			5,722
All other		5,398			5,337

Total gross definite life intangible assets		64,605			63,940
Less: accumulated depreciation		(53,649	)		(51,837	)

Net definite life intangible assets		10,956			12,103

Indefinite life intangible assets:
Horizon license		1,500			1,500

Total net intangible assets	$	12,456		$	13,603

Intangible amortization expense was $0.9 million and $0.9 million for the three months ended June 30, 2011 and 2010, respectively, and $1.8 million and $2.0 million for the six months ended June 30, 2011 and 2010, respectively. Intangible amortization is included as part of “Other expenses” in the accompanying unaudited condensed consolidated statements of operations.

13. Notes Payable and Collateralized Borrowings

On March 31, 2008, the Company entered into a Note Purchase Agreement pursuant to which it issued $150.0 million principal amount of its senior notes (the “Senior Notes”) to a number of investors. The Senior Notes incurred interest semiannually at the rate of 5.19% per annum (plus 2.31% per annum paid to Cantor for the guarantee provision as discussed in Note 9 — “Related Party Transactions”). The Senior Notes matured on April 1, 2010. Therefore, the Company did not record any interest expense related to the Senior Notes for the three months ended June 30, 2010 or 2011. During the six months ended June 30, 2010, the Company recorded interest expense related to the Senior Notes of $1.9 million prior to their maturity on April 1, 2010.

On April 1, 2010, BGC Holdings issued an aggregate of $150.0 million principal amount of the 8.75% convertible notes to Cantor in a private placement transaction. The Company used the proceeds to repay at maturity the Senior Notes.

The 8.75% convertible notes are senior unsecured obligations and rank equally and ratably with all existing and future senior unsecured obligations of the Company. The 8.75% convertible notes bear an annual interest rate of 8.75%, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2010, and are currently convertible into approximately 22.1 million shares of Class A common stock. The 8.75% convertible notes will mature on April 15, 2015, unless earlier repurchased, exchanged or converted.

The Company recorded interest expense related to the 8.75% convertible notes of $3.3 million and $3.3 million for the three months ended June 30, 2011 and 2010, respectively, and $6.6 million and $3.3 million for the six months ended June 30, 2011 and 2010, respectively. The conversion rate of the BGC Holdings Notes into BGC Holdings exchangeable limited partnership interests and the conversion rate of the 8.75% convertible notes into shares of Class A common stock are subject to customary adjustments upon certain corporate events, including stock dividends and stock splits on the Class A common stock and the Company’s payment of a quarterly cash dividend in excess of $0.10 per share of Class A common stock. The conversion rate will not be adjusted for accrued and unpaid interest to the conversion date.

On September 25, 2009, BGC Partners, L.P. entered into a secured loan arrangement, under which it pledged certain fixed assets including furniture, computers and telecommunications equipment in exchange for a loan of $19.0 million. The principal and interest on this secured loan arrangement are repayable in 36 consecutive monthly installments at a fixed rate of 8.09% per annum. The outstanding balance of the secured loan arrangement was $8.5 million as of June 30, 2011 and $11.6 million as of December 31, 2010. The value of the fixed assets pledged

was $7.2 million as of June 30, 2011 and $9.6 million as of December 31, 2010. The secured loan arrangement is guaranteed by the Company. The Company recorded interest expense related to the secured loan arrangement of $0.2 million and $0.3 million for the three months ended June 30, 2011 and 2010, respectively, and $0.4 million and $0.7 million for the six months ended June 30, 2011 and 2010, respectively.

On various dates during 2010 and continuing through June 30, 2011, the Company sold certain furniture, equipment and software for $34.2 million, net of costs, and concurrently entered into agreements to lease the property back. The principal and interest on the leases are repayable in equal monthly installments for terms of 36 months (software) and 48 months (furniture and equipment) with maturities through September 2014. The outstanding balance of the leases was $28.0 million as of June 30, 2011. The Company recorded interest expense of $0.4 million and $0.0 for the three months ended June 30, 2011 and 2010, respectively, and $0.7 million and $0.0 for the six months ended June 30, 2011 and 2010, respectively. Because assets revert back to the Company at the end of the leases, the transactions were capitalized. As a result, consideration received from the purchaser is included in the unaudited condensed consolidated balance sheets as a financing obligation, and payments made under the lease are being recorded as interest expense (at an effective rate of approximately 6%). Depreciation on these fixed assets will continue to be charged to “Occupancy and equipment” in the unaudited condensed consolidated statements of operations.

On June 23, 2011, the Company entered into a $130.0 million credit agreement (the “Credit Agreement”) which provides for up to $130.0 million of unsecured revolving credit through June 23, 2013. Borrowings under the Credit Agreement will bear interest at a per annum rate equal to, at the Company’s option, either (a) a base rate equal to the greatest of (i) the prime rate as established by the Administrative Agent from time to time, (ii) the average federal funds rate plus 0.5%, and (iii) the reserve adjusted one-month LIBOR reset daily plus 1.0%, or (b) the reserve adjusted LIBOR for interest periods of one, two, three or six months, as selected by the Company, in each case plus an applicable margin. The applicable margin will initially be 2.0% with respect to base rate borrowings in (a) above and 3.0% with respect to borrowings selected as LIBOR borrowings in (b) above, but may increase to a maximum of 3.0% and 4.0%, respectively, depending upon the Company’s credit rating. The Credit Agreement also provides for an unused facility fee and certain upfront and arrangement fees. The Credit Agreement requires that the outstanding loan balance be reduced to zero every 270 days for three days. The Credit Agreement further provides for certain financial covenants, including minimum equity, tangible equity and interest coverage, as well as maximum levels for total assets to equity capital and debt to equity. The Credit Agreement also contains certain other affirmative and negative covenants. As of June 30, 2011, there were no borrowings outstanding under the Credit Agreement.

14. Compensation

Restructuring of Compensation Arrangements, Redemptions, and Related Charges

In March 2010, the Company began a global partnership redemption and compensation restructuring program to enhance the Company’s employment arrangements by leveraging the Company’s unique partnership structure. Under this program, participating partners generally agree to extend the lengths of their employment agreements, to accept a larger portion of their compensation in limited partnership units and to other contractual modifications sought by the Company. Also as part of this program, the Company redeemed limited partnership units and founding/working partner units for cash and/or other units and granted exchangeability to certain units. At the same time, the Company sold shares of Class A common stock under its controlled equity offering (see Note 3 — “Earnings Per Share”).

In connection with the global partnership redemption and compensation restructuring program, the Company granted exchangeability on limited partnership units of 2,540,644 units and 4,010,260 units for the three months ended June 30, 2011 and June 30, 2010, respectively, for which the Company incurred compensation expense of approximately $23.0 million and $23.7 million, respectively. These expenses are included in “Compensation and employee benefits” in the accompanying unaudited condensed consolidated statements of operations.

During the six months ended June 30, 2010, the Company completed the global compensation restructuring related to the modification of pre-merger contractual arrangements which accelerated the amortization of the associated deferred compensation expense. As a result, the Company incurred a one-time compensation charge of $41.3 million. Additionally, during the six months ended June 30, 2011 and 2010, the Company granted exchangeability on 3,674,069 and 6,350,743 limited partnership units for which the Company incurred

compensation expense of $34.0 million and $39.4 million, respectively. These expenses are also included in “Compensation and employee benefits” in the unaudited condensed consolidated statements of operations.

Restricted Stock Units

A summary of the activity associated with RSUs is as follows:


	Restricted Stock Units		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (Years)
Balance at December 31, 2010		4,271,429	$	4.13		0.87
Granted		973,699		8.48
Less: Delivered units		1,501,961		3.53
Less: Forfeited units		473,178		3.00

Balance at June 30, 2011		3,269,989	$	5.87		1.12

The fair value of RSUs awarded to employees and directors is determined on the date of grant based on the market value of Class A common stock and is recognized, net of the effect of estimated forfeitures, ratably over the vesting period. The Company uses historical data, including historical forfeitures and turnover rates, to estimate expected forfeiture rates for both employee and director RSUs. Each RSU is settled in one share of Class A common stock upon completion of the vesting period.

During the six months ended June 30, 2011 and 2010, the Company granted 1.0 million and 1.6 million, respectively, of RSUs with aggregate estimated grant date fair values of approximately $8.3 million and $7.9 million, respectively, to employees and directors. These RSUs were awarded in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses. RSUs granted to these individuals generally vest over a two-, three- or four-year period.

As of June 30, 2011 and 2010, the aggregate estimated grant date fair value of outstanding RSUs was approximately $19.2 million and $16.6 million, respectively.

Compensation expense related to RSUs, before associated income taxes, was approximately $2.5 million and $2.3 million for the three months ended June 30, 2011 and 2010, respectively, and $4.6 million and $3.7 million for the six months ended June 30, 2011 and 2010, respectively. As of June 30, 2011, there was $14.6 million of total unrecognized compensation expense related to unvested RSUs.

Stock Options

A summary of the activity associated with stock options is as follows:


	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance at December 31, 2010		10,379,540	$	12.34		3.25	$	6,626,196
Less: Exercised options		1,811,606		5.10
Less: Forfeited options		55,799		20.83

Balance at June 30, 2011		8,512,135	$	13.82		2.31	$	649,689

Options exercisable at June 30, 2011		8,512,135	$	13.82		2.31	$	649,689

The Company did not grant any stock options during the six months ended June 30, 2011 and 2010. The Company did not record any compensation expense related to stock options for the six months ended June 30, 2011 and 2010. As of June 30, 2011, there was no unrecognized compensation cost related to unvested stock options.

Limited Partnership Units

A summary of the activity associated with limited partnership units is as follows:


	Number of Units		Notional Value
Balance at December 31, 2010		40,851,365	$	42,873,120
Granted		13,414,385		6,146,011
Less: Redeemed units		2,027,126		4,577,815
Less: Forfeited units		4,322,356		3,630,000

Balance at June 30, 2011		47,916,268	$	40,811,316

The Company recognized compensation expense, before associated income taxes, related to limited partnership units that were not redeemed of approximately $1.6 million and $2.6 million for the three months ended June 30, 2011 and 2010, respectively. The Company recognized compensation expense, before associated income taxes, related to limited partnership units that were not redeemed, of $3.3 million and $5.6 million for the six months ended June 30, 2011 and 2010, respectively. As of June 30, 2011 and December 31, 2010, the aggregate fair value of limited partnership units held by executives and non-executive employees was approximately $11.7 million and $8.7 million, respectively.

Business Partner Warrants

A summary of the activity associated with business partner warrants is as follows (warrants in thousands):


	Warrants		Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Balance at December 31, 2010		653	$	10.36
Less: Expired warrants		313		8.87

Balance at June 30, 2011		340	$	11.74		0.63

The Company did not recognize any expense related to the business partner warrants for the three and six months ended June 30, 2011 and 2010, respectively.

15. Commitments, Contingencies and Guarantees

Commitments

In the event the Company anticipates incurring costs under any of its leases that exceed anticipated sublease revenues, it recognizes a loss and records a liability for the present value of the excess lease obligations over the estimated sublease rental income. The liability for future lease payments, net of anticipated sublease rental income, was approximately $4.2 million and $0.6 million, as of June 30, 2011 and December 31, 2010, respectively, and is included as part of “Accounts payable, accrued and other liabilities” in the accompanying unaudited condensed consolidated statements of financial condition. The lease liability takes into consideration various assumptions, including prevailing rental rates. The Company adjusted its lease liability in the three months ended June 30, 2011 based on a review of prevailing rental rates in the second quarter. The adjustment of the Company’s lease liability resulted in a charge of $3.6 million in the three months ended June 30, 2011, which is included as part of “Occupancy and equipment” in the unaudited condensed consolidated statements of operations.

Contingencies

In the ordinary course of business, various legal actions are brought and are pending against the Company and its affiliates in the U.S. and internationally. In some of these actions, substantial amounts are claimed. The Company is also involved, from time to time, in reviews, examinations, inspections, investigations and enforcement actions by governmental and self-regulatory agencies (both formal and informal) regarding the Company’s business. These matters may result in judgments, settlements, costs, fines, penalties, sanctions or other relief. The following

generally does not include matters that the Company has pending against other parties which, if successful, would result in awards in favor of the Company or its subsidiaries.

Employment and Competitor-Related Litigation

From time to time, the Company and its affiliates are involved in litigation, claims and arbitrations, in the U.S. and internationally, relating to various employment matters, including with respect to termination of employment, hiring of employees currently or previously employed by competitors, terms and conditions of employment and other matters. In light of the competitive nature of the brokerage industry, litigation, claims and arbitration between competitors regarding the hiring of employees are not uncommon.

Other Matters

On February 15, 2006, the SEC issued a formal order of investigation into trading by certain inter-dealer brokers in the government and fixed income securities markets. The formal order alleges that the broker-dealers named therein, including us, (1) may have made fictitious quotations or made false or misleading statements about the prices at which U.S. Treasury or other fixed income securities would be purchased or sold, (2) may have fabricated market quotations or trading activity in U.S. Treasury or other fixed income securities to stimulate trading and to generate commissions, (3) may have engaged in “front running” or “interpositioning,” (4) may have engaged in fraudulent, deceptive or manipulative acts to induce the purchase or sale of government securities, (5) may have failed to keep and preserve certain books and records as required by the SEC and/or the U.S. Treasury and (6) may have failed to supervise with a view to preventing violations of applicable rules and regulations as required by the Exchange Act. We are cooperating in the investigation, which has been inactive for over a year. Our management believes that, based on the currently available information, the final outcome of the investigation will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

In August 2004, Trading Technologies International, Inc. (“TT”) commenced an action in the United States District Court, Northern District of Illinois, Eastern Division, against us. In its complaint, TT alleged that we infringed two of its patents. TT later added eSpeed International Ltd., ECCO LLC and ECCO Ware LLC as defendants. On June 20, 2007, the Court granted eSpeed’s motion for partial summary judgment on TT’s claims of infringement covering the then current versions of certain products. As a result, the remaining products at issue in the case were the versions of the eSpeed and ECCO products that have not been on the market in the U.S. since around the end of 2004. After a trial, a jury rendered a verdict that eSpeed and ECCO willfully infringed. The jury awarded TT damages in the amount of $3.5 million against ECCO and eSpeed. Thereafter, the Court granted eSpeed’s motion for directed verdict that eSpeed’s infringement was not willful as a matter of law, and denied eSpeed’s general motions for directed verdict and for a new trial. eSpeed’s remittitur motion was conditionally granted in part. TT indicated by letter that it accepted the remittitur, which would reduce the total principal amount of the verdict to $2,539,468. Although ultimately the Court’s “Final Judgment in a Civil Case” contained no provision for monetary damages, TT’s motion for pre-judgment interest was granted, and interest was set at the prime rate, compounded monthly. On May 23, 2008, the Court granted TT’s motion for a permanent injunction and on June 13, 2008 denied its motion for attorneys’ fees. On July 16, 2008, TT’s costs were assessed by the Court clerk in the amount of $3,321,776 against eSpeed. eSpeed filed a motion to strike many of these costs, which a magistrate judge said on October 29, 2010 should be assessed at $381,831. We have asked the District Court to reduce that amount. Both parties appealed to the United States Court of Appeals for the Federal Circuit, which issued an opinion on February 25, 2010, affirming the District Court on all issues presented on appeal. The mandate of the Court of Appeals was issued on April 28, 2010.

On June 9, 2010, TT filed in the District Court a “Motion to Enforce the Money Judgment.” We have opposed this motion on the ground that no money judgment was entered prior to the taking of the appeal by TT. A Magistrate Judge concluded there was no money judgment, but on its own initiative recommended the District Court amend the Final Judgment to include damages in the principal amount of $2,539,468. On March 29, 2011, the District Court affirmed. The parties subsequently stipulated to a further amendment to the judgment to apportion this amount in accordance with the remitted jury verdict between eSpeed. We reserved our rights with respect to this amended judgment and on May 27, 2011 filed an appeal of the amended judgment, which remains pending. We may be required to pay TT damages and/or certain costs. We have accrued the amount of the District Court jury’s verdict as remitted plus interest and a portion of the preliminarily assessed costs that we believe would cover the amount if any were actually awarded.

On February 3, 2010, TT filed another civil action against the Company in the Northern District of Illinois, alleging direct and indirect infringement of three additional patents, U.S. Patents Nos. 7,533,056, 7,587,357, and 7,613,651, and by later amendment to the complaint No. 7,676,411 by the eSpeedometer product. On June 24, 2010, TT filed a Second Amended Complaint to add certain of our affiliates. On May 25, 2011, TT filed a Third Amended Complaint substituting certain of our affiliates for the previously-named defendants. On June 15, 2011, TT filed a Fourth Amended Complaint adding claims of direct and indirect infringement of six additional U.S. Patents Nos. 7,685,055, 7,693,768, 7,725,382, 7,813,996, 7,904,374, and 7,930,240. We have moved to dismiss the claims of indirect infringement.

On August 24, 2009, Tullett Liberty Securities LLC (“Tullett Liberty”) filed a claim with Financial Industry Regulatory Authority (“FINRA”) dispute resolution (the “FINRA Arbitration”) in New York, New York against BGC Financial, L.P., an affiliate of BGC Partners (“BGC Financial”), one of BGC Financial’s officers, and certain persons formerly or currently employed by Tullett Liberty subsidiaries. Tullett Liberty thereafter added Tullett Prebon Americas Corp. (“Tullett Americas,” together with Tullett Liberty, the “Tullett Subsidiaries”) as a claimant, and added 35 individual employees, who were formerly employed by the Tullett Subsidiaries, as respondents. In the FINRA Arbitration, the Tullett Subsidiaries allege that BGC Financial harmed their inter-dealer brokerage business by hiring 79 of their employees, and that BGC Financial aided and abetted various alleged wrongs by the employees, engaged in unfair competition, misappropriated trade secrets and confidential information, tortiously interfered with contract and economic relationships, and violated FINRA Rules of Conduct. The Tullett Subsidiaries also alleged certain breaches of contract and duties of loyalty and fiduciary duties against the employees. BGC Financial has generally agreed to indemnify the employees. In the FINRA Arbitration, the Tullett Subsidiaries claim compensatory damages of not less than $779 million and exemplary damages of not less than $500 million. The Tullett Subsidiaries also seek costs and permanent injunctions against the defendants.

The parties stipulated to consolidate the FINRA Arbitration with five other related arbitrations (FINRA Case Nos. 09-04807, 09-04842, 09-06377, 10-00139 and 10-01265) — two arbitrations previously commenced against Tullett Liberty by certain of its former brokers now employed by BGC Financial, as well as three arbitrations commenced against BGC Financial by brokers who were previously employed by BGC Financial before returning to Tullett Liberty. FINRA did consolidate them. BGC Financial and the employees filed their Statement of Answer and BGC’s Statement of Counterclaim. Tullett Liberty responded to BGC’s Counterclaim. Tullett filed an action in the Supreme Court, New York County against three of BGC’s executives involved in the recruitment in the New York metropolitan area. Tullett has agreed to add these claims to the FINRA Arbitration. Tullett and the Company have also agreed to join Tullett’s claims against BGC Capital Markets, L.P. to the FINRA Arbitration.

On October 22, 2009, Tullett Prebon plc (“Tullett”) filed a complaint in the United States District Court for the District of New Jersey against BGC Partners captioned Tullett Prebon plc vs. BGC Partners, Inc. (the “New Jersey Action”). In the New Jersey Action, Tullett asserted claims relating to decisions made by approximately 81 brokers to terminate their employment with the Tullett Subsidiaries and join BGC Partners’ affiliates. In its complaint, Tullett made a number of allegations against BGC Partners related to raiding, unfair competition, New Jersey RICO, and other claims arising from the brokers’ current or prospective employment by BGC Partners’ affiliates. Tullett claimed compensatory damages against BGC Partners in excess of $1 billion for various alleged injuries as well as exemplary damages. It also sought costs and an injunction against additional hirings.

In response to a BGC motion, Tullett filed its First Amended Complaint (the “Amended New Jersey Complaint”), which largely repeated the allegations of injury and the claims asserted in the initial complaint. The Amended New Jersey Complaint incorporates the damages sought in the FINRA Arbitration, repeats many of the allegations raised in the FINRA Arbitration and also references hiring of employees of Tullett affiliates by BGC Partners or BGC Partners’ affiliates overseas, for which Tullett and/or the Tullett Subsidiaries have filed suit outside of the United States, including one in the High Court in London and another commenced by a Tullett affiliate against seven of our brokers in Hong Kong, on which we may have certain indemnity obligations. In the London action, the High Court found liability for certain of BGC Partners’ actions, affirmed on appeal, and the case was settled during the damages hearing thereafter. BGC Partners moved to dismiss the Amended New Jersey Complaint, or in the alternative, to stay the action pending the resolution of the FINRA Arbitration. In that motion, BGC Partners argued that Tullett lacked standing to pursue its claims, that the court lacked subject matter jurisdiction and that each of the causes of action in the Amended New Jersey Complaint failed to state a legally sufficient claim. On June 18, 2010, the District Court ordered that the First Amended Complaint be dismissed with prejudice. Tullett appealed. On May 13, 2011, the United States Court of Appeals for the Third Judicial Circuit affirmed the decision

of the District Court dismissing the case with prejudice. Subsequently, Tullett has filed a complaint against BGC Partners in New Jersey state court alleging substantially the same claims. The New Jersey state action also raises claims related to employees who decided to terminate their employment with Tullett and join BGC Partners subsequent to the federal complaint.

Subsidiaries of Tullett filed additional claims with FINRA on April 4, 2011, seeking unspecified damages and injunctive relief against BGC Financial, L.P. (“BGC Financial”), an affiliate of BGC Partners, and nine additional former employees of the Tullett subsidiaries alleging similar claims related to BGC Financial’s hiring of those nine employees in 2011. These claims have not been consolidated with the other FINRA proceedings. BGC Financial and those employees filed their Statement of Answer and the employee’s Statement of Counterclaims, and the Tullett subsidiaries responded to the employees’ counterclaims.

BGC Partners and its affiliates intend to vigorously defend against and seek appropriate affirmative relief in the FINRA Arbitration and the other actions, and believe that they have substantial defenses to the claims asserted against them in those proceedings, believe that the damages and injunctive relief sought against them in those proceedings are unwarranted and unprecedented, and believe that Tullett Liberty, Tullett and the Tullett Subsidiaries are attempting to use the judicial and industry dispute resolution mechanisms in an effort to shift blame to BGC Partners for their own failures. However, no assurance can be given as to whether Tullett, Tullett Liberty or any of the Tullett Subsidiaries may actually succeed against either BGC Partners or any of its affiliates.

In November, 2010, the Company’s affiliates filed three proceedings against Tullett Prebon Information (C.I.) Ltd and certain of its affiliates. In these proceedings, our affiliates seek to recover hundreds of millions of dollars relating to Tullett’s theft of BGCantor Market Data’s proprietary data. BGCantor Market Data (and two predecessors in interest) seek contractual damages and two of our brokerage affiliates seek disgorgement of profits due to unfair competition.

In addition to the matters discussed above, the Company is a party to several pending legal proceedings and claims that have arisen during the ordinary course of business. The outcome of such matters cannot be determined with certainty; therefore, we cannot predict what the eventual loss or range of losses related to such matters will be. Management believes that, based on currently available information, the final outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

Legal reserves are established in accordance with FASB guidance on Accounting for Contingencies, when a material legal liability is both probable and reasonably estimable. Once established, reserves are adjusted when there is more information available or when an event occurs requiring a change. The outcome of such items cannot be determined with certainty; therefore, the Company cannot predict what the eventual loss related to such matters will be. Management believes that, based on currently available information, the final outcome of these current pending matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Letter of Credit Agreements

The Company has irrevocable uncollateralized letters of credit with various banks, where the beneficiaries are clearing organizations through which it transacted, that are used in lieu of margin and deposits with those clearing organizations. As of June 30, 2011, the Company was contingently liable for $1.9 million under these letters of credit.

Risk and Uncertainties

The Company generates revenues by providing financial intermediary and securities trading and brokerage activities to institutional customers and by executing and, in some cases, clearing transactions for institutional counterparties. Revenues for these services are transaction-based. As a result, revenues could vary based on the transaction volume of global financial markets. Additionally, financing is sensitive to interest rate fluctuations, which could have an impact on its overall profitability.

Guarantees

The Company provides guarantees to securities clearing houses and exchanges which meet the definition of a guarantee under FASB interpretations. Under these standard securities clearing house and exchange membership agreements, members are required to guarantee, collectively, the performance of other members and, accordingly, if another member becomes unable to satisfy its obligations to the clearing house or exchange, all other members would be required to meet the shortfall. In the opinion of management, the Company’s liability under these agreements is not quantifiable and could exceed the cash and securities it has posted as collateral. However, the potential of being required to make payments under these arrangements is remote. Accordingly, no contingent liability has been recorded in the Company’s unaudited condensed consolidated statements of financial condition for these agreements.

16. Income Taxes

The accompanying unaudited condensed consolidated financial statements include U.S. federal, state and local income taxes on the Company’s allocable share of the U.S. results of operations, as well as taxes payable to jurisdictions outside the U.S. In addition, certain of the Company’s entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax (“UBT”) in the City of New York. Therefore, the tax liability or benefit related to the partnership income or loss except for UBT rests with the partners, (see Note 2 — “Limited Partnership Interests in BGC Holdings” for discussion of partnership interests) rather than the partnership entity. Income taxes are accounted for using the asset and liability method, as prescribed in FASB guidance on Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against deferred tax assets if it is deemed more likely than not that those assets will not be realized. No deferred U.S. federal income taxes have been provided for the undistributed foreign corporate earnings since they have been permanently reinvested in the Company’s foreign operations. It is not practical to determine the amount of additional tax that may be payable in the event these earnings are repatriated. Effective January 1, 2007, the Company, adopted FASB guidance on Accounting for Uncertainty in Income Taxes. It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of June 30, 2011, the Company had $2.6 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. During the three and six months ended June 30, 2011, the Company did not have any material changes with respect to interest and penalties.

17. Regulatory Requirements

Many of the Company’s businesses are subject to regulatory restrictions and minimum capital requirements. These regulatory restrictions and capital requirements may restrict the Company’s ability to withdraw capital from its subsidiaries.

Certain U.S. subsidiaries of the Company are registered as U.S. broker-dealers or Futures Commissions Merchants subject to Rule 15c3-1 of the SEC and Rule 1.17 of the Commodity Futures Trading Commission, which specify uniform minimum net capital requirements, as defined, for their registrants, and also require a significant part of the registrants’ assets be kept in relatively liquid form. As of June 30, 2011, the Company’s U.S. subsidiaries had net capital in excess of their minimum capital requirements.

Certain European subsidiaries of the Company are regulated by the U.K. Financial Services Authority (the “FSA”) and must maintain financial resources (as defined by the FSA) in excess of the total financial resources requirement of the FSA. As of June 30, 2011, the European subsidiaries had financial resources in excess of their requirements.

Certain other subsidiaries of the Company are subject to regulatory and other requirements of the jurisdictions in which they operate.

The regulatory requirements referred to above may restrict the Company’s ability to withdraw capital from its regulated subsidiaries. As of June 30, 2011, $330.4 million of net assets were held by regulated subsidiaries. These subsidiaries had aggregate regulatory net capital, as defined, in excess of the aggregate regulatory requirements, as defined, of $221.6 million.

18. Segment and Geographic Information

Segment Information

The Company currently operates its business in one reportable segment, that of providing financial intermediary services to the financial markets, integrated voice and electronic brokerage and trade execution services in a broad range of products and services, including global fixed income securities, equities, futures, foreign exchange, derivatives and other instruments, including proprietary market data offerings.

Geographic Information

The Company offers products and services in the UK, U.S., France, Asia (including Australia), Other Americas, Other Europe, and the Middle East and Africa region (defined as the “MEA” region). Information regarding revenues for the three and six months ended June 30, 2011 and 2010, respectively, and information regarding long-lived assets (defined as loans, forgivable loans and other receivables from employees and partners, fixed assets, net, certain other investments, goodwill, other intangible assets, net of accumulated amortization, and rent and other deposits) in the geographic areas as of June 30, 2011 and December 31, 2010, respectively, are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Revenues:
United Kingdom	$	157,468	$	136,090	$	319,357	$	290,156
United States		90,920		96,917		188,137		193,794
France		34,621		35,555		63,275		67,643
Asia		60,746		52,030		118,507		100,913
Other Americas		11,977		8,254		22,964		16,288
Other Europe/MEA		8,826		6,858		17,341		14,061

Total revenues	$	364,558	$	335,704	$	729,581	$	682,855


	June 30, 2011		December 31, 2010
Long-lived assets:
United Kingdom	$	158,579	$	151,132
United States		183,739		169,399
France		12,955		11,706
Asia		47,933		44,229
Other Europe/MEA		3,933		3,509
Other Americas		22,295		21,128

Total long-lived assets	$	429,434	$	401,103

19. Subsequent Events

Second Quarter Dividend

On July 24, 2011, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share payable on August 25, 2011 to Class A and Class B common stockholders of record as of August 11, 2011.

Convertible Senior Notes

On July 29, 2011, the Company issued an aggregate of $160 million principal amount of 4.50% Convertible Senior Notes due 2016 (the “4.50% convertible notes”). In connection with the issuance of the 4.50% convertible notes, the Company entered into an Indenture, dated as of July 29, 2011, with U.S. Bank National Association, as trustee. The 4.50% convertible notes were offered and sold solely to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The 4.50% convertible notes are general senior unsecured obligations of BGC Partners, Inc. The 4.50% convertible notes pay interest semiannually at a rate of 4.50% per annum and were priced at par. The 4.50% convertible notes are convertible, at the holder’s option, at a conversion rate of 101.6260 shares of Class A common stock per $1,000 principal amount of notes, subject to adjustment in certain circumstances. This conversion rate is equal to a conversion price of $9.84 per share, a 20% percent premium over the $8.20 closing price of BGC’s Class A common stock on the NASDAQ on July 25, 2011. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s Class A common stock, or a combination thereof at the Company’s election.

In connection with the offering of the 4.50% convertible notes, the Company entered into capped call transactions with affiliates of Bank of America Merrill Lynch and Deutsche Bank Securities. The capped call transactions are expected generally to reduce the potential dilution of the Company’s Class A common stock upon any conversion of the 4.50% convertible notes in the event that the market value per share of the Company’s Class A common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions (which corresponds to the initial conversion price of the 4.50% convertible notes and is subject to certain adjustments similar to those contained in the 4.50% convertible notes). The capped call transactions have a cap price equal to $12.30 per share (50% above the last reported sale price of the Company’s Class A common stock on the NASDAQ on July 25, 2011).

The net proceeds from this offering were approximately $144 million after deducting the initial purchasers’ discounts and commissions, estimated offering expenses and the cost of the capped call transactions. The Company expects to use the net proceeds from the offering for general corporate purposes, which may include financing acquisitions.

Shares Issued under CEO

During the period since July 1, 2011 to the date of this filing, the Company issued, pursuant to its current controlled equity offering, 1,280,000 shares of Class A common stock related to exchanges and redemptions of limited partnership interests as well as for general corporate purposes.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of BGC Partners, Inc. financial condition and results of operations should be read together with BGC Partners, Inc. unaudited condensed consolidated financial statements and notes to those statements, as well as forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), included elsewhere in this Report. When used herein, the terms “BGC Partners,” “BGC” the “Company,” “we,” “us” and “our” refer to BGC Partners, Inc., including consolidated subsidiaries.

This discussion summarizes the significant factors affecting our results of operations and financial condition during the three and six months ended June 30, 2011 and 2010 and as of June 30, 2011. This discussion is provided to increase the understanding of, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Report.

Overview and Business Environment

BGC Partners is a leading global brokerage company primarily servicing the wholesale financial markets. The Company specializes in the brokering of a broad range of financial products, including fixed income securities, interest rate swaps, foreign exchange, equities, equity derivatives, credit derivatives, commodities, futures, structured products and other instruments. BGC Partners also provides a full range of services, including trade execution, broker-dealer services, clearing, processing, information, and other back office services to a broad range 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, where available, fully electronic brokerage services in connection with transactions executed either over-the-counter (“OTC”) or through an exchange. Through its eSpeed and BGC Trader™ brands, BGC Partners uses its technology to operate multiple buyer, multiple seller real-time electronic marketplaces for many of the world’s most liquid capital markets. BGC Partners’ neutral platform, reliable network, straight-through processing and superior products make it the trusted source for electronic trading for the world’s largest financial firms. Through its BGC Market Data brand, the Company also offers globally distributed and innovative market data and analysis products for numerous financial instruments and markets. BGC Partners’ customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds, governments and investment firms. Named after fixed income trading innovator B. Gerald Cantor, BGC Partners has offices in 25 cities, located in New York and London, as well as in Aspen, Beijing, Chicago, Copenhagen, Dubai, Garden City (New York), Hong Kong, Istanbul, Johannesburg, Mexico City, Moscow, Nyon, Paris, Rio de Janeiro, São Paulo, Sarasota, Seoul, Singapore, Sydney, Tokyo, Toronto, West Palm Beach and Zurich.

The financial intermediary sector has been a competitive area that has had strong revenue growth over the past decade due to several factors. One factor is the increasing use of derivatives to manage risk or to take advantage of the anticipated direction of a market by allowing users to protect gains and/or guard against losses in the price of underlying assets without having to buy or sell the underlying assets. Derivatives are often used to mitigate the risks associated with interest rate movements, equity ownership, changes in the value of foreign currency, credit defaults by corporate and sovereign debtors and changes in the prices of commodity products. Over the past decade, demand from financial institutions, financial services intermediaries and large corporations have increased volumes in the wholesale derivatives market, thereby increasing the business opportunity for financial intermediaries.

Another key factor in the growth of the financial intermediary sector over the past decade has been the increase in the number of new products. As market participants and their customers strive to mitigate risk, new types of equity and fixed income securities, futures, options and other financial instruments are developed. These new securities and derivatives are not immediately ready for more liquid and standardized electronic markets, and generally increase the need for trading and require broker-assisted execution.

From the second half of 2008, and through the first three quarters of 2009, the onset of the credit crisis and ensuing global economic slowdown resulted in an industry-wide slowdown in growth or outright decline in the volumes for many of the OTC and listed products we broker. Beginning in December 2009, and continuing through the second quarter of 2011, industry-wide monthly volumes for many of the products we broker once again

increased year-over-year. These industry volumes are generally good proxies for the volumes in our Rates, Foreign Exchange, and Equities and Other Asset Classes brokerage businesses.

BGC Growth Drivers

As a wholesale intermediary, our business is driven by several key drivers in addition to those listed above. These include: overall industry volumes in the markets in which we broker, the size and productivity of our front-office headcount (sales people and brokers alike), regulatory issues, and the percentage of our revenues related to fully electronic brokerage.

Many of these main drivers had a positive impact on our results in the second quarter of 2011 compared to the year earlier period.

Overall Market Volumes and Volatility

Trading volume is driven by a number of items, including the level of issuance for financial instruments, the price volatility of these financial instruments, overall macro-economic conditions, the creation and adoption of new financial products, the regulatory environment, and the introduction and adoption of new trading technologies. In general, increased price volatility increases the demand for hedging instruments, including many of the cash and derivative products which we broker.

Rates Volumes and Volatility

BGC’s Rates business is particularly influenced by the level of sovereign debt issuance globally, and during 2010, this issuance continued to grow substantially. For example, according to the Securities Industry and Financial Markets Association (“SIFMA”), gross U.S. Treasury issuance, excluding bills, during 2010 increased by approximately 5% compared to 2009, and was over 2.2 times the level for 2008. Largely as a result of this increase, the U.S. Federal Reserve reported that U.S. Treasury average daily volumes traded by primary dealers increased by 24.0% year-over-year in the first half of 2011. Because we have a broader customer base than just primary dealers, and because of increased fully electronic trading by our clients across several desks, BGC’s fully electronic Rates volumes increased by 29.3% year-over-year in the first half of 2011.

Analysts and economists expect sovereign debt issuance to remain at these high levels for the foreseeable future as governments finance their future deficits and roll over their sizable existing debt. For instance, according to the Congressional Budget Office (the “CBO”), U.S. federal debt will be 69% of GDP at the end of fiscal year 2011, versus 36% at the end of fiscal year 2007. The CBO currently estimates that U.S. federal debt will remain at or above these levels for at least the next decade. Similarly, the European Commission says that, in the aggregate, European Union (“EU”) government debt as a percent of GDP will increase from 59% in 2007 to 83% by 2012. For certain EU countries, the Commission expects this figure to be over 100% for the next few years.

Credit Volumes

The cash portion of BGC’s Credit business is impacted by the level of global corporate bond issuance, while both the cash and credit derivatives sides of this business are impacted by sovereign and corporate issuance. BGC’s Credit revenues increased by 1.3% in the second quarter of 2011 compared to a year earlier, despite an industry-wide softening in corporate bond and credit derivative activity. For example, in the second quarter of 2011 TRACE eligible corporate securities volumes were down 3.4% year-over-year. Although overall credit default swap (“CDS”) market activity remains below its 2008 peak, the notional value of CDS on government bonds increased due to concern by market participants over the large deficits facing various governments. The uncertainty caused by these sovereign fiscal issues positively impacted volumes, and thus our revenues in our sovereign CDS, Rates and Foreign Exchange (“FX”) businesses.

Foreign Exchange Volumes

The overall FX market continued to grow year-over-year in the second quarter of 2011, as credit is returning for many local banks that trade foreign exchange, particularly in emerging markets. CLS Group (“CLS”), which settles the majority of bank-to-bank spot and forward FX transactions, reports that its average daily value traded grew by 16.7% year-over-year in the second quarter of 2011. With respect to BGC’s overall FX business, our

revenues grew even faster than the corresponding industry figures in the second quarter of 2011: our fully electronic spot foreign exchange revenues were up 33.7% and our overall foreign exchange revenues were up 18.9%, both when compared to the second quarter of 2010.

Equity-Related Volumes and Volatility

BGC’s revenues from Equities and Other Asset Classes were impacted in the second quarter of 2011 in part by trends in cash equity, equity derivatives and energy related volumes. For example, during the second quarter of 2011, overall European and U.S. cash equities volumes were generally down by double digit percentages year-over-year, while equity derivatives volumes (including indices) as reported by the Options Clearing Corporation, Eurex, and Euronext were flat-to-down. OCC equity options volumes were roughly flat, Eurex equity derivatives were down by approximately 12%, while Euronext equity derivatives were down approximately 22%. Energy and commodity volumes as reported by ICE and CME were up year-over-year during this timeframe. Overall, industry volumes had a dampening effect on BGC’s Equities and Other Asset Classes business during the quarter. Despite the industry-wide weakness, BGC’s Equities and Other Asset Classes business grew by 22.7% year-over-year in the second quarter, as we benefitted from the addition of assets from Mint and from the ramp-up of other equities desk personnel hired at the end of 2009 and in 2010.

Hybrid and Fully Electronic Trading

Historically, e-broking growth has led to higher margins and greater profits over time for exchanges and wholesale financial intermediaries alike, even if overall company revenues remain consistent. This is largely because fewer front-office employees are needed to process the same amount of volume as trading becomes more automated. Over time, electronification of exchange-traded and OTC markets has also generally led to volumes increasing faster than commissions decline, and thus often an overall increase in the rate of growth in revenues. BGC has been a pioneer in creating and encouraging hybrid and fully electronic trading, and continually works with its customers to expand such trading across more asset classes and geographies.

Outside of U.S. Treasuries and spot FX, the banks and broker-dealers which dominate the OTC markets had generally been hesitant in adopting e-broking. However, in recent years, hybrid and fully electronic inter-dealer OTC markets for products, including CDS indices, FX options, and most recently interest rate swaps, have sprung up as banks and dealers have become more open to e-broking and as firms like BGC have invested in the kinds of technology favored by our customers. Pending regulation in Europe and the U.S. regarding OTC derivatives is likely to only hasten the spread of fully electronic trading.

The combination of more market acceptance of hybrid and fully electronic trading and BGC Partners’ competitive advantage in terms of technology and experience has contributed to our strong gains in e-broking. During the second quarter of 2011, we continued to invest in hybrid and fully electronic technology broadly across our product categories.

This is largely why BGC’s second quarter of 2011 fully electronic volumes were up 17% and quarterly fully electronic brokerage revenues increased by 32.1% year-over-year. E-broking represented 10.5% of brokerage revenues in the second quarter of 2011, compared with 8.6% in the year earlier period.

Our growth in revenues from e-broking was broad based across Rates, Credit, and FX, and was generated by multiple desks in Europe, the Americas, and Asia. As we continue to benefit from the tailwind of massive global government debt issuance, and as we roll out BGC Trader and Volume Match to more of our desks, we expect our strong hybrid and fully electronic trading performance to continue.

Regulatory Environment

In addition, regulators and legislators in the U.S. and EU continue to craft new laws and regulations for the global OTC derivatives markets, including, most recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules and proposals for rules have mainly called for additional transparency, position limits and collateral or capital requirements, as well as for central clearing of most standardized derivatives. We believe that uncertainty around the final form such new rules might take may have negatively impacted trading volumes in certain markets in which we broker. We believe that it is too early to comment on specific aspects of the U.S.

regulations as rules are still being created, and much too early to comment on laws not yet passed in Europe. However, we generally believe the net impact of the rules and regulations will be positive for our business.

From time to time, we and our “associated persons” have been and are subject to periodic examinations, inspections and investigations that have and may result in significant costs and possible disciplinary actions by the SEC, the CFTC, the FSA, self-regulatory organizations and state securities administrators. Currently, we and certain other inter-dealer brokers are being investigated by the SEC with respect to trading practices and the Company and/or its executives are being questioned by the FSA with respect to certain matters relating to prior litigation.

The FSA’s biennial Advanced, Risk-Responsive Operating Frame Work risk assessment of our UK group’s regulated businesses identified certain weaknesses in our UK group’s risk, compliance and control functionality, including governance procedures. Consequently, the FSA has made a number of requests and imposed certain requirements, restrictions and limitations, and may impose additional requirements, restrictions and limitations, to enhance our regulatory compliance and controls.

Specifically, as discussed in recent meetings with our senior management, the FSA has made the following requests and imposed the following requirements, restrictions and limitations. The FSA has raised certain concerns with respect to our risk management policies and procedures relating to our anti-money laundering, anti-bribery, and corruption and fraud prevention systems and controls. The FSA has requested that we provide them with a method of supervising, on a pro forma consolidated basis, for regulatory capital purposes, certain of the businesses in our UK group with those of Cantor and its UK entities (the “Cantor UK group”), and may request or require other changes to the structure of our UK group and the Cantor UK group. In response to the FSA’s request, we have agreed to a six-month voluntary limitation on closing acquisitions of new businesses regulated by the FSA or entering into new regulated business lines, which may have a temporary impact on our ability to add businesses to our UK group, and the FSA may request additional restrictions and limitations. The FSA has also notified us that it plans to increase the liquidity and capital requirements of our UK group’s and the Cantor UK group’s existing and potential future FSA-regulated businesses to levels consistent with the industry, and has requested that we review and enhance our policies and procedures relating to assessing risks and our liquidity and capital requirements. The FSA has further requested detailed contingency planning steps to determine the stand-alone viability of each of the businesses in our UK group and the Cantor UK group as well as a theoretical orderly wind-down scenario for these businesses. The FSA has advised us that it expects our UK group to implement a large-scale program of remediation to address the foregoing, with such remediation efforts to be complete by Fall 2011. The FSA has indicated that it will provide a meeting schedule during the remediation to allow for close and continuous supervision of developments and progress against our proposed timelines. In accordance with its normal process, the FSA has provided us with a draft written mitigation program regarding the foregoing.

To address these matters, we have retained an international accounting firm and UK counsel to assist us with our UK remediation efforts. We currently expect that our remediation efforts will take until at least September 30, 2011. While we do not anticipate that the costs, and any requirements, restrictions or limitations in the UK imposed by the FSA in connection with its ongoing review, would have a material adverse effect on our businesses, financial condition, results of operations or prospects, there can be no assurance that such costs, requirements, restrictions or limitations would not have such effect.

Liquidity and Capital Resources

During the three months ended June 30, 2011, the Company entered into a $130.0 million Credit Agreement which provides for up to $130.0 million of unsecured revolving credit through June 23, 2013 (for a detailed description of this facility, see Note 13 — “Notes Payable and Collateralized Borrowings”). The borrowings under the Credit Agreement will be used for general corporate purposes, including, but not limited to, financing the Company’s existing businesses and operations, expanding its businesses and operations through additional broker hires, strategic alliances and acquisitions, and repurchasing shares of its Class A common stock or purchasing limited partnership interests in BGC Holdings or other equity interests in the Company’s subsidiaries. As of July 31, 2011, the Company has $10.0 million in borrowings outstanding under the Credit Agreement.

In addition, on July 29, 2011, the Company issued an aggregate of $160 million principal amount of the 4.50% convertible notes. For a complete description of these notes, see Note 19 — “Subsequent Events.”

In connection with the offering of the 4.50% convertible notes, the Company entered into capped call transactions which are expected generally to reduce the potential dilution of the Company’s Class A common stock upon any conversion of the 4.50% convertible notes in the event that the market value per share of the Company’s Class A common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions (which corresponds to the initial conversion price of the 4.50% convertible notes and is subject to certain adjustments similar to those contained in the 4.50% convertible notes).

Hiring and Acquisitions

Another key driver of our revenue growth is front-office headcount. We believe that our strong technology platform and unique partnership structure have enabled us to use both acquisitions and recruiting to profitably increase our front-office staff at a faster rate than our largest competitors over the past year and since the formation of BGC in 2004.

BGC Partners has invested significantly to capitalize on the current business environment through acquisitions, technology spending and the hiring of new brokers. The business climate for these acquisitions has been competitive, and it is expected that these conditions will persist for the foreseeable future. BGC Partners has been able to attract businesses and brokers to its platform as it believes they recognize that BGC Partners has the scale, technology, experience and expertise to succeed in the current business environment.

As of June 30, 2011, our front-office headcount was up by 10.4% year-over-year to 1,780 brokers and salespeople. For the three months ended June 30, 2011, average revenue generated per broker or salesperson was approximately $200,000, down approximately 2.0% from the three months ended June 30, 2010 when it was approximately $204,000.

Our revenue per front-office employee tends to decline following periods of rapid headcount growth. This is because our newer revenue producers generally achieve higher productivity levels in their second year with the Company. We expect the productivity of our newer brokers and salespeople throughout the Company to improve, especially in our newest offices in Brazil, Russia, and China, as well as our new employees who joined with respect to our recent acquisition of Mint Partners in the UK.

On April 28, 2011, we announced that we have entered into an agreement to acquire Newmark, the real estate advisory firm which operates as Newmark Knight Frank in the U.S. and which is associated with London-based Knight Frank. The transaction, which encompasses approximately 425 Newmark brokers and includes Newmark’s New York business as well as a majority interest in over 25 other domestic offices and certain of its affiliates, is expected to be immediately accretive to BGC. Newmark is one of the fastest growing real estate services companies in the global property markets. Its brand is recognized for providing seamless, sophisticated, comprehensive real estate solutions to prominent corporate and institutional clients across the globe. The purchase price will consist of cash, stock and assumption of debt. Upon acquisition, certain of its management and brokers are expected to become partners in BGC following the closing. CF & Co, an affiliate of Cantor, acted as an adviser in connection with this transaction.

On August 2, 2011, the Company’s Audit Committee authorized BGC to acquire from Cantor its North American environmental brokerage business CantorCO2e, L.P. (“CO2e”). CO2e is a provider of financial services to the environmental and renewable energy markets, primarily in the United States, offering brokerage, escrow and clearing, consulting, and technical services to clients engaged in using energy and managing emissions. CO2e primarily serves environmental credit buyers and sellers in the U.S. state and regional compliance markets (including NOx, SO2, RECs, RTCs and ERCs) and the voluntary carbon market. The business consists of 11 staff in 4 offices. The transaction is expected to be completed in the third quarter of 2011 and the purchase price will not have a material impact on our financial results.

The laws and regulations passed or proposed on both sides of the Atlantic concerning OTC trading seem likely to favor increased use of technology by all market participants, and are likely to accelerate the adoption of both hybrid and fully electronic trading. We believe these developments will favor the larger inter-dealer brokers over smaller, non-public ones, as the smaller ones generally do not have the financial wherewithal to invest the necessary sums in technology. We believe this will lead to further consolidation in our industry, and thus further allow us to profitably grow our front-office headcount.

Financial Highlights

For the three months ended June 30, 2011, income from operations before income taxes increased $6.0 million to $23.5 million from $17.5 million in the year earlier period. Total revenues increased approximately $28.9 million and total expenses increased approximately $22.9 million.

Total revenues were $364.6 million and $335.7 million for the three months ended June 30, 2011 and 2010, respectively, representing an 8.6% increase. Total revenues were $729.6 million and $682.9 million for the six months ended June 30, 2011 and 2010, respectively, representing a 6.8% increase. The main factors contributing to these increases were:

•

An overall increase in volumes in many of the markets in which we provide brokerage services.

•

An increase in brokerage revenues associated with rates products which was primarily attributable to strong sovereign debt issuance and the resulting industry wide increases in the volumes of both interest rate swaps and government bonds.

•

A global rebound in foreign exchange volumes as the credit crisis abated.

•

An increase in our front-office personnel from 1,612 at June 30, 2010 to 1,780 at June 30, 2011.

•

Continued selective expansion into the global markets, including new offices in Zurich and Dubai.

•

A continued focus on, and investment in, growing areas that complement our existing brokerage services, Equities and Other Asset Classes, particularly equity derivatives and cash equities, which are the primary contributors to our Equities and Other Asset Classes product group, for which revenues increased to $61.7 million for the three months ended June 30, 2011 compared to $50.3 million for the three months ended June 30, 2010.

•

Revenues related to fully electronic trading increased 28.4% to $40.5 million for the three months ended June 30, 2011 as compared to $31.6 million for the three months ended June 30, 2010. This increase is primarily driven by significant increases in fully electronic revenues from rates and credit brokerage. Revenues related to fully electronic trading include brokerage revenues as well as certain revenues recorded in fees from related parties.

Compensation and employee benefits expense increased by $11.2 million or 5.4% for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010.

We believe the overall performance of the Company will continue to improve as we increase revenues generated from fully electronic trading, extend our employment agreements, and increase the percentage of compensation partners receive in the form of limited partnership units. As a result, we expect to increase the amount of cash available for dividends, share repurchases and unit redemptions. Taken together, we believe that these developments will further improve BGC’s competitive position in the marketplace and improve employee retention.

Results of Operations

The following table sets forth BGC’s unaudited condensed consolidated statements of operations data expressed as a percentage of total revenues for the periods indicated (in thousands):


	Three Months Ended June 30,												Six Months Ended June 30,
	2011						2010						2011						2010
	Actual Results			Percentage of Total Revenues			Actual Results			Percentage of Total Revenues			Actual Results			Percentage of Total Revenues			Actual Results			Percentage of Total Revenues
Revenues:
Commissions	$	239,132			65.6	%	$	213,863			63.7	%	$	483,846			66.3	%	$	435,896			63.8	%
Principal transactions		102,007			28.0			99,606			29.7			200,116			27.4			202,734			29.7

Total brokerage revenues		341,139			93.6			313,469			93.4			683,962			93.7			638,630			93.5
Fees from related parties		16,206			4.4			16,436			4.9			31,641			4.3			32,362			4.7
Market data		4,598			1.3			4,444			1.3			9,174			1.3			8,831			1.3
Software solutions		2,257			0.6			1,760			0.5			4,390			0.6			3,512			0.5
Interest income		954			0.3			781			0.2			2,360			0.3			1,453			0.2
Other revenues		803			0.2			506			0.2			1,114			0.2			1,508			0.3
Losses on equity investments		(1,399	)		(0.4	)		(1,692	)		(0.5	)		(3,060	)		(0.4	)		(3,441	)		(0.5	)

Total revenues		364,558			100.0			335,704			100.0			729,581			100.0			682,855			100.0
Expenses:
Compensation and employee benefits		218,729			60.0			207,558			61.8			427,698			58.6			479,246			70.1
Allocation of net income to limited partnership units and founding/working partner units		9,237			2.5			5,163			1.5			18,437			2.5			5,163			0.8

Total compensation and employee benefits		227,966			62.5			212,721			63.3			446,135			61.1			484,409			70.9
Occupancy and equipment		35,740			9.8			28,249			8.4			65,026			8.9			56,377			8.3
Fees to related parties		3,018			0.8			3,338			1.0			5,619			0.8			7,372			1.1
Professional and consulting fees		15,211			4.2			10,016			3.0			28,552			3.9			20,085			2.9
Communications		21,801			6.0			18,468			5.5			43,131			5.9			37,536			5.5
Selling and promotion		19,443			5.4			16,227			4.8			39,629			5.4			32,144			4.7
Commissions and floor brokerage		6,932			1.9			4,916			1.5			13,027			1.8			9,803			1.4
Interest expense		4,768			1.3			3,596			1.1			9,163			1.3			6,507			1.0
Other expenses		6,199			1.7			20,652			6.2			31,280			4.3			25,041			3.7

Total expenses		341,078			93.6			318,183			94.8			681,562			93.4			679,274			99.5

Income from continuing operations before income taxes		23,480			6.4			17,521			5.2			48,019			6.6			3,581			0.5
Provision for income taxes		6,031			1.7			4,710			1.4			13,432			1.8			1,723			0.2

Consolidated net income		17,449			4.8			12,811			3.8			34,587			4.7			1,858			0.3
Less: Net income (loss) attributable to non-controlling interest in subsidiaries		7,785			2.1			5,413			1.6			16,257			2.2			(1,329	)		(0.2	)

Net income available to common stockholders	$	9,664			2.7	%	$	7,398			2.2	%	$	18,330			2.5	%	$	3,187			0.5	%

Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010

Revenues

Brokerage Revenues

Total brokerage revenues increased by $27.7 million, or 8.8%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. Commission revenues increased by $25.3 million, or 11.8%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. Principal transactions revenues increased by $2.4 million, or 2.4%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010.

The increase in brokerage revenues was primarily driven by increases in the revenues for equities and other asset classes, foreign exchange, and rates.

The increase in rates revenues of $6.4 million was primarily driven by increased fully electronic rates brokerage, which in turn was driven mainly by the continued successful roll-out of e-brokered interest rate derivative products.

The increase in credit brokerage revenues of $1.0 million was primarily due to a double-digit percentage increase in BGC’s e-brokered credit products.

Foreign exchange revenues increased by $8.9 million primarily due to continued strong growth in global volumes as well as a 33.7 percent year-over-year increase in BGC’s spot foreign exchange revenues.

Revenues from equities and other asset classes increased by $11.4 million driven primarily by Mint Partners and growth from BGC’s other cash and derivatives equities desks, as brokers hired at the end of 2009 and over the course of 2010 increased their production.

Fees from Related Parties

Fees from related parties decreased by $0.2 million, or 1.4%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The decrease was primarily due to decreased revenues related to back office services provided to Cantor.

Market Data

Market data revenues increased by $0.2 million, or 3.5%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010.

Software Solutions

Software solutions revenues increased by $0.5 million, or 28.2%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010, primarily due to an increased number of clients in the second quarter of 2011.

Interest Income

Interest income increased by $0.2 million, or 22.2%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was primarily related to an increase in employee loan balances.

Other Revenues

Other revenues increased by $0.3 million, or 58.7%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was primarily related to fees earned during the second quarter of 2011.

Losses on Equity Investments

Losses on equity investments decreased by $0.3 million, or 17.3%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. Losses on equity investments represent our pro rata share of the net losses on investments for which we have a significant ownership but do not control.

Expenses

Compensation and Employee Benefits

Compensation and employee benefits expense increased by $11.2 million, or 5.4%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. This increase is primarily related to the increased headcount year-over-year as well as the growth in brokerage revenues.

Allocations of Net Income to Limited Partnership Units and Founding/Working Partner Units

Allocation of income to limited partnership units and founding/working partner units increased by $4.1 million for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. Allocation of income to limited partnership units and founding/working partner units represent the pro rata interest in net income attributable to such partners’ units based on weighted-average economic ownership. The allocation of income to limited partnership units and founding/working partner units for the three months ended June 30, 2011, was $9.2 million, compared to $5.2 million in the three months ended June 30, 2010. The increase was primarily due to an increase in the amount of income allocated to ownership classes in the second quarter of 2011.

Occupancy and Equipment

Occupancy and equipment expense increased by $7.5 million, or 26.5%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was primarily due to the acquisition of Mint Partners, an increase in rent and associated costs related to new facilities, and a charge related to the adjustment of our sublease provision.

Fees to Related Parties

Fees to related parties decreased by $0.3 million, or 9.6%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. Fees to related parties are allocations paid to Cantor for administrative and support services.

Professional and Consulting Fees

Professional and consulting fees increased by $5.2 million, or 51.9%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was primarily due to increased costs associated with ongoing legal and regulatory matters, as well as fees associated with potential acquisitions.

Communications

Communications expense increased by $3.3 million, or 18.0%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. This increase was primarily driven by increased market data and communication costs associated with our increased headcount. As a percentage of total revenues, communications remained relatively unchanged across the two periods.

Selling and Promotion

Selling and promotion expense increased by $3.2 million, or 19.8%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was associated with our increase in brokerage revenues in the three months ended June 30, 2011, which has an impact on the amount spent on client entertainment and travel.

Commissions and Floor Brokerage

Commissions and floor brokerage expense increased by $2.0 million, or 41.0%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010, primarily due to increased volumes in our equities business during the three months ended June 30, 2011.

Interest Expense

Interest expense increased by $1.2 million, or 32.6%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was primarily related to increased costs associated with our notes payable and collateralized borrowings.

Other Expenses

Other expenses decreased by $14.5 million, or 70.0%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The decrease was primarily due to additional costs associated with the hiring of new brokers during the three months ended June 30, 2010.

Net Income Attributable to Noncontrolling Interest in Subsidiaries

Net income attributable to noncontrolling interest in subsidiaries increased by $2.4 million, or 43.8%, for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010. The increase was primarily due to the increase in the allocation of net income to Cantor units in the three months ended June 30, 2011.

Provision for Income Taxes

Provision for income taxes increased by $1.3 million, or 28.0%, for the three months ended June 30, 2011 as compared the three months ended June 30, 2010. This increase was primarily driven by an increase in taxable income in the three months ended June 30, 2011 as compared to the year earlier period. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

Revenues

Brokerage Revenues

Total brokerage revenues increased by $45.3 million, or 7.1%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. Commission revenues increased by $48.0 million, or 11.0%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. Principal transactions revenues decreased by $2.6 million, or 1.3%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010.

The increase in brokerage revenues was primarily driven by increases in the revenues for rates, foreign exchange and equities and other asset classes partially offset by lower revenues in credit products.

The increase in rates revenues of $13.8 million was primarily driven by increased fully electronic rates brokerage.

The decrease in credit brokerage revenues of $1.5 million was primarily due to an industry-wide weakness in credit trading. This was partially offset by the Company’s double-digit percentage increase in BGC’s overall Credit e-broking revenues.

Foreign exchange revenues increased by $18.4 million primarily due to continued strong growth in global volumes.

Revenues from equities and other asset classes increased by $14.5 million driven primarily by Mint Partners and growth from BGC’s energy and commodities desks.

Fees from Related Parties

Fees from related parties decreased by $0.7 million, or 2.2%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The decrease was primarily due to decreased revenues related to back office services provided to Cantor.

Market Data

Market data revenues increased by $0.3 million, or 3.9%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010.

Software Solutions

Software solutions revenues increased by $0.9 million, or 25.0%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010, primarily due to increased clients in the second quarter of 2011.

Interest Income

Interest income increased by $0.9 million, or 62.4%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The increase was primarily related to an increase in employee loan balances.

Other Revenues

Other revenues decreased by $0.4 million, or 26.1%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The decrease was primarily due to a dividend received on our investment in the London Clearing House (LCH) in the six months ended June 30, 2010.

Losses on Equity Investments

Losses on equity investments decreased by $0.4 million, or 11.1%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. Losses on equity investments represent our pro rata share of the net losses on investments for which we have a significant ownership but do not control.

Expenses

Compensation and Employee Benefits

Compensation and employee benefits expense decreased by $51.5 million, or 10.8%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. This decrease is primarily related to $80.7 million of charges that were recorded in the six months ended June 30, 2010, consisting of a $41.3 million one-time, non-recurring charge associated with the completion of a global compensation restructuring related to the modification of pre-merger employee contractual arrangements and a $39.4 million charge in the six months ended June 30, 2010 related to the redemption of founding/working partner units and limited partnership units versus a $34.0 million charge in the six months ended June 30, 2011. Also contributing to this decrease was the ongoing benefit of our global partnership redemption and compensation restructuring program. This was partially offset by our year-on-year growth in brokerage revenue and a corresponding increase in compensation for the period.

Allocations of Net Income to Limited Partnership Units and Founding/Working Partner Units

Allocation of income to limited partnership units and founding/working partner units increased by $13.3 million for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. Allocation of income to limited partnership units and founding/working partner units represent the pro rata interest in net income attributable to such partners’ units based on weighted-average economic ownership. The allocation of income to limited partnership units and founding/working partner units for the six months ended June 30, 2011, was $18.4 million, compared to $5.2 million for the six months ended June 30, 2010. The increase was primarily due to an increase in the amount of income allocated to ownership classes in the six months ended June 30, 2011. There was no allocation of income to limited partnership units and founding/working partner units in the three months ended March 31, 2010 because there was a net loss for the period.

Occupancy and Equipment

Occupancy and equipment expense increased by $8.6 million, or 15.3%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The increase was primarily due to the acquisition of Mint Partners, an increase in rent and associated costs related to new facilities, and a charge related to the adjustment of our sublease provision.

Fees to Related Parties

Fees to related parties decreased by $1.8 million, or 23.8%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. Fees to related parties are allocations paid to Cantor for administrative and support services.

Professional and Consulting Fees

Professional and consulting fees increased by $8.5 million, or 42.2%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The increase was primarily due to increased costs associated with ongoing legal and regulatory matters, as well as fees associated with potential acquisitions.

Communications

Communications expense increased by $5.6 million, or 14.9%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. This increase was primarily driven by increased market data and communication costs associated with our increased headcount. As a percentage of total revenues, communications remained relatively unchanged across the two periods.

Selling and Promotion

Selling and promotion expense increased by $7.5 million, or 23.3%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The increase was associated with an increase in brokerage revenues in the six months ended June 30, 2011, which has an impact on the amount spent on client entertainment and travel.

Commissions and Floor Brokerage

Commissions and floor brokerage expense increased by $3.2 million, or 32.9%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010, primarily due to increased volumes in our equities business during the six months ended June 30, 2011.

Interest Expense

Interest expense increased by $2.7 million, or 40.8%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The increase was primarily related to increased costs associated with our notes payable and collateralized borrowings.

Other Expenses

Other expenses increased by $6.2 million, or 24.9%, for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. The increase was primarily due to additional costs associated with the hiring of new brokers.

Net Income Attributable to Noncontrolling Interest in Subsidiaries

Net income attributable to noncontrolling interest in subsidiaries increased by $17.6 million from a loss of $1.3 million for the six months ended June 30, 2010 to income of $16.3 million for the six months ended June 30, 2011. The increase was primarily due to the increase in the allocation of net income to Cantor units in the six months ended June 30, 2011. There was a net loss attributable to noncontrolling interest in subsidiaries for the six months ended June 30, 2010.

Provision for Income Taxes

Provision for income taxes increased to $13.4 million for the six months ended June 30, 2011 as compared to $1.7 million for the six months ended June 30, 2010. This increase was primarily driven by an increase in taxable income in the six months ended June 30, 2011 as compared to the year earlier period. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

Quarterly Results of Operations

The following table sets forth our unaudited quarterly results of operations for the indicated periods (in thousands). Results of any period are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business.


	June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010			June 30, 2010			March 31, 2010			December 31, 2009			September 30, 2009
Revenues:
Commissions	$	239,132		$	244,714		$	206,275		$	208,918		$	213,863		$	222,033		$	182,014		$	175,219
Principal transactions		102,007			98,109			91,466			83,381			99,606			103,128			91,460			90,608
Fees from related parties		16,206			15,435			17,221			16,413			16,436			15,926			15,776			14,945
Market data		4,598			4,576			4,869			4,614			4,444			4,387			4,265			4,824
Software solutions		2,257			2,133			2,476			1,816			1,760			1,752			1,392			1,759
Interest income		954			1,406			656			1,199			781			672			3,049			2,189
Other revenues		803			311			682			11,770			506			1,002			1,822			1,642
Losses on equity investments		(1,399	)		(1,661	)		(1,890	)		(1,609	)		(1,692	)		(1,749	)		(2,945	)		(1,747	)

Total revenues		364,558			365,023			321,755			326,502			335,704			347,151			296,833			289,439
Expenses:
Compensation and employee benefits		218,729			208,969			179,600			179,871			207,558			271,688			187,232			181,479
Allocation of net income to limited partnership units and founding/working partner units		9,237			9,200			12,320			5,824			5,163			—			3,735			1,727

Total compensation and employee benefits		227,966			218,169			191,920			185,695			212,721			271,688			190,967			183,206
Occupancy and equipment		35,740			29,286			28,982			28,161			28,249			28,128			27,015			27,653
Fees to related parties		3,018			2,601			3,017			3,061			3,338			4,034			3,410			3,208
Professional and consulting fees		15,211			13,341			14,380			10,773			10,016			10,069			12,709			6,852
Communications		21,801			21,330			21,254			19,459			18,468			19,068			18,178			16,880
Selling and promotion		19,443			20,186			18,739			17,183			16,227			15,917			15,250			14,432
Commissions and floor brokerage		6,932			6,095			5,688			4,564			4,916			4,887			4,702			4,084
Interest expense		4,768			4,395			3,777			3,796			3,596			2,911			2,535			2,476
Other expenses		6,199			25,081			7,038			27,436			20,652			4,389			8,584			22,593

Total expenses		341,078			340,484			294,795			300,128			318,183			361,091			283,350			281,384
Income (loss) from operations before income taxes		23,480			24,539			26,960			26,374			17,521			(13,940	)		13,483			8,055
Provision (benefit) for income taxes		6,031			7,401			2,942			6,878			4,710			(2,987	)		6,390			3,310

Consolidated net income (loss)		17,449			17,138			24,018			19,496			12,811			(10,953	)		7,093			4,745

Less: Net income (loss) attributable to noncontrolling interest in subsidiaries		7,785			8,472			12,267			13,272			5,413			(6,742	)		5,391			2,570

Net income (loss) available to common stockholders	$	9,664		$	8,666		$	11,751		$	6,224		$	7,398		$	(4,211	)	$	1,702		$	2,175

The tables below detail our brokerage revenues by product category for the indicated periods (in thousands):


	For the Three Months Ended
	June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010			June 30, 2010			March 31, 2010			December 31, 2009			September 30, 2009
Brokerage revenue by product (actual results):
Rates	$	145,715		$	152,810		$	135,919		$	135,596		$	139,327		$	145,350		$	125,946		$	125,861
Credit		78,134			87,193			70,317			73,923			77,109			89,680			70,388			78,893
Foreign exchange		55,630			54,219			47,966			44,439			46,778			44,665			38,465			35,811
Equities and other asset classes		61,660			48,601			43,539			38,341			50,255			45,466			38,675			25,262

Total brokerage revenues	$	341,139		$	342,823		$	297,741		$	292,299		$	313,469		$	325,161		$	273,474		$	265,827

Brokerage revenue by product (percentage):
Rates		42.7	%		44.6	%		45.7	%		46.4	%		44.4	%		44.7	%		46.1	%		47.3	%
Credit		22.9			25.4			23.6			25.3			24.6			27.6			25.7			29.7
Foreign exchange		16.3			15.8			16.1			15.2