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, 2013

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

Commission File Numbers: 0-28191, 1-35591

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 July 31, 2013, the registrant had 137,023,123 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)		6

	Condensed Consolidated Statements of Financial Condition—At June 30, 2013 and December 31, 2012		6

	Condensed Consolidated Statements of Operations—For the Three and Six Months Ended June 30, 2013 and June 30, 2012		7

	Condensed Consolidated Statements of Comprehensive Income—For the Three and Six Months Ended June 30, 2013 and June 30, 2012		8

	Condensed Consolidated Statements of Cash Flows—For the Six Months Ended June 30, 2013 and June 30, 2012		9

	Condensed Consolidated Statements of Changes in Equity—For the Year Ended December 31, 2012		11

	Condensed Consolidated Statements of Changes in Equity—For the Six Months Ended June 30, 2013		12

	Notes to Condensed Consolidated Financial Statements		13

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		44

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		80

ITEM 4	Controls and Procedures		81

PART II—OTHER INFORMATION

ITEM 1	Legal Proceedings		82

ITEM 1A	Risk Factors		82

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds		82

ITEM 3	Defaults Upon Senior Securities		82

ITEM 4	Mine Safety Disclosures		82

ITEM 5	Other Information		82

ITEM 6	Exhibits		82

SIGNATURES			83

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, which we refer to as the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein or in documents incorporated by reference 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 the factors set forth below and may impact either or both of our operating segments:

•

market conditions, including trading volume and volatility, potential deterioration of the equity and debt capital markets and the condition of the markets for commercial and other real estate, and our ability to access the capital markets;

•

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;

•

our relationships with Cantor Fitzgerald, L.P. (“Cantor”) and its affiliates, including Cantor Fitzgerald & Co. (“CF&Co”), any related conflicts of interest, any impact of Cantor’s results on our credit ratings and/or the associated outlooks, CF&Co’s acting as our sales agent under our controlled equity or other offerings, and CF&Co’s acting as our financial advisor in connection with one or more business combinations or other transactions, and our participation in various investments or cash management vehicles placed by or recommended by CF&Co.

•

economic or geopolitical conditions or uncertainties, the actions of governments or central banks or the impact of weather-related or similar events;

•

extensive regulation of our businesses, changes in regulations relating to the financial services, real estate 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 businesses, 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, a possible need for long-term borrowings or other sources of cash, related to acquisitions or other matters, 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, impairments of any loan balances and increased borrowing costs, as well as interest and currency rate fluctuations;

•

risks associated with the temporary or longer-term investment of our available cash, including defaults or impairments on our investments, or other cash management vehicles;

•

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, real estate and other industries, including acquisitions, dispositions, reorganizations, partnering opportunities and joint ventures, and to meet our financial reporting obligations with respect thereto, the anticipated benefits of any such transactions or the future impact of any such transactions on our financial results for current or future periods, the integration of any completed acquisitions and the use of proceeds of any completed dispositions and any hedging entered into in connection with cash or stock consideration received or to be received in connection with such dispositions;

•

our estimates or determinations of potential value with respect to various assets or portions of our business, including with respect to the accuracy of the assumptions or the valuation models or multiples used (as to which no representation is made);

•

our ability to hire and retain personnel, including brokers, managers and other key employees;

•

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

•

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

•

our ability to maintain or develop relationships with independently owned partner offices in our real estate services businesses;

•

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, assess and manage our operational, regulatory, and financial risks, and integrate our acquired businesses;

•

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 or redemptions of limited partnership interests of BGC Holdings, L.P., 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 or exchangeable debt securities, our repurchases of shares of our Class A common stock and purchases of BGC Holdings limited partnership interests or other equity interests of our subsidiaries, any exchanges or redemptions of limited partnership units and issuances of shares of Class A common stock in connection therewith, including in partnership restructurings, 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, unit exchanges and redemptions and partnership restructurings, conversion of our convertible notes, conversion or exchange of our convertible or exchangeable debt securities, and distributions from Cantor pursuant to Cantor’s distribution rights obligations and other distributions to Cantor partners, including deferred distribution rights shares; and

•

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

The foregoing risks and uncertainties, as well as those risks discussed under the headings “Part II, Item 1A—Risk Factors,” “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part I, Item 3—Quantitative and Qualitative Disclosures about Market Risk,” and elsewhere in this Form 10-Q may cause actual results to differ materially from the forward-looking statements. From time to time, we may also estimate the potential value of certain assets or portions of our business. In such event, no representation is made as to the accuracy of the assumptions or the valuation models or multiples used. Any such valuations are based on assumptions about profit margins and business conditions and actual or pro forma results of BGC. In any event, no representation is made that any such values or multiples could actually be achieved upon disposal of businesses or assets or that any such valuation models or multiples would be adopted by others. The information included herein is given as of the filing date of this Form 10-Q with the SEC, and future events or circumstances could differ significantly from these forward-looking statements. The Company does 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

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s Public Reference Room located at One Station Place, 100 F Street, N.E., Washington, D.C. 20549. You can also request copies of the documents, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. These filings are also available to the public from the SEC’s website at www.sec.gov.

Our website address is www.bgcpartners.com. Through our 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, CF Group Management, Inc. (“CFGM”), Cantor’s managing general partner, our directors and our executive officers; and amendments to those documents. Our website also contains additional information with respect to our industry and business. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this Quarterly Report on Form 10-Q.

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, 2013			December 31, 2012
Assets
Cash and cash equivalents	$	1,070,342		$	388,409
Cash segregated under regulatory requirements		6,570			3,392
Reverse repurchase agreements		49,063			—
Securities owned		32,016			32,003
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers		1,431,962			297,688
Accrued commissions receivable, net		263,897			222,299
Loans, forgivable loans and other receivables from employees and partners, net		124,798			220,098
Fixed assets, net		132,203			141,109
Investments		21,727			25,556
Goodwill		163,684			164,874
Other intangible assets, net		20,644			20,320
Receivables from related parties		12,408			21,655
Other assets		118,954			101,536

Total assets	$	3,448,268		$	1,638,939

Liabilities, Redeemable Partnership Interest, and Equity
Accrued compensation	$	273,870		$	125,793
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		1,424,751			254,289
Payables to related parties		41,228			40,700
Accounts payable, accrued and other liabilities		446,619			260,462
Notes payable and collateralized borrowings		273,805			301,444
Notes payable to related parties		150,000			150,000

Total liabilities		2,610,273			1,132,688
Commitments and contingencies (Note 17)
Redeemable partnership interest		79,374			78,839
Equity
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 500,000 shares authorized; 154,403 and 141,955 shares issued at June 30, 2013 and December 31, 2012, respectively; and 136,328 and 123,914 shares outstanding at June 30, 2013 and December 31, 2012, respectively		1,544			1,419
Class B common stock, par value $0.01 per share; 100,000 shares authorized; 34,848 shares issued and outstanding at June 30, 2013 and December 31, 2012, convertible into Class A common stock		348			348
Additional paid-in capital		717,066			575,381
Contingent Class A common stock		15,791			18,868
Treasury stock, at cost: 18,075 and 18,041 shares of Class A common stock at June 30, 2013 and December 31, 2012, respectively		(110,219	)		(110,090	)
Retained deficit		(145,835	)		(147,452	)
Accumulated other comprehensive loss		(6,845	)		(4,182	)

Total stockholders’ equity		471,850			334,292

Noncontrolling interest in subsidiaries		286,771			93,120

Total equity		758,621			427,412

Total liabilities, redeemable partnership interest, and equity	$	3,448,268		$	1,638,939

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,
	2013			2012			2013			2012
Revenues:
Commissions	$	324,832		$	308,438		$	623,536		$	579,785
Principal transactions		85,349			83,686			173,346			183,431
Real estate management services		39,823			37,930			79,161			41,891
Fees from related parties		12,242			13,494			25,390			26,041
Market data		3,643			3,990			7,768			8,954
Software solutions		2,530			2,487			5,096			4,936
Interest income		1,651			1,543			3,199			3,738
Other revenues		1,174			622			2,005			831
Gain on divestiture		723,147			—			723,147			—
Losses on equity investments		(1,224	)		(2,652	)		(4,512	)		(5,108	)

Total revenues		1,193,167			449,538			1,638,136			844,499
Expenses:
Compensation and employee benefits		765,679			308,029			1,055,071			554,898
Allocations of net income to limited partnership units and founding/working partner units		46,084			1,909			53,522			7,889

Total compensation and employee benefits		811,763			309,938			1,108,593			562,787
Occupancy and equipment		37,340			39,092			76,567			75,321
Fees to related parties		2,286			3,169			5,129			6,688
Professional and consulting fees		11,367			19,515			26,308			38,834
Communications		22,755			21,402			47,096			43,360
Selling and promotion		23,239			23,513			43,554			42,959
Commissions and floor brokerage		6,397			5,833			12,168			11,513
Interest expense		9,989			7,578			19,689			15,136
Other expenses		59,780			15,048			77,084			24,539

Total expenses		984,916			445,088			1,416,188			821,137
Income from operations before income taxes		208,251			4,450			221,948			23,362
Provision for income taxes		78,711			70			81,806			7,272

Consolidated net income	$	129,540		$	4,380		$	140,142		$	16,090

Less: Net income attributable to noncontrolling interest in subsidiaries		95,074			2,422			98,678			5,943

Net income available to common stockholders	$	34,466		$	1,958		$	41,464		$	10,147

Per share data:
Basic earnings per share
Net income available to common stockholders	$	34,466		$	1,958		$	41,464		$	10,147

Basic earnings per share	$	0.20		$	0.01		$	0.25		$	0.07

Basic weighted-average shares of common stock outstanding		171,758			140,368			167,515			138,257

Fully diluted earnings per share
Net income for fully diluted shares	$	69,944		$	3,878		$	89,485		$	19,668

Fully diluted earnings per share	$	0.18		$	0.01		$	0.24		$	0.07

Fully diluted weighted-average shares of common stock outstanding		378,092			274,756			367,582			269,482

Dividends declared per share of common stock	$	0.12		$	0.17		$	0.24		$	0.34

Dividends declared and paid per share of common stock	$	0.12		$	0.17		$	0.24		$	0.34

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 COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Consolidated net income	$	129,540		$	4,380		$	140,142		$	16,090
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		(2,257	)		(3,630	)		(3,123	)		(1,910	)
Unrealized loss on securities available for sale		—			(41	)		—			—

Total other comprehensive loss, net of tax		(2,257	)		(3,671	)		(3,123	)		(1,910	)

Comprehensive income		127,283			709			137,019			14,180
Less: Comprehensive income attributable to noncontrolling interest in subsidiaries, net of tax		94,745			1,762			98,218			5,614

Comprehensive income (loss) attributable to common stockholders	$	32,538		$	(1,053	)	$	38,801		$	8,566

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,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	140,142		$	16,090
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Gain on divestiture		(723,147	)		—
Fixed asset depreciation and intangible asset amortization		24,853			24,752
Employee loan amortization		19,682			14,371
Equity-based compensation		334,641			61,943
Allocations of net income to limited partnership units and founding/working partner units		53,522			7,889
Losses on equity investments		4,512			5,108
Accretion of discount on convertible notes		2,718			2,172
Reserve on loans to employees and partners		160,501			—
Impairment of fixed assets		764			991
Impairment loss on marketable securities		—			291
Deferred tax benefit		(69,044	)		(4,115	)
Other		(316	)		(1,826	)
Decrease (increase) in operating assets:
Reverse repurchase agreements		(49,063	)		—
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers		(1,134,073	)		(354,646	)
Loans, forgivable loans and other receivables from employees and partners, net		(22,901	)		(41,779	)
Accrued commissions receivable, net		(48,049	)		18,062
Securities owned		(171	)		(22,038	)
Receivables from related parties		(2,357	)		(59	)
Cash segregated under regulatory requirements		(3,178	)		(3,115	)
Other assets		(19,804	)		(7,050	)
Increase (decrease) in operating liabilities:
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		1,170,173			348,162
Payables to related parties		858			24,315
Accounts payable, accrued and other liabilities		194,035			1,985
Accrued compensation		25,726			(7,927	)

Net cash provided by operating activities	$	60,024		$	83,576
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	$	(8,796	)	$	(19,532	)
Capitalization of software development costs		(7,728	)		(6,701	)
Investment in equity method investments		(797	)		(16,828	)
Payments for acquisitions, net of cash acquired		(214	)		(25,679	)
Proceeds from divestiture		747,675			—
Sale of marketable securities		—			906
Purchase of notes receivable		—			(22,000	)
Capitalization of trademarks, patent defense and registration costs		(779	)		(234	)

Net cash provided by (used in) investing activities	$	729,361		$	(90,068	)

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2013			2012
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from collateralized borrowings	$	—		$	21,516
Repayments of collateral borrowings		(30,358	)		(12,104	)
Issuance of senior notes, net of deferred issuance costs		—			108,716
Earnings distributions to noncontrolling interests		(32,138	)		(47,821	)
Redemption of limited partnership interests		(3,496	)		(13,255	)
Dividends to stockholders		(39,847	)		(47,385	)
Proceeds from offering of Class A common stock, net		1,446			11,939
Repurchase of Class A common stock		(188	)		(337	)
Proceeds from short-term borrowings		—			90,000
Repayments of short-term borrowings		—			(103,600	)
Cancellation of restricted stock units in satisfaction of withholding tax requirements		(940	)		(1,974	)

Net cash (used in) provided by financing activities		(105,521	)		5,695
Effect of exchange rate changes on cash and cash equivalents		(1,931	)		(1,159	)
Net increase (decrease) in cash and cash equivalents		681,933			(1,956	)
Cash and cash equivalents at beginning of period		388,409			369,713

Cash and cash equivalents at end of period	$	1,070,342		$	367,757

Supplemental cash information:
Cash paid during the period for taxes	$	9,215		$	3,219

Cash paid during the period for interest	$	9,959		$	12,580

Supplemental non-cash information:
Issuance of Class A common stock upon exchange of limited partnership interests	$	41,774		$	37,155
Donations with respect to Charity Day		5,720			7,446
Issuance of Class A common stock upon purchase of notes receivable		—			3,055
Use of notes receivable in business acquisition		—			25,492
Issuance of Class A and contingent Class A common stock for acquisitions		1,040			725

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, 2012

(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 Loss			Noncontrolling Interest in Subsidiaries			Total
Balance, January 1, 2012	$	1,152	$	348	$	489,369		$	20,133		$	(109,870	)	$	(80,726	)	$	(3,752	)	$	98,044		$	414,698
Comprehensive income:
Consolidated net income		—		—		—			—			—			23,864			—			11,649			35,513
Other comprehensive loss, net of tax
Change in cumulative translation adjustment		—		—		—			—			—			—			(430	)		(103	)		(533	)

Comprehensive income		—		—		—			—			—			23,864			(430	)		11,546			34,980
Equity-based compensation, 1,343,894 shares		13		—		2,798			—			—			—			—			2,595			5,406
Dividends to common stockholders		—		—		—			—			—			(90,590	)		—			—			(90,590	)
Earnings distributions to limited partnership interests and other noncontrolling interests		—		—		—			—			—			—			—			(89,963	)		(89,963	)
Grant of exchangeability and redemption of limited partnership interests, issuance of 18,024,094 shares		180		—		65,593			—			—			—			—			65,836			131,609
Issuance of Class A common stock (net of costs), 4,797,177 shares		48		—		17,123			—			—			—			—			8,897			26,068
Issuance of Class A common stock upon purchase of notes receivable, 453,172 shares		5		—		1,991			—			—			—			—			1,059			3,055
Redemption of founding/working partner units, 1,928,069 units		—		—		(6,903	)		—			—			—			—			(3,705	)		(10,608	)
Repurchase of Class A common stock, 44,013 shares		—		—		—			—			(220	)		—			—			(117	)		(337	)
Cantor purchase of Cantor units from BGC Holdings upon redemption of founding/working partner units, 920,729 units		—		—		—			—			—			—			—			2,732			2,732
Re-allocation of equity due to additional investment by founding/working partners		—		—		—			—			—			—			—			(1,378	)		(1,378	)
Issuance of contingent and Class A common stock for acquisitions, 2,119,393 shares		21		—		7,477			(1,651	)		—			—			—			3,179			9,026
Newmark noncontrolling interest		—		—		(2,112	)		386			—			—			—			(5,517	)		(7,243	)
Other		—		—		45			—			—			—			—			(88	)		(43	)

Balance, December 31, 2012	$	1,419	$	348	$	575,381		$	18,868		$	(110,090	)	$	(147,452	)	$	(4,182	)	$	93,120		$	427,412

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, 2013

(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 Loss			Noncontrolling Interest in Subsidiaries			Total
Balance, January 1, 2013	$	1,419	$	348	$	575,381		$	18,868		$	(110,090	)	$	(147,452	)	$	(4,182	)	$	93,120		$	427,412
Comprehensive income:
Consolidated net income		—		—		—			—			—			41,464			—			98,678			140,142
Other comprehensive loss, net of tax
Change in cumulative translation adjustment		—		—		—			—			—			—			(2,663	)		(460	)		(3,123	)

Comprehensive income		—		—		—			—			—			41,464			(2,663	)		98,218			137,019
Equity-based compensation, 623,393 shares		6		—		1,184			—			—			—			—			1,111			2,301
Dividends to common stockholders		—		—		—			—			—			(39,847	)		—			—			(39,847	)
Earnings distributions to limited partnership interests and other noncontrolling interests		—		—		—			—			—			—			—			(30,957	)		(30,957	)
Grant of exchangeability and redemption of limited partnership interests, issuance of 8,837,725 shares		88		—		134,250			—			—			—			—			129,227			263,565
Issuance of Class A common stock (net of costs), 1,899,687 shares		19		—		5,280			—			—			—			—			2,421			7,720
Redemption of founding/working partner units, 888,085 units		—		—		—			—			—			—			—			(913	)		(913	)
Repurchase of Class A common stock, 33,478 shares		—		—		—			—			(129	)		—			—			(59	)		(188	)
Re-allocation of equity due to additional investment by founding/working partners		—		—		—			—			—			—			—			(938	)		(938	)
Issuance of contingent and Class A common stock for acquisitions, 1,086,975 shares		11		—		3,782			(3,077	)		—			—			—			324			1,040
Newmark noncontrolling interest		—		—		(2,684	)		—			—			—			—			(5,990	)		(8,674	)
Other		1		—		(127	)		—			—			—			—			1,207			1,081

Balance, June 30, 2013	$	1,544	$	348	$	717,066		$	15,791		$	(110,219	)	$	(145,835	)	$	(6,845	)	$	286,771		$	758,621

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

Business Overview

BGC Partners, Inc. (together with its subsidiaries, “BGC Partners,” “BGC” or the “Company”) is a leading global brokerage company primarily servicing the wholesale financial and real estate markets through its two segments, Financial Services and Real Estate Services. The Company’s Financial Services segment specializes in the brokerage of a broad range of products, including fixed income securities, interest rate swaps, foreign exchange, equities, equity derivatives, credit derivatives, commodities, futures and structured products. It 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 in many markets, fully electronic brokerage services in connection with transactions executed either over the counter (“OTC”) or through an exchange. Through its BGC Trader™ and BGC Market Data brands, BGC Partners offers financial technology solutions, market data, and analytics related to select financial instruments and markets.

In the fourth quarter of 2011, BGC Partners acquired Newmark & Company Real Estate, Inc., the real estate advisory firm which operates as Newmark Knight Frank (“Newmark”) in the United States (“U.S.”) and which is associated with London-based Knight Frank. In the second quarter of 2012, BGC Partners completed the acquisition of substantially all of the assets of Grubb & Ellis Company and its direct and indirect subsidiaries, which the Company refers to as “Grubb & Ellis.” The Company has largely completed the integration of the Grubb & Ellis assets with Newmark Knight Frank to form the resulting brand, Newmark Grubb Knight Frank (“NGKF”). NGKF is a full-service commercial real estate platform that comprises the Company’s Real Estate Services segment, offering commercial real estate tenants, owners, investors and developers a wide range of services, including leasing; capital markets services, including investment sales, debt placement, appraisal and valuation services; commercial mortgage brokerage services; as well as consulting, project and development management, leasing and corporate advisory services and property and corporate facilities management services.

In connection with the Company’s acquisition of substantially all of the assets of Grubb & Ellis, the Company changed its reportable segments beginning with the second quarter of 2012, to consist of two reportable segments, Financial Services and Real Estate Services. Prior to the second quarter of 2012, BGC Partners had only one reportable segment.

The Company’s customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds, governments, corporations, property owners, real estate developers and investment firms. BGC Partners has offices in dozens of major markets, including New York and London, as well as in Atlanta, Beijing, Boston, Chicago, Copenhagen, Dallas, Dubai, Hong Kong, Houston, Istanbul, Johannesburg, Los Angeles, Mexico City, Miami, Moscow, Nyon, Paris, Rio de Janeiro, São Paulo, Seoul, Singapore, Sydney, Tokyo, Toronto, Washington, D.C. and Zurich.

NASDAQ OMX Transaction

On June 28, 2013, the Company sold (the “NASDAQ OMX Transaction”) its on-the-run, electronic benchmark U.S. Treasury platform (the “Purchased Assets”) to The NASDAQ OMX Group, Inc. (“NASDAQ OMX”). The total consideration consisted of $750 million in cash, plus an earn-out of up to 14,883,705 shares of NASDAQ OMX common stock to be paid ratably over 15 years, provided that NASDAQ OMX, as a whole, produces at least $25 million in gross revenues each year. The Purchased Assets were part of a larger cash flow-generating product group that includes other fully electronic trading, market data, and software businesses, including electronic brokerage of off-the-run U.S. Treasuries, as well as Treasury Bills, Treasury Swaps, Treasury Repos, Treasury Spreads, and Treasury Rolls. The gain is included in “Gain on divestiture” in the Company’s unaudited condensed consolidated statements of operations.

Share Count Reduction and Modifications/Extensions of Employment Agreements

At the end of the second quarter of 2013, the Company redeemed or exchanged 77.4 million units from the partners of BGC (the “Global Partnership Restructuring Program”). The Company granted and expects to issue 45.2 million shares of the Company’s Class A common stock, of which approximately 39.1 million will be restricted shares. The Company also expects to pay the anticipated withholding taxes owed on behalf of these partners related to this redemption/exchange and issuance. The restricted shares are generally expected to be saleable by partners in good standing after either five or ten years. Transferability of the shares of Restricted Stock will not be subject to continued employment or service with the Company or any affiliate or subsidiary of the Company; however, transferability will be subject to compliance with BGC Partners’ and its affiliates’ customary non-competition obligations. Partners who agree to extend the lengths of their employment agreements and/or other contractual modifications sought by the Company are expected to be able to sell their restricted shares over a shorter time period. Taken together, these actions resulted in the Company reducing its fully diluted share count by 32.2 million shares.

As a result of the above transactions, the Company incurred non-cash, non-dilutive compensation charges of $464.6 million related to the redemption/exchange of partnership units, issuance of restricted shares, and the reduction of compensation-related partnership loans. These charges, along with the $723.1 million gain related to the NASDAQ OMX transaction, have been recognized in the Company’s unaudited condensed consolidated statements of operations for the three months ended June 30, 2013.

Basis of Presentation

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”) and in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The Company’s unaudited condensed consolidated financial statements include the Company’s accounts and all subsidiaries in which the Company has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to previously reported amounts to conform to the current presentation.

The unaudited condensed consolidated financial statements contain all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the unaudited condensed consolidated statements of financial condition, the unaudited condensed consolidated statements of operations, the unaudited condensed consolidated statements of comprehensive income, the unaudited condensed consolidated statements of cash flows and the unaudited condensed consolidated statements of changes in equity of the Company for the periods presented. The results of operations for the 2013 interim periods are not necessarily indicative of results to be expected for the entire fiscal year, which will end on December 31, 2013.

Recently Adopted Accounting Pronouncements:

As of and for the annual period ended December 31, 2012, the Company early adopted the FASB’s guidance on Intangibles—Goodwill and Other—Testing Indefinite-Lived Intangible Assets for Impairment, which simplifies how entities test indefinite-lived intangible assets for impairment. This guidance allows entities to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If a more than fifty percent likelihood exists that an indefinite-lived intangible asset is impaired, then a quantitative impairment test must be performed by comparing the fair value of the asset with its carrying amount. The adoption of this FASB guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In December 2011, the FASB issued guidance on Disclosures about Offsetting Assets and Liabilities, which requires entities to disclose information about offsetting and related arrangements to enable users of financial statements to evaluate the potential effect of netting arrangements on an entity’s financial position, including the potential effect of rights of set-off. This FASB guidance was effective for interim and annual reporting periods beginning on or after January 1, 2013. The adoption of this FASB guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements, as this guidance only requires additional disclosures concerning offsetting and related arrangements.

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 held by Cantor Fitzgerald, L.P. (“Cantor”), 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 Company’s unaudited condensed consolidated statements of financial condition. This classification is applicable to founding/working partner units because these units are redeemable upon termination of a partner, including a termination of employment, which can be at the option of the partner and not within the control of the issuer.

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 generally 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

Certain employees hold limited partnership interests in BGC Holdings (e.g., REUs, RPUs, PSUs, PSIs and LPUs, collectively the “limited partnership units”). 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 Company’s 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 post-termination liability awards, and in accordance with FASB guidance, the Company records compensation expense for the awards based on the change in value at each reporting date in the Company’s unaudited condensed consolidated statements of operations as part of “Compensation and employee benefits.”

Cantor Units

Cantor’s limited partnership interest (“Cantor units”) in BGC Holdings 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 attributable to noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of operations.

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 for Class A common stock on a one-for-one basis (subject to adjustment). Any exchange of limited partnership interests into Class A common shares would not impact the fully diluted number of shares and units outstanding. Because these limited partnership interests generally receive quarterly allocations of net income, such exchange would have no significant impact on the cash flows or equity of the Company. Each quarter, net income is allocated between the limited partnership interests and the common stockholders. In quarterly periods in which the Company has a net loss, the loss allocation for founding/working partner units, limited partnership units and Cantor units is allocated to Cantor and reflected as a component of “Net income attributable to noncontrolling interest in subsidiaries.” In subsequent quarters in which the Company has net income, the initial allocation of income to the limited partnership interests is to “Net income attributable to noncontrolling interests,” to recover any losses taken in earlier quarters. The remaining income is allocated to the limited partnership interests based on their weighted-average pro rata share of economic ownership of the operating subsidiaries for the quarter. This income (loss) allocation process has no impact on the net income allocated to common stockholders.

3.	Acquisitions

Newmark

During the year ended December 31, 2012, the Company purchased a majority interest in an affiliated company of Newmark for total consideration transferred of approximately $2.1 million. As a result of such transaction, the Company recognized goodwill of approximately $1.5 million, which was allocated to the Company’s Real Estate Services segment. During the year ended December 31, 2012, the Company purchased additional noncontrolling interests related to Newmark for approximately $8.3 million. During the six months ended June 30, 2013, the Company purchased additional noncontrolling interests related to Newmark for approximately $9.4 million.

Grubb & Ellis

On April 13, 2012, the Company completed the acquisition of substantially all of the assets of Grubb & Ellis. The total consideration transferred for Grubb & Ellis was $47.1 million. The consideration transferred included the extinguishment of approximately $30.0 million (principal amount) pre-bankruptcy senior secured debt (the “Notes Receivable”), which the Company purchased at a discount, and which had a fair value of approximately $25.6 million as of the acquisition date. The consideration transferred also included approximately $5.5 million under debtor-in-possession term loans and $16.0 million in cash to the bankruptcy estate for the benefit of Grubb & Ellis’ unsecured creditors. The excess of the consideration transferred over the fair value of the net assets acquired has been recorded as goodwill of $5.0 million and allocated to the Company’s Real Estate Services segment. The Company had total direct costs of approximately $2.8 million related to the acquisition of Grubb & Ellis.

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition of Grubb & Ellis had occurred on January 1, 2011. Grubb & Ellis’ results for the second quarter of 2012 prior to its acquisition by the Company are not material and, as a result, pro forma unaudited supplemental information has not been provided for the three months ended June 30, 2012 as the amounts are materially consistent with the amounts recognized in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2012. These pro forma results are not indicative of operations that would have been achieved, nor are they indicative of future results of operations. The pro forma results do not reflect any potential cost savings or other operational efficiencies that could result from the acquisition. The historical financials of Grubb & Ellis and the pro forma information contain unusual and non-recurring expenses incurred during the distressed period leading up to the Grubb & Ellis bankruptcy. The pro forma information also does not include any adjustments for expenses with respect to assets or liabilities not acquired or assumed by the Company.


In millions	Six Months Ended June 30, 2012
Pro forma revenues	$	927.4
Pro forma consolidated net income	$	9.3

Other Acquisitions

During the year ended December 31, 2012, the Company completed other acquisitions for a total consideration of $24.5 million, of which $20.0 million was attributed to goodwill. Of the $20.0 million attributed to goodwill, approximately $15.7 million was allocated to the Company’s Real Estate Services segment and approximately $4.3 million was allocated to the Company’s Financial Services segment. See Note 14—“Goodwill and Other Intangible Assets, Net” for further information with regard to the Company’s goodwill by reportable segment. The Company’s allocation of the consideration transferred to the assets acquired and liabilities assumed is preliminary. The Company expects to finalize its analysis within the first year after the acquisitions, and therefore adjustments to the preliminary allocation may occur.

In February 2013, the Company acquired certain assets of Sterling International Brokers, a money brokerage company, for nominal consideration. The Company expects to finalize its allocation of the consideration transferred to the assets acquired and liabilities assumed within the first year after the acquisition, and therefore adjustments to the preliminary allocation may occur.

In June 2013, the Company acquired a controlling interest in an entity that had previously been accounted for using the equity method. This transaction resulted in the consolidation of the entity in the Company’s unaudited condensed consolidated financial statements subsequent to the Company’s acquisition of a controlling interest. In connection with this transaction, the Company recognized goodwill of approximately $1.3 million, which was allocated to the Company’s Financial Services segment. The Company expects to finalize its analysis within the first year after the acquisition, and therefore adjustments to the preliminary allocation may occur.

The results of operations of Newmark, Grubb & Ellis and the Company’s other acquisitions have been included in the Company’s unaudited condensed consolidated financial statements subsequent to their respective dates of acquisition.

4.	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 and contingent shares for which all necessary conditions have been satisfied except for the passage of time. 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 of the operating subsidiaries.

The Company’s earnings for the three and six months ended June 30, 2013 and 2012 were allocated as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net income available to common stockholders	$	34,466	$	1,958	$	41,464	$	10,147
Allocation of income to limited partnership interests in BGC Holdings	$	140,068	$	3,034	$	151,026	$	13,471

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Basic earnings per share:
Net income available to common stockholders	$	34,466	$	1,958	$	41,464	$	10,147

Basic weighted-average shares of common stock outstanding (1)		171,758		140,368		167,515		138,257

Basic earnings per share	$	0.20	$	0.01	$	0.25	$	0.07

(1)

For the three and six months ended June 30, 2013, basic weighted-average shares of common stock include, on a weighted-average basis, 45.2 million shares of the Company’s Class A common stock (of which approximately 39.1 million are restricted shares) that the Company granted and expects to issue in connection with the global partnership restructuring program (see Note 1—“Organization and Basis of Presentation”).

Fully diluted EPS 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 Convertible Notes, if applicable (see Note 15—“Notes Payable, Collateralized and Short-Term Borrowings”), and expense related to dividend equivalents for certain RSUs, if applicable, as the numerator. The denominator is comprised of the Company’s weighted-average outstanding shares of common stock and, if dilutive, the weighted-average number of limited partnership interests and other contracts to issue shares of common stock, including Convertible Notes, stock options, RSUs and warrants. 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 be dilutive.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Fully diluted earnings per share:
Net income available to common stockholders	$	34,466	$	1,958	$	41,464	$	10,147
Allocation of net income to limited partnership interests in BGC Holdings, net of tax		31,618		1,836		39,361		9,373
Interest expense on convertible notes, net of tax		3,860		—		8,657		—
Dividend equivalent expense on RSUs, net of tax		—		84		3		148

Net income for fully diluted shares	$	69,944	$	3,878	$	89,485	$	19,668

Weighted-average shares:
Common stock outstanding		171,758		140,368		167,515		138,257
Limited partnership interests in BGC Holdings (1)		165,127		132,035		159,255		129,158
Convertible notes		39,780		—		39,722		—
RSUs (Treasury stock method)		630		585		339		765
Other		797		1,768		751		1,302

Fully diluted weighted-average shares of common stock outstanding		378,092		274,756		367,582		269,482

Fully diluted earnings per share	$	0.18	$	0.01	$	0.24	$	0.07

(1)

For the three and six months ended June 30, 2013, limited partnership interests in BGC Holdings exclude, on a weighted-average basis, 77.4 million limited partnership units that were redeemed or exchanged in June 2013 in connection with the global partnership restructuring program (see Note 1—“Organization and Basis of Presentation”).

For the three months ended June 30, 2013 and 2012, respectively, approximately 6.6 million and 48.4 million potentially dilutive securities were not included in the computation of fully diluted EPS because their effect would have been anti-dilutive.

Additionally, as of June 30, 2013 and 2012, respectively, approximately 5.9 million and 3.5 million shares of contingent Class A common stock were excluded from the computation of fully diluted EPS because the conditions for issuance had not been met by the end of the respective periods.

5.	Stock Transactions and Unit Redemptions

Class A Common Stock

Changes in shares of the Company’s Class A common stock outstanding for the three and six months ended June 30, 2013 and 2012 were as follows. This table does not include 45.2 million shares of the Company’s Class A common stock (of which approximately 39.1 million are restricted shares) that the Company granted and expects to issue in connection with the global partnership restructuring program (see Note 1—“Organization and Basis of Presentation”).


	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Shares outstanding at beginning of period		130,873,581			104,762,935		123,913,759			97,220,042
Share issuances:
Redemptions and exchanges of limited partnership interests (1)		3,498,243			2,530,980		8,837,725			6,004,888
Vesting of restricted stock units (RSUs)		131,571			201,316		623,393			876,289
Acquisitions (2)		1,086,975			839,120		1,086,975			918,835
Purchase of notes receivable in connection with the Company’s acquisition of Grubb & Ellis		—			—		—			453,172
Other issuances of Class A common stock		771,169			47,023		1,899,687			2,952,161
Treasury stock repurchases		(33,478	)		—		(33,478	)		(44,013	)

Shares outstanding at end of period		136,328,061			108,381,374		136,328,061			108,381,374

(1)	The issuances related to redemptions and exchanges of limited partnership interests did not impact the fully diluted number of shares and units outstanding.

(2)	For the three and six months ended June 30, 2012, 72,009 of these shares were issued pursuant to the exemption from registration provided by Regulation S under the Securities Act.

Class B Common Stock

The Company did not issue any shares of Class B common stock during the three and six months ended June 30, 2013 and 2012.

Controlled Equity Offering

On December 12, 2012, the Company entered into a controlled equity offering sales agreement (the “December 2012 Sales Agreement”) with Cantor Fitzgerald & Co. (“CF&Co”), pursuant to which the Company may offer and sell up to an aggregate of 20 million shares of Class A common stock. Shares of the Company’s Class A common stock sold under its controlled equity offering sales agreements are used primarily for redemptions of limited partnership interests in BGC Holdings. CF&Co is a wholly-owned subsidiary of Cantor and an affiliate of the Company. Under the December 2012 Sales Agreement, the Company has agreed to pay CF&Co 2% of the gross proceeds from the sale of shares. As of June 30, 2013, the Company has sold 8,672,410 shares of Class A common stock under the December 2012 Sales Agreement.

Unit Redemptions and Share Repurchase Program

The Company’s Board of Directors and Audit Committee have authorized repurchases of the Company’s Class A common stock and redemptions of BGC Holdings limited partnership interests or other equity interests in the Company’s subsidiaries. On May 1, 2013, the Company’s Board of Directors and Audit Committee increased the BGC Partners share repurchase and unit redemption authorization to $100 million. This authorization increased to $250 million upon the closing of the NASDAQ OMX Transaction on June 28, 2013 (see Note 1—“Organization and Basis of Presentation”).

The below table excludes 77.4 million units which the Company redeemed or exchanged from partners at the end of the second quarter of 2013. The Company granted and expects to issue 45.2 million restricted shares of the Company’s Class A common stock, of which approximately 39.1 million will be restricted shares (see Note 1—“Organization and Basis of Presentation”). Unit redemption and share repurchase activity for the six months ended June 30, 2013 was as follows:


Period	Total Number of Units Redeemed or Shares Repurchased		Average Price Paid per Unit or Share		Approximate Dollar Value of Units and Shares That May Yet Be Redeemed/ Purchased Under the Plan
Redemptions (1), (2)
January 1, 2013—March 31, 2013		5,193,534	$	4.16
April 1, 2013—April 30, 2013		894,218		5.51
May 1, 2013—May 31, 2013		—		—
June 1, 2013—June 30, 2013		1,764,245		5.48

Total Redemptions		7,851,997	$	4.61
Repurchases (3), (4)
January 1, 2013—March 31, 2013		—	$	—
April 1, 2013—April 30, 2013		33,478		5.61
May 1, 2013—May 31, 2013		—		—
June 1, 2013—June 30, 2013		—		—

Total Repurchases		33,478	$	5.61

Total Redemptions and Repurchases		7,885,475	$	4.61	$	250,000,000

(1)

During the three months ended June 30, 2013, the Company redeemed approximately 2.5 million limited partnership units at an average price of $5.54 per unit and approximately 0.2 million founding/working partner units at an average price of $4.68 per unit. During the three months ended June 30, 2012, the Company redeemed approximately 2.6 million limited partnership units at an average price of $6.47 per unit and approximately 0.3 million founding/working partner units at an average price of $7.76 per unit.

(2)

During the six months ended June 30, 2013, the Company redeemed approximately 6.9 million limited partnership units at an average price of $4.71 per unit and approximately 0.9 million founding/working partner units at an average price of $3.78 per unit. During the six months ended June 30, 2012, the Company redeemed approximately 5.4 million limited partnership units at an average price of $6.61 per unit and approximately 1.3 million founding/working partner units at an average price of $6.55 per unit.

(3)

During the three months ended June 30, 2013, the Company repurchased 33,478 shares of its Class A common stock at an aggregate purchase price of approximately $0.2 million for an average price of $5.61 per share. The Company did not repurchase any shares of its Class A common stock during the three months ended June 30, 2012.

(4)

During the six months ended June 30, 2013, the Company repurchased 33,478 shares of its Class A common stock at an aggregate purchase price of approximately $0.2 million for an average price of $5.61 per share. During the six months ended June 30, 2012, the Company repurchased 44,013 shares of its Class A common stock at an aggregate purchase price of approximately $0.3 million for an average price of $7.66 per share.

Redeemable Partnership Interest

The changes in the carrying amount of redeemable partnership interest for the six months ended June 30, 2013 and 2012 were as follows (in thousands):


	Six Months Ended June 30,
	2013			2012
Balance at beginning of period	$	78,839		$	86,269
Consolidated net income allocated to founding/working partner units		5,631			2,367
Earnings distributions		(1,181	)		—
Re-allocation of equity due to additional investment by founding/working partners		938			144
Founding/working partner units exchanged		(1,541	)		(1,716	)
Founding/working partner units redeemed		(2,583	)		(3,895	)
Cantor purchase of Cantor units from BGC Holdings upon redemption of founding/working partner units		—			(2,732	)
Other		(729	)		(2	)

Balance at end of period	$	79,374		$	80,435

6.	Securities Owned

Securities owned primarily consist of unencumbered U.S. Treasury bills held for liquidity purposes. Total securities owned were $32.0 million as of both June 30, 2013 and December 31, 2012.

Securities owned consisted of the following (in thousands):


	June 30, 2013		December 31, 2012
Government debt	$	32,016	$	32,003

Total	$	32,016	$	32,003

As of June 30, 2013, the Company had not pledged any of the securities owned to satisfy deposit requirements at exchanges or clearing organizations.

7.	Collateralized Transactions

Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell (“Reverse Repurchase Agreements”) are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be resold, including accrued interest.

For Reverse Repurchase Agreements, it is the Company’s policy to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under Reverse Repurchase Agreements. Collateral is valued daily, and the Company may require counterparties to deposit additional collateral or return collateral pledged when appropriate. As of June 30, 2013, the Company had $49.1 million of Reverse Repurchase Agreements for which the underlying collateral consisted of U.S. Treasury securities with a fair value of $49.1 million. These agreements were transacted with unrelated parties to facilitate the settlement of matched principal transactions.

As of December 31, 2012, the Company had no Reverse Repurchase Agreements outstanding.

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


	June 30, 2013		December 31, 2012
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to deliver	$	1,360,542	$	238,790
Cash and cash equivalents held at clearing organizations		55,103		45,563
Other receivables from broker-dealers and customers		10,352		11,587
Net pending trades		3,876		966
Open derivative contracts		2,089		782

Total	$	1,431,962	$	297,688

Payables to broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to receive	$	1,344,755	$	229,037
Payables to clearing organizations		51,187		1,632
Other payables to broker-dealers and customers		28,409		23,282
Open derivative contracts		400		338

Total	$	1,424,751	$	254,289

A portion of these receivables and payables are with Cantor. See Note 11—“Related Party Transactions,” for additional information related to these receivables and payables.

Substantially all open fails to deliver, open fails to receive and pending trade transactions as of June 30, 2013 have subsequently settled at the contracted amounts.

9.	Derivatives

In the normal course of operations, the Company enters into derivative contracts. These derivative contracts primarily consist of interest rate and foreign exchange swaps. The Company enters into derivative contracts to facilitate client transactions, hedge principal positions and facilitate hedging activities of affiliated companies.

Derivative contracts can be exchange-traded or OTC. Exchange-traded derivatives typically fall within Level 1 or Level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values exchange-traded derivatives using the closing price of the exchange-traded derivatives. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

The Company does not designate any derivative contracts as hedges for accounting purposes. FASB guidance requires that an entity recognize all derivative contracts as either assets or liabilities in the unaudited condensed consolidated statements of financial condition and measure those instruments at fair value. The fair value of all derivative contracts is recorded on a net-by-counterparty basis where a legal right to offset exists under an enforceable netting agreement. Derivative contracts are recorded as part of “Receivables from broker-dealers, clearing organizations, customers and related broker-dealers” and “Payables to broker-dealers, clearing organizations, customers and related broker-dealers” in the Company’s unaudited condensed consolidated statements of financial condition. The change in fair value of derivative contracts is reported as part of “Principal transactions” in the Company’s unaudited condensed consolidated statements of operations.

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


	June 30, 2013				December 31, 2012
	Assets		Liabilities		Assets		Liabilities
Interest rate swaps	$	737	$	—	$	782	$	—
Foreign exchange swaps		1,352		400		—		338

	$	2,089	$	400	$	782	$	338

The notional amounts of the interest rate swap transactions at June 30, 2013 and December 31, 2012 were $192.7 million and $361.8 million, 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, 2013 and December 31, 2012 were $339.5 million and $233.5 million, respectively.

The replacement cost of contracts in a gain position at June 30, 2013 was $2.1 million.

As described in Note 15—“Notes Payable, Collateralized and Short-Term Borrowings,” on July 29, 2011, the Company issued an aggregate of $160.0 million principal amount of 4.50% Convertible Senior Notes due 2016 (the “4.50% Convertible Notes”) containing an embedded conversion feature. The conversion feature meets the requirements to be accounted for as an equity instrument, and the Company classifies the conversion feature within “Additional paid-in capital” in the Company’s unaudited condensed consolidated statements of financial condition. The embedded conversion feature was measured in the amount of approximately $19.0 million on a pre-tax basis ($16.1 million net of taxes and issuance costs) at the issuance of the 4.50% Convertible Notes as the difference between the proceeds received and the fair value of a similar liability without the conversion feature and is not subsequently remeasured.

Also in connection with the issuance of the 4.50% Convertible Notes, the Company entered into capped call transactions. The capped call transactions meet the requirements to be accounted for as equity instruments, and the Company classifies the capped call transactions within “Additional paid-in capital” in the Company’s unaudited condensed consolidated statements of financial condition. The purchase price of the capped call transactions resulted in a decrease to “Additional paid-in capital” of $11.4 million on a pre-tax basis ($9.9 million on an after-tax basis) at the issuance of the 4.50% Convertible Notes, and such capped call transactions are not subsequently remeasured.

10.

Fair Value of Financial Assets and Liabilities

The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under FASB guidance at June 30, 2013 (in thousands):


	Assets at Fair Value at June 30, 2013 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Government debt	$	32,016	$	—	$	—	$	—	$	32,016
Interest rate swaps		—		737		—		—		737
Foreign exchange swaps		—		1,352		—		—		1,352

Total	$	32,016	$	2,089	$	—	$	—	$	34,105


	Liabilities at Fair Value at June 30, 2013 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Foreign exchange swaps	$	—	$	400	$	—	$	—	$	400

Total	$	—	$	400	$	—	$	—	$	400

The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under FASB guidance at December 31, 2012 (in thousands):


	Assets at Fair Value at December 31, 2012 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Government debt	$	32,003	$	—	$	—	$	—	$	32,003
Interest rate swaps		—		782		—		—		782

Total	$	32,003	$	782	$	—	$	—	$	32,785


	Liabilities at Fair Value at December 31, 2012 (1)
	Level 1		Level 2		Level 3		Netting and Collateral		Total
Foreign exchange swaps	$	—	$	338	$	—	$	—	$	338

Total	$	—	$	338	$	—	$	—	$	338

(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.

The following tables show the gross and net amounts of recognized assets and liabilities as of June 30, 2013 (in thousands):


					Net Amounts Presented in the		Gross Amounts Not Offset
Assets	Gross Amounts		Gross Amounts Offset		Statements of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
Interest rate swaps	$	951	$	214	$	737	$	—	$	—	$	737
Foreign exchange swaps		1,728		376		1,352		—		—		1,352

Total	$	2,679	$	590	$	2,089	$	—	$	—	$	2,089


Liabilities
Interest rate swaps	$	214	$	214	$	—	$	—	$	—	$	—
Foreign exchange swaps		776		376		400		—		—		400

Total	$	990	$	590	$	400	$	—	$	—	$	400

The following tables show the gross and net amounts of recognized assets and liabilities as of December 31, 2012 (in thousands):


					Net Amounts Presented in the		Gross Amounts Not Offset
Assets	Gross Amounts		Gross Amounts Offset		Statements of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
Interest rate swaps	$	990	$	208	$	782	$	—	$	—	$	782
Foreign exchange swaps		791		791		—		—		—		—

Total	$	1,781	$	999	$	782	$	—	$	—	$	782


Liabilities
Interest rate swaps	$	208	$	208	$	—	$	—	$	—	$	—
Foreign exchange swaps		1,129		791		338		—		—		338

Total	$	1,337	$	999	$	338	$	—	$	—	$	338

11.

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 United Kingdom (“U.K.”), the Company provides these services to Cantor through 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 attributable to noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of operations. In the U.S., the Company provides Cantor with technology services for which it charges Cantor based on the cost of providing such services.

The administrative services agreement provides that direct costs incurred are charged back to the service recipient. Additionally, the services recipient generally indemnifies the services provider for liabilities that it incurs arising from the provision of services other than liabilities arising from fraud or willful misconduct of the service provider. In accordance with the administrative service agreement, the Company has not recognized any liabilities related to services provided to service recipient affiliates.

The Company, together with other leading financial institutions, formed ELX, a limited partnership that has established a fully-electronic futures exchange. The Company accounts for ELX under the equity method of accounting (see Note 12—“Investments” for more details). During the three and six months ended June 30, 2013, the Company made no capital contributions to ELX. During the year ended December 31, 2012, the Company made a $16.0 million capital contribution to ELX. On March 28, 2012, the Company entered into a credit agreement with ELX, whereby the Company has agreed to lend ELX up to $16.0 million. As of June 30, 2013, the Company had not loaned ELX any amounts under this agreement. The commitment period for this credit facility extends through March 28, 2015. The Company has entered into a technology services agreement with ELX pursuant to which the Company provided software technology licenses, monthly maintenance support and other technology services as requested by ELX. As part of the NASDAQ OMX Transaction (see Note 1—“Organization and Basis of Presentation”), the Company sold the technology services agreement with ELX to NASDAQ OMX.

For the three months ended June 30, 2013 and 2012, the Company recognized related party revenues of $12.2 million and $13.5 million, respectively, for the services provided to Cantor and ELX. For the six months ended June 30, 2013 and 2012, the Company recognized related party revenues pursuant to these agreements of $25.4 million and $26.0 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, 2013 and 2012, the Company was charged $8.7 million and $9.6 million, respectively, for the services provided by Cantor and its affiliates, of which $6.4 million and $6.4 million, respectively, were to cover compensation to leased employees for the three months ended June 30, 2013 and 2012. For the six months ended June 30, 2013 and 2012, the Company was charged $16.7 million and $17.1 million, respectively, for the services provided by Cantor and its affiliates, of which $11.6 million and $10.4 million, respectively, were to cover compensation to leased employees for the six months ended June 30, 2013 and 2012. 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.

For the three months ended June 30, 2013 and 2012, Cantor’s share of the net profit in Tower Bridge was $0.3 million and $1.0 million, respectively. For the six months ended June 30, 2013 and 2012, Cantor’s share of the net profit in Tower Bridge was $0.1 million and $0.4 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 with Cantor

The Company receives certain clearing services (“Clearing Services”) from Cantor pursuant to its 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.

Other Agreements with Cantor

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, 2013, the Company had not entered into any arrangements to cover any failed U.S. Treasury transactions.

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.

In March 2009, the Company and Cantor were authorized to utilize each other’s brokers to provide brokerage services for securities not brokered by such entity, so long as, unless otherwise agreed, such brokerage services were provided in the ordinary course and on terms no less than favorable to the receiving party than such services are provided to typical third-party customers.

Receivables from and Payables to Related Broker-Dealers

Amounts due from or to Cantor and Freedom International Brokerage are for transactional revenues under a technology and services agreement with Freedom International Brokerage as well as for open derivative contracts. These are included as part of “Receivables from 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, 2013 and December 31, 2012, the Company had receivables from Cantor and Freedom International Brokerage of $3.2 million and $2.9 million, respectively.

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

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 individuals receive 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, 2013 and December 31, 2012, the aggregate balance of employee loans was $124.8 million and $220.1 million, respectively, and is included as “Loans, forgivable loans and other receivables from employees and partners, net” 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, 2013 and 2012 was $170.7 million and $7.4 million, respectively. Compensation expense for the above mentioned employee loans for the six months ended June 30, 2013 and 2012 was $180.2 million and $14.4 million, respectively.

At the end of the second quarter of 2013, the Company commenced a global partnership restructuring program to provide retention incentives and to allow the Company to take advantage of certain tax efficiencies (see Note 1—“Organization and Basis of Presentation”). Under the program, certain BGC Holdings limited partnership units were redeemed or exchanged for Restricted Stock. Due to the net redemption/exchange of the limited partnership units described above, the Company determined that the collectability of a portion of the employee loan balances is not expected and, therefore, the Company recognized a reserve for the three months ended June 30, 2013 in the amount of approximately $160.5 million. The compensation expense related to this reserve is included as part of “Compensation and employee benefits” in the Company’s unaudited condensed consolidated statements of operations.

8.75% 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 8.75% Convertible Notes in the amount of $3.3 million for both the three months ended June 30, 2013 and the three months ended June 30, 2012. The Company recorded interest expense related to the 8.75% Convertible Notes in the amount of $6.6 million for both the six months ended June 30, 2013 and the six months ended June 30, 2012. See Note 15—“Notes Payable, Collateralized and Short-Term Borrowings,” for more information.

Controlled Equity Offerings and Other Transactions with CF&Co

As discussed in Note 5—“Stock Transactions and Unit Redemptions,” the Company has entered into controlled equity offering sales agreements with CF&Co, as the Company’s sales agent. For the three months ended June 30, 2013 and 2012, the Company was

charged approximately $0.2 million and $0.3 million, respectively, for services provided by CF&Co related to the Company’s controlled equity offering sales agreements. For the six months ended June 30, 2013 and 2012, the Company was charged approximately $0.7 million and $0.9 million, respectively, for services provided by CF&Co related to the Company’s controlled equity offering sales agreements. These expenses are included as part of “Professional and consulting fees” in the Company’s unaudited condensed consolidated statements of operations.

The Company has engaged 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. 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 in full or partial payment of such fees.

On April 13, 2012, the Company completed the acquisition of Grubb & Ellis (see Note 3—“Acquisitions”). In connection with this acquisition, the Company paid an advisory fee of $1.0 million to CF&Co during the year ended December 31, 2012. This fee was recorded as part of “Professional and consulting fees” in the Company’s unaudited condensed consolidated statements of operations.

On June 26, 2012, the Company issued an aggregate $112.5 million principal amount of 8.125% Senior Notes due 2042 (the “8.125% Senior Notes”). In connection with this issuance, the Company paid underwriting fees of approximately $0.2 million to CF&Co. This fee was recorded as a debt issuance cost, which is amortized as interest expense over the term of the notes.

On June 28, 2013, the Company sold its on-the-run, electronic benchmark U.S. Treasury platform to NASDAQ OMX, pursuant to a Purchase Agreement dated April 1, 2013 (see Note 1—“Organization and Basis of Presentation”). In connection with this transaction, the Company paid fees of approximately $7.4 million to CF&Co. These expenses are included as a reduction of “Gain on divestiture” in the Company’s unaudited condensed consolidated statements of operations.

Under rules adopted by the Commodity Futures Trading Commission (“CFTC”), all foreign introducing brokers engaging in transactions with U.S. persons are required to register with the National Futures Association and either meet financial reporting and net capital requirements on an individual basis or obtain a guarantee agreement from a registered Futures Commission Merchant. The Company’s European-based brokers engage from time to time in interest rate swap transactions with U.S.-based counterparties and therefore the Company is subject to the CFTC requirements. CF&Co has entered into guarantees on behalf of the Company, and the Company is required to indemnify CF&Co for the amounts, if any, paid by CF&Co on behalf of the Company pursuant to this arrangement.

Cantor Rights to Purchase Limited Partnership Interests from BGC Holdings

Cantor has the right to purchase limited partnership interests (Cantor units) from BGC Holdings upon redemption of non-exchangeable 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).

During the year ended December 31, 2012, in connection with the redemption by BGC Holdings of an aggregate of 431,985 non-exchangeable founding/working partner units from founding partners of BGC Holdings for an aggregate consideration of $1,282,045, Cantor purchased 431,985 exchangeable limited partnership interests from BGC Holdings for an aggregate consideration of $1,282,045. The redemption of the non-exchangeable founding partner units and issuance of an equal number of exchangeable limited partnership interests did not change the fully diluted number of shares outstanding. In addition, pursuant to the Sixth Amendment to the BGC Holdings Limited Partnership Agreement, during the year ended December 31, 2012, Cantor purchased 488,744 exchangeable limited partnership interests from BGC Holdings for an aggregate consideration of $1,449,663 in connection with the grant of exchangeability and exchange of 488,744 founding partner units. Such exchangeable limited partnership interests are exchangeable by Cantor at any time on a one-for-one basis (subject to adjustment) for shares of the Company’s Class A common stock.

As of June 30, 2013, there were 1,293,751 non-exchangeable founding/working partner units remaining in which BGC Holdings had the right to redeem and Cantor had the right to purchase an equivalent number of Cantor units.

Transactions with Executive Officers and Directors

On May 4, 2012, the Company restructured the partnership and compensation arrangement of Mr. Lutnick by (i) the issuance to Mr. Lutnick of 2,449,312 PSUs and the cancellation of the equivalent number of outstanding REUs that had been previously issued to Mr. Lutnick and (ii) the grant of a right of exchange with respect to such 2,449,312 PSUs. The restructuring was approved by the Compensation Committee.

During the six months ended June 30, 2013, the Company repurchased 33,478 shares of Class A common stock at an average price of $5.61 per share. Such shares were purchased from Stephen M. Merkel, the Company’s Executive Vice President, General Counsel and Secretary.

During the year ended December 31, 2012, the Company repurchased 44,013 shares of Class A common stock at an average price of $7.66 per share. An aggregate of 41,523 of such shares were purchased from Stephen M. Merkel, the Company’s Executive Vice President, General Counsel and Secretary, and certain family trusts.

Transactions with Relief Fund

During the six months ended June 30, 2013, the Company issued and donated an aggregate of 1,000,000 shares of Class A common stock to The Cantor Fitzgerald Relief Fund (the “Relief Fund”) in connection with the Company’s annual Charity Day.

During the three months ended June 30, 2013, the Company also committed to make charitable contributions to the Relief Fund in the amount of $25.0 million, which the Company recorded in “Other expenses” in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2013.

During the year ended December 31, 2012, the Company issued and donated an aggregate of 2,860,000 shares of Class A common stock to the Relief Fund in connection with the Company’s annual Charity Day.

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; such arrangements would be proportionally and on the same terms as similar arrangements between Aqua and Cantor.

The Company has entered into a Subordinated Loan Agreement, whereby the Company agreed to lend Aqua the principal sum of $980 thousand. The scheduled maturity date on the subordinated loan is September 1, 2015, and the current rate of interest on the loan is three month LIBOR plus 600 basis points. The loan to Aqua is recorded as part of “Receivables from related parties” in the Company’s unaudited condensed consolidated statements of financial condition.

In June 2008, the Company was authorized to enter into loans, investments or other credit support arrangements for Aqua of up to $5.0 million in the aggregate (which amount authorized was increased by $2.0 million on November 1, 2010 and an additional $3.0 million on November 5, 2012). The Company has been further authorized to provide counterparty or similar guarantees on behalf of Aqua from time to time, provided that liability for any such guarantees, as well as similar guarantees provided by Cantor, would be shared proportionally with Cantor. Aqua is 51% owned by Cantor and 49% owned by the Company. Aqua is accounted for under the equity method of accounting. During both the six months ended June 30, 2013 and the six months ended June 30, 2012, the Company made $0.8 million in cash contributions to Aqua. These contributions are recorded as part of “Investments” in the Company’s unaudited condensed consolidated statements of financial condition.

12.

Investments

Equity Method Investments


	June 30, 2013		December 31, 2012
Equity method investments (in thousands)	$	21,727	$	25,556

The Company’s share of losses related to its equity method investments was $1.2 million and $2.7 million for the three months ended June 30, 2013 and 2012, respectively. The Company’s share of losses related to its equity method investments was $4.5 million and $5.1 million for the six months ended June 30, 2013 and 2012, respectively. The Company’s share of the losses is reflected in “Losses on equity investments” in the Company’s unaudited condensed consolidated statements of operations.

On March 28, 2012, the Company made a capital contribution of $16.0 million to ELX.

Summarized condensed financial information for the Company’s equity method investments is as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Statements of operations:
Total revenues	$	14,398		$	9,854		$	26,546		$	19,769
Total expenses		17,610			14,926			34,814			31,607

Net loss	$	(3,212	)	$	(5,072	)	$	(8,268	)	$	(11,838	)

See Note 11—“Related Party Transactions,” for information regarding related party transactions with unconsolidated entities included in the Company’s unaudited condensed consolidated financial statements.

Investments in Variable Interest Entities

Certain of the Company’s equity method investments included in the equity method investment table above are considered variable interest entities (“VIEs”), as defined under the accounting guidance for consolidation. The Company is not considered the primary beneficiary of, and therefore does not consolidate, any of the VIEs in which it holds a variable interest. The Company’s involvement with such entities is in the form of direct equity interests and related agreements. The Company’s maximum exposure to loss with respect to the VIEs is its investment in such entities as well as a credit facility and a subordinated loan.

The following table sets forth the Company’s investment in its unconsolidated VIEs and the maximum exposure to loss with respect to such entities as of June 30, 2013 and December 31, 2012. The amounts presented in the “Investment” column below are included in, and not in addition to, the equity method investment table above (in thousands):


	June 30, 2013				December 31, 2012
	Investment		Maximum Exposure to Loss		Investment		Maximum Exposure to Loss
Variable interest entities (1)	$	11,236	$	28,216	$	15,199	$	44,441

(1)

In addition to its equity investments, the Company has entered into a credit agreement to lend one of its variable interest entities (ELX) up to $16.0 million. The commitment period for such credit facility extends through March 28, 2015. Additionally, the Company has entered into a subordinated loan agreement with another of its variable interest entities (Aqua), whereby the Company agreed to lend the principal sum of $980 thousand. As of June 30, 2013, the Company’s maximum exposure to loss with respect to its variable interest entities is the sum of its equity investment in such variable interest entities plus the $16.0 million credit facility and the $980 thousand subordinated loan.

13.

Fixed Assets, Net

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


	June 30, 2013		December 31, 2012
Computer and communications equipment	$	156,761	$	176,845
Software, including software development costs		104,453		146,676
Leasehold improvements and other fixed assets		107,151		111,575

		368,365		435,096
Less: accumulated depreciation and amortization		236,162		293,987

Fixed assets, net	$	132,203	$	141,109

Depreciation expense was $8.1 million and $9.3 million for the three months ended June 30, 2013 and 2012, respectively. Depreciation expense was $17.0 million and $18.2 million for the six months ended June 30, 2013 and 2012, respectively. Depreciation is included as part of “Occupancy and equipment” in the Company’s 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, 2013 and 2012, software development costs totaling $3.8 million and $2.7 million, respectively, were capitalized. For the six months ended June 30, 2013 and 2012, software development costs totaling $7.7 million and $6.7 million, respectively, were capitalized. Amortization of software development costs totaled $2.2 million and $2.0 million for the three months

ended June 30, 2013 and 2012, respectively. Amortization of software development costs totaled $4.9 million and $4.7 million for the six months ended June 30, 2013 and 2012, respectively. Amortization of software development costs is included as part of “Occupancy and equipment” in the Company’s unaudited condensed consolidated statements of operations.

Impairment charges of $0.4 million and $0.2 million were recorded for the three months ended June 30, 2013 and 2012, respectively, related to the evaluation of capitalized software projects for future benefit and for fixed assets no longer in service. Impairment charges of $0.8 million and $1.0 million were recorded for the six months ended June 30, 2013 and 2012, 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 reflected in “Occupancy and equipment” in the Company’s unaudited condensed consolidated statements of operations.

As a result of the NASDAQ OMX Transaction, the Company sold fixed assets with a carrying value of approximately $13.5 million (see Note 21—”Divestiture”).

14.

Goodwill and Other Intangible Assets, Net

The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2013 were as follows (in thousands):


	Financial Services			Real Estate Services			Total
Balance at December 31, 2012	$	85,005		$	79,869		$	164,874
Acquisitions		1,296			—			1,296
Measurement period adjustments		(83	)		(1,693	)		(1,776	)
Cumulative translation adjustment		(710	)		—			(710	)

Balance at June 30, 2013	$	85,508		$	78,176		$	163,684

During the six months ended June 30, 2013, the Company recognized measurement period adjustments of approximately $1.7 million and $0.1 million relating to Real Estate Services and Financial Services, respectively. The Company considers the adjustments insignificant to its unaudited condensed consolidated financial statements and accordingly the Company’s unaudited condensed consolidated statements of financial position at December 31, 2012 were not retrospectively adjusted.

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.

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


	June 30, 2013
	Gross amount		Accumulated amortization		Net carrying amount		Weighted-average remaining life (years)
Definite life intangible assets:
Patents	$	6,897	$	5,081	$	1,816		2.9
Acquired intangibles		22,592		18,451		4,141		2.6
Noncompete agreements		1,790		764		1,026		2.3
All other		2,473		997		1,476		5.5

Total definite life intangible assets		33,752		25,293		8,459		3.1
Indefinite life intangible assets:
Trade names		10,685		—		10,685		N/A
Horizon license		1,500		—		1,500		N/A

Total indefinite life intangible assets		12,185		—		12,185		N/A

Total	$	45,937	$	25,293	$	20,644		3.1


	December 31, 2012
	Gross amount		Accumulated amortization		Net carrying amount		Weighted-average remaining life (years)
Definite life intangible assets:
Patents	$	36,347	$	35,047	$	1,300		4.9
Acquired intangibles		20,770		16,778		3,992		3.6
Noncompete agreements		3,418		2,169		1,249		2.8
All other		3,832		2,238		1,594		7.2

Total definite life intangible assets		64,367		56,232		8,135		4.4
Indefinite life intangible assets:
Trade names		10,685		—		10,685		N/A
Horizon license		1,500		—		1,500		N/A

Total indefinite life intangible assets		12,185		—		12,185		N/A

Total	$	76,552	$	56,232	$	20,320		4.4

Intangible amortization expense was $2.0 million and $0.9 million for the three months ended June 30, 2013 and 2012, respectively. Intangible amortization expense was $2.9 million and $1.8 million for the six months ended June 30, 2013 and 2012, respectively. Intangible amortization is included as part of “Other expenses” in the Company’s unaudited condensed consolidated statements of operations.

15.

Notes Payable, Collateralized and Short-Term Borrowings

Notes payable, collateralized and short-term borrowings consisted of the following (in thousands):


	June 30, 2013		December 31, 2012
8.75% Convertible Notes	$	150,000	$	150,000
4.50% Convertible Notes		145,595		143,354
8.125% Senior Notes		108,842		108,780
Collateralized borrowings		19,368		49,310

Total	$	423,805	$	451,444

The Company’s Convertible Notes and 8.125% Senior Notes are recorded at amortized cost. The carrying amounts and estimated fair values of the Company’s Convertible Notes and 8.125% Senior Notes were as follows (in thousands):


	June 30, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
8.75% Convertible Notes	$	150,000	$	180,023	$	150,000	$	155,718
4.50% Convertible Notes		145,595		162,600		143,354		147,200
8.125% Senior Notes		108,842		119,790		108,780		116,955

Total	$	404,437	$	462,413	$	402,134	$	419,873

The fair value of the 8.75% Convertible Notes was estimated based on a jump-diffusion convertible pricing model, which among other inputs incorporates the scheduled coupon and principal payments, the conversion feature inherent in the 8.75% Convertible Notes, the Company’s Class A common stock price and a stock price volatility assumption. The stock price volatility assumptions are based on the historic volatility of the Company’s Class A common stock. The fair value measurements of the 8.75% Convertible Notes are based on significant inputs observable in the market and are considered Level 2 within the fair value hierarchy. The fair values of the 8.125% Senior Notes and 4.50% Convertible Notes were determined using observable market prices as these securities are traded and are considered Level 1 and Level 2, respectively, within the fair value hierarchy, based on whether they are deemed to be actively traded.

Convertible Notes

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 of the 8.75% Convertible Notes to repay $150.0 million principal amount of Senior Notes that matured on April 1, 2010. 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 were convertible into 23.6 million shares of Class A common stock as of June 30, 2013. 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 for both the three months ended June 30, 2013 and the three months ended June 30, 2012. The Company recorded interest expense related to the 8.75% Convertible Notes of $6.6 million for both the six months ended June 30, 2013 and the six months ended June 30, 2012.

As of June 30, 2013, the 8.75% Convertible Notes were convertible, at the holder’s option, at a conversion rate of 157.1566 shares of Class A common stock per $1,000 principal amount of notes, 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 July 29, 2011, the Company issued an aggregate of $160.0 million principal amount of 4.50% Convertible Senior Notes due 2016. The 4.50% Convertible Notes are general senior unsecured obligations of the Company. 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 will mature on July 15, 2016, unless earlier repurchased, exchanged or converted. The Company recorded interest expense related to the 4.50% Convertible Notes of $2.9 million for both the three months ended June 30, 2013 and the three months ended June 30, 2012. The Company recorded interest expense related to the 4.50% Convertible Notes of $5.8 million for both the six months ended June 30, 2013 and the six months ended June 30, 2012.

As of June 30, 2013, the 4.50% Convertible Notes were 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, 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 $0.17 per share of Class A common stock. Upon conversion, the Company will pay or deliver cash, shares of the Company’s Class A common stock, or a combination thereof at the Company’s election. As of June 30, 2013, the 4.50% Convertible Notes were convertible into approximately 16.3 million shares of Class A common stock.

As prescribed by FASB guidance, Debt, the Company recognized the value of the embedded conversion feature of the 4.50% Convertible Notes as an increase to “Additional paid-in capital” of approximately $19.0 million on a pre-tax basis ($16.1 million net of taxes and issuance costs). The embedded conversion feature was measured as the difference between the proceeds received and the fair value of a similar liability without the conversion feature. The value of the conversion feature is treated as a debt discount and reduced the initial carrying value of the 4.50% Convertible Notes to $137.2 million, net of debt issuance costs of $3.8 million allocated to the debt component of the instrument. The discount is amortized as interest cost and the carrying value of the 4.50% Convertible Notes will accrete up to the face amount over the term of the 4.50% Convertible Notes.

In connection with the offering of the 4.50% Convertible Notes, the Company entered into capped call transactions, which are expected 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 ($10.17 as of June 30, 2013, subject to adjustment in certain circumstances). The capped call transactions had an initial 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), and had a cap price equal to approximately $12.72 per share as of June 30, 2013. The purchase price of the capped call transactions resulted in a decrease to “Additional paid-in capital” of $11.4 million on a pre-tax basis ($9.9 million on an after-tax basis). The capped call transactions cover approximately 15.7 million shares of BGC’s Class A common stock as of June 30, 2013, subject to adjustment in certain circumstances.

Below is a summary of the Company’s Convertible Notes (in thousands, except share and per share amounts):


	4.50% Convertible Notes						8.75% Convertible Notes
	June 30, 2013			December 31, 2012			June 30, 2013			December 31, 2012
Principal amount of debt component	$	160,000		$	160,000		$	150,000		$	150,000
Unamortized discount		(14,405	)		(16,646	)		—			—
Carrying amount of debt component		145,595			143,354			150,000			150,000
Equity component		18,972			18,972			—			—
Effective interest rate		7.61	%		7.61	%		8.75	%		8.75	%
Maturity date (period through which discount is being amortized)		7/15/2016			7/15/2016			4/15/2015			4/15/2015
Conversion price	$	9.84		$	9.84		$	6.36		$	6.41
Number of shares to be delivered upon conversion		16,260,160			16,260,160			23,573,484			23,384,070
Amount by which the notes’ if-converted value exceeds their principal amount	$	—		$	—		$	—		$	—

Below is a summary of the interest expense related to the Company’s Convertible Notes (in thousands):


	4.50% Convertible Notes				8.75% Convertible Notes
	For the three months ended				For the three months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Coupon interest	$	1,800	$	1,800	$	3,281	$	3,281
Amortization of discount		1,125		1,090		—		—

Total interest expense	$	2,925	$	2,890	$	3,281	$	3,281


	4.50% Convertible Notes				8.75% Convertible Notes
	For the six months ended				For the six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Coupon interest	$	3,600	$	3,600	$	6,562	$	6,562
Amortization of discount		2,241		2,172		—		—

Total interest expense	$	5,841	$	5,772	$	6,562	$	6,562

8.125% Senior Notes

On June 26, 2012, the Company issued an aggregate of $112.5 million principal amount of 8.125% Senior Notes due 2042. The 8.125% Senior Notes are senior unsecured obligations of the Company. The 8.125% Senior Notes may be redeemed for cash, in whole or in part, on or after June 26, 2017, at the Company’s option, at any time and from time to time, until maturity at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. The 8.125% Senior Notes are listed on the New York Stock Exchange under the symbol “BGCA.” The Company used the proceeds to repay short-term borrowings under its unsecured revolving credit facility and for general corporate purposes, including acquisitions.

The initial carrying value of the 8.125% Senior Notes was $108.7 million, net of debt issuance costs of $3.8 million. The issuance costs are amortized as interest cost, and the carrying value of the 8.125% Senior Notes will accrete up to the face amount over the term of the 8.125% Senior Notes. The Company recorded interest expense related to the 8.125% Senior Notes of $2.3 million and $0.1 million for the three months ended June 30, 2013 and 2012, respectively. The Company recorded interest expense related to the 8.125% Senior Notes of $4.6 million and $0.1 million for the six months ended June 30, 2013 and 2012, respectively.

Collateralized Borrowings

On various dates beginning in 2009 and most recently in December 2012, the Company entered into secured loan arrangements under which it pledged certain fixed assets in exchange for loans. The secured loan arrangements have fixed rates between 2.62% and 8.09% per annum and are repayable in consecutive monthly installments with the final payments due in December 2016. The outstanding balance of the secured loan arrangements was $19.4 million and $37.6 million as of June 30, 2013 and December 31, 2012, respectively. The value of the fixed assets pledged was $16.9 million and $32.1 million as of June 30, 2013 and December 31, 2012, respectively. The secured loan arrangements are guaranteed by the Company. The Company recorded interest expense related to the secured loan arrangements of $0.6 million and $0.3 million for the three months ended June 30, 2013 and 2012, respectively. The Company recorded interest expense related to the secured loan arrangements of $0.9 million and $0.7 million for the six months ended June 30, 2013 and 2012, respectively.

During the three months ended June 30, 2013, the Company prepaid $12.2 million related to the secured loan arrangements. As a result of the prepayment, the Company incurred $0.1 million of early termination fees and recognized $0.1 million as a result of the acceleration of deferred financing costs, which are recorded in “Interest expense” in the Company’s unaudited condensed consolidated statements of operations.

On various dates during the years ended December 31, 2011 and 2010, 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 were repayable in equal monthly installments for terms of 36 months (software) and 48 months (furniture and equipment) with maturities through September 2014.

During the three months ended June 30, 2013, the Company terminated the leases and prepaid the outstanding balance of $7.4 million. As a result of the prepayment, the Company incurred $0.1 million of early termination fees and recognized $0.2 million as a result of the acceleration of deferred financing costs, which are recorded in “Interest expense” in the Company’s unaudited condensed consolidated statements of operations.

Because the leases were terminated during the three months ended June 30, 2013, the Company had no outstanding balance or fixed assets pledged related to the leases as of June 30, 2013. As of December 31, 2012, the outstanding balance of the leases and the

value of the fixed assets pledged were $11.7 million and $8.3 million, respectively. The Company recorded interest expense of $0.4 million and $0.3 million for the three months ended June 30, 2013 and 2012, respectively. The Company recorded interest expense of $0.6 million for both the six months ended June 30, 2013 and the six months ended June 30, 2012.

Because assets reverted back to the Company at the end of the leases, the transactions were capitalized. As a result, consideration received from the purchaser was included in the Company’s unaudited condensed consolidated statements of financial condition as a financing obligation, and payments made under the lease were recorded as interest expense (at an effective rate of approximately 6%). Depreciation on these fixed assets was charged to “Occupancy and equipment” in the Company’s unaudited condensed consolidated statements of operations.

Credit Agreement

On June 23, 2011, the Company entered into a credit agreement with a bank syndicate (the “Credit Agreement”) which provides for up to $130.0 million of unsecured revolving credit through September 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 affirmative and negative covenants including financial covenants, such as minimum equity, tangible equity and interest coverage, as well as maximum levels for total assets to equity capital and debt to equity. On June 20, 2013, the Company entered into the Second Amendment to Credit Agreement and Waiver, pursuant to which the parties agreed to a three-month extension of the termination date of the Credit Agreement to September 23, 2013 and a waiver of certain provisions of the Credit Agreement in connection with the NASDAQ OMX Transaction and the Company’s possible hedge of NASDAQ shares to be received in the earn-out portion of the transaction consideration.

As of both June 30, 2013 and December 31, 2012, there were no borrowings outstanding under the Credit Agreement. The Company recorded interest expense related to the Credit Agreement of $0.1 million and $0.7 million for the three months ended June 30, 2013 and 2012, respectively. The Company recorded interest expense related to the Credit Agreement of $0.2 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively.

16.

Compensation

The Company’s Compensation Committee may grant stock options, stock appreciation rights, deferred stock such as RSUs, bonus stock, performance awards, dividend equivalents and other equity-based awards, including to provide exchange rights for shares of the Company’s Class A common stock upon exchange of limited partnership units and founding/working partner units. On June 4, 2013, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the Company’s Third Amended and Restated Long Term Incentive Plan (the “Equity Plan”) to increase from 150 million to 200 million the aggregate number of shares of the Company’s Class A common stock that may be delivered or cash settled pursuant to awards granted during the life of the Equity Plan.

At the end of the second quarter of 2013, the Company commenced a global partnership restructuring program (see Note 1—“Organization and Basis of Presentation”). As a result of the program, the Company redeemed or exchanged 77.4 million limited partnership units from the partners of BGC. The Company granted and expects to issue 45.2 million shares of the Company’s Class A common stock, of which approximately 39.1 million will be restricted shares. The Company also expects to pay the anticipated withholding taxes owed on behalf of these partners related to this redemption/exchange and issuance. The restricted shares are generally expected to be saleable by partners in good standing after either five or ten years. Transferability of the shares of Restricted Stock will not be subject to continued employment or service with the Company or any affiliate or subsidiary of the Company; however, transferability will be subject to compliance with BGC Partners’ and its affiliates’ customary non-competition obligations. Partners who agree to extend the lengths of their employment agreements and/or other contractual modifications sought by the Company are expected to be able to sell their restricted shares over a shorter time period. During the three months ended June 30, 2013, the Company incurred compensation expense with respect to the grant of the shares of Restricted Stock, before associated income taxes, of $304.1 million. Additionally, due to the redemption/exchange of the limited partnership units, the Company determined that the collectability of a portion of its employee loan balances is not expected and, therefore, the Company recognized a reserve for the three months ended June 30, 2013 in the amount of approximately $160.5 million (see Note 11—“Related Party Transactions”).

Limited Partnership Units

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


	Number of Units
Balance at December 31, 2012		68,480,097
Granted		33,502,634
Redeemed/exchanged units		(85,496,599	)
Forfeited units		—

Balance at June 30, 2013		16,486,132

During the three months ended June 30, 2013 and 2012, the Company granted exchangeability on 2.3 million and 6.2 million limited partnership units for which the Company incurred compensation expense, before associated income taxes, of $12.9 million and $38.1 million, respectively. During the six months ended June 30, 2013 and 2012, the Company granted exchangeability on 5.0 million and 10.1 million limited partnership units for which the Company incurred compensation expense, before associated income taxes, of $23.5 million and $64.1 million, respectively.

As of June 30, 2013 and December 31, 2012, the number of limited partnership units exchangeable into shares of Class A common stock at the discretion of the unit holder was 0.5 million and 6.4 million, respectively.

As of June 30, 2013 and December 31, 2012, the notional value of the limited partnership units with a post-termination pay-out amount held by executives and non-executive employees, awarded in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses was $7.9 million and $64.5 million, respectively. As of June 30, 2013 and December 31, 2012, the aggregate estimated fair value of these limited partnership units was $4.1 million and $12.3 million, respectively. The number of unvested limited partnership units as of June 30, 2013 and December 31, 2012, was 0.9 million and 6.6 million, respectively.

Compensation expense related to limited partnership units with a post-termination pay-out amount is recognized over the stated service period. These units generally vest between three and five years from the date of grant. The Company recognized compensation expense, before associated income taxes, related to limited partnership units that were not redeemed of $1.3 million and $1.2 million for the three months ended June 30, 2013 and 2012, respectively. The Company recognized compensation expense, before associated income taxes, related to limited partnership units that were not redeemed of $3.8 million and $1.5 million for the six months ended June 30, 2013 and 2012, respectively.

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, 2012		2,608,731		$	5.94		1.83
Granted		1,296,498			2.73
Delivered units		(770,359	)		6.39
Forfeited units		(105,257	)		5.49

Balance at June 30, 2013		3,029,613		$	4.47		2.20

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 (adjusted if appropriate based upon the award’s eligibility to receive dividends), 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, 2013 and 2012, the Company granted 1.3 million and 1.4 million, respectively, of RSUs with aggregate estimated grant date fair values of approximately $3.5 million and $7.6 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- to four-year period.

For RSUs that vested during the six months ended June 30, 2013 and 2012, the Company withheld shares valued at $1.0 million and $2.0 million, respectively, to pay taxes due at the time of vesting.

As of June 30, 2013 and December 31, 2012, the aggregate estimated grant date fair value of outstanding RSUs was approximately $13.5 million and $15.5 million, respectively.

Compensation expense related to RSUs, before associated income taxes, was approximately $1.3 million and $1.1 million for the three months ended June 30, 2013 and 2012, respectively. Compensation expense related to RSUs, before associated income taxes, was approximately $3.3 million and $4.0 million for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013, there was approximately $11.8 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, 2012		6,450,931		$	14.11		2.4	$	—
Granted		—			—
Exercised options		—			—
Expired options		(530,193	)		15.54

Balance at June 30, 2013		5,920,738		$	13.99		2.0	$	—

Options exercisable at June 30, 2013		5,920,738		$	13.99		2.0	$	—

The Company did not grant any stock options during the six months ended June 30, 2013 and 2012. There were no options exercised during the six months ended June 30, 2013 and 2012.

The Company did not record any compensation expense related to stock options for the three or six months ended June 30, 2013 and 2012, as all of these options vested in prior years. As of June 30, 2013, compensation expense related to unvested stock options was fully recognized.

17.

Commitments, Contingencies and Guarantees

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, investigations and proceedings by governmental and self-regulatory agencies (both formal and informal) regarding the Company’s business, which may result in judgments, settlements, fines, penalties, injunctions 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, Competitor-Related and Other 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 employee hiring are not uncommon.

On February 3, 2010, Trading Technologies International, Inc. (“TT”) filed a civil action against the Company in the Northern District of Illinois, alleging direct and indirect infringement of three 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 the Company’s affiliates. On February 4, 2011, the Court ordered that the case be consolidated with nine other cases filed by TT in February 2010 against other defendants, involving some of the same patents. On May 25, 2011, TT filed a Third Amended Complaint, substituting certain of the Company’s 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. On July 31, 2012, the Court, acting on motions for partial summary judgment, entered a final judgment of invalidity as to Patents Nos. 7,676,411, 7,685,055, 7,693,768, and 7,904,374, and certified that final judgment for immediate interlocutory appeal. An appeal of that judgment is presently pending, while the Company continues to defend against TT’s claims under other patents in the District Court.

On August 24, 2009, Tullett Liberty Securities LLC (“Tullett Liberty”) filed a claim with FINRA dispute resolution (the “FINRA Arbitration”) in New York, New York against BGC Financial, L.P. (“BGC Financial”), an affiliate of BGC Partners, 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 (the “FINRA Arbitration”). 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 consolidated 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, but later agreed to discontinue the action in New York state court and 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. The parties and FINRA also agreed to consolidate an eighth arbitration filed against the Tullett Subsidiaries by certain of its former brokers now employed by BGC Financial. The hearings in the FINRA Arbitration and the arbitrations consolidated therewith began in mid-April 2012.

On October 22, 2009, Tullett Prebon plc (“Tullett”) filed a complaint in the U.S. 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.

After some additional pleading and motion practices, on June 18, 2010, the District Court ordered that the case be dismissed with prejudice, and the U.S. Court of Appeals for the Third Judicial Circuit affirmed.

Subsequently, Tullett, joined by two subsidiaries, 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 a BGC Partners affiliate subsequent to the federal complaint. BGC moved to stay the New Jersey state action and dismiss certain of the claims asserted therein. On November 9, 2011, the court granted BGC Partners’ motion to dismiss Tullett’s claim for “raiding,” but otherwise denied the motions to dismiss and for a stay. BGC Partners moved for leave to appeal the denial of its motions, which was denied. On December 22, 2011, BGC Partners filed its Answer and Affirmative Defenses. This action is currently in discovery.

Subsidiaries of Tullett filed additional claims with FINRA on April 4, 2011, seeking unspecified damages and injunctive relief against BGC Financial and nine additional former employees of the Tullett subsidiaries, alleging claims (similar to those asserted in the previously filed FINRA Arbitration) related to BGC Financial’s hiring of those nine employees in 2011. On January 11, 2013, a FINRA panel denied Tullett’s claims in their entirety and no damages were awarded against BGC. The panel granted the employees’ counterclaims, and ordered Tullett to pay the employees (collectively) approximately $367,000 in compensatory damages. On January 25, 2013, the New York Supreme Court, Commercial Division, confirmed the arbitration award, and on April 17, 2013, judgment was entered. These claims were not consolidated with the other FINRA proceedings.

On August 10, 2012, the Tullett Subsidiaries commenced a FINRA arbitration against BGC Financial, BGC USA, L.P. (“BGC USA”), another affiliate of BGC Partners, and an officer and an employee of BGC Financial who were formerly employed by the Tullett Subsidiaries. The Tullett Subsidiaries allege that BGC Financial and BGC USA aided and abetted various alleged wrongs by the individual respondents, tortiously interfered with these individuals’ employment contracts with Tullett, and violated a FINRA Rule of Conduct. The Tullett Subsidiaries also allege breaches of contract and duties of loyalty and fiduciary duties, as well as the misappropriation of trade secrets and confidential information, and the violation of a FINRA Rule of Conduct against their former employees, and seek a declaratory judgment invalidating indemnification agreements entered into between the BGC respondents and the individual respondents. The Tullett Subsidiaries seek compensatory damages of not less than $14 million in salaries, bonuses and other compensation and benefits they paid to the individual respondents, as well as consequential and punitive damages. The Tullett Subsidiaries also seek costs and a permanent injunction, in addition to the aforementioned declaratory judgment, against the respondents. In November 2012, BGC Financial and an employee of BGC Financial were dismissed as respondents, and Statements of Answer were filed on behalf of the remaining respondents. In June 2013, the parties agreed to stay this arbitration pending the resolution of the FINRA Arbitration.

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, the Company’s affiliates seek to recover significant damages 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 the Company’s brokerage affiliates seek disgorgement of profits due to unfair competition. An award has been rendered in the arbitration by BGCantor Market Data (and two predecessors in interest) in favor of the Company in the approximate amount of $0.8 million. The Company moved to vacate the award because of its failure to award attorneys’ fees and award a greater amount in damages and Tullett moved to confirm the award. The court granted Tullett’s motion to confirm the award. The Company has appealed.

On March 9, 2012, a purported derivative action was filed in the Supreme Court of the State of New York, County of New York captioned International Painters and Allied Trades Industry Pension Fund, etc. v. Cantor Fitzgerald L.P., CF Group Management, Cantor Fitzgerald & Co., the Company and its directors, Index No. 650736-2012, which suit alleges that the terms of the April 1, 2010 8.75% Convertible Notes issued to Cantor were unfair to the Company, the Company’s Controlled Equity Offerings unfairly benefited Cantor at the Company’s expense and the August 2011 amendment to the change in control agreement of Mr. Lutnick was unfair to the Company. It seeks to recover for the Company unquantified damages, disgorgement of payments received by defendants, a declaration that the 8.75% Convertible Notes are void and attorneys’ fees (the “New York Complaint”). On April 2, 2012, a purported derivative action was filed in the Court of Chancery of the State of Delaware captioned Samuel Pill v. Cantor Fitzgerald L.P., CF Group Management, Cantor Fitzgerald & Co., the Company and its directors, Civil Action No. 7382-CS, which suit made similar allegations to the New York Complaint, and seeks the same relief (the “Delaware Complaint”). On April 12, 2012, the Delaware Complaint was subsequently amended to delete any claim for relief in connection with the 8.75% Convertible Notes. On June 8, 2012, Defendants filed a motion simultaneously in New York and Delaware requesting that the two actions proceed in one forum. In response to Defendants’ motion, Plaintiff Samuel Pill voluntarily dismissed the Delaware action, without prejudice, in the Court of Chancery in the State of Delaware on June 19, 2012. On the same date, Plaintiff Pill refiled his complaint in the Supreme Court of the State of New York, County of New York, captioned Samuel Pill v. Cantor Fitzgerald, L.P., CF Group Management, Cantor Fitzgerald & Co., the Company and its directors, Index No. 652126-2012. The two actions filed in New York were consolidated on August 27, 2012. Defendants filed a motion to dismiss the consolidated action on August 10, 2012, and plaintiffs filed their opposition to defendants’ motion to dismiss on September 24, 2012. Defendants’ reply to plaintiffs’ opposition was filed on October 18, 2012, pursuant to the briefing schedule set by the court. Oral argument on the motion to dismiss was held on April 2, 2013. The Company believes that plaintiffs’ allegations are without merit and intends to continue to defend against them vigorously.

In the ordinary course of business, various legal actions are brought and may be pending against the Company. The Company is also involved, from time to time, in other reviews, investigations and proceedings by governmental and self-regulatory agencies (both formal and informal) regarding the Company’s business. Any such actions may result in judgments, settlements, fines, penalties, injunctions or other relief.

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 taken as a whole.

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, 2013, the Company was contingently liable for $2.0 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 the Company’s overall profitability.

Guarantees

The Company provides guarantees to securities clearinghouses and exchanges which meet the definition of a guarantee under FASB interpretations. Under these standard securities clearinghouse 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 clearinghouse 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.

In connection with the NASDAQ OMX Transaction (see Note 1—“Organization and Basis of Presentation”), the Company has guaranteed all payment obligations of ELX through December 31, 2014 under the Amended and Restated Technology Services Agreement, dated as of March 28, 2012, by and between eSpeed Technology Services L.P. and ELX Futures L.P. However, in the opinion of management, the potential of being required to make payments under this arrangement is remote. Accordingly, no contingent liability has been recorded in the Company’s unaudited condensed consolidated statements of financial condition for this agreement.

Indemnification

In connection with the NASDAQ OMX Transaction (see Note 1—“Organization and Basis of Presentation”), the Company has indemnified NASDAQ OMX for amounts over a defined threshold against damages arising from breaches of representations, warranties and covenants. As of June 30, 2013 and December 31, 2012, no contingent liability has been recorded in the Company’s unaudited condensed consolidated statements of financial condition for this indemnification, as the potential for being required to make payments under this indemnification is remote.

Gain Contingency

In connection with the NASDAQ OMX Transaction (see Note 1—“Organization and Basis of Presentation”), the Company will receive an earn-out of up to 14,883,705 shares of NASDAQ OMX common stock to be paid ratably over 15 years, provided that NASDAQ OMX, as a whole, produces at least $25 million in gross revenues each year. The contingent earn-out was excluded from the gain on the divestiture and will be recognized in income as and when it is realized and earned, consistent with the accounting guidance for gain contingencies.

18.

Income Taxes

The Company’s 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 New York City. 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 unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. As of June 30, 2013, the Company had approximately $97.5 million of cumulative undistributed foreign pre-tax earnings for which no deferred U.S. federal income taxes have been provided 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. Pursuant to FASB guidance on Accounting for Uncertainty in Income Taxes, the Company provides for uncertain tax positions 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, 2013, the Company had $3.3 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company recognizes interest and penalties related to income tax matters in “Interest expense” and “Other expenses,” respectively, in the Company’s unaudited condensed consolidated statements of operations. As of June 30, 2013, the Company had approximately $0.5 million of accrued interest related to uncertain tax positions. During the three and six months ended June 30, 2013, the Company did not have any material charges with respect to interest and penalties.

19.

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, 2013, 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 Financial Conduct Authority (“FCA”) and must maintain financial resources (as defined by the FCA) in excess of the total financial resources requirement of the FCA. As of June 30, 2013, 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, 2013, $325.4 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 $149.6 million.

20.

Segment and Geographic Information

Segment Information

The Company’s business segments are determined based on the products and services provided and reflect the manner in which financial information is evaluated by management. Prior to the quarter ended June 30, 2012, the Company had one reportable segment. Following the acquisition of substantially all of the assets of Grubb & Ellis, the Company changed its segment reporting structure. As a result, beginning with the quarter ended June 30, 2012, the Company’s operations consisted of two reportable segments, Financial Services and Real Estate Services.

Accordingly, all segment information presented herein reflects the Company’s revised segment reporting structure for all periods presented. The Company’s Financial Services segment specializes in the brokerage of a broad range of products, including fixed income securities, interest rate swaps, foreign exchange, equities, equity derivatives, credit derivatives, commodities, futures and structured products. It 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. The Company’s Real Estate Services segment offers commercial real estate tenants, owners, investors and developers a wide range of services, including leasing; capital markets services, including investment sales, debt placement, appraisal and valuation services; commercial mortgage brokerage services; as well as consulting, project and development management, leasing and corporate advisory services and property and corporate facilities management services.

The Company evaluates the performance and reviews the results of the segments based on each segment’s “Income (loss) from operations before income taxes.”

The amounts shown below for the Financial Services and Real Estate Services segments reflect the amounts that are used by management to allocate resources and assess performance, which is based on each segment’s “Income (loss) from operations before income taxes.” In addition to the two business segments, the tables below include a “Corporate Items” category. Corporate revenues include fees from related parties and interest income as well as gains that are not considered part of the Company’s ordinary, ongoing business such as the gain related to the NASDAQ OMX Transaction. Corporate expenses include non-cash compensation expenses (such as the grant of exchangeability to limited partnership units; redemption/exchange of partnership units, issuance of restricted shares and reduction of compensation-related partnership loans; and allocations of net income to founding/working partner units and limited partnership units) as well as unallocated expenses such as certain professional and consulting fees, executive compensation and interest expense, which are managed separately at the corporate level.

Certain financial information for the Company’s segments is presented below. See Note 14—“Goodwill and Other Intangible Assets, Net,” for goodwill by reportable segment.

Three months ended June 30, 2013 (in thousands):


	Financial Services		Real Estate Services		Corporate Items			Total
Brokerage revenues:
Rates	$	138,299	$	—	$	—		$	138,299
Credit		67,343		—		—			67,343
Foreign Exchange		60,692		—		—			60,692
Equities and Other Asset Classes		40,692		—		—			40,692
Real Estate		—		103,155		—			103,155
Real estate management services		—		39,823		—			39,823
Fees from related parties		2,858		—		9,384			12,242
Market data		3,643		—		—			3,643
Software solutions		2,530		—		—			2,530
Other revenues		—		3		1,171			1,174
Gain on divestiture		—		—		723,147			723,147
Losses on equity investments		—		—		(1,224	)		(1,224	)

Total non-interest revenues		316,057		142,981		732,478			1,191,516
Interest income		281		90		1,280			1,651

Total revenues		316,338		143,071		733,758			1,193,167
Interest expense		1,144		—		8,845			9,989
Non-interest expenses		258,833		133,820		582,274			974,927

Income (loss) from operations before income taxes	$	56,361	$	9,251	$	142,639		$	208,251

For the three months ended June 30, 2013, the Real Estate Services segment income (loss) from operations before income taxes excludes $1.9 million related to the collection of receivables and associated expenses that were recognized at fair value as part of acquisition accounting.

Three months ended June 30, 2012 (in thousands):


	Financial Services		Real Estate Services		Corporate Items			Total
Brokerage revenues:
Rates	$	134,402	$	—	$	—		$	134,402
Credit		70,084		—		—			70,084
Foreign Exchange		53,240		—		—			53,240
Equities and Other Asset Classes		41,716		—		—			41,716
Real Estate		—		92,682		—			92,682
Real estate management services		—		37,930		—			37,930
Fees from related parties		3,076		—		10,418			13,494
Market data		3,990		—		—			3,990
Software solutions		2,487		—		—			2,487
Other revenues		25		465		132			622
Losses on equity investments		—		—		(2,652	)		(2,652	)

Total non-interest revenues		309,020		131,077		7,898			447,995
Interest income		223		117		1,203			1,543

Total revenues		309,243		131,194		9,101			449,538
Interest expense		1,426		77		6,075			7,578
Non-interest expenses		249,341		125,971		62,198			437,510

Income (loss) from operations before income taxes	$	58,476	$	5,146	$	(59,172	)	$	4,450

For the three months ended June 30, 2012, the Real Estate Services segment income (loss) from operations before income taxes excludes $8.8 million related to the collection of receivables and associated expenses that were recognized at fair value as part of acquisition accounting.

Six months ended June 30, 2013 (in thousands):


	Financial Services		Real Estate Services		Corporate Items			Total
Brokerage revenues:
Rates	$	283,291	$	—	$	—		$	283,291
Credit		136,485		—		—			136,485
Foreign Exchange		120,040		—		—			120,040
Equities and Other Asset Classes		80,662		—		—			80,662
Real Estate		—		176,404		—			176,404
Real estate management services		—		79,161		—			79,161
Fees from related parties		5,680		—		19,710			25,390
Market data		7,768		—		—			7,768
Software solutions		5,096		—		—			5,096
Other revenues		623		32		1,350			2,005
Gain on divestiture		—		—		723,147			723,147
Losses on equity investments		—		—		(4,512	)		(4,512	)

Total non-interest revenues		639,645		255,597		739,695			1,634,937
Interest income		538		153		2,508			3,199

Total revenues		640,183		255,750		742,203			1,638,136
Interest expense		2,484		1		17,204			19,689
Non-interest expenses		517,282		249,606		629,611			1,396,499

Income (loss) from operations before income taxes	$	120,417	$	6,143	$	95,388		$	221,948

For the six months ended June 30, 2013, the Real Estate Services segment income (loss) from operations before income taxes excludes $7.3 million related to the collection of receivables and associated expenses that were recognized at fair value as part of acquisition accounting.

Six months ended June 30, 2012 (in thousands):


	Financial Services		Real Estate Services		Corporate Items		Total
Brokerage revenues:
Rates	$	281,286	$	—	$	—	$	281,286
Credit		154,455		—		—		154,455
Foreign Exchange		111,971		—		—		111,971
Equities and Other Asset Classes		85,537		—		—		85,537
Real Estate		—		129,967		—		129,967
Real estate management services		—		41,891		—		41,891
Fees from related parties		5,980		—		20,061		26,041
Market data		8,954		—