Edgar Filing: BGC Partners, Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

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, 2016

¨	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 August 4, 2016, the registrant had 241,897,958 shares of Class A common stock, $0.01 par value, and 34,848,107 shares of Class B common stock, $0.01 par value, outstanding.

BGC PARTNERS, INC.

TABLE OF CONTENTS


		Page
PART I—FINANCIAL INFORMATION

ITEM 1	Financial Statements (unaudited)		5

	Condensed Consolidated Statements of Financial Condition—At June 30, 2016 and December 31, 2015		5

	Condensed Consolidated Statements of Operations—For the Three and Six Months Ended June 30, 2016 and June 30, 2015		6

	Condensed Consolidated Statements of Comprehensive Income—For the Three and Six Months Ended June 30, 2016 and June 30, 2015		7

	Condensed Consolidated Statements of Cash Flows—For the Six Months Ended June 30, 2016 and June 30, 2015		8

	Condensed Consolidated Statements of Changes in Equity—For the Year Ended December 31, 2015		10

	Condensed Consolidated Statements of Changes in Equity—For the Six Months Ended June 30, 2016		11

	Notes to Condensed Consolidated Financial Statements		12

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		48

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		89

ITEM 4	Controls and Procedures		91

PART II—OTHER INFORMATION

ITEM 1	Legal Proceedings		92

ITEM 1A	Risk Factors		92

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds		92

ITEM 3	Defaults Upon Senior Securities		92

ITEM 4	Mine Safety Disclosures		92

ITEM 5	Other Information		92

ITEM 6	Exhibits		93

SIGNATURES			94

SPECIAL NOTE ON FORWARD-LOOKING INFORMATION

This Form 10-Q (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 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,” “possible,” “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 equity and debt capital markets and markets for commercial real estate and related services, and our ability to access the capital markets;

•

pricing, commissions and fees, and market position with respect to 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. and its affiliates, which we refer to as “Cantor,” including Cantor Fitzgerald & Co., which we refer to as “CF&Co,” and Cantor Commercial Real Estate Company, L.P., which we refer to as “CCRE,” any related conflicts of interest, any impact of Cantor’s results on our credit ratings and/or the associated outlooks, any loans to or from us or Cantor, CF&Co’s acting as our sales agent or underwriter under our controlled equity or other offerings, Cantor’s holdings of our debt securities, CF&Co’s acting as a market maker in our debt securities, CF&Co’s acting as our financial advisor in connection with potential business combinations, dispositions, or other transactions, our participation in various investments, stock loans or cash management vehicles placed by or recommended by CF&Co, and any services provided by or transactions with CCRE;

•

economic or geopolitical conditions or uncertainties, the actions of governments or central banks, including uncertainty regarding a U.K. exit from the European Union following the recent referendum, and the impact of terrorist acts, acts of war or other violence or political unrest, as well as natural disasters or weather-related or similar events, including power failures, communication and transportation disruptions, and other interruptions of utilities or other essential services;

•

the effect on our businesses, our clients, the markets in which we operate, and the economy in general of possible shutdowns of the U.S. government, sequestrations, uncertainties regarding the debt ceiling and the federal budget, and other potential political impasses, as well as the economic and market response to the U.S. presidential campaign and election;

•

the effect on our businesses of reductions in overall industry volumes in certain of our products as a result of central bank quantitative easing, interest rate changes, market volatility, and other factors;

•

the effect on our businesses of worldwide governmental debt issuances, austerity programs, increases or decreases in deficits, and other changes to monetary policy, and potential political impasses or regulatory requirements, including increased capital requirements for banks and other institutions;

•

extensive regulation of our businesses and customers, changes in regulations relating to financial services companies, commercial real estate and other industries, and risks relating to compliance matters, including regulatory examinations, inspections, investigations and enforcement actions, and any resulting costs, increased financial and capital requirements, enhanced oversight, fines, penalties, sanctions, 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 principal risk, trade failures, counterparty failures, 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 and the impact thereof on our financial results and cash flows in any given period;

•

certain financial risks, including the possibility of future losses, reduced cash flows from operations, increased leverage and the need for short- or long-term borrowings, including from Cantor, or other sources of cash relating to acquisitions, dispositions, 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 and increased borrowing costs, as well as interest rate and foreign currency exchange rate fluctuations;

•

risks associated with the temporary or longer-term investment of our available cash, including defaults or impairments on our investments, stock loans or cash management vehicles and collectability of loan balances owed to us by partners, employees, or others;

•

our ability to enter new markets or develop new products, trading desks, marketplaces, or services for existing or new customers and to induce such 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 combinations or other transactions in the financial services, real estate, and other industries, including acquisitions, tender offers, dispositions, offerings, reorganizations, partnering opportunities and joint ventures, and our ability to maintain or develop relationships with independently owned offices in our real estate services business and our ability to grow in other geographic regions, the anticipated benefits of any such transactions, relationships or growth and the future impact of any such transactions, relationships or growth on our financial results for current or future periods, the integration of any completed acquisitions and the use of proceeds of any completed dispositions or offerings, and the value of and any hedging entered into in connection with 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 businesses, including with respect to the accuracy of the assumptions or the valuation models or multiples used;

•

our ability to hire and retain personnel, including brokers, salespeople, managers, and other professionals;

•

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

•

our ability to effectively manage any growth that may be achieved, while ensuring compliance with all applicable financial reporting, internal control, legal compliance, and regulatory requirements;

•

our ability to identify and remediate any material weaknesses in our internal controls that could affect our ability to prepare financial statements and reports in a timely manner, control our policies, practices and procedures, operations and assets, assess and manage our operational, regulatory, and financial risks, and integrate our acquired businesses and brokers, salespeople, managers and other professionals;

•

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

•

information technology risks, including capacity constraints, failures, or disruptions in our systems or those of the clients, counterparties, exchanges, clearing facilities, or other parties with which we interact, including cybersecurity risks and incidents and regulatory focus;

•

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., which we refer to as “BGC Holdings,” or other equity interests in our subsidiaries, including from Cantor, our executive officers, other employees, partners, and others, and the net proceeds to be realized by us from offerings of shares of our Class A common stock; and

•

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 securities, our repurchases of shares of our Class A common stock and purchases of BGC Holdings limited partnership interests or other equity interests in our subsidiaries, any exchanges by Cantor of shares of our Class A common stock for shares of our Class B common stock, 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 outstanding debt or other securities, share sales and stock pledge, stock loan, and other financing transactions by holders of our shares (including by Cantor or others), including of shares acquired pursuant to our employee benefit plans, unit exchanges and redemptions, partnership restructurings, acquisitions, conversions of our Class B common stock and our other convertible securities, stock pledge, stock loan, or other financing transactions, and distributions from Cantor pursuant to Cantor’s distribution rights obligations and other distributions to Cantor partners, including deferred distribution rights shares.

The foregoing risks and uncertainties, as well as those risks and uncertainties set forth in this Quarterly Report on Form 10-Q, may cause actual results and events to differ materially from the forward-looking statements. The information included herein is given as of the filing date of this Form 10-Q with the Securities and Exchange Commission (the “SEC”), and future results or events 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”), our directors and our executive officers; and amendments to those documents. Our website also contains additional information with respect to our industries and businesses. 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, 2016			December 31, 2015
Assets
Cash and cash equivalents	$	427,558		$	461,207
Cash segregated under regulatory requirements		16,495			3,199
Securities owned		318,580			32,361
Marketable securities		152,995			650,400
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers		2,022,920			812,240
Accrued commissions receivable, net		368,214			342,299
Loans, forgivable loans and other receivables from employees and partners, net		247,922			158,176
Fixed assets, net		148,018			145,873
Investments		42,117			33,813
Goodwill		816,156			811,766
Other intangible assets, net		223,758			233,967
Receivables from related parties		8,231			15,466
Other assets		319,420			290,687

Total assets	$	5,112,384		$	3,991,454

Liabilities, Redeemable Partnership Interest, and Equity
Securities loaned	$	—		$	117,890
Accrued compensation		322,196			303,959
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		1,857,733			714,823
Payables to related parties		23,650			21,551
Accounts payable, accrued and other liabilities		568,623			692,639
Notes payable and collateralized borrowings		1,132,226			840,877

Total liabilities		3,904,428			2,691,739
Commitments and contingencies (Note 19)
Redeemable partnership interest		55,462			57,145
Equity
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 750,000 and 500,000 shares authorized at June 30, 2016 and December 31, 2015, respectively; 286,088 and 255,859 shares issued at June 30, 2016 and December 31, 2015, respectively; and 241,292 and 219,063 shares outstanding at June 30, 2016 and December 31, 2015, respectively		2,861			2,559
Class B common stock, par value $0.01 per share; 150,000 and 100,000 shares authorized at June 30, 2016 and December 31, 2015, respectively; 34,848 shares issued and outstanding at June 30, 2016 and December 31, 2015, convertible into Class A common stock		348			348
Additional paid-in capital		1,413,245			1,109,000
Contingent Class A common stock		44,415			50,095
Treasury stock, at cost: 44,796 and 36,796 shares of Class A common stock at June 30, 2016 and December 31, 2015, respectively		(267,703	)		(212,331	)
Retained deficit		(326,018	)		(273,492	)
Accumulated other comprehensive income (loss)		(20,743	)		(25,056	)

Total stockholders’ equity		846,405			651,123
Noncontrolling interest in subsidiaries		306,089			591,447

Total equity		1,152,494			1,242,570

Total liabilities, redeemable partnership interest, and equity	$	5,112,384		$	3,991,454

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,
	2016		2015		2016		2015
Revenues:
Commissions	$	498,588	$	487,810	$	973,675	$	903,093
Principal transactions		86,448		95,349		178,887		165,117
Real estate management services		45,529		46,528		91,587		87,130
Fees from related parties		4,865		6,095		11,935		12,701
Data, software and post-trade		12,448		27,693		24,765		39,220
Interest income		3,777		3,161		6,160		4,866
Other revenues		305		2,495		3,987		4,571

Total revenues		651,960		669,131		1,290,996		1,216,698
Expenses:
Compensation and employee benefits		418,621		431,287		827,804		777,871
Allocations of net income and grant of exchangeability to limited partnership units and FPUs		40,975		26,200		73,899		63,254

Total compensation and employee benefits		459,596		457,487		901,703		841,125
Occupancy and equipment		49,511		63,108		99,513		106,073
Fees to related parties		3,534		4,121		9,743		8,688
Professional and consulting fees		14,201		15,220		29,611		38,501
Communications		30,600		32,110		61,508		57,047
Selling and promotion		25,514		26,763		51,112		47,239
Commissions and floor brokerage		10,097		10,473		19,140		16,751
Interest expense		14,624		18,439		28,082		34,341
Other expenses		23,684		27,179		46,495		48,220

Total expenses		631,361		654,900		1,246,907		1,197,985
Other income (losses), net:
Gain (loss) on divestiture and sale of investments		—		894		—		679
Gains (losses) on equity method investments		500		833		1,058		1,636
Other income (loss)		10,012		1,331		7,095		32,531

Total other income (losses), net		10,512		3,058		8,153		34,846

Income from operations before income taxes		31,111		17,289		52,242		53,559
Provision for income taxes		10,548		2,272		15,388		12,318

Consolidated net income	$	20,563	$	15,017	$	36,854	$	41,241

Less: Net income attributable to noncontrolling interest in subsidiaries		4,838		5,670		7,470		17,839

Net income available to common stockholders	$	15,725	$	9,347	$	29,384	$	23,402

Per share data:
Basic earnings per share
Net income available to common stockholders	$	15,725	$	9,347	$	29,384	$	23,402

Basic earnings per share	$	0.06	$	0.04	$	0.11	$	0.10

Basic weighted-average shares of common stock outstanding		275,997		244,862		274,895		233,504

Fully diluted earnings per share
Net income for fully diluted shares	$	25,359	$	13,256	$	47,562	$	33,997

Fully diluted earnings per share	$	0.06	$	0.04	$	0.11	$	0.10

Fully diluted weighted-average shares of common stock outstanding		437,257		366,774		435,963		352,707

Dividends declared per share of common stock	$	0.16	$	0.14	$	0.30	$	0.26

Dividends declared and paid per share of common stock	$	0.16	$	0.14	$	0.30	$	0.26

The accompanying Notes to the unaudited Condensed Consolidated Financial Statement
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,
	2016			2015			2016		2015
Consolidated net income	$	20,563		$	15,017		$	36,854	$	41,241
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(149	)		2,254			4,117		(6,932	)
Available for sale securities		(1,923	)		(383	)		32		(16,351	)

Total other comprehensive income (loss), net of tax		(2,072	)		1,871			4,149		(23,283	)

Comprehensive income		18,491			16,888			41,003		17,958
Less: Comprehensive income attributable to noncontrolling interest in subsidiaries, net of tax		4,436			5,940			7,306		15,111

Comprehensive income (loss) attributable to common stockholders	$	14,055		$	10,948		$	33,697	$	2,847

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,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	36,854		$	41,241
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Fixed asset depreciation and intangible asset amortization		38,452			40,283
Employee loan amortization and reserves on employee loans		20,997			19,761
Equity-based compensation and allocations of net income to limited partnership units and FPUs		83,374			73,256
Deferred compensation expense		9,780			11,360
Losses (gains) on equity method investments		(1,058	)		(1,636	)
Amortization of (premium)/discount on notes payable		(1,014	)		2,958
Unrealized loss (gain) on marketable securities		2,937			(837	)
Impairment of fixed assets		3,169			17,679
Deferred tax provision (benefit)		(7,671	)		2,160
Sublease provision adjustment		(549	)		(924	)
Realized losses (gains) on marketable securities (see Note 9– “Marketable Securities”)		(9,606	)		(29,040	)
Loss (gain) on divestitures		—			(537	)
Forfeitures of Class A common stock		(99	)		(1,102	)
Other		(391	)		—

Consolidated net income, adjusted for non-cash and non-operating items		175,175			174,622
Decrease (increase) in operating assets:
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers		(1,207,888	)		229,099
Loans, forgivable loans and other receivables from employees and partners, net		(110,515	)		(50,015	)
Accrued commissions receivable, net		(25,454	)		1,977
Securities borrowed		—			62,499
Securities owned		(286,219	)		4,142
Receivables from related parties		7,609			(1,659	)
Cash segregated under regulatory requirements		(13,288	)		3,868
Other assets		(15,956	)		4,033
Increase (decrease) in operating liabilities:
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		1,141,883			(308,983	)
Payables to related parties		2,103			15,755
Securities sold, not yet purchased		—			(1,557	)
Securities loaned		(117,967	)		47,792
Accounts payable, accrued and other liabilities		(15,976	)		(117,301	)
Accrued compensation		(12,657	)		(70,959	)

Net cash provided by (used in) operating activities	$	(479,150	)	$	(6,687	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	$	(22,642	)	$	(14,210	)
Capitalization of software development costs		(10,267	)		(6,948	)
Purchase of equity method investments		(7,612	)		(687	)
Payments for acquisitions, net of cash acquired		(113,151	)		(155,518	)
Purchase of marketable securities		(63,341	)		—
Proceeds from sale of marketable securities		566,319			—
Disposal of assets and liabilities held for sale, net		—			(5,633	)
Capitalization of trademarks, patent defense and registration costs		(363	)		(742	)

Net cash provided by (used in) investing activities	$	348,943		$	(183,738	)

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—(Continued)

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2016			2015
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of collateralized borrowings	$	(3,400	)	$	(1,643	)
Issuance of senior notes, net of deferred issuance costs		295,762			—
Issuance of collateralized borrowings, net of deferred issuance costs		—			27,886
Earnings distributions		(41,154	)		(39,155	)
Redemption and repurchase of limited partnership interests		(20,896	)		(14,400	)
Dividends to stockholders		(81,910	)		(60,995	)
Repurchase of Class A common stock		(69,730	)		(5,886	)
Cancellation of restricted stock units in satisfaction of withholding tax requirements		(30	)		(488	)
Proceeds from issuance of Class A common stock, net of costs		14,961			—
Proceeds from exercise of stock options		86			275
Repayments of short-term borrowings		—			(20,000	)

Net cash provided by (used in) financing activities		93,689			(114,406	)
Cash and cash equivalents classified as assets held for sale		—			23,228
Effect of exchange rate changes on cash and cash equivalents		2,869			(2,661	)

Net decrease in cash and cash equivalents		(33,649	)		(284,264	)
Cash and cash equivalents at beginning of period		461,207			648,277

Cash and cash equivalents at end of period	$	427,558		$	364,013

Supplemental cash information:
Cash paid during the period for taxes	$	35,811		$	15,374
Cash paid during the period for interest		27,999			25,660
Supplemental non-cash information:
Issuance of Class A common stock upon exchange of limited partnership interests	$	28,435		$	32,998
Issuance of Class A and contingent Class A common stock for acquisitions		1,846			32,263
Issuance of Class A common stock upon conversion of 8.75% convertible notes		—			150,000

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, 2015

(in thousands, except share amounts)


	BGC Partners, Inc. Stockholders
	Class A Common Stock		Class B Common Stock		Additional Paid-in Capital			Contingent Class A Common Stock			Treasury Stock			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest in Subsidiaries			Total
Balance, January 1, 2015	$	2,202	$	348	$	817,158		$	47,383		$	(200,958	)	$	(268,920	)	$	4,303		$	180,406		$	581,922
Consolidated net income		—		—		—			—			—			126,788			—			141,530			268,318
Other comprehensive gain, net of tax		—		—		—			—			—			—			(29,359	)		(3,876	)		(33,235	)
Equity-based compensation, 825,996 shares		8		—		2,909			—			—			—			—			1,454			4,371
Dividends to common stockholders		—		—		—			—			—			(131,360	)		—			—			(131,360	)
Earnings distributions to limited partnership interests and other noncontrolling interests		—		—		—			—			—			—			—			(70,538	)		(70,538	)
Grant of exchangeability and redemption of limited partnership interests, issuance of 9,445,664 shares		94		—		141,262			—			—			—			—			75,684			217,040
Issuance of Class A common stock (net of costs), 129,151 shares		1		—		860			—			—			—			—			247			1,108
Redemption of FPUs, 539,275 units		—		—		—			—			—			—			—			(835	)		(835	)
Repurchase of Class A common stock, 1,416,991 shares		—		—		—			—			(9,371	)		—			—			(2,743	)		(12,114	)
Forfeitures of restricted Class A common stock, 270,422 shares		—		—		688			—			(2,002	)		—			—			(387	)		(1,701	)
Cantor purchase of Cantor units from BGC Holdings upon redemption of founding/working partner units, 1,775,481 units		—		—		—			—			—			—			—			6,573			6,573
Re-allocation of equity due to additional investment by founding/working partners		—		—		—			—			—			—			—			(80	)		(80	)
Issuance of Class A common stock for acquisitions, 1,199,052 shares		12		—		5,112			(4,579	)		—			—			—			—			545
Issuance of contingent shares and limited partnership interests in connection with acquisitions		—		—		23,104			7,291			—			—			—			8,695			39,090
Conversion of 8.75% Convertible Notes to Class A common stock, 24,042,599 shares		240		—		117,178			—			—			—			—			32,582			150,000
Reclassification of Redeemable noncontrolling interest to noncontrolling interest for GFI Back-End Merger		—		—		—			—			—			—			—			222,148			222,148
Purchases of Newmark noncontrolling interest		—		—		731			—			—			—			—			(1,219	)		(488	)
Other		2		—		(2	)		—			—			—			—			1,806			1,806

Balance, December 31, 2015	$	2,559	$	348	$	1,109,000		$	50,095		$	(212,331	)	$	(273,492	)	$	(25,056	)	$	591,447		$	1,242,570

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, 2016

(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 Deficit			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest in Subsidiaries			Total
Balance, January 1, 2016	$	2,559	$	348	$	1,109,000		$	50,095		$	(212,331	)	$	(273,492	)	$	(25,056	)	$	591,447		$	1,242,570
Consolidated net income		—		—		—			—			—			29,384			—			7,470			36,854
Other comprehensive gain, net of tax		—		—		—			—			—			—			4,313			(164	)		4,149
Equity-based compensation, 487,471 shares		5		—		1,999			—			—			—			—			1,024			3,028
Dividends to common stockholders		—		—		—			—			—			(81,910	)		—			—			(81,910	)
Earnings distributions to limited partnership interests and other noncontrolling interests		—		—		—			—			—			—			—			(38,549	)		(38,549	)
Grant of exchangeability and redemption of limited partnership interests, issuance of 3,321,754 shares		33		—		25,028			—			—			—			—			15,414			40,475
Issuance of Class A common stock (net of costs), 1,690,305 shares		17		—		12,243			—			—			—			—			3,015			15,275
Redemption of FPUs, 140,133 units		—		—		—			—			—			—			—			(1,263	)		(1,263	)
Repurchase of Class A common stock, 7,984,235 shares		—		—		—			—			(55,257	)		—			—			(14,626	)		(69,883	)
Forfeitures of restricted Class A common stock, 15,660 shares		—		—		36			—			(115	)		—			—			(20	)		(99	)
Issuance of Class A common stock for acquisitions, 1,247,841 shares		12		—		6,704			(6,716	)		—			—			—			—			—
Issuance of contingent shares and limited partnership interests in connection with acquisitions		—		—		449			1,036			—			—			—			376			1,861
Completion of GFI Back-End Mergers and Issuance of Class A common stock, 23,481,192 shares		235		—		258,440			—			—			—			—			(258,690	)		(15	)
Other		—		—		(654	)		—			—			—			—			655			1

Balance, June 30, 2016	$	2,861	$	348	$	1,413,245		$	44,415		$	(267,703	)	$	(326,018	)	$	(20,743	)	$	306,089		$	1,152,494

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

BGC PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 servicing the financial and real estate markets through its two segments, Financial Services and Real Estate Services. Through its brands, including BGC^®, GFI^® and R.P. Martin^TM, among others, the Company’s Financial Services segment specializes in the brokerage of a broad range of products, including fixed income (rates and credit), foreign exchange, equities, energy and commodities, and futures. It also provides a wide range of services, including trade execution, broker-dealer services, clearing, trade compression, post trade, 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 FENICS^®, BGC Trader™, BGC Market Data and Capitalab^® brands, BGC Partners offers fully electronic brokerage, financial technology solutions, market data, post-trade services and analytics related to select financial instruments and markets.

Newmark Grubb Knight Frank (“NGKF”) is a full-service commercial real estate platform that comprises the Company’s Real Estate Services segment. Under brand names including Newmark Grubb Knight Frank^TM, Newmark Cornish & Carey^TM, ARA^®, Computerized Facility Integration^TM, Landauer^® Valuation & Advisory, and Excess Space Retail Services, Inc^®, NGKF offers commercial real estate tenants, owners, investors and developers a wide range of services, including leasing and corporate advisory, investment sales, and real estate finance, consulting, project and development management, and property and facilities management.

On February 26, 2015, the Company successfully completed a tender offer to acquire shares of common stock, par value $0.01 per share, of GFI Group Inc. (“GFI”) for $6.10 per share in cash and accepted for purchase 54.3 million shares (the “Tendered Shares”) tendered to the Company pursuant to its offer (the “Offer”). The Tendered Shares, together with the 17.1 million shares already owned by the Company, represented approximately 56% of GFI’s outstanding shares. On April 28, 2015, a subsidiary of BGC purchased approximately 43.0 million newly issued shares of GFI’s common stock at the price of $5.81 per share for an aggregate purchase price of $250 million, which increased the Company’s ownership in GFI to approximately 67.0%. The purchase price was paid to GFI in the form of a note due on June 19, 2018 that bore an interest rate of LIBOR plus 200 basis points.

On January 12, 2016, the Company, Jersey Partners, Inc. (“JPI”), New JP Inc. (“New JPI”), Michael A. Gooch, Colin Heffron, and certain subsidiaries of JPI and the Company closed on a previously agreed upon merger. This merger provided for the acquisition of JPI by BGC (the “JPI Merger”) as provided for by a merger agreement dated December 22, 2015. Shortly following the completion of the JPI Merger, a subsidiary of the Company merged with and into GFI pursuant to a short-form merger under Delaware law, with GFI continuing as the surviving entity (the “GFI Merger” and, together with the JPI Merger, the “Back-End Mergers”). The Back-End Mergers allowed the Company to acquire the remaining approximately 33% of the outstanding shares of GFI common stock that it did not already own. Following the closing of the Back-End Mergers, the Company and its affiliates now own 100% of the outstanding shares of GFI’s common stock.

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, Charlotte, Chicago, Copenhagen, Dallas, Denver, Dubai, Hong Kong, Houston, Istanbul, Johannesburg, Los Angeles, Mexico City, Miami, Moscow, Nyon, Paris, Philadelphia, Rio de Janeiro, San Francisco, Santa Clara, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tokyo, Toronto, Washington, D.C. and Zurich, and over 50 other offices.

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.

During the three months ended March 31, 2016, the Company changed the line item formerly known as “Market data and software solutions” to “Data, software and post-trade.” Reclassifications have been made to previously reported amounts to conform to the current presentation.

In addition, for the three and six months ended June 30, 2015, the Company has made reclassifications to previously reported amounts related to GFI to conform to the current presentation for the line items “Compensation and employee benefits” and “Professional and consulting fees.”

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.

Recently Adopted Accounting Pronouncements

In February 2015, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendment eliminates the deferral of certain consolidation standards for entities considered to be investment companies and modifies the consolidation analysis performed on certain types of legal entities. The guidance was effective beginning January 1, 2016 and early adoption was permitted. The adoption of this FASB guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest, which relates to simplifying the presentation of debt issuance costs. This ASU requires that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this update were effective for the annual period beginning January 1, 2016 for the Company, and early adoption was permitted. The adoption of this FASB guidance did not have a material impact on the Company’s unaudited condensed financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This ASU requires adjustments to provisional amounts that are identified during the measurement period of a business combination to be recognized in the reporting period in which the adjustment amounts are determined. Acquirers are no longer required to revise comparative information for prior periods as if the accounting for the business combination had been completed as of the acquisition date. The guidance was effective beginning January 1, 2016, with early adoption permitted. The adoption of this FASB guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

New Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which relates to how an entity recognizes the revenue it expects to be entitled to for the transfer of promised goods and services to customers. The ASU will replace certain existing revenue recognition guidance. The guidance, as stated in ASU No. 2014-09, was initially effective beginning on January 1, 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers—Deferral of Effective Date, which defers the effective date by one year, with early adoption on the original effective date permitted. The standard permits the use of either the retrospective or cumulative effect transition method. Management is currently evaluating the impact of the new guidance on the Company’s unaudited condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern, which relates to disclosure of uncertainties about an entity’s ability to continue as a going concern. This ASU provides additional guidance on management’s responsibility to evaluate the condition of an entity and the required disclosures based on this assessment. The amendments in this update are effective for the annual period ending after December 15, 2016, and early application is permitted. The adoption of this FASB guidance would not impact the Company’s unaudited condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. Entities will also have to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. In addition, entities will be required to present enhanced disclosures of financial assets and financial liabilities. The guidance is effective beginning January 1, 2018, with early adoption of certain provisions of the ASU permitted. Management is currently evaluating the impact of the new guidance on the Company’s unaudited condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The guidance is effective beginning January 1, 2019, with early adoption permitted. Management is currently evaluating the impact of the new guidance on the Company’s unaudited condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The new standard will become effective for the Company beginning with the first quarter of 2017, and early adoption is permitted. Management is currently evaluating the impact of the new guidance on the Company’s unaudited condensed consolidated financial statements.

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

Founding/working partner units are held by limited partners who are employees and generally receive quarterly allocations of net income. Upon termination of employment or otherwise ceasing to provide substantive services, the founding/working partner units are generally redeemed, and the unit holders are no longer entitled to participate in the quarterly allocations of net income. Since these allocations of net income are cash distributed on a quarterly basis and are contingent upon services being provided by the unit holder, they are reflected as a component of compensation expense under “Allocations of net income and grant of exchangeability to limited partnership units and FPUs” 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, which are cash distributed and generally are 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 component of compensation expense under “Allocations of net income and grant of exchangeability to limited partnership units and FPUs” in the Company’s unaudited condensed consolidated statements of operations. From time to time, the Company issues limited partnership units as part of the consideration for acquisitions; these units are not entitled to a distribution of earnings.

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.”

The Company has also awarded certain preferred partnership units (“Preferred Units”). Each quarter, the net profits of BGC Holdings are allocated to such units at a rate of either 0.6875% (which is 2.75% per calendar year) or such other amount as set forth in the award documentation (the “Preferred Distribution”). These allocations are deducted before the calculation and distribution of the quarterly partnership distribution for the remaining partnership units and are generally contingent upon services being provided by the unit holder. The Preferred Units are not entitled to participate in partnership distributions other than with respect to the Preferred Distribution. Preferred Units may not be made exchangeable into the Company’s Class A common stock and are only entitled to the Preferred Distribution, and accordingly they are not included in the Company’s fully diluted share count. The quarterly allocations of net income on Preferred Units are reflected in compensation expense under “Allocations of net income and grant of exchangeability to limited partnership units and FPUs” in the Company’s unaudited condensed consolidated statements of operations. After deduction of the Preferred Distribution, the remaining partnership units generally receive quarterly allocations of net income based on their weighted-average pro rata share of economic ownership of the operating subsidiaries.

Cantor Units

Cantor units are reflected as a component of “Noncontrolling interest in subsidiaries” in the Company’s unaudited condensed consolidated statements of financial condition. Cantor receives allocations of net income, which are cash distributed on a quarterly basis and are 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). Because they are included in the Company’s fully diluted share count, if dilutive, 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 FPUs, 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 the Company’s unaudited condensed consolidated statements of operations. In subsequent quarters in which the Company has net income, the initial allocation of income to the limited partnership interests is to “Net income attributable to noncontrolling interests in subsidiaries,” to recover any losses taken in earlier quarters, with the remaining income allocated to the limited partnership interests. This income (loss) allocation process has no impact on the net income allocated to common stockholders.

Acquisitions

Financial Services

On February 26, 2015, the Company successfully completed its tender offer to acquire shares of common stock, par value $0.01 per share, of GFI for $6.10 per share in cash and accepted for purchase 54.3 million shares tendered to the Company pursuant to the offer. The Tendered Shares, together with the 17.1 million shares already owned by the Company, represented approximately 56% of the then- outstanding shares of GFI. The Company issued payment for the Tendered Shares on March 4, 2015 in the aggregate amount of $331.1 million. On April 28, 2015, a subsidiary of the Company purchased from GFI approximately 43.0 million new shares at that date’s closing price of $5.81 per share, for an aggregate purchase price of $250 million. The purchase price was paid to GFI in the form of a note due on June 19, 2018 that bears an interest rate of LIBOR plus 200 basis points. The new shares and the note eliminate in consolidation. Following the issuance of the new shares, the Company owned approximately 67% of GFI’s outstanding common stock. On January 12, 2016, the Company completed its acquisition of JPI. Shortly following the JPI Merger, a subsidiary of the Company merged with and into GFI pursuant to a short-form merger under Delaware law, with GFI continuing as the surviving entity. The Company issued approximately 23.5 million shares of its Class A common stock and paid $111.2 million in cash in connection with the closing of the Back-End Mergers. Following the closing of the Back-End Mergers, the Company and its affiliates now own 100% of the outstanding shares of GFI common stock. The excess of total consideration over the fair value of the total net assets acquired, of approximately $450.0 million, has been recorded to goodwill and was allocated to the Company’s Financial Services segment. In addition, “Total revenues” in the Company’s unaudited condensed consolidated statements of operations for the six months ended June 30, 2016 and June 30, 2015 included $293.2 million and $235.2 million, respectively, related to GFI.

The following tables summarize the components of the purchase consideration transferred and the allocation of the assets acquired and liabilities assumed based on the fair values as of the acquisition date (in millions, except share and per share amounts).

Calculation of purchase consideration transferred


	February 26, 2015
Cash	$	331.1
Cost value of shares already owned (17,075,464 shares)		75.1
Redeemable noncontrolling interest (56,435,876 shares at $6.10 per share)		344.3

Total purchase consideration and noncontrolling interest (cost value)		750.5
Appreciation of shares already owned (17,075,464 shares at $6.10 per share less cost value)		29.0

Total purchase consideration and noncontrolling interest (fair value)	$	779.5

Allocation of the assets acquired and the liabilities assumed


	February 26, 2015
Cash and cash equivalents	$	238.8
Receivables from broker-dealers, clearing organizations, customers and related-broker dealers		704.8
Accrued commissions receivable, net		93.6
Fixed assets, net		58.4
Goodwill		450.0
Finite-lived intangible assets:
Non-compete agreement		15.4
Technology		39.2
Customer relationships		133.8
Acquired intangibles		6.7
Indefinite-lived intangible assets:
Trade name		92.1
Other assets		194.2
Assets held for sale		208.3
Short-term borrowings		(70.0	)
Accrued compensation		(141.0	)
Payables to broker-dealers, clearing organizations, customers and related broker-dealers		(648.6	)
Accounts payable, accrued and other liabilities		(163.3	)
Notes payable and collateralized borrowings		(255.3	)
Liabilities held for sale		(175.5	)
Pre-existing noncontrolling interest		(2.1	)

Total	$	779.5

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition of GFI had occurred on January 1, 2015, and as if the Company owned 100% of GFI from the date of acquisition. The unaudited pro forma results are not indicative of operations that would have been achieved, nor are they indicative of future results of operations. The unaudited pro forma results do not reflect any potential cost savings or other operations efficiencies that could result from the acquisition. In addition, the unaudited pro forma condensed combined financial information does not include any adjustments in respect of certain expenses recorded in the GFI financial statements that were associated with non-recurring events unrelated to the acquisition and does not include any adjustments in respect of any potential future sales of assets. However, the unaudited pro forma results below for the six months ended June 30, 2015 do include non-recurring pro forma adjustments directly related to the acquisition which mainly consisted of: (a) Prior to the acquisition, GFI had entered into an agreement with the CME Group Inc. (“CME”) for CME to acquire GFI. The CME transaction was terminated and as a result, GFI incurred breakage costs of approximately $24.7 million; (b) Severance and compensation restructuring charges of $22.2 million incurred by GFI; (c) The aggregate of BGC’s and GFI’s professional fees incurred which totaled $24.9 million; and (d) The $29.0 million gain recorded by the Company upon acquisition of GFI on the 17.1 million shares of GFI common stock owned prior to the completion of the acquisition.

In millions (unaudited)


	Six Months Ended June 30, 2015
	Six Months Ended June 30, 2015
Pro forma revenues	$	1,379.9
Pro forma consolidated net income	$	40.1

Real Estate Services

On February 26, 2016, the Company completed the acquisition of Rudesill-Pera Multifamily, LLC (“Memphis Multifamily”). Memphis Multifamily is a multifamily brokerage firm operating in Memphis and the Mid-South Region.

On June 17, 2016, the Company completed the acquisition of The CRE Group, Inc. (“CRE Group”). CRE Group is a real estate services provider focused on project management, construction management and Leadership in Energy and Environmental Design (LEED) consulting.

The total consideration for acquisitions during the six months ended June 30, 2016, within the Real Estate Services segment was approximately $6.3 million in total fair value, comprised of cash and BGC Holdings limited partnership units, of which $3.1 million may be issued contingent on certain targets being met through 2020. The excess of the consideration over the fair value of the net assets acquired has been recorded as goodwill of approximately $5.7 million and was allocated to the Company’s Real Estate Service segment.

The results of operations of the Company’s acquisitions have been included in the Company’s unaudited condensed consolidated financial statements subsequent to their respective dates of acquisition. The Company has made a preliminary allocation of the consideration to the assets acquired and liabilities assumed as of the acquisition date, and expects to finalize its analysis with respect to acquisitions within the first year after the completion of the transaction. Therefore, adjustments to preliminary allocations may occur.

Divestitures

Sales of KGL and KBL

In connection with the successful completion of the tender offer to acquire GFI on February 26, 2015, the Company acquired Kyte Group Limited (“KGL”) which primarily included GFI’s clearing business, and Kyte Broking Limited (“KBL”).

On January 24, 2015, GFI entered into an agreement to sell its 100% equity ownership of KGL, and the transaction was completed in March 2015. The total cash consideration received by the Company was approximately $10.6 million. The loss incurred from the sale of KGL of $0.2 million is included within “Gain (loss) on divestiture and sale of investments” in the Company’s unaudited condensed consolidated statements of operations.

On February 3, 2015, GFI entered into an agreement to sell 100% equity ownership of KBL. In May 2015, the Company completed the sale of KBL. The transaction included total cash consideration of $6.1 million and the Company recorded a gain on the sale of $0.8 million, which is included within “Gain (loss) on divestiture and sale of investments” in the Company’s unaudited condensed consolidated statements of operations. KBL’s operations prior to the completion of the transaction were included in the Company’s unaudited condensed consolidated statements of operations.

Sale of Trayport

In connection with the successful completion of the tender offer to acquire GFI, the Company also acquired GFI’s Trayport business. The Trayport business was GFI’s European electronic energy software business. On December 11, 2015, the Company completed the sale of its Trayport business to Intercontinental Exchange, Inc. (“Intercontinental Exchange” or “ICE”). Under the terms of the purchase agreement, Intercontinental Exchange acquired the Trayport business from the Company in exchange for 2,527,658 ICE common shares issued with respect to the $650.0 million purchase price, which was adjusted at closing. The Company recorded a pre-tax gain on the sale of $391.0 million, net of $10.4 million in fees, which was included within “Gain (loss) on divestiture and sale of investments” in the Company’s consolidated statements of operations for the year ended December 31, 2015. Trayport’s operations prior to the completion of the transaction were included in the Company’s unaudited condensed consolidated statements of operations within the Financial Services segment.

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 the Company’s outstanding common stock, FPUs, limited partnership units and Cantor units (see Note 2—“Limited Partnership Interests in BGC Holdings”).

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,
	2016		2015		2016		2015
Basic earnings per share:
Net income available to common stockholders	$	15,725	$	9,347	$	29,384	$	23,402

Basic weighted-average shares of common stock outstanding		275,997		244,862		274,895		233,504

Basic earnings per share	$	0.06	$	0.04	$	0.11	$	0.10

Fully diluted EPS is calculated utilizing net income available to 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 17—“Notes Payable, Collateralized and Short-Term Borrowings”), 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 and RSUs. The limited partnership interests generally are potentially exchangeable into shares of Class A common stock and are entitled to remaining earnings after the deduction for the Preferred Distribution; as a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Fully diluted earnings per share
Net income available to common stockholders	$	15,725	$	9,347	$	29,384	$	23,402
Allocation of net income to limited partnership interests in BGC Holdings, net of tax		8,113		3,909		15,133		10,595
Interest expense on convertible notes, net of tax		1,521		—		3,045		—

Net income for fully diluted shares	$	25,359	$	13,256	$	47,562	$	33,997

Weighted-average shares:
Common stock outstanding		275,997		244,862		274,895		233,504
Limited partnership interests in BGC Holdings		143,229		120,122		141,536		117,359
Convertible notes		16,260		—		16,260		—
RSUs (Treasury stock method)		376		944		517		944
Other		1,395		846		2,755		900

Fully diluted weighted-average shares of common stock outstanding		437,257		366,774		435,963		352,707

Fully diluted earnings per share	$	0.06	$	0.04	$	0.11	$	0.10

For the three months ended June 30, 2016 and 2015, respectively, approximately 1.0 million and 20.8 million potentially dilutive securities were not included in the computation of fully diluted EPS because their effect would have been anti-dilutive. Anti-dilutive securities for the three months ended June 30, 2016 included, on a weighted-average basis, 1.0 million other securities or other contracts to issue shares of common stock. Anti-dilutive securities for the three months ended June 30, 2015 included, on a weighted-average basis, 19.7 million shares underlying convertible notes and 1.1 million other securities or other contracts to issue shares of common stock.

Additionally, as of June 30, 2016 and 2015, respectively, approximately 4.6 million and 8.9 million shares of contingent Class A common stock and limited partnership units were excluded from the fully diluted EPS computations because the conditions for issuance had not been met by the end of the respective periods.

Stock Transactions and Unit Redemptions

Class A Common Stock

On June 22, 2016, at the Company’s 2016 Annual Meeting of Stockholders, the stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to increase the number of authorized shares of Class A common stock from 500 million shares to 750 million shares. The Company filed the certificate of amendment on June 23, 2016, and the amendment was effective on that date.

Changes in shares of the Company’s Class A common stock outstanding for the three and six months ended June 30, 2016 and 2015 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Shares outstanding at beginning of period		236,749,861			186,952,687			219,063,365			185,108,316
Share issuances:
Exchanges of limited partnership interests¹		2,427,152			1,804,434			3,321,754			3,962,745
Issuance of Class A common stock for general corporate purposes		1,648,000			—			1,648,000			—
Vesting of restricted stock units (RSUs)		113,572			220,514			487,471			648,747
Acquisitions		1,147,516			656,962			24,729,033			757,287
Conversion of 8.75% Convertible Notes to Class A common stock		—			24,042,599			—			24,042,599
Other issuances of Class A common stock		15,079			13,120			42,305			52,968
Treasury stock repurchases		(797,189	)		(6,520	)		(7,984,235	)		(741,081	)
Forfeitures of restricted Class A common stock		(11,958	)		(27,338	)		(15,660	)		(175,123	)

Shares outstanding at end of period		241,292,033			213,656,458			241,292,033			213,656,458

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

Class B Common Stock

On June 22, 2016, at the Company’s 2016 Annual Meeting of Stockholders, the stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to increase the number of authorized shares of Class B common stock from 100 million shares to 150 million shares and to provide that Class B common stock shall be issued only to certain affiliated entities or related persons. The Company filed the certificate of amendment on June 23, 2016, and the amendment was effective on that date.

The Company did not issue any shares of Class B common stock during the three and six months ended June 30, 2016 and 2015. As of June 30, 2016 and 2015, the Company’s Class B common stock outstanding was 34,848,107 shares.

Controlled Equity Offering

The Company has entered into a controlled equity offering (“CEO”) sales agreement with CF&Co (“November 2014 Sales Agreement”), 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 CEO sales agreements are used primarily for redemptions and exchanges of limited partnership interests in BGC Holdings. CF&Co is a wholly owned subsidiary of Cantor and an affiliate of the Company. Under this agreement, the Company has agreed to pay CF&Co 2% of the gross proceeds from the sale of shares. As of June 30, 2016, the Company has sold 10,128,575 shares of Class A common stock under this agreement. For additional information, see Note 13—“Related Party Transactions.”

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. In February 2014, the Company’s Audit Committee authorized such repurchases of stock or units from Cantor, employees and partners. On October 27, 2015, the Company’s Board of Directors and Audit Committee increased the BGC Partners share repurchase and unit redemption authorization to $300 million, which may include purchases from Cantor, its partners or employees or other affiliated persons or entities. As of June 30, 2016, the Company had approximately $201.8 million remaining from its share repurchase and unit redemption authorization. From time to time, the Company may actively continue to repurchase shares and/or redeem units. The table below represents unit redemption and share repurchase activity for the three and six months ended June 30, 2016:


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, 2016—March 31, 2016		775,791	$	8.59
April 1, 2016—June 30, 2016		1,804,365		8.91
Repurchases^3,4
January 1, 2016—March 31, 2016		7,187,046	$	8.72
April 1, 2016—April 30, 2016		260,042		9.10
May 1, 2016—May 31, 2016		291,323		8.87
June 1,2016—June 30, 2016		245,824		9.17

Total Repurchases		7,984,235	$	8.75

Total Redemptions and Repurchases		10,564,391	$	8.77	$	201,785,151

During the three months ended June 30, 2016, the Company redeemed approximately 1.8 million limited partnership units at an aggregate redemption price of approximately $15.8 million for an average price of $8.93 per unit and approximately 39.6 thousand FPUs at an aggregate redemption price of approximately $0.3 million for an average price of $8.01 per unit. During the three months ended June 30, 2015, the Company redeemed approximately 1.2 million limited partnership units at an aggregate redemption price of approximately $10.8 million for an average price of $8.85 per unit and approximately 17.6 thousand FPUs at an aggregate redemption price of approximately $130.4 thousand for an average price of $7.39 per unit.

During the six months ended June 30, 2016, the Company redeemed approximately 2.4 million limited partnership units at an aggregate redemption price of approximately $21.6 million for an average price of $8.85 per unit and approximately 140.1 thousand FPUs at an aggregate redemption price of approximately $1.1 million for an average price of $8.17 per unit. During the six months ended June 30, 2015, the Company redeemed approximately 3.3 million limited partnership units at an aggregate redemption price of approximately $28.4 million for an average price of $8.73 per unit and approximately 27.6 thousand FPUs at an aggregate redemption price of approximately $215.8 thousand for an average price of $7.83 per unit.

During the three months ended June 30, 2016, the Company repurchased approximately 0.8 million shares of its Class A common stock at an aggregate purchase price of approximately $7.2 million for an average price of $9.04 per share. During the three months ended June 30, 2015, the Company repurchased approximately 6.5 thousand shares of its Class A common stock at an aggregate purchase price of approximately $41.0 thousand for an average price of $6.29 per share.

⁴

During the six months ended June 30, 2016, the Company repurchased approximately 8.0 million shares of its Class A common stock at an aggregate purchase price of approximately $69.7 million for an average price of $8.75 per share. During the six months ended June 30, 2015, the Company repurchased approximately 0.7 million shares of its Class A common stock at an aggregate purchase price of approximately $5.9 million for an average price of $7.94 per share.

The table above represents the gross unit redemptions and share repurchases of the Company’s Class A common stock during the six months ended June 30, 2016. Approximately 2.0 million of the 2.6 million units above were redeemed using cash from the Company’s CEO program, and therefore did not impact the fully diluted number of shares and units outstanding. The remaining redemptions along with the Class A common stock repurchases resulted in a 8.5 million reduction in the fully diluted share count. This net reduction cost the Company approximately $74.5 million (or $8.73 per share/unit) during the six months ended June 30, 2016. This reduction partially offset the overall growth in the fully diluted share count which resulted from shares issued for general corporate purposes, acquisitions, equity-based compensation and front office hires.

Redeemable Partnership Interest

The changes in the carrying amount of redeemable partnership interest for the six months ended June 30, 2016 and 2015 were as follows (in thousands):


	Six Months Ended June 30,
	2016			2015
Balance at beginning of period	$	57,145		$	59,501
Consolidated net income allocated to FPUs		2,173			—
Earnings distributions		(2,605	)		—
Re-allocation of equity due to additional investment by founding/working partners		—			80
FPUs exchanged		(1,368	)		(546	)
FPUs redeemed		(454	)		(59	)
Other		571			—

Balance at end of period	$	55,462		$	58,976

Securities Owned and Securities Sold, Not Yet Purchased

Securities owned primarily consist of unencumbered U.S. Treasury bills held for liquidity purposes. Total Securities owned were $318.6 million as of June 30, 2016 and $32.4 million as of December 31, 2015. There were no Securities sold, not yet purchased as of June 30, 2016 and December 31, 2015. For additional information, see Note 12—“Fair Value of Financial Assets and Liabilities.”

Collateralized Transactions

Securities loaned

As of June 30, 2016, the Company had no Securities loaned transactions. As of December 31, 2015, the Company had Securities loaned transactions of $117.9 million with CF&Co. The market value of the securities lent was $116.3 million. As of December 31, 2015, the cash collateral received from CF&Co bore interest rates ranging from 0.80% to 1.00%. Securities loaned transactions are included in “Securities loaned” in the Company’s unaudited condensed consolidated statements of financial condition.

Marketable Securities

Marketable securities consist of the Company’s ownership of various investments. The investments had a fair value of $153.0 million and $650.4 million as of June 30, 2016 and December 31, 2015, respectively.

As of June 30, 2016 and December 31, 2015, the Company held Marketable securities classified as trading securities with a market value of $146.7 million and $644.9 million, respectively. These securities are measured at fair value, with any changes in fair value recognized currently in earnings and included in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations. During the three months ended June 30, 2016 and 2015, the Company recognized a net gain (realized and unrealized) of $7.5 million and a loss of $2.1 million, respectively, related to the mark-to-market on these shares and any related hedging transactions when applicable. During the six months ended June 30, 2016 and 2015, the Company recognized a net gain (realized and unrealized) of $6.7 million and a gain of $0.8 million, respectively, related to the mark-to-market on these shares and any related hedging transactions when applicable.

In connection with the Company’s sale of its on-the-run, electronic benchmark U.S. Treasury platform (“eSpeed”) to Nasdaq, Inc. (“Nasdaq,” formerly known as “NASDAQ OMX Group, Inc.”) on June 28, 2013, the Company will receive a remaining earn-out of up to 11,906,964 shares of Nasdaq common stock ratably over the next approximately 12 years, provided that Nasdaq, as a whole, produces at least $25 million in gross revenues each year.

As of June 30, 2016 and December 31, 2015, the Company held marketable securities classified as available-for-sale with a market value of $6.3 million and $5.5 million, respectively. These securities are measured at fair value, with unrealized gains or losses included as part of “Other comprehensive income (loss)” in the Company’s unaudited condensed consolidated statements of comprehensive income. During the three months ended June 30, 2016 and 2015, the Company recognized a loss of $1.9 million and $0.4 million, respectively, related to these Marketable securities classified as available-for-sale. During the six months ended June 30, 2016 and 2015, the Company recognized a loss of $1.2 million and a gain of $1.6 million respectively, related to these Marketable securities classified as available-for-sale. In addition, for the six months ended June 30, 2015, the Company recorded a $29.0 million gain upon acquisition of GFI on the 17.1 million shares of GFI common stock owned prior to the completion of the acquisition, which were previously classified as available-for-sale marketable securities. The $29.0 million gain previously recorded in “Accumulated other comprehensive income (loss)” was recorded as a gain in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.

During the six months ended June 30, 2016, the Company purchased Marketable securities with a market value of $63.3 million at the time of purchase and sold Marketable securities with a market value of $566.3 million at the time of sale. The majority (or $509.9 million) of the Marketable securities sold during the six months ended June 30, 2016, was related to the shares of ICE the Company received for the sale of Trayport in December 2015.

10.

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, including derivative contracts into which the Company may enter to minimize the effect of price changes of the Company’s Nasdaq shares and/or ICE shares (see Note 11—“Derivatives”). As of June 30, 2016 and December 31, 2015, Receivables from and payables to broker-dealers, clearing organizations, customers and related broker-dealers consisted of the following (in thousands):


	June 30, 2016		December 31, 2015
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to deliver	$	1,872,298	$	692,530
Receivables from clearing organizations		127,611		92,915
Other receivables from broker-dealers and customers		17,414		18,252
Net pending trades		4,163		6,544
Open derivative contracts		1,434		1,999

Total	$	2,022,920	$	812,240

Payables to broker-dealers, clearing organizations, customers and related broker-dealers:
Contract values of fails to receive	$	1,761,710	$	660,365
Payables to clearing organizations		74,372		30,037
Other payables to broker-dealers and customers		21,364		23,287
Open derivative contracts		287		1,134

Total	$	1,857,733	$	714,823

A portion of these receivables and payables are with Cantor. See Note 13—“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, 2016 have subsequently settled at the contracted amounts.

11.

Derivatives

In the normal course of operations, the Company enters into derivative contracts. These derivative contracts primarily consist of interest rate swaps, futures, forwards, foreign exchange/commodities options, 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 their closing prices. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. For OTC derivatives that trade in liquid markets, such as 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 consolidated statements of financial condition and measure those instruments at fair value. The fair value of all derivative contracts is recorded on a net-by-counterparty basis where a legal right to offset exists under an enforceable netting agreement. Derivative contracts are recorded as part of “Receivables from broker-dealers, clearing organizations, customers and related broker-dealers” and “Payables to broker-dealers, clearing organizations, customers and related broker-dealers” in the Company’s unaudited condensed consolidated statements of financial condition. The fair value of derivative contracts, computed in accordance with the Company’s netting policy, is set forth below (in thousands):


	June 30, 2016				December 31, 2015
	Assets		Liabilities		Assets		Liabilities
Futures	$	808	$	273	$	39	$	44
Interest rate swaps		327		—		256		—
Foreign exchange swaps		191		11		883		375
Foreign exchange/commodities options		108		3		—		537
Forwards		—		—		821		178

Total	$	1,434	$	287	$	1,999	$	1,134

The notional amounts of these derivative contracts at June 30, 2016 and December 31, 2015 were $12.0 billion and $10.9 billion, respectively. At June 30, 2016, the notional amounts primarily consisted of long futures and short futures of $5.8 billion each. As of June 30, 2016, these notional values of long and short futures contracts were primarily related to fixed income futures in a consolidated VIE acquired in the acquisition of GFI, of which the Company’s exposure to economic loss is approximately $5.0 million.

The interest rate swaps represent matched customer transactions settled through and guaranteed by a central clearing organization. Certain of the Company’s foreign exchange swaps are with Cantor. See Note 13—“Related Party Transactions,” for additional information related to these transactions.

The replacement cost of contracts in a gain position at June 30, 2016 was $1.4 million.

The change in fair value of interest rate swaps, futures, foreign exchange/commodities options and foreign exchange swaps is reported as part of “Principal transactions” in the Company’s unaudited condensed consolidated statements of operations, and the change in fair value of equity options related to the Nasdaq and ICE hedges and forwards are included as part of “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations. The table below summarizes gains and losses on derivative contracts for the three and six months ended June 30, 2016 and 2015 (in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
Derivative contract	2016		2015			2016		2015
Futures	$	566	$	3,474		$	1,298	$	5,102
Interest rate swaps		9		(22	)		13		(61	)
Foreign exchange swaps		137		1			257		(33	)
Foreign exchange/commodities options		3,281		6,001			6,410		6,418
Forwards		—		443			152		910
Equity options		3,317		—			3,761		—

Gain (loss)	$	7,310	$	9,897		$	11,891	$	12,336

As described in Note 17—“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. At the issuance of the 4.50% Convertible Notes, the embedded conversion feature was measured at approximately $19.0 million on a pre-tax basis ($16.1 million net of taxes and issuance costs) 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.

12.

Fair Value of Financial Assets and Liabilities

FASB guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 measurements—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 measurements—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 measurements—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

As required by 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 set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under FASB guidance at June 30, 2016 and December 31, 2015 (in thousands):


	Assets at Fair Value at June 30, 2016
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Marketable securities	$	152,995	$	—	$	—	$	—		$	152,995
Government debt		318,494		—		—		—			318,494
Securities owned—Equities		86		—		—		—			86
Foreign exchange swaps		—		400		—		(209	)		191
Interest rate swaps		—		344		—		(17	)		327
Futures		—		808		—		—			808
Foreign exchange/commodities options		108		—		—		—			108

Total	$	471,683	$	1,552	$	—	$	(226	)	$	473,009


	Liabilities at Fair Value at June 30, 2016
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Futures	$	—	$	273	$	—	$	—		$	273
Foreign exchange/commodities options		3		—		—		—			3
Foreign exchange swaps		—		220		—		(209	)		11
Interest rate swaps		—		17		—		(17	)		—
Contingent consideration		—		—		62,272		—			62,272

Total	$	3	$	510	$	62,272	$	(226	)	$	62,559


	Assets at Fair Value at December 31, 2015
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Marketable securities	$	650,315	$	85	$	—	$	—		$	650,400
Government debt		32,352		—		—		—			32,352
Securities owned—Equities		9		—		—		—			9
Forwards		—		869		—		(48	)		821
Foreign exchange swaps		—		1,256		—		(373	)		883
Interest rate swaps		—		283		—		(27	)		256
Futures		—		39		—		—			39
Foreign exchange/commodities options		309		—		—		(309	)		—

Total	$	682,985	$	2,532	$	—	$	(757	)	$	684,760


	Liabilities at Fair Value at December 31, 2015
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Forwards	$	—	$	226	$	—	$	(48	)	$	178
Futures		—		44		—		—			44
Government debt		12		—		—		—			12
Foreign exchange/commodities options		846		—		—		(309	)		537
Foreign exchange swaps		—		748		—		(373	)		375
Interest rate swaps		—		27		—		(27	)		—
Contingent consideration		—		—		65,043		—			65,043

Total	$	858	$	1,045	$	65,043	$	(757	)	$	66,189

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the three months ended June 30, 2016 are as follows (in thousands):


	Opening Balance		Total realized and unrealized gains (losses) included in Net income⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at June 30, 2016		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2016
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	64,337	$	(749	)	$	80	$	578	$	(3,312	)	$	62,272	$	(669	)

⁽¹⁾	Realized and unrealized gains (losses) are reported in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the three months ended June 30, 2015 are as follows (in thousands):


	Opening Balance		Total realized and unrealized gains (losses) included in Net income⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)			Issuances		Settlements			Closing Balance at June 30, 2015		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2015
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	63,514	$	(197	)	$	(116	)	$	16,544	$	(2,678	)	$	77,693	$	(313	)

⁽¹⁾	Realized and unrealized gains (losses) are reported in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the six months ended June 30, 2016 are as follows (in thousands):


	Opening Balance		Total realized and unrealized gains (losses) included in Net income⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at June 30, 2016		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2016
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	65,043	$	(748	)	$	78	$	1,411	$	(4,852	)	$	62,272	$	(670	)

⁽¹⁾	Realized and unrealized gains (losses) are reported in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the six months ended June 30, 2015 are as follows (in thousands):


	Opening Balance		Total realized and unrealized gains (losses) included in Net income⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at June 30, 2015		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2015
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	56,299	$	(1,490	)	$	131	$	24,219	$	(4,184	)	$	77,693	$	(1,359	)

⁽¹⁾	Realized and unrealized gains (losses) are reported in “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.

The following tables present information about the offsetting of derivative instruments and collateralized transactions as of June 30, 2016 and December 31, 2015 (in thousands):


	June 30, 2016
	Gross Amounts		Gross Amounts Offset		Net Amounts Presented in the Statements of Financial Condition		Gross Amounts Not Offset				Net Amount
	Gross Amounts		Gross Amounts Offset				Financial Instruments		Cash Collateral Received		Net Amount
Assets
Foreign exchange swaps	$	400	$	209	$	191	$	—	$	—	$	191
Interest rate swaps		344		17		327		—		—		327
Futures		808		—		808		—		—		808
Foreign exchange /commodities options		108		—		108		—		—		108

Total	$	1,660	$	226	$	1,434	$	—	$	—	$	1,434

Liabilities
Foreign exchange swaps	$	220	$	209	$	11	$	—	$	—	$	11
Interest rate swaps		17		17		—		—		—		—
Futures		273		—		273		—		—		273
Foreign exchange /commodities options		3		—		3		—		—		3

Total	$	513	$	226	$	287	$	—	$	—	$	287


	December 31, 2015
	Gross Amounts		Gross Amounts Offset		Net Amounts Presented in the Statements of Financial Condition		Gross Amounts Not Offset				Net Amount
	Gross Amounts		Gross Amounts Offset				Financial Instruments		Cash Collateral Received		Net Amount
Assets
Forwards	$	869	$	48	$	821	$	—	$	—	$	821
Foreign exchange swaps		1,256		373		883		—		—		883
Interest rate swaps		283		27		256		—		—		256
Futures		39		—		39		—		—		39
Foreign exchange /commodities options		309		309		—		—		—		—

Total	$	2,756	$	757	$	1,999	$	—	$	—	$	1,999

Liabilities
Forwards	$	226	$	48	$	178	$	—	$	—	$	178
Foreign exchange swaps		748		373		375		—		—		375
Interest rate swaps		27		27		—		—		—		—
Futures		44		—		44		—		—		44
Foreign exchange /commodities options		846		309		537		—		—		537

Total	$	1,891	$	757	$	1,134	$	—	$	—	$	1,134

Certain of the Company’s foreign exchange swaps are with Cantor. See Note 13—“Related Party Transactions,” for additional information related to these transactions.

Quantitative Information About Level 3 Fair Value Measurements

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurement of Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):

Fair Value as of
June 30, 2016

Valuation Technique

Unobservable Inputs

Weighted Average

Liabilities

Accounts payable, accrued and other liabilities:

Contingent consideration

62,272

Present value of expected payments

Discount rate

Forecasted financial information

5.4

% (a)

(a)	The Company’s estimate of contingent consideration as of June 30, 2016 was based on the acquired businesses’ projected future financial performance, including revenues.

Fair Value as of
December 31,
2015

Valuation Technique

Unobservable Inputs

Weighted Average

Liabilities

Accounts payable, accrued and other liabilities:

Contingent consideration

65,043

Present value of expected payments

Discount rate

Forecasted financial information

5.6

% (a)

(a)	The Company’s estimate of contingent consideration as of December 31, 2015 was based on the acquired businesses’ projected future financial performance, including revenues.

Valuation Processes – Level 3 Measurements

Valuations for contingent consideration are conducted by the Company. Each reporting period, the Company updates unobservable inputs. The Company has a formal process to review changes in fair value for satisfactory explanation.

Sensitivity Analysis – Level 3 Measurements

The significant unobservable inputs used in the fair value of the Company’s contingent consideration are the discount rate and forecasted financial information. Significant increases (decreases) in the discount rate would have resulted in a lower (higher) fair value measurement. Significant increases (decreases) in the forecasted financial information would have resulted in a higher (lower) fair value measurement. As of June 30, 2016 and December 31, 2015, the present value of expected payments related to the Company’s contingent consideration was $62.3 million and $65.0 million, respectively. The undiscounted value of the payments, assuming that all contingencies are met, would be $69.6 million and $76.1 million, respectively.

13.

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 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 service recipient generally indemnifies the service 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 affiliates.

For the three months ended June 30, 2016 and 2015, the Company recognized related party revenues of $4.9 million and $6.1 million, respectively, for the services provided to Cantor. For the six months ended June 30, 2016 and 2015, the Company recognized related party revenues of $11.9 million and $12.7 million, respectively, for the services provided to Cantor. 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, 2016 and 2015, the Company was charged $9.7 million and $10.5 million, respectively, for the services provided by Cantor and its affiliates, of which $6.2 million and $6.4 million, respectively, were to cover compensation to leased employees for the three months ended June 30, 2016 and 2015. For the six months ended June 30, 2016 and 2015, the Company was charged $22.6 million and $21.4 million, respectively, for the services provided by Cantor and its affiliates, of which $12.9 million and $12.7 million, respectively, were to cover compensation to leased employees for the six months ended June 30, 2016 and 2015. 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, 2016, Cantor’s share of the net loss in Tower Bridge was $0.1 million, and for the three months ended June 30, 2015, Cantor’s share of net profit was $0.3 million. For the six months ended June 30, 2016 and 2015, Cantor’s share of the net profit in Tower Bridge was $0.5 million and $1.0 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.

Equity Method Investment

On June 3, 2014, the Company’s Board of Directors and Audit Committee authorized the purchase of 1,000 Class B Units of LFI Holdings, LLC (“LFI”), a subsidiary of Cantor, representing 10% of the issued and outstanding Class B Units of LFI after giving effect to the transaction. On the same day, the Company completed the acquisition for $6.5 million and was granted an option to purchase an additional 1,000 Class B Units of LFI for an additional $6.5 million. On January 15, 2016, the Company closed on the exercise of its option to acquire additional Class B Units of LFI Holdings, LLC. At the closing, the Company made a payment of $6.5 million to LFI. As a result of the option exercise, the Company has a 20% ownership interest in LFI. LFI is a limited liability corporation headquartered in New York which is a technology infrastructure provider tailored to the financial sector. The Company accounts for the investment using the equity method.

Clearing Agreement with Cantor

The Company receives certain 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, 2016 and December 31, 2015, 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 have 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 is utilized to determine the shares of profit or loss allocated to each for the period. During the three months ended June 30, 2016 and 2015, the Company recognized its share of foreign exchange losses of $1.5 million and $25 thousand, respectively. During the six months ended June 30, 2016 and 2015, the Company recognized its share of foreign exchange losses of $1.4 million and foreign exchange gains of $621 thousand, respectively. These gains and losses are included as part of “Other expenses” in the Company’s unaudited condensed consolidated statements of operations.

Pursuant to the separation agreement relating to the Company’s acquisition of certain BGC businesses from Cantor in 2008, Cantor has a right, subject to certain conditions, to be the Company’s customer and to pay the lowest commissions paid by any other customer, whether by volume, dollar or other applicable measure. In addition, Cantor has an unlimited right to internally use market data from the Company without any cost. Any future related-party transactions or arrangements between the Company and Cantor are subject to the prior approval by the Company’s Audit Committee. During the three months ended June 30, 2016 and 2015, the Company recorded revenues from Cantor entities of $28 thousand and $140 thousand, respectively, related to commissions paid to the Company by Cantor. During the six months ended June 30, 2016 and 2015, the Company recorded revenues from Cantor entities of $80 thousand and $204 thousand, respectively, related to commissions paid to the Company by Cantor.

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 favorable to the receiving party than such services are provided to typical third-party customers.

In August 2013, the Audit Committee authorized the Company to invest up to $350 million in an asset-backed commercial paper program for which certain Cantor entities serve as placement agent and referral agent. The program issues short-term notes to money market investors and is expected to be used by the Company from time to time as a liquidity management vehicle. The notes are backed by assets of highly rated banks. The Company is entitled to invest in the program so long as the program meets investment policy guidelines, including policies related to ratings. Cantor will earn a spread between the rate it receives from the short-term note issuer and the rate it pays to the Company on any investments in this program. This spread will be no greater than the spread earned by Cantor for placement of any other commercial paper note in the program. As of June 30, 2016 and December 31, 2015, the Company did not have any investments in the program.

On June 5, 2015, the Company entered into an agreement with Cantor providing Cantor, CF Group Management, Inc. (“CFGM”) and other Cantor affiliates entitled to hold Class B common stock the right to exchange from time to time, on a one-to-one basis, subject to adjustment, up to an aggregate of 34,649,693 shares of Class A common stock now owned or subsequently acquired by such Cantor entities for up to an aggregate of 34,649,693 shares of Class B common stock. Such shares of Class B common stock, which currently can be acquired upon the exchange of exchangeable limited partnership units owned in BGC Holdings, are already included in the Company’s fully diluted share count and will not increase Cantor’s current maximum potential voting power in the common equity. The exchange agreement will enable the Cantor entities to acquire the same number of shares of Class B common stock that they are already entitled to acquire without having to exchange its exchangeable limited partnership units in BGC Holdings. The Company’s Audit Committee and full Board of Directors determined that it was in the best interests of the Company and its stockholders to approve the exchange agreement because it will help ensure that Cantor retains its exchangeable limited partnership units in BGC Holdings, which is the same partnership in which the Company’s partner employees participate, thus continuing to align the interests of Cantor with those of the partner employees.

Under the exchange agreement, Cantor and CFGM have the right to exchange 17,014,511 shares of Class A common stock owned by them as of June 30, 2016 (including the remaining shares of Class A common stock held by Cantor from the exchange of convertible notes for 24,042,599 shares of Class A common stock on April 13, 2015) for the same number of shares of Class B common stock. Cantor would also have the right to exchange any shares of Class A common stock subsequently acquired by it for shares of Class B common stock, up to 34,649,693 shares of Class B common stock.

The Company and Cantor have agreed that any shares of Class B common stock issued in connection with the exchange agreement would be deducted from the aggregate number of shares of Class B common stock that may be issued to the Cantor entities upon exchange of exchangeable limited partnership units in BGC Holdings. Accordingly, the Cantor entities will not be entitled to receive any more shares of Class B common stock under this agreement than they were previously eligible to receive upon exchange of exchangeable limited partnership units.

On June 23, 2015, the Audit Committee of the Company authorized management to enter into a revolving credit facility with Cantor of up to $150 million in aggregate principal amount pursuant to which Cantor or BGC would be entitled to borrow funds from each other from time to time. The outstanding balances would bear interest at the higher of the borrower’s or the lender’s short-term borrowing rate then in effect, plus 1%. On October 1, 2015, the Company borrowed $100.0 million under this facility (the “Cantor Loan”). The Company did not have any interest expense related to the Cantor Loan for the three and six months ended June 30, 2016 or 2015. The Cantor Loan was repaid on December 31, 2015. As of June 30, 2016, there were no borrowings outstanding under this facility.

Receivables from and Payables to Related Broker-Dealers

Amounts due to or from Cantor and Freedom International Brokerage, one of the Company’s equity method investments, 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, 2016 and December 31, 2015, the Company had receivables from Freedom International Brokerage of $4.7 million and $4.1 million, respectively. As of June 30, 2016 and December 31, 2015, the Company had $0.2 million and $0.9 million, respectively, in receivables from Cantor related to open derivative contracts. As of June 30, 2016 and December 31, 2015, the Company had $11 thousand and $0.4 million, respectively, in payables to Cantor related to open derivative contracts. Additionally, as of December 31, 2015, the Company had $4.6 million in payables to Cantor related to fails and equity trades pending settlement. As of June 30, 2016, the Company did not have any payables to Cantor related to fails and pending trades.

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

The Company has entered into various agreements with certain 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, 2016 and December 31, 2015, the aggregate balance of employee loans, net of reserve, was $247.9 million and $158.2 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, 2016 and 2015 was $10.5 million and $11.7 million, respectively. Compensation expense for the above-mentioned employee loans for the six months ended June 30, 2016 and 2015 was $21.0 million and $19.8 million, respectively. The compensation expense related to these employee loans 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. On April 13, 2015, the Company’s 8.75% Convertible Notes, due April 15, 2015, were fully converted into 24,042,599 shares of the Company’s Class A common stock, par value $0.01 per share, and the shares were issued to Cantor as settlement of the notes. The Company recorded interest expense related to the 8.75% Convertible Notes of $0.5 million and $3.8 million for the three and six months ended June 30, 2015, respectively. See Note 17—“Notes Payable, Collateralized and Short-Term Borrowings,” for more information. On June 15, 2015, the Company filed a resale registration statement on Form S-3 pursuant to which 24,042,599 shares of Class A common stock may be sold from time to time by Cantor or by certain of its pledgees, donees, distributees, counterparties, transferees or other successors in interest of the shares, including banks or other financial institutions which may enter into stock pledge, stock loan or other financing transactions with Cantor or its affiliates, as well as by their respective pledgees, donees, distributees, counterparties, transferees or other successors in interest.

Repurchases from Cantor

On February 23, 2016, the Company purchased from Cantor 5,000,000 shares of the Company’s Class A common stock at a price of $8.72 per share, the closing price on the date of the transaction. This transaction was included in the Company’s stock repurchase authorization and was approved by the Audit Committee of the Board of Directors.

Controlled Equity Offerings and Other Transactions with CF&Co

As discussed in Note 6—“Stock Transactions and Unit Redemptions,” the Company has entered into the November 2014 Sales Agreements with CF&Co, as the Company’s sales agent. During the three months ended June 30, 2016, the Company sold 3.3 million shares under the November 2014 Sales Agreement for aggregate proceeds of $30.3 million, at a weighted-average price of $9.18 per share. For the three months ended June 30, 2016 and 2015, the Company was charged approximately $0.6 million and $0.2 million, respectively, for services provided by CF&Co related to the Company’s November 2014 Sales Agreement. During the six months ended June 30, 2016, the Company sold 3.7 million shares under the November 2014 Sales Agreement for aggregate proceeds of $33.6 million, at a weighted-average price of $9.16 per share. For the six months ended June 30, 2016 and 2015, the Company was charged approximately $0.7 million and $0.5 million, respectively, for services provided by CF&Co related to the Company’s November 2014 Sales Agreement. 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 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 February 26, 2015, the Company completed the tender offer for GFI shares. In connection with the acquisition of GFI, during the three months ended March 31, 2015, the Company recorded advisory fees of $7.1 million payable to CF&Co. These fees were included in “Professional and Consulting Fees” in the Company’s unaudited condensed consolidated statements of operations.

On May 7, 2015, GFI retained CF&Co to assist it in the sale of Trayport. During the year ended December 31, 2015, the Company recorded advisory fees of $5.1 million payable to CF&Co in connection with the sale of Trayport. These fees were netted against the gain on sale in “Gain (loss) on divestures and sale of investments” in the Company’s consolidated statements of operations.

On May 27, 2016, the Company issued an aggregate $300.0 million principal amount of 5.125% Senior Notes due 2021 (the “5.125% Senior Notes”). In connection with this issuance of 5.125% Senior Notes, the Company recorded approximately $0.5 million in underwriting fees payable to CF&Co and $18 thousand to CastleOak Securities, L.P. These fees were recorded as a deduction from the carrying amount of the debt liability, which is amortized as interest expense over the term of the notes. Cantor Fitzgerald Securities, an affiliate of the Company, purchased $15 million of such senior notes.

Under rules adopted by the Commodity Futures Trading Commission (the “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. From time to time, the Company’s foreign-based brokers engage 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. There have been no payments made pursuant to this arrangement.

Transactions with Cantor Commercial Real Estate Company, L.P.

On October 29, 2013, the Audit Committee of the Board of Directors authorized the Company to enter into agreements from time to time with Cantor and/or its affiliates, including Cantor Commercial Real Estate Company, L.P. (“CCRE”), to provide services, including finding and reviewing suitable acquisition or partner candidates, structuring transactions, negotiating and due diligence services, in connection with the Company’s acquisition and other business strategies in commercial real estate and other businesses. Such services are provided at fees not to exceed the fully-allocated cost of such services, plus 10%. In connection with this agreement, the Company did not recognize any expense for the three and six months ended June 30, 2016 and 2015.

The Company also has a referral agreement in place with CCRE, in which the Company’s brokers are incentivized to refer business to CCRE through a revenue-share agreement. In connection with this revenue-share agreement, the Company recognized revenues of $0.9 million and $0.1 million for the three months ended June 30, 2016 and 2015, respectively. The Company recognized revenues of $1.8 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively. This revenue was recorded as part of “Commissions” in the Company’s unaudited condensed consolidated statements of operations.

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 FPUs redeemed by BGC Holdings upon termination or bankruptcy of the founding/working partner. In addition, pursuant to the Sixth Amendment to the BGC Holdings Limited Partnership Agreement (the “Sixth Amendment”), where either current, terminating, or terminated partners are permitted by the Company to exchange any portion of their FPUs and Cantor consents to such exchangeability, the Company shall offer to Cantor the opportunity for Cantor to purchase the same number of new exchangeable limited partnership interests (Cantor units) in BGC Holdings at the price that Cantor would have paid for the FPUs had the Company redeemed them. Any such Cantor units purchased by Cantor are currently exchangeable for up to 34,649,693 shares of Class B common stock or, at Cantor’s election or if there are no such additional 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).

On November 4, 2015, the Company issued exchange rights with respect to, and Cantor purchased, in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act, an aggregate of 1,775,481 exchangeable limited partnership units in BGC Holdings, as follows: In connection with the redemption by BGC Holdings of an aggregate of 588,356 non-exchangeable founding partner units from founding partners of BGC Holdings for an aggregate consideration of $2,296,801, Cantor purchased 554,196 exchangeable limited partnership units from BGC Holdings for an aggregate of $2,115,306 (after offset of a founding partner’s $46,289 debt due to Cantor). In addition, pursuant to the Sixth Amendment, on November 4, 2015, Cantor purchased 1,221,285 exchangeable limited partnership units from BGC Holdings for an aggregate consideration of $4,457,436 in connection with the grant of exchangeability and exchange of 1,221,285 founding partner units. Exchangeable limited partnership units held by Cantor are exchangeable by Cantor at any time on a one-for-one basis (subject to adjustment) for shares of Class A common stock of the Company.

As of June 30, 2016, there were 844,632 FPUs remaining in which BGC Holdings had the right to redeem or exchange and Cantor had the right to purchase an equivalent number of Cantor units.

Transactions with Executive Officers and Directors

On May 9, 2014, partners of BGC Holdings approved the Tenth Amendment to the Agreement of Limited Partnership of BGC Holdings (the “Tenth Amendment”) effective as of May 9, 2014. In order to facilitate partner compensation and for other corporate purposes, the Tenth Amendment creates a new class of partnership units (“NPSUs”).

NPSUs are not entitled to participate in partnership distributions, will not be allocated any items of profit or loss, may not be made exchangeable into shares of the Company’s Class A common stock and will not be included in the fully diluted share count. Subject to the approval of the Compensation Committee or its designee, N Units may be converted into the underlying unit type (i.e. an NREU will be converted into an REU) and will then participate in partnership distributions, subject to terms and conditions determined by the general partner of BGC Holdings in its sole discretion, including that the recipient continue to provide substantial services to the Company and comply with his or her partnership obligations. The Tenth Amendment was approved by the Audit Committee of the Board of Directors and by the full Board of Directors.

On January 1, 2015, (i) 1,000,000 of Mr. Lutnick’s (the Company’s Chief Executive Officer) NPSUs converted into 550,000 PSUs and 450,000 PPSUs, with respect to which Mr. Lutnick was offered the right to exchange 239,739 PSUs and 196,150 PPSUs for shares and cash, which he waived at that time under the Company’s policy, and (ii) 142,857 of Mr. Merkel’s (the Company’s Executive Vice President, General Counsel and Secretary) NPSUs converted into 78,571 PSUs and 64,286 PPSUs, of which 5,607 PSUs and 4,588 PPSUs were made exchangeable and repurchased by the Company at the average price of shares of Class A common stock sold under the Company’s controlled equity offering less 2%, or $91,558.

On January 30, 2015, the Compensation Committee granted 4,000,000 NPSUs to Mr. Lutnick and 1,000,000 NPSUs to Mr. Lynn, the Company’s President. These awards convert 25% per year on January 1 of each year beginning January 1, 2016 such that 1,000,000 of Mr. Lutnick’s NPSUs and 250,000 of Mr. Lynn’s NPSUs may be converted into an equivalent number of non-exchangeable PSUs/PPSUs for Mr. Lutnick and non-exchangeable LPUs/PLPUs for Mr. Lynn on each conversion date, subject to the approval of the Compensation Committee for all such conversions beginning in 2016. The grant of exchange rights with respect to such PSUs/PPSUs and LPUs/PLPUs will be determined in accordance with the Company’s practices when determining discretionary bonuses or awards, and any grants of exchangeability shall be subject to the approval of the Compensation Committee. Upon the signing of any agreement that would result in a “Change in Control” (as defined in the Amended and Restated Change in Control Agreement entered into by Mr. Lutnick and the applicable Deed of Adherence entered into by Mr. Lynn), (1) any unvested NPSUs held by Mr. Lutnick or Mr. Lynn shall convert in full and automatically be converted into exchangeable PSUs/PPSUs or LPUs/PLPUs (i.e., such PSUs and LPUs shall be exchangeable for shares of Class A common stock and PPSUs and PLPUs shall be exchangeable for cash), and (2) any non-exchangeable PSUs/PPSUs held by Mr. Lutnick and non-exchangeable LPUs/PLPUs held by Mr. Lynn shall become immediately exchangeable, which exchangeability may be exercised in connection with such “Change in Control,” except that, with respect to (1) and (2), 9.75% of Mr. Lynn’s LPUs/PLPUs shall be deemed to be redeemed for zero in proportion to such exchanges of LPUs/PLPUs in accordance with the customary LPU/PLPU structure.

On January 30, 2015, the Compensation Committee approved the acceleration of the lapse of restrictions on transferability with respect to an aggregate of 598,904 shares of restricted stock held by our executive officers as follows: Mr. Lynn, 455,733 shares; Mr. Merkel, 16,354 shares; Mr. Windeatt (the Company’s Chief Operating Officer), 95,148 shares; and Mr. Sadler (the Company’s former Chief Financial Officer), 31,669 shares. On January 30, 2015, these executives sold these shares to the Company at $7.83 per share. In connection with such sales, an aggregate of 87,140 of LPUs were redeemed for zero as follows: Mr. Lynn, 68,381 units; Mr. Windeatt, 20,684 units; and Mr. Sadler 4,752 units.

On July 27, 2015, the Compensation Committee granted exchange rights with respect to 8,536 PSUs and 6,983 PPSUs that were issued pursuant to converted NPSUs that were awarded to Mr. Merkel in May 2014. On October 29, 2015, the Company repurchased (i) the 8,536 PSUs at a price of $8.34 per share, the closing price of the Class A common stock on the date the Compensation Committee approved the transaction, and (ii) the 6,983 PPSUs at a price of $9.15 per share, the closing price of the Class A common stock on December 31, 2014.

On February 24, 2016, the Compensation Committee granted 1,500,000 NPSUs to Mr. Lutnick, 2,000,000 NPSUs to Mr. Lynn, 1,000,000 NPSUs to Mr. Merkel and 75,000 NPSUs to Mr. Windeatt. Conversion of NPSUs into PSUs/PPSUs for Messrs. Lutnick and Merkel and into LPUs/PLPUs for Messrs. Lynn and Windeatt may be (i) 25% per year with respect to NPSUs granted in 2016; (ii) 25% of the previously awarded NPSUs currently held by Messrs. Lutnick and Lynn based upon the original issuance date (the first 25% having already been converted); and (iii) 25% per year of the current balance of NPSUs previously awarded to Mr. Merkel, provided that, with respect to all of the foregoing, such future conversions are subject to the approval of the Compensation Committee each year. The grant of exchange rights with respect to such PSUs/PPSUs and LPUs/PLPUs will be determined in accordance with the Company’s practices when determining discretionary bonuses or awards, and any grants of exchangeability shall be subject to the approval of the Compensation Committee.

On February 24, 2016, the Compensation Committee granted 750,000 non-exchangeable PSUs and 291,667 PPSUs (which may not be made exchangeable) to Mr. Lutnick; 621,429 non-exchangeable LPUs and 241,667 PLPUs (which may not be made exchangeable) to Mr. Lynn; 114,583 non-exchangeable PSUs and 93,750 PPSUs (which may not be made exchangeable) to Mr. Merkel; 105,188 non-exchangeable LPUs and 40,906 non-exchangeable PLPUs (which may not be made exchangeable) to Mr. Windeatt; and 55,688 non-exchangeable LPUs and 21,656 non-exchangeable PLPUs (which may not be made exchangeable) to Mr. Sadler.

On February 24, 2016, the Compensation Committee approved the acceleration of the lapse of restrictions on transferability with respect to 612,958 shares of restricted stock held by our executive officers as follows: Mr. Lynn, 431,782 shares; Mr. Merkel, 150,382 shares; and Mr. Sadler, 30,794 shares. On February 24, 2016, Messrs. Lynn and Sadler sold these shares to the Company at $8.40 per share, and Mr. Merkel sold 120,000 of such shares to the Company at $8.40 per share. In connection with such transaction, 64,787 of Mr. Lynn’s and 4,621 of Mr. Sadler’s partnership units were redeemed for zero.

In February 2016, the Company granted exchange rights and/or released transfer restrictions with respect to 2,127,648 rights available to Mr. Lutnick with respect to some of his non-exchangeable limited partnership units (which amount included the lapse of restrictions with respect to 235,357 shares of restricted stock held by him), which were all of such rights available to him at such time. Mr. Lutnick has not transferred or exchanged such shares or units as of the date hereof.

On March 9, 2016, Mr. Lutnick exercised an employee stock option with respect to 250,000 shares of Class A common stock at an exercise price of $8.42 per share. The net exercise of the option resulted in 17,403 shares of the Company’s Class A common stock being issued to Mr. Lutnick.

Transactions with Relief Fund

During the year ended December 31, 2015, the Company issued an interest-free loan to the Relief Fund for $1.0 million in connection with the Company’s annual Charity Day. As a result of the loan, the Relief Fund issued a promissory note to the Company in the aggregate principal amount of $1.0 million due on August 4, 2016. On March 2, 2016, the promissory note was canceled in connection with charitable contribution commitments related to the Company’s annual Charity Day.

During the year ended December 31, 2015, the Company committed to make charitable contributions to the Relief Fund in the amount of $40.0 million, which the Company recorded in “Other expenses” in the Company’s unaudited condensed consolidated statements of operations for the year ended December 31, 2015. As of June 30, 2016, the remaining liability associated with this commitment was $38.0 million, which is included in “Accounts payable, accrued and other liabilities” in the Company’s unaudited condensed consolidated statements of financial condition.

On February 23, 2016, the Company purchased from the Relief Fund 970,639 shares of the Company’s Class A common stock at a price of $8.72 per share, the closing price on the date of the transaction.

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 that offers new pools of block liquidity to the global equities markets, such arrangements are proportionally and on the same terms as similar arrangements between Aqua and Cantor. On October 27, 2015, the Company’s Board of Directors and Audit Committee increased the authorized amount by an additional $4.0 million, to $16.2 million. 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 the three months ended June 30, 2016 and 2015, the Company made $0.8 million and $0.5 million, respectively, in cash contributions to Aqua. During the six months ended June 30, 2016 and 2015, the Company made $1.1 million and $0.7 million, respectively, in cash contributions to Aqua. These contributions are recorded as part of “Investments” in the Company’s unaudited condensed consolidated statements of financial condition.

The Company has also entered into a Subordinated Loan Agreement with Aqua, whereby the Company loaned Aqua the principal sum of $980 thousand. The scheduled maturity date on the subordinated loan is September 1, 2017, 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.

14.

Investments

Equity Method and Similar Investments


(in thousands)	June 30, 2016		December 31, 2015
Equity method investments	$	40,723	$	32,277
Cost method investments		1,394		1,536

	$	42,117	$	33,813

The Company recognized gains of $0.5 million and $0.4 million related to its equity method investments for the three months ended June 30, 2016 and 2015, respectively. The Company recognized gains of $1.1 million and losses of $0.6 million related to its equity method investments for the six months ended June 30, 2016 and 2015, respectively. The Company’s share of the gains or losses is reflected in “Gains (losses) on equity method investments” in the Company’s unaudited condensed consolidated statements of operations. As a result of the GFI acquisition, the Company also had certain investments in brokerage businesses in which the Company had a contractual right to receive a percentage of revenues, less certain direct expenses. The Company accounted for these investments in a manner similar to the equity method of accounting. The sale of KBL (see Note 4–“Divestitures”) in May 2015 included these investments. The Company’s share of gains on these investments was $0.4 million and $1.0 million for three and six months ended June 30, 2015, respectively. The Company’s total share of gains and losses is reflected in “Gains (losses) on equity method investments” in the Company’s unaudited condensed consolidated statement of operations.

See Note 13—“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 tables 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, these VIEs. 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, 2016 and December 31, 2015. 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, 2016				December 31, 2015
	Investment		Maximum Exposure to Loss		Investment		Maximum Exposure to Loss
Variable interest entities¹	$	5,217	$	6,197	$	3,858	$	4,838

The Company has entered into a subordinated loan agreement with Aqua, whereby the Company agreed to lend the principal sum of $980 thousand. As of June 30, 2016, the Company’s maximum exposure to loss with respect to its unconsolidated VIEs includes the sum of its equity investments in its unconsolidated VIEs and the $980 thousand subordinated loan to Aqua.

Consolidated VIE

Through the acquisition of GFI, the Company is invested in a limited liability company that is focused on developing a proprietary trading business. The limited liability company is a VIE and it was determined that the Company is the primary beneficiary of this VIE because the Company, through GFI, was the provider of the majority of this VIE’s start-up capital and has the power to direct the activities of this VIE that most significantly impact its economic performance, primarily through its voting percentage and consent rights on the activities that would most significantly influence the entity. The consolidated VIE had total assets of $8.4 million at June 30, 2016, which primarily consisted of clearing margin. There were no material restrictions on the consolidated VIE’s assets. The consolidated VIE had total liabilities of $1.1 million at June 30, 2016. The Company’s exposure to economic loss on this VIE is approximately $5.0 million.

Cost Method Investments

As a result of the GFI acquisition, the Company acquired investments for which it did not have the ability to exert significant influence over operating and financial policies. These investments are generally accounted for using the cost method of accounting in accordance with ASC 325-10, Investments—Other. At June 30, 2016 and December 31, 2015, the carrying value of these cost method investments was $1.4 million and $1.5 million, respectively.

15.

Fixed Assets, Net

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


	June 30, 2016			December 31, 2015
Computer and communications equipment	$	145,234		$	142,511
Software, including software development costs		143,953			140,416
Leasehold improvements and other fixed assets		154,969			137,736

		444,156			420,663
Less: accumulated depreciation and amortization		(296,138	)		(274,790	)

Fixed assets, net	$	148,018		$	145,873

Depreciation expense was $6.7 million and $7.6 million for the three months ended June 30, 2016 and 2015, respectively. Depreciation expense was $13.6 million and $15.5 million for the six months ended June 30, 2016 and 2015, respectively. Depreciation is included as part of “Occupancy and equipment” in the Company’s unaudited condensed consolidated statements of operations.

The Company has approximately $6.5 million of asset retirement obligations related to certain of its leasehold improvements. The associated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset. The liability is discounted and accretion expense is recognized using the credit adjusted risk-free interest rate in effect when the liability was initially recognized.

For the three months ended June 30, 2016 and 2015, software development costs totaling $7.5 million and $3.9 million, respectively, were capitalized. For the six months ended June 30, 2016 and 2015, software development costs totaling $10.3 million and $7.0 million, respectively, were capitalized. Amortization of software development costs totaled $7.4 million for both the three months ended June 30, 2016 and 2015. Amortization of software development costs totaled $14.6 million and $11.2 million for the six months ended June 30, 2016 and 2015, 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 $1.4 million and $13.2 million were recorded for the three months ended June 30, 2016 and 2015, respectively, related to the evaluation of capitalized software projects for future benefit and for fixed assets no longer in service. Impairment charges of $3.2 million and $17.7 million were recorded for the six months ended June 30, 2016 and 2015, 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.

16.

Goodwill and Other Intangible Assets, Net

The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2016 were as follows (in thousands):


	Financial Services			Real Estate Services		Total
Balance at December 31, 2015	$	418,929		$	392,837	$	811,766
Acquisitions		—			5,733		5,733
Measurement period adjustments		(3,803	)		1,853		(1,950	)
Cumulative translation adjustment		607			—		607

Balance at June 30, 2016	$	415,733		$	400,423	$	816,156

During the six months ended June 30, 2016, the Company recognized additional goodwill of approximately $5.7 million, which was allocated to the Company’s Real Estate Services segment. See Note 3—“Acquisitions” for more information.

During the six months ended June 30, 2016, the Company recognized measurement period adjustments of approximately $(3.8) million relating to Financial Services, and $1.9 million for Real Estate Services. The Company considers the adjustments insignificant to its consolidated financial statements, and accordingly the Company’s unaudited condensed consolidated statements of financial condition at December 31, 2015 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, except weighted-average remaining life):


	June 30, 2016
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Life (Years)
Definite life intangible assets:
Patents	$	9,691	$	7,923	$	1,768		2.0
Acquired intangibles		174,675		45,053		129,622		14.3
Noncompete agreements		1,790		1,790		—		—
All other		1,885		1,272		613		3.1

Total definite life intangible assets		188,041		56,038		132,003		14.1
Indefinite life intangible assets:
Trade names		90,255		—		90,255		N/A
Horizon license		1,500		—		1,500		N/A

Total indefinite life intangible assets		91,755		—		91,755		N/A

Total	$	279,796	$	56,038	$	223,758		14.1


	December 31, 2015
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Life (Years)
Definite life intangible assets:
Patents	$	8,144	$	6,944	$	1,200		2.4
Acquired intangibles		177,858		37,996		139,862		13.9
Noncompete agreements		1,790		1,790		—		—
All other		2,127		977		1,150		3.3

Total definite life intangible assets		189,919		47,707		142,212		13.7
Indefinite life intangible assets:
Trade names		90,255		—		90,255		N/A
Horizon license		1,500		—		1,500		N/A

Total indefinite life intangible assets		91,755		—		91,755		N/A

Total	$	281,674	$	47,707	$	233,967		13.7

Intangible amortization expense was $4.9 million and $8.7 million for the three months ended June 30, 2016 and 2015, respectively. Intangible amortization expense was $10.3 million and $13.6 million for the six months ended June 30, 2016 and 2015, respectively. Intangible amortization is included as part of “Other expenses” in the Company’s unaudited condensed consolidated statements of operations.

The estimated future amortization expense of definite life intangible assets as of June 30, 2016 is as follows (in millions):


2016	$	9.3
2017		16.3
2018		12.3
2019		10.9
2020		9.3
2021 and thereafter		73.9

Total	$	132.0

17.

Notes Payable, Collateralized and Short-Term Borrowings

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


	June 30, 2016		December 31, 2015
4.50% Convertible Notes	$	159,791	$	157,332
8.125% Senior Notes		109,209		109,147
5.375% Senior Notes		296,592		296,100
8.375% Senior Notes		251,167		255,300
5.125% Senior Notes		295,834		—
Collateralized borrowings		19,633		22,998

Total	$	1,132,226	$	840,877

The Company’s Convertible Notes and Senior Notes are recorded at amortized cost. As of June 30, 2016 and December 31, 2015, the carrying amounts and estimated fair values of the Company’s Convertible Notes and Senior Notes were as follows (in thousands):


	June 30, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
4.50% Convertible Notes	$	159,791	$	159,800	$	157,332	$	173,700
8.125% Senior Notes		109,209		121,230		109,147		121,095
5.375% Senior Notes		296,592		314,100		296,100		309,750
8.375% Senior Notes		251,167		258,600		255,300		263,724
5.125% Senior Notes		295,834		301,800		—		—

Total	$	1,112,593	$	1,155,530	$	817,879	$	868,269

The fair values of the 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 were senior unsecured obligations and ranked equally and ratably with all existing and future senior unsecured obligations of the Company. The 8.75% Convertible Notes bore 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. On April 13, 2015, the Company’s 8.75% Convertible Notes were fully converted into 24,042,599 shares of the Company’s Class A common stock, par value $0.01 per share, issued to Cantor. The Company recorded interest expense related to the 8.75% Convertible Notes of $0.5 million and $3.8 million for the three and six months ended June 30, 2015, respectively.

On July 29, 2011, the Company issued an aggregate of $160.0 million principal amount of 4.50% Convertible Notes due July 15, 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 $3.0 million for both the three months ended June 30, 2016 and 2015. The Company recorded interest expense related to the 4.50% Convertible Notes of $6.1 million and $6.0 million for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, 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. As of June 30, 2016, 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 were 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, was greater than the strike price of the capped call transactions ($10.83 as of June 30, 2016), subject to adjustment in certain circumstances). The capped call transactions had a cap price equal to $13.54 per share as of June 30, 2016. 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).

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


	4.50% Convertible Notes
	June 30, 2016			December 31, 2015
Principal amount of debt component	$	160,000		$	160,000
Unamortized discount		(209	)		(2,668	)
Carrying amount of debt component		159,791			157,332
Equity component		18,972			18,972
Effective interest rate		7.61	%		7.61	%
Maturity date (period through which discount is being amortized)		7/15/2016			7/15/2016
Conversion price	$	9.84		$	9.84
Number of shares to be delivered upon conversion		16,260,160			16,260,160
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, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Coupon interest	$	1,800	$	1,800	$	—	$	547
Amortization of discount		1,234		1,197		—		—

Total interest expense	$	3,034	$	2,997	$	—	$	547


	4.50% Convertible Notes				8.75% Convertible Notes
	For the six months ended				For the six months ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Coupon interest	$	3,600	$	3,600	$	—	$	3,828
Amortization of discount		2,459		2,384		—		—

Total interest expense	$	6,059	$	5,984	$	—	$	3,828

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”). 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 for both the three months ended June 30, 2016 and 2015. The Company recorded interest expense related to the 8.125% Senior Notes of $4.6 million for both the six months ended June 30, 2016 and 2015.

5.375% Senior Notes

On December 9, 2014, the Company issued an aggregate of $300.0 million principal amount of 5.375% Senior Notes due 2019 (the “5.375% Senior Notes”). The 5.375% Senior Notes are general senior unsecured obligations of the Company. These Senior Notes bear interest at a rate of 5.375% per year, payable in cash on June 9 and December 9 of each year, commencing June 9, 2015. The interest rate payable on the notes will be subject to adjustments from time to time based on the debt rating assigned by specified rating agencies to the

notes, as set forth in the Indenture. The 5.375% Senior Notes will mature on December 9, 2019. The Company may redeem some or all of the notes at any time or from time to time for cash at certain “make-whole” redemption prices (as set forth in the Indenture). If a “Change of Control Triggering Event” (as defined in the Indenture) occurs, holders may require the Company to purchase all or a portion of their notes for cash at a price equal to 101% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The initial carrying value of the 5.375% Senior Notes was $295.1 million, net of the discount and debt issuance costs of $4.9 million. The issuance costs are amortized as interest cost, and the carrying value of the 5.375% Senior Notes will accrete up to the face amount over the term of the notes. The Company recorded interest expense related to the 5.375% Senior Notes of $4.3 million for both the three months ended June 30, 2016 and 2015. The Company recorded interest expense related to the 5.375% Senior Notes of $8.6 million for both the six months ended June 30, 2016 and 2015.

8.375% Senior Notes

As part of the GFI acquisition, the Company assumed $240.0 million in aggregate principal amount of 8.375% Senior Notes (the “8.375% Senior Notes”) due July 2018. The carrying value of these notes as of June 30, 2016 was $251.2 million. Interest on these notes is payable, semi-annually in arrears on the 19th of January and July. Due to the cumulative effect of downgrades to the credit rating of GFI’s 8.375% Senior Notes, the 8.375% Senior Notes were subjected to 200 basis points penalty interest. On April 28, 2015, a subsidiary of the Company purchased from GFI approximately 43.0 million new shares of GFI common stock. This increased BGC’s ownership to approximately 67% of GFI’s outstanding common stock and gave us the ability to control the timing and process with respect to a full merger. Also on July 10, 2015, the Company guaranteed the obligations of GFI under the 8.375% Senior Notes. These actions resulted in upgrades of the credit ratings of GFI’s 8.375% Senior Notes by Moody’s Investors Service, Fitch Ratings Inc. and Standard & Poor’s, which reduced the penalty interest to 25 basis points effective July 19, 2015. In addition, on January 13, 2016, Moody’s further upgraded the credit rating on GFI’s 8.375% Senior Notes, eliminating the penalty interest. The Company recorded interest expense related to the 8.375% Senior Notes of $5.0 million and $6.2 million for the three months ended June 30, 2016 and 2015, respectively. The Company recorded interest expense related to the 8.375% Senior Notes of $10.1 million and $8.3 million for the six months ended June 30, 2016 and 2015, respectively.

5.125% Senior Notes

On May 27, 2016, the Company issued an aggregate of $300.0 million principal amount of 5.125% Senior Notes due 2021 (the “5.125% Senior Notes”). The 5.125% Senior Notes are general senior unsecured obligations of the Company. These Senior Notes bear interest at a rate of 5.125% per year, payable in cash on May 27 and November 27 of each year, commencing November 27, 2016. The 5.125% Senior Notes will mature on May 27, 2021. The Company may redeem some or all of the notes at any time or from time to time for cash at certain “make-whole” redemption prices (as set forth in the Indenture). If a “Change of Control Triggering Event” (as defined in the Indenture) occurs, holders may require the Company to purchase all or a portion of their notes for cash at a price equal to 101% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The initial carrying value of the 5.125% Senior Notes was $295.8 million, net of the discount and debt issuance costs of $4.2 million. The issuance costs are amortized as interest expense, and the carrying value of the 5.125% Senior Notes will accrete up to the face amount over the term of the notes. The Company recorded interest expense related to the 5.125% Senior Notes of $1.6 million for the three and six months ended June 30, 2016.

Collateralized Borrowings

On March 13, 2015, the Company entered into a secured loan arrangement of $28.2 million under which it pledged certain fixed assets as security for a loan. This arrangement incurs interest at a fixed rate of 3.70% and matures on March 13, 2019. As of June 30, 2016, the Company had $19.6 million outstanding related to this secured loan arrangement, which includes $0.2 million of deferred financing costs. The value of the fixed assets pledged as of June 30, 2016 was $7.0 million. The Company recorded interest expense related to this secured loan arrangement of $0.2 million for both the three months ended June 30, 2016 and 2015. The Company recorded interest expense related to this secured loan arrangement of $0.4 million and $0.3 million for the six months ended June 30, 2016 and 2015, respectively.

Credit Agreement

As part of the GFI acquisition, the Company acquired a credit agreement as amended (the “GFI Credit Agreement”) with Bank of America, N.A. and certain other lenders, which provided for maximum revolving loans of up to $75.0 million. The amount outstanding was repaid by the Company on October 2, 2015, prior to the sale of the Company’s Trayport division. For the three and six months ended June 30, 2015, the Company recorded interest expense related to the GFI Credit Agreement of $0.8 million and $1.0 million, respectively.

On October 1, 2015, the Company entered into a previously authorized $150.0 million revolving credit facility (the “Facility”) with Cantor and borrowed $100.0 million under such facility (the “Cantor Loan”). The Cantor Loan bears interest at the rate of LIBOR plus 3.25% and may be adjusted based on Cantor’s short-term borrowing rate then in effect plus 1%. The Facility has a maturity date of August 10, 2017. The Cantor Loan was repaid on December 31, 2015.

On December 24, 2015, the Company entered into a committed unsecured credit agreement with Bank of America, N.A. The credit agreement provided for maximum revolving loans of $25.0 million through March 24, 2016. The interest rate on this facility was LIBOR plus 200 basis points.

On February 25, 2016, the Company entered into a committed unsecured credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of lenders. Several of the Company’s domestic non-regulated subsidiaries are parties to the credit agreement as guarantors. The credit agreement provides for revolving loans of $150.0 million, with the option to increase the aggregate loans to $200.0 million. The maturity date of the facility is February 25, 2018. Borrowings under this facility bear interest at either LIBOR or a defined base rate plus an additional margin which ranges from 50 basis points to 250 basis points depending on the Company’s debt rating as determined by S&P and Fitch and whether such loan is a LIBOR loan or a base rate loan. Contemporaneously with the closing of this credit agreement, the $25.0 million unsecured credit agreement entered into on December 24, 2015 with Bank of America, N.A. as lender was terminated. As of June 30, 2016, there were no borrowings outstanding under either this $150.0 million facility or the terminated $25.0 million facility. For the three and six months ended June 30, 2016, the Company recorded interest expense related to the credit facility of $0.2 million and $0.3 million, respectively.

18.

Compensation

The Company’s Compensation Committee may grant various equity-based and partnership awards, including restricted stock units, restricted stock, stock options, limited partnership units and exchange rights for shares of the Company’s Class A common stock upon exchange of limited partnership units and FPUs. On June 22, 2016, at our Annual Meeting of Stockholders of the Company, the stockholders approved the Seventh Amended and Restated Long Term Incentive Plan (the “Equity Plan”) to increase from 350 million to 400 million the aggregate number of shares of Class A common stock of the Company that may be delivered or cash settled pursuant to awards granted during the life of the Equity Plan. As of June 30, 2016, the limit on the aggregate number of shares authorized to be delivered allowed for the grant of future awards relating to 222.3 million shares. Upon vesting of RSUs, issuance of restricted stock or exercise of employee stock options, the Company generally issues new shares of the Company’s Class A common stock.

Limited Partnership Units

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


	Number of Units
Balance at December 31, 2015		76,401,775
Granted units		23,176,799
Redeemed/exchanged units		(3,197,260	)
Forfeited units		(2,472,802	)

Balance at June 30, 2016		93,908,512

During the three months ended June 30, 2016 and 2015, the Company granted exchangeability on 3.5 million and 2.7 million limited partnership units for which the Company incurred non-cash compensation expense, before associated income taxes, of $30.6 million and $25.6 million, respectively. During the six months ended June 30, 2016 and 2015, the Company granted exchangeability on 6.7 million and 7.1 million limited partnership units for which the Company incurred non-cash compensation expense, before associated income taxes, of $58.4 million and $62.2 million, respectively.

As of June 30, 2016 and December 31, 2015, the number of limited partnership units exchangeable into shares of Class A common stock at the discretion of the unit holder was 8.8 million and 5.4 million, respectively.

As of June 30, 2016 and December 31, 2015, 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 approximately $99.8 million and $30.4 million, respectively. As of June 30, 2016 and December 31, 2015, the aggregate estimated fair value of these limited partnership units was approximately $17.4 million and $11.3 million, respectively. The number of outstanding limited partnership units with a post-termination pay-out as of June 30, 2016 and December 31, 2015 was approximately 10.8 million and 3.3 million, respectively, of which approximately 7.7 million and 1.6 million were unvested.

Certain of the limited partnership units with a post-termination pay-out have been granted in connection with the Company’s acquisitions. As of June 30, 2016 and December 31, 2015, the aggregate estimated fair value of these acquisition-related limited partnership units was $25.7 million and $26.2 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 these limited partnership units of $4.6 million and $2.8 million for the three months ended June 30, 2016 and 2015, respectively. The Company recognized compensation expense, before associated income taxes, related to these limited partnership units of $6.7 million and $7.3 million for the six months ended June 30, 2016 and 2015, respectively. These are included in “Compensation and employee benefits” in the Company’s unaudited condensed consolidated statements of operations.

Certain limited partnership units generally receive quarterly allocations of net income, which are cash distributed on a quarterly basis and generally contingent upon services being provided by the unit holders. The allocation of income to limited partnership units and FPUs was $10.4 million and $0.6 million for the three months ended June 30, 2016 and 2015, respectively. The allocation of income to limited partnership units and FPUs was $15.5 million and $1.1 million for the six months ended June 30, 2016 and 2015, 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, 2015		1,622,431		$	5.83		1.53
Granted units		661,566			7.98
Delivered units		(705,201	)		5.74
Forfeited units		(41,641	)		6.66

Balance at June 30, 2016		1,537,155		$	6.77		1.94

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, 2016 and 2015, the Company granted 0.7 million and 0.5 million, respectively, of RSUs with aggregate estimated grant date fair values of approximately $5.3 million and $3.9 million, respectively, to employees and directors. These RSUs were awarded in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses. RSUs granted to these individuals generally vest over a two- to four-year period.

For RSUs that vested during the six months ended June 30, 2016 and 2015, the Company withheld shares valued at $1.2 million, to pay taxes due at the time of vesting.

As of June 30, 2016 and December 31, 2015, the aggregate estimated grant date fair value of outstanding RSUs was approximately $10.4 million and $9.5 million, respectively.

Compensation expense related to RSUs, before associated income taxes, was approximately $1.2 million for both the three months ended June 30, 2016 and 2015. Compensation expense related to RSUs, before associated income taxes, was approximately $2.8 million and $2.7 million, respectively, for the six months ended June 30, 2016 and 2015. As of June 30, 2016, there was approximately $10.6 million of total unrecognized compensation expense related to unvested RSUs.

Restricted Stock

The Company has granted restricted shares under its Equity Plan. Such restricted shares are generally saleable by partners in five to ten years. Partners who agree to extend the length 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. Transferability of the shares of restricted stock is not subject to continued employment or service with the Company or any affiliate or subsidiary of the Company; however, transferability is subject to compliance with BGC Partners’ and its affiliates’ customary noncompete obligations. During the six months ended June 30, 2016 and 2015, approximately 16 thousand shares and 27 thousand shares, respectively, were forfeited in connection with this clause. During the six months ended June 30, 2016 and 2015, the Company released the restrictions with respect to approximately 2.2 million and 1.9 million of such shares, respectively.

Deferred Cash Compensation

As part of the acquisition of GFI, the Company now maintains a Deferred Cash Award Program which was adopted by GFI on February 12, 2013, and provides for the grant of deferred cash incentive compensation to eligible employees. The Company may pay certain bonuses in the form of deferred cash compensation awards, which generally vest over a future service period. In addition, prior to the completion of the tender offer, GFI’s outstanding RSUs were converted into the right to receive an amount in cash equal to $6.10 per unit, with such cash payable on and subject to the terms and conditions of the original vesting schedule of each RSU. The total compensation expense recognized in relation to the deferred cash compensation awards for the three months ended June 30, 2016 and 2015 was $3.9 million and $8.2 million, respectively. The total compensation expense recognized in relation to the deferred cash compensation awards for the six months ended June 30, 2016 and 2015 was $9.8 million and $11.4 million, respectively. As of June 30, 2016, the total liability for the deferred cash compensation awards was $16.9 million, which is included in “Accrued compensation” on the Company’s unaudited condensed consolidated statements of financial condition. Total unrecognized compensation cost related to deferred cash compensation, prior to the consideration of forfeitures, was approximately $21.7 million and is expected to be recognized over a weighted-average period of 1.02 years.

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, 2015		2,079,238		$	9.73		1.4	$	1,169,664
Granted options		—			—
Exercised options		(250,000	)		8.42
Forfeited options		(14,619	)		9.53

Balance at June 30, 2016		1,814,619		$	9.92		1.0	$	—

Options exercisable at June 30, 2016		1,814,619		$	9.92		1.0	$	—

There were 250 thousand and 30 thousand stock options exercised during the six months ended June 30, 2016 and 2015, respectively. The Company did not grant any stock options during the six months ended June 30, 2016 and 2015.

The Company did not record any compensation expense related to stock options for the three or six months ended June 30, 2016 or 2015, as all of these options had vested in prior years. As of June 30, 2016, all of the compensation expense related to stock options was fully recognized.

19.

Commitments, Contingencies and Guarantees

Contingencies

In the ordinary course of business, various legal actions are brought and are pending against the Company and its subsidiaries 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 businesses, 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 subsidiaries 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.

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. The Company is unable to estimate a possible loss or range of loss in connection with specific matters beyond its current accrual and any other amounts disclosed. Management believes that, based on currently available information, the final outcome of these current pending matters will not have a material adverse effect on the Company’s unaudited condensed consolidated financial statements and disclosures 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, 2016, the Company was contingently liable for $1.9 million under these letters of credit.

Risk and Uncertainties

The Company generates revenues by providing financial intermediary, securities trading and brokerage activities, and commercial real estate services 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 and real estate 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.

Indemnification

In connection with the sale of eSpeed, the Company has indemnified Nasdaq for amounts over a defined threshold against damages arising from breaches of representations, warranties and covenants. In addition, in connection with the acquisition of GFI, the Company has indemnified the Directors and Officers of GFI. As of June 30, 2016, 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.

20.

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, 2016, the Company had $368.5 million of undistributed foreign pre-tax earnings, which excludes the cash proceeds from the sale of Trayport in the amount of $603.9 million. Except for the cash proceeds from the sale of Trayport, it is the Company’s intention to permanently reinvest these undistributed foreign pre-tax earnings in the Company’s foreign operations. It is not practicable to determine the amount of additional tax that may be payable in the event these earnings are repatriated due to the fluctuation of the relative ownership percentages of the foreign subsidiaries between the Company and BGC Holdings, L.P. For the cash proceeds which are not permanently reinvested, the accrued tax liability is $135.5 million, net of foreign tax credits. In addition, certain GFI Group net operating loss carryforwards are expected to be utilized to reduce cash taxes. Taking these items together, we therefore expect to pay effective cash taxes of no more than $64 million related to the Trayport transaction.

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, 2016, the Company had $1.6 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. As of December 31, 2015, the Company’s unrecognized tax benefits, excluding related interest and penalties, were $1.6 million, all of which, if recognized, would affect the effective tax rate. 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, 2016, the Company had approximately $0.2 million of accrued interest related to uncertain tax positions. As of December 31, 2015, there were $0.2 million of accrued interest and penalties related to uncertain tax positions.

21.

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, 2016, 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 (the “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, 2016, 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.

In addition, the Company’s Swap Execution Facilities (“SEFs”), BGC Derivative Markets and GFI Swaps Exchange, are required to maintain financial resources to cover operating costs for at least one year, keeping at least enough cash or highly liquid securities to cover six months’ operating costs.

The regulatory requirements referred to above may restrict the Company’s ability to withdraw capital from its regulated subsidiaries. As of June 30, 2016, $546.8 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 $283.0 million.

22.

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. The Company’s operations consist of two reportable 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 (rates and credit), foreign exchange, equities, energy and commodities, and futures. It also provides a wide range of services, including trade execution, broker-dealer services, clearing, trade compression, post trade, 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 and corporate advisory, investment sales and real estate finance, consulting, project and development management, and property and facilities management.

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 realized gain related to the GFI shares owned by the Company prior to the completion of the tender offer to acquire GFI on February 26, 2015 and the gain related to the disposition of the equity interests in the entities that make up the Trayport business. 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 a reserve on compensation-related partnership loans; and allocations of net income to limited partnership units and FPUs), 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. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. See Note 16—“Goodwill and Other Intangible Assets, Net,” for goodwill by reportable segment.

Three months ended June 30, 2016 (in thousands):


	Financial Services		Real Estate Services		Corporate Items		Total
Brokerage revenues:
Rates	$	120,678	$	—	$	—	$	120,678
Credit		77,330		—		—		77,330
Foreign exchange		76,835		—		—		76,835
Energy and commodities		57,306		—		—		57,306
Equities and other asset classes		45,593		—		—		45,593
Leasing and other services		—		124,555		—		124,555
Real estate capital markets		—		82,739		—		82,739
Real estate management services		—		45,529		—		45,529
Fees from related parties		—		—		4,865		4,865
Data, software and post-trade		12,448		—		—		12,448
Other revenues		100		76		129		305

Total non-interest revenues		390,290		252,899		4,994		648,183
Interest income		640		863		2,274		3,777

Total revenues		390,930		253,762		7,268		651,960


Interest expense		—			—		14,624			14,624
Non-interest expenses		336,678			229,032		51,027			616,737

Total expenses		336,678			229,032		65,651			631,361
Other income (losses), net:
Gains (losses) on equity investments		—			—		500			500
Other income (losses)		(1,326	)		—		11,338			10,012

Total other income (losses), net		(1,326	)		—		11,838			10,512

Income (loss) from operations before income taxes	$	52,926		$	24,730	$	(46,545	)	$	31,111

Three months ended June 30, 2015 (in thousands):


	Financial Services			Real Estate Services		Corporate Items			Total
Brokerage revenues:
Rates	$	126,798		$	—	$	—		$	126,798
Credit		73,814			—		—			73,814
Foreign exchange		85,976			—		—			85,976
Energy and commodities		54,843			—		—			54,843
Equities and other asset classes		50,329			—		—			50,329
Leasing and other services		—			130,221		—			130,221
Real estate capital markets		—			61,178		—			61,178
Real estate management services		—			46,528		—			46,528
Fees from related parties		83			—		6,012			6,095
Data, software and post-trade		27,693			—		—			27,693
Other revenues		1,858			445		192			2,495

Total non-interest revenues		421,394			238,372		6,204			665,970
Interest income		327			325		2,509			3,161

Total revenues		421,721			238,697		8,713			669,131
Interest expense		185			12		18,242			18,439
Non-interest expenses		366,451			211,650		58,360			636,461

Total expenses		366,636			211,662		76,602			654,900
Other income (losses), net:
Gains (losses) on divestiture and sale of investments		—			—		894			894
Gains (losses) on equity investments		—			—		833			833
Other income (losses)		(2,097	)		—		3,428			1,331

Total other income (losses), net		(2,097	)		—		5,155			3,058

Income (loss) from operations before income taxes	$	52,988		$	27,035	$	(62,734	)	$	17,289

Six months ended June 30, 2016 (in thousands):


	Financial Services		Real Estate Services		Corporate Items			Total
Brokerage revenues:
Rates	$	240,297	$	—	$	—		$	240,297
Credit		162,245		—		—			162,245
Foreign exchange		159,303		—		—			159,303
Energy and commodities		121,704		—		—			121,704
Equities and other asset classes		93,959		—		—			93,959
Leasing and other services		—		230,182		—			230,182
Real estate capital markets		—		144,872		—			144,872
Real estate management services		—		91,587		—			91,587
Fees from related parties		—		—		11,935			11,935
Data, software and post-trade		24,765		—		—			24,765
Other revenues		3,496		76		415			3,987

Total non-interest revenues		805,769		466,717		12,350			1,284,836
Interest income		1,150		1,525		3,485			6,160

Total revenues		806,919		468,242		15,835			1,290,996
Interest expense		—		—		28,082			28,082
Non-interest expenses		678,103		427,606		113,116			1,218,825

Total expenses		678,103		427,606		141,198			1,246,907
Other income (losses), net:
Gains (losses) on equity investments		—		—		1,058			1,058
Other income (losses)		9,646		—		(2,551	)		7,095

Total other income (losses), net		9,646		—		(1,493	)		8,153

Income (loss) from operations before income taxes	$	138,462	$	40,636	$	(126,856	)	$	52,242

Six months ended June 30, 2015 (in thousands):


	Financial Services		Real Estate Services		Corporate Items			Total
Brokerage revenues:
Rates	$	249,549	$	—	$	—		$	249,549
Credit		140,687		—		—			140,687
Foreign exchange		161,608		—		—			161,608
Energy and commodities		84,250		—		—			84,250
Equities and other asset classes		83,412		—		—			83,412
Leasing and other services		—		233,784		—			233,784
Real estate capital markets		—		114,920		—			114,920
Real estate management services		—		87,130		—			87,130
Fees from related parties		108		—		12,593			12,701
Data, software and post-trade		39,220		—		—			39,220
Other revenues		3,517		639		415			4,571

Total non-interest revenues		762,351		436,473		13,008			1,211,832
Interest income		723		613		3,530			4,866

Total revenues		763,074		437,086		16,538			1,216,698
Interest expense		657		12		33,672			34,341
Non-interest expenses		643,433		393,803		126,408			1,163,644

Total expenses		644,090		393,815		160,080			1,197,985
Other income (losses), net:
Gains (losses) on divestiture and sale of investments		—		—		679			679
Gains (losses) on equity investments		—		—		1,636			1,636
Other income (losses)		836		—		31,695			32,531

Total other income (losses), net		836		—		34,010			34,846

Income (loss) from operations before income taxes	$	119,820	$	43,271	$	(109,532	)	$	53,559

Total assets by reportable segment (in thousands):


Total Assets¹	Financial Services		Real Estate Services		Total
At June 30, 2016	$	4,382,364	$	730,020	$	5,112,384

At December 31, 2015	$	3,296,815	$	694,639	$	3,991,454

¹	Corporate assets have been fully allocated to the Company’s business segments.

Geographic Information

The Company offers products and services in the U.S., U.K., Asia (including Australia), France, Other Americas, Other Europe, and the Middle East and Africa region (defined as the “MEA” region). Information regarding revenues for the three months and six months ended June 30, 2016 and 2015, respectively, is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenues:
United States	$	373,835	$	378,145	$	728,909	$	685,085
United Kingdom		161,444		172,070		325,271		313,774
Asia		52,704		58,689		109,455		107,307
France		25,271		22,697		50,838		43,524
Other Americas		14,756		14,295		29,363		26,729
Other Europe/MEA		23,950		23,235		47,160		40,279

Total revenues	$	651,960	$	669,131	$	1,290,996	$	1,216,698

Information regarding long-lived assets (defined as loans, forgivable loans and other receivables from employees and partners, net; fixed assets, net; certain other investments; goodwill; other intangible assets, net of accumulated amortization; and rent and other deposits) in the geographic areas as of June 30, 2016 and December 31, 2015, respectively, is as follows (in thousands):


	June 30,		December 31,
	2016		2015
Long-lived assets:
United States	$	1,231,564	$	1,145,876
United Kingdom		168,310		164,970
Asia		29,156		28,368
France		6,466		6,964
Other Americas		17,733		16,135
Other Europe/MEA		6,163		6,277

Total long-lived assets	$	1,459,392	$	1,368,590

23.

Subsequent Events

Second Quarter 2016 Dividend

On July 26, 2016, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share for the second quarter of 2016, payable on September 1, 2016 to Class A and Class B common stockholders of record as of August 18, 2016.

4.50% Convertible Notes

On July 13, 2016, certain holders of the 4.50% Convertible Notes converted $68,000 in principal amount of notes, and, upon conversion, the Company delivered 6,909 shares of its Class A common stock to such holders. On July 15, 2016, the Company repaid the remaining approximately $159.9 million principal amount of its 4.50% Convertible Notes that matured on July 15, 2016. The capped call transactions, which the Company had entered into in connection with the offering of the 4.50% Convertible Notes, expired unexercised on July 13, 2016.

Controlled Equity Offering

Since June 30, 2016, the Company has sold, pursuant to the November 2014 Sales Agreement, 680 thousand shares of Class A common stock related to redemptions and exchanges of limited partnership interests.

Acquisition

On July 19, 2016, the Company announced that it has entered into an agreement to acquire the businesses of Sunrise Brokers Group (“Sunrise Brokers”), an independent financial brokerage with a leading reputation in worldwide equity derivatives. Founded in 1991, Sunrise Brokers offers broking services across equity, credit, FX, hybrid and commodity derivative asset classes. The firm covers its markets globally from its offices in London, New York and Hong Kong. The acquisition of Sunrise Brokers will be recorded in the Company’s Financial Services segment. Completion of the transaction is subject to legal and regulatory approvals and certain closing conditions.

ITEM 2.

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

The following discussion of BGC Partners, Inc.’s financial condition and results of operations should be read together with BGC Partners, Inc.’s unaudited condensed consolidated financial statements and notes to those statements, as well as the risk factors and cautionary statements relating to forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), included in our Annual Report on Form 10-K for the year ended December 31, 2015, in subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and in this report. When used herein, the terms “BGC Partners,” “BGC,” the “Company,” “we,” “us” and “our” refer to BGC Partners, Inc., including consolidated subsidiaries.

This discussion summarizes the significant factors affecting our results of operations and financial condition during the three and six months ended June 30, 2016 and 2015. This discussion is provided to increase the understanding of, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report.

OVERVIEW AND BUSINESS ENVIRONMENT

We are a leading global brokerage company servicing the financial and real estate markets through our Financial Services and Real Estate Services businesses. Through our brands, including BGC^®, GFI^® and R.P. Martin^TM, among others, our Financial Services business specializes in the brokerage of a broad range of products, including fixed income (rates and credit), foreign exchange, equities, energy and commodities, and futures. Our Financial Services business also provides a wide range of services, including trade execution, broker-dealer services, clearing, trade compression, post trade, information, and other back-office services to a broad range of financial and non-financial institutions. Our 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 our brands including FENICS^®, BGC Trader^TM, BGC Market Data and Capitalab^®, we offer fully electronic brokerage, financial technology solutions, market data, post-trade services and analytics related to select financial instruments and markets.

We entered into the commercial real estate business in October 2011 with the acquisition of Newmark & Company Real Estate, Inc. (“Newmark”), a leading U.S. commercial real estate brokerage and advisory firm primarily serving corporate and institutional clients. Newmark was founded in 1929 in New York City. In 2000, Newmark embarked upon a national expansion and in 2006 entered into an agreement with London-based Knight Frank to operate jointly in the Americas as “Newmark Knight Frank.” In the second quarter of 2012, we completed the acquisition of substantially all of the assets of Grubb & Ellis Company and its direct and indirect subsidiaries, which we refer to as “Grubb & Ellis.” Grubb & Ellis was formed in 1958 and built a full-service national commercial real estate platform of property management, facilities management and brokerage services. Grubb & Ellis was integrated with Newmark Knight Frank to form the resulting brand, Newmark Grubb Knight Frank (“NGKF^TM”). NGKF is a full-service commercial real estate platform that comprises our Real Estate Services segment. Under brand names including Newmark Grubb Knight Frank^TM, Newmark Cornish & Carey^TM, ARA^®, Computerized Facility Integration^TM, Landauer^® Valuation & Advisory, and Excess Space Retail Services, Inc^®, we offer commercial real estate tenants, owners, investors and developers a wide range of services, including leasing and corporate advisory, investment sales, and real estate finance, consulting, project and development management, and property and facilities management.

Our 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. We have offices in dozens of major markets, including New York and London, as well as in Atlanta, Beijing, Boston, Charlotte, Chicago, Copenhagen, Dallas, Denver, Dubai, Hong Kong, Houston, Istanbul, Johannesburg, Los Angeles, Mexico City, Miami, Moscow, Nyon, Paris, Philadelphia, Rio de Janeiro, San Francisco, Santa Clara, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tokyo, Toronto, Washington, D.C. and Zurich, and over 50 other offices.

We remain confident in our future growth prospects as we continue to increase the scale and depth of our Financial Services and Real Estate Services platforms and continue to seek market-driven opportunities to expand our business in numerous financial asset classes and other products and services. This was exemplified by our acquisition of GFI Group, Inc. (“GFI”). Beginning in the first quarter of 2015, BGC began consolidating the results of GFI, which continues to operate as a separately branded division of BGC. On January 12, 2016, we completed the merger with GFI by acquiring 100% of GFI’s outstanding shares (see “Acquisition of GFI Group, Inc.”). Over the last twelve months, we also completed the purchase of Steffner Commercial Real Estate (which operates as Newmark Grubb Memphis), Cincinnati Commercial Real Estate (“CCR”), Rudesill-Pera Multifamily and The CRE Group, Inc. (“CRE Group”). By adding these leading companies to our platform, we have greatly broadened the scope and depth of services we can provide to our clients across our consolidated business. We have continued to make key hires around the world and integrate our recent acquisitions onto our global platform. We expect these additions to increase our revenues and earnings per share going forward. These investments underscore BGC’s ongoing commitment to make accretive acquisitions and profitable hires.

Acquisition of GFI Group, Inc.

GFI is a leading intermediary and provider of trading technologies and support services to the global OTC and listed markets. GFI serves institutional clients in operating electronic and hybrid markets for cash and derivative products across multiple asset classes. On February 26, 2015, we successfully completed our tender offer to acquire shares of common stock, par value $0.01 per share, of GFI for $6.10 per share in cash and accepted for purchase 54.3 million shares tendered to us pursuant to the offer. The tendered shares, together with the 17.1 million shares already owned by us, represented approximately 56% of the then-outstanding shares of GFI. We issued payment for the tendered shares on March 4, 2015 in the aggregate amount of $331.1 million. On April 28, 2015, we purchased from GFI approximately 43.0 million new shares at that date’s closing price of $5.81 per share, for an aggregate purchase price of $250 million. The purchase price was paid to GFI in the form of a note due on June 19, 2018 that bore an interest rate of LIBOR plus 200 basis points. The new shares and the note eliminate in consolidation. Following the issuance of the new shares, we owned approximately 67% of GFI’s outstanding common stock, which gave us control over the timing and process for the completion of a back-end merger (the “Back-End Mergers”) pursuant to the tender offer agreement.

On January 12, 2016, we completed our acquisition (the “JPI Merger”) of Jersey Partners, Inc. (“JPI”). The JPI Merger occurred pursuant to a merger agreement, dated as of December 22, 2015. Shortly following the completion of the JPI Merger, a subsidiary of BGC merged with and into GFI pursuant to a short-form merger under Delaware law, with GFI continuing as the surviving entity. The Back-End Mergers allowed BGC to acquire the remaining approximately 33% of the outstanding shares of GFI common stock that BGC did not already own. Following the closing of the Back-End Mergers, BGC and its affiliates now own 100% of the outstanding shares of GFI’s common stock.

In total, approximately 23.5 million shares of BGC Class A common stock and $111.2 million in cash were issued or paid with respect to the closing of the Back-End Mergers, inclusive of adjustments. The total purchase consideration for all shares of GFI purchased by BGC was approximately $750 million, net of the $250.0 million note previously issued to GFI by BGC, which is eliminated in consolidation. This figure excludes the $29.0 million gain recorded in the first quarter of 2015 with respect to the appreciation of the 17.1 million shares of GFI held by BGC prior to the successful completion of the tender offer. The excess of total consideration over the fair value of the total net assets acquired, of approximately $450.0 million, has been recorded to goodwill and was allocated to our Financial Services segment.

We believe the combination of BGC and GFI creates a strong and diversified Financial Services business, well positioned to capture future growth opportunities. Through this combination, we expect to deliver substantial benefits to customers of the combined company, and we expect to become the largest and most profitable wholesale financial brokerage company. We also believe this is a highly complementary combination, which has resulted, and will continue to result, in meaningful economies of scale. While the front-office operations will remain separately branded divisions, the back office, technology, and infrastructure of these two companies are being integrated in a smart and deliberate way. We have achieved our previously stated cost synergies related to GFI and now expect additional reductions in expense.

On July 10, 2015, the Company guaranteed the obligations of GFI under the 8.375% Senior Notes; as a consequence of guaranteeing GFI’s debt, we have substantially improved the credit rating of GFI’s bonds and lowered future interest payments. We have also been able to free up capital set aside for regulatory and clearing purposes, allowing us to use our balance sheet more efficiently. As the integration of BGC and GFI continues, we expect to generate increased productivity per broker and to continue converting voice and hybrid broking to more profitable fully electronic trading on our FENICS platform, all of which should lead to increased revenues, profitability and cash flows. In addition, we expect our results to further improve as we invest the net proceeds from the $650 million Trayport sale.

Trayport Transaction

On December 11, 2015, we completed the sale (the “Trayport Transaction”) of all of the equity interests in the entities that make up the Trayport business to Intercontinental Exchange, Inc. (“ICE”). The Trayport business was GFI’s electronic European energy software, trading, and market data business. The Trayport Transaction occurred pursuant to a Stock Purchase Agreement, dated as of November 15, 2015. At the closing, we received 2,527,658 shares of ICE common stock issued with respect to the $650 million purchase price, which was adjusted at closing. Through June 30, 2016, we have sold more than 85% of our shares of ICE common stock. Trayport, prior to its sale, had generated gross revenues of approximately $80 million over the twelve months ended September 30, 2015. BGC expects to pay effective cash taxes of no more than $64 million related to the Trayport sale price, or an expected rate of less than 10%.

Nasdaq Transaction

On June 28, 2013, we completed the sale (the “Nasdaq Transaction”) of certain assets to Nasdaq, Inc. (“Nasdaq,” formerly known as “NASDAQ OMX Group, Inc.”), which purchased certain assets and assumed certain liabilities from us and our affiliates, including the eSpeed brand name and various assets comprising the fully electronic portion of our benchmark on-the-run U.S. Treasury brokerage, market data and co-location service businesses (“eSpeed”), for cash consideration of $750 million paid at closing, plus an earn-out of up to 14,883,705 shares of Nasdaq common stock to be paid ratably in each of the fifteen years following the closing in which the consolidated

gross revenue of Nasdaq is equal to or greater than $25 million. Through June 30, 2016, we have received 2,976,741 shares of Nasdaq common stock in accordance with the agreement. The contingent future issuances of Nasdaq common stock are also subject to acceleration upon the occurrence of certain events.

As a result of the sale of eSpeed, we only sold our on-the-run benchmark 2-, 3-, 5-, 7-, 10-, and 30-year fully electronic trading platform for U.S. Treasury Notes and Bonds. We continue to offer voice brokerage for on-the-run U.S. Treasuries, as well as across various other products in rates, credit, FX, market data and software solutions. As we continue to focus our efforts on converting voice and hybrid desks to electronic execution, our e-businesses, excluding Trayport and including revenues from inter-company data, software, and post-trade services, have continued to grow their revenues and generated $255.7 million during the most recent trailing twelve-month period ended June 30, 2016, up 62.4% from a year ago. These fully electronic revenues are more than double those of eSpeed, which generated $48.6 million in revenues for the six months ended June 30, 2013 and was sold in the second quarter of 2013 for $1.2 billion (based on the value of Nasdaq stock at the time the deal was announced).

For the purposes of this document and subsequent Securities and Exchange Commission (“SEC”) filings, all of our fully electronic businesses are referred to as “FENICS.” These offerings include Financial Services segment fully electronic brokerage products, as well as offerings in market data and software solutions across both BGC and GFI. FENICS results do not include the results of Trayport, either before or after the completed sale to ICE. Going forward, we expect these businesses to become an even more valuable part of BGC as they continue to grow faster than, and be substantially larger than, eSpeed ever was for us.

Financial Services:

The financial intermediary sector has been a competitive area that grew over the first half of the past decade due to several factors. One factor was the increasing use of derivatives to manage risk or to take advantage of the anticipated direction of a market by allowing users to protect gains and/or guard against losses in the price of underlying assets without having to buy or sell the underlying assets. Derivatives are often used to mitigate the risks associated with interest rates, equity ownership, changes in the value of foreign currency, credit defaults by corporate and sovereign debtors and changes in the prices of commodity products. For the period from 1998 through 2007, demand from financial institutions, financial services intermediaries and large corporations had increased volumes in the wholesale derivatives market, thereby increasing the business opportunity for financial intermediaries.

Another key factor in the growth of the financial intermediary sector during the same timeframe was the increase in the number of new financial products. As market participants and their customers strive to mitigate risk, new types of equity and fixed income securities, futures, options and other financial instruments have been developed. Most of these new securities and derivatives were not immediately ready for more liquid and standardized electronic markets, and generally increase the need for trading and require broker-assisted execution.

In recent years, our Financial Services businesses have faced more challenging market conditions. While our foreign exchange (“FX”), energy and commodities, and equities and other businesses have operated in a generally improved macro environment in recent periods, our credit and rates businesses have continued to face a challenging macro environment that has been part of a greater industry trend which has been attributed to a number of cyclical factors, including historically low and even negative interest rates across the globe. Additionally, accommodative monetary policies by several major central banks including the Federal Reserve, Bank of England, Bank of Japan and the European Central Bank have resulted in historically low levels of volatility and interest rates across many of the financial markets in which we operate. The global credit markets have also faced structural issues such as increased bank capital requirements under Basel III. Consequently, these factors have contributed to lower trading volumes in our rates and credit asset classes across most geographies in which we operate.

On June 23, 2016, the U.K. held a referendum regarding continued membership in the European Union (the “EU”). The exit from the EU is commonly referred to as the “Brexit.” The Brexit vote passed by 51.9% to 48.1%. The referendum was non-binding. However, the newly installed Prime Minister of the U.K. has indicated that she intends to follow through on the wishes of the voters. If so, negotiations would commence under Article 50 of the Lisbon Treaty to determine the future terms of the U.K.’s relationship with the EU, including the terms of trade, also known as “passporting rights” between the U.K. and the EU. The effects of the Brexit will depend on any agreements the U.K. makes to retain access to EU markets – including for financial services – either during a transitional period or more permanently.

The announcement of the Brexit caused significant volatility in most of the global financial markets in which we broker, and also led to currency exchange rate fluctuations that resulted in significant weakening of the British pound against most major foreign currencies. Although we generate a significant amount of revenue in the U.K., most of it is denominated in other currencies. However, a majority of our U.K. expenses are denominated in pounds. As a result, we expect the decrease in the value of the pound to have a minimal effect on our consolidated earnings.

Since the negotiations for completing the Brexit have not yet commenced, and could take up to two years once initiated, we anticipate higher than average global financial market volatility to occur periodically for the foreseeable future, all else equal. Historically, elevated volatility has often led to increased volumes in the Financial Services markets in which we broker, which could be beneficial for that segment.

Regulators in the U.S. have finalized most of the new rules across a range of financial marketplaces, including OTC derivatives, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Many of these rules became effective in prior years, while ongoing phase-ins are anticipated over coming years. Legislators and regulators in Europe and the Asia-Pacific region have crafted similar rules, some of which have already been implemented, specifically those falling under the Markets in Financial Instruments Directive II (“MiFID II”), while others are expected to be implemented in the future.

These OTC-related regulations and proposed rules call for, among other actions, additional pre- and post-trade market transparency, heightened collateral and capital standards, the transacting of certain derivatives using authorized venues, central clearing of most standardized derivatives, specific business conduct standards and the delivery of transaction data to newly designated trade repositories for public dissemination.

BGC Derivative Markets and GFI Swaps Exchange, our subsidiaries, began operating as Swap Execution Facilities (“SEFs”) on October 2, 2013. Both BGC Derivative Markets and GFI Swaps Exchange received permanent registration approval from the Commodity Future Trading Commission (the “CFTC”) as SEFs on January 22, 2016. Mandatory Dodd-Frank Act compliant execution on SEFs by eligible U.S. persons commenced in February 2014 for “made available to trade” products, and a wide range of other rules relating to the execution and clearing of derivative products have been finalized with implementation periods in 2016 and beyond. We also maintain our ownership stake in ELX, a CFTC-approved designated contract market (“DCM”).

We believe that our relative competitive position is strong in this evolving landscape, and that we will gain market share. This is not only because the new rules require OTC market execution venues to maintain robust front-end and back-office IT capabilities and to make large and ongoing technology investments, but also because recent revisions to the execution methodology rules will allow elements of voice brokerage to flourish. We are a leader in both the breadth and scale of our hybrid and fully electronic trading capabilities, and we expect to outperform our competitors in such an environment.

In recent years, there has been significant consolidation among the interdealer-brokers and wholesale brokers with which we compete. In addition to our 2015 acquisition of GFI, Tullett Prebon plc (“Tullett”) and ICAP plc (“ICAP”) announced in November 2015 an agreement whereby Tullett would purchase the vast majority of ICAP’s global hybrid/voice broking and information businesses. Following the completion of their proposed deal, which is subject to further stockholder and other approvals, ICAP expects to change its corporate name to “NEX Group plc” (“NEX”), while Tullett plans to change its name to “TP-ICAP.” We expect to continue to compete with the remaining electronic markets, post-trade and information businesses of NEX through the various offerings on our FENICS platform. We will also continue to compete with TP-ICAP across various voice/hybrid brokerage marketplaces. There has also been significant consolidation among smaller non-public wholesale brokers, including our acquisitions of R.P. Martin, Heat Energy Group, and Remate Lince. We view the recent consolidation in the industry favorably, as we expect it to provide additional operating leverage to our Financial Services businesses in the future.

Growth Drivers

As a wholesale intermediary, our business is driven primarily by overall industry volumes in the markets in which we broker, the size and productivity of our front-office headcount (including brokers, salespeople, managers and other front-office personnel), regulatory issues and the percentage of our revenues we are able to execute by fully electronic means.

Below is a brief analysis of the market and industry volumes for some of our financial services products including our overall hybrid and fully electronic trading activities.

Overall Market Volumes and Volatility

Volume is driven by a number of items, including the level of issuance for financial instruments, the price volatility of financial instruments, macro-economic conditions, the creation and adoption of new products, the regulatory environment, and the introduction and adoption of new trading technologies. Historically, increased price volatility has typically increased the demand for hedging instruments, including many of the cash and derivative products that we broker.

Rates volumes in particular are influenced by market volumes and volatility. Historically low and negative interest rates across the globe have significantly reduced the overall trading appetite for rates products. The ECB and Bank of Japan have cut key interest rates to below zero, while many other sovereign nations continue to issue bonds at negative yields. According to a recent Fitch report, there is approximately $11.7 trillion of sovereign debt with negative yields as of quarter-end. The U.K.’s recent referendum vote to exit the European Union has driven historically low yields even lower, as a subsequent flight to high quality and deeply liquid asset classes ensued. Rates volumes have been tempered industry-wide by this historic period of exceptionally low interest rates, which has driven many traditional investor classes to other investible asset classes, in search of higher yields.

Also weighing on yields and rates volumes are global central bank quantitative easing programs. The programs depress rates volumes because they entail the central banks buying government securities or other securities in the open market — particularly longer-dated instruments — in an effort to promote increased lending and liquidity and bring down long-term interest rates. When central banks hold these instruments, they tend not to trade or hedge, thus lowering rates volumes across cash and derivatives markets industry-wide. Despite the conclusion of its quantitative easing program in the fourth quarter of 2014, the U.S. Federal Reserve still had approximately $3.7 trillion worth of long-dated U.S. Treasury and Federal Agency securities as of June 30, 2016, compared with $1.7 trillion at the

beginning of 2011 and zero prior to September 2008. Additionally, the U.S. Federal Reserve has continued to roll over its existing positions and it is expected to keep its balance sheet at elevated levels for the foreseeable future. Other major central banks have also greatly increased the amount of longer-dated debt on their balance sheets over the past few years and have indicated that they may continue to do so until economic conditions allow for a tapering or an unwinding of their quantitative easing programs.

In addition, the G-20 central banks have agreed to implement the Basel III accord. Basel III was drafted with the intention of making banks more stable in the wake of the financial crisis. The accord, which will continue to be phased in over the next few years, will force most large banks in G-20 nations to hold approximately three times as much Tier 1 capital as is required under the previous set of rules. These capital rules make it more expensive for banks to hold non-sovereign debt assets on their balance sheets, and as a result, analysts say that banks have reduced or will reduce their trading activity in corporate and asset-backed fixed income securities as well as in various other OTC cash and derivative instruments. We believe that this has further reduced overall industry volumes in many of the products we broker, particularly in credit.

During the three months ended June 30, 2016, industry volumes were generally mixed to down year-over-year for the OTC and listed products we broker in rates, credit, FX, equities, energy and commodities. For example, volumes were generally up within U.S. equities and in global energy and commodities, while volumes were generally down within U.S. and European interest rate futures, FX, and credit. Below is an expanded discussion of the volume and growth drivers of our various financial services brokerage product categories.

Rates Volumes and Volatility

Our rates business is influenced by a number of factors, including global sovereign issuances, secondary trading and the hedging of these sovereign debt instruments. While the amount of global sovereign debt outstanding remains high by historical standards, the level of secondary trading and related hedging activity remains muted. For example, according to Bloomberg, the average daily volume of various U.S. Treasuries of greater than 3 years tenor among primary dealers was down 1% to 6% during the second quarter of 2016 as compared with a year earlier. Additionally, interest rate volumes were down by 18% at Eurex, flat for ICE, and up by 3% at the CME Group Inc. (“CME”), all according to Credit Suisse. In comparison, our overall rates revenues were $120.7 million, down by approximately 5% from a year earlier.

Our rates revenues are not totally dependent on market volumes and therefore do not always fluctuate consistently with industry metrics. This is largely because our voice, hybrid, and fully electronic desks in rates often have volume discounts built into their price structure, which results in our rates revenues being less volatile than the overall industry volumes.

Overall, analysts and economists expect the absolute level of sovereign debt outstanding to remain at elevated levels for the foreseeable future as governments finance their future deficits and roll over their sizable existing debt. For example, the Organization for Economic Cooperation and Development (the “OECD”), which includes almost all of the advanced and developed economies of the world, reported that general government debt as a percentage of GDP will be 72% for the entire OECD in 2017. This would represent a slight increase from 71% in 2015, but up considerably from the 39% figure in 2007. Meanwhile, economists expect that the effects of various forms of quantitative easing will continue to negatively impact financial markets, as economic growth remains weak in most OECD countries. As a result, we expect long-term tailwinds in our rates business from continuing high levels of government debt, but continued near-term headwinds due to the current low interest rate environment and continued accommodative monetary policy of many major central banks.

Foreign Exchange Volumes and Volatility

Global FX volumes were generally down during the second quarter of 2016, as the second quarter was impacted by the intervention and support of certain emerging market currencies by their respective central governments as well as concerns over the U.K.’s referendum regarding their potential exit from the European Union. Thus, spot FX at Thomson Reuters was down 9% during the quarter, overall FX volumes were down 13% for EBS, while FX futures at CME were down 7%. In comparison, our overall FX revenues decreased by 11% to $76.8 million, primarily related to the challenging market conditions described above.

Credit Volumes

The cash portion of our credit business is impacted by the level of global corporate bond issuance, while both the cash and credit derivatives sides of this business are impacted by sovereign and corporate issuance. The global credit derivative market turnover has declined over the last few years due to the introduction of rules and regulations for the clearing of credit derivatives in the U.S. and elsewhere, along with non-uniform regulation across different geographies. In addition, many of our large bank customers continue to reduce their inventory of bonds and other credit products in order to comply with Basel III and other international financial regulations. During the second quarter, primary dealer average daily volume for corporate bonds was up by 5% according to Bloomberg, although dealer inventory of such bonds was down 34%. As of July 1, 2016, total gross and notional credit derivatives outstanding as reported by the International Swaps and Derivatives Association — a reflection of the OTC derivatives market — were down by 75% and 14%, respectively, from a year earlier. In comparison, our overall credit revenues were up 5% to $77.3 million, while our fully electronic credit revenues were up approximately 11%, driven largely by increased trading volumes across primary dealers and organic growth.

Energy and Commodities

Energy and commodities volumes were generally up during the second quarter of 2016, driven by the increased volatility exhibited in global oil and other physical commodity prices. Energy and commodities futures were up by between 10% and 30% at ICE and CME year-over-year during the quarter, according to Credit Suisse. BGC’s energy and commodities revenues were up over 4% to $57.3 million, largely driven by increased trading volumes and organic growth.

Equities and Other Asset Classes

Global equity volumes were generally mixed during the second quarter of 2016. According to Credit Suisse, the average daily volumes of U.S. shares were up 17%, while European shares traded were down 13%. Additionally, equity derivatives were up 6% as compared to the second quarter of 2015. Our overall revenues from equities and other asset classes decreased by 9% to $45.6 million.

Fully Electronic Trading (FENICS) and Hybrid Trading

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

Outside of U.S. Treasuries and spot FX, the banks and broker-dealers that dominate the OTC markets had generally been hesitant in adopting electronically traded products. However, in recent years, hybrid and fully electronic wholesale OTC markets for products, including CDS indices, FX options, non-U.S. sovereign bonds, corporate bonds, and interest rate derivatives, have been created as banks and broker-dealers have become more open to electronically traded products and as firms like BGC have invested in the kinds of technology favored by our customers. Recently enacted and pending regulation in Asia, Europe and the U.S. regarding banking, capital markets, and OTC derivatives has accelerated the adoption of fully electronic trading, and we expect to benefit from the rules and regulation surrounding OTC derivatives. Our understanding is that the rules that have been adopted or are being finalized will continue to allow for trading through a variety of means, including voice, and we believe the net impact of these rules and additional bank capital requirements will encourage the growth of fully electronic trading for a number of products we broker.

The combination of more market acceptance of hybrid and fully electronic trading and our competitive advantage in terms of technology and experience has contributed to our strong gains in electronically traded products. We continue to invest in hybrid and fully electronic technology broadly across our financial services product categories. FENICS has exhibited significant growth that we believe has outpaced the financial technology and wholesale brokerage industry as a whole. We expect this trend to continue as we convert more of our voice and hybrid brokerage into fully electronic brokerage across our FENICS platform.

FENICS revenues, excluding Trayport, increased by 6% to $53.5 million for the quarter, as compared with $50.7 million for the three months ended June 30, 2015. The increase in overall FENICS revenues for the period was primarily due to strong organic growth generated by our data, software and post-trade products. We offer electronically traded products on a significant portion of our Financial Services segment’s hundreds of brokerage desks. The revenues, profits, and growth of these products have been significantly higher than those of eSpeed, which we sold in the second quarter of 2013 for over $1.2 billion. The financial results of FENICS also compare favorably to other highly valuable electronic trading platforms that are either publicly traded or that have recently been sold by other companies. We expect the proportion of desks offering electronically traded products to continue to increase as we invest in technology to drive electronic trading over our platform. Over time, we expect the growth of FENICS to further improve this segment’s profitability and market share.

Real Estate Services:

Our discussion of financial results for “Newmark Grubb Knight Frank,” “NGKF,” or “Real Estate Services” reflects only those businesses owned by us and does not include the results for Knight Frank or for the independently owned offices that use some variation of the NGKF name in their branding or marketing.

Our Real Estate Services segment continued to show strong growth and generated approximately 39% of our revenues for the three months ended June 30, 2016. Real Estate brokerage revenues were $207.3 million, up over 8% year-over-year, which included growth in real estate capital markets of over 35%, partially offset by declines in leasing and other services revenue of 4%. The growth across our capital markets business was driven by strong double-digit organic growth, while the declines in our leasing and other services business reflected lower market volumes. Our Real Estate management services and other revenues were down by 2%, and overall NGKF revenues improved by over 6%. Although U.S. industry-wide activity across commercial leasing and capital markets was down in the second quarter according to NGKF research, we believe that NGKF continued to gain market share given our general market outperformance.

We continued to invest in the segment by adding dozens of high profile and talented brokers and other revenue-generating professionals. Historically, newly hired commercial real estate brokers tend to achieve dramatically higher productivity in their second year with the Company, although we incur related expenses immediately. This is largely why NGKF’s pre-tax earnings were down for the segment in the quarter. As our newly-hired brokers ramp up their production, we expect NGKF’s revenue and earnings growth to strongly accelerate, thus demonstrating our operating leverage.

Over time, we expect the overall profitability of our Real Estate Services business to increase as we increase its size and scale. However, the pre-tax margins in the segment are also impacted by the mix of revenues generated by NGKF. For example, real estate capital markets, which includes sales, commercial mortgage broking, and other real estate-related financial services, generally has larger transactions that occur with less frequency and more seasonality when compared with leasing advisory. However, real estate capital markets tend to have significantly higher pre-tax margins than NGKF as a whole. Leasing advisory revenues are generally more predictable than revenues from real estate capital markets, while pre-tax earnings margins tend to be more similar to those of the segment as a whole. Property and facilities management, which together are called “real estate management services,” generally have the most predictable and steady revenues, but with pre-tax earnings margins below those for NGKF as a whole. When management services clients agree to give us exclusive rights to provide real estate services for their facilities or properties, it is for an extended period of time, which provides us with stable and foreseeable sources of revenues.

Growth Drivers

The key drivers of revenue growth for U.S. commercial real estate services companies include the overall health of the U.S. economy, including gross domestic product and employment trends in the U.S., which drives demand for various types of commercial leases and purchases, the institutional ownership of commercial real estate as an investible asset class, and the ability to attract and retain talent to our real estate services platform. In addition, in real estate sales, also known as real estate capital markets, growth is driven by the availability of credit to purchasers of and investors in commercial real estate.

Economic Growth in the U.S.

The U.S. economy expanded by an annualized rate of 1.2% during the second quarter of 2016, which fell short of the 2.6% growth that had been expected, according to a recent Wall Street Journal survey of economists. This growth compares with an increase of 0.8% and 2.6% during the first quarter of 2016 and the second quarter of 2015, respectively. The consensus is for U.S. GDP to expand by 2.0% in 2016 and 2.2% in 2017, according to the same Wall Street Journal survey. This moderate pace of growth should help keep interest rates and inflation low by historical standards.

The Bureau of Labor Statistics reported that employers added a monthly average of 153 thousand net new payroll jobs during the second quarter, as compared to 251 thousand in the prior year period. U.S. employers added 292 thousand jobs in June of 2016, versus the trailing twelve month average of 206 thousand. Despite the return to pre-recession unemployment rates (4.9% as of July 2016), the number of long-term unemployed and the labor force participation rate (the latter of which is near a 38-year low) remain disappointing for many economists, but these indicators are less important to commercial real estate than job creation.

The 10-year Treasury yield ended the second quarter at 1.47%, down over