“IT IS SAID THAT IN TIMES OF DIFFICULTY AND DISASTER, OUR
TRUE SELVES EMERGE. AS A COMPANY WE HAVE ALWAYS
BELIEVED IN THE POWER OF KINDNESS, TEAMWORK AND
COLLECTIVE RESPONSIBILITY TO ADAPT, RISE AND THRIVE,
DESPITE HARDSHIPS AND UNEXPECTED CIRCUMSTANCES. THE
DEDICATION DEMONSTRATED BY OUR EMPLOYEES IN 2020 IS
TESTAMENT TO THOSE VALUES.
AS WE EMERGE FROM A YEAR THAT HAS BEEN EXTREMELY
CHALLENGING BUT ALSO ONE OF GREAT PROGRESS FOR BGC
PARTNERS, WE ARE NOW LOOKING OPTIMISTICALLY TOWARDS
THE FUTURE. I’M EXCITED TO SEE HOW WE CAN SERVE OUR
CLIENTS TO EVEN GREATER LEVELS IN 2021 AND BEYOND.”
HOWARD W. LUTNICK
Chairman and Chief Executive Officer
BGC Partners, Inc.
ANNUAL REPORT 2020
03
Chicago
Toronto
Memphis
Louisville
New York
Bermuda
Los Angeles
Houston
Miami
Mexico City
Martinique
Bogota
Rio de Janeiro
São Paulo
Santiago
Buenos Aires
BGC IS CONSISTENTLY RECOGNIZED AS AN INDUSTRY LEADER
Interdealer Broker of the Year
OTC Trading Platform of the Year
Financial News
Risk Magazine
Trading and Execution Solution
of the Year
FOW
OTC Infrastructure Service
of the Year
Risk Magazine
Note: Certain numbers and percentages may not sum due to rounding.
$2.1B
REVENUE
$300T+
NOTIONAL
VOLUME
~ 5000
EMPLOYEES
25+
COUNTRIES
Edinburgh
Dublin
Copenhagen
Frankfurt
London
Paris
Geneva
Madrid
Istanbul
Athens
Moscow
Tel Aviv
Bahrain
Dubai
Beijing
Shanghai
Seoul
Tokyo
Hong Kong
Manila
Singapore
Cape Town
Johannesburg
Durban
Perth
Brisbane
Sydney
Melbourne
Financial Services
Insurance
05
BGC IS CONSISTENTLY RECOGNIZED AS AN INDUSTRY LEADER
FY 2020 REVENUE BY
GEOGRAPHY
2020
57%
EMEA
28%
Americas
15%
Asia Pacific
WHERE WE
OPERATE
$1, 168M
EMEA REVENUE
$578M
AMERICAS REVENUE
$311M
APAC REVENUE
REVENUE BY ASSET CLASS
7%
Data, Software &
Post-trade and Other1
2020
REVENUE BY ASSET CLASS
2020
26%
Rates
16%
Credit
36%
Rates
21%
Credit
9%
Insurance
12%
Equity Derivatives
& Cash Equities
14%
Energy &
Commodities
15%
FX
26%
Data, software
and post-trade
2%
Fenics Other2
16%
FX
NET REVENUE
(USD millions)
317
21%
CAGR
261
209
101
78
48
2010 2012 2014 2016 2018 2020
REVENUE CONTRIBUTION
(Excluding Insurance Brokerage)3
17%
13%
14%
9%
6%
4%
2010 2012 2014 2016 2018 2020
1 Other includes fees from related parties, interest income and other revenue.
2 Fenics Other includes Energy and Commodities and Equity Derivatives and Cash Equities.
3 Excludes Insurance Brokerage revenue as well as historical Newark Group, Inc. revenue prior to 2018 spin-off.
07
BGC PARTNERS, INC. SELECTED
CONSOLIDATED FINANCIAL DATA
(in USD 000’s except per share data)
Revenues
Rates
Credit
Foreign Exchange
Energy and Commodities
Equity Derivatives and Cash Equities
Insurance
Data, Software and Post-trade
Other1
Total Revenues
GAAP Earnings
2020
2019
% Change
$544,094
$594,884
329,904
306,713
-9%
8%
315,253
370,318
-15%
292,641
288,697
254,702
251,339
182,707
155,790
81,920
73,166
55,499
63,324
1%
1%
17%
12%
-12%
$2,056,720 $2,104,231
-2%
Income (loss) from operations before income taxes
Net income (loss) for fully diluted shares
$77,905
$122,064
70,430
62,054
-36%
13%
Adjusted Earnings
Adjusted Earnings before noncontrolling interest in subsidiaries and taxes
Post-tax adjusted earnings
Per Share Data
$353,465
$369,370
315,420
322,994
-4%
-2%
Post-tax adjusted earnings per share
GAAP fully diluted earnings (loss) per share
$0.58
$0.62
$0.13
$0.13
-6%
0%
Adjusted EBITDA
Adjusted EBITDA
Balance Sheet
Liquidity2
Notes payable and other borrowings
Total capital3
$430,477
$438,089
-2%
$652,567
$473,230
1,315,935
1,142,687
38%
15%
$828,903
$748,606
11%
1Other includes fees from related parties, interest income and other revenues.
2 As of December 31, 2019, $13.9 million of marketable securities on our balance sheet had been lent in a securities loaned transaction and, therefore,
are not included in this Liquidity analysis.
3Defined as redeemable partnership interest, stockholders’ equity, and noncontrolling interest in subsidiaries.
Note: Certain numbers and percentage changes may not sum due to rounding.
ENVIRONMENTAL CONSIDERATIONS
BGC’s leading Environmental brokerage business supports the reduction of global carbon emissions
and promotes clean and renewable energy.
> 260
MILLION MWHs
BROKERED RENEWABLE
ENERGY (FY 2020)
> 370
MILLION TONS
BROKERED CARBON
CREDITS & OFFSETS
(FY 2020)
=
=
> 160
MILLION
BARRELS OF OIL EQUIVALENT IN
GREEN & RENEWABLE ENERGY1
~7.8
MILLION
MATURE TREE EQUIVALENTS
ABSORBING CO2 FROM THE
ATMOSPHERE2
09
1 1 Mega Watt Hour (MWH) = 0.6278 Barrel of Oil Equivalent (BOE);
Source: European Commission (http://ec.Europa.eu).
2 A mature tree absorbs an estimated 48lbs of carbon dioxide (CO2)
per year; Source: Keystone Ten Million Trees Partnership (http://ten-
milliontrees.org/trees).
TO MY FELLOW
STOCKHOLDERS
2020 A YEAR IN REVIEW
Perseverance is core to who we are as an organization. As I wrote this letter last year, we were in the throes
of the worst global pandemic in over a century. Our employees showed tremendous resolve highlighted by our
success providing critical infrastructure and access to liquidity across the global capital markets throughout the
course of the pandemic.
While the onset of the pandemic provided a short-term spike to market volatility and trading volumes, its effects
ultimately weighed on secondary trading volumes throughout the year. Pandemic-related dislocations reduced risk
appetite, while responses by governments and central banks created challenging trading conditions across the
wholesale capital markets. Record levels of government and corporate debt issuance were largely offset by
record levels of quantitative easing (“QE”). For example, SIFMA reported that primary dealer volumes for U.S.
Treasuries grew by less than two percent, despite U.S. Treasury issuance increasing by 74 percent over the same
period1. Overall demand for hedging risk fell as benchmark rates moved lower and volatility-suppressing QE
programs were executed by central banks. However, as the global economy continues its recovery, and central
bank buying programs are scaled back, record global debt issuance is expected to provide significant tailwinds to
our business.
Despite the challenging macro environment, we made substantial progress in growing our Fenics businesses.
Fenics revenues reached new annual records and gained strong traction in their respective markets. The
wholesale capital markets offer some of the deepest liquidity pools and largest average trade sizes, which in turn
offer unique digitalization opportunities. We have built our Fenics platforms to accommodate the needs
of the world’s largest and most sophisticated traders across multiple environments.
During 2020, our Fenics UST and GO platforms generated record volumes and achieved record market
share. Lucera had strong double-digit revenue growth and won several key new clients, which
accelerated growth in both its Connect and LUMEMarkets businesses. Our 2020 acquisition of Algomi
was highly synergistic with Lucera’s existing network and technology. Combining Algomi with Lucera
led to one of our newest offerings, LUMEAlfa, a solution that enables banks to stream prices directly
to buy-side clients via our infrastructure. Additionally, our Data, Software, and Post-trade business,
which is predominantly comprised of recurring revenue, continued to grow at double-digit rates. Scaling
these Fenics businesses remains a top priority, and we expect their growth to accelerate going forward.
11
We also made significant progress in growing our Insurance Brokerage business, generating yet another
year of record revenue. We entered this market in 2017 with the aim to do what we do best – build a
preeminent brokerage business underpinned by highly productive brokers and technology. In under just
three years, we’ve scaled our Insurance Brokerage business from zero to over $180 million in revenue.
Throughout 2020, we acted to improve the profitability and margins of our overall Company. These
steps included tighter cost management and the execution of cost savings initiatives. Increased uptake
of technology and automation, alongside a reduction in less profitable brokers and salespeople, drove
productivity higher and supported margins. This trend has continued into 2021, where all Adjusted
Earnings metrics and margins have improved through the first half of the year.
While we strive to maximize profitability for BGC’s shareholders, we also aim to ensure the Company
is delivering maximum value for all its stakeholders. Environmental, Social, and Governance (“ESG”)
factors are front of mind, and we are improving the way we implement and report on our ESG
programs. We anticipate refining our ESG programs and reporting over time, but I look forward to
updating you on our progress in next year’s letter.
EVOLUTION OF BGC, FENICS, AND THE WHOLESALE CAPITAL MARKETS
Electronic brokerage is in our DNA; BGC’s history can be traced to the creation of eSpeed, a
revolutionary electronic U.S. Treasury trading platform that was the first of its kind. When eSpeed
THROUGHOUT 2020, WE ACTED TO
IMPROVE THE PROFITABILITY AND
MARGINS OF OUR OVERALL COMPANY.
launched, digitalization of the OTC markets had never been achieved at scale. However, our ability to marry
leading-edge technology with extraordinary liquidity changed the U.S. Treasury markets forever.
We sold our benchmark U.S. Treasury business to Nasdaq in 2013 for what was approximately the entire
market cap of BGC at the time, and its success provided the blueprints for BGC to digitalize significant
parts of the wholesale OTC markets. We have been steadfast in our commitment to electronic brokerage.
When others redoubled voice broking efforts, we continued to innovate and push the wholesale markets
electronic. Today, we have built Fenics, a leading provider of market infrastructure and digital marketplaces
delivering liquidity, data, software and post-trade solutions to the wholesale capital markets.
We believe our Fenics Growth Platforms2 are the future of the wholesale capital markets. These platforms
stand-alone from our existing voice/hybrid businesses and are supported by technologists instead of brokers.
We have tailored our Fenics platforms to the largest and most liquid markets in the world. Our platforms
provide the anonymity, liquidity, and speed required to shift trading behavior from analog to digital.
When we set down the path of building our Fenics Growth Platforms, we did so with the intention of
building state-of-the-art technology that would be scalable across the entire financial marketplace. We
believe the success we’ve seen with platforms like Fenics UST, Fenics GO, and Lucera is just the beginning.
The technology underpinning these platforms is scalable and requires significantly less investment to extend
across the financial services landscape.
At the time of this letter, we have U.S. Treasuries, Treasury Bills and U.S. Repos on our Fenics UST
platform. We have also begun executing on our plan to enter the U.S. Rates futures market. Adding U.S.
Rates futures to our Fenics ecosystem, which already includes cash U.S. Treasuries, FX, market data, and
post-trade services, will position us to compete directly with the CME. We will launch our Futures platform
with a world-class clearing partner, delivering our clients with the highest levels of collateral and cross-
margining efficiencies. We are very excited about this opportunity and look forward to providing you with
updates as we go forward.
Fenics FX launched Asian Non-Deliverable Forwards (NDFs), utilizing Lucera’s low latency LUMEMarkets
platform. We are actively marketing our new LUMEAlfa subscription service to both bank and
institutional clients. Additionally, Fenics GO has introduced several new equity index option products in
2021, with future plans for Fixed Income and Commodity options.
13
BGC remains uniquely positioned to continue to convert its $1.5 billion voice/hybrid brokerage base into
higher-margin, technology-driven Fenics revenue. We will continue to innovate and deliver market-
leading technology solutions to the wholesale capital markets. We have built incredibly valuable assets
within this Company, which I believe are demonstrably undervalued.
LOOKING AHEAD
Our path forward is exciting. Pandemic-related uncertainty has given way to scientific advances of
modern medicine. Global vaccinations continue to trend higher, and countries have seen widescale
reopening. Most economists are projecting solid U.S. and global GDP growth in 2021 and 2022 which,
along with government stimulus and spending measures, have sent U.S. inflation and interest rates higher.
The combination of improved global economic activity, record debt issuance, rising interest rates, and
expected QE tapering, has set the stage for what I believe will be a robust trading environment.
In May of 2021, we announced the sale of our Insurance Brokerage business to The Ardonagh Group, for
$500 million in cash, representing a strong double-digit return on investment for our stockholders. Like
our past sales of eSpeed and Trayport, as well as our IPO and tax-free spin-off of Newmark, this sale
demonstrated our commitment to delivering shareholder value. The proceeds from the Insurance
Brokerage sale will provide us with significant capital to repurchase our shares and units and grow our
Fenics businesses, which we expect will enhance shareholder value.
We continue to make significant progress in growing our Fenics businesses, where net revenue growth
accelerated by over 30 percent through the six months of 2021. Fenics Growth Platforms revenue grew
WE ENDED 2020 IN A POSITION
OF STRENGTH, SUPPORTED BY
ACCELERATING MARGINS.
by over 68 percent during the same period, while Fenics represented a record 21 percent of total
revenue, excluding Insurance Brokerage. We are excited about the prospects that our U.S. Rates futures
launch will bring. With the support of our clients and partners, we are developing a unique solution that
we believe will lead to more choice, better execution, and greater efficiency.
IN CONCLUSION
We ended 2020 in a position of strength, supported by accelerating margins. The Company is well
positioned for growth, and we remain focused on improving profitability and maximizing value for our
stockholders. We continue to make major strides in digitalizing our overall business, which will lead to a
more technology-driven, and ultimately more profitable business.
Lastly, none of our success would be possible without the continued support of our clients, partners,
employees, investors, and all other stakeholders. I want to personally thank our customers for their
incredible support and enduring partnership over the years. I also want to thank our partners and
employees whose resolve, ingenuity, and dedication to client service have allowed us to overcome the
challenges that 2020 brought us all. In summary, I would like to express my gratitude to all our
stockholders and stakeholders. Every one of us at BGC ultimately works for you. I am honored to serve
as the Chairman of the Board and CEO of this great company that you continue to support.
Sincerely,
HOWARD W. LUTNICK
Chairman of the Board and
Chief Executive Officer
15
1Source: SIFMA U.S. Treasury Securities Statistics report as of September 23, 2021. 2Fenics Growth Platforms include Fenics UST, Fenics GO, Lucera, Fenics FX, and other newer standalone platforms.Note: This letter was finalized on October 4, 2021. Any forward-looking statements made in this document are only as of this date, unless otherwise stated. Please see the section in the enclosed Form 10-K titled “Special Note on Forward-Looking Information”. Note: U.S. Generally Accepted Accounting Principles is referred to as “GAAP”. “GAAP income before income taxes and noncontrolling interests” and “Adjusted Earnings before noncontrolling interests and taxes” may be used interchangeably with “GAAP pre-tax income” and “pre-tax Adjusted Earnings”, respectively. See the sections of this document including “Timing of Outlook for Certain GAAP and Non-GAAP Items”, “Non-GAAP Financial Measures”, “Adjusted Earnings Defined”, “Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS”, “Fully Diluted Weighted-Average Share Count under GAAP and for Adjusted Earnings”, “Adjusted EBITDA Defined”, “Reconciliation of GAAP Net Income (Loss) Available to Common Stockholders to Adjusted EBITDA”, and “Liquidity Analysis”, including any footnotes to these sections, for the complete and updated definitions of these non-GAAP terms and how, when and why management uses them, as well as for the differences between results under GAAP and non-GAAP for the periods discussed herein. VIRTUAL
CHARITY DAY 2020
Charity Day is the day we honor the 658 Cantor and 61 Eurobrokers colleagues and
friends we lost during the World Trade Center attacks on September 11, 2001.
Our first Charity Day took place on September 11, 2002. Every year since then, BGC, Cantor Fitzgerald and GFI
donate 100% of our global revenues generated on Charity Day to the Cantor Fitzgerald Relief Fund (“Relief Fund”),
and to other organizations in need of our help around the globe. We have raised $200 million to date, and we will
continue to raise more due to the generous support of so many inspirational people.
The Relief Fund began as a way to support the families of our employees. We have since broadened its scope to
also provide aid to victims of natural disasters and emergencies, direct service charities, and wounded members of
Kiera Knightly
16
CHARITY DAY 2020
Matthew McConaughey
the military. Since its inception the Cantor Fitzgerald Relief
Fund has raised and distributed over $357 million to provide
care and assistance when people need it the most.
Over the past year, normal life as we knew it ended as the
pandemic took hold. Nevertheless, we persisted with our
efforts. We are proud to have raised millions of dollars in
2020 for those who need it the most via our virtual Charity
Day, which saw our clients, employees, and celebrity
supporters join together online to raise funds.
Charity Day is our way of turning 9/11, a day of tragedy,
into a day of resolution and commemoration. It is a way for
us to remember and celebrate those we lost, and to push
forward with positive change, no matter the difficulties. It is
our day of healing and hope.
100%
of our global revenues are
donated on Charity Day.
17
VIRTUAL
CHARITY DAY 2020
Kristen Bell
The past year has brought huge hardship to billions of people around the globe. Despite the challenges, we were
determined to continue our fundraising efforts. We have made Charity Day happen every year since its inception,
and 2020 was no different. As the world stayed at home, we took our annual Charity Day online.
Our first ever virtual Charity Day proved vital to many of our charity partners, some of whom would not have been
able to continue without our support. The millions of dollars we raised online provided direct aid to organizations
who lost vital revenue streams as the pandemic brought their normal fundraising activities to a standstill.
18
CHARITY DAY 2020
Victor Cruz
On Charity Day 2020, we were proud to raise $10
million despite not being able to bring our supporters
and employees together in person. “Globally, people are
seeking unity and inspiration now, maybe more than
ever, and that is exactly what Charity Day represents
each year,” said Howard Lutnick. “We are humbled and
grateful to continue to be able to fundraise and partner
with distinguished guests to put on an event – no matter
what that looks like – to assist those most in need.”
Now, perhaps more than ever, we are witnessing the
incredible value of combining our efforts to raise and
redistribute funds to those who need it most. As former
British prime minister Tony Blair said: “Even if we’re
doing it virtually this year, the sentiment and the values
behind Charity Day are still the same. If anything, the
urgency and the need is even greater.”
Tony Blair
$10
Million Raised
We are incredibly grateful to our
friends from the worlds of sports,
government, music and entertainment,
who gave us their time, commitment
and support online in 2020.
19
VIRTUAL
CHARITY DAY 2020
Nile Rogers
Edie Lutnick, President and Co-Founder of the Cantor Fitzgerald Relief Fund said of our 2020
Charity Day: “This year, those in need – and the charities that support them – have been dramatically
affected by COVID-19. But as we know, it is often in trying times that our best selves emerge. We
find a mission larger than ourselves and can make spectacular things happen. Based on the success of
this year’s Charity Day, we truly saw that resilience in action.”
20
CHARITY DAY 2020
Goldie Hawn
Our virtual
2020 Charity Day
is making a
multi-million dollar
impact in
the real world.
Billy Crudup
21
VIRTUAL
CHARITY DAY 2020
C.J. Mosley
22
CHARITY DAY 2020
Rosie Perez
We were delighted to gather our esteemed
guests, clients and employees in a virtual
meet-and-greet session to raise funds for
charitable organizations. Our thanks go
to Matthew McConaughey, Kevin Durant,
Patrick Dempsey, Alec Baldwin, Ed Norton,
Kristen Bell, Spencer Dinwiddie, CJ Mosley,
Victor Cruz, John Stamos, Goldie Hawn, Tony
Gonzalez, Patrick Reed, David Costabile, Billy
Crudup, Edie Falco, John Slattery, Matthew
Rhys, Steve Buscemi, Allan Houston, Mark
Messier, Jim Leyritz, Darryl ‘DMC’ McDaniels,
Kathryn Winnick, Jeff Ross, Mark Teixeria,
Gerry Cooney, Petra Nemcova, Tony Blair,
Henrik Lundqvist, Nick Swisher, Steve Nash,
Brian Cashman, Rosie Perez, and
Virginia Williams.
Jodie Comer
23
NOW
The Network of Women was launched in 2014 with the goal of supporting the recruitment,
development and retention of women across BGC Partners and affiliates. NOW strives to offer
opportunities and tools to help members make new professional contacts, find mentors, and
develop their careers. NOW offers formal networking functions, career panels, speaker events,
and skills workshops, all of which help to attract, empower, and retain high-performing women
throughout the company. In turn, this helps to create a more inclusive and supportive working
environment where all employees can thrive. In 2020, we took our efforts online, delivering
support via dedicated webinars and digital talks.
NETWORK OF WOMEN: NOW, MORE THAN EVER
The past year saw enormous social upheaval, while the pandemic created great economic uncertainty.
While we have been aware of the need to foster greater equality for women and girls long before 2020,
our mission of driving the recruitment, development and retention of women across BGC Partners and
its affiliates is now more important than ever.
NOW plays an important role in supporting its members in the workplace through a variety of initiatives,
many of which we were able to conduct virtually in 2020 with great success. NOW creates a win-win
situation: the women in our businesses have greater chances to grow and thrive, while the company
benefits from a more inclusive workforce and access to a fantastic talent pool.
25
COVID-19 represents a direct threat to women in the workplace; a 2020 McKinsey Institute study found
womens’ jobs to be 1.8 times more vulnerable to the crisis than mens’ jobs. While women make up 39%
of the global workforce, they account for 54% of COVID-19-related job losses. Childcare has long been as-
signed to mothers, rather than fathers; a fact further exacerbated by the pandemic as those that were able
were expected to work from home.
We wanted to ensure the women in our NOW network had access to information and education during
the pandemic through our online event series. We’re proud to have hosted distinguished thinkers and
businesswomen such as Sandie Okoro, the World Bank Senior Vice President and General Counsel, and Dr.
Linda A. Bell, Provost and Dean of Faculty at Barnard College, Columbia University, as part of our celebra-
tion of Women’s History Month.
NOW is looking forward to creating more opportunities to empower and educate its members; we are
committed to a successful and more equal future for everyone.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-28191
BGC Partners, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
499 Park Avenue, New York, NY
(Address of Principal Executive Offices)
13-4063515
(I.R.S. Employer
Identification No.)
10022
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(212) 610-2200
(Registrant’s telephone number, including area code)
Title of each class
Class A Common Stock, $0.01 par value
Trading
Symbol(s)
BGCP
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-accelerated Filer
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
Accelerated Filer
Smaller Reporting Company
☒
☐
☐
☐
☐
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of voting common equity held by non-affiliates of the registrant, based upon the closing price of the Class A common stock on June 30, 2020
as reported on NASDAQ, was approximately $836,497,422.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
On February 25, 2021, the registrant had 323,716,736 shares of Class A common stock, $0.01 par value, and 45,884,380 shares of Class B common stock, $0.01 par value,
outstanding.
Portions of the registrant’s definitive proxy statement for its 2021 annual meeting of stockholders (the “2021 Proxy Statement”) are incorporated by reference in Part III
of this Annual Report on Form 10-K. We anticipate that we will file the 2021 Proxy Statement with the SEC on or before April 30, 2021.
DOCUMENTS INCORPORATED BY REFERENCE.
BGC Partners, Inc.
2020 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
GLOSSARY OF TERMS, ABBREVIATIONS AND ACRONYMS ..............................................................
SPECIAL NOTE ON FORWARD-LOOKING INFORMATION ............................................................................
RISK FACTOR SUMMARY ...................................................................................................................................
WHERE YOU CAN FIND MORE INFORMATION ..............................................................................................
BUSINESS ................................................................................................................................................................
RISK FACTORS .......................................................................................................................................................
UNRESOLVED STAFF COMMENTS ....................................................................................................................
PROPERTIES ...........................................................................................................................................................
LEGAL PROCEEDINGS..........................................................................................................................................
MINE SAFETY DISCLOSURES .............................................................................................................................
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES ................................................................................................
SELECTED CONSOLIDATED FINANCIAL DATA .............................................................................................
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ..........................................................................................................................................................
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..........................................
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ..........................................................................
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ..........................................................................................................................................................
CONTROLS AND PROCEDURES ..........................................................................................................................
OTHER INFORMATION .........................................................................................................................................
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ...................................................
EXECUTIVE COMPENSATION .............................................................................................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS ..................................................................................................................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ............
PRINCIPAL ACCOUNTANT FEES AND SERVICES ...........................................................................................
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
ITEM 16.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ................................................................................
FORM 10-K SUMMARY .........................................................................................................................................
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GLOSSARY OF TERMS, ABBREVIATIONS AND ACRONYMS
The following terms, abbreviations and acronyms are used to identify frequently used terms and phrases in this report:
TERM
2019 Promissory Note
2042 Promissory Note
3.750% Senior Notes
4.375% Senior Notes
5.125% Senior Notes
5.375% Senior Notes
8.125% Senior Notes
8.375% Senior Notes
Adjusted Earnings
Algomi
API
DEFINITION
BGC U.S. OpCo’s $300.0 million principal amount promissory note, issued as of December 9, 2014 to
the Company in relation to the 5.375% Senior Notes and assumed by Newmark OpCo in connection
with the Separation, which was repaid on November 23, 2018
BGC U.S. OpCo’s $112.5 million principal amount promissory note, issued as of June 26, 2012 to the
Company in relation to the 8.125% Senior Notes and assumed by Newmark OpCo in connection with
the Separation, which was repaid on September 5, 2018
The Company’s $300.0 million principal amount of 3.750% senior notes maturing on October 1, 2024
and issued on September 27, 2019
The Company’s $300.0 million principal amount of 4.375% senior notes maturing on December 15,
2025 and issued on July 10, 2020
The Company’s original $300.0 million principal amount of 5.125% senior notes maturing on May 27,
2021 and issued on May 27, 2016, of which $44.0 million was redeemed through a cash tender offer by
the Company on August 14, 2020
The Company’s $450.0 million principal amount of 5.375% senior notes maturing on July 24, 2023
and issued on July 24, 2018
The Company’s $112.5 million principal amount of 8.125% senior notes due 2042, issued on June 26,
2012, which were repaid on September 5, 2018
The Company’s $240.0 million principal amount of GFI 8.375% senior notes due July 2018, assumed
by BGC in connection with the GFI Merger, which were repaid on July 19, 2018
A non-GAAP financial measure used by the Company to evaluate financial performance, which
primarily excludes (i) certain non-cash items and other expenses that generally do not involve the
receipt or outlay of cash and do not dilute existing stockholders, and (ii) certain gains and charges that
management believes do not best reflect the ordinary results of BGC
Algomi Limited, a wholly owned subsidiary of the Company, acquired on March 6, 2020
Application Programming Interface
April 2008 distribution rights shares
Cantor’s deferred stock distribution rights provided to current and former Cantor partners on April 1,
2008
April 2017 Sales Agreement
CEO sales agreement, by and between the Company and CF&Co, dated April 12, 2017, pursuant to
which the Company offered and sold an aggregate of 20 million shares of BGC Class A common stock
Aqua
ASC
ASU
Aqua Securities L.P., an alternative electronic trading platform, which offers new pools of block
liquidity to the global equities markets and is a 49%-owned equity method investment of the Company
and 51% owned by Cantor
Accounting Standards Codification
Accounting Standards Update
Audit Committee
Audit Committee of the Board
BEAT
Berkeley Point
Base Erosion and Anti-abuse Tax
Berkeley Point Financial LLC, a wholly owned subsidiary of the Company acquired on September 8,
2017 and contributed to Newmark in the Separation
2
TERM
DEFINITION
Besso
BGC
Besso Insurance Group Limited, a wholly owned subsidiary of the Company, acquired on February 28,
2017
BGC Partners, Inc. and, where applicable, its consolidated subsidiaries
BGC or our Class A common stock
BGC Partners Class A common stock, par value $0.01 per share
BGC or our Class B common stock
BGC Partners Class B common stock, par value $0.01 per share
BGC Credit Agreement
Agreement between the Company and Cantor, dated March 19, 2018, that provides for each party or its
subsidiaries to borrow up to $250.0 million, as amended on August 6, 2018 to increase the facility to
$400.0 million
BGC Financial or BGCF
BGC Financial, L.P
BGC Global OpCo
BGC Group
BGC Holdings
BGC Global Holdings, L.P., an operating partnership, which is owned jointly by BGC and BGC
Holdings and holds the non-U.S. businesses of BGC
BGC, BGC Holdings, and BGC U.S. OpCo, and their respective subsidiaries (other than, prior to the
Spin-Off, the Newmark Group), collectively
BGC Holdings, L.P., an entity owned by Cantor, Founding Partners, BGC employee partners and, after
the Separation, Newmark employee partners
BGC Holdings Distribution
Pro-rata distribution, pursuant to the Separation and Distribution Agreement, by BGC Holdings to its
partners of all of the exchangeable limited partnership interests of Newmark Holdings owned by BGC
Holdings immediately prior to the distribution, completed on the Distribution Date
BGC OpCos
BGC Partners
BGC U.S. OpCo
Board
Brexit
Cantor
Cantor group
Cantor units
CCRE
CECL
BGC U.S. OpCo and BGC Global OpCo, collectively
BGC Partners, Inc. and, where applicable, its consolidated subsidiaries
BGC Partners, L.P., an operating partnership, which is owned jointly by BGC and BGC Holdings and
holds the U.S. businesses of BGC
Board of Directors of the Company
Exit of the U.K. from the EU
Cantor Fitzgerald, L.P. and, where applicable, its subsidiaries
Cantor and its subsidiaries other than BGC Partners
Limited partnership interests of BGC Holdings or Newmark Holdings held by the Cantor group, which
units are exchangeable into shares of BGC Class A common stock or BGC Class B common stock, or
Newmark Class A common stock or Newmark Class B common stock, as applicable
Cantor Commercial Real Estate Company, L.P.
Current Expected Credit Losses
CEO Program
Controlled equity offering program
CF&Co
CFGM
CFS
CFTC
Charity Day
Cantor Fitzgerald & Co., a wholly owned broker-dealer subsidiary of Cantor
CF Group Management, Inc., the general partner of Cantor
Cantor Fitzgerald Securities, a wholly owned broker-dealer subsidiary of Cantor
Commodity Futures Trading Commission
BGC’s annual event held on September 11th where employees of the Company raise proceeds for
charity
3
TERM
DEFINITION
Class B Issuance
CLOB
CME
Company
Issuance by BGC of 10,323,366 and 712,907 shares of BGC Class B common stock to Cantor and
CFGM, respectively, in exchange for 11,036,273 shares of BGC Class A common stock under the
Exchange Agreement, completed on November 23, 2018
Central Limit Order Book
CME Group Inc., the company that acquired NEX in November 2018
BGC Partners, Inc. and, where applicable, its consolidated subsidiaries
Company Debt Securities
The 5.125% Senior Notes, 5.375% Senior Notes, 3.750% Senior Notes, 4.375% Senior Notes and any
future debt securities issued by the Company
Compensation Committee
Compensation Committee of the Board
Contribution Ratio
Equal to a BGC Holdings limited partnership interest multiplied by one, divided by 2.2 (or 0.4545)
Converted Term Loan
Corant
COVID-19
CRD
Credit Facility
CSC
Distribution Date
BGC’s term loan in an aggregate principal amount of $400.0 million entered into on November 22,
2017 in conversion of its then-outstanding borrowings under its revolving credit facility, which
Converted Term Loan was assumed by Newmark in connection with the Separation and was repaid on
November 6, 2018
Corant Global Limited, the proposed holding company for all insurance interests of BGC Partners, Inc,
subject to regulatory consent; comprises its broking operations of Ed Broking, Besso, Piiq Risk
Partners and Junge as well as the group’s managing general agents Cooper Gay, Globe Underwriting
and Epsilon
Coronavirus Disease 2019
Capital Requirements Directive
A $150.0 million credit facility between the Company and an affiliate of Cantor entered into on April
21, 2017, which was terminated on March 19, 2018
CSC Commodities UK Limited
November 30, 2018, the date that BGC and BGC Holdings completed the Spin-Off and the BGC
Holdings Distribution, respectively
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
ECB
Ed Broking
EMIR
EPS
EPUs
Equity Plan
ESG
eSpeed
ETR
EU
European Central Bank
Ed Broking Group Limited, a wholly owned subsidiary of the Company, acquired on January 31, 2019
European Market Infrastructure Regulation
Earnings Per Share
Exchangeable preferred limited partnership units, issued by Newmark OpCo in June 2018 and
September 2018 in the Newmark OpCo Preferred Investments, and entitled to a preferred payable-in-
kind dividend
Seventh Amended and Restated Long Term Incentive Plan, approved by the Company’s stockholders
at the annual meeting of stockholders on June 22, 2016
Environmental, social and governance
Various assets comprising the Fully Electronic portion of the Company’s former benchmark on-the-run
U.S. Treasury brokerage, market data and co-location service businesses, sold to Nasdaq on June 28,
2013
Effective Tax Rate
European Union
4
TERM
DEFINITION
Exchange Act
Securities Exchange Act of 1934, as amended
Exchange Agreement
A letter agreement by and between BGC Partners and Cantor and CFGM, dated June 5, 2015, that
grants Cantor and CFGM the right to exchange shares of BGC Class A common stock into shares of
BGC Class B common stock on a one-to-one basis up to the limits described therein
Exchange Ratio
Ratio by which a Newmark Holdings limited partnership interest can be exchanged for shares of
Newmark Class A or Class B common stock
FASB
FCA
FCM
Financial Accounting Standards Board
Financial Conduct Authority of the U.K.
Futures Commission Merchant
February 2012 distribution rights shares
Cantor’s deferred stock distribution rights provided to current and former Cantor partners on February
14, 2012
Fenics
FINRA
Founding Partners
BGC’s group of electronic brands, offering a number of market infrastructure and connectivity
services, Fully Electronic marketplaces, and the Fully Electronic brokerage of certain products that also
may trade via Voice and Hybrid execution, including market data and related information services,
Fully Electronic brokerage, connectivity software, compression and other post-trade services, analytics
related to financial instruments and markets, and other financial technology solutions
Financial Industry Regulatory Authority
Individuals who became limited partners of BGC Holdings in the mandatory redemption of interests in
Cantor in connection with the 2008 separation and merger of Cantor’s BGC division with eSpeed, Inc.
(provided that members of the Cantor group and Howard W. Lutnick (including any entity directly or
indirectly controlled by Mr. Lutnick or any trust with respect to which he is a grantor, trustee or
beneficiary) are not founding partners) and became limited partners of Newmark Holdings in the
Separation
Founding/Working Partners
Holders of FPUs
FPUs
Freedom
Founding/Working Partners units in BGC Holdings or Newmark Holdings that are generally redeemed
upon termination of employment
Freedom International Brokerage Company, a 45%-owned equity method investment of the Company
Fully Electronic
Broking transactions intermediated on a solely electronic basis rather than by Voice or Hybrid Broking
FX
GDPR
GFI
GFI Merger
Foreign exchange
General Data Protection Regulation
GFI Group Inc., a wholly owned subsidiary of the Company, acquired on January 12, 2016
Acquisition of GFI by a wholly owned subsidiary of the Company pursuant to the GFI Merger
Agreement, completed on January 12, 2016 after BGC’s acquisition of Jersey Partners, Inc., GFI’s
largest shareholder
GFI Merger Agreement
Agreement in connection with the GFI Merger, dated December 22, 2015
GILTI
Ginga Petroleum
GUI
HDUs
Global Intangible Low-Taxed Income
Ginga Petroleum (Singapore) Pte Ltd, a wholly owned subsidiary of the Company, acquired on March
12, 2019
Graphical User Interface
LPUs with capital accounts, which are liability awards recorded in “Accrued compensation” in the
Company’s statements of financial condition
5
Hybrid
ICAP
ICE
IMO
TERM
DEFINITION
Broking transactions executed by brokers and involving some element of Voice Broking and electronic
trading
ICAP plc, a part of TP ICAP group, and a leading markets operator and provider of execution and
information services
Intercontinental Exchange
Initial Margin Optimization
Incentive Plan
The Company’s Second Amended and Restated Incentive Bonus Compensation Plan, approved by the
Company’s stockholders at the annual meeting of stockholders on June 6, 2017
Intercompany Credit Agreement
Agreement between the Company and Newmark entered into on December 13, 2017 that provided for
each party to issue revolving loans to the other party in the lender’s discretion, as amended March 19,
2018
Investment in Newmark
Purchase of 16.6 million Newmark Holdings limited partnership units for $242.0 million by BGC
Partners and BGC U.S. OpCo on March 7, 2018
Legacy BGC Holdings Units
BGC Holdings LPUs outstanding immediately prior to the Separation
Legacy Newmark Holdings Units
Newmark Holdings LPUs issued in connection with the Separation
LGD
LIBOR
LPUs
Lucera
Loss Given Default
London Interbank Offering Rate
Certain limited partnership units in BGC Holdings or Newmark Holdings held by certain employees of
BGC Partners or Newmark and other persons who have provided services to BGC Partners or
Newmark, which units may include APSIs, APSUs, AREUs, ARPSUs, HDUs, U.K. LPUs, N Units,
PLPUs, PPSIs, PPSUs, PSEs, PSIs, PSUs, REUs, and RPUs, along with future types of limited
partnership units in BGC Holdings or Newmark Holdings
A wholly owned subsidiary of the Company. Lucera (also known as “LFI Holdings, LLC” or “LFI”) is
our software defined network, offering the trading community direct connectivity
March 2018 Sales Agreement
CEO sales agreement, by and between the Company and CF&Co, dated March 9, 2018, pursuant to
which the Company may offer and sell up to an aggregate of $300.0 million of shares of BGC Class A
common stock
MEA
MiFID II
Mint Brokers
Nasdaq
Newmark
Middle East and Africa region
Markets in Financial Instruments Directive II, a legislative framework instituted by the EU
to regulate financial markets and improve protections for investors by increasing transparency and
standardizing regulatory disclosures
A wholly owned subsidiary of the Company, acquired on August 19, 2010, registered as an FCM with
both the CFTC and NFA
Nasdaq, Inc., formerly known as NASDAQ OMX Group, Inc.
Newmark Group, Inc. (NASDAQ symbol: NMRK), a publicly traded and former majority-owned
subsidiary of BGC until the Distribution Date, and, where applicable, its consolidated subsidiaries
Newmark Class A common stock
Newmark Group Class A common stock, par value $0.01 per share
Newmark Class B common stock
Newmark Group Class B common stock, par value $0.01 per share
Newmark Group
Newmark, Newmark Holdings, and Newmark OpCo and their respective subsidiaries, collectively
Newmark Holdings
Newmark Holdings, L.P.
Newmark IPO
Initial public offering of 23 million shares of Newmark Class A common stock by Newmark at a price
of $14.00 per share in December 2017
6
TERM
DEFINITION
Newmark OpCo
Newmark Partners, L.P., an operating partnership, which is owned jointly by Newmark and Newmark
Holdings and holds the business of Newmark
Newmark OpCo Preferred Investments
Issuances of EPUs by Newmark OpCo in June 2018 and September 2018
NYAG
NEX
NFA
Non-GAAP
N Units
OCC
OCI
OECD
OTC
OTF
PCD assets
PD
Period Cost Method
Poten & Partners
Preferred Distribution
Preferred Units
Real Estate L.P.
Real GDP
New York Attorney General’s Office
NEX Group plc, an entity formed in December 2016, formerly known as ICAP
National Futures Association
A financial measure that differs from the most directly comparable measure calculated and presented in
accordance with U.S. GAAP, such as Adjusted Earnings and Adjusted EBITDA
Non-distributing partnership units of BGC Holdings or Newmark Holdings that may not be allocated
any item of profit or loss, and may not be made exchangeable into shares of Class A common stock,
including NREUs, NPREUs, NLPUs, NPLPUs, NPSUs, and NPPSUs
Options Clearing Corporation
Other comprehensive income (loss), including gains and losses on cash flow and net investment
hedges, unrealized gains and losses on available for sale securities (in periods prior to January 1, 2018),
certain gains and losses relating to pension and other retirement benefit obligations and foreign
currency translation adjustments
Organization for Economic Cooperation and Development
Over-the-Counter
Organized Trading Facility, a regulated execution venue category introduced by MiFID II
Purchased financial assets with deterioration in credit quality since origination
Probability of Default
Treatment of taxes associated with the GILTI provision as a current period expense when incurred
rather than recording deferred taxes for basis differences
Poten & Partners Group, Inc., a wholly owned subsidiary of the Company, acquired on November 15,
2018
Allocation of net profits of BGC Holdings or Newmark Holdings to holders of Preferred Units, at a rate
of either 0.6875% (i.e., 2.75% per calendar year) or such other amount as set forth in the award
documentation
Preferred partnership units in BGC Holdings or Newmark Holdings, such as PPSUs, which are settled
for cash, rather than made exchangeable into shares of Class A common stock, are only entitled to a
Preferred Distribution, and are not included in BGC’s or Newmark’s fully diluted share count
CF Real Estate Finance Holdings, L.P., a commercial real estate-related financial and investment
business controlled and managed by Cantor, of which Newmark owns a minority interest. On
September 8, 2017, the Company invested $100.0 million in Real Estate L.P. which was part of the
Spin-Off on November 30, 2018
Real Gross Domestic Product is a macroeconomic measure of the value of economic output adjusted
for price changes (i.e. inflation or deflation), which transforms the money-value measure,
nominal GDP, into an index for quantity of total output
Record Date
Close of business on November 23, 2018, in connection with the Spin-Off
Repurchase Agreements
Securities sold under agreements to repurchase that are recorded at contractual amounts, including
interest, and accounted for as collateralized financing transactions
7
TERM
DEFINITION
Revolving Credit Agreement
The Company’s unsecured senior revolving credit facility with Bank of America, N.A., as
administrative agent, and a syndicate of lenders, dated as of November 28, 2018, that provides for a
maximum revolving loan balance of $350.0 million, bearing interest at either LIBOR or a defined base
rate plus additional margin, amended on December 11, 2019 to extend the maturity date to February
26, 2021 and further amended on February 26, 2020 to extend the maturity date to February 26, 2023
ROU
RSUs
SaaS
SEC
Securities Act
SEF
Separation
Right-of-Use
BGC or Newmark unvested restricted stock units, payable in shares of BGC Class A common stock or
Newmark Class A common stock, respectively, held by certain employees of BGC Partners or
Newmark and other persons who have provided services to BGC Partners or Newmark, or issued in
connection with certain acquisitions
Software as a Service
U.S. Securities and Exchange Commission
Securities Act of 1933, as amended
Swap Execution Facility
Principal corporate transactions pursuant to the Separation and Distribution Agreement, by which
BGC, BGC Holdings and BGC U.S. OpCo and their respective subsidiaries (other than the Newmark
Group) transferred to Newmark, Newmark Holdings and Newmark OpCo and their respective
subsidiaries the assets and liabilities of the BGC Group relating to BGC’s real estate services business,
and related transactions, including the distribution of Newmark Holdings units to holders of units in
BGC Holdings and the assumption and repayment of certain BGC indebtedness by Newmark
Separation and Distribution Agreement
Separation and Distribution Agreement, by and among the BGC Group, the Newmark Group, Cantor
and BGC Global OpCo, originally entered into on December 13, 2017, as amended on November 8,
2018 and amended and restated on November 23, 2018
SMCR
Spin-Off
Tax Act
Term Loan
Tower Bridge
TP ICAP
Tradition
Tullett
U.K.
Senior Managers Certification Regime
Pro-rata distribution, pursuant to the Separation and Distribution Agreement, by BGC to its
stockholders of all the shares of common stock of Newmark owned by BGC Partners immediately prior
to the Distribution Date, with shares of Newmark Class A common stock distributed to the holders of
shares of BGC Class A common stock (including directors and executive officers of BGC Partners) of
record on the Record Date, and shares of Newmark Class B common stock distributed to the holders of
shares of BGC Class B common stock (Cantor and CFGM) of record on the Record Date, completed
on the Distribution Date
Tax Cuts and Jobs Act enacted on December 22, 2017
BGC’s term loan in an aggregate principal amount of $575.0 million under a credit agreement with
Bank of America, N.A., as administrative agent, and a syndicate of lenders, dated as of September 8,
2017, as amended, which Term Loan was assumed by Newmark in connection with the Separation and
repaid on March 31, 2018
Tower Bridge International Services L.P., a subsidiary of the Company, which is 52% owned by the
Company and 48% owned by Cantor
TP ICAP plc, an entity formed in December 2016, formerly known as Tullett
Compagnie Financière Tradition (which is majority owned by Viel & Cie)
Tullett Prebon plc, a part of TP ICAP group and an interdealer broker, primarily operating as an
intermediary in the wholesale financial and energy sectors
United Kingdom
U.S. GAAP or GAAP
Generally Accepted Accounting Principles in the United States of America
UBT
Unincorporated Business Tax
8
TERM
DEFINITION
VIE
Voice
Variable Interest Entity
Voice-only broking transactions executed by brokers over the telephone
9
SPECIAL NOTE ON FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K contains forward-looking statements. 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. The information included herein is given as of the filing date of this Form 10-K with 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.
RISK FACTOR SUMMARY
The following is a summary of material risks that could affect our businesses, each of which may have a material adverse effect on
our businesses, financial condition, results of operations and prospects. This summary may not contain all of our material risks, and it is
qualified in its entirety by the more detailed risk factors set forth in Item 1A “Risk Factors.”
• The COVID-19 pandemic, and governmental measures taken in response thereto, have materially adversely affected, and may in
the future continue to materially adversely affect, the global economy, the United States economy and the global financial
markets, resulting in a global recession that may adversely affect our businesses, financial condition and results of operations.
The extent to which the COVID-19 pandemic, including any successive waves or variants of the virus, or the emergence of
another pandemic, and measures taken in response thereto, including “shelter-in-place” orders and other restrictions and delays
or complications in the implementation of vaccination programs, could continue to materially adversely affect the conduct of
our business will depend upon future developments and conditions, which remain highly uncertain.
• The COVID-19 pandemic, and governmental measures taken in response thereto, have severely disrupted the global conduct of
business, and have disrupted, and may continue to disrupt, our operations and our clients' operations, which has had, and may
continue to have, a material adverse effect on our businesses, financial condition and results of operations. As a result, we have
been required to implement operational changes, including transitioning a large portion of our workforce to remote working,
thus exposing us to greater cybersecurity risks. The extent to which the pandemic, and governmental measures taken in response
thereto, could materially adversely affect our businesses, financial condition and results of operations will depend on future
developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and the
actions taken by governmental authorities in response thereto.
• The U.K. exit from the EU could materially adversely impact our customers, counterparties, businesses, financial condition,
results of operations and prospects.
• We may pursue strategic alliances, acquisitions, dispositions, joint ventures or other growth opportunities (including hiring new
brokers and salespeople), which could present unforeseen integration obstacles or costs and could dilute our stockholders. We
may also face competition in our acquisition strategy, and such competition may limit our number of strategic alliances,
acquisitions, joint ventures and other growth opportunities (including hiring new brokers and salespeople).
• We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined, the expected
transition away from LIBOR and the use of alternative reference rates, including financial risks arising from any changes in the
valuation of financial instruments, and operational risks due to the potential requirement to adapt our information technology
systems and operational processes to address the transition away from LIBOR.
• We are subject to certain risks relating to our indebtedness, including constraints on our ability to raise additional capital,
declines in our credit ratings and limitations on our financial flexibility to react to changes in the economy or the financial
services industry. We may need to incur additional indebtedness to finance our growth strategy, including in connection with the
re-positioning of aspects of our business to adapt to changes in market conditions in the financial services industry.
• Our ability to retain our key employees and the ability of certain key employees to devote adequate time and attention to us are
critical to the success of our businesses, and failure to do so may materially adversely affect our businesses, financial condition,
results of operations and prospects.
10
• Our management has identified a material weakness in our internal control over financial reporting. While the remediation is in
process, if we are unable to successfully remediate this material weakness, or if we otherwise fail to implement and maintain an
effective internal control environment, our operations, reputation and stock price could suffer, we may need to restate our
financial statements and we may be delayed in or prevented from accessing the capital markets.
• The financial services industry in general faces potential regulatory, litigation and/or criminal risks that may result in damages
or fines or other penalties as well as costs, and we may face damage to our professional reputation and legal liability if our
products and services are not regarded as satisfactory, our employees do not adhere to all applicable legal and professional
standards, or for other reasons, all of which could have a material adverse effect on our businesses, financial condition, results
of operations and prospects.
• Because competition for the services of brokers, salespeople, managers, and other professionals, in the financial services
industry is intense, it could affect our ability to attract and retain a sufficient number of highly skilled brokers or other
professional services personnel, in turn adversely impacting our revenues, resulting in a material adverse effect on our
businesses, financial condition, results of operations and prospects.
• We are a holding company with dual class common stock. Holders of our Class A common stock are subject to certain risks
resulting from our structure, including our dependence upon distributions from the BGC OpCos and the concentration of our
voting control among the holders of our Class B common stock, which may materially adversely affect the market price of our
Class A common stock.
• Reductions in our quarterly cash dividend and corresponding reductions in distributions by BGC Holdings to its partners may
reduce the value of our common stock and the attractiveness of our equity-based compensation and limit the ability of our
partners to repay employee loans.
• We are controlled by Cantor and Mr. Lutnick, who have potential conflicts of interest with us and may exercise their control in a
way that favors their interests to our detriment. Cantor’s interests may conflict with our interests, and Cantor may exercise its
control in a way that favors its interests to our detriment, including in competition with us for acquisitions or other business
opportunities. In addition, agreements between us and Cantor are between related parties, and the terms of these agreements
may be less favorable to us than those that we could negotiate with third parties and may subject us to litigation.
•
If there is a determination that the Spin-Off (as defined below) was taxable for U.S. federal income tax purposes, then we and
our stockholders could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.
• Purchasers, as well as existing stockholders, may experience significant dilution as a result of offerings of shares of our Class A
common stock. Our management will have broad discretion as to the timing and amount of sales of our Class A common stock,
as well as the application of the net proceeds of any such sales.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are 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 with respect to our securities filed on behalf of Cantor, CFGM, our directors and our executive officers; and
amendments to those documents. Our website also contains additional information with respect to our industry and businesses. The
information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this Annual Report on
Form 10-K.
11
ITEM 1.
BUSINESS
Throughout this document, BGC Partners, Inc. is referred to as “BGC” and, together with its subsidiaries, as the “Company,” “BGC
PART I
Partners,” “we,” “us,” or “our.”
Our Businesses
We are a leading global brokerage and financial technology company servicing the global financial markets.
Through brands including BGC®, GFI®, Sunrise Brokers™, Besso™, Ed® Broking, Poten & Partners®, RP Martin™, CORANT™,
and CORANT GLOBAL™, among others, our businesses specialize in the brokerage of a broad range of products, including fixed income
such as government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit derivatives. We
also broker products across FX, equity derivatives and cash equities, energy and commodities, shipping, insurance, and futures and options.
Our businesses also provide a wide variety of services, including trade execution, brokerage services, clearing, compression and other post-
trade services, information, and other back-office services to a broad assortment of financial and non-financial institutions.
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 OTC or through an exchange. Through our Fenics® group of electronic brands, we offer a number of market infrastructure
and connectivity services, Fully Electronic marketplaces, and the Fully Electronic brokerage of certain products that also may trade via Voice
and Hybrid execution. The full suite of Fenics® offerings include Fully Electronic brokerage, market data and related information services,
trade compression and other post-trade services, analytics related to financial instruments and markets, and other financial technology
solutions. Fenics® brands operate under the names Fenics®, BGC Trader™, CreditMatch®, Fenics Market Data™, BGC Market Data™,
kACE2®, EMBonds®, Capitalab®, Swaptioniser®, CBID® and Lucera®.
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, Sunrise Brokers, Corant, Corant Global, Besso,
Ed Broking, Poten & Partners, RP Martin, kACE2, EMBonds, Capitalab, Swaptioniser, CBID, Aqua and Lucera are trademarks/service
marks, and/or registered trademarks/service marks of BGC Partners, Inc. and/or its affiliates.
Our customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds, governments,
corporations, and investment firms. We have dozens of offices globally in major markets including New York and London, as well as in
Bahrain, Beijing, Bermuda, Bogotá, Brisbane, Buenos Aires, Chicago, Copenhagen, Dubai, Dublin, Frankfurt, Geneva, Hong Kong,
Houston, Istanbul, Johannesburg, Madrid, Melbourne, Mexico City, Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo, Seoul,
Shanghai, Singapore, Sydney, Tel Aviv, Tokyo and Toronto.
As of December 31, 2020, we had over 2,822 brokers, salespeople, managers and other front-office personnel across our businesses.
The outbreak of COVID-19 has impacted our business. See “—COVID-19 Information,” “Item 1A — Risk Factors —Risks Related
to Our Business Generally— Risks Related to the COVID-19 Pandemic” and “Item 7. — Management’s Discussion and Analysis of
Financial Condition and Results of Operations —.COVID -19” for additional information.
Our History
Our business originates from one of the oldest and most established inter-dealer or wholesale brokerage franchises in the financial
intermediary industry. Cantor started our wholesale intermediary brokerage operations in 1972. In 1996, Cantor launched its eSpeed system,
which revolutionized the way government bonds are traded in the inter-dealer market by providing a fully electronic trading marketplace.
eSpeed completed an initial public offering in 1999 and began trading on NASDAQ, yet it remained one of Cantor’s controlled subsidiaries.
Following eSpeed’s initial public offering, Cantor continued to operate its inter-dealer voice/hybrid brokerage business separately from
eSpeed. In August 2004, Cantor announced the reorganization and separation of its inter-dealer voice/hybrid brokerage business into a
subsidiary called “BGC,” in honor of B. Gerald Cantor, the pioneer in screen brokerage services and fixed income market data products. In
April 2008, BGC and certain other Cantor assets merged with and into eSpeed, and the combined company began operating under the name
“BGC Partners, Inc.” In June 2013, BGC sold certain assets relating to its U.S. Treasury benchmark business and the name “eSpeed” to
Nasdaq.
Prior to the events of September 11, 2001, our financial brokerage business was widely recognized as one of the leading full-service
wholesale financial brokers in the world, with a rich history of developing innovative technological and financial solutions. After
September 11, 2001 and the loss of the majority of our U.S.-based employees, our voice financial brokerage business operated primarily in
Europe.
Since the formation of BGC in 2004, we have substantially rebuilt our U.S. presence and have continued to expand our global footprint
through the acquisition and integration of established brokerage companies and the hiring of experienced brokers. Through these actions, we
have been able to expand our presence in key markets and position our business for sustained growth. Since 2015, our acquisitions have
included those of GFI Group, Inc., Sunrise Brokers Group, Poten & Partners Group, Inc., Ed Broking Group Limited, Perimeter Markets Inc.,
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Lucera, Micromega Securities Proprietary Limited, Besso Insurance Group Limited, Ginga Petroleum (Singapore) Private Limited, Emerging
Markets Bond Exchange Ltd, Kalahari Ltd and Algomi Limited.
COVID-19 Information
Our businesses have been and continue to be adversely impacted by the COVID-19 pandemic and the dislocations it has caused our
brokers, salespeople, and clients. Globally, both national and local governments have taken unprecedented actions to abate the spread of
COVID-19, which include lockdowns, shelter-in-place orders, quarantines, travel bans and mandated business closures.
Our revenues were adversely impacted for the year ended December 31, 2020 as a result of COVID-19 and its impact on the
macroeconomic environment, including interest rates, FX, and oil prices. This resulted in lower year-on-year secondary trading volumes
across rates and certain FX products, which impacted our rates and FX businesses.
Responsive actions taken by Central Banks across the globe lowered interest rates and included restarting quantitative easing programs
at levels not seen since the financial crisis. While both low interest rates and high levels of quantitative easing adversely affect certain of our
businesses, including Rates and FX, we believe record levels of government and corporate debt issued in conjunction with pandemic will
provide a tailwind for our businesses going forward. In certain areas of our businesses, such as our fully-electronic Fenics business, we
believe the pandemic’s promotion of virtual and remote work arrangements, will support existing trends of electronification across our
business. Other businesses, such as our data, software and post-trade businesses, continue to be recurring. The insurance brokerage industry
also tends to be more predictable at certain times of year and we expect the pandemic to generate greater demand for insurance brokerage and
we expect growth in this business over time.
From the onset of the pandemic, we have been able to provide our front, middle and back office staff with a remote work environment.
While the majority of our front office brokers and salesforce have returned to designated office locations, a significant number of our middle
and back office employees continue to work remotely.
The continued impact of the pandemic on our businesses is largely dependent on global efforts to stem the spread of COVID-19,
including governmental efforts to distribute vaccines and overall vaccination rates across the United States, Europe, Asia and other
geographies.
Additional information about the impact of COVID-19 on our businesses as a whole or specific businesses or line items, and the risks
and other factors impacting our results, may be found in Item 1A –“Risk Factors”, Item 7 – Management, Discussion and Analysis -
Forward-Looking Cautionary Statements,” “Impact of COVID-19 on Employees” and “Impact of COVID-19 on the Company’s Results” and
in other portions of this Annual Report on Form 10-K.
Overview of Our Products and Services
Financial Brokerage (including Fenics)
We are focused on serving four principal financial brokerage markets:
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traditional, liquid brokerage markets, such as government bonds, over the counter (OTC) European and U.S. interest rate,
foreign exchange, and energy derivatives, as well as listed futures and options;
less liquid markets, such as emerging market bonds and single name credit derivatives;
targeted local markets throughout the world; and
wholesale insurance brokerage.
Fenics is our foundation for our fully electronic and associated hybrid transactions across all asset classes. For the purposes of this
document and subsequent SEC filings, all of our fully electronic businesses may be collectively referred to as “Fenics.” These offerings
include fully electronic brokerage products and services, as well as offerings in market data, software solutions, and post-trade services across
the Company.
We provide electronic marketplaces in multiple financial markets through numerous products and services, including Fenics, BGC
Trader, and several multi-asset hybrid offerings for voice and electronic execution, including BGC’s Volume Match and GFI’s CreditMatch.
These electronic marketplaces include government bond markets, interest rate derivatives, spot foreign exchange, foreign exchange
derivatives, corporate bonds, and credit derivatives. We believe that we offer a comprehensive application providing volume, access,
connectivity, speed of execution and ease of use. Our trading platform establishes a direct link between our brokers and customers and
occupies valuable real estate on traders’ desktops, which is difficult to replicate. We believe that we can leverage our platform to offer fully
electronic trading as additional products transition from voice and hybrid trading to fully electronic execution.
During the COVID-19 pandemic, our fully electronic Fenics business has been a key growth driver and competitive advantage as many
of our brokers and clients have adapted to working remotely. We have leveraged our hybrid platform to provide real-time product and price
discovery information through applications such as BGC Trader. We also provide straight-through processing to our customers for an
increasing number of products. Our end-to-end solution includes real-time and auction-based transaction processing, credit and risk
management tools and back-end processing and billing systems. Customers can access our trading application through our privately managed
global high speed data network, over the Internet, or through third-party communication networks.
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The following table identifies some of the key products that we broker:
Rates
Credit
Interest rate derivatives
Benchmark U.S. Treasuries
Off-the-run U.S. Treasuries
Other global government bonds
Agencies
Futures
Inflation derivatives
Repurchase agreements
Non-deliverable swaps
Interest rate swaps and options
Credit derivatives
Asset-backed securities
Convertibles
Corporate bonds
High yield bonds
Emerging market bonds
Foreign Exchange
Foreign exchange forwards and options
G-10
Emerging markets
Cross currencies
Exotic options
Spot FX
Emerging market FX options
Non-deliverable forwards
Energy and Commodities (OTC and listed derivatives)
Environmental products and emissions
Electricity
Natural Gas
Coal
Base and precious metals
Refined and crude oil
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Equity Derivatives and Cash Equities
Equity derivatives
Soft commodities
Shipping brokerage
Insurance
Cash equities
Index futures
Other derivatives and futures
Accident and Health
Aerospace
Aviation
Cargo
Cyber
Energy
Engineering
Financial and Political Risk
Marine
Parametric insurance products
Professional and Executive Risk
Property and Casualty
Specialty
Reinsurance
Fine Art, Jewelry and Specie
Certain categories of trades settle for clearing purposes with CF&Co, one of our affiliates. CF&Co is a member of FINRA and the
Fixed Income Clearing Corporation (“FICC”), a subsidiary of the Depository Trust & Clearing Corporation (“DTCC”). In addition, certain
affiliated entities are subject to regulation by the CFTC, including CF&Co and BGCF. In certain products, we, CF&Co, BGC Financial and
other affiliates act in a matched principal or principal capacity in markets by posting and/or acting upon quotes for our account. Such activity
is intended, among other things, to assist us, CF&Co and other affiliates in managing proprietary positions (including, but not limited to,
those established as a result of combination of trades and errors), facilitating transactions, framing markets, adding liquidity, increasing
commissions and attracting order flow.
Market Data
Fenics Market Data™ is a supplier of real-time, tradable, indicative, end-of-day and historical market data. Our market data product
suite includes fixed income, interest rate derivatives, credit derivatives, foreign exchange, foreign exchange options, money markets, energy,
metals, and equity derivatives and structured market data products and services. The data are sourced from the voice, hybrid and electronic
broking operations, as well as the market data operations, including BGC, GFI and RP Martin, among others. The data are made available to
financial professionals, research analysts and other market participants via direct data feeds and BGC-hosted FTP environments, as well as
via information vendors such as Bloomberg, Refinitiv, ICE Data Services, QUICK Corp., and other select specialist vendors. In the fourth
quarter of 2020, we began delivering our innovative new data product created for compliance and surveillance departments.
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Software Solutions and Post-Trade Services
Through our Software Solutions business, we provide customized screen-based market solutions to both related and unrelated parties.
Our clients are able to develop a marketplace, trade with their customers and access our network and our intellectual property. We can add
advanced functionality to enable our customers to distribute branded products to their customers through online offerings and auctions,
including private and reverse auctions, via our trading platform and global network.
We offer a derivative price discovery, pricing analysis, risk management and trading software used by over 200 institutions across 38
countries. Our clients include mid-tier banks, financial institutions and corporate clients. In 2020, we acquired Algomi (a buy-side focused
platform that allows bond market participants to improve their workflow and liquidity by data aggregation, pre-trade information analysis,
and execution facilitation) which is being folded into LumeMarkets. In 2019 we launched our Gateway module that links our client base with
their counterparties, trading venues and regulators, enabling clients to automate order flow, straight through processing, data distribution and
regulatory reporting. During the first half of 2018, we fully integrated Fenics software and Kalahari software to form kACE2, our analytics
brand.
Our Software Solutions business provides the software and technology infrastructure for the transactional and technology related
elements of the Freedom International Brokerage Company marketplace as well as certain other services in exchange for specified
percentages of transaction revenue from the marketplace.
As part of our Software Solutions business, our Lucera® brand delivers high-performance technology solutions designed to be secure
and scalable and to power demanding financial applications across several offerings: LumeFX® (distributed FX platform with managed
infrastructure and software stack), LumeMarkets™ (multi-asset class aggregation platform), Connect™ (global SDN for rapid provisioning
of connectivity to counter-parties), and Compute™ (on-demand, co-located compute services in key financial data centers).
Our Post-Trade Services include post-trade risk mitigation services provided using our Capitalab® brand. Capitalab, a division of BGC
Brokers L.P. (“BGC Brokers”), provides compression, matching and optimization services that are designed to bring greater capital and
operational efficiency to the global derivatives market. Capitalab assists clients in managing the growing cost of holding derivatives, while
helping them to meet their regulatory mandates. Through the Swaptioniser® service for portfolio compression of Interest Rate Swaptions,
Interest Rate Swaps, Caps and Floors, and through the Capitalab FX, with CLS service offering portfolio compression of FX Forwards, FX
Swaps and FX Options, as well as Initial Margin Optimization services complete with fully automated trade processing and connection with
LCH SwapAgent, Capitalab looks to simplify the complexities of managing large quantities of derivatives to promote sustainable growth and
lower systemic risk and to improve resiliency in the industry.
Aqua Business
Cantor owns 51% and we own 49% of Aqua, a business that provides access to new block trading liquidity in the equities markets. The
SEC has granted approval for Aqua to operate an Alternative Trading System in compliance with Regulation ATS.
Insurance Brokerage (Corant Global)
In February 2017, we completed the acquisition of Besso and in January 2019, we completed the acquisition of Ed Broking, each an
independent Lloyd’s of London insurance broker. In addition, in 2019 we established Piiq Risk Partners Inc. and Piiq Risk Partners Limited
as brokers in the U.S. and U.K., respectively, to focus exclusively on the insurance requirements of the aerospace and aviation industry. We
established Ed Broking (Bermuda) Limited in 2019 to develop additional insurance opportunities in the Bermuda market, and in 2020, we
expanded the Piiq platform further by establishing Piiq Risk Partners SAS in France. In January 2021 we launched Corant Global Limited
(“Corant”). Subject to regulatory consent, Corant will become the holding company for all the insurance interests of BGC. Our insurance
brokerage business has a strong reputation across Accident and Health, Aerospace, Aviation, Cargo, Cyber, Energy, Engineering, Financial
and Political Risk, Marine, Parametric Insurance Products, Professional and Executive Risk, Property and Casualty, Specialty and
Reinsurance and Fine Art, Jewelry and Specie.
Shipping Brokerage
In November 2018, we acquired Poten & Partners, a leading ship brokerage, consulting and business intelligence firm specializing in
LNG, tanker and LPG markets. Founded over 80 years ago and with 170 employees worldwide, Poten & Partners provides its clients with
valuable insight into the international oil, gas and shipping markets.
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Energy Brokerage
In March 2019, we acquired Ginga Petroleum, which complements our existing energy brokerage businesses within BGC, GFI, and
Poten. Ginga Petroleum provides a comprehensive range of broking services for physical and derivative energy products including naphtha,
liquefied petroleum gas, fuel oil, biofuels, middle distillates, petrochemicals and gasoline.
Industry Recognition
Our business has consistently won global industry awards and accolades in recognition of its performance and achievements. Recent
examples include:
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Fenics GO was named OTC Trading Platform of the Year by Risk.net and Risk magazine at the Risk Awards 2021
• Capitalab was named OTC Infrastructure Service of the Year by Risk.net and Risk magazine at the Risk Awards 2021
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Fenics GO was named Trading and Execution Solution of the Year at the FOW International Awards 2020
• BGC was named Interdealer Broker of the Year at the Financial News Trading and Technology Awards in 2020
• BGC was named Equity Derivatives Interdealer Broker of the Year at the GlobalCapital Global Derivatives Awards in 2020
• BGC won Best Broker for Currency Options at the FX Markets Best Bank Awards in 2020
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In 2020, GFI was ranked #1 Overall for Precious Metals; #1 in Gold; #1 in Silver; and #1 in France for European Power in the
Energy Risk Commodity Rankings 2020
In 2020, GFI was named #1 Overall Top Bulk Commodities Inter-Dealer Broker; #1 Overall Iron Ore Inter-Dealer Broker; #1 62%
Iron Ore Futures Inter-Dealer Broker; and #1 Coking Coal Options Inter-Dealer Broker by the Singapore Exchange for their SGX
Commodities Awards 2019.
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Customers and Clients
We primarily serve the wholesale financial, energy and insurance markets, with clients including many of the world’s largest banks,
brokerage houses, investment firms, hedge funds, and investment banks. Customers using our branded products and services also include
professional trading firms, futures commission merchants, and other professional market participants and financial institutions. Our market
data products and services are available through many platforms and are available to a wide variety of capital market participants, including
banks, investment banks, brokerage firms, asset managers, hedge funds, investment analysts and financial advisors. We also license our
intellectual property portfolio and offerings in Software Solutions to various financial markets participants. For the year ended December 31,
2020, our top ten customers, collectively, accounted for approximately 27.8% of our total revenue on a consolidated basis, and our largest
customer accounted for approximately 4.4% of our total revenue on a consolidated basis.
Sales and Marketing
Our brokers and salespeople are the primary marketing and sales resources to our customers. Thus, our sales and marketing program is
aimed at enhancing the ability of our brokers to cross-sell effectively in addition to informing our customers about our product and service
offerings. We also employ product teams and business development professionals. We leverage our customer relationships through a variety
of direct marketing and sales initiatives and build and enhance our brand image through marketing and communications campaigns targeted
at a diverse audience, including traders, potential partners and the investor and media communities. We may also market to our existing and
prospective customers through a variety of co-marketing/co-branding initiatives with our partners.
Our brokerage product team is composed of product managers who are each responsible for a specific part of our brokerage business.
The product managers seek to ensure that our brokers, across all regions, have access to technical expertise, support and multiple execution
methods in order to grow and market their business. This approach of combining marketing with our product and service strategy has enabled
us to turn innovative ideas into both deliverable fully electronic and hybrid solutions, such as BGC Trader, our multi-asset hybrid offering to
our customers for voice and electronic execution.
Our team of business development professionals is responsible for growing our global footprint through raising awareness of our
products and services. The business development team markets our products and services to new and existing customers. As part of this
process, they analyze existing levels of business with these entities in order to identify potential areas of growth and also to cross-sell our
multiple offerings.
Our market data, software solutions, and post-trade products and services are promoted to our existing and prospective customers
through a combination of sales, marketing and co-marketing campaigns.
These efforts are supported by a central team of professionals across marketing, design, event planning, public relations, and corporate
communications.
Technology
Pre-Trade Technology. Our financial brokers use a suite of pricing and analytical tools that have been developed both in-house and in
cooperation with specialist software suppliers. The pre-trade software suite combines proprietary market data, pricing and calculation
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libraries, together with those outsourced from external providers. The tools in turn publish to a normalized, global market data distribution
platform, allowing prices and rates to be distributed to our proprietary network, data vendor pages, secure websites and trading applications
as indicative pricing.
Inter-Dealer and Wholesale Trading Technology. We utilize a sophisticated proprietary electronic trading platform to provide
execution and market data services to our customers. The services are available through our proprietary API, FIX and a multi-asset
proprietary trading platform, operating under brands including BGC Trader™, CreditMatch®, Fenics®, GFI ForexMatch®, BGCForex™,
BGCCredit™, BGCRates™, FenicsFX™, FenicsUST™, FenicsDirect™, Fenics GO™, and MidFX. This platform presently supports a wide
and constantly expanding range of products and services, which includes FX options, corporate bonds, credit derivatives, OTC interest rate
derivatives in multiple currencies, US REPO, TIPS, MBS, government bonds, spot FX, NDFs, and other products. Every product on the
platform is supported in either view-only, hybrid/managed or fully electronic mode, and can be transitioned from one mode to the next in
response to market demands. The flexible BGC technology stack is designed to support feature-rich workflows required by the hybrid mode
as well as delivering high throughput and low transaction latency required by the fully-electronic mode. Trades executed by our customers in
any mode are, when applicable, eligible for immediate electronic confirmation through direct straight-through processing (“STP”) links as
well as STP hubs. The BGC trading platform services are operated out of several globally distributed data centers and delivered to customers
over BGC’s global private network, third-party connectivity providers as well as the Internet. BGC’s proprietary graphical user interfaces and
the API/FIX connectivity are deployed at hundreds of major banks and institutions and service thousands of users.
Post-Trade Straight Through Processing Technology. Our platform automates previously paper and telephone-based transaction
processing, confirmation and other functions, substantially improving and reducing the cost of many of our customers’ back offices and
enabling STP. In addition to our own system, confirmation and trade processing is also available through third-party hubs, including
MarkitWIRE, ICElink, Reuters RTNS, and STP in FIX for various banks.
We have electronic connections to most mainstream clearinghouses, including DTCC, CLS Group, Euroclear, Clearstream, Monte
Titoli, LCH.Clearnet, Eurex Clearing, CME Clearing and the Options Clearing Corporation (“OCC”). As more products become centrally
cleared, and as our customers request that we use a particular venue, we expect to expand the number of clearinghouses to which we connect
in the future.
Systems Architecture. Our systems consist of layered components, which provide matching, credit management, market data
distribution, position reporting, customer display and customer integration. The private network currently operates from six concurrent core
data centers (three of which are in the U.K., one each in Trumbull, Connecticut, Weehawken, New Jersey and Secaucus, New Jersey) and
many hub cities throughout the world acting as distribution points for all private network customers. The redundant structure of our system
provides multiple backup paths and re-routing of data transmission in the event of failure.
In addition to our own network system, we also receive and distribute secure trading information from customers using the services of
multiple, major Internet service providers throughout the world. These connections enable us to offer our products and services via the
Internet to our global customers.
Software Development
We devote substantial efforts to the development and improvement of our hybrid and electronic marketplaces and licensed software
products and services. We work with our customers to identify their specific requirements and make modifications to our software, network
distribution systems and technologies that are responsive to those needs. Our efforts focus on internal development, strategic partnering,
acquisitions and licensing.
Our Intellectual Property
We regard our technology and intellectual property rights, including our brands, as a critical part of our business. We hold various
trademarks, trade dress and trade names and rely on a combination of patent, copyright, trademark, service mark and trade secret laws, as
well as contractual restrictions, to establish and protect our intellectual property rights. We own numerous domain names and have registered
numerous trademarks and/or service marks in the United States and foreign countries. Our trademark registrations must be renewed
periodically, and, in most jurisdictions, every 10 years.
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We have adopted a comprehensive intellectual property program to protect our proprietary technology and innovations. We currently
have licenses covering various patents from related parties. We also have agreements to license technology that may be covered by several
pending and/or issued U.S. patent applications relating to various aspects of our electronic trading systems, including both functional and
design aspects. We have filed a number of patent applications to further protect our proprietary technology and innovations and have received
patents for some of those applications. We will continue to file additional patent applications on new inventions, as appropriate,
demonstrating our commitment to technology and innovation.
Our patent portfolio continues to grow and we continue to look for opportunities to license and/or otherwise monetize the patents in
our portfolio.
Credit Risk
For a description of our exposure to credit risk, see “Item 7A — Quantitative and Qualitative Disclosures About Market Risk — Credit
Risk.”
Principal Transaction Risk
For a description of our exposure to principal transaction risk, see “Item 7A — Quantitative and Qualitative Disclosures About Market
Risk — Principal Transaction Risk.”
Market Risk
For a description of our exposure to market risk, see “Item 7A — Quantitative and Qualitative Disclosures About Market Risk —
Market Risk.”
Operational Risk
For a description of our exposure to operational risk, see “Item 7A — Quantitative and Qualitative Disclosures About Market Risk —
Operational Risk.”
Foreign Currency Risk
For a description of our exposure to foreign currency risk, see “Item 7A — Quantitative and Qualitative Disclosures About Market
Risk — Foreign Currency Risk.”
Interest Rate Risk
For a description of our exposure to interest rate risk, see “Item 7A — Quantitative and Qualitative Disclosures About Market Risk
— Interest Rate Risk.”
Disaster Recovery
For a description of our disaster recovery processes, see “Item 7A — Quantitative and Qualitative Disclosures About Market Risk
— Disaster Recovery.”
Competition
We encounter competition in all aspects of our businesses. We compete primarily with other inter-dealer or wholesale financial
brokers, and wholesale insurance brokers for brokers, salespeople, and suitable acquisition candidates. Our existing and potential competitors
are numerous and include other wholesale financial brokerage and inter-dealer brokerage firms, wholesale insurance brokers, multi-dealer
trading companies, financial technology companies, market data and information vendors, securities and futures exchanges, electronic
communications networks, crossing systems, software companies, financial trading consortia, shipping brokers, business-to-business
marketplace infrastructure companies, as well as niche market energy and other Internet-based commodity trading systems.
Inter-Dealer or Wholesale Financial Brokers and Wholesale Insurance Brokers
We primarily compete with two publicly traded, diversified inter-dealer and/or wholesale financial brokers. These are TP ICAP and
Compagnie Financière Tradition (which is majority owned by Viel & Cie) (“Tradition”). Other competitors include a number of smaller,
private firms that tend to specialize in specific product areas or geographies, such as Marex Spectron Group Limited in energy and
commodities, XP Inc. in fixed income and foreign exchange, and Gottex Brokers Holding SA, which is an affiliate of Tradition, in OTC
interest rate derivatives.
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We also compete with global wholesale insurance and reinsurance brokers, including Aon, Marsh & McLennan Companies, Arthur J.
Gallagher & Co., as well as numerous regional and specialist firms.
Demand for wholesale brokerage services is directly affected by the overall level of economic activity, international and domestic
economic and political conditions, broad trends in business and finance, including employment levels, the level and volatility of interest rates,
changes in and uncertainty regarding tax laws and substantial fluctuations in the volume and price levels of securities transactions. Other
significant factors affecting competition in the brokerage industry are the quality and ability of professional personnel, the depth and pricing
efficiency of the markets in which the brokers transact, the strength of the technology used to service and execute on those markets and the
relative prices of products and services offered by the brokers and by competing markets and trading processes.
Business development is another highly competitive component of wholesale financial and insurance brokerage. During the COVID-
19 pandemic, traditional business development efforts were adversely impacted for both us and our competitors. Competition for new and
existing client business remains high, as does developing new ways to execute successful business development efforts in the current
environment.
Market Data and Financial Software Vendors
The majority of our large inter-dealer and wholesale financial broker competitors also sell proprietary market data and information,
which competes with our market data offerings. In addition to direct sales, we resell market data through large market data and information
providers. These companies have established significant presences on the vast majority of trading desks in our industry. Some of these market
data and information providers, such as Bloomberg L.P. and Refinitiv, include in their product mix electronic trading and execution of both
OTC and listed products in addition to their traditional market data offerings. In January 2021, Refinitiv was acquired by the London Stock
Exchange Group, which also sells proprietary market data and information.
Exchanges and Other Trading Platforms
Although our businesses will often use exchanges to execute transactions brokered in both listed and OTC markets, we believe that
exchanges have sought and will seek to migrate products traditionally traded in OTC markets by inter-dealer and/or wholesale financial
brokers to exchanges. However, we believe that when a product goes from OTC to exchange-traded, the underlying or related OTC market
often continues to experience growth in line with the growth of the exchange-traded contract. In addition, ICE operates both regulated
exchanges and OTC execution services, and in the latter it competes directly with inter-dealer and/or wholesale financial brokers in energy,
commodities, and credit products. ICE entered these OTC markets primarily by acquiring independent OTC brokers. We also compete with
CME via its acquisition of NEX. We believe that it is likely ICE, CME, or other exchange operators may seek to compete with us in the
future by acquiring other such brokers, by creating listed products designed to mimic OTC products, or through other means.
In addition to exchanges, other electronic trading platforms which primarily operate in the dealer-to-client markets, including those run
by MarketAxess Holdings Inc. (“MarketAxess”) and Tradeweb Markets Inc. (“Tradeweb”), now compete with us in the inter-dealer markets.
At the same time, we have begun to offer an increasing number of our products and services to the customers of firms like MarketAxess and
Tradeweb. Further, ICE also operates a SEF, as does Tradeweb, and we expect that other exchanges and trading platforms may also seek to
do so.
Banks and Broker-Dealers
Banks and broker-dealers have in the past created and/or funded consortia to compete with exchanges and inter-dealer brokers. For
example, CME’s wholesale businesses for fully electronic trading of U.S. Treasuries and spot foreign exchange both began as dealer-owned
consortia before being acquired by CME’s NEX platform. An example of a current and similar consortium is Tradeweb. Several large banks
continue to hold public equity stakes in Tradeweb. Refinitiv, which was acquired by the London Stock Exchange Group in January 2021, is
Tradeweb’s single largest shareholder. Although Tradeweb operates primarily as a dealer to customer platform, some of its offerings include
a voice and electronic inter-dealer platform and a SEF. Tradeweb’s management has said that it would like to further expand into other inter-
dealer markets, and in February 2021, it announced it had entered into a definitive agreement to acquire Nasdaq’s U.S. fixed income
electronic trading platform, formerly known as eSpeed. In 2013, BGC sold the eSpeed platform to Nasdaq, and subsequently launched a
competing platform, Fenics UST.
In addition, certain investment management firms that traditionally deal with banks and broker-dealers have expressed a desire to have
direct access to certain parts of the wholesale financial markets via firms such as ours. We believe that over time, interdealer-brokers will
therefore gain a small percentage of the sales and trading market currently dominated by banks and broker-dealers. Since their collective
revenues are many times those of the global inter-dealer market, we believe that gaining even a small share of banks and broker-dealers’
revenues could lead to a meaningful increase in our revenues. Additionally, wholesale financial brokers have aimed to grow their agency
brokerage businesses, which typically serve a broader client set, including banks, broker-dealers, and institutional clients. Recent actions
taken by wholesale financial brokers to expand their agency businesses include our acquisition of Algomi in March 2020 and TP ICAP’s
announced acquisition of Liquidnet in October 2020.
Overall, we believe that we may also face future competition from market data and technology companies and some securities
brokerage firms, some of which are currently our customers, as well as from any future strategic alliances, joint ventures or other partnerships
created by one or more of our potential or existing competitors.
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Seasonality
Traditionally, the financial markets around the world generally experience lower volume during the late summer and at the end of the
year due to a slowdown in the business environment around holiday seasons. Therefore, our revenues tend to be strongest in the first quarter
and lowest in the fourth quarter. For the year 2020, we earned approximately 29.3% of our revenues in the first quarter, while in 2019 we
earned 25.9% of such revenues in the first quarter.
Partnership Overview
Many of our key brokers, salespeople and other front office professionals have a substantial amount of their own capital invested in our
business, aligning their interests with our stockholders. Limited partnership interests in BGC Holdings and Newmark Holdings (received in
connection with the Spin-Off) consist of: (i) “founding/working partner units” held by limited partners who are employees; (ii) “limited
partnership units,” which consist of a variety of units that are generally held by employees such as REUs, RPUs, PSUs, PSIs, PSEs, U.K.
LPUs, APSUs, APSIs, APSEs, AREUs, ARPUs and NPSUs; (iii) “Cantor units” which are the exchangeable limited partnership interests
held by Cantor entities; and (iv) Preferred Units, which are working partner units that may be awarded to holders of, or contemporaneous
with, the grant of certain limited partnership units. For further details, see “Our Organizational Structure.” NPSUs are partnership units that
are not entitled to participate in partnership distributions, not allocated any items of profit or loss and may not be exchangeable into shares of
our common stock. On terms and conditions determined by the General Partner of the Partnership in its sole discretion, NPSUs are expected
to be replaced by a grant of limited partnership units, which may be set forth in a written schedule and subject to additional terms and
conditions, provided that, in all circumstances such grant of limited partnership units shall be contingent upon our, including our affiliates,
earning, in aggregate, at least $5 million in gross revenues in the calendar quarter in which the applicable award of limited partnership units is
to be granted. In addition, we have N Units which are non-distributing partnership units that may not be allocated any item of profit or loss
and may not be made exchangeable into shares of our Class A common stock. Subject to the approval of the Compensation Committee or its
designee, the N Units are expected to be converted into the underlying unit type (i.e., an NREU will be converted into an REU) and then
participate in Partnership distributions, subject to terms and conditions determined by the General Partner of the Partnership in its sole
discretion, including that the recipient continue to provide substantial services to us and comply with his or her partnership obligations.
We believe that our emphasis on equity-based compensation promotes recruitment, motivation of our brokers and employees and
alignment of interest with shareholders. Virtually all of our executives and front-office employees have equity or partnership stakes in the
Company and its subsidiaries and generally receive grants of deferred equity or LPUs as part of their compensation. A significant percentage
of BGC’s fully diluted shares are owned by its executives, partners and employees. While BGC Holdings limited partnership interests
generally entitle our partners to participate in distributions of income from the operations of our business, upon leaving BGC Holdings (or
upon any other redemption or purchase of such limited partnership interests as described below), any such partners are only entitled to
receive over time, and provided he or she does not violate certain partner obligations, an amount for his or her BGC Holdings limited
partnership interests that reflects such partner’s capital account or compensatory grant awards, excluding any goodwill or going concern
value of our business unless Cantor, in the case of the founding partners, and we, as the general partner of BGC Holdings, otherwise
determine. We may effect redemptions of BGC Holdings LPUs and FPUs, and concurrently grant shares of our Class A common stock, or
may grant our partners the right to exchange their BGC Holdings limited partnership interests for shares of our Class A common stock (if, in
the case of founding partners, Cantor so determines and, in the case of working partners and limited partnership unit holders, the BGC
Holdings general partner, with Cantor’s consent, determines otherwise) and thereby realize any higher value associated with our Class A
common stock. Similar provisions with respect to Newmark Holdings limited partnership interests are contained in the Newmark Holdings
limited partnership agreement. We believe that, having invested in us, partners feel a sense of responsibility for the health and performance of
our business and have a strong incentive to maximize our revenues and profitability.
Relationship Between BGC Partners and Cantor
See “Risk Factors—Risks Related to our Relationship with Cantor and its Affiliates.”
Debt
For information about our credit agreements and senior notes, see “Item 7— Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and Capital Resources.”
Newmark Spin-Off
On November 30, 2018, we completed the Spin-Off of the shares of Newmark Class A and Class B common stock held by us to our
stockholders as of the close of business on the Record Date through a special pro-rata stock dividend pursuant to which shares of Newmark
Class A common stock held by BGC were distributed to holders of BGC Class A common stock and shares of Newmark Class B common
stock held by BGC were distributed to holders of BGC Class B common stock (which holders of BGC Class B common stock were Cantor
and CFGM). Following the Spin-Off, BGC no longer holds any interest in Newmark.
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For more information about the Newmark Spin-Off, see Note 1—“Organization and Basis of Presentation” to our consolidated
financial statements in Part II, Item 8 of this Annual Report on Form 10-K and “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Overview and Business Environment.”
Regulation
U.S. Regulation
The financial services industry in the United States is subject to extensive regulation under both federal and state laws. As registered
broker-dealers, introducing brokers and FCMs, and other types of regulated entities as described below, certain of our subsidiaries are subject
to laws and regulations which cover all aspects of financial services, including sales methods, trade practices, use and safekeeping of
customers’ funds and securities, minimum capital requirements, recordkeeping, business practices, securities lending and financing of
securities purchases and the conduct of associated persons. We and our subsidiaries also are subject to the various anti-fraud provisions of the
Securities Act, the Exchange Act, the Commodity Exchange Act, certain state securities laws and the rules and regulations thereunder. We
also may be subject to vicarious and controlling person liability for the activities of our subsidiaries and our officers, employees and affiliated
persons.
The SEC is the federal agency primarily responsible for the administration of federal securities laws, including adopting rules and
regulations applicable to broker-dealers (other than government securities broker-dealers) and enforcing both its rules regarding broker-
dealers and the Treasury’s rules regarding government securities broker-dealers. In addition, we operate a number of platforms that are
governed pursuant to SEC Regulation ATS. Broker-dealers are also subject to regulation by state securities administrators in those states in
which they conduct business or have registered to do business. In addition, Treasury rules relating to trading government securities apply to
such activities when engaged in by broker-dealers. The CFTC is the federal agency primarily responsible for the administration of federal
commodities future laws and other acts, including the adoption of rules applicable to FCMs, Designated Contract Markets (“DCM”) and
SEFs such as BGC Derivative Markets, L.P. (“BGC Derivative Markets”) and GFI Swaps Exchange LLC.
Much of the regulation of broker-dealers’ operations in the United States has been delegated to self-regulatory organizations. These
self-regulatory organizations adopt rules (which are subject to approval by the SEC) that govern the operations of broker-dealers and
government securities broker-dealers and conduct periodic inspections and examinations of their operations. In the case of our U.S. broker-
dealer subsidiaries, the principal self-regulatory organization is FINRA. FINRA was formed from the consolidation of the NASD’s member
regulation operations and the regulatory arm of the NYSE Group to act as the self-regulatory organization for all broker-dealers doing
business within the United States. Accordingly, our U.S. broker-dealer subsidiaries are subject to both scheduled and unscheduled
examinations by the SEC and FINRA. In our futures-related activities, our subsidiaries are also subject to the rules of the CFTC, futures
exchanges of which they are members and the NFA, a futures self-regulatory organization. See the section entitled “2019 Settlement” below
for a description of the September 2019 settlement between two of our subsidiaries and the CFTC and NYAG.
The changing regulatory environment, new laws that may be passed by Congress, and rules that may be promulgated by the SEC, the
Treasury, the Federal Reserve Bank of New York, the CFTC, the NFA, FINRA and other self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules, if adopted, may directly affect our operations and profitability and those of our
competitors and customers and of the securities markets in which we participate in a way that could adversely affect our businesses.
The SEC, self-regulatory organizations and state securities administrators conduct informal and formal investigations of possible
improprieties or illegal action by broker-dealers and their “associated persons,” which could be followed by the institution of administrative,
civil and/or criminal proceedings against broker-dealers and/or “associated persons.” Among the sanctions that may result if administrative,
civil or criminal proceedings were ever instituted against us or our “associated persons” are injunctions, censure, fines, penalties, the issuance
of cease-and-desist orders or suspension or expulsion from the industry and, in rare instances, even imprisonment. The principal purpose of
regulating and disciplining broker-dealers is to protect customers and the securities markets, rather than to protect broker-dealers or their
creditors or equity holders. From time to time, our “associated persons” have been and are subject to routine investigations, none of which to
date have had a material adverse effect on our businesses, financial condition, results of operations or prospects.
In light of recent events in the U.S. and global financial markets, regulators and legislators in the U.S. and EU continue to craft new
laws and regulations for the global OTC derivatives markets. The Dodd-Frank Act mandates or encourages several reforms regarding
derivatives, including new regulations for swaps markets creating impartiality considerations, additional pre- and post-trade transparency
requirements, and heightened collateral or capital standards, as well as recommendations for the obligatory use of central clearing for most
standardized derivatives. The law also requires that standardized OTC derivatives be traded in an open and non-exclusionary manner on a
DCM or a SEF. The SEC is still in the process of finalizing rules for the implementation of many of these requirements, however the SEC
has not indicated when they may release their rule set surrounding security-based SEFs. The actual implementation of such rules may be
phased in over a longer period.
As these rules require authorized execution facilities to maintain robust front-end and back-office IT capabilities and to make large and
ongoing technology investments, and because these execution facilities may be supported by a variety voice and auction-based execution
methodologies, we expect our hybrid and fully electronic trade and execution capability to perform strongly in such an environment.
Similarly, while the Volcker Rule does not apply directly to us, the Volcker Rule may have a material impact on many of the banking
and other institutions with which we do business or compete. There may be continued uncertainty regarding the Volcker Rule, its impact on
various affected businesses, how those businesses will respond to it, and the effect that it will have on the markets in which we do business.
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BGC Derivative Markets and GFI Swaps Exchange, our subsidiaries, operate as SEFs . 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 were finalized with implementation periods in 2016 and beyond. We also
own ELX, which became a dormant contract market on July 1, 2017. As these rules require authorized execution facilities to maintain robust
front-end and back-office IT capabilities and to make large and ongoing technology investments, and because these execution facilities may
be supported by a variety of voice and auction-based execution methodologies, we expect our Hybrid and Fully Electronic trading capability
to perform strongly in such an environment.
On June 25, 2020, the CFTC approved a final rule prohibiting post-trade name give-up for swaps executed, prearranged or
prenegotiated anonymously on or pursuant to the rules of a SEF and intended to be cleared. The rule provides exemptions for package
transactions that include a component transaction that is not a swap that is intended to be cleared. The rule went into effect on November 1,
2020 for swaps subject to the trade execution requirement under the Commodity Exchange Act Section 2(h)(8) and July 5, 2021 for swaps
not subject to the trade execution requirement, but intended to be cleared.
In addition, several state laws that have recently come to into effect, and may come into effect in the future, have created and will
create new compliance obligations in related to personal data.
Democratic Party control of both houses of Congress and the U.S. Presidency could result in new regulations. While we continue to
have a compliance framework in place to comply with both existing and proposed rules and regulations, it is possible that the existing
regulatory framework may be amended, which amendments could have a positive or negative impact on our businesses, financial condition,
results of operations and prospects.
Recent Settlements
In September 2019, two of the Company’s subsidiaries, BGCF and GFI Group Inc., settled investigations conducted jointly by the
CFTC and the NYAG. The CFTC and NYAG alleged that, in 2014 and 2015, certain emerging markets foreign exchange options (EFX
options) brokers in the U.S. misrepresented that certain prices posted to their electronic platform were immediately executable when in fact
they were not and that such brokers had communicated that transactions had been matched when they had not. On October 9, 2019, the
Company paid an aggregate of $25.0 million in connection with the settlements and agreed to a monitor for two years to assess regulatory
compliance. The NYAG settlements include a non-prosecution agreement, and there was no criminal penalty from either agency.
In September 2020, the SEC announced a settlement with BGC regarding alleged negligent disclosure violations related to one of
BGC's non-GAAP financial measures for periods beginning with the first quarter of 2015 through the first quarter of 2016. All of the relevant
disclosures related to those periods and pre-dated the SEC staff’s May 2016 detailed compliance and disclosure guidance with respect to non-
GAAP presentations. BGC revised its non-GAAP presentation beginning with the second quarter of 2016 as a result of the SEC’s guidance,
and the SEC has made no allegations with regard to any periods following the first quarter of 2016. In connection with the SEC settlement,
BGC was ordered to cease and desist from any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Section 13(a) of the
Exchange Act and Rule 13a-11 thereunder, and Rule 100(b) of Regulation G, and agreed to pay a civil penalty of $1.4 million without
admitting or denying the SEC’s allegations.
U.K. and European Regulation
The FCA is the relevant statutory regulator for the United Kingdom financial services industry. The FCA’s objectives are to protect
customers and financial markets, protect and enhance the integrity of the United Kingdom financial system and promote competition between
financial services providers. It has broad rule-making, investigative and enforcement powers derived from the Financial Services and Markets
Act 2000 and subsequent and derivative legislation and regulations. The FCA’s recent focus has been on liquidity risk management and
separation of business and prudential regulation. Currently, we have subsidiaries and branches regulated by the FCA (some include BGC
Brokers L.P., the U.K. branch of Aurel BGC, GFI Securities Ltd., GFI Brokers Limited and Sunrise Brokers LLP).
From time to time, we have been and are subject to periodic examinations, inspections and investigations, including periodic risk
assessment and related reviews of our U.K. group. As a result of such reviews, we may be required to include or enhance certain regulatory
structures and frameworks in our operating procedures, systems and controls. When acquiring control of regulated entities, we may be
required to obtain the consent of their applicable regulator.
Increasingly, the FCA has developed a practice of requiring senior officers of regulated firms to provide individual attestations or
undertakings as to the status of a firm’s control environment, compliance with specific rules and regulations, or the completion of required
tasks. Officers of BGC Brokers L.P. and GFI Brokers Limited have given such attestations or undertakings in the past and may do so again in
the future. Similarly, the FCA can seek a voluntary requirement notice, which is a voluntary undertaking on behalf of a firm that is made
publicly available on the FCA’s website. The Senior Managers Certification Regime (“SMCR”) came into effect in the U.K. on December 9,
2019 for FCA solo-regulated firms. Personal accountability requirements will fall on senior managers, and a wider population of U.K. staff
will be subject to certification requirements. SMCR will likely increase the cost of compliance, and will potentially increase financial
penalties for non-compliance.
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Recent European Regulatory Developments
The EMIR on OTC derivatives, central counterparties and trade repositories was adopted in July 2012. EMIR fulfills several of the
EU’s G20 commitments to reform OTC derivatives markets. The reforms are designed to reduce systemic risk and bring more transparency
to both OTC and listed derivatives markets.
Along with the implementation of EMIR reporting requirements, the Regulation on Wholesale Energy Markets Integrity and
Transparency (“REMIT”) Implementation Acts became effective on January 7, 2015. The REMIT Implementing Acts developed by the
European Commission define the details of reporting under REMIT, drawing up the list of reportable contracts and derivatives; defining
details, timing and form of reporting, and establishing harmonized rules to report that information to the Agency for the Cooperation of
Energy Regulators (“ACER”). They enable ACER to collect information in relation to wholesale energy market transactions and
fundamentals through the Agency’s REMIT Information System (ARIS), to analyze this data to detect market abuse and to report suspicious
events to the National Competent Authorities, which are responsible for investigating these matters further, and if required, imposing
sanctions. Market participants and third parties reporting on their behalf have had to: (i) report transactions executed at organized market
places and fundamental data from the central information transparency platforms; and (ii) report transactions in the remaining wholesale
energy contracts (OTC standard and non-standard supply contracts, transportation contracts) and additional fundamental data.
To achieve a high level of harmonization and convergence in regular supervisory reporting requirements, the Committee of European
Banking Supervisors issued guidelines on prudential reporting with the aim of developing a supervisory reporting framework based on
common formats, known as COREP. COREP has become part of European Banking Authorities’ implementing technical standards on
reporting under Basel III. Basel III (or the Third Basel Accord) is a global regulatory standard on bank capital adequacy, stress testing and
market liquidity risk introduced by bank regulators in most, if not all, of the world’s major economies. Basel III is designed to strengthen
bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. The ongoing adoption of these
rules could restrict the ability of our large bank and broker-dealer customers to operate proprietary trading businesses and to maintain current
capital market exposures under the present structure of their balance sheets, and will cause these entities to need to raise additional capital in
order to stay active in our marketplaces. Meanwhile, global “Basel IV” standards are expected be adopted in the years to come.
Much of our global derivatives volumes continue to be executed by non-U.S. based clients outside the U.S. and subject to local
prudential regulations. As such, we will continue to operate a number of European regulated venues in accordance with EU or U.K.
legislation and licensed by the FCA or EU-based national supervisors. These venues are also operated for non-derivative instruments for
these clients. MiFID II was published by the European Securities and Markets Authority in September 2015, and implemented in January
2018 and introduced important infrastructural changes.
MiFID II requires a significant part of the market in these instruments to trade on trading venues subject to transparency regimes, not
only in pre- and post-trade prices, but also in fee structures and access. In addition, it has impacted a number of key areas, including corporate
governance, transaction reporting, pre- and post-trade transparency, technology synchronization, best execution and investor protection.
MiFID II is intended to help improve the functioning of the EU single market by achieving a greater consistency of regulatory
standards. By design, therefore, it is intended that EU member states should have very similar regulatory regimes in relation to the matters
addressed to MiFID. MiFID II has also introduced a new regulated execution venue category known as an OTF that captures much of the
Voice-and Hybrid-oriented trading in EU. Much of our existing EU derivatives and fixed income execution business now take place on
OTFs. Further to its decision to leave the EU, the U.K. has implemented MIFID II’s requirements into its own domestic legislation. Brexit
may impact future market structures and MiFID II rulemaking and implementation due to potential changes in mutual passporting between
the U.K. and EU member states. See “— Brexit” below
In addition, the GDPR came into effect in the EU on May 25, 2018 and creates new compliance obligations in relation to personal data.
The GDPR may affect our practices, and will increase financial penalties for non-compliance significantly.
In 2019, a new European Commission took office which may over the course of its five-year mandate or introduce new legislative
proposals for the Financial Services Sector and change the Brexit landscape for EU and UK financial firms alike. We are unable to predict
how any of these new laws and proposed rules and regulations in the U.S. or the U.K. will be implemented or in what form, or whether any
additional or similar changes to statutes or rules and regulations, including the interpretation or implementation thereof or a relaxation or
other amendment of existing rules and regulations, will occur in the future. Any such action could affect us in substantial and unpredictable
ways, including important changes in market infrastructure, increased reporting costs and a potential rearrangement in the sources of
available revenue in a more transparent market. Certain enhanced regulations could subject us to the risk of fines, sanctions, enhanced
oversight, increased financial and capital requirements and additional restrictions or limitations on our ability to conduct or grow our
businesses, and could otherwise have an adverse effect on our businesses, financial condition, results of operations and prospects. We believe
that uncertainty and potential delays around the final form of such new rules and regulations may negatively impact our customers and
trading volumes in certain markets in which we transact, although a relaxation of existing rules and requirements could potentially have a
positive impact in certain markets. Increased capital requirements may also diminish transaction velocity.
We believe that it remains premature to know conclusively the specific aspects of the U.S. and EU proposals that may directly affect
our businesses, as some proposals have not yet been finalized and others which have been proposed remain subject to supervisory debate.
While we generally believe the net impact of the rules and regulations may be positive for our businesses, it is possible that unintended
consequences of the rules and regulations may materially adversely affect us in ways yet to be determined.
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Brexit
On June 23, 2016, the U.K. held a referendum regarding continued membership of the EU. The exit from the EU is commonly referred
to as Brexit. On January 1, 2021, the UK formally left the EU and UK-EU trade became subject to a new agreement that was concluded in
December of 2020. Financial services falls outside of the scope of this trade agreement. Instead, the relationship will largely be determined
by a series of “equivalence decisions,” each of which would grant mutual market access for a limited subset of financial services where either
party finds the other party has a regulatory regime that achieves similar outcomes to its own. It is currently unknown if or when equivalence
decisions will be taken.
In light of ongoing uncertainties, market participants are still adjusting. The exact impact of Brexit on the U.K.-EU flow of financial
services therefore remains unknown. This same uncertainty applies to the consequences for the economies of the U.K. and the EU member
states as a result of the U.K.’s withdrawal from the EU.
We have implemented plans to ensure continuity of service in Europe and continue to have regulated entities in place in many of the
major European markets. As part of our Brexit strategy, ownership of BGC Madrid, Copenhagen and Frankfurt & GFI Paris, Madrid and
Dublin branches was transferred to Aurel BGC SAS (a French based operation and therefore based in the EU) in July 2020, BGC’s Insurance
division (Corant) has established new brokerage platforms in Cyprus and France and we have been generally increasing our footprint in the
EU.
Regardless of these and other mitigating measures, our European headquarters and largest operations are in London, and market access
risks and uncertainties have had and could continue to have a material adverse effect on our customers, counterparties, businesses, prospects,
financial condition and results of operations. Furthermore, in the future the U.K. and EU’s regulation may diverge, which could disrupt and
increase the costs of our operations, and result in a loss of existing levels of cross-border market access.
Insurance Regulation
Our insurance business is regulated by various national regulators, such as the FCA in the U.K., the Monetary Authority of Singapore
in Singapore, the Dubai Financial Supervisory Authority in Dubai and the Bermuda Monetary Authority in Bermuda. Our insurance
operations adhere to the statutory regulatory requirements but there are occasions where regulators will conduct periodic thematic reviews
into specific practices and procedures within a chosen market. We fully comply with these reviews, however we may become the subject of
these reviews at any point, often with little or no notice.
Other Regulation
Our subsidiaries that have foreign operations are subject to regulation by the relevant regulatory authorities and self-regulatory
organizations in the countries in which they do business. The following table sets forth certain jurisdictions, other than the U.S., in which we
do business and the applicable regulatory authority or authorities of each such jurisdiction:
Jurisdiction
Argentina
Australia
Bahrain
Belgium
Bermuda
Brazil
Regulatory Authorities/Self-Regulatory
Organizations
Comisión Nacional de Valores
Australian Securities and Investments Commission and Australian Securities Exchange
The Central Bank of Bahrain
National Bank of Belgium, L’Autorité des services et marchés financiers
Bermuda Monetary Authority
Brazilian Securities and Exchange Commission, the Central Bank of Brazil, BM&F BOVESPA
and Superintendencia de Seguors Privados
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Jurisdiction
Canada
Cayman
Chile
China
Columbia
Cyprus
Denmark
Dubai
France
Germany
Guernsey
Hong Kong
Ireland
Japan
Jersey
Mexico
Peru
Philippines
Russia
Singapore
Ontario Securities Commission, Autorite des Marches Financiers (Quebec), Investment
Industry Regulatory Organization of Canada (IIROC)
Regulatory Authorities/Self-Regulatory
Organizations
Cayman Islands Monetary Authority
Superintendencia de Valores y Seguros
China Banking Regulatory Commission, State Administration of Foreign Exchange and China
Insurance Regulatory Commission
Superintendencia Financiera de Columbia
Superintendent of Insurance
Finanstilsynet
Dubai Financial Supervisory Authority
ACPR (L’Autorité de Contrôle Prudentiel et de Résolution), AMF (Autorité des Marchés
Financiers)
Bundesanstalt für Finanzdienstleistungsaufsicht (BAFIN)
Guernesey Financial Services Commission
Hong Kong Securities and Futures Commission, The Hong Kong Monetary Authority and
Professional Insurance Brokers Association
Central Bank of Ireland
Japanese Financial Services Agency, Japan Securities Dealers Association and the Securities
and Exchange Surveillance Commission
Jersey Financial Services Commission
Banking and Securities National Commission, Comision Nacional Bancaria y de Valores
(CNBV)
Ministerio de Economica y Finanzas
Securities and Exchange Commission
Federal Service for Financial Markets
Monetary Authority of Singapore
South Africa
Johannesburg Stock Exchange
South Korea
Ministry of Strategy and Finance, The Bank of Korea, The Financial Services Commission and
Spain
Switzerland
Turkey
The Financial Supervisory Service
Comision Nacional del Mercado de Valores (CNMV)
Financial Markets Supervisory Authority (FINMA), Swiss Federal Banking Commission
Capital Markets Board of Turkey, The Financial Crimes Investigation Board of Turkey, the
Undersecretariat of the Turkish Treasury and the Insurance Regulation and Supervision
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Jurisdiction
Authority
United Kingdom
Financial Conduct Authority
Regulatory Authorities/Self-Regulatory
Organizations
Capital Requirements
U.S.
Every U.S.-registered broker-dealer is subject to the Uniform Net Capital Requirements. FCMs, such as our subsidiary, Mint Brokers
(“Mint”), are also subject to CFTC capital requirements. These requirements are designed to ensure financial soundness and liquidity by
prohibiting a broker or dealer from engaging in business at a time when it does not satisfy minimum net capital requirements.
In the United States, net capital is essentially defined as net worth (assets minus liabilities), plus qualifying subordinated borrowings
and less certain mandatory deductions that result from excluding assets that are not readily convertible into cash and from conservatively
valuing certain other assets, such as a firm’s positions in securities. Among these deductions are adjustments, commonly referred to as
“haircuts,” to the market value of securities positions to reflect the market risk of such positions prior to their liquidation or disposition. The
Uniform Net Capital Requirements also impose a minimum ratio of debt to equity, which may include qualified subordinated borrowings.
Regulations have been adopted by the SEC that prohibit the withdrawal of equity capital of a broker-dealer, restrict the ability of a
broker-dealer to distribute or engage in any transaction with a parent company or an affiliate that results in a reduction of equity capital or to
provide an unsecured loan or advance against equity capital for the direct or indirect benefit of certain persons related to the broker-dealer
(including partners and affiliates) if the broker-dealer’s net capital is, or would be as a result of such withdrawal, distribution, reductions, loan
or advance, below specified thresholds of excess net capital. In addition, the SEC’s regulations require certain notifications to be provided in
advance of such withdrawals, distributions, reductions, loans and advances that exceed, in the aggregate, 30% of excess net capital within any
30-day period. The SEC has the authority to restrict, for up to 20 business days, such withdrawal, distribution or reduction of capital if the
SEC concludes that it may be detrimental to the financial integrity of the broker-dealer or may expose its customers or creditors to loss.
Notice is required following any such withdrawal, distribution, reduction, loan or advance that exceeds, in the aggregate, 20% of excess net
capital within any 30 day period. The SEC’s regulations limiting withdrawals of excess net capital do not preclude the payment to employees
of “reasonable compensation.”
Five of our subsidiaries, BGCF, GFI Securities LLC, Fenics Execution, LLC, Sunrise Brokers LLC and Mint, are registered with the
SEC and are subject to the Uniform Net Capital Requirements. As a FCM, Mint is also subject to CFTC minimum capital requirements. In
December of 2018, BGCF submitted an application with the CFTC to withdraw its FCM license which was approved. BGCF now conducts
its business as an Introducing Broker registered with the NFA. BGCF is also a member of the FICC, which imposes capital requirements on
its members. We also hold a 49% limited partnership interest in Aqua, a U.S. registered broker-dealer and ATS. In addition, our 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. Compliance with the Uniform Net Capital
Requirements may limit the extent and nature of our operations requiring the use of our registered broker-dealer subsidiaries’ capital, and
could also restrict or preclude our ability to withdraw capital from our broker-dealer subsidiaries or SEFs.
Non-U.S.
Our international operations are also subject to capital requirements in their local jurisdictions. Besso Limited, BGC Brokers L.P.,
BGC European Holdings, L.P, Ed Brokering LLP, GFI Brokers Limited, GFI Securities Limited, Piiq Risk Partners Limited and Sunrise
Brokers LLP, which are based in the U.K., are currently subject to capital requirements established by the FCA. The capital requirements of
our French entities (and its EU branches) are predominantly set by ACPR and AMF. U.K. and EU authorities apply stringent provisions with
respect to capital applicable to the operation of these brokerage firms, which vary depending upon the nature and extent of their activities. EU
policymakers have introduced a new capital regime applicable to EU Investment Firms with a phased implementation beginning in June
2021. The U.K. has introduced a regime that, while applying different rules and methods, is largely similar in its objectives. This regime will
enter into force beginning in January 2022, with a similarly phased implementation.
In addition, the majority of our other foreign subsidiaries are subject to similar regulation by the relevant authorities in the countries in
which they do business. Additionally, certain other of our foreign subsidiaries are required to maintain non-U.S. net capital requirements. For
example, in Hong Kong, BGC Securities (Hong Kong), LLC, GFI (HK) Securities LLC and Sunrise Brokers (Hong Kong) Limited are
regulated by the Securities and Futures Commission. BGC Capital Markets (Hong Kong) Limited and GFI (HK) Brokers Ltd, are regulated
by The Hong Kong Monetary Authority. All are subject to Hong Kong net capital requirements. In France, Aurel BGC and BGC France
Holdings; in Australia, BGC Partners (Australia) Pty Limited, BGC (Securities) Pty Limited and GFI Australia Pty Ltd.; in Japan, BGC
Shoken Kaisha Limited’s Tokyo branch and BGC Capital Markets Japan LLC’s Tokyo Branch; in Singapore, BGC Partners (Singapore)
Limited, GFI Group Pte Ltd and Ginga Global Market Pte Ltd; in South Korea, BGC Capital Markets & Foreign Exchange Broker (Korea)
Limited and GFI Korea Money Brokerage Limited; and in Turkey, BGC Partners Menkul Degerler AS, all have net capital requirements
imposed upon them by local regulators. In addition, the LCH (LIFFE/LME) clearing organization, of which BGC Brokers L.P. is a member,
also imposes minimum capital requirements. In Latin America, BGC Liquidez Distribuidora De Titulos E Valores Mobiliarios Ltda. (Brazil)
has net capital requirements imposed upon it by local regulators.
27
We had net assets in our regulated subsidiaries of $676.3 million and $561.9 million for the years ended December 31, 2020 and 2019,
respectively.
Human Capital Management
Human Capital Resources
As of December 31, 2020, we employed approximately 5,000 employees in 28 countries spread across five continents. Within this
total, 98% of our employee base was comprised of full-time employees. Brokers, salespeople, managers and other front-office employees
comprise approximately 3,600 employees, representing 72% of the total workforce Approximately 22% of our brokers, salespeople,
managers and other front-office employees were based in the Americas, and approximately 57% were based in Europe, the Middle East and
Africa, with the remaining approximately 21% based in the Asia-Pacific region. Various of our employees also work for Cantor and its
affiliates and provide services to us pursuant to the Administrative Services Agreement, and therefore devote only a portion of their time to
our business. Generally, our employees are not subject to any collective bargaining agreements, except for certain of our employees based in
our European offices that are covered by the national, industry-wide collective bargaining agreements relevant to the countries in which they
work.
We have invested significantly through acquisitions, and the hiring of new brokers, salespeople, managers and other front-office
personnel. The business climate for these acquisitions and recruitment has been competitive, and it is expected that these conditions will
persist for the foreseeable future. We have been able to attract businesses and brokers, salespeople, managers and other front-office personnel
to our platform as we believe they recognize that we have the scale, technology, experience and expertise to succeed.
BGC is an organization built on strong values, employee engagement and ownership. At our core, we are committed to our employees
by providing an opportunity to participate in our success. By cultivating a dynamic mix of people and ideas, we enrich the performance of
our businesses, the experience of our increasingly diverse employee base, and the dynamism of our communities.
Human Capital Measures and Objectives
In operating our businesses, we focus on certain human capital measures and objectives that are key drivers of our revenues and
margins. We continually work to expand our trading across more asset classes and geographies and to grow our Fully Electronic business and
seek to manage our human capital resources to maximize our profitability in the face of shifting demands.
Our key human capital measures and objectives include front-office employee headcount (described above) and average revenue per
front-office employee. With respect to this area, we have made significant investments in our insurance brokerage business (Corant),
including meaningful increases in front-office employees. Our average revenue per front-office employee has historically declined year-over-
year for the period immediately following significant headcount increases, and the additional brokers and salespeople generally achieve
significantly higher productivity levels in their second or third year with the Company. Further, because revenue per broker is not a widely
used or relevant statistic for the insurance brokerage industry, we do not commonly provide revenue statistics with respect to front-office
staff for our insurance brokerage business. Excluding our insurance brokerage business, as of December 31, 2020, our front-office headcount
was 2,297 brokers, salespeople, managers and other front-office personnel, down 10.7% from 2,573 a year ago. Compared to the prior year
period, average revenue per front-office employee for the year ended December 31, 2020, increased by 1.9% to approximately $750
thousand. On a stand-alone basis, our total insurance brokerage headcount increased by 16.4% to 900 from 773 a year ago.
We invest heavily in developing our technology and new products and services in order to drive increased front-office productivity and
generate higher margins, in particular with respect to our Fenics, insurance brokerage and other higher-margin businesses. For example, in
our Fenics businesses, we aim to convert Voice and Hybrid trading to Fully Electronic trading in order to improve our margins. This is
largely because automated and electronic trading efficiency allows the same number of employees to manage a greater volume of trades
resulting in a decrease in the marginal cost of trading. Our Fully Electronic business has generally overcome challenges associated with
remote working during the COVID-19 pandemic and productivity has remained high with revenue growth of 14.1% for the year ended
December 31, 2020 compared to the prior year. From time to time, we also engage in cost-savings initiatives and restructurings in order to
improve our margins.
Performance-Based and Highly Retentive Compensation Structure
Virtually all of our executives and front-office employees have equity or partnership stakes in the Company and its subsidiaries and
generally receive grants of deferred equity or LPUs as part of their compensation. A significant percentage of BGC’s fully diluted shares are
owned by its executives, partners and employees.
We issue LPUs as well as other forms of equity-based compensation, including grants of exchangeability into shares of Class A
common stock and grants of shares of restricted stock, to provide liquidity to our employees, to align the interests of our employees and
management with those of common stockholders, to help motivate and retain key employees, and to encourage a collaborative culture that
drives cross-selling and revenue growth. These LPUs, which may be redeemed at any time for zero, and shares of restricted stock, which are
subject to forfeiture if the non-compete, confidentiality or non-solicit provisions of the BGC Holdings limited partnership agreement are
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violated, are also extremely retentive. In addition, we pay amounts due to a partner upon termination of service over a number of years in
order to ensure compliance with partner obligations.
We also rely heavily on various agreements we enter into with certain of our employees and partners whereby these individuals receive
loans which may be either wholly or in part repaid from the distribution earnings that the individual receives on some or all of their LPUs or
may be forgiven over a period of time. These loans provide incentives and promote retention.
Human Capital and Social Policies and Practices
We are committed to our people, stakeholders and to the community as a whole. We are investing in the long-term development and
engagement of our employees by delivering training and development programs and a culture where our people can thrive. We are committed
to equal opportunity, diversity and other policies and practices. And, we have a passionate commitment to community service and charity.
We also take seriously the health, safety and welfare of our employees, clients, vendors and the broader communities in which we operate
and are taking extraordinary measures in light of the current COVID-19 pandemic
Environmental, Social and Governance (ESG) / Sustainability Information
To learn more about policies and practices and our continuing efforts related to human capital, as well as environmental, social and
governance matters, please refer to the ESG / sustainability section of our website at www.bgcpartners.com/esg for further information. You
will also find our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, the charters of the committees of our Board
of Directors, our Hedging Policy, information about our charitable initiatives and other sustainability and ESG policies and practices on our
website and in our annual proxy statement. The information contained on, or that may be accessed through, our website, is not part of, and
not incorporated into, this Annual Report on Form 10-K.
Legal Proceedings
See Note 20—“Commitments, Contingencies and Guarantees” to our consolidated financial statements in Part II, Item 8 of this Annual
Report on Form 10-K and the section under the heading “Derivative Suit” included in Part I, Item 7 of this Annual Report on Form 10-K,
Management’s Discussion and Analysis of Financial Condition and Results of Operations for a description of our legal proceedings.
OUR ORGANIZATIONAL STRUCTURE
Stock Ownership
As of December 31, 2020, there were 323,017,960 shares of BGC Class A common stock outstanding. On June 21, 2017, Cantor
pledged 10,000,000 shares of BGC Class A common stock in connection with a partner loan program. On November 23, 2018, those shares
of BGC Class A common stock were converted into 10,000,000 shares of BGC Class B common stock and remain pledged in connection
with the partner loan program. On November 23, 2018, BGC Partners issued 10,323,366 shares of BGC Class B common stock to Cantor and
712,907 shares of BGC Class B common stock to CFGM, an affiliate of Cantor, in each case in exchange for shares of BGC Class A
common stock from Cantor and CFGM, respectively, on a one-to-one basis pursuant to Cantor’s and CFGM’s right to exchange such shares
under the letter agreement, dated as of June 5, 2015, by and between BGC Partners and Cantor. Pursuant to the Exchange Agreement, no
additional consideration was paid to BGC Partners by Cantor or CFGM for the Class B Issuance. The Class B Issuance was exempt from
registration pursuant to Section 3(a)(9) of the Securities Act. As of December 31, 2020, Cantor and CFGM did not own any shares of BGC
Class A common stock. Each share of BGC Class A common stock is entitled to one vote on matters submitted to a vote of our stockholders.
In addition, as of December 31, 2020, Cantor and CFGM held 45,884,380 shares of BGC Class B common stock (which represents all
of the outstanding shares of BGC Class B common stock), representing approximately 58.7% of our voting power on such date. Each share
of BGC Class B common stock is generally entitled to the same rights as a share of BGC Class A common stock, except that, on matters
submitted to a vote of our stockholders, each share of Class B common stock is entitled to ten votes. The BGC Class B common stock
generally votes together with the BGC Class A common stock on all matters submitted to a vote of our stockholders.
Through December 31, 2020, Cantor has distributed to its current and former partners an aggregate of 20,850,346 shares of BGC
Class A common stock, consisting of (i) 19,372,639 April 2008 distribution rights shares, and (ii) 1,477,707 February 2012 distribution rights
shares. As of December 31, 2020, Cantor is still obligated to distribute to its current and former partners an aggregate of 15,756,625 shares of
BGC Class A common stock, consisting of 13,999,105 April 2008 distribution rights shares and 1,757,520 February 2012 distribution rights
shares.
We received shares of Newmark in connection with the Separation, and Newmark completed the Newmark IPO on December 19,
2017. However, on the Distribution Date, we completed our previously announced Spin-Off to our stockholders of all of the shares of
common stock of Newmark owned by us as of immediately prior to the effective time of the Spin-Off. Following the Spin-Off, we ceased to
be Newmark’s controlling stockholder, and we and our subsidiaries no longer held any shares of Newmark’s common stock or other equity
interests in Newmark or its subsidiaries. For more information on the Spin-Off of Newmark, see Note 1—“Organization and Basis of
Presentation” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Overview and Business Environment – Newmark Spin-Off.”
From time to time, we may actively continue to repurchase shares of our Class A common stock including from Cantor, Newmark, our
executive officers, other employees, partners and others.
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BGC Partners, Inc. Partnership Structure
We are a holding company with no direct operations, and our business is operated through two operating partnerships, BGC U.S.
OpCo, which holds our U.S. businesses, and BGC Global OpCo, which holds our non-U.S. businesses. The limited partnership interests of
the two operating partnerships are held by us and BGC Holdings, and the limited partnership interests of BGC Holdings are currently held by
LPU holders, Founding Partners, and Cantor. We hold the BGC Holdings general partnership interest and the BGC Holdings special voting
limited partnership interest, which entitle us to remove and appoint the general partner of BGC Holdings, and serve as the general partner of
BGC Holdings, which entitles us to control BGC Holdings. BGC Holdings, in turn, holds the BGC U.S. OpCo general partnership interest
and the BGC U.S. OpCo special voting limited partnership interest, which entitle the holder thereof to remove and appoint the general partner
of BGC U.S. OpCo, and the BGC Global OpCo general partnership interest and the BGC Global OpCo special voting limited partnership
interest, which entitle the holder thereof to remove and appoint the general partner of BGC Global OpCo, and serves as the general partner of
BGC U.S. OpCo and BGC Global OpCo, all of which entitle BGC Holdings (and thereby us) to control each of BGC U.S. OpCo and BGC
Global OpCo. BGC Holdings holds its BGC Global OpCo general partnership interest through a company incorporated in the Cayman
Islands, BGC Global Holdings GP Limited.
As of December 31, 2020, we held directly and indirectly, through wholly-owned subsidiaries, 368,902,340 BGC U.S. OpCo limited
partnership units and 368,902,340 BGC Global OpCo limited partnership units, representing approximately 68.9% of the outstanding limited
partnership units in both BGC U.S. OpCo and BGC Global OpCo. As of that date, BGC Holdings held 166,877,100 BGC U.S. OpCo limited
partnership units and 166,877,100 BGC Global OpCo limited partnership units, representing approximately 31.1% of the outstanding limited
partnership units in both BGC U.S. OpCo and BGC Global OpCo.
LPU holders, Founding Partners, and Cantor directly hold BGC Holdings limited partnership interests. Since BGC Holdings in turn
holds BGC U.S. OpCo limited partnership interests and BGC Global OpCo limited partnership interests, LPU holders, Founding Partners,
and Cantor indirectly have interests in BGC U.S. OpCo limited partnership interests and BGC Global OpCo limited partnership interests.
Further, in connection with the Separation and Distribution Agreement, limited partnership interests in Newmark Holdings were distributed
to the holders of limited partnership interests in BGC Holdings, whereby each holder of BGC Holdings limited partnership interests who at
that time held a BGC Holdings limited partnership interest received a corresponding Newmark Holdings limited partnership interest, equal in
number to a BGC Holdings limited partnership interest divided by 2.2 (i.e., 0.4545 of a unit in Newmark Holdings). Accordingly, existing
partners at the time of the Separation in BGC Holdings are also partners in Newmark Holdings and hold corresponding units issued at the
applicable ratio. Thus, such partners now also have an indirect interest in Newmark OpCo.
As of December 31, 2020, excluding Preferred Units and NPSUs described below, outstanding BGC Holdings partnership interests
included 115,269,224 LPUs, 11,518,592 FPUs and 52,362,964 Cantor units.
We may in the future effect additional redemptions of BGC Holdings LPUs and FPUs, and concurrently grant shares of BGC Class A
common stock. We may also continue our earlier partnership restructuring programs, whereby we redeemed or repurchased certain LPUs and
FPUs in exchange for new units, grants of exchangeability for BGC Class A common stock or cash and, in many cases, obtained
modifications or extensions of partners’ employment arrangements. We also generally expect to continue to grant exchange rights with
respect to outstanding non-exchangeable LPUs and FPUs, and to repurchase BGC Holdings partnership interests from time to time, including
from Cantor, our executive officers, and other employees and partners, unrelated to our partnership restructuring programs.
Cantor units in BGC Holdings are generally exchangeable under the Exchange Agreement for up to 23,613,420 shares of BGC Class B
common stock (or, at Cantor’s option or if there are no such additional authorized but unissued shares of our Class B common stock, BGC
Class A common stock) on a one-for-one basis (subject to adjustments). Upon certain circumstances, Cantor may have the right to acquire
additional Cantor units in connection with the redemption of or grant of exchangeability to certain non-exchangeable BGC Holdings FPUs
owned by persons who were previously Cantor partners prior to our 2008 acquisition of the BGC business from Cantor. Cantor has exercised
this right from time to time.
As of December 31, 2020, there were 2,703,089 FPUs remaining which BGC Holdings had the right to redeem or exchange and with
respect to which Cantor had the right to purchase an equivalent number of Cantor units.
In order to facilitate partner compensation and for other corporate purposes, the BGC Holdings limited partnership agreement provides
for Preferred Units, which are Working Partner units that may be awarded to holders of, or contemporaneous with the grant of, PSUs, PSIs,
PSEs, LPUs, APSUs, APSIs, APSEs, REUs, RPUs, AREUs, and ARPUs. These Preferred Units carry the same name as the underlying unit,
with the insertion of an additional “P” to designate them as Preferred Units.
Such Preferred Units may not be made exchangeable into BGC Class A common stock and accordingly will not be included in the
fully diluted share count. 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) of the allocation amount assigned to them based on their award price, or such other amount as set forth in the award
documentation, before calculation and distribution of the quarterly Partnership distribution for the remaining Partnership units. The Preferred
Units will not be entitled to participate in Partnership distributions other than with respect to the Preferred Distribution. As of December 31,
2020, there were 48,128,948 such units granted and outstanding in BGC Holdings.
On June 5, 2015, we entered into an agreement with Cantor providing Cantor, CFGM and other Cantor affiliates entitled to hold BGC
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 BGC Class A common stock now owned or subsequently acquired by such Cantor entities for up to an aggregate of
34,649,693 shares of BGC Class B common stock. Such shares of BGC Class B common stock, which currently can be acquired upon the
exchange of exchangeable LPUs owned in our Holdings, are already included in the Company’s fully diluted share count and will not
30
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 BGC Class B common stock that they were already entitled to acquire without having to exchange
their exchangeable LPUs in our Holdings.
Under the Exchange Agreement, Cantor and CFGM have the right to exchange shares of BGC Class A common stock owned by them
for the same number of shares of BGC Class B common stock. As of December 31, 2020, Cantor and CFGM do not own any shares of BGC
Class A common stock. Cantor and CFGM would also have the right to exchange any shares of BGC Class A common stock subsequently
acquired by either of them for shares of BGC Class B common stock, up to 23,613,420 shares of BGC Class B common stock.
We and Cantor have agreed that any shares of BGC Class B common stock issued in connection with the Exchange Agreement would
be deducted from the aggregate number of shares of BGC Class B common stock that may be issued to the Cantor entities upon exchange of
exchangeable LPUs in BGC Holdings. Accordingly, the Cantor entities will not be entitled to receive any more shares of BGC Class B
common stock under this agreement than they were previously eligible to receive upon exchange of exchangeable LPUs.
Non-distributing partnership units, or N Units, carry the same name as the underlying unit with the insertion of an additional “N” to
designate them as the N Unit type and are designated as NREUs, NPREUs, NLPUs, NPLPUs and NPPSUs. The N Units are not entitled to
participate in Partnership distributions, will not be allocated any items of profit or loss and may not be made exchangeable into shares of
BGC Class A common stock. Subject to the approval of the Compensation Committee or its designee, certain 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.
On December 13, 2017, the Amended and Restated BGC Holdings Partnership Agreement was amended and restated a second time to
include prior standalone amendments and to make certain other changes related to the Separation. The Second Amended and Restated BGC
Holdings Partnership Agreement, among other things, reflects changes resulting from the division in the Separation of BGC Holdings into
BGC Holdings and Newmark Holdings, including:
•
•
an apportionment of the existing economic attributes (including, among others, capital accounts and post-termination payments)
of each BGC Holdings LPU outstanding immediately prior to the Separation between such Legacy BGC Holdings Unit and the
0.4545 of a Newmark Holdings LPU issued in the Separation in respect of each such Legacy BGC Holdings Unit, based on the
relative value of BGC and Newmark as of after the Newmark IPO; and
a right of the employer of a partner to determine whether to grant exchangeability with respect to Legacy BGC Holdings Units
held by such partner.
The Second Amended and Restated BGC Holdings Partnership Agreement also removes certain classes of BGC Holdings units that are
no longer outstanding, and permits the general partner of BGC Holdings to determine the total number of authorized BGC Holdings units.
The Second Amended and Restated BGC Holdings Limited Partnership Agreement was approved by the Audit Committee of the Board of
Directors of the Company.
The following diagram illustrates our organizational structure as of December 31, 2020. The diagram does not reflect the various
subsidiaries of BGC, BGC U.S. OpCo, BGC Global OpCo, or Cantor, or the noncontrolling interests in our consolidated subsidiaries other
than Cantor’s units in BGC Holdings.*
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STRUCTURE OF BGC PARTNERS, INC. AS OF DECEMBER 31, 2020
32
* Shares of BGC Class B common stock are convertible into shares of BGC Class A common stock at any time in the discretion of the
holder on a one-for-one basis. Accordingly, if Cantor and CFGM converted all of their BGC Class B common stock into BGC Class A
common stock, Cantor would hold 12.2% of the voting power, CFGM would hold 0.2% of the voting power, and the public stockholders
would hold 87.6% of the voting power (and Cantor and CFGM’s indirect economic interests in BGC U.S. and BGC Global would remain
unchanged). The diagram does not reflect certain BGC Class A common stock and BGC Holdings partnership units as follows: (a) any shares
of BGC Class A common stock that may become issuable upon the conversion or exchange of any convertible or exchangeable debt
securities that may in the future be sold under our shelf Registration Statement on Form S-3 (Registration No. 333-180331); (b) 48,128,948
Preferred Units granted and outstanding to BGC Holdings partners (see “BGC Partners, Inc. Partnership Structure” herein); and (c)
27,521,164 N Units granted and outstanding to BGC Holdings partners.
The diagram reflects BGC Class A common stock and BGC Holdings partnership unit activity from January 1, 2020 through
December 31, 2020 as follows: (a) an aggregate of 22,839,991 LPUs granted by BGC Holdings; (b) 1,449,089 LPUs repurchased by us; (c)
230,176 shares of BGC Class A common stock sold by us under the March 2018 Sales Agreement pursuant to our Registration Statement on
Form S-3 (Registration No. 333-223550), but not the remaining $89.2 million of stock remaining for sale by us under such sales agreement;
(d) 1,133,725 shares of BGC Class A common stock issued for vested restricted stock units; (e) 390,775 shares of Class A common stock
issued by us under our acquisition shelf Registration Statement on Form S-4 (Registration No. 333-169232), but not the 5,778,100 of such
shares remaining available for issuance by us under such Registration Statement; (f) 105,228 shares issued by us under our Dividend
Reinvestment and Stock Purchase Plan shelf Registration Statement on Form S-3 (Registration No. 333-173109), but not the 9,263,094 of
such shares remaining available for issuance by us under shelf Registration Statement on Form S-3 (Registration No. 333-196999); (g)
50,315 shares sold by selling stockholders under our resale shelf Registration Statement on Form S-3 (Registration No. 333-175034), but not
the 418,476 of such shares remaining available for sale by selling stockholders under such Registration Statement; (h) 8,421 shares sold by
selling stockholders under our resale shelf Registration Statement on Form S-3 (Registration No. 333-167953), but not the 136,975 shares
remaining available for sale by selling stockholders under such Registration Statement. As December 31, 2020, we have not issued any
shares of BGC Class A common stock under our 2019 Form S-4 Registration Statement (Registration No. 333-233761).
Possible Corporate Conversion
The Company continues to explore a possible conversion into a simpler corporate structure, weighing any significant change in
taxation policy. In particular, the Company is awaiting insight into future U.S. Federal tax policies, which remain uncertain after the results of
the U.S. elections. Should the Company decide to move forward with a corporate conversion it will work with regulators, lenders, and rating
agencies, and BGC’s board and committees will review potential transaction arrangements.
Newmark Real Estate Services Business (Discontinued Operations)
We have determined that the Spin-Off met the criteria for reporting the financial results of Newmark as discontinued operations within
our consolidated results for all periods through November 30, 2018.See Note 28—“Discontinued Operations” in our consolidated financial
statements included in Part II, Item 8 of this Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS
Any investment in shares of our Class A common stock, our 5.125% Senior Notes, our 5.375% Senior Notes, our 3.750% Senior
Notes, our 4.375% Senior Notes or our other securities involves risks and uncertainties. The following are important risks and uncertainties
that could affect our businesses, but we do not ascribe any particular likelihood or probability to them unless specifically indicated. Any of
the risks and uncertainties set forth below, should they occur, could significantly and negatively affect our businesses, financial condition,
results of operations, and prospects and/or the trading price of our Class A common stock, our 5.125% Senior Notes, our 5.375% Senior
Notes, our 3.750% Senior Notes, our 4.375% Senior Notes or our other securities.
RISKS RELATED TO OUR BUSINESSES GENERALLY
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic, and governmental measures taken in response thereto, have materially adversely affected, and may in the
future continue to materially adversely affect, the global economy, the United States economy and the global financial markets,
resulting in a global recession that may adversely affect our businesses, financial condition and results of operations. The extent to
which the COVID-19 pandemic, including any successive waves or variants of the virus, or the emergence of another pandemic, and
measures taken in response thereto, including “shelter-in-place” orders and other restrictions and delays or complications in the
implementation of vaccination programs, could continue to materially adversely affect the conduct of our businesses will depend
upon future developments and conditions, which remain highly uncertain.
The outbreak of COVID-19, and governmental measures taken in response thereto, have materially adversely affected the global
economy, the United States economy and the global financial markets. Unemployment rates in the United States have increased dramatically
to levels not experienced since the Great Depression. The United States reported 4.0% growth in GDP for the fourth quarter of 2020
following a significant improvement in the third quarter of 2020. Most economists expect the recovery, to continue throughout 2021. The
U.S. equity capital markets (as measured by the S&P 500) suffered a more than 30% decline during the first few weeks of the pandemic after
many national and regional governments implemented “shelter-in-place” orders. While the S&P 500 increased by 11.7% over the course of
the fourth quarter of 2020, there can be no assurance that the broader equity markets will not suffer similar declines in future periods should
the pandemic further harm the U.S. or global economy. Oil prices and interest rates remain low, primarily as a result of the decline in
economic activity. All of these unprecedented developments in the global economy and the United States economy have led to substantial
uncertainty about future economic conditions.
Our revenues were adversely impacted in the fiscal year 2020 as a result of COVID-19 and its impact on the macroeconomic
environment, including interest rates, FX, and oil prices, as well as causing continued dislocations faced by us and our clients. All these
factors negatively impacted, and may continue to negatively impact, market volumes, which have had and could continue to have an adverse
effect on our businesses, financial condition and results of operations. Governmental actions in response to the pandemic, including in
response to further spreading of the virus through successive waves or variants of the virus, such as "shelter in place" orders, have been
confronted and may continue to be confronted with resistance. While vaccines have been approved, there may be a lengthy period of time
before any vaccine is widely distributed. It is also uncertain whether there will be sufficient public confidence in the effectiveness of any
vaccine to enable widespread vaccination of the public. Because of these and other factors, we are unable to predict the full impact of the
pandemic if conditions persist, and there can be no assurance that these increased levels of volumes will be replicated in future quarters.
Should these global market conditions be prolonged or worsen, or the pandemic lead to additional market disruptions, we could experience
reduced client activity and demand for our products and services, counterparty defaults, impairments of other financial assets and other
negative impacts on our financial position.
A decline in economic conditions may also lead to constraints on capital and liquidity, a higher cost of capital, and possible change
or downgrades to our credit ratings, and additional restructuring charges.
The full extent to which the COVID-19 outbreak, or the emergence of another pandemic, and measures taken in response thereto,
could continue to negatively affect the global economy, the United States economy, and global financial markets and, in turn, materially
adversely affect our businesses, results of operations and financial condition will depend on future developments, which are highly uncertain
and cannot be predicted, including the scope and duration of the outbreak or pandemic, actions taken by governmental authorities to contain
the financial and economic impact of the outbreak or pandemic, the effects on our clients, employees and third-party vendors, and the overall
impact on financial markets, the economy and society.
The COVID-19 pandemic, and governmental measures taken in response thereto, have severely disrupted the global
conduct of business, and have disrupted, and may continue to disrupt, our operations and our clients' operations, which has had, and
may continue to have, a material adverse effect on our businesses, financial condition and results of operations. As a result, we have
been required to implement operational changes, including transitioning a large portion of our workforce to remote working, thus
exposing us to greater cybersecurity risks. The extent to which the pandemic, and governmental measures taken in response thereto,
could materially adversely affect our businesses, financial condition and results of operations will depend on future developments,
34
which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and the actions taken by
governmental authorities in response thereto.
The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United
States economies and financial markets. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.
The global spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, significant
reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial
market instability. As of February 26, 2021, the United States had the world’s most reported COVID-19 cases, and all 50 states and the
District of Columbia have reported cases of infected individuals. Several states and countries, including New York and the U.K., where we
are headquartered, have declared states of emergency.
The economic and financial disruptions from the COVID-19 outbreak, as well as measures taken by various governmental
authorities in response to the outbreak, led us to implement operational changes as we executed our business continuity plan in the first
quarter of 2020. We continue to take significant steps to protect our employees. While a majority of the front office personnel are working in
a firm office currently, a majority of BGC staff members continue to work from home or other remote locations and disaster recovery venues.
In all cases, the Company has mandated appropriate social distancing measures.
Although our information technology systems have been able to support remote working to date, we cannot assure you that they
will continue to be able to support the volume of business conducted remotely by our employees in the future or to address increased volumes
as our workforce shifts to additional locations and venues. We are also dependent on third-party vendors for the performance of certain
critical processes and many such vendors are continuing to operate under business continuity plans. In addition, many of our vendors’ and
clients’ workforces continue to work from home or remote locations and their normal operations have been disrupted due to the COVID-19
pandemic. Working remotely may place additional stress on the telecommunications infrastructure in the areas where our employees live and
work. Disruptions in the availability of internet and telephone service has adversely affected and may continue to adversely affect the ability
of our employees to perform their operations remotely in a timely manner. An extended period of remote working by our employees could
also increase our cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including
phishing and social engineering attempts that seek to exploit the COVID-19 pandemic. While we have taken significant precautions to protect
employees who work in our offices, no assurance can be given that measures will contain the spread of the virus. Even as phased re-openings
continue for some workers and in some locations, the current increase in infections has led to the re-implementation of restrictions in many
jurisdictions, including New York City, and further changes in state and local work orders or in our policies or those of our clients and
vendors, including in response to further spreading of the virus through successive waves or variants of the virus, may impact work
arrangements of our employees, clients and vendors for the foreseeable future.
In particular, any disruption in our Fenics business operations has had and may continue to have an adverse effect on our results. We
believe the pandemic’s promotion of virtual and remote work arrangements will support existing trends of electronification across our
business. A disruption or certain employees in our Fenics operations not being able to fully utilize our most advanced technology while
working remotely has led and may continue to lead to an increased reliance on Voice and Hybrid brokerage, which may adversely affect our
revenues and profit margins. Any disruption in the insurance markets may also adversely affect our businesses.
If significant portions of our, third-party vendors’ or our clients’ workforce, including executives or key personnel, are unable to
work effectively because of illness, government actions, or other restrictions in connection with the pandemic, this may impair our ability to
operate our businesses, particularly when coupled with the significant increase in client trading volumes and inquiries. COVID-19 presents a
threat to our employees’ well-being. While we implemented a business continuity plan at the end of the first quarter of 2020 and continue to
revise the plan to implement changes in state and local responses and development of protocols and other factors to protect the health of our
employees, such plan cannot anticipate all scenarios. These factors significantly impacted productivity during the fourth quarter and fiscal
year 2020, and we experienced and may continue to experience a continuing loss of productivity or adjustment to our business over time.
Additionally, due to the physical dislocations experienced by our brokers and clients, the pace of adoption of some of our newer fully
electronic brokerage offerings has been and may continue to be adversely affected.
The extent to which the COVID-19 pandemic, including any successive waves or variants of the virus, or the emergence of another
pandemic, and measures taken in response thereto could continue to materially adversely affect the conduct of our businesses will depend
upon future developments, which are highly uncertain. While vaccines have been approved, there may be a lengthy period of time before any
vaccine is widely distributed. It is also uncertain whether there will be sufficient public confidence in the effectiveness of any vaccine to
enable widespread vaccination of the public. Any increase in the duration and impact of the pandemic, including any successive waves
variants of the virus, as well as measures taken in response thereto, could materially adversely affect our businesses, financial condition and
results of operations.
Risks Related to Global Economic and Market Conditions
Our businesses, financial condition, results of operations and prospects have been and may continue to be affected both
positively and negatively by conditions in the global economy and financial markets generally.
Our businesses and results of operations have been and may continue to be affected both positively and negatively by conditions in
the global economy and financial markets generally. Difficult market and economic conditions and geopolitical uncertainties have in the past
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adversely affected and may in the future adversely affect our businesses. Such conditions and uncertainties include financial pressures
exacerbated by the Covid-19 pandemic, fluctuating levels of economic output, interest and inflation rates, employment levels, consumer
confidence levels, and fiscal and monetary policy. Economic policies of the current administration and Congress, potential increases in
interest rates and potential changes to existing tax rates and infrastructure spending plans may change the regulatory and economic landscape.
These conditions may directly and indirectly impact a number of factors in the global markets that may have a positive or negative effect on
our operating results, including the levels of trading, investing, and origination activity in the financial markets, the valuations of financial
instruments, changes in interest rates, changes in benchmarks, changes in and uncertainty regarding laws and regulations, substantial
fluctuations in volume and commissions on securities and derivatives transactions, the absolute and relative level of currency rates and the
actual and the perceived quality of issuers, borrowers and investors. For example, the actions of the U.S. Federal Reserve and international
central banking authorities directly impact our cost of funds and may impact the value of financial instruments we hold. In addition, changes
in monetary policy may affect the credit quality of our customers. Changes in domestic and international monetary policy are beyond our
control and difficult to predict.
Our revenues and profitability are likely to decline significantly during periods of low trading volume in the financial markets in
which we offer our products and services.
The global financial services markets are, by their nature, risky and volatile and are directly affected by many national and
international factors that are beyond our control. Any one of these factors may cause substantial changes in the U.S. and global financial
markets, resulting in reduced transactional volume and profitability for our businesses. These factors include:
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pandemics and other international health emergencies;
economic and geopolitical conditions and uncertainties in the United States, Europe, Asia and elsewhere in the world,
including government deficits, debt and possible defaults, austerity measures, changes in interest rates, and changes in
central bank and/or fiscal policies, including the level and timing of government debt issuances, purchases and outstanding
amounts;
possible political turmoil with respect to the U.S. government, the U.K, the EU and/or its member states, Hong Kong,
China, or other major economies around the world;
the effect of Federal Reserve Board and other central banks’ monetary policies, increased capital requirements for banks
and other financial institutions, and other regulatory requirements;
terrorism, war and other armed hostilities;
the impact of short-term or prolonged U.S. government shutdowns, elections or other political events;
inflation, deflation and wavering institutional and consumer confidence levels;
the availability of capital for borrowings and investments by our clients and their customers;
the level and volatility of interest rates, foreign currency exchange rates and trading in certain equity, debt and commodity
markets;
the level and volatility of the difference between the yields on corporate securities being traded and those on related
benchmark securities, which we refer to as “credit spreads”; and
margin requirements, capital requirements, credit availability, and other liquidity concerns with respect to our business, its
clients, and the customers of its clients.
Low transaction volumes for any of our brokerage asset classes generally result in reduced revenues. Under these conditions, our
profitability is adversely affected since many of our costs are fixed. In addition, although less common, some of our transaction revenues are
determined on the basis of the value of transactions or on spreads. For these reasons, substantial decreases in trading volume, declining
prices, and/or reduced spreads could have material adverse effects on our businesses, financial condition, results of operations and prospects.
Any downgrades of the U.S. sovereign credit rating by one or more of the major credit rating agencies could have material adverse
effects on financial markets and economic conditions in the U.S. and throughout the world. This in turn could have a material adverse impact
on our businesses, financial condition, results of operations, and prospects. Because of the unprecedented nature of any negative credit rating
actions with respect to U.S. government obligations, the ultimate impacts on global financial markets and our businesses, financial condition,
results of operations, and prospects are unpredictable and may not be immediately apparent. Additionally, the negative impact on economic
conditions and global financial markets from further sovereign debt matters with respect to the U.K., the EU and/or its member states, Japan,
China, or other major economies could adversely affect our businesses, financial condition, results of operations and prospects. Concerns
about the sovereign debt of certain major economies have caused uncertainty and disruption for financial markets globally, and continued
uncertainties loom over the outcome of the various governments’ financial support programs and the possibility that EU member states or
other major economies may experience similar financial troubles. Any downgrades of the long-term sovereign credit rating of the U.S. or
additional sovereign debt crises in major economies could cause disruption and volatility of financial markets globally and have material
adverse effects on our businesses, financial condition, results of operations and prospects.
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Over the past year, the Covid-19 pandemic has led to uncertainties about global economic growth, which may impact the stability of
financial markets and lead to uncertainty with respect to the likely responses of governments and central banks. Any one of these factors, or
others, could have a material adverse effect on our businesses, financial condition, results of operations and prospects.
Risks Related to the Geographic Locations of Our Business
Our businesses are geographically concentrated and could be significantly affected by any adverse change in the regions in
which we operate.
Historically, our business operations have been substantially located in the U.S. and the U.K. While we are expanding our
businesses to new geographic areas, we are still highly concentrated in these areas. Because we derived approximately 42.2% and
approximately 25.2% of our total revenues on a consolidated basis for the year ended December 31, 2020 from our operations in the U.K. and
the U.S., respectively, our businesses are exposed to adverse regulatory and competitive changes, economic downturns and changes in
political conditions in these countries. If we are unable to identify and successfully manage or mitigate these risks, our businesses, financial
condition, results of operations and prospects could be materially adversely affected.
The U.K. exit from the EU could materially adversely impact our customers, counterparties, businesses, financial condition,
results of operations and prospects.
On June 23, 2016, the U.K. held a referendum regarding continued membership of the EU. The exit from the EU is commonly
referred to as Brexit. On January 1, 2021, the UK formally left the EU and UK-EU trade became subject to a new agreement that was
concluded in December of 2020. Financial services falls outside of the scope of this trade agreement. Instead, the relationship will largely be
determined by a series of “equivalence decisions,” each of which would grant mutual market access for a limited subset of financial services
where either party finds the other party has a regulatory regime that achieves similar outcomes to its own. It is currently unknown if or when
equivalence decisions will be taken.
In light of ongoing uncertainties, market participants are still adjusting. The exact impact of Brexit on the U.K.-EU flow of financial
services therefore remains unknown. This same uncertainty applies to the consequences for the economies of the U.K. and the EU member
states as a result of the U.K.’s withdrawal from the EU.
We have implemented plans to ensure continuity of service in Europe and continue to have regulated entities in place in many of the
major European markets. As part of our Brexit strategy, ownership of BGC Madrid, Copenhagen and Frankfurt & GFI Paris, Madrid and
Dublin branches were transferred to Aurel BGC SAS (a French based operation and therefore based in the EU) in July 2020, BGC’s
Insurance division (Corant) has established new brokerage platforms in Cyprus and France and we have been generally increasing our
footprint in the EU.
Regardless of these and other mitigating measures, our European headquarters and largest operations are in London, and market
access risks and uncertainties have had and could continue to have a material adverse effect on our customers, counterparties, businesses,
prospects, financial condition and results of operations. Furthermore, in the future the U.K. and EU’s regulation may diverge, which could
disrupt and increase the costs of our operations, and result in a loss of existing levels of cross-border market access.
Risks Related to New Opportunities/Possible Transactions and Hires
If we are unable to identify and successfully exploit new product, service and market opportunities, including through
hiring new brokers, salespeople, managers and other professionals, our businesses, financial condition, results of operations, cash
flows and prospects could be materially adversely affected.
Because of significant competition in our market, our strategy is to broker more transactions, increase our share of existing markets
and seek out new clients and markets. We may face enhanced risks as these efforts to expand our businesses result in our transacting with a
broader array of clients and expose us to new products and services and markets. Pursuing this strategy may also require significant
management attention and hiring expense and potential costs and liability in any litigation or arbitration that may result. We may not be able
to attract new clients or brokers, salespeople, managers, or other professionals or successfully enter new markets. If we are unable to identify
and successfully exploit new product, service and market opportunities, our business, financial condition, results of operations and prospects
could be materially adversely affected.
We may pursue strategic alliances, acquisitions, dispositions, joint ventures or other growth opportunities (including hiring
new brokers and salespeople), which could present unforeseen integration obstacles or costs and could dilute our stockholders. We
may also face competition in our acquisition strategy, and such competition may limit our number of strategic alliances, acquisitions,
joint ventures and other growth opportunities (including hiring new brokers and salespeople).
We have explored a wide range of strategic alliances, acquisitions and joint ventures with other financial services companies that
have interests in related businesses or other strategic opportunities. We continue to evaluate and potentially pursue or amend possible
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strategic alliances, acquisitions, dispositions, joint ventures and other growth opportunities (including hiring new brokers and salespeople).
Such transactions may be necessary in order for us to enter into or develop new products or services or markets, as well as to strengthen our
current ones.
Strategic alliances, acquisitions, dispositions, joint ventures and other growth opportunities (including hiring new brokers and
salespeople) specifically involve a number of risks and challenges, including:
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potential disruption of our ongoing business and product, service and market development and distraction of management;
difficulty retaining and integrating personnel and integrating administrative, operational, financial reporting, internal
control, compliance, technology and other systems;
the necessity of hiring additional managers and other critical professionals and integrating them into current operations;
increasing the scope, geographic diversity and complexity of our operations;
to the extent that we pursue these opportunities internationally, exposure to political, economic, legal, regulatory,
operational and other risks that are inherent in operating in a foreign country, including risks of possible nationalization
and/or foreign ownership restrictions, expropriation, price controls, capital controls, foreign currency fluctuations,
regulatory and tax requirements, economic and/or political instability, geographic, time zone, language and cultural
differences among personnel in different areas of the world, exchange controls and other restrictive government actions, as
well as the outbreak of hostilities;
the risks relating to integrating accounting and financial systems and accounting policies and the related risk of having to
recast our historical financial statements;
potential dependence upon, and exposure to liability, loss or reputational damage relating to systems, controls and
personnel that are not under our control;
addition of business lines in which we have not previously engaged;
potential unfavorable reaction to our strategic alliance, acquisition, disposition or joint venture strategy by our customers,
counterparties, and employees;
the upfront costs associated with pursuing transactions and recruiting personnel, which efforts may be unsuccessful in the
increasingly competitive marketplace for the most talented producers and managers;
conflicts or disagreements between any strategic alliance or joint venture partner and us;
exposure to potential unknown liabilities of any acquired business, strategic alliance or joint venture that are significantly
larger than we anticipate at the time of acquisition, and unforeseen increased expenses or delays associated with
acquisitions, including costs in excess of the cash transition costs that we estimate at the outset of a transaction;
reduction in availability of financing due to tightened credit markets or credit ratings downgrades or defaults by us, in
connection with strategic alliances, acquisitions, dispositions, joint ventures and other growth opportunities;
a significant increase in the level of our indebtedness in order to generate cash resources that may be required to effect
acquisitions;
dilution resulting from any issuances of shares of our Class A common stock or limited partnership units in connection
with strategic alliances, acquisitions, joint ventures and other growth opportunities in the event that these arrangements are
amended or terminated;
a reduction of the diversification of our businesses resulting from any dispositions;
the necessity of replacing certain individuals and functions that are sold in dispositions;
the cost of rebranding and the impact on our market awareness of dispositions;
adverse effects on our liquidity as a result of payment of cash resources and/or issuance of shares of our Class A common
stock or limited partnership units;
the impact of any reduction in our asset base resulting from dispositions on our ability to obtain financing or the terms
thereof; and
a lag in the realization of financial benefits from these transactions and arrangements.
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We face competition for acquisition targets, which may limit our number of acquisitions and growth opportunities and may lead to
higher acquisition prices or other less favorable terms. To the extent that we choose to grow internationally from acquisitions, strategic
alliances, joint ventures, or other growth opportunities, we may experience additional expenses or obstacles. There can be no assurance that
we will be able to identify, acquire or profitably manage additional businesses or integrate successfully any acquired businesses without
substantial costs, delays or other operational or financial difficulties.
In addition, the acquisition of regulated firms generally requires the consent of the home jurisdiction regulator in which the target is
domiciled and those jurisdictions in which the target has regulated subsidiaries. In certain circumstances, one or more of these regulators may
withhold their consent, impose restrictions or make their consent subject to conditions which may result in increased costs or delays.
Any future growth will be partially dependent upon the continued availability of suitable transactional candidates at favorable prices
and upon advantageous terms and conditions, which may not be available to us, as well as sufficient liquidity to fund these transactions.
Future transactions and any necessary related financings also may involve significant transaction-related expenses, which include payment of
break-up fees, assumption of liabilities, including compensation, severance, lease termination, and other restructuring costs, and transaction
and deferred financing costs, among others. In addition, there can be no assurance that such transactions will be accretive or generate
favorable operating margins. The success of these transactions will also be determined in part by the ongoing performance of the acquired
companies and the acceptance of acquired employees of our equity-based compensation structure and other variables which may be different
from the existing industry standards or practices at the acquired companies.
We will need to successfully manage the integration of recent acquisitions and future growth effectively. The integration and
additional growth may place a significant strain upon our management, administrative, operational, financial reporting, internal control and
compliance infrastructure. Our ability to grow depends upon our ability to successfully hire, train, supervise and manage additional
employees, expand our management, administrative, operational, financial reporting, compliance and other control systems effectively,
allocate our human resources optimally, maintain clear lines of communication between our transactional and management functions and our
finance and accounting functions, and manage the pressure on our management, administrative, operational, financial reporting, compliance
and other control infrastructure. Additionally, managing future growth may be difficult due to our new geographic locations, markets and
business lines. As a result of these risks and challenges, we may not realize the full benefits that we anticipate from strategic alliances,
acquisitions, joint ventures or other growth opportunities. There can be no assurance that we will be able to accurately anticipate and respond
to the changing demands we will face as we integrate and continue to expand our operations, and we may not be able to manage growth
effectively or to achieve growth at all. Any failure to manage the integration of acquisitions and other growth opportunities effectively could
have a material adverse effect on our businesses, financial condition, results of operations and prospects.
From time to time, we may also seek to dispose of portions of our businesses, or otherwise reduce our ownership, each of which
could materially affect our cash flows and results of operations. Dispositions involve significant risks and uncertainties, such as ability to sell
such businesses on satisfactory price and terms and in a timely manner (including long and costly sales processes and the possibility of
lengthy and potentially unsuccessful attempts by a buyer to receive required regulatory approvals), or at all, disruption to other parts of the
businesses and distraction of management, loss of key employees or customers, exposure to unanticipated liabilities or ongoing obligations to
support the businesses following such dispositions. In addition, if such dispositions are not completed for any reason, the market price of our
Class A common stock may reflect a market assumption that such transactions will occur, and a failure to complete such transactions could
result in a decline in the market price of our Class A common stock. As a result of these factors, any disposition (whether or not completed)
could have a material adverse effect on our businesses, financial condition, results of operations and prospects.
Risks Related to Change in LIBOR
We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined, the
expected transition away from LIBOR and the use of alternative reference rates, including financial risks arising from any changes
in the valuation of financial instruments, and operational risks due to the potential requirement to adapt our information technology
systems and operational processes to address the transition away from LIBOR.
Our $350 million Revolving Credit Agreement is indexed to LIBOR. As of December 31, 2020, we had no indebtedness
outstanding under the Revolving Credit Agreement. LIBOR is the rate of interest used in lending between banks on the London interbank
market and is widely used as a reference for setting the interest rate on loans globally. In July 2017, the head of the FCA announced the
desire to phase out the use of LIBOR by the end of 2021. However, the ICE Benchmark Administration, in its capacity as administrator of
USD LIBOR, has announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) by 18 months
to June 2023. Several regulatory agencies have encouraged banks to cease entering into new contracts using USD LIBOR as a reference rate
by the end of 2021. Federal and state legislative proposals to adopt a replacement reference rate are currently under consideration. At this
time, no consensus exists as to what reference rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict
whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will
cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the U.K. or
elsewhere. As such, the potential effect of any such event on our cost of capital and interest expense cannot yet be determined.
The expected withdrawal and replacement of LIBOR with alternative benchmarks also introduces a number of risks for us, our
clients and the financial services industry more widely. Globally, vast amounts of loans, securities, derivatives and other financial instruments
are linked to the LIBOR benchmark, and any failure by market participants and regulators to successfully introduce benchmark rates to
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replace LIBOR and implement effective transitional arrangements to address the discontinuation of LIBOR could result in disruption in the
global financial markets in which we do business and suppress capital markets activities and trading volume. We may also be subject to legal
implementation risks, as extensive changes to documentation for new and existing clients may be required, and operational risks due to the
potential requirement to adapt information technology systems and operational processes to address the withdrawal and replacement of
LIBOR.
In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged
increase or decrease in reported LIBOR, the use of various alternative rates, and disruption in the financial markets which rely on the
availability of a broadly accepted reference rate, any of which could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Risks Related to Liquidity, Funding and Indebtedness
We have debt, which could adversely affect our ability to raise additional capital to fund our operations and activities, limit
our ability to react to changes in the economy or our businesses, expose us to interest rate risk, impact our ability to obtain or
maintain favorable credit ratings and prevent us from meeting or refinancing our obligations under our indebtedness, which,
depending on the impact of the COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of
operations and prospects.
Our indebtedness, which at December 31, 2020 was $1,315.9 million, may have important, adverse consequences to us and our
investors, including:
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it may limit our ability to borrow money, dispose of assets or sell equity to fund our working capital, capital expenditures,
dividend payments, debt service, strategic initiatives or other obligations or purposes;
it may limit our flexibility in planning for, or reacting to, changes in the economy, the markets, regulatory requirements,
our operations or businesses;
our financial leverage may be higher than some of our competitors, which may place us at a competitive disadvantage;
it may make us more vulnerable to downturns in the economy or our businesses;
it may require a substantial portion of our cash flow from operations to make interest payments;
it may make it more difficult for us to satisfy other obligations;
it may increase the risk of a future downgrade of our credit ratings or otherwise impact our ability to obtain or maintain
investment-grade credit ratings, which could increase future debt costs and limit the future availability of debt financing;
we may not be able to borrow additional funds or refinance existing debt as needed or take advantage of business
opportunities as they arise, pay cash dividends or repurchase shares of our Class A common stock and purchase limited
partnership units; and
there would be a material adverse effect on our businesses, financial condition, results of operations and prospects if we
were unable to service our indebtedness or obtain additional financing or refinance our existing debt on terms acceptable
to us.
To the extent that we incur additional indebtedness or seek to refinance our existing debt, or the COVID-19 pandemic continues to
negatively affect the local, national and global economies, the risks described above could increase. In addition, our actual cash requirements
in the future may be greater than expected and may impact the rate at which we make payments of obligations or occur additional obligations.
Our cash flow from operations may not be sufficient to service our outstanding debt or to repay the outstanding debt as it becomes due, and
we may not be able to borrow money, dispose of assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our
debt.
Some of our borrowings have variable interest rates. As a result, a change in market interest rates could have a material adverse
effect on our interest expense. In periods of rising interest rates, our cost of funds will increase, which could reduce our net income. In an
effort to limit our exposure to interest rate fluctuations, we may rely on interest rate hedging or other interest rate risk management activities.
These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged borrowings. Adverse
developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We are dependent upon availability of adequate funding and liquidity to meet our clearing margin requirements, among other
financial needs. Clearing margin is the amount of cash, guarantees or similar collateral that we must provide or deposit with our third-party
clearing organizations in support of our obligations under contractual clearing arrangements with these organizations. Historically, these
needs have been satisfied from internally generated funds and proceeds from debt and equity financings. We have also relied on arrangements
with Cantor to clear certain of our transactions under the clearing agreement we entered into with Cantor in November 2008 which was
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amended in June 2020. Our next bond maturity is in May 2021 and the Company’s senior unsecured revolving credit facility matures in
February 2023. Although we have historically been able to raise debt on acceptable terms, the impact of the COVID-19 pandemic on the
world’s credit markets could make it more difficult for us to refinance or replace such indebtedness in a timely manner or on acceptable
terms. Further, if for any reason we need to raise additional funds, including in order to meet regulatory capital requirements and/or clearing
margin requirements arising from growth in our brokerage businesses, to complete acquisitions or otherwise, we may not be able to obtain
additional financing when needed. If we cannot raise additional funds on acceptable terms, we may not be able to develop or enhance our
businesses, take advantage of future growth opportunities or respond to competitive pressure or unanticipated requirements.
Our Revolving Credit Agreement contains restrictions that may limit our flexibility in operating our businesses.
Our Revolving Credit Agreement contains covenants that could impose operating and financial restrictions on us, including
restrictions on our ability to, among other things and subject to certain exceptions:
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create liens on certain assets;
incur additional debt;
make significant investments and acquisitions;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
dispose of certain assets;
pay additional dividends on or make additional distributions in respect of our capital stock or make restricted payments;
repurchase shares of our Class A common stock or purchase limited partnership units;
enter into certain transactions with our affiliates; and
place restrictions on certain distributions from subsidiaries.
Indebtedness that we may enter into in the future, if any, could also contain similar or additional covenants or restrictions. Any of
these restrictions could limit our ability to adequately plan for or react to market conditions and could otherwise restrict certain of our
corporate activities. Any material failure to comply with these covenants could result in a default under the Revolving Credit Agreement as
well as instruments governing our future indebtedness. Upon a material default, unless such default were cured by us or waived by lenders in
accordance with the Revolving Credit Agreement, the lenders under such agreement could elect to invoke various remedies under the
agreement, including potentially accelerating the payment of unpaid principal and interest, terminating their commitments or, however
unlikely, potentially forcing us into bankruptcy or liquidation. In addition, a default or acceleration under such agreement could trigger a
cross default under other agreements, including potential future debt arrangements. Although we believe that our operating results will be
more than sufficient to meet all of these obligations, including potential future indebtedness, no assurance can be given that our operating
results will be sufficient to service our indebtedness or to fund all of our other expenditures or to obtain additional or replacement financing
on a timely basis and on reasonable terms in order to meet these requirements when due.
Risks Related to Our Senior Notes
Credit ratings downgrades or defaults by us could adversely affect us.
Our credit ratings and associated outlooks are critical to our reputation and operational and financial success. Our credit ratings and
associated outlooks are influenced by a number of factors, including: operating environment, regulatory environment, earnings and
profitability trends, the rating agencies’ view of our funding and liquidity management practices, balance sheet size/composition and
resulting leverage, cash flow coverage of interest, composition and size of the capital base, available liquidity, outstanding borrowing levels,
our competitive position in the industry, our relationships in the industry, our relationship with Cantor, acquisitions or dispositions of assets
and other matters. A credit rating and/or the associated outlook can be revised upward or downward at any time by a rating agency if such
rating agency decides that circumstances of that company or related companies warrant such a change. Any adverse ratings change or a
downgrade in the credit ratings of BGC, Cantor or any of their other affiliates, and/or the associated ratings outlooks could adversely affect
the availability of debt financing to us on acceptable terms, as well as the cost and other terms upon which we may obtain any such financing.
In addition, our credit ratings and associated outlooks may be important to clients of ours in certain markets and in certain transactions. A
company’s contractual counterparties may, in certain circumstances, demand collateral in the event of a credit ratings or outlook downgrade
of that company. Further, interest rates, including with respect to our 5.375% Senior Notes, 3.750% Senior Notes and 4.375% Senior Notes,
may increase in the event that our ratings decline.
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As of December 31, 2020, BGC Partners’ public long-term credit ratings were BBB- from Fitch Ratings Inc. and Standard &
Poor’s, BBB from Kroll Bond Rating Agency and BBB+ from Japan Credit Rating Agency, Ltd. and the associated outlooks on all the
ratings were stable. No assurance can be given that the credit ratings will remain unchanged in the future. Any additional indebtedness that
we incur, as well as any negative change to our credit ratings and associated outlooks, may restrict our ability to raise additional capital or
refinance debt on favorable terms, and consequently. any resulting impacts on our funding access, liquidity or creditworthiness perception
among our clients, counterparties, lenders, investors, or other market participants, could have a material adverse effect on our businesses,
financial condition, results of operations and prospects.
Our acquisitions may require significant cash resources and may lead to a significant increase in the level of our
indebtedness.
Potential future acquisitions may lead to a significant increase in the level of our indebtedness. We may enter into short- or long-
term financing arrangements in connection with acquisitions which may occur from time to time. In addition, we may incur substantial non-
recurring transaction costs, including break-up fees, assumption of liabilities and expenses and compensation expenses and we would likely
incur similar expenses. The increased level of our consolidated indebtedness in connection with potential acquisitions may restrict our ability
to raise additional capital on favorable terms, and such leverage, and any resulting liquidity or credit issues, could have a material adverse
effect on our businesses, financial condition, results of operations and prospects.
We may incur substantially more debt or take other actions which would intensify the risks discussed herein.
We may incur substantial additional debt in the future, some of which may be secured debt. We are not restricted under the terms of
the indentures governing our 5.125% Senior Notes, 5.375% Senior Notes, 3.750% Senior Notes and 4.375% Senior Notes from incurring
additional debt, securing existing or future debt (with certain exceptions, including to the extent already secured), recapitalizing our debt or
taking a number of other actions that are not limited by the terms of our debt instruments that could have the effect of diminishing our ability
to make payments on our debt when due.
We may not have the funds necessary to repurchase our 5.125% Senior Notes, 5.375% Senior Notes, 3.750% Senior Notes or
4.375% Senior Notes upon a change of control triggering event as required by the indentures governing these notes.
Upon the occurrence of a “change of control triggering event” (as defined in the indentures governing the 5.125% Senior Notes, the
5.375% Senior Notes , the 3.750% Senior Notes and the 4.375% Senior Notes), unless we have exercised our right to redeem such notes,
holders of the notes will have the right to require us to repurchase all or any part of their notes at a price in cash equal to 100% of the then-
outstanding aggregate principal amount of the notes repurchased plus accrued and unpaid interest, if any. There can be no assurance that we
would have sufficient, readily available financial resources, or would be able to arrange financing, to repurchase the 5.125% Senior Notes,
the 5.375% Senior Notes, the 3.750% Senior Notes or the 4.375% Senior Notes upon a “change of control triggering event.” A failure by us
to repurchase the notes when required would result in an event of default with respect to the notes. In addition, such failure may also
constitute an event of default and result in the effective acceleration of the maturity of our other then-existing indebtedness.
The requirement to offer to repurchase the 5.125% Senior Notes, the 5.375% Senior Notes, the 3.750% Senior Notes and the
4.375% Senior Notes upon a “change of control triggering event” may delay or prevent an otherwise beneficial takeover attempt of
us.
The requirement to offer to repurchase the 5.125% Senior Notes, the 5.375% Senior Notes, the 3.750% Senior Notes and the
4.375% Senior Notes upon a “change of control triggering event” may in certain circumstances delay or prevent a takeover of us and/or the
removal of incumbent management that might otherwise be beneficial to investors in our Class A common stock.
Risks Related to the Spin-Off
If there is a determination that the Spin-Off was taxable for U.S. federal income tax purposes because the facts,
assumptions, representations or undertakings underlying the tax opinion with respect to the Spin-Off were incorrect, or for any
other reason, then we and our stockholders could incur significant U.S. federal income tax liabilities.
We received an opinion of outside counsel to the effect that the Spin-Off, together with certain related transactions, qualified as a
transaction that is described in Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”). The opinion
relied on certain facts, assumptions, representations and undertakings from us and Newmark regarding the past and future conduct of the
companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not
otherwise satisfied, we and our stockholders may not be able to rely on the opinion of tax counsel.
Moreover, notwithstanding the opinion of counsel, the Internal Revenue Service (“IRS”) could determine that the Spin-Off is
taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or if it
disagrees with the conclusions in the opinion, or for any other reasons. In addition, certain events occurring after the Spin-Off may not be in
our control, including certain significant changes in the stock ownership of us or Newmark after the Spin-Off. If the Spin-Off or a related
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transaction is determined to be taxable for U.S. federal income tax purposes, we and our stockholders could incur significant U.S. federal
income tax liabilities. Any such liabilities could be substantial and could have a negative impact on our financial results and operations.
Risks Related to Our Intellectual Property
We may not be able to protect our intellectual property rights or may be prevented from using intellectual property
necessary for our businesses.
Our success is dependent, in part, upon our intellectual property, including our proprietary technology. We rely primarily on trade
secret, contract, patent, copyright, and trademark law in the U.S. and other jurisdictions as well as confidentiality procedures and contractual
provisions to establish and protect our intellectual property rights to proprietary technologies, products, services or methods, and our brand.
For example, we regularly file patent applications to protect inventions arising from our research and development, and we are currently
pursuing patent applications around the world. We also control access to our proprietary technology and enter into confidentiality and
invention assignment agreements with our employees and consultants and confidentiality agreements with other third parties. Protecting our
intellectual property rights is costly and time consuming.
Unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. We
cannot ensure that our intellectual property rights are sufficient to protect our competitive advantages or that any particular patent, copyright
or trademark is valid and enforceable, and all patents ultimately expire. In addition, the laws of some foreign countries may not protect our
intellectual property rights to the same extent as the laws in the U.S., or at all. Any significant impairment of our intellectual property rights
could harm our business or our ability to compete.
Many companies, including those in the computer and financial services industries own large numbers of patents, copyrights, and
trademarks and sometimes file lawsuits based on allegations of infringement or other violations of intellectual property rights. In addition,
there has been a proliferation of patents applicable to these industries and a substantial increase in the number of such patent applications
filed. Under current law, U.S. patent applications typically remain secret for 18 months or, in some cases, until a patent is issued. Because of
technological changes in these industries, patent coverage, and the issuance of new patents, it is possible certain components of our products
and services may unknowingly infringe existing patents or other intellectual property rights of others. Although we have taken steps to
protect ourselves, there can be no assurance that we will be aware of all patents, copyrights or trademarks that may pose a risk of
infringement by our products and services. Generally, it is not economically practicable to determine in advance whether our products or
services may infringe the present or future rights of others.
Accordingly, we may face claims of infringement or other violations of intellectual property rights that could interfere with our
ability to use intellectual property or technology that is material to our businesses. In addition, restrictions on the distribution of some of the
market data generated by our brokerage desks could limit the comprehensiveness and quality of the data we are able to distribute or sell. The
number of such third-party claims may grow. Our technologies may not be able to withstand such third-party claims or rights against their
use.
We may have to rely on litigation to enforce our intellectual property rights, protect our trade secrets, determine the validity and
scope of the rights of others or defend against claims of infringement or invalidity. Any such claims or litigation, whether successful or
unsuccessful, could result in substantial costs, and the diversion of resources and the attention of management, any of which could materially
negatively affect our businesses. Responding to these claims could also require us to enter into royalty or licensing agreements with the third
parties claiming infringement, stop selling or redesign affected products or services or pay damages on our own behalf or to satisfy
indemnification commitments with our customers. Such royalty or licensing agreements, if available, may not be available on terms
acceptable to us, and may negatively affect our business, financial condition, results of operations and prospects.
If our licenses or services from third parties are terminated or adversely changed or amended or contain material defects or
errors, or if any of these third parties were to cease doing business or if products or services offered by third parties were to contain
material defects or errors, our ability to operate our businesses may be materially adversely affected.
We license databases, software and services from third parties, much of which is integral to our systems and our businesses. The
licenses are terminable if we breach or have been perceived to have breached our obligations under the license agreements. If any material
licenses were terminated or adversely changed or amended, if any of these third parties were to cease doing business or if any licensed
software or databases licensed by these third parties were to contain material defects or errors, we may be forced to spend significant time
and money to replace the licensed software and databases, and our ability to operate our businesses may be materially adversely affected.
Further, any errors or defects in third-party services or products (including hardware, software, databases, cloud computing and other
platforms and systems) or in services or products that we develop ourselves, could result in errors in, or a failure of our services or products,
which could harm our businesses. Although we take steps to locate replacements, there can be no assurance that the necessary replacements
will be available on acceptable terms, if at all. There can be no assurance that we will have an ongoing license to use all intellectual property
which our systems require, the failure of which could have a material adverse effect on our businesses, financial condition, results of
operations and prospects.
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Risks Related to Our IT Systems and Cyber-Security
Defects or disruptions in our technology or services could diminish demand for our products and services and subject us to
liability.
Because our technology, products and services are complex and use or incorporate a variety of computer hardware, software and
databases, both developed in-house and acquired from third party vendors, our technology, products and services may have errors or defects.
Errors and defects could result in unanticipated downtime or failure and could cause financial loss and harm to our reputation and our
business. We have from time to time found defects and errors in our technology, products and service and defects and errors in our
technology, products or services may be detected in the future. In addition, our customers may use our technology, products and services in
unanticipated ways that may cause a disruption for other customers. As we acquire companies, we may encounter difficulty in incorporating
the acquired technologies, products and services, and maintaining the quality standards that are consistent with our technology, products and
services. Since our customers use our technology, products and services for important aspects of their businesses and for financial
transactions, any errors, defects, or disruptions in such technology, products and services or other performance problems with our technology,
products and services could subject our customers to financial loss and hurt our reputation.
Malicious cyber-attacks and other adverse events affecting our operational systems or infrastructure, or those of third
parties, could disrupt our businesses, result in the disclosure of confidential information, damage our reputation and cause losses or
regulatory penalties.
Our businesses require us to process and monitor, on a daily basis, a very large number of transactions, many of which are highly
complex, across numerous and diverse markets in many currencies. Developing and maintaining our operational systems and infrastructure
are challenging, particularly as a result of us and our clients entering into new businesses, jurisdictions and regulatory regimes, rapidly
evolving legal and regulatory requirements and technological shifts. Our financial, accounting, data processing or other operating and
compliance systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our
control, including malicious cyber-attack or other adverse events, which may adversely affect our ability to process these transactions or
provide services or products.
In addition, our operations rely on the secure processing, storage and transmission of confidential and other information on our
computer systems and networks. Although we take protective measures, such as software programs, firewalls and similar technology, to
maintain the confidentiality, integrity and availability of our and our customers’ information, and endeavor to modify these protective
measures as circumstances warrant, the nature of cyber threats continues to evolve. As a result, our computer systems, software and networks
may be vulnerable to unauthorized access, loss or destruction of data (including confidential customer information), account takeovers,
unavailability or disruption of service, computer viruses, acts of vandalism, or other malicious code, ransomware, hacking, phishing and other
cyber-attacks and other adverse events that could have an adverse security impact. Despite the defensive measures we have taken, these
threats may come from external forces, such as governments, nation-state actors, organized crime, hackers, and other third parties, including
outsource or infrastructure-support providers and application developers, or may originate internally from within us. Given the high volume
of transactions, certain errors may be repeated or compounded before they are discovered and rectified.
We also face the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate
our business activities, including vendors, customers, counterparties, exchanges, clearing agents, clearinghouses or other financial
intermediaries. Such parties could also be the source of a cyber-attack on or breach of our operational systems, network, data or
infrastructure.
There have been an increasing number of ransomware, hacking, phishing and other cyber-attacks in recent years in various
industries, including ours, and cyber-security risk management has been the subject of increasing focus by our regulators. Like other
companies, we have on occasion experienced, and may continue to experience, threats to our systems, including viruses, phishing and other
cyber-attacks. The number and complexity of these threats continue to increase over time. The techniques used in these attacks are
increasingly sophisticated, change frequently and are often not recognized until launched. If one or more cyber-attacks occur, it could
potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer
systems and networks, or otherwise cause interruptions or malfunctions in our, as well as our customers’ or other third parties’ operations,
which could result in reputational damage, financial losses, customer dissatisfaction and/or regulatory penalties, which may not in all cases
by covered by insurance. If an actual, threatened or perceived cyber-attack or breach of our security occurs, our clients could lose confidence
in our platforms and solutions, security measures and reliability, which would materially harm our ability to retain existing clients and gain
new clients. As a result of any such attack or breach, we may be required to expend significant resources to repair system, network or
infrastructure damage and to protect against the threat of future cyber-attacks or security breaches. We could also face litigation or other
claims from impacted individuals as well as substantial regulatory sanctions or fines.
The extent of a particular cyber- attack and the steps that we may need to take to investigate the attack may not be immediately
clear, and it may take a significant amount of time before such an investigation can be completed and full and reliable information about the
attack is known. While such an investigation is ongoing, we may not necessarily know the full extent of the harm caused by the cyber-attack,
and any resulting damage may continue to spread. Furthermore, it may not be clear how best to contain and remediate the harm caused by the
cyber-attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these
factors could further increase the costs and consequences of a cyber-attack.
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Our regulators in recent years have increased their examination and enforcement focus on all matters of our businesses, especially
matters relating to cyber-security threats, including the assessment of firms’ vulnerability to cyber-attacks. In particular, regulatory concerns
have been raised about firms establishing effective cyber-security governance and risk management policies, practices and procedures that
enable the identification of risks, testing and monitoring of the effectiveness of such procedures and adaptation to address any weaknesses;
protecting firm networks and information; data loss prevention, identifying and addressing risk associated with remote access to client
information and fund transfer requests; identifying and addressing risks associated with customers business partners, counterparties, vendors,
and other third parties, including exchanges and clearing organizations; preventing and detecting unauthorized access or activities; adopting
effective mitigation and business continuity plans to timely and effectively address the impact of cyber-security breaches; and establishing
protocols for reporting cyber-security incidents. As we enter new jurisdictions or different product area verticals, we may be subject to new
areas of risk or to cyber-attacks in areas in which we have less familiarity and tools. A technological breakdown could also interfere with our
ability to comply with financial reporting requirements. The SEC has issued guidance stating that, as a public company, we are expected to
have controls and procedures that relate to cybersecurity disclosure, and are required to disclose information relating to certain cyber-attacks
or other information security breaches in disclosures required to be made under the federal securities laws. While any insurance that we may
have that covers a specific cyber-security incident may help to prevent our realizing a significant loss from the incident, it would not protect
us from the effects of adverse regulatory actions that may result from the incident or a finding that we had inadequate cyber-security controls,
including the reputational harm that could result from such regulatory actions.
Additionally, data privacy is subject to frequently changing rules and regulations in countries where we do business. For example,
the EU adopted a new regulation that became effective in May 2018, the GDPR, which requires entities both in the European Economic Area
and outside to comply with new regulations regarding the handling of personal data. We are also subject to certain U.S. federal and state laws
governing the protection of personal data. These laws and regulations are increasing in complexity and number. In addition to the increased
cost of compliance, our failure to successfully implement or comply with appropriate processes to adhere to the GDPR and other laws and
regulations relating to personal data could result in substantial financial penalties for non-compliance, expose us to litigation risk and harm
our reputation.
Risk Relating to Our Key Personnel and Employees
Our ability to retain our key employees and the ability of certain key employees to devote adequate time and attention to us
are critical to the success of our businesses, and failure to do so may materially adversely affect our businesses, financial condition,
results of operations and prospects.
Our people are our most important resource. We must retain the services of our key employees and strategically recruit and hire new
talented employees to attract customer transactions that generate most of our revenues.
Howard W. Lutnick, who serves as our Chief Executive Officer and as Chairman of us and Newmark, is also the Chairman of the
Board, President and Chief Executive Officer of Cantor and President of CFGM, the managing partner of Cantor. Stephen M. Merkel, who
serves as our Executive Vice President and General Counsel, is employed as Executive Managing Director, General Counsel and Secretary of
Cantor and Executive Vice President and Chief Legal Officer of Newmark. In addition, Messrs. Lutnick and Merkel also hold offices at
various other affiliates of Cantor. These two key employees are not subject to employment agreements with us or any of our subsidiaries. Our
Board appointed Steven Bisgay as our Chief Financial Officer, effective January 1, 2020. Mr. Bisgay previously served as the Chief Financial
Officer of Cantor. While Mr. Bisgay will no longer be involved in Cantor’s operating businesses, including its investment bank and broker-
dealer. Mr. Bisgay continues to oversee overlapping functions such as bondholder, lender, and rating agency relations at Cantor and its
affiliates, including Newmark.
Currently, Mr. Lutnick and Mr. Merkel each typically spends at least 50% of his time on our matters, and Mr. Bisgay is expected to
spend a significant majority of his time on our matters. These percentages may vary depending on business developments at us or Newmark
or Cantor or any of our or Cantor’s other affiliates, including SPACs sponsored by Cantor and other ventures or investments. As a result,
these key employees (and others in key executive or management roles whom we may hire from time to time) dedicate only a portion of their
professional efforts to our businesses and operations, and there is no contractual obligation for them to spend a specific amount of their time
with us and/or Cantor and its affiliates. These key employees may not be able to dedicate adequate time and attention to our businesses and
operations, and we could experience an adverse effect on our operations due to the demands placed on our management team by their other
professional obligations. In addition, these key employees’ other responsibilities could cause conflicts of interest with us.
The BGC Holdings limited partnership agreement and the Newmark Holdings limited partnership agreement to the extent that our
executive officers and employees continue to hold Newmark Holdings limited partnership units following the Spin-Off, which includes non-
competition and other arrangements applicable to our key employees who are limited partners of BGC Holdings and/or Newmark Holdings,
may not prevent our key employees, including Messrs. Lutnick, Merkel and Bisgay, whose employment by Cantor is not subject to these
provisions in the limited partnership agreement, from resigning or competing against us.
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In addition, our success has largely been dependent on the efforts of Mr. Lutnick and other executive officers. Should Mr. Lutnick
leave or otherwise become unavailable to render services to us, control of us would likely pass to Cantor, and indirectly pass to the then-
controlling stockholder of CFGM (which is Mr. Lutnick), Cantor’s managing general partner, or to such other managing general partner as
CFGM would appoint, and as a result control could remain with Mr. Lutnick. If any of our key employees were to join an existing
competitor, form a competing company, offer services to Cantor or any affiliates that compete with our products, services or otherwise leave
us, some of our customers could choose to use the services of that competitor or another competitor instead of our services, which could
adversely affect our revenues and as a result could materially adversely affect our businesses, financial condition, results of operations and
prospects.
Internal Controls
Our management has identified a material weakness in our internal control over financial reporting. While the remediation
is in process, if we are unable to successfully remediate this material weakness, or if we otherwise fail to implement and maintain an
effective internal control environment, our operations, reputation and stock price could suffer, we may need to restate our financial
statements and we may be delayed in or prevented from accessing the capital markets.
As a public company, we are required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among
other things, the effectiveness of our internal control over financial reporting. This assessment is required to include disclosure of any
material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a control
deficiency or combination of control deficiencies that results in more than a remote likelihood that a material misstatement of annual or
interim financial statements will not be prevented or detected. To achieve compliance with Section 404 within the prescribed period, we will
be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.
Internal controls over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal controls
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or
detect all misstatements. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-
making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by management override of the controls. Moreover, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. As such, we could lose investor confidence in the accuracy and
completeness of our financial reports, which may have a material adverse effect on our reputation and stock price.
Our ability to identify and remediate any material weaknesses in our internal controls over financial reporting could affect our
ability to prepare financial reports in a timely manner, control our policies, procedures, operations and assets, assess and manage our
operational, regulatory and financial risks, and integrate our acquired businesses. Similarly, we need to effectively manage any growth that
we achieve in such a way as to ensure continuing compliance with all applicable control, financial reporting and legal and regulatory
requirements.
As disclosed in “Item 9A – Controls and Procedures,” management has identified a material weakness in our internal control over
financial reporting. Because of the material weakness identified, our management concluded that we did not maintain effective internal
control over financial reporting as of December 31, 2020. Management has taken immediate action to remediate the material weakness
identified. While certain remedial actions have been completed, others are in process. If we are unable to successfully remediate this material
weakness in our internal control over financial reporting, or if we otherwise fail to implement and maintain an effective internal control
environment, our operations, reputation and stock price could suffer, we may need to restate our financial statements, and we may be delayed
or prevented from accessing the capital markets.
Risks Related to Seasonality
The financial markets in which we operate are generally affected by seasonality, which could have a material adverse effect
on our results of operations in a given period.
Traditionally, the financial markets around the world experience lower volume during the summer and at the end of the year due to
a general slowdown in the business environment around holiday seasons, and, therefore, our transaction volume levels may decrease during
those periods. The timing of local holidays also affects transaction volumes. These factors could have a material effect on our results of
operations in any given period.
The seasonality of our businesses makes it difficult to determine during the course of the year whether planned results will be
achieved, and thus to adjust to changes in expectations. To the extent that we are not able to identify and adjust for changes in expectations or
we are confronted with negative conditions that inordinately impact seasonal norms, our businesses, financial condition, results of operations
and prospects could be materially adversely affected.
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Risks Related to Income Tax Regulations
We may be adversely affected by the impact of recent income tax regulations.
On December 22, 2017, the Tax Act, was signed into law in the U.S. During 2020, the Treasury and the IRS released proposed and
finalized regulations associated with certain provisions of the Tax Act to provide taxpayers with clarifying guidance. Certain provisions of
the Tax Act, such as the reduction in the Federal income tax rate from 35% to 21%is expected to have a favorable impact on the Company’s
effective tax rate and net income as reported under U.S. GAAP in 2020 and subsequent reporting periods to which the Tax Act is effective,
while other provisions, such as the Global Intangible Low Taxed Income (“GILTI”) is expected to have an unfavorable impact. We are
continuing to evaluate the Tax Act and its requirements, as well as its application to our business and impact on our effective tax rate. The
impact of the Tax Act may differ from our estimate for the provision for income taxes, possibly materially, due to, among other things,
changes in interpretations, additional guidance that may be issued, unexpected negative changes in business and market conditions that could
reduce certain tax benefits, and actions taken by the Company as a result of the Tax Act.
Risks Related to General Market Conditions
Consolidation and concentration of market share in the banking, brokerage, exchange and financial services industries
could materially adversely affect our businesses, financial condition, results of operations and prospects because we may not be able
to compete successfully.
In recent years, there has been substantial consolidation and concentration of market share among companies in the banking,
brokerage, exchange, and financial services industries, resulting in increasingly large existing and potential competitors, and increased
concentration in markets dominated by some of our largest customers. In addition, some of our large broker-dealer customers, such as
Deutsche Bank, Barclays, Goldman Sachs, and Credit Suisse, have reduced their sales and trading businesses in fixed income, currency, and
commodities. This is in addition to the reductions in these businesses already completed by customers, including Morgan Stanley, UBS, and
The Royal Bank of Scotland.
The combination of this consolidation and concentration of market share and the reduction by large customers of certain businesses
may lead to increased concentration among our brokerage customers, which may reduce our ability to negotiate pricing and other matters
with our customers and lower volumes. Additionally, the sales and trading global revenue market share has generally become more
concentrated over the past five years among five of the top investment banks across equities, fixed income, currencies, and commodities.
We also face existing and potential competition from large exchanges, which seek or may seek to migrate trading from the inter-
dealer market to their own platform. Consolidation and concentration of market share are occurring in this area as well. For example, in
recent years, CME acquired NEX; BATS Global Markets acquired the foreign-exchange trading venue, Hotspot, from KCG Holdings
(“KCG”). KCG was itself acquired by Virtu in 2017, while BATS was acquired by CBOE. In early 2018, the Intercontinental Exchange
acquired BondPoint, a provider of electronic fixed income trading solutions, from Virtu Financial. In addition, the Hong Kong Exchange and
Clearing Limited acquired the London Metal Exchange, ICE completed the acquisition of NYSE Euronext, and London Stock Exchange
completed its acquisition of Refinitiv in January 2021. Most recently, in February 2021, Tradeweb announced it had entered into a definitive
agreement to acquire Nasdaq’s U.S. fixed income electronic trading platform, formerly known as eSpeed. In 2013, BGC sold the eSpeed
platform to Nasdaq, and subsequently launched a competing platform, Fenics UST. In addition, in April of 2019, Tradeweb completed its
initial public offering, which may increase their ability to hire and acquire in competition with us. Finally, TP ICAP announced an agreement
to acquire Liquidnet, an electronic trading network, in October 2020. This transaction is expected to close in the first quarter of 2021.
Consolidation among exchanges may increase their financial resources and ability to compete with us.
Continued consolidation and concentration of market share in the financial services industry and especially among our customers
could lead to the exertion of additional pricing pressure by our customers, impacting the commissions and spreads we generate from our
brokerage services. Further, the consolidation and concentration among exchanges, and expansion by these exchanges into derivative and
other non-equity trading markets, will increase competition for customer trades and place additional pricing pressure on commissions and
spreads. These developments have increased competition from firms with potentially greater access to capital resources than we have.
Finally, consolidation among our competitors other than exchanges could result in increased resources and product or service offerings for
our competitors. If we are not able to compete successfully in the future, our businesses, financial condition, results of operations and
prospects could be materially adversely affected.
Actions taken by central banks in major global economies may have a material negative impact on our businesses.
In recent years, including in response to the COVID-19 pandemic, policies undertaken by certain central banks, such as the U.S.
Federal Reserve, the ECB, and the Bank of England, have involved quantitative easing. Quantitative easing involves open market
transactions by monetary authorities to stimulate economic activity through the purchase of assets of longer maturity and has the effect of
lowering interest rates further out on the yield curve.
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For example, as of January 27, 2021, the U.S. Federal Reserve held approximately $5.5 trillion worth of long-dated U.S. Treasury
and Federal Agency securities which are not being traded or hedged. This compares to $2.9 trillion prior to the onset of the Covid-19
pandemic, $1.7 trillion at the beginning of 2011 and zero prior to September 2008. This has reduced volatility and volumes for listed and
OTC interest rate products in the U.S. In addition, the Federal Reserve and other central banks may continue to use traditional methods to
keep short-term interest rates low by historical standards.
Similarly, global FX volumes have been muted over various periods during the past several years, largely because low interest rates
(themselves partially a result of quantitative easing) in most major economies make carry-trade strategies less appealing for FX market
participants. In addition, increased capital requirements for banks and other financial institutions are likely to result in increased holdings of
government securities, and these holdings will be less likely to be traded or hedged, thus reducing further transaction volumes in those
securities. Since the new capital requirements make it more expensive for the banks and other financial institutions to hold assets other than
government securities, the new requirements may also reduce their trading and hedging activities in corporate and asset-backed fixed income
securities as well as in various other OTC cash and derivative instruments. Moreover, many of our large bank customers have faced
increasing regulatory scrutiny of their rates and FX businesses, and this may negatively impact industry volumes. These central banking
policies may materially adversely affect our businesses, particularly our rates and FX businesses.
The migration of OTC swaps to SEF markets may adversely impact volumes, liquidity, and demand for our services in
certain markets.
BGC Derivative Markets and GFI Swaps Exchange, our subsidiaries, operate as SEFs. 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.
Although we believe that BGC Derivative Markets and GFI Swaps Exchange are in compliance with applicable rules, no assurance
can be given that this will always be the case, that the market for these products will not be less robust, that there may accordingly be less
volume and liquidity in these markets, that there may be less demand for our services or the market in general or that the industry will not
experience disruptions as customers or market participants transition to the rules associated with the Dodd-Frank Act. While we continue to
have a compliance framework in place to comply with both existing and proposed rules and regulations, including any potential relaxation of
rules and regulations, our businesses in these products could be significantly reduced and our businesses, financial condition, results of
operations and prospects could be materially adversely affected by applicable regulations.
Even after the award of permanent registration status to our SEFs, we will incur significant additional costs, our revenues
may be lower than in the past and our financial condition and results of operations may be materially adversely affected by future
events.
The Dodd-Frank Act mandated that certain cleared swaps (subject to an exemption from the clearing requirement) trade on either a
SEF or DCM. SEF and DCM core principles relate to trading and product requirements, compliance and audit-trail obligations, governance
and disciplinary requirements, operational capabilities, surveillance obligations and financial information and resource requirements. While
these principles may or may not be permanently enforced, we do know that we will be subject to a more complex regulatory framework
going forward, and that there will be significant costs to prepare for and to comply with these ongoing regulatory requirements and potential
amendments. We will incur increased legal fees, personnel expenses, and other costs, as we work to analyze and implement the necessary
legal structure for full compliance with all applicable regulations. There will also be significant costs related to the development, operation
and enhancement of our technology relating to trade execution, trade reporting, surveillance, compliance and back-up and disaster recovery
plans designed to meet the requirements of the regulators.
In addition, it is not clear at this point what the impact of these rules and regulations will be on the markets in which we currently
provide our SEF services. During the continued implementation of the Dodd-Frank Act and related rules, the markets for cleared and non-
cleared swaps may continue to be less robust, there may be less volume and liquidity in these markets and there may be less demand for our
services.
On June 25, 2020, the CFTC approved a final rule prohibiting post-trade name give-up for swaps executed, prearranged or
prenegotiated anonymously on or pursuant to the rules of a SEF and intended to be cleared. The rule provides exemptions for package
transactions that include a component transaction that is not a swap that is intended to be cleared. The rule went into effect on November 1,
2020 for swaps subject to the trade execution requirement under the Commodity Exchange Act Section 2(h)(8) and July 5, 2021 for swaps
not subject to the trade execution requirement but intended to be cleared.
Democratic Party control of both houses of Congress and the U.S. Presidency could result in new regulations. While we continue to
have a compliance framework in place to comply with both existing and proposed rules and regulations, it is possible that the existing
regulatory framework may be amended, which amendments could have a positive or negative impact on our businesses, financial condition,
results of operations and prospects.
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Certain banks and other institutions may continue to be limited in their conduct of proprietary trading and may be further limited
from trading in certain derivatives. The new rules, including the proprietary trading restrictions for certain banks and other institutions, could
materially impact transaction volumes and liquidity in these markets and our businesses, financial condition, results of operations and
prospects could be materially adversely impacted as a result.
If we fail to continue to qualify as a SEF under any of these conditions, we may be unable to maintain our position as a provider of
execution and brokerage services in the markets for many of the OTC products for which we have traditionally acted as an intermediary. This
would have a broad impact on us and could have a material adverse effect on our businesses, financial condition, results operations, and
prospects.
Our commodities derivatives activities, including those related to electricity, natural gas and environmental interests,
subject us to extensive regulation, potential catastrophic events and other risks that may result in our incurring significant costs and
liabilities.
We engage in the brokerage of commodities derivatives, including those involving electricity and natural gas, and related products
and indices. These activities subject us and our customers to extensive regulatory oversight, involving federal, state, and local and foreign
commodities, energy, environmental, and other governmental laws and regulations and may result in our incurring significant costs and
liabilities.
We or our clients may incur substantial costs in complying with current or future laws and regulations relating to our commodities-
related activities, including trading of electricity, natural gas, and environmental interests. New regulation of OTC derivatives markets in the
U.S. and similar legislation proposed or adopted abroad will impose significant new costs and new requirements on the commodities
derivatives activities of us and our customers. Therefore, the overall reputation of us or our customers may be adversely affected by the
current or future regulatory environment. Failure to comply with these laws and regulations may result in substantial civil and criminal
penalties and fines for market participants.
The commodities-related activities of us and our customers are also subject to the risk of unforeseen catastrophic events, many of
which are outside of our control, which could result in significant liabilities for us or our customers. We may not be able to obtain insurance
to cover these risks, and the insurance that we have may be inadequate to cover our liabilities. The occurrence of any of such events may
prevent us from performing under our agreements with customers, may impair our operations, and may result in litigation, regulatory action,
negative publicity or other reputational harm, which could have a material negative effect on our businesses, financial condition, results of
operations and prospects.
Risks Related to Our Insurance Brokerage Business
We face significant competitive pressures in the insurance brokerage business.
The insurance brokerage business is highly competitive, and many insurance brokerage firms actively compete with us in one or
more areas of our business. We compete with global wholesale insurance and reinsurance brokers, including Aon, Marsh & McLennan
Companies, Arthur J. Gallagher & Co., as well as numerous regional and specialist firms. Firms that we compete with may have greater
financial, technical, and marketing resources, larger customer bases, greater name recognition, stronger presence in certain geographies, or
more established relationships with their customers and suppliers than we have. In addition, new competitors in the insurance industry,
alliances among competitors, or mergers of competitors could emerge and gain significant market share. Over the past decade, private equity
sponsors have invested heavily in the insurance industry, creating new competitors, and strengthening existing ones. The insurance industry
continued to see robust market consolidation in 2020, and this trend could continue or accelerate in 2021. If we fail to respond successfully to
the competition we face, our insurance brokerage business, financial condition, results of operations and prospects could be negatively
affected.
Our ability to retain senior insurance brokerage management and key brokers is critical to the success of our insurance
brokerage business.
We rely upon the contributions of our senior insurance brokerage management team to manage the future growth of our insurance
brokerage business. The loss of any of these individuals could limit our ability to successfully execute our insurance brokerage business’
strategy or adversely affect our ability to retain existing and attract new clients. Across all our insurance brokerage businesses, brokers and
other employees are critical to developing and retaining client relationships as well as performing the services on which our revenues are
earned. Losing key brokers who manage or support substantial client relationships or possess substantial experience or expertise and/or the
managerial and other professionals who support them could adversely affect our ability to secure and complete client engagements.
Additionally, if a key insurance broker or employee were to join an existing competitor or form a competing company, some of our insurance
brokerage clients could choose to use the services of that competitor instead of our services. Competition for experienced insurance brokers
and employees is intense, and we are constantly working to retain and attract these individuals. If we cannot successfully do so, our insurance
brokerage business, financial condition, results of operations and prospects could be negatively affected.
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We may be subject to errors and omissions and other claims.
Through our insurance brokerage business, we assist our insurance brokerage customers by placing insurance and reinsurance
coverage and handling related claims. Errors and omissions (“E&O”) claims against us may allege our potential liability for damages arising
from these services. E&O claims could include, for example, the failure of our employees, whether negligently or intentionally, to place
coverage correctly or notify carriers of claims on behalf of clients or to provide insurance carriers with complete and accurate information
relating to the risks being insured. While we provide regular trainings to all our insurance brokerage staff, have a client servicing team and
have instituted a file review process with peer to peer checks, it is not always possible to prevent and detect errors and omissions. In addition,
our insurance business is subject to other types of claims, litigation, and proceedings in the ordinary course of business, which along with
E&O claims, may subject us to liability for monetary damages, negative publicity or other reputational harm.
Risks Related to Regulatory and Legal Compliance
The financial services industry in which we operate is subject to significant regulation. We are subject to regulatory capital
requirements on our regulated businesses, and a significant operating loss or any extraordinary charge against capital could
materially adversely affect our ability to expand or, depending upon the magnitude of the loss or charge, even to maintain the
current level of our businesses.
Many aspects of our businesses, like those of other financial services firms, are subject to significant capital requirements. In the
U.S., the SEC, FINRA, the CFTC, the NFA and various other regulatory bodies have stringent provisions with respect to capital applicable to
the operation of brokerage firms, which vary depending upon the nature and extent of these entities’ activities. Five of our subsidiaries,
BGCF, GFI Securities LLC, Fenics Execution LLC, Sunrise Brokers LLC and Mint are registered with the SEC and subject to the Uniform
Net Capital Requirements. As a FCM, Mint is also subject to CFTC capital requirements. In December of 2018, BGCF submitted an
application with the CFTC to withdraw its FCM license which was approved. BGCF now conducts its business as an Introducing Broker
registered with the NFA. BGCF is also a member of the FICC, which imposes capital requirements on its members. We also hold a 49%
limited partnership interest in Aqua, a U.S. registered broker-dealer and ATS. These entities are subject to SEC, FINRA, CFTC and NFA net
capital requirements. In addition, our 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.
Our international operations are also subject to capital requirements in their local jurisdictions. BGC Brokers L.P., BGC European
Holdings, L.P, GFI Brokers Limited, GFI Securities Limited and Sunrise Brokers LLP, which are based in the U.K., are currently subject to
capital requirements established by the FCA. The capital requirements of our French entities (and its EU branches) are predominantly set by
ACPR and AMF. U.K. and EU authorities apply stringent provisions with respect to capital applicable to the operation of these brokerage
firms, which vary depending upon the nature and extent of their activities. EU policymakers have introduced a new capital regime applicable
to EU Investment Firms with a phased implementation beginning in June 2021. The U.K. has introduced a regime that, while applying
different rules and methods, is largely similar in its objectives. This regime will enter into force beginning in January 2022, with a similarly
phased implementation. The impact of both regimes on our firm will be dependent on further detailed legislative requirements, which will be
published next year and in following years.
In addition, the majority of our other foreign subsidiaries are subject to similar regulation by the relevant authorities in the
jurisdictions in which they do business, such as Australia and Hong Kong. These regulations often include minimum capital requirements,
which are subject to change. Further, we may become subject to capital requirements in other foreign jurisdictions in which we currently
operate or in which we may enter.
We expect to continue to maintain levels of capital in excess of regulatory minimums. Should we fail to maintain the required
capital, we may be required to reduce or suspend our brokerage operations during the period that we are not in compliance with capital
requirements, and may be subject to suspension or revocation of registration or withdrawal of authorization or other disciplinary action from
domestic and international regulators, which would have a material adverse effect on us. In addition, should we fail to maintain the capital
required by clearing organizations of which we are a member, our ability to clear through those clearing organizations may be impaired,
which may materially adversely affect our ability to process trades.
If the capital rules are changed or expanded, or if there is an unusually large charge against capital, our operations that require the
intensive use of capital would be limited. Our ability to withdraw capital from our regulated subsidiaries is subject to restrictions, which, in
turn, could limit our ability to pay our indebtedness and other expenses, dividends on our Class A common stock, and distributions on our
BGC Holdings limited partnership interests, and to repurchase shares of our Class A common stock or purchase BGC Holdings limited
partnership interests or other equity interests in our subsidiaries, including from Cantor, our executive officers, other employees, partners and
others, and pursue strategic acquisitions or other growth opportunities. It is possible that capital requirements may also be relaxed as a result
of future changes in U.S. regulation, although no assurance can be given that such changes will occur. We cannot predict our future capital
needs or our ability to obtain additional financing. No assurance can be given that required capital levels will remain stable or that we will not
incur substantial expenses in connection with maintaining current or increased capital levels or engaging in business restructurings or other
activities in response to these requirements.
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In addition, financial services firms such as ours are subject to numerous conflicts of interests or perceived conflicts, including for
example principal trading and trading to make markets. We have adopted various policies, controls, and procedures to address or limit actual
or perceived conflicts, and we will regularly seek to review and update our policies, controls and procedures. However, these policies,
controls and procedures may result in increased costs and additional operational personnel. Failure to adhere to these policies, controls and
procedures may result in regulatory sanctions or customer claims.
Our businesses, financial condition, results of operations and prospects could be materially adversely affected by new laws,
rules, or regulations or by changes in existing law, rules or regulations or the application thereof.
The financial services industry, in general, is heavily regulated. Proposals for additional legislation further regulating the financial
services industry are periodically introduced in the U.S., the U.K., the EU, and other geographic areas. Moreover, the agencies regulating the
financial services industry also periodically adopt changes to their rules and regulations, particularly as these agencies have increased the
focus and intensity of their regulation of the financial services industry.
Changes in legislation and in the rules and regulations promulgated by the SEC, FINRA, the CFTC, the NFA, the U.S. Treasury, the
FCA, the European Commission, ESMA and other domestic and international regulators and self-regulatory organizations, as well as changes
in the interpretation or enforcement of existing laws and rules, often directly affect the method of operation and profitability of brokerage and
could result in restrictions in the way we conduct our businesses. For example, the U.S. Congress, the U.S. Treasury, the Board of Governors
of the Federal Reserve System, the SEC and the CFTC are continuing to review the nature and scope of their regulation and oversight of the
government securities markets and U.S. securities and derivative markets. Furthermore, in Europe, MiFID II was implemented in January
2018. MiFID II requires a significant part of the market in these instruments to trade on trading venues subject to pre- and post- trade
transparency regimes and non-discriminatory fee structures and access. In addition, it has had a particularly significant impact in several key
areas, including corporate governance, transaction reporting, technology synchronization, best execution and investor protection. MiFID II
also introduced a new regulated execution venue category to accompany the existing Multilateral Trading Facility regime. The new venue
category is known as an OTF, and it captures much of the voice and hybrid trading in EU. Certain of our existing EU derivatives and fixed
income execution business now take place on OTFs, and we currently operate one OTF for each of the U.K.-regulated entities, one in France
at Aurel BGC and one MTF under GFI Securities Limited. In 2019, a new European Commission took office which may over the course of
its five-year mandate or introduce new legislative proposals for the financial services sector. This will include various legislative reviews of
MIFID, which have started in 2020. After the Brexit transition period, the U.K. may introduce new Financial Services legislation, which
could deviate from EU legislation. The uncertainties resulting from the possibility of additional legislation and/or regulation could materially
adversely impact our businesses. Failure to comply with any of these laws, rules or regulations could result in fines, penalties, restrictions or
limitations on business activity, suspension, or expulsion from the industry, any of which could have a material adverse effect upon us. The
European Commission’s CSD regulation (“CSDR”) introduces mandatory buy-ins for transactions where the seller fails to deliver the
instrument contracted for in February 2022 to all transactions settled on an EU CSD. Market participants have warned for possible risks this
may pose to market liquidity. There may also be some specific risks associated with the Matched Principal trading model. These risks are
currently being addressed by various industry bodies.
Similarly, while the Volcker Rule will not apply directly to us, the Volcker Rule may have a material impact on many of the
banking and other institutions with which we do business or compete. There may be a continued uncertainty regarding the application of the
Volcker Rule, its impact on various affected businesses, how those businesses will respond to it, and the effect that it will have on the
markets in which we do business.
Other regulatory initiatives include Basel III (or the Third Basel Accord), a global regulatory standard on bank capital adequacy,
stress testing and market liquidity risk introduced by bank regulators in most, if not all, of the world’s major economies. Basel III is designed
to strengthen bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. The ongoing
adoption of these rules could restrict the ability of our large bank and brokerage customers to operate proprietary trading businesses and to
maintain current capital market exposures under the present structure of their balance sheets, and will cause these entities to need to raise
additional capital in order to stay active in our marketplaces. Meanwhile, global “Basel IV” standards will be implemented across the globe
in the years to come. Most of the requirements are expected to be implemented by national and regional authorities by around 2023, with
certain delays announced by regulators recently due to COVID-19. The adoption of these proposed rules could restrict the ability of our large
bank and broker-dealer customers to operate trading businesses and to maintain current capital market exposures under the present structure
of their balance sheets, and will cause these entities to need to raise additional capital in order to stay active in our marketplaces. As a result,
their businesses, results of operations, financial condition or prospects could be materially adversely affected, which might cause them to do
less business. Such potential impact could materially adversely affect our revenues and profitability.
Further, the authorities of the U.K. and certain EU countries may from time to time institute changes to tax law that, if applicable to
us, could have a material adverse effect on our businesses, financial condition, results of operations and prospects. Similarly, the U.S. has
proposed a series of changes to U.S. tax law, some of which could apply to us. It is not possible to predict if any of these new provisions will
be enacted or, if they are, what form they may take. It is possible that one or more of such provisions could negatively impact our costs and
our effective tax rate, which would affect our after-tax earnings. If any of such changes to tax law were implemented and/or deemed to apply
to us, they could have a material adverse effect on our businesses, financial condition, results of operations and prospects, including on our
ability to attract, compensate and retain brokers, salespeople, managers, and other professionals.
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.Democratic Party control of both houses of Congress and the U.S. Presidency could result in new regulations. While we continue to
have a compliance framework in place to comply with both existing and proposed rules and regulations, it is possible that the existing
regulatory framework may be amended, which amendments could have a positive or negative impact on our businesses, financial condition,
results of operations and prospects.
We believe that uncertainty and potential delays around the final form that such new laws and regulations might take may
negatively impact trading volumes in certain markets in which we transact. Increased capital requirements may also diminish transaction
velocity. We believe that it remains premature to know conclusively the specific aspects of the U.S., U.K. and EU proposals which may
directly impact our businesses as some proposals have not yet been finalized and others which have been proposed remain subject to further
debate. Additionally, unintended consequences of the laws, rules and regulations may adversely affect us in ways yet to be determined. We
are unable to predict how any of these new laws, rules, regulations and proposals will be implemented or in what form, or whether any
additional or similar changes to laws, rules or regulations, including the interpretation or implementation thereof, will occur in the future.
Any such action could affect us in substantial and unpredictable ways and could have a material adverse effect on our businesses, financial
condition, results of operations and prospects.
Extensive regulation of our businesses restricts and limits our operations and activities and results in ongoing exposure to
potential significant costs and penalties, including fines, sanctions, enhanced oversight, increased financial and capital requirements,
and additional restrictions or limitations on our ability to conduct or grow our businesses.
The financial services industry, including our businesses, is subject to extensive regulation, which is very costly. The requirements
imposed by regulators are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal
with us and are not designed to protect the holders of our stock, notes or other securities. These regulations will often serve to restrict or limit
our operations and activities, including through capital, customer protection and market conduct requirements.
Our businesses are subject to regulation by governmental and self-regulatory organizations in the jurisdictions in which we operate
around the world. Many of these regulators, including U.S. and non-U.S. government agencies and self-regulatory organizations, as well as
state securities commissions in the U.S., are empowered to bring enforcement actions and to conduct administrative proceedings and
examinations, inspections, and investigations, which may result in costs, penalties, fines, enhanced oversight, increased financial and capital
requirements, restrictions or limitations, and censure, suspension, or expulsion. Self-regulatory organizations such as FINRA and the NFA,
along with statutory bodies such as the SEC, the CFTC, and the FCA, and other international regulators, require strict compliance with their
rules and regulations. In addition, as a result of regulatory actions, our registration statements under the Securities Act will be subject to SEC
review prior to effectiveness, which may lengthen the time required for us to raise capital, reducing our access to the capital markets or
increasing our cost of capital.
Firms in the financial services industry, including us, have experienced increased scrutiny in recent years, and penalties, fines and
other sanctions sought by regulatory authorities, including the SEC, the CFTC, FINRA, the NFA, state securities commissions and state
attorneys general in the U.S., and the FCA in the U.K. and other international regulators, have increased accordingly. This trend toward a
heightened regulatory and enforcement environment can be expected to continue for the foreseeable future, and this environment may create
uncertainty. From time to time, we have been and are subject to periodic examinations, inspections, and investigations, including periodic
risk assessment and related reviews of our U.K. group. As a result of such reviews, we may be subject to increased monitoring and be
required to include or enhance certain regulatory structures and frameworks in our operating procedures, systems, and controls.
Increasingly, the FCA has developed a practice of requiring senior officers of regulated firms to provide individual attestations or
undertakings as to the status of the firm’s control environment, compliance with specific rules and regulations, or the completion of required
tasks. Officers of BGC Brokers L.P. and GFI Brokers Limited have given such attestations or undertakings in the past and may do so again in
the future. Similarly, the FCA can seek a voluntary requirement notice, which is a voluntary undertaking on behalf of a firm that is made
publicly available on the FCA’s website. The SMCR came into effect in the U.K. on December 9, 2019. Accountability requirements will fall
on senior managers, and a wider population of U.K. staff will be subject to certification requirements. SMCR will likely increase the cost of
compliance and will potentially increase financial penalties for non-compliance. These activities have resulted, and may in the future result,
in significant costs and remediation expenses, and possible disciplinary actions by the SEC, the CFTC, the FCA, self-regulatory organizations
and state securities administrators and have impacted, and may impact in the future, our acquisitions of regulated businesses or entry into new
business lines.
The financial services industry in general faces potential regulatory, litigation and/or criminal risks that may result in
damages or fines or other penalties as well as costs, and we may face damage to our professional reputation and legal liability if our
products and services are not regarded as satisfactory, our employees do not adhere to all applicable legal and professional
standards, or for other reasons, all of which could have a material adverse effect on our businesses, financial condition, results of
operations and prospects.
Many aspects of our current businesses involve substantial risks of liability. The expansion of our businesses, including into new
areas, imposes additional risks of liability.
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In the normal course of business, we have been a party to investigations, administrative proceedings, lawsuits, arbitrations, and
other actions involving primarily claims for damages. In certain circumstances, we could also face potential criminal investigations,
enforcement actions or liability, including fines or other penalties. Examinations, inspections, regulatory inquiries and subpoenas or other
requests for information or testimony may cause us to incur significant expenses, including fees for legal representation and other
professional advisors and costs associated with document production and remediation efforts. Such regulatory, legal, or other actions may
also be directed at certain executives or employees who may be critical to our businesses or to particular brokerage desks. The risks
associated with such matters often may be difficult to assess or quantify, and their existence and magnitude often remain unknown for
substantial periods of time.
A settlement of, or judgment related to, any such matters could result in regulatory, civil or criminal liability, fines, penalties,
restrictions or limitations on our operations and activities and other sanctions and could otherwise have a material adverse effect on our
businesses, results of operations, financial condition and prospects. Any such action could also cause us significant reputational harm, which,
in turn, could seriously harm us. In addition, regardless of the outcome of such matters, we may incur significant legal and other costs,
including substantial management time, dealing with such matters, even if we are not a party to the litigation or a target of the inquiry. For
example, in September 2019, the Company settled investigations conducted jointly by the CFTC and the NYAG which alleged that certain
emerging markets foreign exchange options (EFX options) brokers in the U.S. misrepresented that certain prices posted to their electronic
platform were immediately executable when in fact they were not and that such brokers had communicated that matches had occurred when
they had not. We have agreed to pay certain financial penalties in connection with the settlements and have agreed to a monitor for two years
to assess regulatory compliance for certain of our businesses. In addition, in September 2020, the SEC announced a settlement with BGC
regarding alleged negligent disclosure violations related to one of BGC's non-GAAP financial measures for periods beginning with the first
quarter of 2015 through the first quarter of 2016. All of the relevant disclosures related to those periods and pre-dated the SEC staff’s May
2016 detailed compliance and disclosure guidance with respect to non-GAAP presentations. BGC revised its non-GAAP presentation
beginning with the second quarter of 2016 as a result of the SEC’s guidance, and the SEC has made no allegations with regard to any periods
following the first quarter of 2016. In connection with the SEC settlement, BGC was ordered to cease and desist from any future violations of
Sections 17(a)(2) and 17(a)(3) of the Securities Act, Section 13(a) of the Exchange Act and Rule 13a-11 thereunder, and Rule 100(b) of
Regulation G, and agreed to pay a civil penalty of $1.4 million without admitting or denying the SEC’s allegations. Further, during the fourth
quarter, management identified the theft of UK tax payment related funds from the Company. The theft, which occurred over several years
ending September 2020, was perpetrated by two individuals associated with the Company, and did not involve the operations or business of
the Company. Litigation has commenced against the two individuals seeking recovery of stolen amounts. The cumulative impact to the
Company’s ”Consolidated net income (loss)” as a result of the theft was determined to be $35.2 million. The Company expects to recover
most or substantially all of the stolen funds through a combination of insurance and return of assets through litigation.
We depend to a large extent on our relationships with our customers and our reputation for integrity and high-caliber professional
services to attract and retain customers. We are subject to the risk of failure of our employees to comply with applicable laws, rules and
regulations or to be adequately supervised by their managers, and to the extent that such individuals do not meet these requirements, we may
be subject to the risk of fines or other penalties as well as reputational risk. As a result, if our customers are not satisfied with our products or
services, or our employees do not adhere to all applicable legal and professional standards, such matters may be more damaging to our
businesses than to other types of businesses. Significant regulatory action or substantial legal liability against us could have a material
adverse effect on our businesses, financial condition, results of operations and prospects, or cause significant reputational damage to us,
which could seriously harm us.
Risks Related to Competition
Because competition for the services of brokers, salespeople, managers, and other professionals, in the financial services
industry is intense, it could affect our ability to attract and retain a sufficient number of highly skilled brokers or other professional
services personnel, in turn adversely impacting our revenues, resulting in a material adverse effect on our businesses, financial
condition, results of operations and prospects.
Our ability to provide high-quality brokerage and other professional services and maintain long-term relationships with our
customers depends, in large part, upon our brokers, salespeople, managers, and other professionals. As a result, we must attract and retain
highly qualified personnel.
Competition for talent is intense, especially for brokers with experience in the specialized businesses in which we participate or we
may seek to enter. If we are unable to hire or retain highly qualified professionals, including retaining those employed by businesses we
acquire in the future, we may not be able to enter new brokerage markets or develop new products or services. If we lose one or more of our
brokers in a particular market in which we participate, our revenues may decrease, and we may lose market share.
In addition, recruitment and retention of qualified professionals could result in substantial additional costs. We have been and are
currently a party to, or otherwise involved in, several lawsuits and arbitrations involving competitor claims in connection with employee hires
and/or departures. We may also pursue our rights through litigation when competitors hire our employees who are under contract with us. We
believe such proceedings are common in the financial services industry due to its highly competitive nature. An adverse settlement or
judgment related to these or similar types of claims could have a material adverse effect on our businesses, financial condition, results of
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operations and prospects. Regardless of the outcome of these claims, we generally incur significant costs and substantial management time in
dealing with them.
If we fail to attract new personnel, or fail to retain and motivate our current personnel, or if we incur increased costs or restrictions
associated with attracting and retaining personnel (such as lawsuits, arbitrations, sign-on or guaranteed bonuses or forgivable loans), our
businesses, financial condition, results of operations and prospects could be materially adversely affected.
We face strong competition from brokerages, exchanges, and other financial services firms, many of which have greater
market presence, marketing capabilities and financial, technological and personnel resources than we have, which could lead to
pricing pressures that could adversely impact our revenues and as a result could materially adversely affect our businesses, financial
condition, results of operations and prospects.
The financial services industry is intensely competitive and is expected to remain so. We primarily compete with three major,
diversified inter-dealer brokers and financial intermediaries. These include CME, TP ICAP and Compagnie Financiere Tradition (which is
majority owned by Viel & Cie) (“Tradition”), TP ICAP and Tradition are currently publicly traded companies. Other inter-dealer broker and
financial intermediary competitors include a number of smaller, privately held firms that tend to specialize in specific products and services
or geographic areas.
We also compete with companies that provide alternative products and services, such as contracts traded on futures exchanges, and
trading processes, such as the direct dealer-to-dealer market for government securities and stock exchange markets for corporate equities,
debt and other securities. We increasingly compete, directly or indirectly, with exchanges for the execution of trades in certain products,
mainly in derivatives such as futures, swaps, options, and options on futures. Certain exchanges have made and will likely continue to make
attempts to move certain OTC-traded products to exchange-based execution, or to create listed derivatives products that mimic the qualities
of similar OTC-traded products. We also compete with consortia, which are created or funded from time to time by banks, broker-dealers and
other companies involved in financial services to compete in various markets with exchanges and inter-dealer brokers. We may compete in
OTC-traded products with platforms, such as those owned by MarketAxess Holdings Inc. and Tradeweb Markets, in fixed income products
or various OTC FX platforms owned by exchanges such as CBOE and Deutsche Börse. In addition, financial data and information firms such
as Refinitiv and Bloomberg L.P. operate trading platforms for both OTC and listed products and may attempt to compete with us for trade
execution in the future.
Some of our competitors have greater market presence, marketing capabilities and financial, technological and personnel resources
than we have and, as a result, our competitors may be able to:
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develop and expand their network infrastructures and product and service offerings more efficiently or more quickly than
we can;
adapt more swiftly to new or emerging technologies and changes in customer requirements;
identify and consummate acquisitions and other opportunities more effectively than we can;
hire our brokers, salespeople, managers and other professionals;
devote greater resources to the marketing and sale of their products and services;
more effectively leverage existing relationships with customers and strategic partners or exploit more recognized brand
names to market and sell their products and services;
provide a lower cost structure and lower commissions and fees;
provide access to trading in products or a range of products that at any particular time we do not offer; and
develop services that are preferred by our customers.
In addition, new competitors may emerge, and our product and service lines may be threatened by new technologies or market
trends that reduce the value of our existing product and service lines. If we are not able to compete successfully in the future, our revenues
could be adversely impacted, and as a result our businesses, financial condition, results of operations and prospects could be materially
adversely affected.
Competition for financial brokerage transactions also has resulted in substantial commission discounting by brokers that compete
with us for business. Further discounting could adversely impact our revenues and margins and as a result could materially adversely affect
our businesses, financial condition, results of operations and prospects.
Our operations also include the sale of pricing and transactional data and information produced by our brokerage operations to
securities information processors and/or vendors. There is a high degree of competition in pricing and transaction reporting products and
services, and such businesses may become more competitive in the future. Competitors and customers of our financial brokerage businesses
have together and individually offered market data and information products and services in competition with those offered and expected to
be offered by us.
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Risks Related to Our International Operations
We are generally subject to various risks inherent in doing business in the international financial markets, in addition to
those unique to the regulated brokerage industry, and any failure to identify and manage those risks could materially adversely
affect our businesses, financial condition, results of operations and prospects.
We currently provide products and services to customers in many foreign countries, and we may seek to further expand our
operations into additional jurisdictions. On a consolidated basis, revenues from foreign countries were approximately $1.5 billion, or
approximately 75% of total revenues for the year ended December 31, 2020. In many countries, the laws and rules and regulations applicable
to the financial services industry are uncertain and evolving, and it may be difficult for us to determine the exact requirements of local
regulations in every jurisdiction. Our inability to remain in compliance with local laws and rules and regulations in a particular foreign
jurisdiction could have a significant and negative effect not only on our businesses in that market but also on our reputation generally. If we
are unable to manage any of these risks effectively, our businesses, financial condition, results of operations and prospects could be adversely
affected.
There are also certain additional political, economic, legal, operational, and other risks inherent in doing business in international
financial markets, particularly in the regulated financial services industry. These risks include:
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less developed automation in exchanges, depositories and national clearing systems;
additional or unexpected changes in regulatory requirements, capital requirements, tariffs and other trade barriers;
the impact of the laws, rules and regulations of foreign governmental and regulatory authorities of each country in which
we conduct business, including initiatives such as Brexit;
possible nationalization, expropriation and regulatory, political and price controls;
difficulties in staffing and managing international operations;
capital controls, exchange controls and other restrictive governmental actions;
failure to develop effective compliance and reporting systems, which could result in regulatory penalties in the applicable
jurisdiction;
fluctuations in currency exchange rates;
reduced protections for intellectual property rights;
adverse labor and employment laws, including those related to compensation, tax, health insurance and benefits, and social
security;
outbreak of hostilities or mass demonstrations, pandemics, etc.; and
potentially adverse tax consequences arising from compliance with foreign laws, rules, and regulations to which our
international businesses are subject and the repatriation of overseas earnings.
Credit Risk
Credit ratings downgrades or defaults by us, Cantor or another large financial institution could adversely affect us or
financial markets generally.
The commercial soundness of many financial institutions may be closely interrelated as a result of interconnectedness arising from
credit, trading, clearing or other relationships between the institutions. A default by one of our customers could lead to liquidity concerns in
our business and, to the extent that Cantor or another entity that clears for us has difficulty meeting capital requirements or otherwise meeting
its obligations, we may need to provide our own liquidity.
As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity
problems, losses, or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial
intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we transact on a regular basis,
and therefore could adversely affect us. Similarly, our vendors, including insurance companies and other providers, are subject to normal
business risks as well as risks related to changes in U.S. and international economic and market conditions. Failure of any of these vendor
institutions could also materially, adversely affect us.
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Our credit ratings and associated outlooks are critical to our reputation and operational and financial success. Our credit ratings and
associated outlooks are influenced by a number of factors, including: operating environment, regulatory environment, earnings and
profitability trends the rating agencies’ view of our funding and liquidity management practices, balance sheet size/composition and resulting
leverage, cash flow coverage of interest, composition and size of the capital base, available liquidity, outstanding borrowing levels, our
competitive position in the industry, our relationships in the industry, including with Cantor, acquisitions or dispositions of assets and other
matters. Our credit ratings and/or the associated rating outlooks can be revised upward or downward at any time by a rating agency if such
rating agency decides circumstances of BGC or related companies warrant such a change. Any negative change or a downgrade in credit
ratings and/or the associated rating outlooks could adversely affect the availability of debt financing on acceptable terms, as well as the cost
and other terms upon which any such financing can be obtained. In addition, credit ratings and associated outlooks may be important to
customers or counterparties in certain markets and in certain transactions. Additional collateral may be required in the event of a negative
change in credit ratings or rating outlooks.
Our activities are subject to credit and performance risks, which could result in us incurring significant losses that could
materially adversely affect our businesses, financial condition, results of operations and prospects.
Our activities are subject to credit and performance risks. For example, our customers and counterparties may not deliver securities
to one of our operating subsidiaries which has sold those securities to another customer. If the securities due to be delivered have increased in
value, there is a risk that we may have to expend our own funds in connection with the purchase of other securities to consummate the
transaction. While we will take steps to ensure that our customers and counterparties have high credit standings and that financing
transactions are adequately collateralized, the large dollar amounts that may be involved in our broker-dealer and financing transactions could
subject us to significant losses if, as a result of customer or counterparty failures to meet commitments, we were to incur significant costs in
liquidating or covering our positions in the open market.
We have adopted policies and procedures to identify, monitor and manage credit and market risks, in both agency and principal
transactions, leveraging risk reporting and control procedures and by monitoring credit standards applicable to our customers and
counterparties. These policies and procedures, however, may not be fully effective, particularly against fraud, unauthorized trading, and
similar incidents. Some of these risk management methods depend upon the evaluation of information regarding markets, customers,
counterparties, or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate,
complete, up-to-date, or properly evaluated. If our policies and procedures are not fully effective or we are not always successful in
monitoring or evaluating the risks to which we are, or may be, exposed, our businesses, financial condition, results of operations and
prospects could be materially adversely affected. In addition, our insurance policies do not provide coverage for these risks.
Transactions executed on a matched principal basis where the instrument has the same or similar characteristics to the counterparty
may expose us to correlation risk. In this case, the counterparty’s inability to meet its obligations will also result in the value of the instrument
declining. For example, if we were to enter into a transaction to sell to a customer a bond or structured note where the issuer or credit support
provider was such customer’s affiliate, the value of the instrument would decline in value in tandem with the default. This correlation has the
potential effect of magnifying the credit loss.
We are subject to financing risk because, if a transaction does not settle on a timely basis, the resulting unmatched position may
need to be financed, either directly by us or through one of the clearing organizations, at our expense. These charges may be recoverable from
the failing counterparty, but sometimes they are not. In addition, in instances where the unmatched position or failure to deliver is prolonged
or widespread due to rapid or widespread declines in liquidity for an instrument, there may also be regulatory capital charges required to be
taken by us, which, depending on their size and duration, could limit our business flexibility or even force the curtailment of those portions of
our businesses requiring higher levels of capital. Credit or settlement losses of this nature could materially adversely affect our businesses,
financial condition, results of operations and prospects.
Disruptions in the financial markets have also led to the exposure of several cases of financial fraud. If we were to have trading
activity on an agency or principal basis with an entity engaged in defrauding investors or counterparties, we could bear the risk that the
counterparty would not have the financial resources to meet their obligations, resulting in a credit loss. Similarly, we may engage in financial
transactions with third parties that have been victims of financial fraud and, therefore, may not have the financial resources to meet their
obligations to us.
In agency transactions, we charge a commission for connecting buyers and sellers and assisting in the negotiation of the price and
other material terms of the transaction. After all material terms of a transaction are agreed upon, we identify the buyer and seller to each other
and leave them to settle the trade directly. We are exposed to credit risk for commissions, as we bill customers for our agency brokerage
services. Our customers may default on their obligations to us due to disputes, bankruptcy, lack of liquidity, operational failure, or other
reasons. Any losses arising from such defaults could materially adversely affect our businesses, financial condition, results of operations and
prospects.
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In emerging market countries, we primarily conduct our businesses on an agency and matched principal basis, where the
risk of counterparty default, inconvertibility events and sovereign default is greater than in more developed countries.
We enter transactions in cash and derivative instruments primarily on an agency and matched principal basis with counterparties
domiciled in countries in Latin America, Eastern Europe and Asia. Transactions with these counterparties are generally in instruments or
contracts of sovereign or corporate issuers located in the same country as the counterparty. This exposes us to a higher degree of sovereign or
convertibility risk than in more developed countries. In addition, these risks may entail correlated risks. A correlated risk arises when the
counterparty’s inability to meet its obligations also corresponds to a decline in the value of the instrument traded. In the case of a sovereign
convertibility event or outright default, the counterparty to the trade may be unable to pay or transfer payment of an instrument purchased out
of the country when the value of the instrument has declined due to the default or convertibility event. The global financial crisis of recent
years has heightened the risk of sovereign or convertibility events in emerging markets similar to the events that occurred in previous
financial downturns. Our risk management function monitors the creditworthiness of emerging countries and counterparties on an ongoing
basis and, when the risk of inconvertibility or sovereign default is deemed to be too great, correlated transactions or all transactions may be
restricted or suspended. However, there can be no assurance that these procedures will be effective in controlling these risks.
Concentration and Market Risk
The rates business is our largest product category, and we could be significantly affected by any downturn in the rates
product market.
We offer our brokerage services in six broad product categories: rates, credit, FX, energy and commodities, insurance, and equity
derivatives and cash equities. Our brokerage revenues are strongest in our rates products, which accounted for approximately 28.3% of our
total brokerage revenues on a consolidated basis for the year ended December 31, 2020. While we focus on expanding and have successfully
diversified our product offerings, we may currently be exposed to any adverse change or condition affecting the rates product market.
Accordingly, the concentration of our brokerage businesses on rates products subjects our results to a greater market risk than if we had more
diversified product offerings.
Due to our current customer concentration, a loss of one or more of our significant customers could materially harm our
businesses, financial condition, results of operations and prospects.
For the year ended December 31, 2020, on a consolidated basis, our top ten customers, collectively, accounted for approximately
27.8% of our total revenues. We have limited long-term contracts with certain of these customers. If we were to lose one or more of these
significant customers for any reason, including as a result of further consolidation and concentration in the financial services industry, and not
be compensated for such loss by doing additional business with other customers or by adding new customers, our revenues would decline
significantly and our businesses, financial condition, results of operations and prospects would materially suffer.
Our revenues and profitability could be reduced or otherwise materially adversely affected by pricing plans relating to
commissions and fees on our trading platform.
We negotiate from time to time with certain customers (including many of our largest customers) to enter into customized volume
discount pricing plans. While the pricing plans are designed to encourage customers to be more active on our Fully Electronic trade execution
platform, they reduce the amount of commissions and fees payable to us by certain of our most active customers for certain products, which
could reduce our revenues and constrain our profitability. From time to time, these pricing plans come up for renewal. Failure of a number of
our larger customers to enter into renewed agreements, or agreements on terms as favorable as existing agreements, could have a material
adverse effect on volumes on our Fully Electronic trade execution platform, the commissions payable to us, our revenues and our
profitability.
Reduced spreads in pricing, levels of trading activity and trading through market makers and/or specialists could materially
adversely affect our businesses, financial condition, results of operations and prospects.
Computer-generated buy/sell programs and other technological advances and regulatory changes in the marketplace may continue
to tighten securities spreads. In addition, new and enhanced alternative trading systems, such as electronic communications networks, have
emerged as alternatives for individual and institutional investors, as well as brokerage firms. As such systems do not direct trades through
market makers, their use could result in reduced revenues for us or for our customers. In addition, reduced trading levels could lead to lower
revenues which could materially adversely affect our businesses, financial condition, results of operations and prospects.
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We have market risk exposure from unmatched principal transactions entered into by some of our desks, as well as holdings
of marketable equity securities, which could result in losses and have a material adverse effect on our businesses, financial condition,
results of operations, and prospects for any particular reporting period. In addition, financial fraud or unauthorized trading activity
could also adversely impact our businesses, financial condition, results of operations and prospects.
On a limited basis, our desks enter into unmatched principal transactions in the ordinary course of business to facilitate transactions,
add liquidity, improve customer satisfaction, increase revenue opportunities and attract additional order flow or, in certain instances, as the
result of an error. As a result, we have market risk exposure on these unmatched principal transactions.
Market risk refers to the risk that a change in the level of one or more market prices, rates, indices or other factors will result in
losses for a specified position. We may allow certain of our desks to enter into unmatched principal transactions in the ordinary course of
business and hold long and short inventory positions. These transactions are primarily for the purpose of managing proprietary positions,
facilitating customer execution needs, adding liquidity to a market or attracting additional order flow. As a result, we may have market risk
exposure on these transactions. Our exposure varies based on the size of the overall position, the terms and liquidity of the instruments
brokered and the amount of time the position is held before we dispose of the position. Although we have limited ability to track our
exposure to market risk and unmatched positions on an intra-day basis, we attempt to mitigate market risk on these positions by strict risk
limits, extremely limited holding periods and active risk management, including hedging our exposure. These positions are intended to be
held short term, and generally to facilitate customer transactions. However, due to a number of factors, including the nature of the position
and access to the market on which it trades, we may not be able to unwind the position and we may be forced to hold the position for a longer
period than anticipated. All positions held longer than intra-day are marked to market.
Certain categories of trades settle for clearing purposes with CF&Co, one of our affiliates. CF&Co is a member of FINRA and the
FICC, a subsidiary of the Depository Trust & Clearing Corporation. In addition, certain affiliated entities are subject to regulation by the
CFTC, including CF&Co and BGC Financial. In certain products we, CF&Co, BGC Financial and other affiliates act in a matched principal
or principal capacity in markets by posting and/or acting upon quotes for our account. Such activity is intended, among other things, to assist
us, CF&Co, and other affiliates in managing proprietary positions (including, but not limited to, those established as a result of combination
trades and errors), facilitating transactions, framing markets, adding liquidity, increasing commissions and attracting order flow.
From a risk management perspective, we monitor risk daily, on an end-of-day basis, and desk managers generally monitor such
exposure on a continuous basis. Any unmatched positions are intended to be disposed of in the short term. However, due to a number of
factors, including the nature of the position and access to the markets on which we trade, we may not be able to match the position or
effectively hedge its exposure and often may be forced to hold a position overnight that has not been hedged. To the extent these unmatched
positions are not disposed of intra-day, we mark these positions to market. Adverse movements in the market values of assets or other
reference benchmarks underlying these positions or a downturn or disruption in the markets for these positions could result in a loss. In the
event of any unauthorized trading activity or financial fraud that is not detected by management, it is possible that these unmatched positions
could be outstanding for a long period. At the time of any sales and settlements of these positions, the price we ultimately realize will depend
on the demand and liquidity in the market at that time and may be materially lower than their current fair values. In addition, our estimates or
determinations of the values of our various positions, assets or businesses are subject to the accuracy of our assumptions and the valuation
models or multiples used. Any principal losses and gains resulting from these positions could on occasion have disproportionate effects,
negative or positive, on our businesses, financial condition, results of operations and prospects for any particular reporting period.
In addition, in recent years we have had considerable holdings of marketable securities received by us as consideration for the sale
of certain businesses. We may seek to manage the market risk exposure inherent in such holdings by minimizing the effect of price changes
on a portion of such holdings, including through the use of derivative contracts. There can, however, be no assurance that our hedging
activities will be adequate to protect us against price risks associated with these holdings, or that the costs of such hedging activities will not
be significant. Further, any such hedging activities and other risk management techniques may not be fully effective in mitigating our risk
exposure in all market environments or against all types of risk, including unpredicted price movements, counterparty defaults or other risks
that are unidentified or unanticipated. Any such events could have a material adverse effect on our businesses, financial condition, results of
operations and prospects.
We may have equity investments or profit sharing interests in entities whose primary business is proprietary trading. These
investments could expose us to losses that could adversely affect our net income and the value of our assets.
We may have equity investments or profit sharing interests in entities whose primary business is proprietary trading. The accounting
treatment applied for these investments varies depending on a number of factors, including, but not limited to, our percentage ownership or
profit share and whether we have any influence or control over the relevant entity. Under certain accounting standards, any losses
experienced by these entities on their investment activities could adversely impact our net income and the value of our assets. In addition, if
these entities were to fail and cease operations, we could lose the entire value of our investment and the stream of any shared profits from
trading.
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Other General Risks
Our operations are global and exchange rate fluctuations and international market events could materially adversely impact
our businesses, financial condition, results of operations and prospects.
Because our operations are global, we are exposed to risks associated with changes in FX rates. Changes in foreign currency rates
create volatility in the U.S. dollar equivalent of revenues and expenses, in particular with regard to British Pounds and Euros. In addition,
changes in the remeasurement of our foreign currency denominated net assets are recorded as part of our results of operations and fluctuate
with changes in foreign currency rates. We monitor our net exposure in foreign currencies on a daily basis and hedge our exposure as deemed
appropriate with major financial institutions. However, potential movements in the U.S. dollar against other currencies in which we earn
revenues could materially adversely affect our financial results.
Furthermore, our revenues derived from non-U.S. operations are subject to risk of loss from social or political instability, changes in
government policies or policies of central banks, downgrades in the credit ratings of sovereign countries, expropriation, nationalization,
confiscation of assets and unfavorable legislative, political developments, and other events in such non-U.S. jurisdictions. Revenues from the
trading of non-U.S. securities may be subject to negative fluctuations as a result of the above factors. The impact of these fluctuations on our
results could be magnified because generally non-U.S. trading markets, particularly in emerging market countries, are smaller, less liquid and
more volatile than U.S. trading markets.
Employee misconduct, fraud, miscommunication or error could harm us by impairing our ability to attract and retain
customers and subjecting us to significant financial losses, legal liability, regulatory sanctions and penalties and reputational harm;
moreover, misconduct is difficult to detect and deter, and error is difficult to prevent.
Employee misconduct, fraud or error could subject us to financial losses, legal liability, and regulatory sanctions and penalties and
could seriously harm our reputation and negatively affect us. Misconduct or fraud by employees could include engaging in improper or
unauthorized transactions or activities, failing to properly supervise other employees or improperly using confidential information.
Employee errors and miscommunication, including mistakes in executing, recording or processing transactions for customers, could
cause us to enter into transactions that customers may disavow and refuse to settle, which could expose us to the risk of material losses even
if the errors and miscommunication are detected and the transactions are unwound or reversed. If our customers are not able to settle their
transactions on a timely basis, the time in which employee errors and miscommunication are detected may be increased and our risk of
material loss could be increased. The risk of employee error and miscommunication may be greater for products or services that are new or
have non-standardized terms.
It is not always possible to deter and detect employee misconduct or fraud or prevent errors and miscommunications. While we
have various supervisory systems and compliance processes and procedures in place, and seek to mitigate applicable risks, the precautions we
take to deter and detect and prevent this activity may not be effective in all cases.
Although portions of our compensation structure are variable, significant parts of our cost structure are fixed, and if our
revenues decline and we are unable to reduce our costs in the amount that our revenues decline, our profitability could be materially
adversely affected.
Although portions of our compensation structure are variable, significant parts of our cost structure are fixed. We base our overall
cost structure on historical and expected levels of demand for our products and services. If demand for these products and services and our
resulting revenues decline, we may not be able to adjust our cost structure on a timely basis. If we are unable to reduce our costs in the
amount that our revenues decline, our profitability could be materially adversely affected.
RISKS RELATED TO OUR CORPORATE AND PARTNERSHIP STRUCTURE
Risks Related to Our Corporate Structure
Because our voting control is concentrated among the holders of our Class B common stock, the market price of our Class A
common stock may be materially adversely affected by its disparate voting rights.
As of February 25, 2021, Cantor (including CFGM) beneficially owned all of the outstanding shares of our Class B common stock,
representing approximately 58.6% of our total voting power. In addition, Cantor has the right to exchange exchangeable partnership interests
in BGC Holdings into additional shares of our Class B common stock, and pursuant to an exchange agreement with us, Cantor has the right to
exchange shares of our Class A common stock for additional shares of our Class B common stock.
As long as Cantor beneficially owns a majority of our total voting power, it will have the ability, without the consent of the public
holders of our Class A common stock, to elect all of the members of our Board and to control our management and affairs. In addition, it will
be able to determine the outcome of matters submitted to a vote of our stockholders for approval and will be able to cause or prevent a change
of control of us. In certain circumstances, such as when transferred to an entity controlled by Cantor or Mr. Lutnick, the shares of our Class B
common stock issued to Cantor may be transferred without conversion to our Class A common stock.
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The holders of our Class A common stock and Class B common stock have substantially identical rights, except that holders of
Class A common stock are entitled to one vote per share, while holders of Class B common stock are entitled to 10 votes per share on all
matters to be voted on by stockholders in general. BGC Class B common stock is controlled by Cantor and is not subject to conversion or
termination by our Board or any committee thereof, or any other stockholder or third party. This differential in the voting rights of our Class
B common stock could adversely affect the market price of our Class A common stock.
The possible restructuring of our partnership into a corporation is subject to various risks and uncertainties, may not be
completed in the anticipated timeline, or at all, may not achieve the anticipated benefits, and will involve significant time and
expense, potential tax or accounting charges and management attention, which could negatively impact our businesses, financial
condition, results of operations and prospects.
We continue to explore a possible conversion into a simpler corporate structure, weighing any significant change in taxation policy.
In particular, the Company is awaiting insight into future U.S. Federal tax policies, which remain uncertain after the results of the U.S.
elections. Should the Company decide to move forward with a corporate conversion it will work with regulators, lenders, and rating agencies,
and BGC’s board and committees will review potential transaction arrangements.
Any such restructuring is subject to various risks and uncertainties. There can be no assurance as to whether management will make
a proposal or whether the Board will accept management’s proposal, whether the restructuring will be completed in accordance with the
expected timeline or whether it will achieve its anticipated benefits. Other factors such as changes in legal, tax, regulatory, political or other
regimes could impact the potential transaction. If such transaction is completed, there can be no assurance that (i) our brokers and other
employees, the rating agencies, our lenders, our bondholders, our investors, our counterparties, our clients, or others will view our new
structure favorably, (ii) that the new structure will have the expected retentive effect on said employees or (iii) it will have the expected
impact on our GAAP or non-GAAP results, cash position, cash or non-cash accounting charges, or other factors. Furthermore, the
restructuring will involve significant time, expense and management attention. Any of these factors or others could negatively affect our
businesses, financial condition, results of operations and prospects.
Delaware law may protect decisions of our Board that have a different effect on holders of our Class A common stock and Class
B common stock.
Stockholders may not be able to challenge decisions that have an adverse effect upon holders of our Class A common stock
compared to holders of our Class B common stock if our Board acts in a disinterested, informed manner with respect to these decisions, in
good faith and in the belief that it is acting in the best interests of our stockholders. Delaware law generally provides that a Board owes an
equal duty to all stockholders, regardless of class or series, and does not have separate or additional duties to different groups of stockholders,
subject to applicable provisions set forth in a corporation’s certificate of incorporation and general principles of corporate law and fiduciary
duties.
Delaware law, our corporate organizational documents and other requirements may impose various impediments to the
ability of a third party to acquire control of us, which could deprive investors in our Class A common stock of the opportunity to
receive a premium for their shares.
We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a
third party to acquire control of us, even if a change of control would be beneficial to our Class A stockholders. Some provisions of the
Delaware General Corporation Law (the “DGCL”), our restated certificate of incorporation, and our amended and restated bylaws could
make the following more difficult:
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acquisition of us by means of a tender offer;
acquisition of us by means of a proxy contest or otherwise; or
removal of our incumbent officers and directors.
These provisions, summarized below, may discourage coercive takeover practices and inadequate takeover bids. These provisions
may also encourage persons seeking to acquire control of us to first negotiate with our Board. We believe that the benefits of increased
protection give us the potential ability to negotiate with the initiator of an unfriendly or unsolicited proposal to acquire or restructure us and
outweigh the disadvantages of discouraging those proposals because negotiation of them could result in an improvement of their terms.
Our amended and restated bylaws provide that special meetings of stockholders may be called only by the Chairman of our Board,
or in the event the Chairman of our Board is unavailable, by the Chief Executive Officer or by the holders of a majority of the voting power
of our Class B common stock, which is held by Cantor and CFGM. In addition, our restated certificate of incorporation permits us to issue
“blank check” preferred stock.
Our amended and restated bylaws require advance written notice prior to a meeting of our stockholders of a proposal or director
nomination which a stockholder desires to present at such a meeting, which generally must be received by our Secretary not later than 120
60
days prior to the first anniversary of the date of our proxy statement for the preceding year’s annual meeting. In the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be
so delivered not later than the close of business on the later of the 120th day prior to the date of such proxy statement or the tenth day
following the day on which public announcement of the date of such meeting is first made by us. Our bylaws provide that all amendments to
our bylaws must be approved by either the holders of a majority of the voting power of all of our outstanding capital stock entitled to vote or
by a majority of our Board.
We are subject to Section 203 of the DGCL. In general, Section 203 of the DGCL prohibits a publicly held Delaware corporation
from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date the person became
an interested stockholder, unless the “business combination” or the transaction in which the person became an “interested stockholder” is
approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a
financial benefit to the “interested stockholder.” An “interested stockholder” is a person who, together with affiliates and associates, owns
15% or more of a corporation’s outstanding voting stock, or was the owner of 15% or more of a corporation’s outstanding voting stock at any
time within the prior three years, other than “interested stockholders” prior to the time our Class A common stock was traded on Nasdaq. The
existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by our
Board, including discouraging takeover attempts that might result in a premium over the market price for shares of our Class A common
stock.
In addition, our brokerage businesses are heavily regulated and some of our regulators require that they approve transactions which
could result in a change of control, as defined by the then-applicable rules of our regulators. The requirement that this approval be obtained
may prevent or delay transactions that would result in a change of control.
Further, our Equity Plan contains provisions pursuant to which grants that are unexercisable or unvested may automatically become
exercisable or vested as of the date immediately prior to certain change of control events. Additionally, change in control and employment
agreements between us and our named executive officers also provide for certain grants, payments, and grants of exchangeability, and
exercisability in the event of certain change of control events.
The foregoing factors, as well as the significant common stock ownership by Cantor, including shares of our Class B common
stock, and rights to acquire additional such shares, and the provisions of the indentures for our outstanding notes discussed above, could
impede a merger, takeover or other business combination or discourage a potential investor from making a tender offer for our Class A
common stock, which, under certain circumstances, could reduce the market value of the Class A common stock.
The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
S&P Dow Jones and FTSE Russell previously announced changes to their eligibility criteria for inclusion of shares of public
companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares of common stock from being
added to such indices or limit their inclusion in them. In addition, several shareholder advisory firms have announced their opposition to the
use of multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A common
stock in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or
otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our
Class A common stock. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital
structure could also adversely affect the value of our Class A common stock.
We are a holding company, and accordingly we are dependent upon distributions from BGC U.S. OpCo and BGC Global
OpCo to pay dividends, taxes and indebtedness and other expenses and to make repurchases.
We are a holding company with no direct operations and will be able to pay dividends, taxes and other expenses, and to make
repurchases of shares our Class A common stock and purchases of BGC Holdings limited partnership interests or other equity interests in us
or in our subsidiaries, only from our available cash on hand and funds received from distributions, loans or other payments, primarily from
BGC U.S. OpCo and BGC Global OpCo. As discussed above, regulatory, tax restrictions or elections, and other legal or contractual
restrictions may limit our ability to transfer funds freely from our subsidiaries. In addition, any unanticipated accounting, tax or other charges
against net income could adversely affect our ability to pay dividends and to make repurchases.
BGC U.S. OpCo and BGC Global OpCo intend to distribute to their limited partners, including us, on a pro rata and quarterly basis,
cash that is not required to meet BGC U.S. OpCo’s and BGC Global OpCo’s anticipated business and regulatory needs. As a result, BGC
U.S. OpCo’s and BGC Global OpCo’s ability, and in turn our ability, to pay dividends, taxes and indebtedness and other expenses and to
make repurchases will depend upon the continuing profitability and strategic and operating needs of our businesses, including various capital
adequacy and clearing capital requirements promulgated by federal, self-regulatory, and other authorities to which our subsidiaries are
subject.
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BGC’s 2021 capital allocation priorities are to return capital to stockholders and to continue investing in its high growth Fenics
businesses. BGC plans to prioritize share and unit repurchases over dividends and distributions. The Company plans to reassess its current
dividend and distribution with an aim to nominally increase it toward the end of the year.
Traditionally, our dividend policy provides that we expect to pay a quarterly cash dividend to our common stockholders based on
our post-tax Adjusted Earnings per fully diluted share. Please see below for a detailed definition of post-tax Adjusted Earnings per fully
diluted share. Beginning in the first quarter of 2020, and for all of the quarterly periods in 2020, the Board reduced the quarterly dividend to
$0.01 per share out of an abundance of caution in order to strengthen the Company’s balance sheet as the global capital markets faced
difficult and unprecedented macroeconomic conditions related to the global pandemic. Additionally, during 2020, BGC Holdings, L.P.
reduced its distributions to or on behalf of its partners. BGC plans to reassess its current dividend and distribution with an aim to nominally
increase it toward the end of the year. BGC believes that these steps will allow the Company to maintain its financial strength.
Any dividends, if and when declared by our Board, will be paid on a quarterly basis. The dividend to our common stockholders is
expected to be calculated based on post-tax Adjusted Earnings allocated to us and generated over the fiscal quarter ending prior to the record
date for the dividend. No assurance can be made, however, that a dividend will be paid each quarter. The declaration, payment, timing, and
amount of any future dividends payable by us will be at the sole discretion of our Board. With respect to any distributions which are declared,
amounts paid to or on behalf of partners will at least cover their related tax payments. Whether any given post-tax amount is equivalent to the
amount received by a stockholder also on an after tax basis depends upon stockholders’ and partners’ domiciles and tax status.
We are a holding company, with no direct operations, and therefore we are able to pay dividends only from our available cash on
hand and funds received from distributions from BGC U.S. OpCo and BGC Global OpCo. Our ability to pay dividends may also be limited
by regulatory considerations as well as by covenants contained in financing or other agreements. In addition, under Delaware law, dividends
may be payable only out of surplus, which is our net assets minus our capital (as defined under Delaware law), or, if we have no surplus, out
of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Accordingly, any unanticipated
accounting, tax, regulatory or other charges against net income may adversely affect our ability to declare and pay dividends. While we
intend to declare and pay dividends quarterly, there can be no assurance that our Board will declare dividends at all or on a regular basis or
that the amount of our dividends will not change.
Our Board and our Audit Committee have authorized repurchases of shares of BGC Class A common stock and purchases of BGC
Holdings limited partnership interests or other equity interests in us or in subsidiaries, from Cantor, our executive officers, other employees,
partners and others. On August 1, 2018, our Board renewed and increased the authorization to $300 million. As of December 31, 2020, we
had approximately $249.9 million remaining under this authorization and may continue to actively make repurchases or purchases, or cease
to make such repurchases or purchases, from time to time. In addition, from time to time, we may reinvest all or a portion of the distributions
we receive from BGC U.S. OpCo and BGC Global OpCo in our businesses. Accordingly, there can be no assurance that future dividends will
be paid or that dividend amounts will be maintained or that repurchases and purchases will be made at current or future levels.
Reductions in our quarterly cash dividend and corresponding reductions in distributions by BGC Holdings to its partners
may reduce the value of our common stock and the attractiveness of our equity-based compensation and limit the ability of our
partners to repay employee loans.
Our Board has authorized a dividend policy which provides that we expect to pay a quarterly cash dividend to our common
stockholders based on our post-tax Adjusted Earnings per fully diluted share. On February 23, 2021, our Board declared a quarterly qualified
cash dividend of $0.01 per share to Class A and Class B common stockholders of record as of March 16, 2021. Our Board took the step in the
first quarter of 2020 of reducing the quarterly dividend from the previous $0.10 per share in order to strengthen our balance sheet as the
global capital markets face difficult and unprecedented macroeconomic conditions due to the COVID-19 pandemic. We cannot predict the
duration of the current economic slowdown and its impact on our future quarterly dividend payments. Investors seeking a high short-term
dividend yield may find our Class A common stock less attractive than securities of issuers continuing to pay larger dividends.
Our ability to pay dividends is dependent upon our available cash on hand and funds received from distributions, loans or other
payments from BGC U.S. OpCo and BGC Global OpCo. The BGC OpCos intend to distribute to its limited partners, including us, on a pro
rata and quarterly basis, cash in an amount that will be determined by BGC Holdings, their general partner, of which we are the general
partner. The BGC OpCos’ ability, and in turn our ability, to make such distributions will depend upon the continuing profitability and
strategic and operating needs of our business. We may not pay the same dividend to our shares as the distribution paid by the BGC OpCos to
their limited partners.
Additionally, beginning with the first quarter of 2020 and for the foreseeable future, BGC Holdings has reduced its distributions to
or on behalf of its partners. The distributions to or on behalf of partners will at least cover their related tax payments. Whether any given post-
tax amount is equivalent to the amount received by a stockholder also on an after-tax depends upon stockholders’ and partners’ domiciles and
tax status. Current or potential partners may find our equity-based compensation structure less attractive as a result. Moreover, we have
entered into various agreements with certain partners, whereby these partners receive loans that may be either wholly or in part repaid from
distributions that the partners receive on some or all of their limited partner units or may be forgiven over a period of time. The reduction in
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BGC Holdings distributions may adversely affect the ability of such partners to repay such loans. The inability of partners to repay the loans
may require us to forgive a greater portion of such loans, increasing our compensation expense.
We believe that these actions reinforce the Company’s ability to maintain financial flexibility during the pandemic and emerge from
the crisis with market share gains, but we cannot assure you that such steps will prevent a decline in our financial condition. The Company
plans to reassess its current dividend and distribution during year with an aim to nominally increase it from current levels. We may also
repurchase shares of our common stock or purchase BGC Holdings limited partnership interests or other equity interests in our subsidiaries,
including from Cantor or our executive officers, other employees, partners and others, or cease to make such repurchases or purchases, from
time to time. In addition, from time to time, we may reinvest all or a portion of the distributions we receive in the BGC OpCos’ businesses.
Accordingly, there can be no assurance that future dividends will be paid, that dividend amounts will be maintained or that repurchases or
purchases will be made at current or future levels. See “Item 5-Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities-Dividend Policy.”
If our dividend policy is materially different than the distribution policy of BGC Holdings, upon the exchange of any BGC
Holdings limited partnership interests such BGC Holdings limited partners could receive a disproportionate interest in the aggregate
distributions by BGC U.S. OpCo and BGC Global OpCo that have not been distributed by us.
To the extent BGC Holdings distributes to its limited partners a greater share of that income that it receives from BGC U.S. OpCo
and BGC Global OpCo than we distribute to our stockholders, then as founding/working partners, limited partnership unit holders and/or
Cantor exercise any exchange right to acquire our Class A common stock or Class B common stock, as applicable, exchanging partners may
receive a disproportionate interest in the aggregate distributions by BGC U.S. OpCo and BGC Global OpCo that have not been distributed by
us. The reason is that the exchanging partner could receive both (1) the benefit of the distribution that has not been distributed by us that we
received from BGC U.S. OpCo and BGC Global OpCo to BGC Holdings (in the form of a distribution by BGC Holdings to its limited
partners) and (2) the benefit of the distribution from BGC U.S. OpCo and BGC Global OpCo to us (in the form of a subsequent cash dividend
paid by us, a greater percentage indirect interest in BGC U.S. OpCo and BGC Global OpCo following a repurchase of BGC Class A common
stock by us or a greater value of assets following a purchase of assets by us with the cash that otherwise would be distributed to our
stockholders). Consequently, if our dividend policy does not match the level of the distribution policy of BGC Holdings, other holders of
BGC Class A common stock and BGC Class B common stock as of the date of an exchange could experience a reduction in their interest in
the profits previously distributed by BGC U.S. OpCo and BGC Global OpCo that have not been distributed by us. Our current dividend
policy could result in distributions to our common stockholders that are different from the distributions made by BGC Holdings to its unit
holders.
If we or BGC Holdings were deemed an “investment company” under the Investment Company Act, the Investment
Company Act’s restrictions could make it impractical for us to continue our businesses and structure as contemplated and could
materially adversely affect our businesses, financial condition, results of operations, and prospects.
Generally, an entity is deemed an “investment company” under Section 3(a)(1)(A) of the Investment Company Act if it is primarily
engaged in the business of investing, reinvesting, or trading in securities, and is deemed an “investment company” under Section 3(a)(1)(C)
of the Investment Company Act if it owns “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of
U.S. Government Securities and cash items) on an unconsolidated basis. We believe that neither we nor BGC Holdings should be deemed an
“investment company” as defined under Section 3(a)(1)(A) because neither of us is primarily engaged in the business of investing,
reinvesting, or trading in securities. Rather, through our operating subsidiaries, we and BGC Holdings are primarily engaged in the operation
of various types of brokerage businesses as described in this report. Neither we nor BGC Holdings is an “investment company” under Section
3(a)(1)(C) because more than 60% of the value of our total assets on an unconsolidated basis are interests in majority-owned subsidiaries that
are not themselves “investment companies.” In particular, our BGC brokerage subsidiaries are entitled to rely on, among other things, the
broker-dealer/market intermediary exemption in Section 3(c)(2) of the Investment Company Act.
To ensure that we and BGC Holdings are not deemed “investment companies” under the Investment Company Act, we need to be
primarily engaged, directly or indirectly, in the non-investment company businesses of our operating subsidiaries. If we were to cease
participation in the management of BGC Holdings, if BGC Holdings, in turn, were to cease participation in the management of the BGC
OpCos, or if the BGC OpCos, in turn, were to cease participation in the management of our BGC operating subsidiaries, that would increase
the possibility that we and BGC Holdings could be deemed “investment companies.” Further, if we were deemed not to have a majority of
the voting power of BGC Holdings (including through our ownership of the Special Voting Limited Partnership Interest), if BGC Holdings,
in turn, were deemed not to have a majority of the voting power of the BGC OpCos (including through its ownership of Special Voting
Limited Partnership Interests), or if the BGC OpCos, in turn, were deemed not to have a majority of the voting power of our BGC operating
subsidiaries, that would increase the possibility that we and BGC Holdings could be deemed “investment companies,” our interests in BGC
Holdings and the BGC OpCos could be deemed “investment securities,” and we and BGC Holdings could be deemed “investment
companies.”
We expect to take all legally permissible action to ensure that we and BGC Holdings are not deemed investment companies under
the Investment Company Act, but no assurance can be given that this will not occur.
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The Investment Company Act and the rules thereunder contain detailed prescriptions for the organization and operations of
investment companies. Among other things, the Investment Company Act and the rules thereunder limit or prohibit transactions with
affiliates, limit the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements.
If anything were to happen that would cause us or BGC Holdings to be deemed to be an “investment company” under the Investment
Company Act, the Investment Company Act would limit our or its capital structure, ability to transact business with affiliates (including
Cantor, BGC Holdings or the BGC OpCos as the case may be), and ability to compensate key employees. Therefore, if we or BGC Holdings
became subject to the Investment Company Act, it could make it impractical to continue our businesses in this structure, impair agreements
and arrangements, and impair the transactions contemplated by those agreements and arrangements, between and among us, BGC Holdings
and the BGC OpCos, or any combination thereof, and materially adversely affect our businesses, financial condition, results of operations,
and prospects.
Risks Related to Our Partnership and Equity-Based Compensation Structure
Our equity-based compensation structure may adversely affect our ability to recruit, retain, compensate and motivate some
employee partners.
While we believe that our emphasis on equity-based compensation promotes recruitment, motivation of our brokers and other
employees and alignment of interest with shareholders, such employee may be more attracted to the benefits of working at a privately
controlled partnership, or at a public company with a different compensation structure than our own, which may adversely affect our ability
to recruit, retain, compensate and motivate these persons. While BGC Holdings limited partnership interests entitle founding/working and
other limited partners to participate in distributions of income from the operations of our businesses, upon leaving BGC Holdings (or upon
any other purchase of such limited partnership interests, as described below), any such founding/working or other limited partners are, unless
Cantor, in the case of the founding partners, and us, as the general partner of BGC Holdings, otherwise determine, only entitled to receive
over time, and provided he or she does not violate certain partner obligations, an amount for his or her BGC Holdings limited partnership
interests that reflects such partner’s capital account or post-termination amount, if any, and not any goodwill or going concern value of our
businesses. Further, certain partner units have no right to a post-termination payment, receive a preferred but fixed distribution amount,
and/or cannot be made exchangeable into shares of our Class A common stock. Moreover, unless and until units are made exchangeable,
limited partners have no unilateral right to exchange their BGC Holdings limited partnership interests for shares of BGC Class A common
stock.
The BGC Holdings limited partnership interests are also subject to redemption, and subject founding/working and other limited
partners to non-competition and non-solicitation covenants, as well as other obligations. In addition, the exercise of Cantor’s right to purchase
from BGC Holdings exchangeable limited partnership interests generally when FPUs are redeemed or granted exchangeability will result in
the share of distributions of income from the operations of our businesses on other outstanding BGC Holdings limited partnership interests,
including those held by founding/working and other limited partners, to remain the same rather than increasing as would be the case if such
interests were redeemed or granted exchangeability without such Cantor right to purchase. In addition, any purchase of exchangeable limited
partnership units by Cantor from BGC Holdings following Cantor’s decision to grant exchangeability on FPUs will result in additional
dilution to the other partners of BGC Holdings.
The terms of the BGC Holdings limited partnership interests held by founding/working and limited partners also provide for the
following:
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such units are not entitled to reinvest the distributions on their BGC Holdings limited partnership interests in additional
BGC Holdings limited partnership interests at preferential or historical prices or at all; and
Cantor is entitled to receive any amounts from selected extraordinary transactions that are withheld from distributions to
certain partners and forfeited by partners leaving BGC Holdings prior to their interests in such withheld distributions fully
vesting, rather than any such forfeited amounts accruing to the benefit of all BGC Holdings limited partners on a pro rata
basis.
In addition, the ability to acquire shares of our Class A common stock underlying BGC Holdings exchangeable units is not
dependent upon the partner’s continued employment with us or compliance with partner obligations, and such partners are therefore not
restricted from leaving us by the potential loss of such shares. In the event that we complete a transaction to simplify our organizational
structure by restructuring our partnership into a corporation there is no assurance that the retention and motivation features of our new
structure will be as beneficial as those of our partnership structure.
We may be required to pay Cantor for a significant portion of the tax benefit, if any, relating to any additional tax
depreciation or amortization deductions we claim as a result of any step up in the tax basis of the assets of BGC U.S. OpCo or BGC
Global OpCo resulting from Cantor’s exchanges of interests in BGC Holdings (together with, prior to the Spin-Off, interests in
Newmark Holdings) for our common stock.
Certain partnership interests in BGC Holdings may be exchanged for shares of BGC Partners common stock. In the vast majority of
cases, the partnership units that become exchangeable for shares of BGC common stock are units that have been granted as compensation,
and, therefore, the exchange of such units will not result in an increase in BGC’s share of the tax basis of the tangible and intangible assets of
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BGC U.S. OpCo, BGC Global OpCo and/or Newmark OpCo. However, exchanges of other partnership units – including non-tax-free
exchanges of units by Cantor – could result in an increase in the tax basis of such tangible and intangible assets that otherwise would not have
been available, although the IRS may challenge all or part of that tax basis increase, and a court could sustain such a challenge by the IRS.
These increases in tax basis, if sustained, may reduce the amount of tax that BGC would otherwise be required to pay in the future. In such
circumstances, the tax receivable agreement that BGC entered into with Cantor provides for the payment by BGC to Cantor of 85% of the
amount of cash savings, if any, in the U.S. federal, state and local income tax or franchise tax that BGC actually realizes as a result of these
increases in tax basis and certain other tax benefits related to its entering into the tax receivable agreement, including tax benefits attributable
to payments under the tax receivable agreement. It is expected that BGC will benefit from the remaining 15% cash savings, if any, in income
tax that we realize.
RISKS RELATED TO OUR RELATIONSHIP WITH CANTOR AND ITS AFFILIATES
We are controlled by Cantor and Mr. Lutnick, who have potential conflicts of interest with us and may exercise their
control in a way that favors their interests to our detriment.
Cantor, and Mr. Lutnick, indirectly through his control of Cantor, are each able to exercise control over our management and affairs
and all matters requiring stockholder approval, including the election of our directors and determinations with respect to acquisitions and
dispositions, as well as material expansions or contractions of our businesses, entry into new lines of businesses and borrowings and
issuances of our Class A common stock and Class B common stock or other securities. This control is subject to the approval of our Audit
Committee on those matters requiring such approval. Cantor’s voting power may also have the effect of delaying or preventing a change of
control of us.
Cantor’s and Mr. Lutnick’s ability to exercise control over us could create or appear to create potential conflicts of interest.
Conflicts of interest may arise between us and Cantor in a number of areas relating to our past and ongoing relationships, including:
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potential acquisitions and dispositions of businesses;
the issuance, acquisition or disposition of securities by us;
the election of new or additional directors to our Board;
the payment of dividends by us (if any), distribution of profits by BGC U.S. OpCo, BGC Global OpCo and/or BGC
Holdings and repurchases of shares of our Class A common stock or purchases of BGC Holdings limited partnership
interests or other equity interests in our subsidiaries, including from Cantor, our executive officers, other employees,
partners, and others;
any loans to or from us or Cantor;
business operations or business opportunities of ours and Cantor’s that would compete with the other party’s business
opportunities, including Cantor’s and our brokerage and financial services;
intellectual property matters;
business combinations involving us;
conflicts between our agency trading for primary and secondary bond sales and Cantor’s investment banking bond
origination business;
competition between our and Cantor’s other equity derivatives and cash equity inter-dealer brokerage businesses;
the nature, quality and pricing of administrative services to be provided to or by Cantor and/or Tower Bridge; and
provision of clearing capital pursuant to the Clearing Agreement and potential and existing loan arrangements.
We also expect Cantor to manage its ownership of us so that it will not be deemed to be an investment company under the
Investment Company Act, including by maintaining its voting power in us above a majority absent an applicable exemption from the
Investment Company Act. This may result in conflicts with us, including those relating to acquisitions or offerings by us involving issuances
of shares of our Class A common stock, or securities convertible or exchangeable into shares of our Class A common stock, that would dilute
Cantor’s voting power in us.
In addition, Cantor has from time to time in the past and may in the future consider possible strategic realignments of its own
businesses and/or of the relationships that exist between and among Cantor and its other affiliates and us. Any related-party transaction or
arrangement between Cantor and its other affiliates and us is subject to the prior approval by our Audit Committee, but generally does not
otherwise require the separate approval of our stockholders, and if such stockholder approval is required, Cantor may retain sufficient voting
power to provide any such requisite approval without the affirmative consent of the other stockholders. There is no assurance that such
consolidation or restructuring would not result in a material expense or disruption to our businesses.
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Moreover, the service of officers or partners of Cantor as our executive officers and directors, and those persons’ ownership
interests in and payments from Cantor and its affiliates, SPACs and similar investments or other entities, could create conflicts of interest
when we and those directors or executive officers are faced with decisions that could have different implications for us and Cantor. Our
ability to retain our key employees and the ability of certain key employees to devote adequate time and attention to us are critical to the
success of our businesses, and failure to do so may adversely affect our businesses, financial condition, results of operations and prospects.
Our agreements and other arrangements with Cantor may be amended upon agreement of the parties to those agreements upon
approval of our Audit Committee. During the time that we are controlled by Cantor, Cantor may be able to require us to agree to amendments
to these agreements. We may not be able to resolve any potential conflicts, and, even if we do, the resolution may be less favorable to us than
if we were dealing with an unaffiliated party.
In order to address potential conflicts of interest between Cantor and its representatives and us, our restated certificate of
incorporation contains provisions regulating and defining the conduct of our affairs as they may involve Cantor and its representatives, and
our powers, rights, duties and liabilities and those of our representatives in connection with our relationship with Cantor and its affiliates,
officers, directors, general partners or employees. Our certificate of incorporation provides that no Cantor Company, as defined in our
certificate of incorporation, or any of the representatives, as defined in our certificate of incorporation, of a Cantor Company will owe any
fiduciary duty to, nor will any Cantor Company or any of their respective representatives be liable for breach of fiduciary duty to, us or any
of our stockholders, including with respect to corporate opportunities. In addition, Cantor and its respective representatives have no duty to
refrain from engaging in the same or similar activities or lines of business as us or doing business with any of our customers. The corporate
opportunity policy that is included in our certificate of incorporation is designed to resolve potential conflicts of interest between us and
Cantor and its representatives.
If any Cantor Company or any its representatives acquires knowledge of a potential transaction or matter that may be a corporate
opportunity (as defined in our restated certificate of incorporation) for any such person, on the one hand, and us or any of our representatives,
on the other hand, such person will have no duty to communicate or offer such corporate opportunity to us or any of our representatives, and
will not be liable to us, any of our stockholders or any of our representatives for breach of any fiduciary duty by reason of the fact that they
pursue or acquire such corporate opportunity for themselves, direct such corporate opportunity to another person or do not present such
corporate opportunity us or any of our representatives, subject to the requirement described in the following sentence. If a third party presents
a corporate opportunity to a person who is both our representative and a representative of a Cantor Company, expressly and solely in such
person’s capacity as our representative, and such person acts in good faith in a manner consistent with the policy that such corporate
opportunity belongs to us, then such person will be deemed to have fully satisfied and fulfilled any fiduciary duty that such person has to us
as our representative with respect to such corporate opportunity, provided that any Cantor Company or any of its representatives may pursue
such corporate opportunity if we decide not to pursue such corporate opportunity.
The BGC Holdings limited partnership agreement contains similar provisions with respect to us and/or Cantor and each of our
respective representatives, and the BGC U.S. OpCo and BGC Global OpCo limited partnership agreements, contain similar provisions with
respect to us and/or BGC Holdings and each of our respective representatives.
This policy, however, could make it easier for Cantor to compete with us. If Cantor competes with us, it could materially harm our
businesses, financial condition, results of operations and prospects.
Agreements between us and Cantor are between related parties, and the terms of these agreements may be less favorable to
us than those that we could have negotiated with third parties and may subject us to litigation.
Our relationship with Cantor results in agreements with Cantor that are between related parties. As a result, the prices charged to us
or by us for services provided under agreements with Cantor or sales or purchases of assets or other similar transactions may be higher or
lower than prices that may be charged by third parties, and the terms of these agreements may be less favorable to us than those that we could
have negotiated with third parties. In addition, Cantor has an unlimited right to internally use market data from us without any cost. Any
related-party transactions or arrangements between us and Cantor are subject to the prior approval by our Audit Committee, but generally do
not otherwise require the separate approval of our stockholders, and if such stockholder approval were required, Cantor may retain sufficient
voting power to provide any such requisite approval without the affirmative consent of the other stockholders.
These related-party relationships may from time to time subject us to litigation. For example, a purported derivative action, was
filed alleging the Berkeley Point Acquisition and our investment in Real Estate LP were unfair to us. While the Company believes that these
allegations are without merit and intends to defend against them vigorously as the case moves forward, as in any litigated matter, the outcome
cannot be determined with certainty.
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We are controlled by Cantor, which in turn controls its wholly owned subsidiary, CF&Co, which has acted and may
continue to act as our sales agent in our CEO program from time to time and provides us with additional investment banking
services. In addition, other affiliates of Cantor may provide us with advice and services from time to time.
We are controlled by Cantor, which in turn controls its wholly owned subsidiary, CF&Co, which has acted in the past and may
continue to act as our sales agent in our CEO program, including pursuant to the March 2018 Sales Agreement, and received fees in
connection therewith. We may enter into similar agreements in the future. Pursuant to the March 2018 Sales Agreement, we may offer and
sell up to $300 million of shares of our Class A common stock. Under the March 2018 Sales Agreement, we agree to pay CF&Co 2% of the
gross proceeds from the sale of shares of our Class A common stock. For certain transactions during 2020, we paid CF&Co 1% of the gross
proceeds from the sale of shares of our Class A common stock in our CEO program. As of December 31, 2020, we have issued and sold 17.6
million shares of BGC Class A common stock (or $210.8 million) under the March 2018 Sales Agreement.
In selling shares of our Class A common stock under the March 2018 Sales Agreement, we may determine to instruct CF&Co not to
sell our shares at less than a minimum price per share designated by us. Alternatively, we may instruct CF&Co to sell our shares so as to seek
to realize a designated minimum price per share for all shares sold over a designated time period, or so as to seek to raise a designated
minimum dollar amount of gross proceeds from sales of all such shares over a designated time period.
CF&Co has retained independent legal advisors in connection with its role as sales agent under the March 2018 Sales Agreement,
but for the reasons described below it may not be in a position to provide us with independent financial input in connection with the offering
of shares of our Class A common stock pursuant to the March 2018 Sales Agreement. We are not required to, and have not engaged, an
independent investment banking firm to act as a qualified independent underwriter or to otherwise provide us with independent input in our
CEO program.
While our Board and Audit Committee will be involved with any decision by us to enter into or terminate new sales agreements
with CF&Co, our management has been delegated the authority to determine, and to so instruct CF&Co with respect to, matters involving the
manner, timing, number of shares, and minimum prices per share or proceeds for sales of our shares, or the suspension thereof, in our CEO
program pursuant to the March 2018 Sales Agreement. Our management may be expected to consult with appropriate personnel from
CF&Co in making such determinations, but given the overlap between our senior management and that of Cantor and its wholly-owned
subsidiary, CF&Co, it may be expected that any joint determinations by our senior management and that of CF&Co with respect to our CEO
program will involve the same individuals. In making such joint determinations, our Audit Committee has instructed our senior management
to act in the best interests of us and our stockholders. Nevertheless, in making such determinations, such individuals will not have the benefit
of input from an independent investment banking firm that is able to make its own determinations with respect to our CEO program,
including, but not limited to, whether to suspend sales under the March 2018 Sales Agreement or to terminate the March 2018 Sales
Agreement.
In addition, Cantor, CF&Co and their affiliates have provided investment banking services to us and our affiliates in the past, and
may be expected to do so in the future, including acting as our financial advisor in connection with business combinations, dispositions, or
other transactions, including the acquisition of GFI, and placing or recommending to us various investments, stock loans or cash management
vehicles. They receive customary fees and commissions for these services in accordance with our investment banking engagement letter with
CF&Co. They may also receive brokerage and market data and analytics products and services from us and our respective affiliates. From
time to time, CF&Co may make a market in our notes. We also provide to and receive from Cantor and its affiliates various administrative
services.
RISKS RELATED TO OUR CLASS A COMMON STOCK
Purchasers, as well as existing stockholders, may experience significant dilution as a result of offerings of shares of our Class
A common stock, which may occur from time to time through our CEO Program or otherwise, as well as other potential forms of
employee share monetization, including issuance of shares to employees and partners which may be sold through broker
transactions. Our management will have broad discretion as to the timing and amount of sales of our Class A common stock under
the March 2018 Sales Agreement or in any other offering, as well as the application of the net proceeds of any such sales.
The March 2018 Sales Agreement with CF&Co currently remains in effect to assist us with partner and employee sales of shares of
Class A common stock, which may occur from time to time, as well as other potential forms of employee share monetization including
issuance of shares to employees and partners which may be sold through broker transactions. The March 2018 Sales Agreement provides for
the issuance and sale of up to $300 million of shares of our Class A common stock of our Class A common stock from time to time on a
delayed or continuous basis. As of December 31, 2020, we have issued and sold 17.6 million shares of BGC Class A common stock (or
$210.8 million) under the March 2018 Sales Agreement. Upon the sale of the remaining amount available under the March 2018 Sales
Agreement or at another time, we may enter into a new sales agreement with CF&Co.
We have an effective registration statement on Form S-4 filed on September 3, 2010 (the “2010 Form S-4 Registration Statement”),
with respect to the offer and sale of up to 20 million shares of BGC Class A common stock from time to time in connection with business
combination transactions, including acquisitions of other businesses, assets, properties or securities. As of December 31, 2020, we have
issued an aggregate of 14.2 million shares of BGC Class A common stock under the 2010 Form S-4 Registration Statement. Additionally, on
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September 13, 2019, we filed a registration statement on Form S-4 (the “2019 Form S-4 Registration Statement”), with respect to the offer
and sale of up to 20 million shares of BGC Class A common stock from time to time in connection with business combination transactions,
including acquisitions of other businesses, assets, properties or securities. As of December 31, 2020, we have not issued any shares of BGC
Class A common stock under the 2019 Form S-4 Registration Statement. We also have an effective shelf Registration Statement on Form S-3
pursuant to which we can offer and sell up to 10 million shares of BGC Class A common stock under the BGC Partners, Inc. Dividend
Reinvestment and Stock Purchase Plan. As of December 31, 2020, we have issued 0.7 million shares of BGC Class A common stock under
the Dividend Reinvestment and Stock Purchase Plan. We have filed a number of registration statements on Form S-8 pursuant to which we
have registered the shares underlying our Equity Plan. As of December 31, 2020, there were 118.5 million shares remaining for sale under
such registration statements.
Because the sales of shares of our Class A common stock under the March 2018 Sales Agreement have been made, and any other
future sales of our Class A common stock may be made, in the markets at prevailing market prices or at prices related to such prevailing
market prices, the prices at which these shares have been sold and may be sold in the future will vary, and these variations may be significant.
Purchasers of these shares may suffer significant dilution if the price they pay is higher than the price paid by other purchasers of shares of
our Class A common stock under the March 2018 Sales Agreement and any future offerings of shares of our Class A common stock.
Our management will have broad discretion as to the timing and amount of sales of our Class A common stock under the March
2018 Sales Agreement or in any other offering, as well as application of the net proceeds of any such sale. Accordingly, purchasers in any
such offering will be relying on the judgment of our management with regard to the use of such net proceeds, and purchasers will not have
the opportunity, as part of their investment decision, to assess whether the proceeds are being used appropriately. It is possible that the
proceeds will be invested in a way that does not yield a favorable, or any, return for us and cause the price of our Class A common stock to
decline.
We cannot predict the effect, if any, of future sales of our Class A common stock, or the availability of shares for future sales, on
the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock, or the perception that such sales
could occur, could dilute existing holders of our Class A common stock and may adversely affect prevailing market prices for our Class A
common stock.
In addition, the sale by us of any shares of our Class A common stock may decrease our existing Class A common stockholders’
proportionate ownership interest in us, reduce the amount of cash available per share for dividends payable on shares of our Class A common
stock and diminish the relative voting strength of each previously outstanding share of our Class A common stock.
Because we intend to use the net proceeds from any sales of shares of our Class A common stock under the March 2018
Sales Agreement from time to time, and may use the net proceeds from future offerings, for general corporate purposes, which,
among other things, are expected to include repurchases of shares of our Class A common stock and purchases of BGC Holdings
units or other equity interests in us or in our subsidiaries from Cantor, our executive officers, other employees, partners, and others,
and/or to replenish cash used to effect such repurchases and purchases, investors should be aware that such net proceeds will not be
available for other corporate purposes, and that, depending upon the timing and prices of such repurchases of shares and purchases
of units and of the sales of our shares under the March 2018 Sales Agreement and the liquidity and depth of our market, we may sell
a greater aggregate number of shares, at a lower average price per share, under the March 2018 Sales Agreement than the number
of shares or units repurchased or purchased, thereby increasing the aggregate number of shares and units outstanding and
potentially decreasing our EPS.
In the event that we make any such sales, we intend to use any net proceeds of the sale of shares of BGC Class A common stock
from time to time under the March 2018 Sales Agreement, and may use the net proceeds from any future offerings, for general corporate
purposes, which among other things, are expected to include repurchases of shares of our Class A common stock and purchases of BGC
Holdings units or other equity interests in us or in our subsidiaries, from Cantor, our executive officers, other employees, partners, and others,
and/or to replenish cash used to effect such repurchases and purchases. From January 1, 2020 to December 31, 2020, we repurchased an
aggregate of 2 thousand shares of our Class A common stock at an aggregate purchase price of approximately $6 thousand, with a weighted-
average repurchase price of $2.58 per share. During that period, we redeemed for cash an aggregate of 1.8 million limited partnership units at
a weighted-average price of $3.03 per unit and an aggregate of 0.7 million founding/working partner units at a weighted-average price of
$1.79 per unit. In the future, we may continue to repurchase shares of our Class A common stock and purchase partnership units from Cantor,
our executive officers, other employees, partners, and others, and these repurchases and purchases may be significant.
While we believe that we can successfully manage our strategy, and that our share price may in fact increase as we increase the
amount of cash available for dividends and share repurchases and unit purchases by paying a portion of the compensation of our employees
in the form of partnership units and restricted stock, gradually lowering our compensation expenses for purposes of Adjusted Earnings, and
lowering our long-term effective tax rate for Adjusted Earnings, there can be no assurance that our strategy will be successful or that we can
achieve any or all of such objectives.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
We have offices in the United States, Canada, Europe, United Kingdom, Latin America, Asia, Africa and the Middle East. Our
principal executive offices are located at 499 Park Avenue, New York, New York. We also occupy a space at 199 Water Street, New York,
New York, which serves as a trading operation for our Financial Services businesses and space at 55 Water Street, New York, New York,
which serves as the headquarters of our GFI division. Under the Administrative Services Agreement with Cantor, we are obligated to Cantor
for our pro rata portion (based on square footage used) of rental expense during the terms of the leases for such spaces.
Our largest presence outside of the New York metropolitan area is in London, located at Five Churchill Place, London, E14 5RD.
We currently occupy concurrent computing centers in Weehawken, New Jersey, Secaucus, New Jersey and Trumbull, Connecticut.
In addition, we occupy three data centers in the United Kingdom located in Canary Wharf, Romford and City of London respectively. Our
U.S. operations also have office space in Princeton, New Jersey, Edison, New Jersey, Palm Beach Gardens, Florida, Garden City, New York,
Sugar Land, Texas, and Chicago, Illinois.
ITEM 3.
LEGAL PROCEEDINGS
See Note 22—“Commitments, Contingencies and Guarantees” to the Company’s consolidated financial statements included in Part
II, Item 8 of this Annual Report on Form 10-K and the section under the heading “Derivative Suit” included in Part I, Item 7 of this Annual
Report on Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations for a description of our legal
proceedings, which are incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock is traded on the NASDAQ Global Select Market under the symbol “BGCP.” There is no public trading
market for our Class B common stock, which is held by Cantor and CFGM.
As of February 25, 2021, there were 731 holders of record of our Class A common stock and two holders of record of our Class B
common stock.
Capital Deployment Priorities, Dividend Policy and Repurchase and Redemption Program
BGC’s 2021 capital allocation priorities are to return capital to stockholders and to continue investing in its high growth Fenics
businesses. BGC plans to prioritize share and unit repurchases over dividends and distributions. The Company plans to reassess its current
dividend and distribution with an aim to nominally increase it toward the end of the year.
Traditionally, our dividend policy provides that we expect to pay a quarterly cash dividend to our common stockholders based on
our post-tax Adjusted Earnings per fully diluted share. Please see below for a detailed definition of post-tax Adjusted Earnings per fully
diluted share. Beginning in the first quarter of 2020, and for all of the quarterly periods in 2020, the Board reduced the quarterly dividend to
$0.01 per share out of an abundance of caution in order to strengthen the Company’s balance sheet as the global capital markets faced
difficult and unprecedented macroeconomic conditions related to the global pandemic. Additionally, during 2020, BGC Holdings, L.P.
reduced its distributions to or on behalf of its partners. We plan to continue dividends and distributions at or near current levels through the
balance of 2021 and prioritize our other capital allocation priorities. BGC believes that these steps will allow the Company to maintain its
financial strength.
Any dividends, if and when declared by our Board, will be paid on a quarterly basis. The dividend to our common stockholders is
expected to be calculated based on post-tax Adjusted Earnings allocated to us and generated over the fiscal quarter ending prior to the record
date for the dividend. No assurance can be made, however, that a dividend will be paid each quarter. The declaration, payment, timing, and
amount of any future dividends payable by us will be at the sole discretion of our Board. With respect to any distributions which are declared,
amounts paid to or on behalf of partners will at least cover their related tax payments. Whether any given post-tax amount is equivalent to the
amount received by a stockholder also on an after tax basis depends upon stockholders’ and partners’ domiciles and tax status.
We are a holding company, with no direct operations, and therefore we are able to pay dividends only from our available cash on
hand and funds received from distributions from BGC U.S. OpCo and BGC Global OpCo. Our ability to pay dividends may also be limited
by regulatory considerations as well as by covenants contained in financing or other agreements. In addition, under Delaware law, dividends
may be payable only out of surplus, which is our net assets minus our capital (as defined under Delaware law), or, if we have no surplus, out
of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Accordingly, any unanticipated
accounting, tax, regulatory or other charges against net income may adversely affect our ability to declare and pay dividends. While we
intend to declare and pay dividends quarterly, there can be no assurance that our Board will declare dividends at all or on a regular basis or
that the amount of our dividends will not change.
Stock and Unit Repurchase and Redemption Program and 2020 Activity
Our Board of Directors and our Audit Committee have authorized repurchases of our Class A common stock and redemptions of
BGC Holdings limited partnership interests or other equity interests in our subsidiaries, including from Cantor, our executive officers, other
employees, partners and others, including Cantor employees and partners. On August 1, 2018, our Board of Directors and Audit Committee
renewed and increased the authorized repurchases of stock or units, including from Cantor employees and partners to $300 million. As of
December 31, 2020, we had approximately $249.9 million remaining under this authorization and may continue to actively make repurchases
or purchases, or cease to make such repurchases or purchases, from time to time.
During the year ended December 31, 2020, we repurchased 2,259 shares of our Class A common stock at an aggregate price of $5.8
thousand for a weighted-average price of $2.58 per share. During the year ended December 31, 2020, we redeemed 2,538,629 limited
partnership interests at an aggregate price of $6.8 million for a weighted-average price of $2.67 per unit.
We did not repurchase any shares of our Class A common stock during the fourth quarter of 2020. During the fourth quarter of
2020, we redeemed 719,591 limited partnership interests at an aggregate price of $1.3 million for a weighted-average price of $1.78 per unit.
Performance Graph
On November 30, 2018, all the shares of Newmark Group, Inc. (NASDAQ: NMRK) (“Newmark”) held by BGC Partners, Inc.
(NASDAQ: BGCP) (“BGC Partners” or “BGC” or the “Company”) were distributed to stockholders of the Company (the “Spin-Off” or
“Distribution”). The Spin-Off included the shares of Newmark Class A and Class B common stock owned by BGC, as well as the shares of
Newmark common stock into which the limited partnership units of Newmark Holdings, L.P. and Newmark Partners, L.P. owned by BGC
were exchanged prior to and in connection with the Spin-Off. Based on the number of shares of BGC common stock outstanding on the
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Record Date, BGC’s stockholders as of the Record Date received 0.463895 of a share of Newmark Class A common stock for each share of
BGC Class A common stock held as of the Record Date, and 0.463895 of a share of Newmark Class B common stock for each share of BGC
Class B common stock held as of the Record Date (the “Distribution Ratio”). No fractional shares of Newmark common stock were
distributed in the Spin-Off. Instead, BGC stockholders received cash in lieu of any fraction of a share of Newmark common stock that they
otherwise would have received in the Spin-Off. For more information, see the press release titled “BGC Partners Announces Completion of
Spin-Off of Newmark” dated November 30, 2018, and the related filing on Form 8-K filed before market open on December 6, 2018.
Following the Spin-Off, all historical prices for BGCP were restated using an adjustment factor based on the closing prices of BGCP
and NMRKV on November 18, 2018, with NMRKV being the when-issued market for the additional shares of Newmark Group, Inc. Class A
common stock that traded on Nasdaq from November 20, 2018 until November 30, 2018. This formula for calculating the adjustment factor
was 1 – (NMRKV Price on 11/30 times the final Distribution Ratio)/(BGCP closing price on 11/30). All historical BGCP prices have been
multiplied by this factor to determine their adjusted historical prices as if BGC had owned only its former Financial Services segment during
the entire 5-year period covered by the BGCP performance graph.
The performance graph below shows a comparison of the cumulative total stockholder return, on a net dividend reinvestment basis
(other than the dividend that effected the Spin-Off), of $100 invested in shares of the Company (identified as “BGC Partners, Inc.”), and the
effects of the restatement of historical prices on December 31, 2015, measured on December 31, 2016, December 31, 2017, December 31,
2018, December 31, 2019, and December 31, 2020. The Peer Group consists of Compagnie Financière Tradition SA and TP ICAP plc. In
December 2016, Tullett Prebon plc acquired ICAP plc’s global hybrid voice broking and information businesses and became TP ICAP plc.
The stock performance of TP ICAP plc before December 29, 2016 reflects the performance of Tullett Prebon plc. The returns of the Peer
Group have been weighted at the beginning of the period according to their U.S. dollar stock market capitalizations for purposes of arriving at
a Peer Group average.
The performance graph below also shows a hypothetical situation in which BGCP stockholders re-invested the proceeds they received
from the NMRK Spin-Off into BGCP on 11/30/2018, the date of the Spin-Off (identified as “BGC Partners, Inc. Scenario 1”). In Scenario 1,
Zacks Investment Research, Inc. applied a special dividend of $3.89676 on 12/3/2018 to account for the NMRK shares being re-invested into
BGCP, and assumed the reinvestment of dividends received on the BGCP shares purchased with the proceeds of the Spin-Off, to calculate
this return. This was the approach followed by the Company in performance graphs in 2019 and will be the approach going forward.
Total returns are shown on a “net dividend” basis, which reflects tax effects on dividend reinvestments from companies operating
under certain U.K. and European tax jurisdictions, according to local tax laws.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among BGC Partners, Inc., the S&P 500 Index,
and Peer Group
$250
$200
$150
$100
$50
$0
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
BGC Partners, Inc.
BGC Partners, Inc. Scenario 1
S&P 500
Peer Group
Note: The above chart reflects $100 invested on 12/31/15 in stock or index, including reinvestment of dividends.
A second scenario that is not depicted in the above chart represents a hypothetical situation in which BGCP stockholders held onto
their shares of both BGCP and NMRK after the Spin-Off and re-invested the dividends they received from both companies (“Scenario 2”). In
other words, Scenario 2 assumes shareholders did not sell the shares of NMRK received for each share of BGCP at the time of the Spin-Off.
In Scenario 2, the total return on $100 would have resulted in approximately $100 from 12/31/2015 - 12/31/2020.
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In addition to the foregoing five-year returns, the 10-year total returns on $100 calculated using the same methodology described above
are as follows:
• The 10-year total return for BGC Partners, Inc. from 12/31/2010 through 12/31/2020 would have resulted in approximately
$157.
• The 10-year total return for BGC Partners, Inc. Scenario 1 would have resulted in approximately $162 from 12/31/2010
through 12/31/2020.
• The 10-year total return for BGCP under Scenario 2 would have resulted in approximately $180 from 12/31/2010 through
12/31/2020.
•
In comparison, the 10-year total return for $100 invested in the Peer Group, Russell 2000, Russell 2000 Financial Services, and
S&P 500 from 12/31/2010 through 12/31/2020 would have resulted in approximately in $101, $289, $254, and $367,
respectively.
Note: Peer group indices use beginning of period market capitalization weighting. The above graph was prepared by Zacks
Investment Research, Inc. and used with their permission, all rights reserved, Copyright 1980-2021. S&P 500 is Copyright © 2021 S&P Dow
Jones Indices LLC, a division of S&P Global, all rights reserved. The second hypothetical scenario above was calculated by S&P Global.
Certain Definitions
We use non-GAAP financial measures that differ from the most directly comparable measures calculated and presented in
accordance with GAAP. Non-GAAP financial measures used by the Company include “Adjusted Earnings before noncontrolling interests
and taxes”, which is used interchangeably with “pre-tax Adjusted Earnings”; “Post-tax Adjusted Earnings to fully diluted shareholders”,
which is used interchangeably with “post-tax Adjusted Earnings”; “Adjusted EBITDA”; and “Liquidity”. The definitions of these terms are
below.
Adjusted Earnings Defined
BGC uses non-GAAP financial measures, including “Adjusted Earnings before noncontrolling interests and taxes” and “Post-tax
Adjusted Earnings to fully diluted shareholders”, which are supplemental measures of operating results used by management to evaluate the
financial performance of the Company and its consolidated subsidiaries. BGC believes that Adjusted Earnings best reflect the operating
earnings generated by the Company on a consolidated basis and are the earnings which management considers when managing its business.
As compared with “Income (loss) from operations before income taxes” and “Net income (loss) for fully diluted shares”, both prepared
in accordance with GAAP, Adjusted Earnings calculations primarily exclude certain non-cash items and other expenses that generally do not
involve the receipt or outlay of cash by the Company and/or which do not dilute existing stockholders. In addition, Adjusted Earnings
calculations exclude certain gains and charges that management believes do not best reflect the ordinary results of BGC. Adjusted Earnings is
calculated by taking the most comparable GAAP measures and adjusting for certain items with respect to compensation expenses, non-
compensation expenses, and other income, as discussed below.
Calculations of Compensation Adjustments for Adjusted Earnings and Adjusted EBITDA
Treatment of Equity-Based Compensation Line Item for Adjusted Earnings and Adjusted EBITDA
The Company’s Adjusted Earnings and Adjusted EBITDA measures exclude all GAAP charges included in the line item “Equity-
based compensation and allocations of net income to limited partnership units and FPUs” (or “equity-based compensation” for purposes of
defining the Company’s non-GAAP results) as recorded on the Company’s GAAP Consolidated Statements of Operations and GAAP
Consolidated Statements of Cash Flows. These GAAP equity-based compensation charges reflect the following items:
∗
∗
Charges with respect to grants of exchangeability, which reflect the right of holders of limited partnership units with no
capital accounts, such as LPUs and PSUs, to exchange these units into shares of common stock, or into partnership units
with capital accounts, such as HDUs, as well as cash paid with respect to taxes withheld or expected to be owed by the
unit holder upon such exchange. The withholding taxes related to the exchange of certain non-exchangeable units without
a capital account into either common shares or units with a capital account may be funded by the redemption of preferred
units such as PPSUs.
Charges with respect to preferred units. Any preferred units would not be included in the Company’s fully diluted share
count because they cannot be made exchangeable into shares of common stock and are entitled only to a fixed distribution.
Preferred units are granted in connection with the grant of certain limited partnership units that may be granted
exchangeability or redeemed in connection with the grant of shares of common stock at ratios designed to cover any
withholding taxes expected to be paid. This is an alternative to the common practice among public companies of issuing
the gross amount of shares to employees, subject to cashless withholding of shares, to pay applicable withholding taxes.
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∗
∗
∗
∗
GAAP equity-based compensation charges with respect to the grant of an offsetting amount of common stock or
partnership units with capital accounts in connection with the redemption of non-exchangeable units, including PSUs and
LPUs.
Charges related to amortization of RSUs and limited partnership units.
Charges related to grants of equity awards, including common stock or partnership units with capital accounts.
Allocations of net income to limited partnership units and FPUs. Such allocations represent the pro-rata portion of post-tax
GAAP earnings available to such unit holders.
The amounts of certain quarterly equity-based compensation charges are based upon the Company’s estimate of such expected charges
during the annual period, as described further below under “Methodology for Calculating Adjusted Earnings Taxes.”
Virtually all of BGC’s key executives and producers have equity or partnership stakes in the Company and its subsidiaries and
generally receive deferred equity or limited partnership units as part of their compensation. A significant percentage of BGC’s fully diluted
shares are owned by its executives, partners and employees. The Company issues limited partnership units as well as other forms of equity-
based compensation, including grants of exchangeability into shares of common stock, to provide liquidity to its employees, to align the
interests of its employees and management with those of common stockholders, to help motivate and retain key employees, and to encourage
a collaborative culture that drives cross-selling and revenue growth.
All share equivalents that are part of the Company’s equity-based compensation program, including REUs, PSUs, LPUs, HDUs, and
other units that may be made exchangeable into common stock, as well as RSUs (which are recorded using the treasury stock method), are
included in the fully diluted share count when issued or at the beginning of the subsequent quarter after the date of grant. Generally, limited
partnership units other than preferred units are expected to be paid a pro-rata distribution based on BGC’s calculation of Adjusted Earnings
per fully diluted share. However, out of an abundance of caution and in order to strengthen the Company’s balance sheet due the uncertain
macroeconomic conditions with respect to the COVID-19 pandemic, BGC Holdings, L.P. has reduced its distributions of income from the
operations of BGC’s businesses to its partners.
Compensation charges are also adjusted for certain other cash and non-cash items, including those related to the amortization of GFI
employee forgivable loans granted prior to the closing of the January 11, 2016 back-end merger with GFI.
Certain Other Compensation-Related Adjustments for Adjusted Earnings
BGC also excludes various other GAAP items that management views as not reflective of the Company’s underlying performance
in a given period from its calculation of Adjusted Earnings. These may include compensation-related items with respect to cost-saving
initiatives, such as severance charges incurred in connection with headcount reductions as part of broad restructuring and/or cost savings
plans.
Calculation of Non-Compensation Adjustments for Adjusted Earnings
Adjusted Earnings calculations may also exclude items such as:
∗
∗
∗
∗
∗
Non-cash GAAP charges related to the amortization of intangibles with respect to acquisitions;
Acquisition related costs;
Certain rent charges;
Non-cash GAAP asset impairment charges; and
Various other GAAP items that management views as not reflective of the Company’s underlying performance in a given
period, including non-compensation-related charges incurred as part of broad restructuring and/or cost savings plans. Such
GAAP items may include charges for exiting leases and/or other long-term contracts as part of cost-saving initiatives, as
well as non-cash impairment charges related to assets, goodwill and/or intangibles created from acquisitions.
Calculation of Adjustments for Other (income) losses for Adjusted Earnings
Adjusted Earnings calculations also exclude certain other non-cash, non-dilutive, and/or non-economic items, which may, in some
periods, include:
∗
∗
∗
Gains or losses on divestitures;
Fair value adjustment of investments;
Certain other GAAP items, including gains or losses related to BGC's investments accounted for under the equity method;
and
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∗
Any unusual, one-time, non-ordinary, or non-recurring gains or losses.
Methodology for Calculating Adjusted Earnings Taxes
Although Adjusted Earnings are calculated on a pre-tax basis, BGC also reports post-tax Adjusted Earnings to fully diluted
shareholders. The Company defines post-tax Adjusted Earnings to fully diluted shareholders as pre-tax Adjusted Earnings reduced by the
non-GAAP tax provision described below and net income (loss) attributable to noncontrolling interest for Adjusted Earnings.
The Company calculates its tax provision for post-tax Adjusted Earnings using an annual estimate similar to how it accounts for its
income tax provision under GAAP. To calculate the quarterly tax provision under GAAP, BGC estimates its full fiscal year GAAP income
(loss) from operations before income taxes and noncontrolling interests in subsidiaries and the expected inclusions and deductions for income
tax purposes, including expected equity-based compensation during the annual period. The resulting annualized tax rate is applied to BGC’s
quarterly GAAP income (loss) from operations before income taxes and noncontrolling interests in subsidiaries. At the end of the annual
period, the Company updates its estimate to reflect the actual tax amounts owed for the period.
To determine the non-GAAP tax provision, BGC first adjusts pre-tax Adjusted Earnings by recognizing any, and only, amounts for
which a tax deduction applies under applicable law. The amounts include charges with respect to equity-based compensation; certain charges
related to employee loan forgiveness; certain net operating loss carryforwards when taken for statutory purposes; and certain charges related
to tax goodwill amortization. These adjustments may also reflect timing and measurement differences, including treatment of employee
loans; changes in the value of units between the dates of grants of exchangeability and the date of actual unit exchange; variations in the
value of certain deferred tax assets; and liabilities and the different timing of permitted deductions for tax under GAAP and statutory tax
requirements.
After application of these adjustments, the result is the Company’s taxable income for its pre-tax Adjusted Earnings, to which BGC
then applies the statutory tax rates to determine its non-GAAP tax provision. BGC views the effective tax rate on pre-tax Adjusted Earnings
as equal to the amount of its non-GAAP tax provision divided by the amount of pre-tax Adjusted Earnings.
Generally, the most significant factor affecting this non-GAAP tax provision is the amount of charges relating to equity-based
compensation. Because the charges relating to equity-based compensation are deductible in accordance with applicable tax laws, increases in
such charges have the effect of lowering the Company’s non-GAAP effective tax rate and thereby increasing its post-tax Adjusted Earnings.
BGC incurs income tax expenses based on the location, legal structure and jurisdictional taxing authorities of each of its subsidiaries.
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. Any U.S. federal and state income tax liability or benefit related to the partnership income or loss, with the exception of UBT, rests with
the unit holders rather than with the partnership entity. The Company’s 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. Outside of the U.S., BGC is expected to operate principally
through subsidiary corporations subject to local income taxes. For these reasons, taxes for Adjusted Earnings are expected to be presented to
show the tax provision the consolidated Company would expect to pay if 100 percent of earnings were taxed at global corporate rates.
Calculations of Pre- and Post-Tax Adjusted Earnings per Share
BGC’s pre- and post-tax Adjusted Earnings per share calculations assume either that:
∗
∗
The fully diluted share count includes the shares related to any dilutive instruments, but excludes the associated expense,
net of tax, when the impact would be dilutive; or
The fully diluted share count excludes the shares related to these instruments, but includes the associated expense, net of
tax.
The share count for Adjusted Earnings excludes certain shares and share equivalents expected to be issued in future periods but not yet
eligible to receive dividends and/or distributions. Each quarter, the dividend payable to BGC’s stockholders, if any, is expected to be
determined by the Company’s Board of Directors with reference to a number of factors, including post-tax Adjusted Earnings per share. BGC
may also pay a pro-rata distribution of net income to limited partnership units, as well as to Cantor for its noncontrolling interest. The amount
of this net income, and therefore of these payments per unit, would be determined using the above definition of Adjusted Earnings per share
on a pre-tax basis.
The declaration, payment, timing, and amount of any future dividends payable by the Company will be at the discretion of its Board
of Directors using the fully diluted share count. For more information on any share count adjustments, see the table titled “Fully Diluted
Weighted-Average Share Count under GAAP and for Adjusted Earnings” in the Company’s most recent financial results press release.
Management Rationale for Using Adjusted Earnings
BGC’s calculation of Adjusted Earnings excludes the items discussed above because they are either non-cash in nature, because the
anticipated benefits from the expenditures are not expected to be fully realized until future periods, or because the Company views results
excluding these items as a better reflection of the underlying performance of BGC’s ongoing operations. Management uses Adjusted
Earnings in part to help it evaluate, among other things, the overall performance of the Company’s business, to make decisions with respect
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to the Company’s operations, and to determine the amount of dividends payable to common stockholders and distributions payable to holders
of limited partnership units. Dividends payable to common stockholders and distributions payable to holders of limited partnership units are
included within “Dividends to stockholders” and “Earnings distributions to limited partnership interests and noncontrolling interests,”
respectively, in our unaudited, condensed, consolidated statements of cash flows.
The term “Adjusted Earnings” should not be considered in isolation or as an alternative to GAAP net income (loss). The Company
views Adjusted Earnings as a metric that is not indicative of liquidity, or the cash available to fund its operations, but rather as a performance
measure. Pre- and post-tax Adjusted Earnings, as well as related measures, are not intended to replace the Company’s presentation of its
GAAP financial results. However, management believes that these measures help provide investors with a clearer understanding of BGC’s
financial performance and offer useful information to both management and investors regarding certain financial and business trends related
to the Company’s financial condition and results of operations. Management believes that the GAAP and Adjusted Earnings measures of
financial performance should be considered together.
For more information regarding Adjusted Earnings, see the section in the Company’s most recent financial results press release
titled “Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to Adjusted Earnings and GAAP Fully Diluted EPS to
Post-Tax Adjusted EPS”, including the related footnotes, for details about how BGC’s non-GAAP results are reconciled to those under
GAAP.
Adjusted EBITDA Defined
BGC also provides an additional non-GAAP financial performance measure, “Adjusted EBITDA”, which it defines as GAAP “Net
income (loss) available to common stockholders”, adjusted to add back the following items:
∗
∗
∗
∗
∗
∗
∗
∗
Provision (benefit) for income taxes;
Net income (loss) attributable to noncontrolling interest in subsidiaries;
Interest expense;
Fixed asset depreciation and intangible asset amortization;
Equity-based compensation and allocations of net income to limited partnership units and FPUs;
Impairment of long-lived assets;
(Gains) losses on equity method investments; and
Certain other non-cash GAAP items, such as non-cash charges of amortized rents incurred by the Company for its new
UK based headquarters.
The Company’s management believes that its Adjusted EBITDA measure is useful in evaluating BGC’s operating performance,
because the calculation of this measure generally eliminates the effects of financing and income taxes and the accounting effects of capital
spending and acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions. Such items may
vary for different companies for reasons unrelated to overall operating performance. As a result, the Company’s management uses this
measure to evaluate operating performance and for other discretionary purposes. BGC believes that Adjusted EBITDA is useful to investors
to assist them in getting a more complete picture of the Company’s financial results and operations.
Since BGC’s Adjusted EBITDA is not a recognized measurement under GAAP, investors should use this measure in addition to
GAAP measures of net income when analyzing BGC’s operating performance. Because not all companies use identical EBITDA
calculations, the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Furthermore, Adjusted EBITDA is not intended to be a measure of free cash flow or GAAP cash flow from operations because the
Company’s Adjusted EBITDA does not consider certain cash requirements, such as tax and debt service payments.
For more information regarding Adjusted EBITDA, see the section in the Company’s most recent financial results press release
titled “Reconciliation of GAAP Net Income (Loss) Available to Common Stockholders to Adjusted EBITDA”, including the footnotes to the
same, for details about how BGC’s non-GAAP results are reconciled to those under GAAP.
75
Timing of Outlook for Certain GAAP and Non-GAAP Items
BGC anticipates providing forward-looking guidance for GAAP revenues and for certain non-GAAP measures from time to time.
However, the Company does not anticipate providing an outlook for other GAAP results. This is because certain GAAP items, which are
excluded from Adjusted Earnings and/or Adjusted EBITDA, are difficult to forecast with precision before the end of each period. The
Company therefore believes that it is not possible for it to have the required information necessary to forecast GAAP results or to
quantitatively reconcile GAAP forecasts to non-GAAP forecasts with sufficient precision without unreasonable efforts. For the same reasons,
the Company is unable to address the probable significance of the unavailable information. The relevant items that are difficult to predict on a
quarterly and/or annual basis with precision and may materially impact the Company’s GAAP results include, but are not limited, to the
following:
∗
∗
∗
∗
∗
Certain equity-based compensation charges that may be determined at the discretion of management throughout and up to
the period-end;
Unusual, one-time, non-ordinary, or non-recurring items;
The impact of gains or losses on certain marketable securities, as well as any gains or losses related to associated mark-to-
market movements and/or hedging. These items are calculated using period-end closing prices;
Non-cash asset impairment charges, which are calculated and analyzed based on the period-end values of the underlying
assets. These amounts may not be known until after period-end;
Acquisitions, dispositions and/or resolutions of litigation, which are fluid and unpredictable in nature.
Liquidity Defined
BGC may also use a non-GAAP measure called “liquidity”. The Company considers liquidity to be comprised of the sum of cash
and cash equivalents, reverse repurchase agreements (if any), securities owned, and marketable securities, less securities lent out in securities
loaned transactions and repurchase agreements (if any). The Company considers liquidity to be an important metric for determining the
amount of cash that is available or that could be readily available to the Company on short notice.
For more information regarding Liquidity, see the section in the Company’s most recent financial results press release titled
“Liquidity Analysis”, including any footnotes to the same, for details about how BGC’s non-GAAP results are reconciled to those under
GAAP.
76
ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the last five years ended December 31, 2020. This selected
consolidated financial data should be read in conjunction with “Item 7—Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our Consolidated Financial Statements and the accompanying Notes thereto included elsewhere in this Annual
Report on Form 10-K. Amounts in thousands, except per share data.
Consolidated Statements of Operations Data:
Revenues:
Commissions
Principal transactions
Total brokerage revenues
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Other expenses
Total expenses
Other income (losses), net:
Gain (loss) on divestiture and sale of investments
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss) from continuing operations
Consolidated net income (loss) from discontinued operations, net of
tax
Consolidated net income (loss)
Less: Net income (loss) from continuing operations attributable
to noncontrolling interest in subsidiaries
Less: Net income (loss) from discontinued operations attributable
to noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share from continuing operations
Fully diluted earnings (loss) per share from
continuing operations
Basic weighted-average shares of common stock
outstanding
Fully diluted weighted-average shares of common stock
outstanding
Dividends declared per share of common stock
Dividends declared and paid per share of common stock
Cash and cash equivalents
Total assets
Notes payable and other borrowings
Total liabilities
Total stockholders’ equity
2020
2019 (1)
Year Ended December 31,
2018 (1) (2)
2017 (1) (2)
2016 (1) (2) (3) (4)
$
1,567,668 $
351,633
1,919,301
25,754
81,920
12,332
17,413
2,056,720
1,645,818 $
321,923
1,967,741
29,442
73,166
18,319
15,563
2,104,231
1,511,522 $
313,053
1,824,575
24,076
65,185
14,404
9,570
1,937,810
1,340,608 $
317,856
1,658,464
27,094
54,557
14,557
2,504
1,757,176
1,136,248
326,682
1,462,930
24,200
54,309
8,896
5,177
1,555,512
1,131,650
1,125,911
1,004,793
947,764
856,708
183,545
1,315,195
670,617
1,985,812
170,625
1,296,536
738,678
2,035,214
200,057
1,204,850
619,066
1,823,916
233,241
1,181,005
602,994
1,783,999
155,057
1,011,765
520,692
1,532,457
394
5,023
1,580
6,997
77,905
21,303
56,602
18,421
4,115
30,511
53,047
122,064
49,811
72,253
—
7,377
50,645
58,022
171,916
63,768
108,148
561
4,627
25,863
31,051
4,228
97,756
(93,528 )
7,044
3,543
84,078
94,665
117,720
57,271
60,449
—
56,602
—
72,253
178,462
286,610
165,986
72,458
191,645
252,094
7,694
24,691
31,293
33,449
69,356
—
48,908 $
—
47,562 $
53,121
202,196 $
(6,681 )
45,690 $
(1,189 )
183,927
0.14 $
0.14 $
0.24 $
(0.44 ) $
(0.03 )
0.13 $
0.13 $
0.24 $
(0.44 ) $
(0.03 )
361,736
344,332
322,141
287,378
277,073
546,848
459,743
323,844
287,378
277,073
0.17 $
0.17 $
0.56 $
0.56 $
0.72 $
0.72 $
0.70 $
0.70 $
0.62
0.62
593,646 $
3,949,300 $
1,315,935 $
3,120,397 $
748,939 $
415,379 $
3,926,914 $
1,142,687 $
3,178,308 $
674,647 $
336,535 $
3,437,366 $
763,548 $
2,562,879 $
760,415 $
513,306 $
5,437,981 $
575,029 $
4,263,696 $
626,662 $
468,986
5,048,930
965,767
3,367,172
1,180,953
$
$
$
$
$
$
$
$
$
$
(1)
(2)
(3)
(4)
Prior years reflect revisions of our previously issued financial statements. See Note 4—“Prior Periods’ Financial Statement Revisions” in
our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Financial results have been retrospectively adjusted as a result of the Spin-Off to reflect Newmark through November 30, 2018 as
discontinued operations for all periods presented.
Amounts include the gain related to the earn-out associated with the NASDAQ transaction. During the third quarter of 2017, the Company
transferred the right to receive the Nasdaq earn-out payments to Newmark.
Financial results have been retrospectively adjusted to include the financial results of Lucera.
77
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of BGC Partners’ financial condition and results of operations should be read together with BGC Partners
Inc.’s consolidated financial statements and notes to those statements, as well as the cautionary statements relating to forward-looking
statements included 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 as of and during the
years ended December 31, 2020, 2019, and 2018. This discussion is provided to increase the understanding of, and should be read in
conjunction with, our consolidated financial statements and the notes thereto included elsewhere in this report.
As described in both Note 4—“Prior Periods’ Financial Statement Revisions” and Note 5—“Quarterly Results of Operations
(Unaudited)” in our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we have revised
previously issued financial statements to correct for immaterial revisions. Accordingly, this Management’s Discussion and Analysis of
Financial Condition and Results of Operations reflects the effects of the revisions as of and for the years ended December 31, 2019 and 2018,
as well as the first three quarters of 2020 and all interim periods of 2019.
FORWARD-LOOKING CAUTIONARY 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:
•
•
•
•
•
•
•
•
•
•
the impact of the COVID-19 pandemic, including possible successive waves or variants of the virus, on our operations,
including the continued ability of our executives, employees, customers, clients, third-party service providers, exchanges
and other facilities to perform their functions at normal levels and the availability of the requisite technology to execute
trades in certain Fully Electronic offerings while working remotely;
macroeconomic and other challenges and uncertainties resulting from the COVID-19 pandemic, such as the extent and
duration of the impact on public health, including the distribution of effective vaccines, public acceptance of the vaccines,
and governmental and public reactions thereto, the U.S. and global economies, financial and insurance markets and
consumer and corporate clients and customers, including economic activity, employment levels and market liquidity, as
well as the various actions taken in response to the challenges and uncertainties by governments, central banks and others,
including us;
market conditions, including trading volume and volatility in the demand for the products and services we provide,
resulting from the effects of COVID-19 or otherwise, possible disruptions in trading, developments in the insurance
industry, potential deterioration of equity and debt capital markets, impact of significant changes in interest rates and our
ability to access the capital markets as needed or on reasonable terms and conditions;
pricing, commissions and fees, and market position with respect to any of our products and services and those of our
competitors;
the effect of industry concentration and reorganization, reduction of customers, and consolidation;
liquidity, regulatory, cash and clearing capital requirements and the impact of credit market events, including the impact of
COVID-19 and actions taken by governments and businesses in response thereto on the credit markets and interest rates;
our relationships and transactions with Cantor and its affiliates, including CF&Co, and CCRE, our structure, including
BGC Holdings, which is owned by us, Cantor, our employee partners and other partners, and the BGC OpCos, which are
owned jointly by us and BGC Holdings, any possible changes to our structure, any related transactions, conflicts of
interest or litigation, any impact of Cantor’s results on our credit ratings and associated outlooks, any loans to or from us
or Cantor, BGC Holdings, or the BGC OpCos, including the balances and interest rates thereof from time to time and any
convertible or equity features of any such loans, CF&Co’s acting as our sales agent or underwriter under our CEO
program or other offerings, Cantor’s holdings of the Company’s Debt Securities, CF&Co’s acting as a market maker in the
Company’s Debt Securities, CF&Co’s acting as our financial advisor in connection with potential acquisitions,
dispositions, or other transactions and our participation in various investments, stock loans or cash management vehicles
placed by or recommended by CF&Co;
the impact on our stock price of the reduction of our dividend and potential future changes in our dividend policy, as well
as reductions in BGC Holdings distributions to partners and the related impact of such reductions, as well as layoffs, salary
cuts, and expected lower commissions or bonuses on the repayment of partner loans;
the integration of acquired businesses with our other businesses;
the rebranding of our current businesses or risks related to any potential dispositions of all or any portion of our existing or
acquired businesses;
78
•
•
•
•
•
•
•
•
•
•
•
•
market volatility as a result of the effects of COVID-19, which may not be sustainable or predictable in future periods;
economic or geopolitical conditions or uncertainties, the actions of governments or central banks, including the impact of
COVID-19 on the global markets, and related government stimulus packages, government “shelter-in-place” mandates and
other restrictions on business and commercial activity and timing of reopening of world economies, uncertainty regarding
the nature, timing and consequences of Brexit following the withdrawal process, including potential reduction in
investment in the U.K., and the pursuit of trade, border control or other related policies by the U.S. and/or other countries
(including U.S.- China trade relations), political and labor unrest in France, Hong Kong, China, and other jurisdictions,
conflict in the Middle East, the impact of U.S. government shutdowns, elections, political unrest or stalemates in response
to governmental mandates and other restrictions related to COVID-19 in the U.S. or abroad, risks of illness of the U.S.
President and other governmental officials, 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 hurricanes as well as power failures,
communication and transportation disruptions, and other interruptions of utilities or other essential services and the
impacts of pandemics and other international health emergencies, including COVID-19;
the effect on our businesses, our clients, the markets in which we operate, our possible restructuring, and the economy in
general of changes in the U.S. and foreign tax and other laws, including changes in tax rates, repatriation rules, and
deductibility of interest, potential policy and regulatory changes in Mexico and other countries, sequestrations,
uncertainties regarding the debt ceiling and the federal budget, and other potential political policies;
the effect on our businesses of changes in interest rates, changes in benchmarks, including the phase out of LIBOR, the
level of worldwide governmental debt issuances, austerity programs, government stimulus packages, including those
related to COVID-19, increases or decreases in deficits and the impact of increased government tax rates, and other
changes to monetary policy, and potential political impasses or regulatory requirements, including increased capital
requirements for banks and other institutions or changes in legislation, regulations and priorities;
extensive regulation of our businesses and customers, changes in regulations relating to financial services companies 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,
remediation, fines, penalties, sanctions, and changes to or restrictions or limitations on specific activities, including
potential delays in accessing markets, including due to our regulatory status and actions, 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;
the effect on our businesses of any extraordinary transactions, including the possible restructuring of our partnership into a
corporate structure, including potential dilution and other impacts;
costs and expenses of developing, maintaining, and protecting our intellectual property, as well as employment,
regulatory, and other litigation and proceedings, and their related costs, including judgments, indemnities, fines, or
settlements paid 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,
reduced availability under the Revolving Credit Agreement resulting from recent borrowings, and the need for short- or
long-term borrowings, including from Cantor, our ability to refinance our indebtedness, including in the credit markets
weakened by the impact of COVID-19, and changes to interest rates and liquidity or our access to other sources of cash
relating to acquisitions, dispositions, or other matters, potential liquidity and other risks relating to our ability to maintain
continued access to credit and availability of financing necessary to support our ongoing business needs, on terms
acceptable to us, if at all, and risks associated with the resulting leverage, including potentially causing a reduction in our
credit ratings and 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 in the BGC OpCos, defaults
or impairments on our investments, joint venture interests, stock loans or cash management vehicles and collectability of
loan balances owed to us by partners, employees, the BGC OpCos or others;
our ability to enter new markets or develop new products, trading desks, marketplaces, or services for existing or new
clients, including efforts to convert certain existing products to a Fully Electronic trade execution, and to induce such
clients to use these products, trading desks, marketplaces, or services and to secure and maintain market share, including
changes to the likelihood or timing of such efforts due to COVID-19 or other measures;
the impact of any restructuring or similar transactions on our ability to enter into marketing and strategic alliances and
business combinations or other transactions in the financial services and other industries, including acquisitions, tender
offers, dispositions, reorganizations, partnering opportunities and joint ventures, the failure to realize the anticipated
benefits of any such transactions, relationships or growth and the future impact of any such transactions, relationships or
growth on our other businesses and our financial results for current or future periods, the integration of any completed
79
•
•
•
•
•
•
•
•
•
•
•
•
acquisitions and the use of proceeds of any completed dispositions, and the value of and any hedging entered into in
connection with consideration received or to be received in connection with such dispositions and any transfers thereof;
our estimates or determinations of potential value with respect to various assets or portions of our businesses, such as
Fenics and our insurance brokerage business, 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, and recent
departures of senior personnel;
our ability to expand the use of technology for Hybrid and Fully Electronic trade execution 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 remediate our material weakness in our internal controls and our ability to identify and remediate any other
material weaknesses or significant deficiencies in our internal controls which could affect our ability to properly maintain
books and records, 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 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 increased demands on such
systems and on the telecommunications infrastructure from remote working during the COVID-19 pandemic, cyber-
security risks and incidents, compliance with regulations requiring data minimization and protection and preservation of
records of access and transfers of data, privacy risk and exposure to potential liability and regulatory focus;
the effectiveness of our governance, risk management, and oversight procedures and impact of any potential transactions
or relationships with related parties;
the impact of our ESG or “sustainability” ratings on the decisions by clients, investors, ratings agencies, potential clients
and other parties with respect to our businesses, investments in us or the market for and trading price of BGC Class A
common stock, Company Debt Securities, or other matters;
the fact that the prices at which shares of our Class A common stock are or may be sold in one or more of our CEO
Program or in other offerings, acquisitions, or other transactions may vary significantly, and purchasers of shares in such
offerings or other 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;
the impact of our recent significant reductions to our dividends and distributions and the timing and amounts of any future
dividends or distributions, including 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 in BGC Holdings, or other equity interests in us or any of our other subsidiaries, including the BGC OpCos,
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 BGC Class A common stock and Company Debt Securities; and
the effect on the markets for and trading prices of our Class A common stock and Company Debt Securities due to
COVID-19 and other market factors as well as on various offerings and other transactions, including our CEO Program
and other offerings of our Class A common stock and convertible or exchangeable debt or other securities, our repurchases
of shares of our Class A common stock and purchases or redemptions of BGC Holdings limited partnership interests or
other equity interests in us or 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
our Class A common stock in connection therewith, including in corporate or partnership restructurings, our payment of
dividends on our Class A common stock and distributions on limited partnership interests in BGC Holdings and the BGC
OpCos, convertible arbitrage, hedging, and other transactions engaged in by us or holders of our outstanding shares,
Company Debt Securities, share sales and stock pledge, stock loans, 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, corporate or partnership restructurings, acquisitions, conversions of shares of our Class B
common stock and our other convertible securities into shares of our Class A common stock, stock pledge, stock loan, or
other financing transactions, and distributions of our Class A common stock by Cantor to its partners, including the April
2008 and February 2012 distribution rights shares.
The foregoing risks and uncertainties, as well as those risks and uncertainties discussed under the headings “Item 1A—Risk
Factors,” and “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” and elsewhere in this Form 10-K, may cause actual
results and events to differ materially from the forward-looking statements.
80
OVERVIEW AND BUSINESS ENVIRONMENT
We are a leading global brokerage and financial technology company servicing the global financial markets.
Through brands including BGC®, GFI®, Sunrise Brokers™, Besso™, Ed® Broking, Poten & Partners®, RP Martin™,
CORANT™, and CORANT GLOBAL™, among others, our businesses specialize in the brokerage of a broad range of products, including
fixed income such as government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit
derivatives. We also broker products across FX, equity derivatives and cash equities, energy and commodities, shipping, insurance, and
futures and options. Our businesses also provide a wide variety of services, including trade execution, brokerage services, clearing,
compression and other post-trade services, information, and other back-office services to a broad assortment of financial and non-financial
institutions.
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 OTC or through an exchange. Through our Fenics® group of electronic brands, we offer a number of market infrastructure
and connectivity services, Fully Electronic marketplaces, and the Fully Electronic brokerage of certain products that also may trade via Voice
and Hybrid execution. The full suite of Fenics® offerings include Fully Electronic brokerage, market data and related information services,
trade compression and other post-trade services, analytics related to financial instruments and markets, and other financial technology
solutions. Fenics® brands operate under the names Fenics®, BGC Trader™, CreditMatch®, Fenics Market Data™, BGC Market Data™,
kACE2®, EMBonds®, Capitalab®, Swaptioniser®, CBID® and Lucera®. We previously offered real estate services through our publicly
traded subsidiary, Newmark (NASDAQ: NMRK). On November 30, 2018, we completed the Spin-Off of Newmark (see “Newmark Spin-
Off” for more information).
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, Sunrise Brokers, Corant, Corant Global,
Besso, Ed Broking, Poten & Partners, RP Martin, kACE2, EMBonds, Capitalab, Swaptioniser, CBID, Aqua and Lucera are
trademarks/service marks, and/or registered trademarks/service marks of BGC Partners, Inc. and/or its affiliates.
Our customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds,
governments, corporations, and investment firms. We have dozens of offices globally in major markets including New York and London, as
well as in Bahrain, Beijing, Bermuda, Bogotá, Brisbane, Buenos Aires, Chicago, Copenhagen, Dubai, Dublin, Frankfurt, Geneva, Hong
Kong, Houston, Istanbul, Johannesburg, Madrid, Melbourne, Mexico City, Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo, Seoul,
Shanghai, Singapore, Sydney, Tel Aviv, Tokyo and Toronto.
As of December 31, 2020, we had over 2,822 brokers, salespeople, managers and other front-office personnel across our businesses.
Newmark Spin-Off
On November 30, 2018, we completed the Spin-Off of the shares of Newmark Class A and Class B common stock held by us to our
stockholders as of the close of business on the Record Date through a special pro-rata stock dividend pursuant to which shares of Newmark
Class A common stock held by BGC were distributed to holders of BGC Class A common stock and shares of Newmark Class B common
stock held by BGC were distributed to holders of BGC Class B common stock (which holders of BGC Class B common stock were Cantor
and CFGM). Following the Spin-Off, BGC no longer holds any interest in Newmark.
For more information about the Newmark Spin-Off, see Note 1—“Organization and Basis of Presentation” to our consolidated
financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Fully Electronic (Fenics) and Hybrid Execution
For the purposes of this document and subsequent SEC filings, all of our Fully Electronic businesses are referred to as Fenics. The
Fenics business includes our group of electronic brands offering a number of Fully Electronic marketplaces, market infrastructure and
connectivity services, and the Fully Electronic brokerage of certain products that also may trade via Voice and Hybrid execution. In addition,
our Fenics offerings include market data and related information services, trade compression and other post-trade services, analytics related
to financial instruments and markets, and other financial technology solutions.
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 automated and electronic trading
efficiency allows the same number of employees to manage a greater volume of trades as the marginal cost of incremental trading activity
falls. Over time, the conversion of exchange-traded and OTC markets to Fully Electronic trading has also typically led to an increase in
volumes which offset lower commissions, and thus often to similar or higher overall revenues. We have been a pioneer in creating and
encouraging Hybrid and Fully Electronic execution, 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 financial firms that dominate the OTC markets had, until recent years,
generally been hesitant in adopting electronically traded products. However, banks, broker-dealers, and other professional trading firms are
now much more active in Hybrid and Fully Electronically traded markets across various OTC products, including credit derivative indices,
FX derivatives, non-U.S. sovereign bonds, corporate bonds, and interest rate derivatives. These electronic markets have grown as a
percentage of overall industry volumes for the past few years as firms like BGC have invested in the kinds of technology favored by our
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customers. Regulation in Asia, Europe and the U.S. regarding banking, capital markets, and OTC derivatives has accelerated the adoption of
Fully Electronic execution, and we expect this demand to continue. We also believe that new clients, beyond our large bank customer base,
will primarily transact electronically across our Fenics platforms.
The combination of wider adoption of Hybrid and Fully Electronic execution and our competitive advantage in terms of technology
and experience has contributed to our strong growth in electronically traded products. We continue to invest in Hybrid and Fully Electronic
technology broadly across our product categories, not only expanding existing product offerings, but also launching new platforms with
market leading protocols and functionality, which we believe will be game changing in the sector. Fenics has exhibited strong growth over
the past several years, and we believe that this growth has outpaced the wholesale brokerage industry as a whole. We expect this trend to
accelerate as we convert more of our Voice and Hybrid execution into Fully Electronic execution across our Fenics platforms and introduce
new standalone Fully Electronic trading platforms.
We expect to benefit from the secular trend towards electronic trading, increased demand for market data, and the need for
increased connectivity, automation and post-trade services. We continue to onboard new customers as the opportunities created by electronic
and algorithmic trading continue to transform our industry. We continue to roll out our next-gen Fenics brokerage platforms across more
products and geographies with the goal of seamlessly integrating Voice liquidity with customer electronic orders either by a graphical user
interface, application programming interface, or web-based interface, and we expect to have continued success converting Voice/Hybrid
desks over time as we roll out these platforms across more products and geographies.
We have continued to invest in our newer Fenics stand-alone Fully Electronic offerings, which currently include:
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Fenics GO, our electronic trading platform, which provides live, real-time and tradeable two-way electronic liquidity for
exchange-listed futures and options, such as Eurex Euro Stoxx 50 Index Options, Euro Stoxx Banks Index Options, which
launched in August 2020, Nikkei 225 Index Options, Hang Seng Composite Index Options, which launched in December
2020, and related Delta One strategies. In July of this year, Fenics GO added Susquehanna International Securities (SIG),
which joined DRW, Lighthouse, Citadel Securities, IMC, Maven Securities, and Optiver as electronic liquidity providers. Our
Fenics GO fully electronic options trading platform has increased its volumes by over 600% in the fourth quarter of 2020
from a year ago. Strong performance across its index options offering, and recent launches of additional European and Asian
index products drove volumes and market share higher during 2020. Fenics GO is the only anonymous multilateral electronic
platform for block-sized listed equity index options, giving it a unique advantage in helping clients satisfy their best execution
requirements. In its short time since going live, we estimate that, as of December 31, 2020, Fenics GO commanded over 5%
and 10% market share in Euro Stoxx 50 and Nikkei 225 front-month block-sized options, respectively. Fenics GO’s market
share is based on estimated Euro Stoxx 50 and Nikkei 225 IDB block-sized transactions for “front-month” option volume,
which refers to the nearest expiration date for an options contract (within 32 days of expiration);
Fenics UST, which generated notional volume growth of more than 66% for year ended December 31, 2020 and increased its
CLOB market share by 600 basis points and is now the second largest CLOB platform for U.S. Treasuries. This compares
with an increase of 3% for overall primary dealer U.S. Treasury volumes. Primary dealer volumes are based on data from the
Securities Industry and Financial Markets Association. Over 70% of all trades in the fourth quarter were transacted at prices
only offered on the Fenics UST platform, providing a tremendous competitive advantage. CLOB market share is based on
BGC’s estimates and data from Greenwich Associates for the U.S. Treasury volumes of Fenics UST, CME BrokerTec,
Nasdaq Fixed Income, and Tradeweb’s Dealerweb platform. Including these CLOB platforms as well as the volumes of
platforms using other fully electronic U.S. Treasury trading protocols, Fenics UST increased its market share from 5.4% to
7.0% year-on-year in December 2020, per Greenwich Associates. Fenics UST is estimated to have saved our clients
approximately $140 million from January 2019 through December 2020 by offering the tightest spreads in the market. As a
result of our continued technological innovations and strong client support, we expect both volumes and market share to
continue to outperform the overall market Additionally, Fenics UST optimized its commercial agreements going into 2021,
which is expected to drive revenue growth. Advancing on its success in U.S. Treasuries, Fenics UST launched Treasury Bills
at the end of the fourth quarter and is expected to introduce U.S. Repo products in the first quarter of 2021;
Our expanded Fenics FX platforms, including MidFX, Spot, FX Options, and non-deliverable and FX forwards;
Lucera, which is our software-defined network, offering the trading community direct connectivity to each other. Lucera has
a fully built, scalable infrastructure that provides clients electronic trading connectivity with their counterparties within two
days, as opposed to months, and at a significantly lower cost. Lucera Connect is quickly becoming the industry standard for
the FX market;
Capitalab’s interest rate and equity options compression, FX matching and initial margin optimization services; and
Algomi, acquired in March 2020, which is a dealer-to-client credit marketplace for banks streaming to buy-side clients, and
provides the buy-side aggregated access to broad bank liquidity. This subscription SaaS improves their workflow and
liquidity through data aggregation, pre-trade information analysis, and execution facilitation. We are integrating this business
with our existing Lucera SaaS connectivity subscription service in order to provide both data and execution capabilities
directly between banks/dealers and their buy-side customers.
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Collectively, our newer Fenics offerings, such as those listed above, are not yet fully up to scale, and are not yet generating
significant revenues. Fenics brokerage revenue comprised 15.5% of overall financial brokerage revenue for the fourth quarter of 2020,
representing its highest ever contribution. Additionally, revenue growth from Fenics standalone businesses, including Fenics UST, Fenics GO
and Lucera, continued to significantly outpace the overall business. Over time, we expect these new products and services to become
profitable, high-margin businesses as their scale and revenues increase, all else equal.
During the second quarter of 2020, we introduced Fenics Integrated, which seamlessly integrates hybrid liquidity with customer
electronic orders either by GUI and/or API. Desks are categorized as “Fenics Integrated” if they utilize sufficient levels of technology such
that significant amounts of their transactions can be or are executed without broker intervention and have expected pre-tax margins of at least
25%. Fenics brokerage revenues include revenues from Fenics Integrated from the second quarter of 2020 onward. We believe that Fenics
Integrated will enhance profit margins by further incentivizing our brokers and clients to automate execution and create superior real-time
information and improve the robustness and value of Fenics Market Data, which will accelerate our growth rate.
Net revenues in our Fully Electronic businesses across brokerage, data, software, and post-trade increased 12.0% to $81.9 million
for the year ended December 31, 2020. Within our Fenics business, total revenues from our high-margin data, software, and post-trade
business, which is predominately comprised of recurring revenue, were up 14.1% for the year ended December 31, 2020, primarily driven by
Lucera’s LumeMarkets platform, their Connect platform winning new SaaS client contracts and the acquisition of Algomi. Fenics Market
Data had solid growth in both the fourth quarter and full year 2020, signing a record number of new, multiyear contracts throughout the year.
Going forward, we expect Fenics to become an even more valuable part of BGC as it continues to grow. We continue to analyze how to
optimally configure our Voice/Hybrid and Fully Electronic businesses.
Possible Corporate Conversion
The Company continues to explore a possible conversion into a simpler corporate structure, weighing any significant change in
taxation policy. In particular, the Company is awaiting insight into future U.S. Federal tax policies, which remain uncertain after the results of
the U.S. elections. Should the Company decide to move forward with a corporate conversion it will work with regulators, lenders, and rating
agencies, and BGC’s board and committees will review potential transaction arrangements.
Impact of ASC 606 on Results
From 2014 through 2016, the FASB issued several accounting standard updates, which together comprise ASC Topic 606, Revenue
from Contracts with Customers. Beginning in the first quarter of 2018, the Company began recording its financial results to conform to ASC
606. ASC 606 does not currently materially impact the results of BGC. The consolidated Company has elected to adopt the guidance using
the modified retrospective approach to ASC 606, under which the consolidated Company applied the new standard only to new contracts
initiated on or after January 1, 2018 and recorded the transition adjustments as part of “Total equity”.
Cost Reduction Program
The Company is continuing to examine how best to operate our business with the goal of reducing expenses. During the first quarter
of 2020, we implemented a $35.0 million cost reduction program to reduce our compensation-related cost base and streamline our operations,
which resulted in $33.5 million of U.S. GAAP compensation charges recorded under this program for the year-ended December 31, 2020.
U.S. GAAP items recorded may include:
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Certain severance charges incurred in connection with headcount reductions as part of a broad cost reduction program; and
Certain compensation and non-compensation-related charges incurred as part of a broad cost reduction program. Such U.S.
GAAP items may include charges for exiting leases and/or other long-term contracts as part of cost-saving initiatives.
Financial Services Industry
The financial services industry has grown historically 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 FX, credit defaults by corporate and sovereign debtors, and changes in the prices of
commodity products. Over this same timeframe, demand from financial institutions, large corporations and other end-users of financial
products have increased volumes in the wholesale derivatives market, thereby increasing the business opportunity for financial
intermediaries.
Another key factor in the historical growth of the financial services industry has been 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 increased the need for trading and required broker-assisted execution.
Due largely to the impacts of the global financial crisis of 2008-2009, our businesses had faced more challenging market conditions
from 2009 until the second half of 2016. Accommodative monetary policies were enacted by several major central banks, including the
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Federal Reserve, Bank of England, Bank of Japan and the European Central Bank, in response to the global financial crises. These policies
resulted in historically low levels of volatility and interest rates across many of the financial markets in which we operate. The global credit
markets also faced structural issues, such as increased bank capital requirements under Basel III. Consequently, these factors contributed to
lower trading volumes in our Rates and Credit asset classes across most geographies in which we operated.
From mid-2016 until the first quarter of 2020, the overall financial services industry benefited from sustained economic growth,
lower unemployment rates in most major economies, higher consumer spending, the modification or repeal of certain U.S. regulations, and
higher overall corporate profitability. In addition, the secular trend towards digitalization and electronification within the industry contributed
to higher overall volumes and transaction count in Fully Electronic execution. From the second quarter of 2020 onward, concerns about the
future trade relationship between the U.K. and the EU after Brexit, a slowdown in global growth driven by the outbreak of COVID-19, and
an increase in trade protectionism are tempered by expectations of monetary and fiscal stimulus.
COVID-19
Impact of COVID-19 on Employees
As a global intermediary to financial markets, BGC has been considered an essential business in many of its various global
locations where key employees are thus able to operate out of its primary offices around the world. We have nonetheless taken proactive
measures intended to protect our employees and clients during this global pandemic. These policies and practices seek to protect the health,
safety and welfare of our workforce while enabling employees to maintain a high level of performance. Certain of these items are
summarized below:
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We activated our Business Continuity Plan in the first quarter of 2020. While a majority of the front office personnel are
working in a firm office currently, a majority of BGC staff members continue to work from home, or other remote locations
and disaster recovery venues. In all cases, we have mandated appropriate social distancing measures.
We provide ongoing informational COVID-19 related messages and notices.
Where applicable, we are applying more frequent and vigorous cleaning and sanitation measures and providing personal
protective equipment (PPE).
Internal and external meetings are generally conducted virtually or via phone calls.
Non-essential business travel, has been restricted since the beginning of March this year, particularly to areas most affected
by the pandemic.
We have deferred and are continuing to defer corporate events and participation in industry conferences.
We are deploying clinical staff internally to support its employees and requiring self-quarantine.
Our medical plans have waived applicable member cost sharing for all diagnostic testing related to COVID-19.
We have reminded employees about our Employee Assistance Program and the ways it can assist them during this
challenging time. There is a zero co-pay for Teladoc mental health visits.
We update employees on vaccination availability as it becomes available from state governmental agencies.
We provide paid leave in accordance with its policies and applicable COVID-19-related laws and regulations.
We continue to take significant steps to protect our employees. Even as re-opening continues for some workers and in some
locations, changes in state work orders and virus spread may impact work arrangements of our employees, vendors and clients for the
foreseeable future. While we have taken significant precautions to protect employees who work in our offices, no assurance can be given that
measures will contain the spread of the virus.
Impact of COVID-19 on the Company’s Results
Revenues
Voice/Hybrid and/or Fully Electronic Brokerage
Our revenues were adversely impacted for the year ended December 31, 2020 as a result of COVID-19 and its impact on the
macroeconomic environment, including interest rates, FX, and oil prices. This resulted in lower year-on-year secondary trading volumes
across rates and certain FX products, which impacted our Rates and FX businesses. In addition, BGC and our clients faced continued
dislocations due to COVID-19.
For the year ended December 31, 2020, Fenics net revenues increased 14.1% driven by double-digit growth in electronic brokerage
and data, software, and post-trade. Our Insurance brokerage business benefitted from favorable pricing trends and improved productivity
from previously hired brokers and salespeople.
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Certain key items are summarized below:
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Revenues across Rates, Credit, FX, Equity derivatives and cash equities, Energy and commodities are generally correlated
with corresponding industry volumes.
The elevated levels of government and corporate debt issuance are expected to benefit BGC’s Rates and Credit businesses in
the long-term.
Conversely, additional quantitative easing measures taken by central banks around the world have lowered and may continue
to lower market volumes.
Responsive actions taken by Central Banks across the globe lowered interest rates and included restarting quantitative easing
programs at levels not seen since the financial crisis. Uniformly low or negative interest rates and quantitative easing
measures in many major economies have negatively impacted and may continue to negatively impact global rates and FX
volumes.
An extended period of historically low oil prices and demand for commodities has led and may continue to lead to lower
demand for hedging and increased risk aversion, which has lowered and may continue to lower market volumes across
Energy and commodities.
Although we have been challenged by the pandemic, we believe that the massive issuance of global debt in the world will
eventually be a tailwind driving our voice business for the long term.
Overall Fenics
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BGC’s Fenics business continued to demonstrate strength and resilience, outperforming a challenging macro trading
backdrop in the fourth quarter of 2020.
Fenics has benefited and is expected to continue to benefit from secular trend towards electronic execution and opportunities
created by algorithmic trading and automation.
The dislocations caused by COVID-19 have resulted in an even greater demand for the Company’s electronic execution. We
believe that the driver of this demand is the best-in-class market liquidity that only integrated global firms like BGC can
provide.
This benefit may be tempered by temporary shifts by traders toward Voice execution in certain markets during periods of
extreme market turbulence.
The pace of adoption of certain financial technology offerings may slow in the short-term due to physical dislocations
experienced by BGC’s employees and clients as a result of the pandemic. Our medium-to longer-term overall strategy with
respect to Fenics is not expected to be impacted.
BGC’s data, software, and post-trade businesses are predominantly comprised of recurring revenues.
Insurance Brokerage (Corant)
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The insurance brokerage industry typically generates significant amounts of predictable revenues at specific times of the year
as different categories of clients sign or renew policies.
Although certain clients may be facing financial hardship or dislocation due to the pandemic, the insurance brokerage
industry has generally performed well during past economic downturns.
BGC expects certain insurance market participants to have an even greater demand for the types of policies it brokers.
Corant generated organic growth in the fourth quarter of 2020 as previously hired brokers and salespeople ramped up
production and the business benefited from favorable pricing trends.
Expenses
BGC’s compensation expenses declined in the fourth quarter of 2020 primarily due to the impact of lower revenues on variable
compensation, as well as our cost reduction program. BGC’s non-compensation expenses declined largely due to lower professional and
consulting fees, and selling and promotion expenses, the latter of which tend to move in line with commission revenues. Selling and
promotion expenses were significantly lower due to a continued focus on tighter cost management as well as the impact of the pandemic.
BGC’s compensation expenses increased for the year ended December 31, 2020 primarily driven by an increase in equity award amortization.
BGC’s non-compensation expenses declined largely due to lower selling and promotion expenses and other expenses. Selling and promotion
expenses, which tend to move in line with commission revenues, were much lower due to a continued focus on tighter cost management as
well as the COVID-19 pandemic significantly impacting travel and entertainment.
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BGC has recorded or may potentially record amounts for certain expenses that are higher than they otherwise would have been due
to the overall impact of the pandemic. Some of these items include:
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Non-cash impairment charges with respect to assets;
Non-cash mark-to-market adjustments for non-marketable investments;
Certain severance charges incurred in connection with headcount reductions as part of a broad cost reduction program;
Certain compensation and non-compensation-related charges incurred as part of a broad cost reduction program. Such U.S.
GAAP items may include charges for exiting leases and/or other long-term contracts as part of cost-saving initiatives;
Expenses relating to setting up and maintaining remote and/or back-up locations; and
Communication expenses related to additional voice and data connections.
Some of the above items may be partially offset by certain tax benefits. It is difficult to predict the amounts of any these items or
when they might be recorded because they may depend on the duration, severity, and overall impact of the pandemic.
Capital and Liquidity
With the outbreak of COVID-19, we reduced our dividend and focused on strengthening our balance sheet. Effective with the first
quarter of 2020 dividend, the Board took the step of reducing the quarterly dividend out of an abundance of caution in order to strengthen the
Company’s balance sheet as the global capital markets face difficult and unprecedented macroeconomic conditions. On February 23, 2021,
our Board declared a $0.01 dividend for the fourth quarter. Additionally, BGC Holdings reduced its distributions to or on behalf of its
partners. The distributions to or on behalf of partners will at least cover their related tax payments. Whether any given post-tax amount is
equivalent to the amount received by a stockholder also on an after-tax basis depends upon stockholders’ and partners’ domiciles and tax
status. BGC believes that these steps will allow the Company to prioritize its financial strength. Our 2021 capital allocation priorities are to
return capital to stockholders and to continue investing in our high growth Fenics businesses. Previously, we were deeply dividend-centric;
going forward, we plan to prioritize share and unit repurchases over dividends and distributions. We plan to reassess our current dividend and
distribution with an aim to nominally increase it toward the end of the year.
The balance sheet as of December 31, 2020 reflects the issuance of $300.0 million of the 4.375% Senior Notes, the $68.9 million
net payoff of the Revolving Credit Agreement and the $44.0 million cash tender offer on the 5.125% Senior Notes, ordinary movements in
working capital, cash paid with respect to annual employee bonuses, taxes, and our continued investment in stand-alone Fenics products and
our insurance brokerage businesses. We continue to manage our business with a focus on its investment grade ratings.
Brexit
On June 23, 2016, the U.K. held a referendum regarding continued membership of the EU. The exit from the EU is commonly
referred to as Brexit. On January 1, 2021, the UK formally left the EU and UK-EU trade became subject to a new agreement that was
concluded in December of 2020. Financial services falls outside of the scope of this trade agreement. Instead, the relationship will largely be
determined by a series of “equivalence decisions,” each of which would grant mutual market access for a limited subset of financial services
where either party finds the other party has a regulatory regime that achieves similar outcomes to its own. It is currently unknown if or when
equivalence decisions will be taken.
In light of ongoing uncertainties, market participants are still adjusting. The exact impact of Brexit on the U.K.-EU flow of financial
services therefore remains unknown. This same uncertainty applies to the consequences for the economies of the U.K. and the EU member
states as a result of the U.K.’s withdrawal from the EU.
We have implemented plans to ensure continuity of service in Europe and continue to have regulated entities in place in many of the
major European markets. As part of our Brexit strategy, ownership of BGC Madrid, Copenhagen and Frankfurt & GFI Paris, Madrid and
Dublin branches was transferred to Aurel BGC SAS (a French-based operation and therefore based in the EU) in July 2020, BGC’s Insurance
division (Corant) has established new brokerage platforms in Cyprus and France and we have been generally increasing our footprint in the
EU.
Regardless of these and other mitigating measures, our European headquarters and largest operations are in London, and market
access risks and uncertainties have had and could continue to have a material adverse effect on our customers, counterparties, businesses,
prospects, financial condition and results of operations. Furthermore, in the future the U.K. and EU’s regulation may diverge, which could
disrupt and increase the costs of our operations, and result in a loss of existing levels of cross-border market access.
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Industry Consolidation
In recent years, there has been significant consolidation among the interdealer-brokers and wholesale brokers with which we
compete. We expect to continue to compete with the electronic markets, post-trade and information businesses of NEX, that are part of CME
now, through the various offerings on our Fenics platform. We will also continue to compete with TP ICAP and Tradition across various
Voice/Hybrid brokerage marketplaces as well as via Fenics. There has also been significant consolidation among smaller non-public
wholesale brokers, including our acquisitions of RP Martin, Heat Energy Group, Remate Lince and Sunrise Brokers Group. We view the
recent consolidation in the industry favorably, as we expect it to provide additional operating leverage to our businesses in the future.
Growth Drivers
As a wholesale intermediary in the financial services industry, our businesses are driven primarily by secondary trading 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 generate by Fully Electronic means. BGC’s
revenues tend to have low correlation in the short and medium-term with global bank and broker-dealer sales and trading revenues, which
reflect bid-ask spreads and mark-to-market movements, as well as industry volumes in both the primary and secondary markets.
Below is a brief analysis of the market and industry volumes for some of our products, including our overall Hybrid and Fully
Electronic execution activities.
Overall Market Volumes and Volatility
Volume is driven by a number of factors, including the level of issuance for financial instruments, price volatility of financial
instruments, macro-economic conditions, creation and adoption of new products, regulatory environment, and the introduction and adoption
of new trading technologies. Historically, increased price volatility has often 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, in certain instances, volatility. Historically low and negative
interest rates across the globe have significantly reduced the overall trading appetite for rates products. As a result of central bank policies
and actions, as well as continued expectations of low inflation rates, many sovereign bonds continue to trade at or close to negative yields,
especially in real terms. Also weighing on yields and rates volumes are global central bank quantitative easing programs. The programs
depress rates volumes because they entail central banks buying government securities or other securities in the open market 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. Following the market dislocation and ongoing
pandemic, major central banks such as the U.S. Federal Reserve, ECB, Bank of Japan, Bank of England, and Swiss National Bank have
restarted or may restart quantitative easing programs, and continue to maintain historically low interest rates, keep key short-term interest
rates low, or a combination of both. The overall dollar value of balance sheets of the G-4 (the U.S., Eurozone, Japan, and U.K.) is expected to
increase and remain high as a percentage of G-4 GDP over the medium-to-long-term.
Additional factors have weighed down market volumes in the products we broker. For example, the Basel III accord, implemented
in late 2010 by the G-20 central banks, is a global regulatory framework on bank capital adequacy, stress testing and market liquidity risk that
was developed with the intention of making banks more stable in the wake of the financial crisis by increasing bank liquidity and reducing
bank leverage. The accord, which is expected to be fully phased in as of January 1, 2022, has already required most large banks in G-20
nations to hold approximately three times as much Tier 1 capital as was required under the previous set of rules. These capital rules have
made 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 their proprietary 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 market exposure and industry volumes in many of the products we
broker, particularly in Credit.
For the year ended December 31, 2020, industry volumes were lower year-over-year across Rates, mixed across FX, and generally
higher across Credit, Equity derivatives and cash equities, and Energy and commodities. BGC’s brokerage revenues, excluding Insurance,
were down by 4.2% year-on-year. Below is an expanded discussion of the volume and growth drivers of our various 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. The amount of global sovereign debt outstanding remains high by historical standards, however the level of
secondary trading and related hedging activity was lower during 2020. In addition, according to Bloomberg and the Federal Reserve Bank of
New York, the average daily volume of various U.S. Treasuries, excluding Treasury bills, among primary dealers was 11% lower in 2020 as
compared to a year earlier. Additionally, interest rate derivative volumes were down 5% and 22% at ICE and the CME, respectively, all
according to company press releases. In comparison, our revenue from Fenics Fully Electronic Rates increased 20.6%, while our overall
Rates revenues were down 8.5% as compared to a year earlier to $544.1 million.
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Our Rates revenues, like the revenues for most of our products, are not fully dependent on market volumes and, therefore, do not
always fluctuate consistently with industry metrics. This is largely because our Voice, Hybrid, and Fully Electronic Rates desks 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. Meanwhile, economists expect that the
effects of various forms of quantitative easing previously and currently being undertaken by the various major central banks will continue to
negatively impact financial market volumes. 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 policies globally.
FX Volumes and Volatility
Global FX volumes were generally mixed during 2020. Volumes for CME FX futures and options, Refinitiv (formerly the Financial
& Risk business of Thomson Reuters) and CME EBS spot FX were up 1%, and down 4%, respectively. In comparison, our overall FX
revenues decreased by 14.9% to $315.3 million.
Insurance Brokerage
Our overall Insurance brokerage business (Corant) includes Ed Broking and Besso, as well as our newly established aviation and
space insurance brokerage business, whose producers are not yet generating meaningful revenue. Therefore, these newer insurance businesses
are not yet up to scale. The pre-tax loss relating to Corant was $25.4 million and $17.8 million for the years ended December 31, 2020 and
2019, respectively. Corant posted record revenue for both the fourth quarter and full year 2020 as it continued to benefit from improved
productivity from previously hired brokers and hardening pricing trends. Corant’s growth was also driven by new business lines including its
aviation & aerospace business, Piiq Risk Partners, which won new key clients.
Equity derivatives and cash equities
Global equity volumes were higher during 2020. Research from Raymond James indicated that the average daily volumes of U.S.
cash equities and U.S. options were up 56% and 52%, respectively, as compared to a year earlier, while average daily volume of European
cash equities shares were up 5% (in notional value). Over the same timeframe, Eurex average daily volumes of equity derivatives were down
36% while Euronext equity derivative index volumes increased by 10%. BGC’s equity business primarily consists of equity derivatives,
which is why we have renamed this revenue line-item: Equity derivatives and cash equities. Our overall revenues from Equity derivatives and
cash equities increased by 1.3% to $254.7 million.
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 parts of our business is impacted by corporate issuance. Global credit derivative market turnover has declined over the last few
years due to the introduction of rules and regulations around 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 2020, primary dealer average
daily volume for corporate bonds (excluding commercial paper) was up by 21% according to Bloomberg and the Federal Reserve Bank of
New York. Total notional traded credit derivatives as reported by the International Swaps and Derivatives Association — a reflection of the
OTC derivatives market — were up by 15%, from a year earlier. In comparison, our overall Credit revenues increased by 7.6% to $329.9
million.
Energy and Commodities
Energy and commodities volumes were generally higher during 2020 compared with the year earlier. CME and ICE energy futures
and options volumes were up 1% and 15%, respectively, in 2020 compared to the previous year. In comparison, BGC’s Energy and
commodities revenues increased by 1.4% to $292.6 million.
FINANCIAL OVERVIEW
Revenues
Our revenues are derived primarily from brokerage commissions charged for either agency or matched principal transactions, fees
from related parties, fees charged for market data, analytics and post-trade products, fees from software solutions, and interest income.
Brokerage
We earn revenues from our brokerage services on both an agency and matched principal basis. In agency transactions, we charge a
commission for connecting buyers and sellers and assisting in the negotiation of the price and other material terms of the transaction. After all
88
material terms of a transaction are agreed upon, we identify the buyer and seller to each other and leave them to settle the trade directly.
Principal transaction revenues are primarily derived from matched principal transactions, whereby revenues are earned on the spread between
the buy and the sell price of the brokered security, commodity or derivative. Customers either see the buy or sell price on a screen or are
given this information over the phone. The brokerage fee is then added to the buy or sell price, which represents the spread we earn as
principal transactions revenues. On a limited basis, we enter into unmatched principal transactions to facilitate a customer’s execution needs
for transactions initiated by such customers. We also provide market data products for selected financial institutions.
We offer our brokerage services in seven broad product categories: Rates, FX, Credit, Energy & commodities, Insurance, Equity
derivatives and cash equities classes. The chart below details brokerage revenues by product category and by Voice/Hybrid versus Fully
Electronic (in thousands):
For the Year Ended December 31,
2019
2018
2020
Brokerage revenue by product:
Rates
Credit
FX
Energy and commodities
Equity derivatives and cash equities
Insurance
Total brokerage revenues
Brokerage revenue by product (percentage):
Rates
Credit
FX
Energy and commodities
Equity derivatives and cash equities
Insurance
Total brokerage revenues
Brokerage revenue by type:
Voice/Hybrid
Fully Electronic
Total brokerage revenues
Brokerage revenue by type (percentage):
Voice/Hybrid
Fully Electronic
Total brokerage revenues
$ 544,094 $ 594,884 $ 549,825
292,171
396,256
229,121
288,265
68,937
$ 1,919,301 $ 1,967,741 $ 1,824,575
329,904
315,253
292,641
254,702
182,707
306,713
370,318
288,697
251,339
155,790
28.3 %
17.2
16.4
15.2
13.4
9.5
100.0 %
30.2 %
15.6
18.8
14.7
12.8
7.9
100.0 %
30.1 %
16.0
21.7
12.6
15.8
3.8
100.0 %
$ 1,684,380 $ 1,763,114 $ 1,628,653
195,922
$ 1,919,301 $ 1,967,741 $ 1,824,575
234,921
204,627
87.8 %
12.2
100.0 %
89.6 %
10.4
100.0 %
89.3 %
10.7
100.0 %
As the above table indicates, our brokerage operations in the Rates product category produce a significant percentage of our total
brokerage revenues. We expect that revenues from our Rates product brokerage operations will increase in absolute terms, but decline as a
percentage of our overall revenues as we continue to invest in expanding in other asset classes.
Our position as a leading wholesale financial broker is enhanced by our Hybrid brokerage platform. We believe that the more
complex, less liquid markets on which we focus often require significant amounts of personal and attentive service from our brokers. In more
mature markets, we offer Fully Electronic execution capabilities to our customers through our platforms, including Fenics and BGC Trader.
Our Hybrid platform allows our customers to trade on a Voice, Hybrid or, where available, Fully Electronic basis, regardless of whether the
trade is OTC or exchange-based, and to benefit from the experience and market intelligence of our worldwide brokerage network. Our
electronic capabilities include clearing, settlement, post-trade, and other back-office services as well as straight-through processing for our
customers across several products. Furthermore, we benefit from the operational leverage in our Fully Electronic platform. We believe our
Hybrid brokerage approach provides a competitive advantage over competitors who do not offer this full range of technology.
Rates
Our Rates business is focused on government debt, futures and currency, and both listed and OTC interest rate derivatives, which
are among the largest, most global and most actively traded markets. The main drivers of these markets are global macroeconomic forces
such as growth, inflation, government budget policies and new issuances.
FX
The FX market is one of the largest financial markets in the world. FX transactions can either be undertaken in the spot market, in
which one currency is sold and another is bought, or in the derivative market in which future settlement of the identical underlying currencies
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are traded. We provide full execution OTC brokerage services in most major currencies, including all G8 currencies, emerging market, cross
and exotic options currencies.
Credit
We provide our brokerage services in a wide range of credit instruments, including asset-backed securities, convertible bonds,
corporate bonds, credit derivatives and high yield bonds.
Energy and Commodities
We provide brokerage services for most widely traded energy and commodities products, including futures and OTC products
covering, refined and crude oil, liquid natural gas, coal, electricity, gold and other precious metals, base metals, emissions, and soft
commodities. We also provide brokerage services associated with the shipping of certain energy and commodities products.
Insurance
We provide wholesale insurance and reinsurance broking solutions and underwriting services across the global marketplace,
operating through the brands Ed Broking, Besso, Piiq Risk Partners and Junge, as well as the group’s managing general agents Cooper Gay,
Globe Underwriting and Epsilon. Subject to regulatory consent, Corant will become the holding company for all insurance interests of BGC,
comprising the brands referenced above.
Equity Derivatives and Cash Equities
We provide brokerage services in a range of markets for equity products, including cash equities, equity derivatives (both listed and
OTC), equity index futures and options on equity products.
Fees from Related Parties
We earn fees from related parties for technology services and software licenses and for certain administrative and back-office
services we provide to affiliates, particularly from Cantor. These administrative and back-office services include office space, utilization of
fixed assets, accounting services, operational support, human resources, legal services and information technology.
Data, software and post-trade
Fenics Market Data is a supplier of real-time, tradable, indicative, end-of-day and historical market data. Our market data product
suite includes fixed income, interest rate derivatives, credit derivatives, FX, FX options, money markets, energy and equity derivatives and
structured market data products and services. The data are sourced from the Voice, Hybrid and Fully Electronic broking operations, as well as
the market data operations, including BGC, GFI and RP Martin, among others. It is made available to financial professionals, research
analysts and other market participants via direct data feeds and BGC-hosted FTP environments, as well as via information vendors such as
Bloomberg, Thomson Reuters, ICE Data Services, QUICK Corp., and other select specialist vendors.
Through our software solutions business, we provide customized software to broaden distribution capabilities and provide electronic
solutions to financial market participants. The software solutions business leverages our global infrastructure, software, systems, portfolio of
intellectual property, and electronic trading expertise to provide customers with electronic marketplaces and exchanges and real-time auctions
to enhance debt issuance and to customize trading interfaces. We take advantage of the scalability, flexibility and functionality of our
electronic trading system to enable our customers to distribute products to their customers through online offerings and auctions, including
private and reverse auctions, via our trading platform and global network. Using screen-based market solutions, customers are able to develop
a marketplace, trade with their customers, issue debt, trade odd lots, access program trading interfaces and access our network and intellectual
property. We provide option pricing and analysis tools that deliver price discovery that is supported with market data sourced from both our
BGC and GFI trading systems.
In the fourth quarter of 2017, Capitalab completed its largest G-4 Interest Rates IMO to date with more than 15 participating
counterparties. The service enabled these counterparties to multilaterally shrink delta, vega and curvature bilateral counterparty risks and
significantly reduce both non-cleared and cleared initial margin at the Central Clearing Counterparty. In January of 2018, Capitalab executed
the first combined compression cycle in Swaptions, Caps, Floors and cleared interest rate swaps due to its appointment as an Approved
Compression Service Provider at LCH’s SwapClear. In the second quarter of 2019, Capitalab launched its Nikkei 225 options compression
service in partnership with the Singapore Exchange.
Interest Income
We generate interest income primarily from the investment of our daily cash balances, interest earned on securities owned and
reverse repurchase agreements. These investments and transactions are generally short-term in nature. We also earn interest income from
employee loans, and we earn dividend income on certain marketable securities.
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Other Revenues
We earn other revenues from various sources, including underwriting and advisory fees.
Expenses
Compensation and Employee Benefits
The majority of our operating costs consist of cash and non-cash compensation expenses, which include base salaries, broker
bonuses based on broker production, guaranteed bonuses, other discretionary bonuses, and all related employee benefits and taxes. Our
employees consist of brokers, salespeople, executives and other administrative support. The majority of our brokers receive a base salary and
a formula bonus based primarily on a pool of brokers’ production for a particular product or sales desk, as well as on the individual broker’s
performance. Members of our sales force receive either a base salary or a draw on commissions. Less experienced salespeople typically
receive base salaries and bonuses.
As part of our compensation plans, certain employees are granted LPUs in BGC Holdings which generally receive quarterly
allocations of net income, that are cash distributed on a quarterly basis and generally contingent upon services being provided by the unit
holders. As prescribed in U.S. GAAP guidance, the quarterly allocations of net income on such LPUs are reflected as a component of
compensation expense under “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in our
consolidated statements of operations.
Certain of these LPUs entitle the holders to receive post-termination payments equal to the notional amount in four equal yearly
installments after the holder’s termination. These limited partnership units are accounted for as post-termination liability awards under U.S.
GAAP guidance, which requires that we record an expense for such awards based on the change in value at each reporting period and include
the expense in our consolidated statements of operations as part of “Equity-based compensation and allocations of net income to limited
partnership units and FPUs.” The liability for LPUs with a post-termination payout amount is included in “Accrued compensation” on our
consolidated statements of financial condition.
Certain LPUs are granted exchangeability into our Class A common stock on a one-for-one basis (subject to adjustment). At the
time exchangeability is granted, the Company recognizes an expense based on the fair value of the award on that date, which is included in
“Equity-based compensation and allocations of net income to limited partnership units and FPUs” in our consolidated statements of
operations.
In addition, Preferred Units are granted in connection with the grant of certain LPUs, such as PSUs, that may be granted
exchangeability or redemption in connection with the grant of shares of common stock to cover the withholding taxes owed by the unit holder
upon such exchange or redemption. This is an acceptable alternative to the common practice among public companies of issuing the gross
amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes. Each quarter, the net profits of
BGC Holdings and Newmark Holdings are allocated to Preferred 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 is deducted before the calculation and distribution of the
quarterly partnership distribution for the remaining partnership interests. 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 our Class A common
stock and are only entitled to the Preferred Distribution, and accordingly they are not included in our fully diluted share count. The quarterly
allocations of net income on Preferred Units are reflected in compensation expense under “Equity-based compensation and allocations of net
income to limited partnership units and FPUs” in our consolidated statements of operations.
We have entered into various agreements with certain of our employees and partners, whereby these individuals receive loans which
may be either wholly or in part repaid from the distribution earnings that the individual receives on their LPUs 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, we
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.
In addition, we also enter into deferred compensation agreements with employees providing services to us. The costs associated
with such plans are generally amortized over the period in which they vest. See Note 21—“Compensation” to our consolidated financial
statements.
Other Operating Expenses
We have various other operating expenses. We incur leasing, equipment and maintenance expenses for our businesses worldwide.
We also incur selling and promotion expenses, which include entertainment, marketing and travel-related expenses. We incur communication
expenses for voice and data connections with our clients, clearing agents and general usage; professional and consulting fees for legal, audit
and other special projects; and interest expense related to short-term operational funding needs, and notes payable and collateralized
borrowings.
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Primarily in the U.S., we pay fees to Cantor for performing certain administrative and other support services, including charges for
occupancy of office space, utilization of fixed assets and accounting, operations, human resources, legal services and technology
infrastructure support. Management believes that these charges are a reasonable reflection of the utilization of services rendered. However,
the expenses for these services are not necessarily indicative of the expenses that would have been incurred if we had not obtained these
services from Cantor. In addition, these charges may not reflect the costs of services we may receive from Cantor in the future. We incur
commissions and floor brokerage fees for clearing, brokerage and other transactional expenses for clearing and settlement services. We also
incur various other normal operating expenses.
Other Income (Losses), Net
Gain (Loss) on Divestiture and Sale of Investments
Gain (Loss) on divestiture and sale of investments represent the gain or loss we recognize for the divestiture or sale of our investments.
Gains (Losses) on Equity Method Investments
Gains (losses) on equity method investments represent our pro-rata share of the net gains (losses) on investments over which we have
significant influence but which we do not control.
Other Income (Loss)
Other Income (loss) is primarily comprised of gains or losses related to fair value adjustments on investments carried under the
alternative method. Other Income (loss) also includes realized and unrealized gains or losses related to sales and mark-to-market adjustments
on Marketable securities and any related hedging transactions when applicable. Acquisition-related fair value adjustments of contingent
consideration and miscellaneous recoveries are also included in Other Income (loss).
Provision (Benefit) for Income Taxes
We incur income tax expenses or benefit based on the location, legal structure and jurisdictional taxing authorities of each of our
subsidiaries. Certain of the Company’s entities are taxed as U.S. partnerships and are subject to the UBT in New York City. U.S. federal and
state income tax liability or benefit related to the partnership income or loss, with the exception of UBT, rests with the partners (see Note 2—
“Limited Partnership Interests in BGC Holdings and Newmark Holdings” for discussion of partnership interests), rather than the partnership
entity. The Company’s 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. Outside of the U.S., we operate principally through subsidiary corporations subject to local income taxes.
REGULATORY ENVIRONMENT
See “Regulation” in Part I, Item 1 of this Annual Report on Form 10-K for additional information related to our regulatory
environment.
LIQUIDITY
See “Liquidity and Capital Resources” herein for information related to our liquidity and capital resources.
HIRING AND ACQUISITIONS
Key drivers of our revenue are front-office producer headcount and average revenue per producer. We believe that our strong
technology platform and unique compensation structure have enabled us to use both acquisitions and recruiting to profitably increase our
front-office staff at a faster rate than our largest competitors since our formation in 2004.
We have invested significantly through acquisitions and the hiring of new brokers, salespeople, managers and other front-office
personnel. The business climate for these acquisitions has been competitive, and it is expected that these conditions will persist for the
foreseeable future. We have been able to attract businesses and brokers, salespeople, managers and other front-office personnel to our
platform as we believe they recognize that we have the scale, technology, experience and expertise to succeed.
We have made significant investments in our Insurance brokerage business (Corant), including meaningful increases in front-office
employees. Our average revenue per front-office employee has historically declined year-over-year for the period immediately following
significant headcount increases, and the additional brokers and salespeople generally achieve significantly higher productivity levels in their
second or third year with the Company. Excluding Corant, as of December 31, 2020, our front-office headcount was 2,297 brokers,
salespeople, managers and other front-office personnel, down 10.7% from 2,573 a year ago. Compared to the prior year, average revenue per
front-office employee for the year ended December 31, 2020 increased by 1.9% to $750 thousand from $736 thousand. On a stand-alone
basis, total Corant headcount increased by 16.4% to 900 from 773 a year ago.
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The laws and regulations passed or proposed on both sides of the Atlantic concerning OTC trading seem likely to favor increased use
of technology by all market participants, and are likely to accelerate the adoption of both Hybrid and Fully Electronic execution. We believe
these developments will favor the larger inter-dealer brokers over smaller, non-public local competitors, as the smaller players generally do
not have the financial resources to invest the necessary amounts in technology. We believe this will lead to further consolidation across the
wholesale financial brokerage industry, and thus allow us to grow profitably.
Since 2018, our acquisitions have included Poten & Partners, Ed Broking, Ginga Petroleum, Algomi and several smaller acquisitions.
On November 15, 2018, we acquired Poten & Partners, a leading ship brokerage, consulting and business intelligence firm specializing
in LNG, tanker and LPG markets. Founded over 80 years ago and with 170 employees worldwide, Poten & Partners provides its clients with
valuable insight into the international oil, gas and shipping markets.
On January 31, 2019, we completed the acquisition of Ed Broking, an independent Lloyd's of London insurance broker with a strong
reputation across accident and health, aerospace, cargo, energy, financial and political risks, marine, professional and executive risks,
property and casualty, specialty and reinsurance. Ed Broking has become part of the Company’s overall Insurance brokerage business.
On March 12, 2019, we completed the acquisition of Ginga Petroleum. Ginga Petroleum provides a comprehensive range of broking
services for physical and derivative energy products, including naphtha, liquefied petroleum gas, fuel oil, biofuels, middle distillates,
petrochemicals and gasoline.
On March 6, 2020, we completed the acquisition of Algomi, a software company that provides technology to bond market participants
to improve their workflow and liquidity by data aggregation, pre-trade information analysis and execution facilitation.
FINANCIAL HIGHLIGHTS
For the year ended December 31, 2020, we had income (loss) from operations before income taxes of $77.9 million compared to
income (loss) from operations before income taxes of $122.1 million in the year earlier period. We have made excellent progress this year
with respect to our investments in Fenics and Insurance brokerage. Our Fenics brokerage revenues grew by double digits in the year ended
December 31, 2020 compared to the year earlier period. Fenics UST and Fenics GO, two of our newer fully electronic offerings, reached
record levels of market share, and our Insurance brokerage group (Corant) is positioned to turn profitable in the near-term. We believe the
macro trends of accelerated adoption of electronic trading, record levels of global debt issuance, and a hardening insurance market will drive
positive fundamentals for our businesses.
Total revenues for the year ended December 31, 2020 decreased $47.5 million to $2,056.7 million compared to the year earlier period,
which was primarily due to a $48.4 million decrease in brokerage revenues. Our revenues were adversely impacted in the year ended
December 31, 2020 as a result of COVID-19 and its impact on the macroeconomic environment, including interest rates, FX and oil prices.
Corant generated 17.3% growth as it benefitted from favorable pricing trends and improved productivity from previously hired brokers and
salespeople. In addition, our Credit business generated a 7.6% increase, while our Energy and commodities, and Equity derivatives and cash
equities businesses generated growths of 1.4% and 1.3%, respectively. Our FX and Rates businesses were adversely impacted by lower year-
on-year secondary trading volumes in certain markets. Net revenues in our Fully Electronic businesses across brokerage, data, software, and
post-trade increased 14.1% to $316.8 million compared to the prior year period. Within our Fenics business, total revenues from our high-
margin data, software, and post-trade business, which is predominantly comprised of recurring revenue, were up 12.0% to $81.9 million
compared to the prior year period. During the second quarter of 2020, we introduced Fenics Integrated, which seamlessly integrates hybrid
liquidity with customer electronic orders. We believe that Fenics Integrated will enhance profit margins by further incentivizing the
Company’s brokers and clients to automate execution. We believe that Fenics Integrated will create superior real-time information,
improving the robustness and value of Fenics Market Data, which will accelerate our growth. As we expand our product offerings, optimize
our commercial agreements, and add new clients across our electronic platforms, we continue to expect profitability in our newer Fenics
stand-alone businesses, which includes Fenics UST, Fenics GO, and Lucera.
Total expenses for the year ended December 31, 2020 decreased $49.4 million to $1,985.8 million compared to the prior year period,
primarily due to a $68.1 million decrease in non-compensation expenses largely as a result of lower selling and promotion expenses due to a
continued focus on tighter cost management as well as the impact of COVID-19, a decrease in other expenses due to certain legal settlements
in the prior year, as well as a decrease in professional and consulting fees. This was partially offset by an increase in interest expense, driven
by the $300 million 3.750% Senior Notes, which were issued in September 2019, and the $300 million 4.375% Senior Notes, which were
issued in July 2020, less lower interest expense on BGC’s revolving credit facility, which was repaid in full during the third quarter of 2020.
Compensation expenses for the year ended December 31, 2020 increased $18.7 million compare to the year earlier period, which was
primarily driven by an increase in equity-based compensation expenses.
93
Total other income (losses), net for the year ended December 31, 2020 decreased $46.1 million to $7.0 million compared to the prior
year period, primarily due to a $18.4 million gain on the divestiture of CSC Commodities in the prior year and gains of $20.3 million related
to fair value adjustments on investments during 2019.
On February 23, 2021, our Board declared a $0.01 dividend for the fourth quarter. Effective with the first quarter of 2020 dividend, the
Board took the step of reducing the quarterly dividend out of an abundance of caution in order to strengthen the Company’s balance sheet as
the global capital markets face difficult and unprecedented macroeconomic conditions. Additionally, BGC Holdings reduced its distributions
to or on behalf of its partners. The distributions to or on behalf of partners will at least cover their related tax payments. Whether any given
post-tax amount is equivalent to the amount received by a stockholder also on an after-tax basis depends upon stockholders’ and partners’
domiciles and tax status. BGC believes that these steps will allow the Company to prioritize its financial strength. Our 2021 capital allocation
priorities are to return capital to stockholders and to continue investing in our high growth Fenics businesses. Previously, we were deeply
dividend-centric; going forward, we plan to prioritize share and unit repurchases over dividends and distribution with an aim to nominally
increase it toward the end of the year.
94
RESULTS OF OPERATIONS
The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenues for the periods
indicated (in thousands):
Revenues:
Commissions
Principal transactions
Total brokerage revenues
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net
income to limited partnership units and FPUs1
Total compensation and employee benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Gains (losses) on divestitures and sale of investments
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
Income (loss) from continuing operations
before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss) from continuing
operations
Consolidated net income (loss) from
discontinued operations, net of tax
Consolidated net income (loss)
Less: Net income (loss) from continuing
operations attributable to noncontrolling
interest in subsidiaries
Less: Net income (loss) from discontinued
operations attributable to noncontrolling
interest in subsidiaries
Net income (loss) available to
common stockholders
2020
Actual
Results
Percentage
of Total
Revenues
Year Ended December 31,
2019
Actual
Results
Percentage
of Total
Revenues
2018
Actual
Results
Percentage
of Total
Revenues
$ 1,567,668
351,633
1,919,301
25,754
81,920
12,332
17,413
2,056,720
76.2 % $ 1,645,818
17.1 321,923
93.3 1,967,741
29,442
73,166
18,319
15,563
100.0 2,104,231
1.3
4.0
0.6
0.8
78.2 % $ 1,511,522
15.3 313,053
93.5 1,824,575
24,076
65,185
14,404
9,570
100.0 1,937,810
1.4
3.5
0.9
0.7
78.0 %
16.2
94.2
1.2
3.4
0.7
0.5
100.0
1,131,650
55.0 1,125,911
53.5 1,004,793
51.9
183,545
1,315,195
189,268
23,193
73,470
121,603
38,167
59,376
76,607
88,933
1,985,812
8.9 170,625
63.9 1,296,536
9.2 183,207
19,365
1.1
3.6
92,167
5.9 119,982
81,645
1.9
63,617
2.9
3.7
60,246
4.4 118,449
96.6 2,035,214
8.1 200,057
61.6 1,204,850
8.7 151,194
20,163
0.9
4.4
84,103
5.7 118,014
69,338
3.9
61,891
3.0
42,494
2.9
71,869
5.6
96.7 1,823,916
394
5,023
1,580
6,997
0.0
0.2
0.1
0.3
18,421
4,115
30,511
53,047
0.9
0.2
1.4
2.5
—
7,377
50,645
58,022
77,905
21,303
3.7 122,064
49,811
0.9
5.8 171,916
63,768
2.4
10.3
62.2
7.8
1.0
4.3
6.1
3.6
3.2
2.2
3.7
94.1
—
0.4
2.6
3.0
8.9
3.3
56,602
2.8
72,253
3.4 108,148
5.6
—
56,602
—
2.8
—
72,253
178,462
—
3.4 286,610
9.2
14.8
7,694
0.4
24,691
1.1
31,293
1.7
—
—
—
—
53,121
2.7
$
48,908
2.4 % $
47,562
2.3 % $ 202,196
10.4 %
95
1
The components of Equity-based compensation and allocations of net income to limited partnership units and FPUs are as follows (in
thousands):
2020
Year Ended December 31,
2019
2018
Issuance of common stock and grants of exchangeability
Allocations of net income
LPU amortization
RSU amortization
$
Actual
Results
84,966
14,006
74,282
10,291
Percentage
of Total
Revenues
Actual
Results
4.1 % $ 100,948
20,491
0.7
41,721
3.6
7,465
0.5
Percentage
of Total
Revenues
Actual
Results
4.8 % $ 150,147
38,352
1.0
6,346
2.0
5,212
0.3
Percentage
of Total
Revenues
7.7 %
2.0
0.3
0.3
Equity-based compensation and allocations of net
income to limited partnership units and FPUs
$ 183,545
8.9 % $ 170,625
8.1 % $ 200,057
10.3 %
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Revenues
Brokerage Revenues
Total brokerage revenues decreased by $48.4 million, or 2.5%, to $1,919.3 million for the year ended December 31, 2020 as compared
to the year ended December 31, 2019. Commission revenues decreased by $78.2 million, or 4.7%, to $1,567.7 million for the year ended
December 31, 2020 as compared to the year ended December 31, 2019. Principal transactions revenues increased by $29.7 million, or 9.2%,
to $351.6 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019.
The decrease in total brokerage revenues was primarily driven by decreases in FX and Rates, partially offset by an increase in revenues
from Insurance, Credit, Energy and commodities, and Equity derivatives and cash equities.
Our FX revenues decreased by $55.1 million, or 14.9%, to $315.3 million for the year ended December 31, 2020. This decrease was
primarily driven by lower industry volumes due to quantitative easing undertaken by several major central banks and uniformly lower global
interest rates.
Our brokerage revenues from Rates decreased by $50.8 million, or 8.5%, to $544.1 million for the year ended December 31, 2020. The
decrease in Rates revenues was primarily driven by lower industry volumes in certain markets due to quantitative easing undertaken by
several major central banks and uniformly lower global interest rates.
Our brokerage revenues from Insurance increased by $26.9 million, or 17.3%, to $182.7 million for the year ended December 31,
2020. This increase was primarily due to organic growth, as previously hired brokers and salespeople ramped up production and benefited
from favorable pricing trends for insurance renewals.
Our Credit revenues increased by $23.2 million, or 7.6%, to $329.9 million for the year ended December 31, 2020. This increase was
mainly due to greater trading volumes.
Our brokerage revenues from Energy and commodities increased by $3.9 million, or 1.4%, to $292.6 million for the year ended
December 31, 2020. This increase was primarily driven by organic growth.
Our brokerage revenues from equity derivatives and cash equities increased by $3.4 million, or 1.3%, to $254.7 million for the
year ended December 31, 2020. This was primarily driven by organic growth.
Fees from Related Parties
Fees from related parties decreased by $3.7 million, or 12.5% to $25.8 million for the year ended December 31, 2020 as compared to
the year ended December 31, 2019.
Data, Software and Post-Trade
Data, software and post-trade revenues increased by $8.8 million, or 12.0%, to $81.9 million for the year ended December 31, 2020 as
compared to the year ended December 31, 2019. This increase was primarily driven by Lucera’s Connect platform winning new SaaS client
contracts, the acquisition of Algomi, as well as an increase in revenues from post-trade services.
Interest and Dividend Income
Interest and dividend income decreased by $6.0 million, or 32.7%, to $12.3 million for the year ended December 31, 2020 as compared
to the year ended December 31, 2019. This decrease was primarily due to a decrease in dividend income and lower interest earned on
deposits.
96
Other Revenues
Other revenues increased by $1.9 million, or 11.9% to $17.4 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. This increase was primarily driven by an increase in consulting income for Poten & Partners.
Expenses
Compensation and Employee Benefits
Compensation and employee benefits expense increased by $5.7 million, or 0.5%, to $1,131.7 million for the year ended December 31,
2020 as compared to the year ended December 31, 2019. The main drivers of this increase were costs associated with the implementation of a
cost reduction program designed to reduce future expenses and streamline operations, partially offset by the impact of lower brokerage
revenues on variable compensation.
Equity-Based Compensation and Allocations of Net Income to Limited Partnership Units and FPUs
Equity-based compensation and allocations of net income to limited partnership units and FPUs increased by $12.9 million, or 7.6%, to
$183.5 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019. This increase was primarily driven
by an increase in equity award amortization.
Occupancy and Equipment
Occupancy and equipment expense increased by $6.1 million, or 3.3%, to $189.3 million for the year ended December 31, 2020 as
compared to the year ended December 31, 2019. This increase was primarily driven by higher software license costs, amortization expense on
developed software, and fixed asset impairments. This was partially offset by a decrease in rent expense related to the build-out phase of
BGC’s new U.K. — based headquarters in the prior year period.
Fees to Related Parties
Fees to related parties increased by $3.8 million, or 19.8%, to $23.2 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. Fees to related parties are allocations paid to Cantor for administrative and support services, such as
accounting, occupancy, and legal.
Professional and Consulting Fees
Professional and consulting fees decreased by $18.7 million, or 20.3%, to $73.5 million for the year ended December 31, 2020 as
compared to the year ended December 31, 2019. This decrease was primarily driven by a decrease in legal and consulting fees.
Communications
Communications expense increased by $1.6 million, or 1.4%, to $121.6 million for the year ended December 31, 2020 as compared to
the year ended December 31, 2019.
Selling and Promotion
Selling and promotion expense decreased by $43.5 million, or 53.3%, to $38.2 million for the year ended December 31, 2020 as
compared to the year ended December 31, 2019. This decrease was primarily a result of a reduction in travel and entertainment expenses due
to a continued focus on tighter cost management as well as the impact of COVID-19.
Commissions and Floor Brokerage
Commissions and floor brokerage expense decreased by $4.2 million, or 6.7%, to $59.4 million for the year ended December 31, 2020
as compared to the year ended December 31, 2019. Commissions and floor brokerage expense tends to move in line with brokerage revenues.
97
Interest Expense
Interest expense increased by $16.4 million, or 27.2%, to $76.6 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. This increase was primarily driven by interest expense related to the 3.750% Senior Notes issued in
September 2019 and interest expense on the 4.375% Senior Notes issued in July 2020, partially offset by lower interest expense related to the
borrowings on BGC’s credit facility.
Other Expenses
Other expenses decreased by $29.5 million, or 24.9%, to $88.9 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019, which was primarily related to a decrease in settlements, and partially offset by an increase in other
provisions.
Other Income (Losses), Net
Gains (Losses) on Divestitures and Sale of Investments
For the year ended December 31, 2020, we had a gain of $394 thousand on divestitures. For the year ended December 31, 2019, there
was a gain of $18.4 million as a result of the sale of CSC Commodities.
Gains (Losses) on Equity Method Investments
Gains (losses) on equity method investments increased by $0.9 million, to a gain of $5.0 million, for the year ended December 31,
2020 as compared to a gain of $4.1 million for the year ended December 31, 2019. Gains (losses) on equity method investments represent our
pro-rata share of the net gains or losses on investments over which we have significant influence, but which we do not control.
Other Income (Loss)
Other income (loss) decreased by $28.9 million, or 94.8%, to $1.6 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. This was primarily driven by a decrease related to fair value adjustments on investments carried under the
measurement alternative. There was also a decrease related the mark-to-market and/or hedging on the Nasdaq shares.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes decreased by $28.5 million, or 57.2%, to $21.3 million for the year ended December 31, 2020 as
compared to the year ended December 31, 2019. This decrease was primarily driven by lower pre-tax earnings, as well as a change in the
geographical and business mix of earnings. In general, our consolidated effective tax rate can vary from period-to-period depending on,
among other factors, the geographic and business mix of our earnings.
Net Income (Loss) From Continuing Operations Attributable to Noncontrolling Interest in Subsidiaries
Net income (loss) from continuing operations attributable to noncontrolling interest in subsidiaries decreased by $17.0 million, or
68.8%, to $7.7 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019, which was primarily driven
by a decrease in earnings.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Revenues
Brokerage Revenues
Total brokerage revenues increased by $143.2 million, or 7.8%, to $1,967.7 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. Commission revenues increased by $134.3 million, or 8.9%, to $1,645.8 million for the
year ended December 31, 2019 as compared to the year ended December 31, 2018. Principal transactions revenues increased by $8.9 million,
or 2.8%, to $321.9 million for the year ended December 31, 2019 as compared to the year ended December 31, 2018.
98
The increase in total brokerage revenues was primarily driven by increases in revenues from Insurance, Energy and commodities,
Rates, and Credit, partially offset by a decrease in revenues from Equity derivatives and cash equities, and FX.
Our brokerage revenues from Insurance increased by $86.9 million, to $155.8 million, for the year ended December 31, 2019. This
increase was primarily driven by the acquisition of Ed Broking.
Our brokerage revenues from Energy and commodities increased by $59.6 million, or 26.0%, to $288.7 million for the year ended
December 31, 2019. This increase was primarily driven by the acquisitions of Poten & Partners and Ginga Petroleum, as well as organic
growth, partially offset by the sale of CSC Commodities.
Our brokerage revenues from Rates increased by $45.1 million, or 8.2%, to $594.9 million for the year ended December 31, 2019. This
increase in Rates was primarily driven by higher global volumes and improvement in our Fully Electronic Rates business, which was a result
of our continued investment in technology and the ongoing conversion of our businesses to more profitable Fully Electronic execution.
Our Credit revenues increased by $14.5 million, or 5.0%, to $306.7 million for the year ended December 31, 2019. The increase was
mainly due to higher global volumes.
Our Equity derivatives and cash equities revenues decreased by $36.9 million, or 12.8%, to $251.3 million for the year ended
December 31, 2019. This decrease was mainly due to lower trading volumes.
Our FX revenues decreased by $25.9 million, or 6.5%, to $370.3 million for the year ended December 31, 2019. This decrease was
primarily driven by lower global volumes and a decrease in market volatility.
Fees from Related Parties
Fees from related parties increased by $5.4 million, or 22.3% to $29.4 million for the year ended December 31, 2019 as compared to
the year ended December 31, 2018.
Data, Software and Post-Trade
Data, software and post-trade revenues increased by $8.0 million, or 12.2%, to $73.2 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. This increase was primarily driven by the acquisition of Poten & Partners, an increase in
revenues from post-trade services and new business contracts.
Interest and Dividend Income
Interest and dividend income increased by $3.9 million, or 27.2%, to $18.3 million for the year ended December 31, 2019 as compared
to the year ended December 31, 2018. This increase was primarily due to higher interest earned on deposits and an increase in dividend
income.
Other Revenues
Other revenues increased by $6.0 million, or 62.6% to $15.6 million for the year ended December 31, 2019 as compared to the
year ended December 31, 2018. This increase was primarily driven by revenues generated from the acquisitions of Poten & Partners and Ed
Broking.
Expenses
Compensation and Employee Benefits
Compensation and employee benefits expense increased by $121.1 million, or 12.1%, to $1,125.9 million for the year ended
December 31, 2019 as compared to the year ended December 31, 2018. The main drivers of this increase were the acquisitions of Poten &
Partners, Ed Broking, and Ginga Petroleum, as well as the impact of higher brokerage revenues on variable compensation.
Equity-Based Compensation and Allocations of Net Income to Limited Partnership Units and FPUs
Equity-based compensation and allocations of net income to limited partnership units and FPUs decreased by $29.4 million, or 14.7%,
to $170.6 million for the year ended December 31, 2019 as compared to the year ended December 31, 2018. This decrease was primarily
driven by a decrease in charges related to equity-based compensation, as well as a decrease in allocations of net income to limited partnership
units and FPUs.
99
Occupancy and Equipment
Occupancy and equipment expense increased by $32.0 million, or 21.2%, to $183.2 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. This increase was primarily driven by increases related to the acquisitions of Poten &
Partners, Ed Broking, and Ginga Petroleum, as well as rent expense related to the build-out phase of BGC’s new U.K.-based headquarters.
Fees to Related Parties
Fees to related parties decreased by $0.8 million, or 4.0%, to $19.4 million for the year ended December 31, 2019 as compared to the
year ended December 31, 2018. Fees to related parties are allocations paid to Cantor for administrative and support services (such as
accounting, occupancy, and legal).
Professional and Consulting Fees
Professional and consulting fees increased by $8.1 million, or 9.6%, to $92.2 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. This increase was primarily driven by fees attributed to the acquisitions of Ed Broking and
Poten & Partners, and an increase in legal fees, which was partially offset by a decrease in consulting fees, notably with regards to the
implementation of MiFID II during the year ended December 31, 2018.
Communications
Communications expense increased by $2.0 million, or 1.7%, to $120.0 million for the year ended December 31, 2019 as compared to
the year ended December 31, 2018. As a percentage of total revenues, communications expense slightly decreased from the prior year period.
Selling and Promotion
Selling and promotion expense increased by $12.3 million, or 17.7%, to $81.6 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. This increase was primarily driven by the acquisitions of Poten & Partners, Ed Broking, and
Ginga Petroleum.
Commissions and Floor Brokerage
Commissions and floor brokerage expense increased by $1.7 million, or 2.8%, to $63.6 million for the year ended December 31, 2019
as compared to the year ended December 31, 2018. This line item tends to move in line with brokerage revenues.
Interest Expense
Interest expense increased by $17.8 million, or 41.8%, to $60.2 million for the year ended December 31, 2019 as compared to the
year ended December 31, 2018. This increase was primarily driven by interest expense on the $450.0 million 5.375% Senior Notes issued in
July 2018, interest expense related to the borrowings on the Revolving Credit Agreement, and interest expense on the $300 million 3.750%
Senior Notes issued in September 2019, partially offset by lower interest expense on the $240.0 million 8.375% Senior Notes which were
repaid in July 2018.
Other Expenses
Other expenses increased by $46.6 million, or 64.8%, to $118.4 million for the year ended December 31, 2019 as compared to the
year ended December 31, 2018, which was primarily related to our previously disclosed settlements with the CFTC and the NYAG, as well
as higher costs associated with the acquisitions of Poten & Partners and Ed Broking.
Other Income (Losses), Net
Gains (Losses) on Divestitures and Sale of Investments
For the year ended December 31, 2019, there was a gain of $18.4 million as a result of the sale of CSC Commodities. We had no gains
or losses from divestitures or sale of investments in the year ended December 31, 2018.
100
Gains (Losses) on Equity Method Investments
Gains (losses) on equity method investments decreased by $3.3 million, to a gain of $4.1 million, for the year ended December 31,
2019 as compared to a gain of $7.4 million for the year ended December 31, 2018. Gains (losses) on equity method investments represent our
pro-rata share of the net gains or losses on investments over which we have significant influence, but which we do not control.
Other Income (Loss)
Other income (loss) decreased by $20.1 million, or 39.8% to $30.5 million for the year ended December 31, 2019 as compared to the
year ended December 31, 2018. This was primarily driven by a decrease related to fair value adjustments on investments carried under the
measurement alternative. There was also a decrease related the mark-to-market and/or hedging on the Nasdaq earn out shares. This was
partially offset by an increase in other recoveries related to our insurance business.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes decreased by $14.0 million, or 21.9%, to $49.8 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. This decrease was primarily driven by lower pre-tax earnings, as well as a change in the
geographical and business mix of earnings, which can have an impact on our consolidated effective tax rate from period-to-period.
Net Income (Loss) From Continuing Operations Attributable to Noncontrolling Interest in Subsidiaries
Net income (loss) from continuing operations attributable to noncontrolling interest in subsidiaries decreased by $6.6 million, or
21.1%, to $24.7 million for the year ended December 31, 2019 as compared to the year ended December 31, 2018.
Net Income (Loss) From Discontinued Operations Attributable to Noncontrolling Interest in Subsidiaries
For the year ended December 31, 2019 there was no net income (loss) from discontinued operations attributable to noncontrolling
interest in subsidiaries. For the year ended December 31, 2018, we had net income (loss) from discontinued operations attributable to
noncontrolling interest in subsidiaries of $53.1 million.
101
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth our unaudited quarterly results of operations for the indicated periods (in thousands). Results of any period
are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business. Certain
reclassifications have been made to prior period amounts to conform to the current period’s presentation.
December
31, 2020
September
30, 2020
June 30,
2020
March 31,
2020
December
31, 2019
September
30, 2019
June
30, 2019
March 31,
2019
Revenues:
Commissions
Principal transactions
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations
of net income to limited partnership units
and FPUs
Total compensation and employee
benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Gain (loss) on divestiture and sale of
investments
Gains (losses) on equity method
investments
Other income (loss)
Total other income (losses), net
Income (loss) from operations before
income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) operations
attributable to noncontrolling
interest in subsidiaries
Net income (loss) available to common
stockholders
4,857
8,814
$ 377,146 $ 352,027 $ 382,640 $ 455,855 $ 382,897 $ 409,765 $ 422,974 $ 430,182
73,687 65,182 99,453 113,311 71,725 75,536 90,432 84,230
5,795
20,860 21,523 20,139 19,398 18,151 18,364 18,741 17,910
3,665
2,969
479,426 455,039 519,088 603,167 487,156 521,137 551,187 544,751
6,536
3,758
3,976
5,288
2,418
5,075
2,865
3,300
4,161
4,921
7,813
4,006
(783 )
3,659
6,562
8,208
5,521
8,218
7,221
258,687 244,419 283,616 344,928 268,696 278,744 290,271 288,200
80,515 33,007 27,819 42,204 69,389 44,093 45,002 12,141
4,954
7,610
5,435
5,194
339,202 277,426 311,435 387,132 338,085 322,837 335,273 300,341
45,723 45,224 47,247 51,074 47,387 44,709 45,109 46,002
2,927
18,072 15,637 19,805 19,956 27,553 21,262 23,347 20,005
30,470 30,088 30,524 30,521 29,715 29,882 29,974 30,411
6,634 18,699 21,432 20,320 21,491 18,402
13,646 12,933 13,520 19,277 16,377 15,831 16,791 14,618
21,811 19,665 17,625 17,506 16,354 15,403 15,136 13,353
21,574 28,348 21,480 17,531 29,487 42,257 21,354 25,351
502,343 442,874 473,464 567,131 529,248 519,624 514,932 471,410
7,123
5,943
2,858
6,457
6,891
403
(9 )
—
—
(14 )
—
(1,619 ) 20,054
1,354
1,687
3,444
1,527
4,779
6,297
1,119
1,129
2,248
1,023
1,064
(6,015 ) 11,642
(4,992 ) 12,692
1,530
2,095
3,625
738
783
194 16,580
(687 ) 37,417
(19,473 ) 18,462 47,872 31,044 (29,400 )
4,075
5,138 35,568 110,758
6,691 13,261 25,784
$ (12,744 ) $ 9,904 $ 39,273 $ 20,169 $ (33,475 ) $ (1,553 ) $ 22,307 $ 84,974
8,599 10,875
(6,729 )
8,558
(10,406 )
251 11,354
6,495 (12,914 )
4,752
8,335 24,518
$ (2,338 ) $ 9,653 $ 27,919 $ 13,674 $ (20,561 ) $ (6,305 ) $ 13,972 $ 60,456
102
The table below details our brokerage revenues by product category for the indicated periods (in thousands):
Brokerage revenue by product:
Rates
FX
Energy and commodities
Credit
Equity derivatives and
cash equities
Insurance
Total brokerage revenues
Brokerage revenue by
product (percentage):
Rates
FX
Energy and commodities
Credit
Equity derivatives and
cash equities
Insurance
Total brokerage revenues
Brokerage revenue by type:
Voice/Hybrid
Fully Electronic
Total brokerage revenues
Brokerage revenue by type
(percentage):
Voice/Hybrid
Fully Electronic
Total brokerage revenues
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
$ 124,495 $ 119,325 $ 133,034 $ 167,240 $ 129,549 $ 156,765 $ 152,959 $ 155,611
86,492 101,899 101,558
73,213
73,012 73,887 70,342
71,706
72,382 78,166 85,727
68,882
73,281 74,393 94,366 80,369
65,871 71,326 83,738 71,456
68,053 95,780 97,189 70,438
56,958 65,078 69,770
63,718
48,819
39,692 41,417 31,404
$ 450,833 $ 417,209 $ 482,093 $ 569,166 $ 454,622 $ 485,301 $ 513,406 $ 514,412
47,410 61,777 81,797 59,533
43,269 45,783 44,836 43,277
27.6 %
16.2
15.9
15.3
28.6 %
17.6
15.8
16.3
27.6 %
15.4
14.8
19.9
29.4 %
16.6
14.6
17.1
28.5 %
17.7
15.7
15.5
32.3 %
17.8
15.0
14.9
29.8 %
19.8
14.4
15.2
30.2 %
19.7
13.7
16.7
14.2
10.8
100.0 %
11.3
10.4
100.0 %
12.8
9.5
100.0 %
14.4
7.9
100.0 %
13.1
9.5
100.0 %
11.8
8.2
100.0 %
12.7
8.1
100.0 %
13.6
6.1
100.0 %
$ 388,388 $ 359,194 $ 423,697 $ 513,101 $ 410,332 $ 436,841 $ 460,359 $ 455,582
48,460 53,047 58,830
62,445
$ 450,833 $ 417,209 $ 482,093 $ 569,166 $ 454,622 $ 485,301 $ 513,406 $ 514,412
58,015 58,396 56,065 44,290
86.1 %
13.9
100.0 %
86.1 %
13.9
100.0 %
87.9 %
12.1
100.0 %
90.1 %
9.9
100.0 %
90.3 %
9.7
100.0 %
90.0 %
10.0
100.0 %
89.7 %
10.3
100.0 %
88.6 %
11.4
100.0 %
LIQUIDITY AND CAPITAL RESOURCES
Balance Sheet
Our balance sheet and business model are not capital intensive. Our assets consist largely of cash and cash equivalents, collateralized
and uncollateralized short-dated receivables and less liquid assets needed to support our businesses. Longer-term capital (equity and notes
payable) is held to support the less liquid assets and potential capital investment opportunities. Total assets as of December 31, 2020 were
$3.9 billion, an increase of 0.6% as compared to December 31, 2019. The increase in total assets was driven primarily by increases in Loans,
forgivable loans and other receivables from employees and partners, net, Other assets, as well as Cash and cash equivalents. We maintain a
significant portion of our assets in Cash and cash equivalents and Securities owned, with our liquidity (which we define as Cash and cash
equivalents, Reverse repurchase agreements, Marketable securities and Securities owned, less Securities loaned and Repurchase Agreements)
as of December 31, 2020 of $652.6 million. See “Liquidity Analysis” below for a further discussion of our liquidity. Our Securities owned
were $58.6 million as of December 31, 2020, compared to $57.5 million as of December 31, 2019. Our Marketable securities decreased to
$0.3 million as of December 31, 2020, compared to $14.2 million as of December 31, 2019. We had no Repurchase agreements as of
December 31, 2020 and 2019. Further, we did not have any Reverse repurchase agreements as of December 31, 2020 and December 31,
2019. We also had no Securities loaned as of December 31, 2020, compared to $13.9 million as of December 31, 2019.
On March 19, 2018, we entered into the BGC Credit Agreement with Cantor. The BGC Credit Agreement provides for each party and
certain of its subsidiaries to issue loans to the other party or any of its subsidiaries in the lender’s discretion in an aggregate principal amount
up to $250.0 million outstanding at any time. The BGC Credit Agreement replaced the previous Credit Facility between BGC and an affiliate
of Cantor, and was approved by the Audit Committee. On August 6, 2018, the Company entered into an amendment to the BGC Credit
Agreement, which increased the aggregate principal amount that can be loaned to the other party or any of its subsidiaries from $250.0
million to $400.0 million that can be outstanding at any time. The BGC Credit Agreement will mature on the earlier to occur of (a) March 19,
2020, after which the maturity date of the BGC Credit Agreement will continue to be extended for successive one-year periods unless prior
written notice of non-extension is given by a lending party to a borrowing party at least six months in advance of such renewal date and (b)
the termination of the BGC Credit Agreement by either party pursuant to its terms. The outstanding amounts under the BGC Credit
Agreement will bear interest for any rate period at a per annum rate equal to the higher of BGC’s or Cantor’s short-term borrowing rate in
effect at such time plus 1.00%. As of December 31, 2020, there were no borrowings by BGC or Cantor outstanding under this Agreement.
103
As part of our cash management process, we may enter into tri-party reverse repurchase agreements and other short-term investments,
some of which may be with Cantor. As of December 31, 2020 and 2019, there were no reverse repurchase agreements outstanding.
Additionally, in August 2013, the Audit Committee authorized us 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 from time to time as a liquidity management vehicle. The notes are backed by assets of highly rated
banks. We are entitled to invest in the program so long as the program meets investment policy guidelines, including policies relating to
ratings. Cantor will earn a spread between the rate it receives from the short-term note issuer and the rate it pays to us 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 December 31, 2020 and 2019, we had no investments in the program.
Funding
Our funding base consists of longer-term capital (equity and notes payable), collateralized financings, shorter-term liabilities and
accruals that are a natural outgrowth of specific assets and/or our business model, such as matched fails and accrued compensation. We have
limited need for short-term unsecured funding in our regulated entities for their brokerage business. Contingent liquidity needs are largely
limited to potential cash collateral that may be needed to meet clearing bank, clearinghouse, and exchange margins and/or to fund fails.
Capital expenditures tend to be cash neutral and approximately in line with depreciation. Current cash and cash equivalent balances exceed
our potential normal course contingent liquidity needs. We believe that cash and cash equivalents in and available to our largest regulated
entities, inclusive of financing provided by clearing banks and cash segregated under regulatory requirements, is adequate for potential cash
demands of normal operations, such as margin or fail financing. We expect our operating activities going forward to generate adequate cash
flows to fund normal operations, including any dividends paid pursuant to our dividend policy. However, we continually evaluate
opportunities for us to maximize our growth and further enhance our strategic position, including, among other things, acquisitions, strategic
alliances and joint ventures potentially involving all types and combinations of equity, debt and acquisition alternatives. As a result, we may
need to raise additional funds to:
•
•
•
•
•
increase the regulatory net capital necessary to support operations;
support continued growth in our businesses;
effect acquisitions, strategic alliances, joint ventures and other transactions;
develop new or enhanced products, services and markets; and
respond to competitive pressures.
Acquisitions and financial reporting obligations related thereto may impact our ability to access longer-term capital markets funding on
a timely basis and may necessitate greater short-term borrowings in the interim. This may impact our credit rating or the interest rates on our
debt. We may need to access short-term capital sources to meet business needs from time to time, including, but not limited to, conducting
operations; hiring or retaining brokers, salespeople, managers and other front-office personnel; financing acquisitions; and providing
liquidity, including in situations where we may not be able to access the capital markets in a timely manner when desired by us. Accordingly,
we cannot guarantee that we will be able to obtain additional financing when needed on terms that are acceptable to us, if at all. In addition,
as a result of regulatory actions, our registration statements under the Securities Act will be subject to SEC review prior to effectiveness,
which may lengthen the time required for us to raise capital, reducing our access to the capital markets or increasing our cost of capital.
As described earlier in this document, on November 30, 2018, we completed the Spin-Off of Newmark. (See “Newmark Spin-Off”
above for more information). As set forth in the Separation and Distribution Agreement, Newmark assumed certain BGC indebtedness and
repaid such indebtedness. (See “Notes Payable, Other and Short-term Borrowings” below for more information).
As discussed above, our liquidity was $652.6 million as of December 31, 2020. Our liquidity remains strong and the steps taken during
the first quarter of 2020 were intended to prevent unwarranted financial stress during this extraordinary COVID-19 period. Our decision to
reduce our dividend and draw down additional funds on the Revolving Credit Agreement, in the first quarter of 2020, was a result of
preparing for the unknown in the current extraordinary macroeconomic/social environment and was not taken to meet an external demand for
liquidity, but rather to strengthen our balance sheet. We continue to operate soundly without stress and do not have any Company-specific
financial issues. The reduction of the dividend was an internally driven, precautionary step to ensure the financial security of the company in
uncertain times. We have no meaningful debt maturities due until May 2021. Further, as of the third quarter of 2020 we have fully repaid the
$225.0 million borrowings then-outstanding under the Revolving Credit Agreement.
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Notes Payable, Other and Short-term Borrowings
Unsecured Senior Revolving Credit Agreement
On September 8, 2017, we entered into a committed unsecured senior revolving credit agreement with Bank of America, N.A., as
administrative agent, and a syndicate of lenders. The revolving credit agreement provided for revolving loans of up to $400.0 million. The
maturity date of the facility was September 8, 2019. On November 22, 2017, the Company and Newmark entered into an amendment to the
unsecured senior revolving credit agreement. Pursuant to the amendment, the then-outstanding borrowings of the Company under the
revolving credit facility were converted into the Converted Term Loan. There was no change in the maturity date or interest rate. Effective
December 13, 2017, Newmark assumed the obligations of the Company as borrower under the Converted Term Loan. We remained a
borrower under, and retained access to, the revolving credit facility for any future draws, subject to availability which increased as Newmark
repaid the Converted Term Loan. During the year ended December 31, 2018, Newmark repaid the outstanding balance of the Converted
Term Loan. During the year ended December 31, 2018, we borrowed $195.0 million under the committed unsecured senior revolving credit
agreement and repaid the $195.0 million during the year. Therefore, there were no borrowings outstanding as of December 31, 2018.
On November 28, 2018, we entered into the Revolving Credit Agreement with Bank of America, N.A., as administrative agent, and a
syndicate of lenders, which replaced the existing committed unsecured senior revolving credit agreement. The maturity date of the Revolving
Credit Agreement was November 28, 2020 and the maximum revolving loan balance is $350.0 million. Borrowings under this agreement
bear interest at either LIBOR or a defined base rate plus additional margin. On December 11, 2019, we entered into an amendment to the new
unsecured Revolving Credit Agreement. Pursuant to the amendment, the maturity date was extended to February 26, 2021. On February 26,
2020, the Company entered into a second amendment to the unsecured revolving credit agreement, pursuant to which, the maturity date was
extended by two years to February 26, 2023. The size of the Revolving Credit Agreement, along with the interest rate on the borrowings
therefrom, remained unchanged. On July 14, 2020, the Company repaid in full the $225.0 million borrowings outstanding under the
Revolving Credit Agreement. As of December 31, 2020, there were no borrowings outstanding under the new unsecured Revolving Credit
Agreement. As of December 31, 2019, there was $68.9 million of borrowings outstanding, net of deferred financing costs of $1.1 million,
under the new unsecured Revolving Credit Agreement. The average interest rate on the outstanding borrowings was 2.88% for the year ended
December 31, 2020. We may draw down on the Revolving Credit Agreement to provide flexibility in the normal course to meet ongoing
operational cash needs, including as necessary to manage through the current extraordinary macroeconomic/business environment as a result
of the COVID-19 pandemic. Our liquidity remains strong, and was $652.6 million as of December 31, 2020, as discussed below.
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8.375% Senior Notes
As part of the GFI acquisition, we assumed $240.0 million in aggregate principal amount of 8.375% Senior Notes. Interest on these
notes was payable, semi-annually in arrears on the 19th of January and July. On July 19, 2018, the Company repaid the $240.0 million
principal amount of its 8.375% Senior Notes upon their maturity.
5.125% Senior Notes
On May 27, 2016, we issued an aggregate of $300.0 million principal amount of 5.125% Senior Notes. The 5.125% Senior Notes are
general senior unsecured obligations of the Company. The 5.125% 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 its 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. Cantor purchased $15.0 million of such senior notes and does not hold such notes as
of December 31, 2020. 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, of which $0.5 million were underwriting fees payable to CF&Co and $18 thousand were underwriting fees payable to
CastleOak Securities, L.P. The carrying value of the 5.125% Senior Notes as of December 31, 2020 was $255.6 million.
On August 16, 2016, we filed a Registration Statement on Form S-4 which was declared effective by the SEC on September 13, 2016.
On September 15, 2016, BGC launched an exchange offer in which holders of the 5.125% Senior Notes, issued in a private placement on
May 27, 2016. could exchange such notes for new registered notes with substantially identical terms. The exchange offer closed on October
12, 2016, at which point the initial 5.125% Senior Notes were exchanged for new registered notes with substantially identical terms.
Tender Offer for 5.125% Senior Notes
On August 5, 2020, the Company commenced a cash tender offer for any and all $300.0 million outstanding aggregate principal
amount of its 5.125% Senior Notes. On August 11, 2020, the Company’s cash tender offer expired at 5:00 p.m., New York City time. As of
the expiration time, $44.0 million aggregate principal amount of the 5.125% Senior Notes were validly tendered. These notes were redeemed
on the settlement date of August 14, 2020. The Company retained CF&Co as one of the dealer managers for the tender offer. As a result of
this transaction, $14 thousand in dealer management fees were paid to CF&Co as of December 31, 2020.
5.375% Senior Notes
On July 24, 2018, we issued an aggregate of $450.0 million principal amount of 5.375% Senior Notes The 5.375% Senior Notes are
general senior unsecured obligations of the Company. The 5.375% Senior Notes bear interest at a rate of 5.375% per year, payable in cash on
January 24 and July 24 of each year, commencing January 24, 2019. The 5.375% Senior Notes will mature on July 24, 2023. We may redeem
some or all of the 5.375% Senior Notes at any time or from time to time for cash at certain “make-whole” redemption prices (as set forth in
the indenture related to the 5.375% Senior Notes). If a “Change of Control Triggering Event” (as defined in the indenture related to the
5.375% Senior Notes) 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 $444.2 million, net of the discount and debt issuance costs of $5.8 million, of which $0.3
million were underwriting fees paid to CF&Co and $41 thousand were underwriting fees paid to CastleOak Securities, L.P. We also paid
CF&Co an advisory fee of $0.2 million in connection with the issuance. The issuance costs are amortized as interest expense and the carrying
value of the 5.375% Senior Notes will accrete up to the face amount over the term of the notes. The carrying value of the 5.375% Senior
Notes as of December 31, 2020 was $446.6 million.
On July 31, 2018, we filed a Registration Statement on Form S-4 which was declared effective by the SEC on August 10, 2018. On
August 10, 2018, BGC launched an exchange offer in which holders of the 5.375% Senior Notes , issued in a private placement on July 24,
2018, could exchange such notes for new registered notes with substantially identical terms. The exchange offer closed on September 17,
2018, at which point the initial 5.375% Senior Notes were exchanged for new registered notes with substantially identical terms.
3.750% Senior Notes
On September 27, 2019, we issued an aggregate of $300.0 million principal amount of 3.750% Senior Notes. The 3.750% Senior Notes
are general unsecured obligations of the Company. The 3.750% Senior Notes bear interest at a rate of 3.750% per annum, payable in cash on
each April 1 and October 1, commencing April 1, 2020. The 3.750% Senior Notes will mature on October 1, 2024. We may redeem some or
all of the 3.750% Senior Notes at any time or from time to time for cash at certain “make-whole” redemption prices (as set forth in the
indenture related to the 3.750% Senior Notes). If a “Change of Control Triggering Event” (as defined in the indenture related to the 3.750%
Senior Notes) 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 3.750% Senior Notes was $296.1 million, net of discount and debt issuance costs of $3.9 million, of which $0.2 million were
underwriting fees payable to CF&Co and $36 thousand were underwriting fees payable to CastleOak Securities, L.P. The issuance costs will
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be amortized as interest expense and the carrying value of the 3.750% Senior Notes will accrete up to the face amount over the term of the
notes. The carrying value of the 3.750% Senior Notes was $296.9 million as of December 31, 2020.
On October 11, 2019, we filed a Registration Statement on Form S-4, which was declared effective by the SEC on October 24, 2019.
On October 28, 2019, BGC launched an exchange offer in which holders of the 3.750% Senior Notes, issued in a private placement on
September 27, 2019, may exchange such notes for new registered notes with substantially identical terms. The exchange offer closed on
December 9, 2019, at which point the initial 3.750% Senior Notes were exchanged for new registered notes with substantially identical terms.
4.375% Senior Notes
On July 10, 2020, we issued an aggregate of $300.0 million principal amount of 4.375% Senior Notes. The 4.375% Senior Notes are
general unsecured obligations of the Company. The 4.375% Senior Notes bear interest at a rate of 4.375% per year, payable in cash on June
15 and December 15, commencing December 15, 2020. The 4.375% Senior Notes will mature on December 15, 2025. We 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 related to
the 4.375% Senior Notes). If a “Change of Control Triggering Event” (as defined in the indenture related to the 4.375% Senior Notes) 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. Cantor purchased $14.5 million of such
senior notes and still holds such notes as of December 31, 2020. The initial carrying value of the 4.375% Senior Notes was $296.8 million,
net of discount and debt issuance costs of $3.2 million, of which $0.2 million were underwriting fees payable to CF&Co and $36 thousand
were underwriting fees payable to CastleOak Securities, L.P. BGC intends to use the net proceeds to repurchase, redeem and/or repay at
maturity all $300 million outstanding aggregate principal amount of its 5.125% Senior Notes, including to pay any applicable redemption
premium. The carrying value of the 4.375% Senior Notes was $297.0 million as of December 31, 2020.
On August 28, 2020, we filed a Registration Statement on Form S-4, which was declared effective by the SEC on September 8, 2020.
On September 9, 2020, BGC launched an exchange offer in which holders of the 4.375% Senior Notes, issued in a private placement on July
10, 2020, may exchange such notes for new registered notes with substantially identical terms. The exchange offer closed on October 14,
2020, at which point the initial 4.375% Senior Notes were exchanged for new registered notes with substantially identical terms.
Collateralized Borrowings
On March 13, 2015, we entered into a secured loan arrangement of $28.2 million under which it pledged certain fixed assets as security
for a loan. This arrangement incurred interest at a fixed rate of 3.70% per year and matured on March 13, 2019, therefore, there were no
borrowings outstanding as of December 31, 2020 and December 31, 2019.
On May 31, 2017, we entered into a secured loan arrangement of $29.9 million under which it pledged certain fixed assets as security
for a loan. This arrangement incurs interest at a fixed rate of 3.44% per year and matures on May 31, 2021. As of December 31, 2020 and
2019, we had $4.0 million and $11.7 million, respectively, outstanding related to this secured loan arrangement. The book value of the fixed
assets pledged as of December 31, 2020 was $0.8 million. The book value of the fixed assets pledged as of December 31, 2019 was $2.3
million.
On April 8, 2019, we entered into a secured loan arrangement of $15.0 million, under which we pledged certain fixed assets as security
for a loan. This arrangement incurs interest at a fixed rate of 3.77% and matures on April 8, 2023. As of December 31, 2020, we had $9.6
million outstanding related to this secured loan arrangement. The net book value of the fixed assets pledged as of December 31, 2020 was
$1.2 million. As of December 31, 2019, we had $13.2 million outstanding related to this secured loan arrangement. The net book value of the
fixed assets pledged as of December 31, 2019 was $8.1 million. Also, on April 19, 2019, we entered into a secured loan arrangement of $10.0
million, under which we pledged certain fixed assets as security for a loan. This arrangement incurs interest at a fixed rate of 3.89% and
matures on April 19, 2023. As of December 31, 2020, we had $6.3 million outstanding related to this secured loan arrangement. The book
value of the fixed assets pledged as of December 31, 2020 was $2.7 million. As of December 31, 2019, we had $8.8 million outstanding
related to this secured loan arrangement. The book value of the fixed assets pledged as of December 31, 2019 was $5.7 million.
Weighted-average Interest Rate
For the years ended December 31, 2020 and 2019, the weighted-average interest rate of our total Notes payable and other borrowings,
which include our Unsecured Senior Revolving Credit Agreement, Senior Notes, and Collateralized Borrowings, was 4.71% and 4.77%,
respectively.
Short-term Borrowings
On August 22, 2017, we entered into a committed unsecured loan agreement with Itau Unibanco S.A. The credit agreement provides
for short-term loans of up to $3.8 million (BRL 20.0 million). The maturity date of the agreement is August 19, 2021, 2021. Borrowings
under this agreement bear interest at the Brazilian Interbank offering rate plus 3.30%. As of December 31, 2020, there were $3.8 million
(BRL 20.0 million) of borrowings outstanding under the facility. As of December 31, 2019, there were $5.0 million (BRL 20.0 million) of
borrowings outstanding under the facility. As of December 31, 2020, the interest rate was 5.3%.
107
On August 23, 2017, we entered into a committed unsecured credit agreement with Itau Unibanco S.A. The credit agreement provides
for an intra-day overdraft credit line up to $9.6 million (BRL 50.0 million). The maturity date of the agreement is March 9, 2021. This
agreement bears a fee of 1.28% per year. As of December 31, 2020 and 2019, there were no borrowings outstanding under this agreement.
BGC Credit Agreement with Cantor
On March 19, 2018, we entered into the BGC Credit Agreement with Cantor. The BGC Credit Agreement provides for each party and
certain of its subsidiaries to issue loans to the other party or any of its subsidiaries in the lender’s discretion in an aggregate principal amount
up to $250.0 million outstanding at any time. The BGC Credit Agreement replaced the previous credit facility between BGC and an affiliate
of Cantor, and was approved by the Audit Committee of BGC. On August 6, 2018, the Company entered into an amendment to the BGC
Credit Agreement, which increased the aggregate principal amount that can be loaned to the other party or any of its subsidiaries from $250.0
million to $400.0 million that can be outstanding at any time. The BGC Credit Agreement will mature on the earlier to occur of (a) March 19,
2021, after which the maturity date of the BGC Credit Agreement will continue to be extended for successive one-year periods unless prior
written notice of non-extension is given by a lending party to a borrowing party at least six months in advance of such renewal date and (b)
the termination of the BGC Credit Agreement by either party pursuant to its terms. The outstanding amounts under the BGC Credit
Agreement will bear interest for any rate period at a per annum rate equal to the higher of BGC’s or Cantor’s short-term borrowing rate in
effect at such time plus 1.00%. As of December 31, 2020, there were no borrowings by BGC or Cantor outstanding under this Agreement.
CREDIT RATINGS
As of December 31, 2020, our public long-term credit ratings and associated outlooks are as follows:
Fitch Ratings Inc.
Standard & Poor’s
Japan Credit Rating Agency, Ltd.
Kroll Bond Rating Agency
Rating
BBB-
BBB-
BBB+
BBB
Outlook
Stable
Stable
Stable
Stable
Credit ratings and associated outlooks are influenced by a number of factors, including, but not limited to: operating environment,
earnings and profitability trends, the prudence of funding and liquidity management practices, balance sheet size/composition and resulting
leverage, cash flow coverage of interest, composition and size of the capital base, available liquidity, outstanding borrowing levels and the
firm’s competitive position in the industry. A credit rating and/or the associated outlook can be revised upward or downward at any time by a
rating agency if such rating agency decides that circumstances warrant such a change. Any reduction in our credit ratings and/or the
associated outlooks could adversely affect the availability of debt financing on terms acceptable to us, as well as the cost and other terms
upon which we are able to obtain any such financing. In addition, credit ratings and associated outlooks may be important to customers or
counterparties when we compete in certain markets and when we seek to engage in certain transactions. In connection with certain
agreements, we may be required to provide additional collateral in the event of a credit ratings downgrade.
LIQUIDITY ANALYSIS
We consider our liquidity to be comprised of the sum of Cash and cash equivalents, Reverse repurchase agreements, Marketable
securities, and Securities owned, less Securities loaned and Repurchase agreements. The discussion below describes the key components of
our liquidity analysis, including earnings, dividends and distributions, net investing and funding activities, including repurchases and
redemptions of BGC Class A common stock and partnership units, security settlements, changes in securities held and marketable securities,
and changes in our working capital.
We consider the following in analyzing changes in our liquidity.
Our liquidity analysis includes a comparison of our Consolidated net income (loss) adjusted for Consolidated net income from
discontinued operations, net of tax and certain non-cash items (e.g., Equity-based compensation) as presented on the cash flow statement.
Dividends and distributions are payments made to our holders of common shares and limited partnership interests and are related to earnings
from prior periods. These timing differences will impact our cash flows in a given period.
Our investing and funding activities represent a combination of our capital raising activities, including short-term borrowings and
repayments, issuances of shares under our CEO Program (net), BGC Class A common stock repurchases and partnership unit redemptions,
purchases and sales of securities, dispositions, and other investments (e.g. acquisitions, forgivable loans to new brokers and capital
expenditures—all net of depreciation and amortization).
Our securities settlement activities primarily represent deposits with clearing organizations. In addition, when advantageous, we may
elect to facilitate the settlement of matched principal transactions by funding failed trades, which results in a temporary secured use of cash
and is economically beneficial to us.
108
Other changes in working capital represent changes primarily in receivables and payables and accrued liabilities that impact our
liquidity.
Changes in Reverse repurchase agreements, Securities owned, and Marketable securities may result from additional cash investments
or sales, which will be offset by a corresponding change in Cash and cash equivalents and, accordingly, will not result in a change in our
liquidity. Conversely, changes in the market value of such securities are reflected in our earnings or other comprehensive income (loss) and
will result in changes in our liquidity.
At December 31, 2019, the Company completed the calculation of the one-time transition tax on the deemed repatriation of foreign
subsidiaries’ earnings pursuant to the Tax Act and previously recorded a net cumulative tax expense of $25.0 million, net of foreign tax
credits. An installment election can be made to pay the taxes over eight years with 40% paid in equal installments over the first five years and
the remaining 60% to be paid in installments of 15%, 20% and 25% in years six, seven and eight, respectively. The cumulative remaining
balance as of December 31, 2020 is $15.8 million.
As of December 31, 2020, the Company had $593.6 million of Cash and cash equivalents, and included in this amount was $443.5
million of Cash and cash equivalents held by foreign subsidiaries.
Discussion of the year ended December 31, 2020
The table below presents our Liquidity Analysis as of December 31, 2020 and December 31, 2019:
(in thousands)
Cash and cash equivalents
Securities owned
Marketable securities1
Total
December 31,
2020
December 31,
2019
$
$
593,646 $
58,572
349
652,567 $
415,379
57,525
326
473,230
1
As of December 31, 2019, $13.9 million of Marketable securities on our balance sheet had been lent in a Securities loaned transaction
and, therefore, are not included in this Liquidity Analysis.
The $179.3 million increase in our liquidity position from $473.2 million as of December 31, 2019 to $652.6 million as of
December 31, 2020 was primarily related to the issuance of $300.0 million of the 4.375% Senior Notes, partially reduced by the $68.9
million net payoff of the Revolving Credit Agreement and the $44.0 million cash tender offer on the 5.125% Senior Notes. This net increase
was partially offset by ordinary movements in working capital (including settlement of payables to related parties), cash paid with respect to
annual employee bonuses and associated tax and compensation expenses, cost reduction charges, tax payments, acquisitions and our
continued investment in new revenue generating hires.
Discussion of the year ended December 31, 2019
The table below presents our Liquidity Analysis as of December 31, 2019 and December 31, 2018:
(in thousands)
Cash and cash equivalents
Securities owned
Marketable securities1
Repurchase agreements
Total
December 31,
2019
December 31,
2018
$
$
415,379 $
57,525
326
—
473,230 $
336,535
58,408
16,924
(986 )
410,881
1
As of December 31, 2019 and 2018, $13.9 million and $15.1 million, respectively, of Marketable securities on our balance sheet had
been lent in a Securities loaned transaction and, therefore, are not included in this Liquidity Analysis.
The $62.3 million increase in our liquidity position from $410.9 million as of December 31, 2018 to $473.2 million as of December 31,
2019 was primarily related to the issuance of $300.0 million of the 3.750% Senior Notes, increased collateralized and other net borrowings of
$82.6 million, partially offset by the financing of acquisitions, ordinary movements in working capital, and our continued investment in new
revenue generating hires.
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CLEARING CAPITAL
In November 2008, we entered into a clearing capital agreement with Cantor to clear U.S. Treasury and U.S. government agency
securities transactions on our behalf. In June 2020, this clearing capital agreement was amended to cover Cantor providing clearing services
in all eligible financial products to us and not just U.S. Treasury and U.S. government agency securities. Pursuant to the terms of this
agreement, so long as Cantor is providing clearing services to us, Cantor shall be entitled to request from us cash or other property acceptable
to Cantor in the amount reasonably requested by Cantor under the clearing capital agreement or Cantor will post cash or other property on
our behalf for a commercially reasonable charge. Cantor had not requested any cash or other property from us as collateral as of
December 31, 2020.
REGULATORY REQUIREMENTS
Our liquidity and available cash resources are restricted by regulatory requirements of our operating subsidiaries. Many of these
regulators, including U.S. and non-U.S. government agencies and self-regulatory organizations, as well as state securities commissions in the
U.S., are empowered to conduct administrative proceedings that can result in civil and criminal judgments, settlements, fines, penalties,
injunctions, enhanced oversight, remediation, or other relief.
In addition, self-regulatory organizations, such as the FINRA and the NFA, along with statutory bodies such as the FCA, the SEC, and
the CFTC require strict compliance with their rules and regulations. The requirements imposed by regulators are designed to ensure the
integrity of the financial markets and to protect customers and other third parties who deal with broker-dealers and are not designed to
specifically protect stockholders. These regulations often serve to limit our activities, including through net capital, customer protection and
market conduct requirements.
The final phase of Basel III (unofficially called “Basel IV”) is a global prudential regulatory standard designed to make banks more
resilient and increase confidence in the banking system. Its wide scope includes reviewing market, credit and operational risk along with
targeted changes to leverage ratios. Basel IV includes updates to the calculation of bank capital requirements with the aim of making
outcomes more comparable across banks globally. Most of the requirements are expected to be implemented by national and regional
authorities by around 2023, with certain delays announced by regulators recently due to COVID-19. The adoption of these proposed rules
could restrict the ability of our large bank and broker-dealer customers to operate trading businesses and to maintain current capital market
exposures under the present structure of their balance sheets, and will cause these entities to need to raise additional capital in order to stay
active in our marketplaces.
The FCA is the relevant statutory regulator in the U.K. The FCA’s objectives are to protect customers, maintain the stability of the
financial services industry and promote competition between financial services providers. It has broad rule-making, investigative and
enforcement powers derived from the Financial Services and Markets Act 2000 and subsequent and derivative legislation and regulations.
In addition, the majority of our other foreign subsidiaries are subject to similar regulation by the relevant authorities in the countries in
which they do business. Certain other of our foreign subsidiaries are required to maintain non-U.S. net capital requirements. For example, in
Hong Kong, BGC Securities (Hong Kong), LLC, GFI (HK) Securities LLC and Sunrise Broker (Hong Kong) Limited are regulated by the
Securities and Futures Commission. BGC Capital Markets (Hong Kong), Limited and GFI (HK) Brokers Ltd are regulated by The Hong
Kong Monetary Authority. All are subject to Hong Kong net capital requirements. In France, Aurel BGC and BGC France Holdings; in
Australia, BGC Partners (Australia) Pty Limited, BGC (Securities) Pty Limited and GFI Australia Pty Ltd.; in Japan, BGC Shoken Kaisha
Limited’s Tokyo branch and BGC Capital Markets Japan LLC’s Tokyo Branch; in Singapore, BGC Partners (Singapore) Limited, GFI Group
Pte Ltd and Ginga Global Markets Pte Ltd; in Korea, BGC Capital Markets & Foreign Exchange Broker (Korea) Limited and GFI Korea
Money Brokerage Limited; and in Turkey, BGC Partners Menkul Degerler AS, all have net capital requirements imposed upon them by local
regulators. In addition, BGC is a member of clearing houses such as The London Metal Exchange, which may impose minimum capital
requirements. In Latin America, BGC Liquidez Distribuidora De Titulos E Valores Mobiliarios Ltda. (Brazil) has net capital requirements
imposed upon it by local regulators.
These subsidiaries may also be prohibited from repaying the borrowings of their parents or affiliates, paying cash dividends, making
loans to their parent or affiliates or otherwise entering into transactions, in each case, that result in a significant reduction in their regulatory
capital position without prior notification or approval from their principal regulator. See Note 24—“Regulatory Requirements” to our
consolidated financial statements for further details on our regulatory requirements.
As of December 31, 2020, $676.3 million of net assets were held by regulated subsidiaries. As of December 31, 2020, these
subsidiaries had aggregate regulatory net capital, as defined, in excess of the aggregate regulatory requirements, as defined, of $373.4 million.
In April 2013, the Board and Audit Committee authorized management to enter into indemnification agreements with Cantor and its
affiliates with respect to the provision of any guarantees provided by Cantor and its affiliates from time to time as required by regulators.
These services may be provided from time to time at a reasonable and customary fee.
BGC Derivative Markets and GFI Swaps Exchange, our subsidiaries, operate as SEFs. 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 own ELX, which became a dormant contract market on July 1, 2017. As these rules require authorized execution facilities to maintain
robust front-end and back-office IT capabilities and to make large and ongoing technology investments, and because these execution facilities
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may be supported by a variety of voice and auction-based execution methodologies, we expect our Hybrid and Fully Electronic trading
capability to perform strongly in such an environment.
Much of our global derivatives volumes continue to be executed by non-U.S. based clients outside the U.S. and subject to local
prudential regulations. As such, we will continue to operate a number of European regulated venues in accordance with EU or U.K.
legislation and licensed by the FCA or EU-based national supervisors. These venues are also operated for non-derivative instruments
for these clients. MiFID II was published by the European Securities and Markets Authority in September 2015, and implemented in
January 2018 and introduced important infrastructural changes.
MiFID II requires a significant part of the market in these instruments to trade on trading venues subject to transparency
regimes, not only in pre- and post-trade prices, but also in fee structures and access. In addition, it has impacted a number of key areas,
including corporate governance, transaction reporting, pre- and post-trade transparency, technology synchronization, best execution
and investor protection.
MiFID II is intended to help improve the functioning of the EU single market by achieving a greater consistency of regulatory
standards. By design, therefore, it is intended that EU member states should have very similar regulatory regimes in relation to the
matters addressed to MiFID. MiFID II has also introduced a new regulated execution venue category known as an OTF that captures
much of the Voice-and Hybrid-oriented trading in EU. Much of our existing EU derivatives and fixed income execution business now
take place on OTFs. Further to its decision to leave the EU, the U.K. has implemented MIFID II’s requirements into its own domestic
legislation. Brexit may impact future market structures and MiFID II rulemaking and implementation due to potential changes in
mutual passporting between the U.K. and EU member states. In addition, the GDPR came into effect in the EU on May 25, 2018 and
creates new compliance obligations in relation to personal data. The GDPR may affect our practices, and will increase financial penalties for
non-compliance significantly.
On September 30, 2020, the SEC announced a settlement with BGC regarding alleged negligent disclosure violations related to one of
BGC's non-GAAP financial measures for periods beginning with the first quarter of 2015 through the first quarter of 2016. All of the relevant
disclosures related to those periods and pre-dated the SEC staff’s May 2016 detailed compliance and disclosure guidance with respect to non-
GAAP presentations. BGC revised its non-GAAP presentation beginning with the second quarter of 2016 as a result of the SEC’s guidance,
and the SEC has made no allegations with regard to any periods following the first quarter of 2016. In connection with the SEC settlement,
BGC was ordered to cease and desist from any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Section 13(a) of the
Exchange Act and Rule 13a-11 thereunder, and Rule 100(b) of Regulation G, and agreed to pay a civil penalty of $1.4 million without
admitting or denying the SEC’s allegations. See “Regulation” included in Part I, Item 1 of this Annual Report on Form 10-K for additional
information related to our regulatory environment.
EQUITY
Class A Common Stock
Changes in shares of BGC Class A common stock outstanding were as follows (in thousands):
Shares outstanding at beginning of period
Share issuances:
Redemptions/exchanges of limited partnership interests¹
Vesting of RSUs
Acquisitions
Other issuances of BGC Class A common stock
Issuance of BGC Class A common stock for general corporate purposes
Treasury stock repurchases
Forfeitures of restricted BGC Class A common stock
Shares outstanding at end of period
Year Ended December 31,
2019
2020
307,915
291,475
13,190
1,134
391
345
45
(2 )
—
323,018
15,008
435
1,039
213
—
(233 )
(22 )
307,915
1
Included in redemptions/exchanges of limited partnership interests for the year ended December 31, 2020, are 9.5 million shares of BGC Class
A common stock granted in connection with the cancellation of 9.2 million LPUs. Included in redemption/exchanges of limited partnership
interests for the year ended December 31, 2019, are 10.1 million shares of BGC Class A common stock granted in connection with the
cancellation of 11.5 million LPUs. Because LPUs are included in the Company’s fully diluted share count, if dilutive, redemptions/exchanges
in connection with the issuance of BGC Class A common stock would not impact the fully diluted number of shares outstanding.
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Class B Common Stock
The Company did not issue any shares of BGC Class B common stock during the years ended December 31, 2020 and 2019. As of
December 31, 2020 and 2019, there were 45.9 million shares of BGC Class B common stock outstanding.
Unit Redemptions and Share Repurchase Program
The Board and Audit Committee have authorized repurchases of BGC Class A common stock and redemptions of limited partnership
interests or other equity interests in our subsidiaries. On August 1, 2018, the Board and Audit Committee increased the Company’s share
repurchase and unit redemption authorization to $300.0 million, which may include purchases from Cantor, its partners or employees or other
affiliated persons or entities. As of December 31, 2020, the Company had $249.9 million remaining from its share repurchase and unit
redemption authorization. From time to time, the Company may actively continue to repurchase shares and/or redeem units.
The table below represents the units redeemed and/or shares repurchased for cash and does not include units redeemed/cancelled in
connection with the grant of shares of BGC Class A common stock nor the limited partnership interests exchanged for shares of BGC Class
A common stock. The unit redemptions and share repurchases of BGC Class A common stock during the year ended December 31, 2020
were as follows (in thousands, except for weighted-average price data):
Period
Redemptions1
January 1, 2020—March 31, 2020
April 1, 2020—June 30, 2020
July 1, 2020—September 30, 2020
October 1, 2020—December 31, 2020
Total Redemptions
Repurchases2
January 1, 2020—March 31, 2020
April 1, 2020—June 30, 2020
July 1, 2020—September 30, 2020
October 1, 2020—December 31, 2020
Total Repurchases
Total Redemptions and Repurchases
Total Number
of Units
Redeemed
or Shares
Repurchased
Weighted-
Average Price
Paid per Unit
or Share
Approximate
Dollar Value
of Units and
Shares That May
Yet Be Redeemed/
Purchased
Under the Program
235 $
103
1,481
720
2,539 $
— $
—
2
—
2
2,541 $
4.30
3.05
2.80
1.78
2.67
—
—
2.58
—
2.58
2.67 $
249,908
1
2
During the year ended December 31, 2020, the Company redeemed 1.8 million LPUs at an aggregate redemption price of $5.5 million for a
weighted-average price of $3.03 per unit and 0.7 million FPUs at an aggregate redemption price of $1.3 million for a weighted-average price
of $1.79 per unit. During the year ended December 31, 2019, the Company redeemed 1.4 million LPUs at an aggregate redemption price of
$8.0 million for a weighted-average price of $5.92 per unit and approximately 56.9 thousand FPUs at an aggregate redemption price of $320.6
thousand for a weighted-average price of $5.64 per unit. The table above does not include units redeemed/cancelled in connection with the
grant of 9.5 million shares and 10.1 million shares of BGC Class A common stock during the years ended December 31, 2020 and 2019,
respectively, nor the limited partnership interests exchanged for 3.7 million and 4.4 million shares of BGC Class A common stock during the
years ended December 31, 2020 and 2019, respectively.
During the year ended December 31, 2020, the Company repurchased 2 thousand shares of BGC Class A common stock at an aggregate price
of $6 thousand for a weighted-average price of $2.58 per share. During the year ended December 31, 2019, the Company repurchased
approximately 0.2 million shares of BGC Class A common stock at an aggregate price of $1.2 million for a weighted-average price of $5.30
per share.
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The weighted-average share counts from continuing operations, including securities that were anti-dilutive for our earnings per share
calculations, for the three months and year ended December 31, 2020 were as follows (in thousands):
Common stock outstanding1
Partnership units2
RSUs (Treasury stock method)
Other
Total3
Three
Months Ended
December 31,
2020
365,259
—
—
—
365,259
Year Ended
December 31,
2020
361,736
183,130
737
1,245
546,848
1
2
3
Common stock consisted of shares of BGC Class A common stock, shares of BGC Class B common stock and contingent shares of our Class
A common stock for which all necessary conditions have been satisfied except for the passage of time. For the quarter ended December 31,
2020, the weighted-average number shares of BGC Class A common stock was 319.4 million and Class B shares was 45.9 million. For the
year ended December 31, 2020, the weighted-average number shares of BGC Class A common stock was 315.9 million and Class B shares
was 45.9 million.
Partnership units collectively include FPUs, LPUs, including contingent units of BGC Holdings for which all necessary conditions have been
satisfied except for the passage of time, and Cantor units (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark
Holdings” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information).
For the quarter ended December 31, 2020, approximately 188.8 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 quarter ended December 31, 2020
included, on a weighted-average basis, approximately 185.3 million limited partnership interests, 2.4 million RSUs, and 1.1 million other
contracts to issue shares of BGC Class A common stock. For the year ended December 31, 2020, approximately 0.7 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 year ended December 31, 2020 included, on a weighted-average basis, approximately 0.7 million RSUs. As of December 31,
2020, approximately 27.7 million shares of contingent BGC Class A common stock, N units, RSUs, and LPUs were excluded from fully
diluted EPS computations because the conditions for issuance had not been met by the end of the period. The contingent BGC Class A
common stock is recorded as a liability and included in “Accounts payable, accrued and other liabilities” in our consolidated statement of
financial condition as of December 31, 2020.
The fully diluted period-end spot share count was as follows (in thousands):
Common stock outstanding
Partnership units
RSUs (Treasury stock method)
Other
Total
As of
December 31,
2020
368,902
179,151
1,971
3,168
553,192
On June 5, 2015, we entered into the Exchange Agreement with Cantor providing Cantor, CFGM and other Cantor affiliates entitled to
hold BGC 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 BGC Class A common stock now owned or subsequently acquired by such Cantor entities for up to an aggregate of
34,649,693 shares of BGC Class B common stock. Such shares of BGC Class B common stock, which currently can be acquired upon the
exchange of Cantor units owned in BGC Holdings, are already included in our fully diluted share count and will not increase Cantor’s current
maximum potential voting power in the common equity. The Exchange Agreement enabled the Cantor entities to acquire the same number of
shares of BGC Class B common stock that they were already entitled to acquire without having to exchange its Cantor units in BGC
Holdings. The Audit Committee and Board have determined that it was in the best interests of us and our stockholders to approve the
Exchange Agreement because it will help ensure that Cantor retains its Cantor units in BGC Holdings, which is the same partnership in
which our partner employees participate, thus continuing to align the interests of Cantor with those of the partner employees. On November
23, 2018, in the Class B Issuance, BGC issued 10,323,366 shares of BGC Class B common stock to Cantor and 712,907 shares of BGC Class
B common stock to CFGM, an affiliate of Cantor, in each case in exchange for shares of BGC Class A common stock from Cantor and
CFGM, respectively, on a one-to-one basis pursuant to the Exchange Agreement. Pursuant to the Exchange Agreement, no additional
consideration was paid to BGC by Cantor or CFGM for the Class B Issuance. Following this exchange, Cantor and its affiliates only have the
right to exchange under the Exchange Agreement up to an aggregate of 23,613,420 shares of BGC Class A common stock, now owned or
subsequently acquired, or its Cantor units in BGC Holdings, into shares of BGC Class B common stock. As of December 31, 2020, Cantor
and CFGM do not own any shares of BGC Class A common stock.
We and Cantor have agreed that any shares of BGC Class B common stock issued in connection with the Exchange Agreement would
be deducted from the aggregate number of shares of BGC Class B common stock that may be issued to the Cantor entities upon exchange of
Cantor units in BGC Holdings. Accordingly, the Cantor entities will not be entitled to receive any more shares of BGC Class B Stock under
this agreement than they were previously eligible to receive upon exchange of Cantor units.
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On November 4, 2015, partners of BGC Holdings created five new classes of non-distributing partnership units (collectively with the
NPSUs, “N Units”). These new N Units carry the same name as the underlying unit with the insertion of an additional “N” to designate them
as the N Unit type and are designated as NREUs, NPREUs, NLPUs, NPLPUs and NPPSUs. The N Units are not entitled to participate in
partnership distributions, will not be allocated any items of profit or loss and may not be made exchangeable into shares of BGC Class A
common stock. The Eleventh Amendment was approved by the Audit Committee and by the Board.
Subject to the approval of the Compensation Committee or its designee, certain 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. Such N Units are not included in the fully diluted share count.
On December 14, 2016, partners of BGC Holdings amended certain terms and conditions of the partnership’s N Units in order to
provide flexibility to the Company and the Partnership in using such N Units in connection with compensation arrangements and practices.
The amendment provides for a minimum $5 million gross revenue requirement in a given quarter as a condition for an N Unit to be replaced
by another type of partnership unit in accordance with the Partnership Agreement and the grant documentation. The amendment was
approved by the Audit Committee.
On December 13, 2017, the Amended and Restated BGC Holdings Partnership Agreement was amended and restated a second time to
include prior standalone amendments and to make certain other changes related to the Separation. The Second Amended and Restated BGC
Holdings Partnership Agreement, among other things, reflects changes resulting from the division in the Separation of BGC Holdings into
BGC Holdings and Newmark Holdings, including:
•
•
•
an apportionment of the existing economic attributes (including, among others, capital accounts and post-termination payments)
of each BGC Holdings limited partnership interests outstanding immediately prior to the Separation between such Legacy BGC
Holdings Unit and the fraction of a Newmark Holdings LPU issued in the Separation in respect of such Legacy BGC Holdings
Unit, based on the relative value of BGC and Newmark as of after the Newmark IPO;
an adjustment of the exchange mechanism between the Newmark IPO and the Distribution so that one exchangeable BGC
Holdings unit together with a number of exchangeable Newmark Holdings units equal to 0.4545 divided by the Newmark
Holdings Exchange Ratio as of such time, must be exchanged in order to receive one share of BGC Class A common stock; and
a right of the employer of a partner (whether it be Newmark or BGC) to determine whether to grant exchangeability with respect
to Legacy BGC Holdings Units or Legacy Newmark Holdings Units held by such partner.
The Second Amended and Restated BGC Holdings Partnership Agreement also removes certain classes of BGC Holdings units that are
no longer outstanding, and permits the general partner of BGC Holdings to determine the total number of authorized BGC Holdings units.
The Second Amended and Restated BGC Holdings Limited Partnership Agreement was approved by the Audit Committee.
Registration Statements
We currently have in place an effective equity shelf registration statement on Form S-3 filed on March 9, 2018 with respect to the
issuance and sale of up to an aggregate of $300.0 million of shares of BGC Class A common stock from time to time on a delayed or
continuous basis. On March 9, 2018, we entered into the March 2018 Sales Agreement, pursuant to which we may offer and sell up to an
aggregate of $300.0 million of shares of BGC Class A common stock under the CEO Program. Proceeds from shares of BGC Class A
common stock sold under this CEO Program Sales Agreement may be used for redemptions of limited partnership interests in BGC
Holdings, as well as for general corporate purposes, including acquisitions and the repayment of debt. CF&Co is a wholly owned subsidiary
of Cantor and an affiliate of us. Under this Sales Agreement, we have agreed to pay CF&Co 2% of the gross proceeds from the sale of shares.
For certain transactions during 2020, we paid CF&Co 1% of the gross proceeds from the sale of shares of our Class A common stock in our
CEO program. As of the date of filing of this Form 10-K, we have issued and sold 17.6 million shares of BGC Class A common stock (or
$210.8 million) under the March 2018 Sales Agreement, and $89.2 million of stock is remaining for sale by us under the March 2018 Sales
Agreement. For additional information on the Company’s CEO Program sales agreements, see Note 16—“Related Party Transactions” to our
consolidated financial statements in Part 8, Item II of this Annual Report on Form 10-K.
As of December 31, 2020, we have issued and sold 17.6 million shares of BGC Class A common stock (or $210.8 million) under the
March 2018 Sales Agreement. As of March 31, 2018, we had sold all 20 million shares of BGC Class A common stock pursuant to the April
2017 Sales Agreement. We intend to use the net proceeds of any shares of BGC Class A common stock sold for general corporate purposes
for potential acquisitions, redemptions of LPUs and FPUs in BGC Holdings and repurchases of shares of BGC Class A common stock from
partners, executive officers and other employees of ours or our subsidiaries and of Cantor and its affiliates. Certain of such partners will be
expected to use the proceeds from such sales to repay outstanding loans issued by, or credit enhanced by, Cantor, or BGC Holdings. In
addition to general corporate purposes, these sales along with our share repurchase authorization are designed as a planning device in order to
facilitate the redemption process. Going forward, we may redeem units and reduce our fully diluted share count under our repurchase
authorization or later sell shares of BGC Class A common stock under the March 2018 Sales Agreement.
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Further, we have an effective registration statement on Form S-4 filed on September 3, 2010, with respect to the offer and sale of up to
20 million shares of BGC Class A common stock from time to time in connection with business combination transactions, including
acquisitions of other businesses, assets, properties or securities. As of December 31, 2020, we have issued an aggregate of 14.2 million shares
of BGC Class A common stock under this Form S-4 registration statement. Additionally, on September 13, 2019, we filed a registration
statement on Form S-4, with respect to the offer and sale of up to 20 million shares of Class A common stock from time to time in connection
with business combination transactions, including acquisitions of other businesses, assets, properties or securities. As of December 31, 2020,
we have not issued any shares of BGC Class A common stock under this Form S-4 registration statement. We also have an effective shelf
registration statement on Form S-3 pursuant to which we can offer and sell up to 10 million shares of BGC Class A common stock under the
BGC Partners, Inc. Dividend Reinvestment and Stock Purchase Plan. As of December 31, 2020, we have issued approximately 0.7 million
shares of BGC Class A common stock under the Dividend Reinvestment and Stock Purchase Plan.
The Compensation Committee may grant stock options, stock appreciation rights, deferred stock such as RSUs, bonus stock,
performance awards, dividend equivalents and other equity-based awards, including to provide exchange rights for shares of BGC Class A
common stock upon exchange of LPUs. On June 22, 2016, at our Annual Meeting of Stockholders, our stockholders approved our Equity
Plan to increase from 350 million to 400 million the aggregate number of shares of BGC Class A common stock that may be delivered or
cash-settled pursuant to awards granted during the life of the Equity Plan. As of December 31, 2020, the limit on the aggregate number of
shares authorized to be delivered allowed for the grant of future awards relating to 118.5 million shares of BGC Class A common stock.
On July 31, 2018, we filed a registration statement on Form S-4 pursuant to which the holders of the 5.375% Senior Notes which were
issued in a private placement, exchanged such notes for new registered notes with substantially identical terms.
On October 11, 2019, we filed a registration statement on Form S-4 pursuant to which the holders of the 3.750% Senior Notes which
were issued in a private placement, exchanged such notes for new registered notes with substantially identical terms.
On October 20, 2020, we filed a registration statement on Form S-3, which was declared effective on October 28, 2020, pursuant to
which CF&Co may make offers and sales of our 5.125% Senior Notes, 5.375% Senior Notes, 3.750% Senior Notes and 4.375% Senior Notes
in connection with ongoing market-making transactions which may occur from time to time. Such market-making transactions in these
securities may occur in the open market or may be privately negotiated at prevailing market prices at a time of resale or at related or
negotiated prices. Neither CF&Co, nor any other of our affiliates, has any obligation to make a market in our securities, and CF&Co or any
such other affiliate may discontinue market-making activities at any time without notice.
CONTINGENT PAYMENTS RELATED TO ACQUISITIONS
Since 2016, the Company has completed acquisitions whose purchase price included an aggregate of approximately 2.2 million shares
of the Company’s Class A common stock (with an acquisition date fair value of approximately $9.2 million), 0.1 million LPUs (with an
acquisition date fair value of approximately $0.2 million), 0.2 million RSUs (with an acquisition date fair value of approximately $1.2
million) and $37.5 million in cash that may be issued contingent on certain targets being met through 2023.
As of December 31, 2020, the Company has issued 0.4 million shares of BGC Class A common stock, 0.1 million of RSUs, and paid
$19.2 million in cash related to such contingent payments.
As of December 31, 2020, 1.9 million shares of the Company’s Class A common stock and 0.2 million RSUs, and $26.4 million in
cash remain to be issued if the targets are met, net of forfeitures and other adjustments.
DERIVATIVE SUIT
On October 5, 2018, Roofers Local 149 Pension Fund filed a putative derivative complaint in the Delaware Chancery Court, captioned
Roofers Local 149 Pension Fund vs. Howard Lutnick, et al. (Case No. 2018-0722), alleging breaches of fiduciary duty against (i) the
members of the Board, (ii) Howard Lutnick, CFGM, and Cantor as controlling stockholders of BGC, and (iii) Howard Lutnick as an officer
of BGC. The complaint challenges the transactions by which BGC (i) completed the Berkeley Point acquisition from CCRE for $875 million
and (ii) committed to invest $100 million for a 27% interest in Real Estate, L.P. (collectively, the “Transaction”). Among other things, the
complaint alleges that (i) the price BGC paid in connection with the Transaction was unfair, (ii) the process leading up to the Transaction was
unfair, and (iii) the members of the special committee of the Board were not independent. It seeks to recover for the Company unquantified
damages, disgorgement of any payments received by defendants, and attorneys' fees.
A month later, on November 5, 2018, the same plaintiffs’ firm filed an identical putative derivative complaint against the same
defendants seeking the same relief on behalf of a second client, Northern California Pipe Trades Trust Funds. The cases have been
consolidated into a single action, captioned In re BGC Partners, Inc. Derivative Litigation (Consolidated C.A. No. 2018-0722-AGB), and the
complaint filed by Roofers Local 149 Pension Fund on October 5, 2018 was designated as the operative complaint.
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In response to motions to dismiss filed by all defendants in December 2018, Plaintiffs filed a motion for leave to amend the operative
complaint in February 2019, requesting that the Court allow them to supplement their allegations, which the Court granted. The amended
complaint alleges the same purported breaches of fiduciary duty as the operative complaint, raises no new claims, and seeks identical relief,
but includes additional allegations, including alleged reasons for plaintiffs’ failure to make a demand on the Board, which was the basis of
defendants’ motion to dismiss. On March 19, 2019, all defendants filed motions to dismiss the amended complaints, again on demand
grounds. On September 30, 2019, the Court denied defendants’ motions to dismiss, permitting the case to move forward into discovery. In its
ruling, the Court determined that the amended complaint sufficiently pled that plaintiffs were not required to make demand on the Board in
order to file a derivative suit, but did not make findings of fact with respect to the underlying merits of plaintiffs’ allegations concerning the
Transaction.
The Company continues to believe that the allegations pled against the defendants in the amended complaint are without merit and
intends to defend against them vigorously as the case moves forward. However, as in any litigated matter, the outcome cannot be determined
with certainty.
PURCHASE OF LIMITED PARTNERSHIP INTERESTS
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 Article Eight,
Section 8.08, of the Second Amended and Restated BGC Holdings Limited Partnership Agreement (previously the Sixth Amendment) and
Article Eight, Section 8.08, of the Newmark Holdings Limited Partnership Agreement, 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 23,613,420 shares of BGC Class B common stock or, at Cantor’s election or if there are no
such additional shares of BGC Class B common stock, shares of BGC Class A common stock, in each case on a one-for-one basis (subject to
customary anti-dilution adjustments).
As of December 31, 2020, there were 2.7 million FPUs in BGC Holdings remaining, which the partnerships had the right to redeem or
exchange and with respect to which Cantor had the right to purchase an equivalent number of Cantor units.
JOINT SERVICES AGREEMENT WITH CANTOR
In February 2019, the Audit Committee authorized us to enter into a short-term services agreement with Cantor pursuant to which
Cantor would be responsible for clearing, settling and processing certain transactions executed on behalf of customers in exchange for a
33% revenue share based on net transaction revenue and the payment by BGC of the fully allocated cost of certain salespersons related
thereto. In May 2020, the Audit Committee authorized us to extend the initial term of the short-term services agreement for an additional nine
months.
GUARANTEE AGREEMENT FROM MINT BROKERS
Under rules adopted by the CFTC, all foreign introducing brokers engaging in transactions with U.S. persons are required to register
with the NFA and either meet financial reporting and net capital requirements on an individual basis or obtain a guarantee agreement from a
registered Futures Commission Merchant. Our European-based brokers engage from time to time in interest rate swap transactions with U.S.-
based counterparties, and therefore we are subject to the CFTC requirements. Mint Brokers has entered into guarantees on our behalf (and on
behalf of GFI), and we are required to indemnify Mint Brokers for the amounts, if any, paid by Mint Brokers on our behalf pursuant to this
arrangement. Effective April 1, 2020, these guarantees were transferred to Mint Brokers from CF&Co. During the years ended December 31,
2020 and 2019, the Company recorded expenses of $125,000 with respect to these guarantees.
BGC SUBLEASE FROM NEWMARK
In May 2020, BGC U.S. OpCo entered into an arrangement to sublease excess space from RKF Retail Holdings LLC, a subsidiary of
Newmark, which sublease was approved by the Audit Committee. The deal is a one-year sublease of approximately 21,000 rentable square
feet in New York City. Under the terms of the sublease, BGC U.S. OpCo will pay a fixed rent amount of $1.1 million in addition to all
operating and tax expenses attributable to the lease. In connection with the sublease, BGC U.S. OpCo paid $0.8 million for the year ended
December 31, 2020.
DEBT REPURCHASE PROGRAM
On June 11, 2020, the Company’s Board of Directors and its Audit Committee authorized a debt repurchase program for the
repurchase by the Company of up to $50.0 million of Company Debt Securities. Repurchases of Company Debt Securities, if any, are
expected to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption.
Under the authorization, the Company may make repurchases of Company Debt Securities for cash from time to time in the open
market or in privately negotiated transactions upon such terms and at such prices as management may determine. Additionally, the Company
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is authorized to make any such repurchases of Company Debt Securities through CF&Co (or its affiliates), in its capacity as agent or
principal, or such other broker-dealers as management shall determine to utilize from time to time, and such repurchases shall be subject to
brokerage commissions which are no higher than standard market commission rates.
As of December 31, 2020, the Company had $50.0 million remaining from its debt repurchase authorization.
EQUITY METHOD INVESTMENTS
The Company was authorized to enter into loans, investments or other credit support arrangements for Aqua; such arrangements are
proportionally and on the same terms as similar arrangements between Aqua and Cantor. On February 5, 2020 and February 25, 2021, the
Company’s Board and Audit Committee increased the authorized amount by an additional $2.0 million and $1.0 million respectively, to an
aggregate of $20.2 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 (see Note 16—“Related Party Transactions,” to our consolidated financial statements in Part II, Item 8 of this Annual Report on
Form 10-K for more information).
UNIT REDEMPTIONS AND EXCHANGES—EXECUTIVE OFFICERS
On February 22, 2021, the Company granted Sean A. Windeatt 123,713 exchange rights with respect to 123,713 non-exchangeable
LPUs that were previously granted to Mr. Windeatt on February 22, 2019. The resulting 123,713 exchangeable LPUs are immediately
exchangeable by Mr. Windeatt for an aggregate of 123,713 shares of BGC Class A common stock. The grant was approved by the
Compensation Committee. Additionally, the Compensation Committee approved the right to exchange for cash 28,477 non-exchangeable
PLPUs held by Mr. Windeatt, for a payment of $178,266 for taxes when the LPU units are exchanged.
On February 22, 2021, the Company granted Shaun Lynn 558,107 exchange rights with respect to 558,107 non-exchangeable LPUs
that were previously granted to Mr. Lynn on February 22, 2019. The resulting 558,107 exchangeable LPUs are immediately exchangeable by
Mr. Lynn for an aggregate of 558,107 shares of BGC Class A common stock. The grant was approved by the Compensation Committee.
Additionally, the Compensation Committee approved the right to exchange for cash 128,468 non-exchangeable PLPUs held by Mr. Lynn, for
a payment of $804,210 for taxes when the LPU units are exchanged.
On March 2, 2020, the Company granted Stephen M. Merkel 360,065 exchange rights with respect to 360,065 non-exchangeable LPUs
that were previously granted to Mr. Merkel. The resulting 360,065 exchangeable LPUs were immediately exchangeable by Mr. Merkel for an
aggregate of 360,065 shares of BGC Class A common stock. The grant was approved by the Compensation Committee. Additionally, the
Compensation Committee approved the right to exchange for cash 265,568 non-exchangeable PLPUs held by Mr. Merkel, for a payment of
$1,507,285 for taxes when the LPU units were exchanged. On March 20, 2020, the Company redeemed 185,300 of such 360,065
exchangeable LPUs held by Mr. Merkel at the average price of shares of BGC Class A common stock sold under BGC’s CEO Program from
March 10, 2020 to March 13, 2020 less 1% (approximately $4.0024 per LPU, for an aggregate redemption price of approximately $741,644).
This transaction was approved by the Compensation Committee. On July 30, 2020, the Company redeemed the remaining 174,765
exchangeable LPUs held by Mr. Merkel at the price of $2.76, the closing price of our Class A Common Stock on July 30, 2020. This
transaction was approved by the Compensation Committee. In connection with the redemption of the 185,300 exchangeable LPUs on March
20, 2020, 122,579 PLPUs were redeemed for $661,303 for taxes. In connection with the redemption of the 174,765 LPUs on July 30, 2020,
142,989 PLPUs were redeemed for $846,182 for taxes.
On March 2, 2020, the Company granted Shaun D. Lynn 883,348 exchange rights with respect to 883,348 non-exchangeable LPUs
that were previously granted to Mr. Lynn. The resulting 883,348 exchangeable LPUs were immediately exchangeable by Mr. Lynn for an
aggregate of 883,348 shares of BGC Class A common stock. The grant was approved by the Compensation Committee. Additionally, the
Compensation Committee approved the right to exchange for cash 245,140 non-exchangeable PLPUs held by Mr. Lynn, for a payment of $
1,099,599 for taxes when the LPU units are exchanged. On July 30, 2020, the Company redeemed 797,222 exchangeable LPUs held by Mr.
Lynn at the price of $2.76, the closing price of our Class A Common Stock on July 30, 2020. This transaction was approved by the
Compensation Committee. In connection with the redemption of the 797,222 exchangeable LPUs, 221,239 exchangeable PLPUs were
redeemed for $992,388 for taxes. In connection with the redemption, Mr. Lynn’s remaining 86,126 exchangeable LPUs and 23,901
exchangeable PLPUs were redeemed for zero upon exchange in connection with his LLP status.
On March 2, 2020, the Company granted Sean A. Windeatt 519,725 exchange rights with respect to 519,725 non-exchangeable LPUs
that were previously granted to Mr. Windeatt. The resulting 519,725 exchangeable LPUs were immediately exchangeable by Mr. Windeatt
for an aggregate of 519,725 shares of BGC Class A common stock. The grant was approved by the Compensation Committee. Additionally,
the Compensation Committee approved the right to exchange for cash 97,656 non-exchangeable PLPUs held by Mr. Windeatt, for a payment
of $645,779 for taxes when the LPU units are exchanged. On August 5, 2020, the Company redeemed 436,665 exchangeable LPUs held by
Mr. Windeatt at the price of $2.90, the closing price of our Class A common stock on August 5, 2020. This transaction was approved by the
Compensation Committee. In connection with the redemption of the 436,665 exchangeable LPUs, 96,216 exchangeable PLPUs were
redeemed for $637,866 for taxes. In connection with the redemption, 20,849 exchangeable LPUs and 1,440 exchangeable PLPUs were
redeemed for zero upon exchange in connection with Mr. Windeatt’s LLP status.
Additionally, on August 5, 2020, the Company granted Mr. Windeatt 40,437 exchange rights with respect to 40,437 non-exchangeable
LPUs that were previously granted to Mr. Windeatt. The resulting 40,437 exchangeable LPUs were immediately exchangeable by Mr.
Windeatt for an aggregate of 40,437 shares of BGC Class A common stock. The grant was approved by the Compensation Committee.
117
Additionally, the Compensation Committee approved the right to exchange for cash 21,774 non-exchangeable PLPUs held by Mr. Windeatt.
On August 5, 2020 the Company redeemed these 40,437 exchangeable LPUs held by Mr. Windeatt at the price of $2.90, the closing price of
our Class A common stock on August 5, 2020. This transaction was approved by the Compensation Committee. In connection with the
redemption of these 40,437 exchangeable LPUs, the 21,774 exchangeable PLPUs were redeemed for $136,305 for taxes.
In addition to the foregoing, on August 6, 2020, Mr. Windeatt was granted exchange rights with respect to 43,890 non-exchangeable
Newmark Holding LPUs that were previously granted to Mr. Windeatt. Additionally, Mr. Windeatt was granted the right to exchange for
cash 17,068 non-exchangeable Newmark Holdings PLPUs held by Mr. Windeatt. As these Newmark Holdings LPUs and PLPUs were
previously non-exchangeable, the Company took a transaction charge of $381,961 upon grant of exchangeability. On August 6, 2020,
Newmark redeemed the 40,209 Newmark Holdings exchangeable LPUs held by Mr. Windeatt for an amount equal to the closing price of
Newmark’s Class A Common Stock on August 6, 2020 ($4.16) multiplied by 37,660 (the amount of shares of Newmark’s Class A Common
Stock the 40,209 Newmark Holdings LPUs were exchangeable into based on the Exchange Ratio at August 6, 2020). In connection with the
redemption of these 40,209 exchangeable Newmark Holdings LPUs, 15,637 exchangeable Newmark Holdings PLPUs were redeemed for
$194,086 for taxes. In connection with the redemption, 3,681 exchangeable Newmark Holding LPUs and 1,431 exchangeable Newmark
Holdings PLPUs were redeemed for zero upon exchange in connection with Mr. Windeatt’s LLP status.
On March 27, 2019, the Audit and Compensation Committees authorized the purchase by the Company from Mr. Merkel of up to
250,000 shares of BGC Class A common stock at the closing price on March 26, 2019. Pursuant to this authorization, 233,172 shares of BGC
Class A common stock were purchased by the Company on March 27, 2019 at $5.30 per share, the closing price on March 26, 2019.
On February 27, 2019, the Audit Committee authorized the purchase by Mr. Lutnick’s retirement plan of up to $56,038 of BGC Class
A common stock at the closing price on March 4, 2019. Pursuant to this authorization, 8,980 shares of BGC Class A common stock were
purchased by the plan on March 5, 2019 at $6.24 per share, the closing price on March 4, 2019.
On October 3, 2018, Mr. Lutnick donated an aggregate of 53,368 shares of BGC Class A common stock from his personal asset trust to
a charitable foundation for which his spouse serves as a director. The Company repurchased the 53,368 shares from the charitable foundation
at a price of $11.73 per share, which was the closing price of BGC Class A common stock on that date. The transaction was approved by the
Audit Committee.
On February 16, 2018, the Audit Committee authorized the purchase by Mr. Lutnick’s retirement plan of up to $105,000 of BGC Class
A common stock at the closing price on the date of purchase. Pursuant to this authorization, 7,883 shares of BGC Class A common stock
were purchased by the plan on February 26, 2018 at $13.17 per share, the closing price on the date of purchase.
In connection with the Company’s 2018 executive compensation process, the Company’s executive officers received certain
monetization of prior awards as set forth below.
On December 31, 2018, the Compensation Committee approved the cancellation of 113,032 non-exchangeable PSUs held by Mr.
Merkel, and the cancellation of 89,225 non-exchangeable PPSUs (which had a determination price of $5.36 per unit). In connection with
these transactions, the Company issued $1,062,500 in BGC Class A common stock, less applicable taxes and withholdings at a 45% tax rate,
resulting in 113,032 net shares of BGC Class A common stock at a price of $5.17 per share and the payment of $478,123 for taxes.
On December 31, 2018, the Compensation Committee approved the monetization of 760,797 PPSUs held by Mr. Lutnick (which at an
average determination price of $6.57 per share on such date, had a value of $5,000,000). On February 1, 2019, the Compensation Committee
approved a modification which consisted of the following: (i) the right to exchange 376,651 non-exchangeable PSUs held by Mr. Lutnick
into 376,651 non-exchangeable HDUs (which, based on the closing price of BGC Class A common stock of $6.21 per share on such date,
had a value of $2,339,000); and (ii) the right to exchange for cash 463,969 non-exchangeable PPSUs held by Mr. Lutnick, for a payment of
$2,661,000 for taxes when (i) is exchanged.
On December 31, 2018, the Compensation Committee approved the grant of exchange rights to Mr. Windeatt with respect to 139,265
non-exchangeable U.K. LPUs (which at the closing price of $5.17 per share on such date, had a value of $720,000) and the exchange for cash
(at the average determination price of $4.388 per unit) of 63,814 non-exchangeable PLPUs for a payment of $280,002 for taxes. On February
22, 2019, the Compensation Committee approved the grant of exchange rights to Mr. Windeatt with respect to an additional 22,020 non-
exchangeable U.K. LPUs (which at the closing price of $6.26 per share on such date, had a value of $137,845) and the exchange for cash (at
the average determination price of $5.6457 per unit) of 9,495 non-exchangeable PLPUs for a payment of $53,606 for taxes.
On December 31, 2018, the Compensation Committee approved the grant of exchange rights to Mr. Lynn with respect to 750,308 non-
exchangeable U.K. LPUs (which at the closing price of $5.17 per share on such date, had a value of $3,879,092) and the exchange for cash
(at the average determination price of $3.894 per unit) of 287,888 non-exchangeable PLPUs for a payment of $1,120,909 for taxes. On
February 22, 2019, the Compensation Committee approved the grant of exchange rights to Mr. Lynn with respect to an additional 43,131
non-exchangeable U.K. LPUs (which at the closing price of $6.26 per share on such date, had a value of $270,000) and the exchange for cash
(at the average determination price of $4.1239 per unit) of 25,461 non-exchangeable PLPUs for a payment of $105,000 for taxes.
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On March 11, 2018, as part of 2017 year-end compensation, the BGC Compensation Committee authorized the Company to issue Mr.
Lutnick $30.0 million of BGC Class A common stock, less applicable taxes and withholdings, based on a price of $14.33 per share, which
was the closing price of BGC Class A common stock on the trading day prior to the date of issuance, which resulted in the net issuance of
979,344 shares of BGC Class A common stock. In exchange, the following equivalent units were redeemed and cancelled: an aggregate of
2,348,479 non-exchangeable LPUs of BGC Holdings consisting of 1,637,215 non-exchangeable BGC Holdings PSUs and 711,264 BGC
Holdings PPSUs, having various determination prices per unit based on the date of the grant, and associated non-exchangeable LPUs of
Newmark Holdings consisting of 774,566 of non-exchangeable Newmark Holdings PSUs and 336,499 of non-exchangeable Newmark
Holdings PPSUs.
MARKET SUMMARY
The following table provides certain volume and transaction count information for the quarterly periods indicated:
Notional Volume (in billions)
Total Fully Electronic volume
Total Hybrid volume1
Total Fully Electronic and Hybrid volume
Transaction Count (in thousands, except for days)
Total Fully Electronic transactions
Total Hybrid transactions
Total Fully Electronic and Hybrid transactions
Trading days
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
$
$
8,600 $
62,056
70,656 $
8,383 $
64,298
72,681 $
7,132 $
63,873
71,005 $
8,051 $
85,290
93,341 $
5,978
66,996
72,974
2,819
1,129
3,948
64
2,711
1,115
3,826
64
3,205
1,333
4,538
63
4,229
1,513
5,742
62
3,108
1,165
4,273
64
Note: Certain information may have been recast with current estimates to reflect changes in reporting methodology. Such revisions have no
impact on the Company’s revenues or earnings.
1
Hybrid is defined as transactions involving some element of electronic trading but executed by BGC’s brokers, exclusive of voice-only
transactions. Fully electronic involves customer-to-customer trades, free from broker execution.
Fully Electronic volume, including new products, was $32.2 trillion for the year ended December 31, 2020, compared to $25.0 trillion
for the year ended December 31, 2019. Our Hybrid volume for the year ended December 31, 2020 was $275.5 trillion, compared to $275.9
trillion for the year ended December 31, 2019.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes certain of our contractual obligations at December 31, 2020 (in thousands):
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
Long-term debt and collateralized borrowings1
Operating leases2
Interest on long-term debt and collateralized borrowings3
Short-term borrowings4
Interest on Short-term borrowings
One-time transition tax5
Other6
Total contractual obligations
$ 1,369,854 $ 310,212 $ 459,642 $ 600,000
39,798
33,833
—
—
9,470
—
—
114,011
—
—
—
—
—
$ 1,823,493 $ 413,390 $ 612,991 $ 683,101 $ 114,011
250,572
177,619
3,849
183
15,817
5,599
36,541
55,566
3,849
183
1,440
5,599
60,222
88,220
—
—
4,907
1
Long-term debt and collateralized borrowings reflects long-term borrowings of $300.0 million of the 5.125% Senior Notes due on May
27, 2021 (the $300.0 million represents the principal amount of the debt; the carrying value of the 5.125% Senior Notes as of
December 31, 2020 was approximately $255.6 million), $450.0 million of the 5.375% Senior Notes due on July 24, 2023 (the $450.0
million represents the principal amount of the debt; the carrying value of the 5.375% Senior Notes as of December 31, 2020 was
$446.6 million), $300.0 million of the 3.750% Senior Notes due October 1, 2024 (the $300.0 million represents the principal amount of
the debt; the carrying value of the 3.750% Senior Notes as of December 31, 2020 was approximately $296.9 million), $300.0 million
of the 4.375% Senior Notes due December 15, 2025 (the $300.0 million represents the principal amount of the debt; the carrying value
of the 4.375% Senior Notes as of December 31, 2020 was approximately $297.0 million, $4.0 million of collateralized borrowings due
May 31, 2021, $9.6 million of collateralized borrowings due April 8, 2023, and $6.3 million of collateralized borrowings due April 19,
2023. See Note 20—“Notes Payable, Other and Short-term Borrowings” to our consolidated financial statements in Part II, Item 8 of
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2
3
4
5
6
this Annual Report on Form 10-K for more information regarding these obligations, including timing of payments and compliance with
debt covenants.
Operating leases are related to rental payments under various non-cancelable leases, principally for office space, net of sublease
payments to be received. There are no sublease payments to be received over the life of the agreement.
Interest on long-term debt and collateralized borrowings also includes interest on the undrawn portion of the committed unsecured
senior Revolving Credit Agreement which was calculated through the maturity date of the facility, which is February 26, 2023. As of
December 31, 2020, the undrawn portion of the committed unsecured Revolving Credit Agreement was $350.0 million (repaid in full).
Short-term borrowings reflects approximately $3.8 million (BRL 20.0 million) of borrowing under the Company’s committed
unsecured loan agreement. See Note 20—“Notes Payable, Other and Short-term Borrowings” for more information regarding this
obligation.
The Company completed the calculation of the one-time transition tax on the deemed repatriation of foreign subsidiaries’ earnings
pursuant to the Tax Act and previously recorded a net cumulative tax expense of $25.0 million, net of foreign tax credits, with an
election to pay the taxes over eight years with 40% to be paid in equal installments over the first five years and the remaining 60% to
be paid in installments of 15%, 20% and 25% in years six, seven and eight, respectively. The cumulative remaining balance as of
December 31, 2020 is $15.8 million.
Other contractual obligations reflect commitments to make charitable contributions, which are recorded as part of “Accounts payable,
accrued and other liabilities” in the Company’s consolidated statements of financial condition. The amount payable each year reflects
an estimate of future Charity Day obligations.
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business, we enter into arrangements with unconsolidated entities, including variable interest entities. See
Note 17—“Investments” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional
information related to our investments in unconsolidated entities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of the assets and liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities in our consolidated financial statements. These accounting estimates require the use of assumptions about matters, some of which
are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated statements
of financial condition, consolidated statements of operations and consolidated statements of cash flows could be materially affected. We
believe that the following accounting policies involve a higher degree of judgment and complexity.
Revenue Recognition
We derive our revenues primarily through commissions from brokerage services, the spread between the buy and sell prices on
matched principal transactions, fees from related parties, data, software and post-trade services, and other revenues. See Note 3—“Summary
of Significant Accounting Policies” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further
information regarding revenue recognition.
Equity-Based and Other Compensation
Discretionary Bonus: A portion of our compensation and employee benefits expense is comprised of discretionary bonuses, which may
be paid in cash, equity, partnership awards or a combination thereof. We accrue expense in a period based on revenues in that period and on
the expected combination of cash, equity and partnership units. Given the assumptions used in estimating discretionary bonuses, actual
results may differ.
Restricted Stock Units: We account for equity-based compensation under the fair value recognition provisions of the U.S. GAAP
guidance. RSUs provided to certain employees are accounted for as equity awards, and in accordance with the U.S. GAAP, we are required to
record an expense for the portion of the RSUs that is ultimately expected to vest. Further, forfeitures are estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Because assumptions are used in estimating
employee turnover and associated forfeiture rates, actual results may differ from our estimates under different assumptions or conditions.
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The fair value of RSU awards to employees is determined on the date of grant, based on the fair value of BGC Class A common stock.
Generally, RSUs granted by us as employee compensation do not receive dividend equivalents; as such, we adjust the fair value of the RSUs
for the present value of expected forgone dividends, which requires us to include an estimate of expected dividends as a valuation input. This
grant-date fair value is amortized to expense ratably over the awards’ vesting periods. For RSUs with graded vesting features, we have made
an accounting policy election to recognize compensation cost on a straight-line basis. The amortization is reflected as part of “Equity-based
compensation and allocations of net income to limited partnership units and FPUs” in our consolidated statements of operations.
Restricted Stock: Restricted stock provided to certain employees is accounted for as an equity award, and as per the U.S. GAAP
guidance, we are required to record an expense for the portion of the restricted stock that is ultimately expected to vest. We have granted
restricted stock that is not subject to continued employment or service; however, transferability is subject to compliance with our and our
affiliates’ customary noncompete obligations. Such shares of restricted stock are generally saleable by partners in five to ten years. Because
the restricted stock is not subject to continued employment or service, the grant-date fair value of the restricted stock is expensed on the date
of grant. The expense is reflected as non-cash equity-based compensation expense in our consolidated statements of operations.
Limited Partnership Units: LPUs in BGC Holdings and Newmark Holdings are generally held by employees. Generally, such units
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. In addition, Preferred Units are granted in connection with the grant of certain LPUs, such as PSUs, that may be
granted exchangeability or redeemed in connection with the grant of shares of common stock to cover the withholding taxes owed by the unit
holder upon such exchange or grant. This is an acceptable alternative to the common practice among public companies of issuing the gross
amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes. Our Preferred Units are not
entitled to participate in partnership distributions other than with respect to a distribution 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 quarterly allocations of net income to such LPUs are
reflected as a component of compensation expense under “Equity-based compensation and allocations of net income to limited partnership
units and FPUs” in our consolidated statements of operations.
Certain of these LPUs entitle the holders to receive post-termination payments equal to the notional amount, generally in four equal
yearly installments after the holder’s termination. These LPUs are accounted for as post-termination liability awards under the U.S. GAAP.
Accordingly, we recognize a liability for these units on our consolidated statements of financial condition as part of “Accrued compensation”
for the amortized portion of the post-termination payment amount, based on the current fair value of the expected future cash payout. We
amortize the post-termination payment amount, less an expected forfeiture rate, over the vesting period, and record an expense for such
awards based on the change in value at each reporting period in our consolidated statements of operations as part of “Equity-based
compensation and allocations of net income to limited partnership units and FPUs.”
Certain LPUs are granted exchangeability into shares of BGC or Newmark Class A common stock or are redeemed in connection with
the grant of BGC or Newmark Class A common stock issued; BGC Class A common stock is issued on a one-for-one basis, and Newmark
Class A common stock is issued based on the number of LPUs exchanged or redeemed multiplied by the then Exchange Ratio. At the time
exchangeability is granted or shares of BGC or Newmark Class A common stock are issued, we recognize an expense based on the fair value
of the award on that date, which is included in “Equity-based compensation and allocations of net income to limited partnership units and
FPUs” in our consolidated statements of operations. During the years ended December 31, 2020, 2019 and 2018, we incurred equity-based
compensation expense of $85.0 million, $100.9 million and $150.1 million, respectively, related to LPUs and issuance of common stock.
Certain LPUs have a stated vesting schedule and do not receive quarterly allocations of net income. Compensation expense related to
these LPUs is recognized over the stated service period, and these units generally vest between two and five years. During the years ended
December 31, 2020, 2019 and 2018, we incurred compensation expense related to these LPUs of $74.3 million, $41.7 million, and $6.3
million, respectively. This expense is included in “Equity-based compensation and allocations of net income to limited partnership units and
FPUs” in our consolidated statements of operations.
Employee Loans: We have entered into various agreements with certain employees and partners, whereby these individuals receive
loans that may be either wholly or in part repaid from distributions that the individuals receive on some or all of their LPUs and from
proceeds of the sale of the employees' shares of BGC Class A common stock or may be forgiven over a period of time. Cash advance
distribution loans are documented in formal agreements and are repayable in timeframes outlined in the underlying agreements. We intend
for these advances to be repaid in full from the future distributions on existing and future awards granted. The distributions are treated as
compensation expense when made and the proceeds are used to repay the loan. The forgivable portion of any loans is recognized as
compensation expense in our consolidated statements of operations over the life of the loan. We review the loan balances each reporting
period for collectability. If we determine that the collectability of a portion of the loan balances is not expected, we recognize a reserve
against the loan balances. Actual collectability of loan balances may differ from our estimates.
As of December 31, 2020 and 2019, the aggregate balance of employee loans, net of reserve, was $408.1 million and $315.6 million,
respectively, and is included as “Loans, forgivable loans and other receivables from employees and partners, net” in our consolidated
statements of financial condition. Compensation expense (benefit) for the above-mentioned employee loans for the years ended December 31,
2020, 2019 and 2018 was $67.0 million, $35.7 million and $16.5 million, respectively. The compensation expense related to these loans was
included as part of “Compensation and employee benefits” in our consolidated statements of operations.
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Goodwill
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. As
prescribed in the U.S. GAAP guidance, Intangibles – Goodwill and Other, goodwill is not amortized, but instead is periodically tested for
impairment. We review goodwill for impairment on an annual basis during the fourth quarter of each fiscal year or whenever an event occurs
or circumstances change that could reduce the fair value of a reporting unit below its carrying amount.
When reviewing goodwill for impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, including goodwill. If the results of the qualitative assessment indicate that it is more
likely than not that the fair value of a reporting unit is less than its carrying amount, or if we choose to bypass the qualitative assessment, we
perform a quantitative goodwill impairment analysis as follows.
The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss,
compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its
fair value, an impairment loss should be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that
reporting unit. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is deemed not to be impaired. To estimate
the fair value of the reporting unit, we use a discounted cash flow model and data regarding market comparables. The valuation process
requires significant judgment and involves the use of significant estimates and assumptions. These assumptions include cash flow
projections, estimated cost of capital and the selection of peer companies and relevant multiples. Because assumptions and estimates are used
in projecting future cash flows, choosing peer companies and selecting relevant multiples, actual results may differ from our estimates under
different assumptions or conditions.
CECL
We present financial assets that are measured at amortized cost net of an allowance for credit losses, which represents the amount
expected to be collected over their estimated life. Expected credit losses for newly recognized financial assets carried at amortized cost, as
well as changes to expected lifetime credit losses during the period, are recognized in earnings. The CECL methodology, which became
effective for the Company on January 1, 2020, represents a significant change from prior U.S. GAAP and replaced the prior multiple
impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other
financial asset in scope, the methodology generally results in the earlier recognition of the provision for credit losses and the related
allowance for credit losses than under prior U.S. GAAP. The CECL methodology’s impact on expected credit losses, among other things,
reflects the Company’s view of the current state of the economy, forecasted macroeconomic conditions and BGC’s portfolios.
Income Taxes
We account for income taxes using the asset and liability method as prescribed in the U.S. GAAP guidance, Income Taxes. Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to basis differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and their respective tax basis. Certain of our entities are taxed as U.S.
partnerships and are subject to UBT in the City of New York. Therefore, the tax liability or benefit related to the partnership income or loss
except for UBT rests with the partners (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings” for a
discussion of partnership interests), rather than the partnership entity. As such, the partners’ tax liability or benefit is not reflected in our
consolidated financial statements. The tax-related assets, liabilities, provisions or benefits included in our consolidated financial statements
also reflect the results of the entities that are taxed as corporations, either in the U.S. or in foreign jurisdictions.
We provide 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. Management is required to determine whether a tax position is more likely than not to be
sustained upon examination by tax authorities, including resolution of any related appeals or litigation processes, based on the technical
merits of the position. Because significant assumptions are used in determining whether a tax benefit is more likely than not to be sustained
upon examination by tax authorities, actual results may differ from our estimates under different assumptions or conditions. We recognize
interest and penalties related to income tax matters in “Provision for income taxes” in our consolidated statements of operations.
A valuation allowance is recorded against deferred tax assets if it is deemed more likely than not that those assets will not be realized.
In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, the existence of
cumulative losses in the most recent fiscal years, estimates of future taxable income and the feasibility of tax planning strategies.
The measurement of current and deferred income tax assets and liabilities is based on provisions of enacted tax laws and involves
uncertainties in the application of tax regulations in the U.S. and other tax jurisdictions. Because our interpretation of complex tax law may
impact the measurement of current and deferred income taxes, actual results may differ from these estimates under different assumptions
regarding the application of tax law.
The Tax Act was enacted on December 22, 2017, which includes the global intangible low-taxed income, GILTI, provision. This
provision requires inclusion in the Company’s U.S. income tax return the earnings of certain foreign subsidiaries. The Company has elected
to treat taxes associated with the GILTI provision using the Period Cost Method and thus has not recorded deferred taxes for basis differences
under this regime.
122
See Note 3—“Summary of Significant Accounting Policies” to our consolidated financial statements in Part II, Item 8 of this Annual
Report on Form 10-K for additional information regarding these critical accounting policies and other significant accounting policies.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1—“Organization and Basis of Presentation” to our consolidated financial statements in Part II, Item 8 of this Annual Report
on Form 10-K for information regarding recent accounting pronouncements.
123
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Credit Risk
Credit risk arises from potential non-performance by counterparties and customers. BGC Partners has established policies and
procedures to manage its exposure to credit risk. BGC Partners maintains a thorough credit approval process to limit exposure to counterparty
risk and employs stringent monitoring to control the counterparty risk from its matched principal and agency businesses. BGC Partners’
account opening and counterparty approval process includes verification of key customer identification, anti-money laundering verification
checks and a credit review of financial and operating data. The credit review process includes establishing an internal credit rating and any
other information deemed necessary to make an informed credit decision, which may include correspondence, due diligence calls and a visit
to the entity’s premises, as necessary.
Credit approval is granted subject to certain trading limits and may be subject to additional conditions, such as the receipt of collateral
or other credit support. Ongoing credit monitoring procedures include reviewing periodic financial statements and publicly available
information on the client and collecting data from credit rating agencies, where available, to assess the ongoing financial condition of the
client.
In addition, BGC Partners incurs limited credit risk related to certain brokerage activities. The counterparty risk relates to the
collectability of the outstanding brokerage fee receivables. The review process includes monitoring both the clients and the related brokerage
receivables. The review includes an evaluation of the ongoing collection process and an aging analysis of the brokerage receivables.
Principal Transaction Risk
Through its subsidiaries, BGC Partners executes matched principal transactions in which it acts as a “middleman” by serving as
counterparty to both a buyer and a seller in matching back-to-back trades. These transactions are then settled through a recognized settlement
system or third-party clearing organization. Settlement typically occurs within one to three business days after the trade date. Cash settlement
of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. BGC Partners generally avoids settlement of
principal transactions on a free-of-payment basis or by physical delivery of the underlying instrument. However, free-of-payment transactions
may occur on a very limited basis.
The number of matched principal trades BGC Partners executes has continued to grow as compared to prior years. Receivables from
broker-dealers, clearing organizations, customers and related broker-dealers and Payables to broker-dealers, clearing organizations, customers
and related broker-dealers on the Company’s consolidated statements of financial condition primarily represent the simultaneous purchase
and sale of the securities associated with those matched principal transactions that have not settled as of their stated settlement dates. BGC
Partners’ experience has been that substantially all of these transactions ultimately settle at the contracted amounts.
Market Risk
Market risk refers to the risk that a change in the level of one or more market prices, rates, indices or other factors will result in losses
for a specified position. BGC Partners may allow certain of its desks to enter into unmatched principal transactions in the ordinary course of
business and hold long and short inventory positions. These transactions are primarily for the purpose of facilitating clients’ execution needs,
adding liquidity to a market or attracting additional order flow. As a result, BGC Partners may have market risk exposure on these
transactions. BGC Partners’ exposure varies based on the size of its overall positions, the risk characteristics of the instruments held and the
amount of time the positions are held before they are disposed of. BGC Partners has limited ability to track its exposure to market risk and
unmatched positions on an intra-day basis; however, it attempts to mitigate its market risk on these positions by strict risk limits, extremely
limited holding periods and hedging its exposure. These positions are intended to be held short term to facilitate customer transactions.
However, due to a number of factors, including the nature of the position and access to the market on which it trades, BGC Partners may not
be able to unwind the position and it may be forced to hold the position for a longer period than anticipated. All positions held longer than
intra-day are marked to market.
We also have investments in marketable equity securities, which are publicly-traded, and which had a fair value of $0.3 million as of
December 31, 2020. Investments in marketable securities carry a degree of risk, as there can be no assurance that the marketable securities
will not lose value and, in general, securities markets can be volatile and unpredictable. As a result of these different market risks, our
holdings of marketable securities could be materially and adversely affected. We may seek to minimize the effect of price changes on a
portion of our investments in marketable securities through the use of derivative contracts. However, there can be no assurance that our
hedging activities will be adequate to protect us against price risks associated with our investments in marketable securities. See Note 12—
“Marketable Securities” and Note 14—“Derivatives” to our consolidated financial statements in Part II, Item 8 of this Annual Report on
Form 10-K for further information regarding these investments and related hedging activities.
Our risk management procedures and strict limits are designed to monitor and limit the risk of unintended loss and have been effective
in the past. However, there is no assurance that these procedures and limits will be effective at limiting unanticipated losses in the future.
Adverse movements in the securities positions or a downturn or disruption in the markets for these positions could result in a substantial loss.
In addition, principal gains and losses resulting from these positions could on occasion have a disproportionate effect, positive or negative, on
BGC Partners’ consolidated financial condition and results of operations for any particular reporting period.
124
Operational Risk
Our businesses are highly dependent on our ability to process a large number of transactions across numerous and diverse markets in
many currencies on a daily basis. If any of our data processing systems do not operate properly or are disabled or if there are other
shortcomings or failures in our internal processes, people or systems, we could suffer impairment to our liquidity, financial loss, a disruption
of our businesses, liability to clients, regulatory intervention or reputational damage. These systems may fail to operate properly or become
disabled as a result of events that are wholly or partially beyond our control, including cybersecurity incidents, a disruption of electrical or
communications services or our inability to occupy one or more of our buildings. The inability of our systems to accommodate an increasing
volume of transactions could also constrain our ability to expand our businesses.
In addition, despite our contingency plans, our ability to conduct business may be adversely impacted by a disruption in the
infrastructure that supports our businesses and the communities in which they are located. This may include a disruption involving electrical,
communications, transportation or other services used by us or third parties with whom we conduct business.
Further, our operations rely on the secure processing, storage and transmission of confidential and other information on our computer
systems and networks. Although we take protective measures such as software programs, firewalls and similar technology to maintain the
confidentiality, integrity and availability of our and our clients’ information, the nature of the threats continue to evolve. As a result, our
computer systems, software and networks may be vulnerable to unauthorized access, loss or destruction of data (including confidential client
information), account takeovers, unavailability or disruption of service, computer viruses, acts of vandalism, or other malicious code, cyber-
attacks and other events that could have an adverse security impact. There have also been an increasing number of malicious cyber incidents
in recent years in various industries, including ours. Any such cyber incidents involving our computer systems and networks, or those of third
parties important to our businesses, could present risks to our operations.
Foreign Currency Risk
BGC Partners is exposed to risks associated with changes in FX rates. Changes in FX rates create volatility in the U.S. Dollar
equivalent of the Company’s revenues and expenses. In addition, changes in the remeasurement of BGC Partners’ foreign currency
denominated financial assets and liabilities are recorded as part of its results of operations and fluctuate with changes in foreign currency
rates. BGC monitors the net exposure in foreign currencies on a daily basis and hedges its exposure as deemed appropriate with highly rated
major financial institutions.
The majority of the Company’s foreign currency exposure is related to the U.S. Dollar versus the British Pound and the Euro. While
our international results of operations, as measured in U.S. Dollars, are subject to FX fluctuations, we do not consider the related risk to be
material to our results of operations. For the financial assets and liabilities denominated in the British Pound and Euro, including foreign
currency hedge positions related to these currencies, we evaluated the effects of a 10% shift in exchange rates between those currencies and
the U.S. Dollar, holding all other assumptions constant. The analysis identified the worst case scenario as the U.S. Dollar strengthening
against both the Euro and the British Pound. If as of December 31, 2020, the U.S. Dollar had strengthened against both the Euro and the
British Pound by 10%, the currency movements would have had an aggregate negative impact on our net income of approximately $1.5
million.
Interest Rate Risk
BGC Partners had $1,315.9 million in fixed-rate debt outstanding as of December 31, 2020. These debt obligations are not currently
subject to fluctuations in interest rates, although in the event of refinancing or issuance of new debt, such debt could be subject to changes in
interest rates. In addition, as of December 31, 2020, BGC Partners had no borrowings outstanding under its Revolving Credit Agreement.
The interest rate on any borrowings under its Revolving Credit Agreement is based on LIBOR.
Disaster Recovery
Our processes address disaster recovery concerns. We operate most of our technology from U.S. and U.K. primary data centers. Either
site alone is typically capable of running all of our essential systems. Replicated instances of this technology are maintained in our redundant
data centers. Our data centers are generally built and equipped to best-practice standards of physical security with appropriate environmental
monitoring and safeguards. Failover for the majority of our systems is automated.
The economic and financial disruptions from the COVID-19 outbreak, as well as measures taken by various governmental authorities
in response to the outbreak, have led us to implement operational changes as we have executed our business continuity plan. We have taken
significant steps to protect our employees. A majority of BGC staff members are working from home, or other remote locations and disaster
recovery venues, and we restricted business travel. We are also dependent on third-party vendors for the performance of certain critical
processes and such vendors are also operating under business continuity plans.
125
ITEM 8.
FINANCIAL STATEMENTS
BGC Partners, Inc. and Subsidiaries
Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
Reports of Independent Registered Public Accounting Firm and Independent Auditor ...........................................................................
127
Consolidated Financial Statements—
Consolidated Statements of Financial Condition .....................................................................................................................................
Consolidated Statements of Operations ....................................................................................................................................................
Consolidated Statements of Comprehensive Income (Loss) ....................................................................................................................
Consolidated Statements of Cash Flows ..................................................................................................................................................
Consolidated Statements of Changes in Equity ........................................................................................................................................
Notes to Consolidated Financial Statements ............................................................................................................................................
130
131
132
133
135
138
126
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BGC Partners, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of BGC Partners, Inc. (the “Company”) as of December
31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), cash flows and changes in equity for each
of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at
Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), as applicable and our
report dated March 1, 2021 expressed an adverse opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit
matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for Income Taxes
Description of the Matter As discussed in Notes 3 and 23 to the consolidated financial statements, the Company is subject to income
taxes in the U.S. and numerous foreign jurisdictions, which affect the Company’s provision for income taxes.
The provision for income taxes is an estimate based on management’s understanding of current enacted tax
laws and tax rates of each tax jurisdiction. For the year-ended December 31, 2020, the Company recognized
a consolidated provision for income taxes of $21.3 million.
Auditing management’s calculation of the provision for income taxes was complex because the Company’s
global structure required an assessment of the Company’s application of tax laws in multiple jurisdictions
including the income tax impact of the legal entity ownership structure. The assessment of tax positions
involves the evaluation and application of complex statutes, regulations, and case law which are subject to
legal and factual interpretation. Our audit procedures required significant audit effort including the use of our
tax professionals to assist in evaluating the provision for income taxes.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s
controls related to the Company’s global tax structure. For example, we tested management’s controls over
the completeness and accuracy of the data utilized, the effective tax rate reconciliation and the evaluation of
permanent and temporary differences within various jurisdictions.
To test the Company’s provision for income taxes and to address the risks associated with the complexity of
127
the Company’s global tax structure, we performed audit procedures that included, among others, evaluating
the income tax impact of the Company’s structure, operations and jurisdictional tax law and considered the
impact of any changes in the current year. We used our tax professionals with specialized skill and
knowledge to assist in evaluating the provision for income taxes including the application of relevant local
and foreign tax laws to management’s calculation methodologies and tax positions. Additionally, we tested
the related effective tax rate reconciliation, evaluated the tax impact of permanent and temporary differences,
and tested the application of new regulations, case law, and other authoritative guidance.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
New York, New York
March 1, 2021
128
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BGC Partners, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited BGC Partners, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the
objectives of the control criteria, BGC Partners, Inc. (the “Company”) has not maintained effective internal control over financial reporting as
of December 31, 2020, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected
on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has
identified a material weakness in controls related to the remittance of certain cash payments in the UK.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated statements of financial condition of BGC Partners, Inc. as of December 31, 2020 and 2019, and the related consolidated
statements of operations, comprehensive income (loss), cash flows and changes in equity for each of the three years in the period ended
December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2). This material weakness
was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2020 consolidated financial statements,
and this report does not affect our report dated March 1, 2021, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
March 1, 2021
129
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except per share data)
December 31, 2020 December 31, 2019
Assets
Cash and cash equivalents
Cash segregated under regulatory requirements
Securities owned
Marketable securities
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers
Accrued commissions and other receivables, net
Loans, forgivable loans and other receivables from employees and partners, net
Fixed assets, net
Investments
Goodwill
Other intangible assets, net
Receivables from related parties
Other assets
Total assets
Liabilities, Redeemable Partnership Interest, and Equity
Short-term borrowings
Securities loaned
Accrued compensation
Payables to broker-dealers, clearing organizations, customers and related broker-dealers
Payables to related parties
Accounts payable, accrued and other liabilities
Notes payable and other borrowings
Total liabilities
Commitments, contingencies and guarantees (Note 22)
Redeemable partnership interest
Equity
$
$
$
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 750,000 shares authorized;
373,545 and 358,440 shares issued at December 31, 2020 and December 31, 2019,
respectively; and 323,018 and 307,915 shares outstanding at December 31, 2020 and
December 31, 2019, respectively
Class B common stock, par value $0.01 per share; 150,000 shares authorized;
45,884 shares issued and outstanding at each of December 31, 2020 and December 31, 2019,
convertible into Class A common stock
Additional paid-in capital
Treasury stock, at cost: 50,527 and 50,525 shares of Class A common stock at December 31, 2020
and December 31, 2019, respectively
Retained deficit
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Noncontrolling interest in subsidiaries
Total equity
Total liabilities, redeemable partnership interest, and equity
$
593,646 $
257,031
58,572
349
304,022
739,009
408,142
214,782
38,008
556,211
287,157
11,953
480,418
3,949,300 $
3,849 $
—
220,726
179,716
36,252
1,363,919
1,315,935
3,120,397
415,379
220,735
57,525
14,228
551,445
788,284
315,590
204,841
40,349
553,745
303,224
14,273
447,296
3,926,914
4,962
13,902
215,085
416,566
72,497
1,312,609
1,142,687
3,178,308
20,674
23,638
3,735
3,584
459
2,354,492
(315,313 )
(1,265,504 )
(28,930 )
748,939
59,290
808,229
3,949,300 $
459
2,272,103
(315,308 )
(1,253,089 )
(33,102 )
674,647
50,321
724,968
3,926,914
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
130
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Revenues:
Commissions
Principal transactions
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Gain (loss) on divestitures and sale of investments
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss) from continuing operations
Consolidated net income (loss) from discontinued operations, net of tax
Consolidated net income (loss)
Less: Net income (loss) from continuing operations attributable to
noncontrolling interest in subsidiaries
Less: Net income (loss) from discontinued operations attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share from continuing operations
Net income (loss) from continuing operations available to common stockholders
Basic earnings (loss) per share from continuing operations
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share from continuing operations
Net income (loss) from continuing operations for fully diluted shares
Fully diluted earnings (loss) per share from continuing operations
Fully diluted weighted-average shares of common stock outstanding
$
$
$
$
$
$
$
2020
Year Ended December 31,
2019
2018
$
1,567,668 $
351,633
25,754
81,920
12,332
17,413
2,056,720
1,645,818 $
321,923
29,442
73,166
18,319
15,563
2,104,231
1,511,522
313,053
24,076
65,185
14,404
9,570
1,937,810
1,131,650
1,125,911
1,004,793
183,545
1,315,195
189,268
23,193
73,470
121,603
38,167
59,376
76,607
88,933
1,985,812
394
5,023
1,580
6,997
77,905
21,303
56,602 $
—
56,602 $
170,625
1,296,536
183,207
19,365
92,167
119,982
81,645
63,617
60,246
118,449
2,035,214
18,421
4,115
30,511
53,047
122,064
49,811
72,253 $
—
72,253 $
200,057
1,204,850
151,194
20,163
84,103
118,014
69,338
61,891
42,494
71,869
1,823,916
—
7,377
50,645
58,022
171,916
63,768
108,148
178,462
286,610
7,694
24,691
31,293
—
48,908 $
—
47,562 $
53,121
202,196
48,908 $
0.14 $
47,562 $
0.14 $
361,736
344,332
70,430 $
0.13 $
62,054 $
0.13 $
546,848
459,743
76,855
0.24
322,141
76,855
0.24
323,844
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
131
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Consolidated net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Benefit plans
Total other comprehensive income (loss), net of tax
Comprehensive income (loss)
Less: Comprehensive income (loss) from continuing operations
attributable to noncontrolling interest in subsidiaries, net of tax
Less: Comprehensive income (loss) from discontinued operations
attributable to noncontrolling interest in subsidiaries, net of tax
Less: Comprehensive income (loss) attributable to noncontrolling interest
in subsidiaries, net of tax
Comprehensive income (loss) attributable to common stockholders
2020
Year Ended December 31,
2019
2018
$
56,602 $
72,253 $
286,610
6,457
(1,840 )
4,617
61,219
(86 )
(12,928 )
(13,014 )
59,239
(13,543 )
—
(13,543 )
273,067
8,139
20,314
29,436
—
—
53,121
$
8,139
53,080 $
20,314
38,925 $
82,557
190,510
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
132
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
Less: Consolidated net income from discontinued operations, net of tax
Adjustments to reconcile consolidated net income (loss) to net cash provided by
(used in) operating activities:
Fixed asset depreciation and intangible asset amortization
Employee loan amortization and reserves on employee loans
Equity-based compensation and allocations of net income to limited partnership units
and FPUs
Deferred compensation expense
Losses (gains) on equity method investments
Realized losses (gains) on marketable securities
Unrealized losses (gains) on marketable securities
Loss (gains) on other investments
Amortization of discount (premium) on notes payable
Impairment of fixed assets, intangible assets and investments
Deferred tax provision (benefit)
Change in estimated acquisition earn-out payables
Forfeitures of Class A common stock
Other
Consolidated net income (loss), adjusted for non-cash and non-operating items
Decrease (increase) in operating assets:
Securities owned
Receivables from broker-dealers, clearing organizations, customers and related
broker-dealers
Accrued commissions receivable, net
Loans, forgivable loans and other receivables from employees and partners, net
Receivables from related parties
Other assets
Increase (decrease) in operating liabilities:
Repurchase agreements
Securities loaned
Accrued compensation
Payables to broker-dealers, clearing organizations, customers and related broker-dealers
Payables to related parties
Accounts payable, accrued and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets
Capitalization of software development costs
Purchase of equity method investments
Proceeds from equity method investments
Payments for acquisitions, net of cash acquired
Proceeds from sale of marketable securities
Purchase of other assets
Net cash provided by (used in) investing activities
2020
Year Ended December 31,
2019
2018
$
56,602 $
—
72,253 $
—
286,610
(178,462 )
84,115
67,032
183,545
630
(1,126 )
(289 )
(69 )
431
4,187
9,396
(16,549 )
4,661
—
2,730
395,296
79,466
35,650
170,625
5,879
(4,115 )
(3,528 )
(3,204 )
(18,163 )
3,223
4,466
(4,196 )
5,622
(139 )
(5,682 )
338,157
71,495
16,460
200,057
5,879
(7,377 )
(11,831 )
2,316
(43,113 )
(1,081 )
2,807
(23,737 )
2,885
(1,458 )
4,445
325,895
(1,346 )
883
(25,401 )
246,498
44,389
(149,145 )
5,427
(20,070 )
—
(13,902 )
13,752
(235,605 )
(38,822 )
57,791
304,263 $
(30,829 ) $
(53,997 )
(1,458 )
4,326
(7,871 )
14,237
(2,000 )
(77,592 ) $
389,058
(22,287 )
(119,469 )
(4,215 )
5,239
(986 )
(1,238 )
(7,231 )
(353,313 )
32,342
(17,878 )
239,062 $
(46,665 ) $
(48,846 )
(1,715 )
3,737
28,261
24,626
—
(40,602 ) $
(206,051 )
(108,851 )
(104,266 )
37,506
(25,343 )
986
(129,580 )
(49,853 )
167,443
(833 )
51,003
(67,345 )
(24,528 )
(49,813 )
(925 )
7,046
(50,562 )
128,018
—
9,236
$
$
$
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
133
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt and collateralized borrowings
Issuance of long-term debt and collateralized borrowings, net of deferred
issuance costs
Earnings distributions to limited partnership interests and
other noncontrolling interests
Redemption and repurchase of limited partnership interests
Dividends to stockholders
Repurchase of Class A common stock
Cancellation of RSUs in satisfaction of withholding tax requirements
Proceeds from issuance of Class A common stock, net of costs
Payments on acquisition earn-outs
Net cash provided by (used in) financing activities
Net cash provided by (used in) operating activities from discontinued operations
Net cash provided by (used in) investing activities from discontinued operations
Net cash provided by (used in) financing activities from discontinued operations
Effect of exchange rate changes on Cash and cash equivalents,
and Cash segregated under regulatory requirements
Net increase (decrease) in Cash and cash equivalents, and
Cash segregated under regulatory requirements
Cash and cash equivalents, and Cash segregated under
regulatory requirements at beginning of period
Cash and cash equivalents, and Cash segregated under
regulatory requirements at end of period
Supplemental cash information:
Cash paid during the period for taxes
Cash paid during the period for interest
Supplemental non-cash information:
Issuance of Class A common stock upon exchange of limited partnership
interests
Issuance of Class A and contingent Class A common stock and limited
partnership interests for acquisitions
ROU assets and liabilities
2020
Year Ended December 31,
2019
2018
$
(357,789 ) $
(332,378 ) $
(449,598 )
524,396
709,849
639,196
(63,109 )
(47,613 )
(60,440 )
(6 )
—
—
(8,540 )
(13,101 ) $
—
—
—
(113,673 )
(43,270 )
(192,442 )
(1,236 )
(458 )
—
(8,146 )
18,246 $
—
—
—
(163,935 )
(51,943 )
(231,446 )
(10,439 )
(647 )
327,624
(7,924 )
50,888
(748,231 )
18,347
367,931
993
2,630
(10,838 )
214,563
219,336
(380,012 )
636,114
416,778
796,790
850,677 $
636,114 $
416,778
41,910 $
69,572
47,997 $
51,776
66,540
41,951
$
$
$
$
11,388 $
26,146 $
143,232
1,578
34,456
3,040
169,065
21,899
—
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
134
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Year Ended December 31, 2018
(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
$
3,063 $
—
—
5
—
348 $ 1,764,013 $ 40,472 $ (303,873 ) $ (866,875 ) $
202,196
—
—
—
—
—
(231,446 )
—
—
—
4,242
—
—
—
—
—
—
—
—
—
(10,486 ) $
—
(11,686 )
—
—
501,208 $ 1,127,870
84,414 286,610
(13,543 )
(1,857 )
3,219
7,466
(6,300 ) (237,746 )
—
—
—
—
—
—
—
(201,484 ) (201,484 )
183
— 158,913
—
—
—
—
79,556 238,652
260
— 245,338
—
—
—
—
67,244 312,842
(111 )
—
—
111
—
—
—
—
—
—
—
—
—
—
(8,185 )
—
—
—
—
—
—
—
(925 )
(2,254 )
—
(925 )
(10,439 )
—
—
1,031
—
(2,182 )
—
—
(306 )
(1,457 )
—
—
(15,921 )
—
—
(3,932 )
—
(10,321 )
(30,174 )
17
—
46,454 (40,472 )
—
—
—
1,649
7,648
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,387
—
—
—
—
14,251
(54 )
2,053
2,303
14,251
(54 )
2,053
18,690
—
—
—
—
3,417 $
—
—
—
—
—
—
—
(617 )
459 $ 2,203,453 $
$
1,671
—
—
—
(226,210 )
—
—
—
— $ (314,240 ) $ (1,108,209 ) $
—
—
—
—
(2,293 )
—
—
—
(24,465 ) $
622
—
320,786 320,786
(764,103 ) (990,313 )
(952 )
89,366 $ 849,781
(335 )
Balance, January 1, 2018
Consolidated net income (loss)
Other comprehensive gain, net of tax
Equity-based compensation, 527,951 shares
Dividends to common stockholders
Earnings distributions to limited partnership interests and
other noncontrolling interests
Grant of exchangeability and redemption of limited
partnership interests, issuance of 18,287,721 shares
Issuance of Class A common stock (net of costs),
26,003,424 shares
Exchange Class A to Class B common stock, 11,036,273
shares
Redemption of FPUs, 108,967 units
Repurchase of Class A common stock, 788,788 shares
Forfeitures of restricted Class A common stock, 231,602
shares
Contributions of capital to and from Cantor for
equity-based compensation
Issuance of Class A common stock for acquisitions,
1,743,963 shares
Issuance of contingent shares and limited partnership
interests in connection with acquisitions
Purchase of Newmark noncontrolling interest
Newmark noncontrolling interest
Cumulative effect of revenue standard adoption
Cumulative effect of adoption of standard on equity
investments
Issuance of EPUs
Spin-Off of Newmark
Other
Balance, December 31, 2018
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
135
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Year Ended December 31, 2019
(in thousands, except share amounts)
BGC Partners, Inc. Stockholders
Balance, January 1, 2019
Consolidated net income (loss)
Other comprehensive gain, net of tax
Equity-based compensation, 434,694 shares
Dividends to common stockholders
Earnings distributions to limited partnership interests and
other noncontrolling interests
Grant of exchangeability and redemption of limited
partnership interests, issuance of 15,008,431 shares
Issuance of Class A common stock (net of costs),
212,711 shares
Redemption of FPUs, 56,878 units
Repurchase of Class A common stock, 233,172 shares
Forfeiture of Class A common stock, 22,046 shares
Contributions of capital to and from Cantor for
equity-based compensation
Issuance of Class A common stock and RSUs for
acquisitions, 1,039,452 shares
Other
Balance, December 31, 2019
Class A
Common
Stock
$
3,417 $
—
—
4
—
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Deficit
Treasury
Stock
459 $ 2,203,453 $ (314,240 ) $ (1,108,209 ) $
47,562
—
—
(192,442 )
—
—
7,066
—
—
—
—
—
—
—
—
—
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest in
Subsidiaries
Total
(24,465 ) $
—
(8,637 )
—
—
89,366 $ 849,781
72,253
24,691
(13,014 )
(4,377 )
10,489
3,419
(192,442 )
—
—
—
—
—
—
—
(89,616 )
(89,616 )
150
—
56,455
—
—
—
29,853
86,458
2
—
—
—
—
—
—
—
879
—
—
(12 )
—
—
(970 )
(98 )
—
—
—
—
—
—
—
—
235
(256 )
(266 )
(29 )
1,116
(256 )
(1,236 )
(139 )
—
—
(382 )
—
—
—
246
(136 )
11
—
3,584 $
$
—
—
—
—
459 $ 2,272,103 $ (315,308 ) $ (1,253,089 ) $
4,471
173
—
—
—
—
(33,102 ) $
3,040
(1,442 )
(1,330 )
(1,503 )
50,321 $ 724,968
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
136
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Year Ended December 31, 2020
(in thousands, except share amounts)
BGC Partners, Inc. Stockholders
Balance, January 1, 2020
Consolidated net income (loss)
Other comprehensive income (loss), net of tax
Equity-based compensation, 1,133,725 shares
Dividends to common stockholders
Earnings distributions to limited partnership interests and
other noncontrolling interests
Grant of exchangeability and redemption of limited partnership
interests, issuance of 13,190,311 shares
Issuance of Class A common stock (net of costs), 390,570
shares
Redemption of FPUs, 730,141 units
Repurchase of Class A common stock, 2,259 shares
Contributions of capital to and from Cantor for
equity-based compensation
Issuance of Class A common stock and RSUs for
acquisitions, 390,775 shares
Cumulative effect of CECL standard adoption
Other
Balance, December 31, 2020
Class A
Common
Stock
$
3,584 $
—
—
11
—
Class B
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
459 $ 2,272,103 $ (315,308 ) $ (1,253,089 ) $
48,908
—
Retained
Deficit
—
—
—
—
—
—
8,565
—
—
—
—
—
(60,440 )
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest in
Subsidiaries
Total
(33,102 ) $
—
4,172
—
—
50,321 $ 724,968
56,602
4,617
12,672
(60,440 )
7,694
445
4,096
—
—
—
—
—
—
—
(36,569 )
(36,569 )
132
—
61,766
—
—
—
31,895
93,793
4
—
—
—
—
—
5,381
—
—
—
—
(5 )
—
—
—
—
—
—
120
(102 )
(1 )
5,505
(102 )
(6 )
—
—
3,613
—
—
—
1,906
5,519
4
—
—
3,735 $
$
—
—
—
—
(883 )
—
459 $ 2,354,492 $ (315,313 ) $ (1,265,504 ) $
1,664
—
1,400
—
—
—
—
—
—
(28,930 ) $
(90 )
(417 )
(8 )
1,578
(1,300 )
1,392
59,290 $ 808,229
Dividends declared per share of common stock
Dividends declared and paid per share of common stock
$
$
0.17
0.17
$
$
0.56
0.56
2020
For the Year Ended December 31,
2019
2018
$
$
0.72
0.72
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
137
BGC PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Basis of Presentation
Business Overview
BGC Partners, Inc. is a leading global brokerage and financial technology company servicing the global financial markets. Through the
Company’s financial service brands, including BGC, GFI, Sunrise Brokers, Besso, Ed Broking, Poten & Partners, RP Martin, CORANT, and
CORANT GLOBAL, among others, the Company specializes in the brokerage of a broad range of products, including fixed income such as
government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit derivatives. The
Company also brokers products across FX, equity derivatives and cash equities, energy and commodities, shipping, insurance, and futures
and options. The Company’s businesses also provide a wide variety of services, including trade execution, brokerage services, clearing,
compression and other post-trade services, information, and other back-office services to a broad assortment of financial and non-financial
institutions.
BGC Partners’ integrated platform is designed to provide flexibility to customers with regard to price discovery, execution and
processing of transactions, and enables them to use Voice, Hybrid, or in many markets, Fully Electronic brokerage services in connection
with transactions executed either OTC or through an exchange. Through the Company’s Fenics group of electronic brands, BGC Partners
offers a number of market infrastructure and connectivity services, Fully Electronic marketplaces, and the Fully Electronic brokerage of
certain products that also may trade via Voice and Hybrid execution. The full suite of Fenics offerings include Fully Electronic brokerage,
market data and related information services, trade compression and other post-trade services, analytics related to financial instruments and
markets, and other financial technology solutions. Fenics brands operate under the names Fenics, BGC Trader, CreditMatch, Fenics Market
Data, BGC Market Data, kACE2, EMBonds, Capitalab, Swaptioniser, CBID and Lucera,
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, Sunrise Brokers, Corant, Corant Global, Besso,
Ed Broking, Poten & Partners, RP Martin, kACE2, EMBonds, Capitalab, Swaptioniser, CBID, Aqua and Lucera are trademarks/service
marks, and/or registered trademarks/service marks of BGC Partners, Inc. and/or its affiliates.
The Company’s customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds,
governments, corporations, and investment firms. BGC Partners has dozens of offices globally in major markets including New York and
London, as well as in Bahrain, Beijing, Bermuda, Bogotá, Brisbane, Buenos Aires, Chicago, Copenhagen, Dubai, Dublin, Frankfurt, Geneva,
Hong Kong, Houston, Istanbul, Johannesburg, Madrid, Melbourne, Mexico City, Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo,
Seoul, Shanghai, Singapore, Sydney, Tel Aviv, Tokyo, and Toronto.
The Company previously offered real estate services through its publicly traded subsidiary, Newmark (NASDAQ: NMRK). On
November 30, 2018, BGC completed the Spin-Off, with shares of Newmark Class A common stock distributed to the holders of shares of
BGC Class A common stock (including directors and executive officers of BGC Partners) of record as of the close of business on the Record
Date and shares of Newmark Class B common stock distributed to the holders of shares of BGC Partners Class B common stock (consisting
of Cantor and CFGM) of record as of the close of business on the Record Date. The Spin-Off was effective as of 12:01 a.m., New York City
time, on the Distribution Date.
Separation and Distribution Agreement and Newmark IPO
The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their respective subsidiaries
regarding, among other things:
•
•
•
•
•
•
the Separation;
the proportional distribution of interests in Newmark Holdings to holders of interests in BGC Holdings in the Separation;
the Newmark IPO;
the assumption and repayment of indebtedness by the BGC Group and the Newmark Group;
the BGC Holdings Distribution; and
the Spin-Off distribution of the shares of Newmark Class A common stock and the shares of Newmark Class B common stock
held by BGC, pursuant to which shares of Newmark Class A common stock held by BGC would be distributed to the holders of
shares of BGC Class A common stock and shares of Newmark Class B common stock held by BGC would be distributed to the
holders of shares of BGC Class B common stock (which were Cantor and CFGM). The Spin-Off is intended to qualify as
generally tax-free for U.S. federal income tax purposes.
138
As part of the Separation described above, BGC contributed its interests in both Berkeley Point and Real Estate L.P. to Newmark.
On December 15, 2017, Newmark announced the pricing of the Newmark IPO of 20 million shares of Newmark Class A common
stock at a price to the public of $14.00 per share, which was completed on December 19, 2017. Newmark Class A shares began trading on
December 15, 2017 on the NASDAQ Global Select Market. In addition, Newmark granted the underwriters of the Newmark IPO a 30-day
option to purchase up to an additional 3 million shares of Newmark Class A common stock at the IPO price, less underwriting discounts and
commissions. On December 26, 2017, the underwriters of the Newmark IPO exercised in full their overallotment option to purchase an
additional 3 million shares of Newmark Class A common stock from Newmark at the IPO price, less underwriting discounts and commission.
Assumption and Repayment of Indebtedness by Newmark Group
In connection with the Separation, on December 13, 2017, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations
under the 2042 Promissory Note in relation to the 8.125% Senior Notes and the 2019 Promissory Note in relation to the 5.375% Senior
Notes. Newmark repaid the $112.5 million outstanding principal amount under the 2042 Promissory Note on September 5, 2018, and repaid
the $300.0 million outstanding principal amount under the 2019 Promissory Note on November 23, 2018. In addition, as part of the
Separation, Newmark assumed the obligations of BGC as borrower under the Term Loan and Converted Term Loan. Newmark repaid the
outstanding balance of the Term Loan as of March 31, 2018, and repaid the outstanding balance of the Converted Term Loan on November 6,
2018. In addition, on March 19, 2018, the Company borrowed $150.0 million under the BGC Credit Agreement from Cantor, and loaned
Newmark $150.0 million under the Intercompany Credit Agreement on the same day. All borrowings outstanding under the Intercompany
Credit Agreement were repaid on November 7, 2018. See Note 20—“Notes Payable, Other and Short-Term Borrowings” for more
information on the Company’s long-term debt.
Spin-Off of Newmark
As described above, on November 30, 2018 the Company completed the Spin-Off. Based on the number of shares of BGC common
stock outstanding on the Record Date, BGC’s stockholders as of the Record Date received 0.463895 of a share of Newmark Class A common
stock for each share of BGC Class A common stock held as of the Record Date, and 0.463895 of a share of Newmark Class B common stock
for each share of BGC Class B common stock held as of the Record Date. No fractional shares of Newmark common stock were distributed
in the Spin-Off. Instead, BGC stockholders received cash in lieu of any fraction of a share of Newmark common stock that they otherwise
would have received in the Spin-Off.
In the aggregate, BGC Partners distributed 131,886,409 shares of Newmark Class A common stock and 21,285,537 shares of
Newmark Class B common stock to BGC’s stockholders in the Spin-Off. These shares of Newmark common stock collectively represented
approximately 94% of the total voting power of the outstanding Newmark common stock and approximately 87% of the total economics of
the outstanding Newmark common stock in each case as of the Distribution Date.
On November 30, 2018, BGC Partners also caused its subsidiary, BGC Holdings, to distribute pro-rata all of the 1,458,931
exchangeable limited partnership interests in Newmark Holdings held by BGC Holdings immediately prior to the Distribution Date to its
limited partners entitled to receive distributions on their BGC Holdings units who were holders as of the Record Date (including Cantor and
executive officers of BGC). The Newmark Holdings units distributed to BGC Holdings partners in the BGC Holdings Distribution are
exchangeable for shares of Newmark Class A common stock, and in the case of the 449,917 Newmark Holdings units received by Cantor
also into shares of Newmark Class B common stock, at the current Exchange Ratio. As of December 31, 2020, the Exchange Ratio equaled
0.9379 shares of Newmark common stock per Newmark Holdings unit (subject to adjustment).
Following the Spin-Off and the BGC Holdings Distribution, BGC ceased to be a controlling stockholder of Newmark, and BGC and its
subsidiaries no longer held any shares of Newmark common stock or other equity interests in Newmark or its subsidiaries. Therefore, the
Company no longer consolidates Newmark with its financial results. Cantor continues to control Newmark and its subsidiaries following the
Spin-Off and the BGC Holdings Distribution.
Basis of Presentation
The Company’s consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC and in
conformity with U.S. GAAP. The Company’s consolidated financial statements include the Company’s accounts and all subsidiaries in which
the Company has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. Certain
reclassifications have been made to previously reported amounts to conform to the current presentation.
During the year ended December 31, 2018, the Company changed the line item formerly known as “Allocations of net income and
grant of exchangeability to limited partnership units and FPUs” to “Allocations of net income and grant of exchangeability to limited
partnership units and FPUs and issuance of common stock” in the Company’s consolidated statements of operations.
139
During the year ended December 31 2019, the Company changed the line item formerly known as “Allocations of net income and
grant of exchangeability to limited partnership units and FPUs and issuance of common stock” to “Equity-based compensation and
allocations of net income to limited partnership units and FPUs” in the Company’s consolidated statements of operations and consolidated
statements of cash flows. The change resulted in the reclassification of amortization charges related to equity-based awards such as REUs and
RSUs from “Compensation and employee benefits” to “Equity-based compensation and allocations of net income to limited partnership units
and FPUs.” This change in presentation had no impact on the Company’s “Total compensation and employee benefits” nor “Total expenses.”
During the year ended December 31 2020, the Company changed the line item formerly known as “Interest income” to “Interest and
dividend income” in the Company’s consolidated statements of operation. The change did not result in any reclassification of revenue, had no
impact on the Company’s “Total revenues” and is viewed only as a name change to better reflect the underlying activity.
“Equity-based compensation and allocations of net income to limited partnership units and FPUs” reflects the following items related
to cash and equity-based compensation:
•
•
•
•
Charges with respect to the issuance of shares of common stock or LPUs with capital accounts, such as HDUs, including in
connection with the redemption of non-exchangeable LPUs, including PSUs, as well as the cash paid in the settlement of the
related Preferred Units to pay withholding taxes owed by the unit holder upon such grant.
Charges with respect to the grant of exchangeability, such as the right of holders of LPUs with no capital accounts, such as
PSUs, to exchange the units into shares of Class A common stock or HDUs, as well as the cash paid in the settlement of the
related Preferred Units to pay the withholding taxes owed by the unit holder upon such issuance or exchange.
Charges related to the amortization of RSUs and LPUs, including REUs.
Allocations of net income to LPUs and FPUs, including the Preferred Distribution
The consolidated financial statements contain all normal and recurring adjustments that, in the opinion of management, are necessary
for a fair presentation of the consolidated statements of financial condition, the consolidated statements of operations, the consolidated
statements of comprehensive income (loss), the consolidated statements of cash flows and the consolidated statements of changes in equity of
the Company for the periods presented.
Revisions of Previously Issued Financial Statements
During the fourth quarter of 2020, the Company’s management identified the theft of U.K. tax payment related funds from the
Company. The theft, which occurred over several years ending September 2020, was perpetrated by two individuals associated with the
Company, and did not involve the operations or business of the Company. Litigation has commenced against the two individuals seeking
recovery of stolen amounts. The cumulative impact to the Company’s “Consolidated net income (loss)” as a result of the theft was
determined to be $35.2 million. As a result, the Company has revised its previously issued financial statements as of and for the years ended
December 31, 2019 and 2018, as well as the first three quarters of 2020 and all interim periods of 2019. The Company believes that these
revisions are not material to any of the Company’s previously issued financial statements based on an analysis of quantitative and qualitative
factors in accordance with the SEC Staff Bulletin Nos. 99 and 108. Accordingly, the Company has concluded that an amendment of
previously filed periodic reports is not required. However, though the revisions were not material to any previously issued financial
statements, correcting the accumulated adjustment in 2020 would have been material to the Company’s consolidated financial statements for
the year ended December 31, 2020. Therefore, the Company has revised the historical periods in this Annual Report on Form 10-K, in
addition to the historical interim periods that will be presented in the Company's prospective filings.
For more information about the revisions to the Company’s previously issued financial statements, see both Note 4—“Prior Periods’
Financial Statement Revisions” and Note 5—“Quarterly Results of Operations (Unaudited)” in the Company’s consolidated financial
statements.
Discontinued Operations
As described earlier, on November 30, 2018, the Company completed the Spin-Off, and distributed to its stockholders all of the shares
of Newmark Class A common stock and Newmark Class B common stock that the Company then owned in a manner that is intended to
qualify as generally tax-free for U.S. federal income tax purposes. The shares of Newmark Class A common stock held by the Company were
distributed to the holders of shares of BGC Class A common stock, and the shares of Newmark Class B common stock held by the Company
were distributed to the holders of shares of BGC Class B common stock. Therefore, the Company no longer consolidates Newmark within its
financial results subsequent to the Spin-Off.
The Company has determined that the Spin-Off met the criteria for reporting the financial results of Newmark as discontinued
operations within BGC’s consolidated results for all periods through the Distribution Date. Newmark’s results are presented in “Consolidated
net income (loss) from discontinued operations, net of tax” and the related noncontrolling interest in Newmark and its subsidiaries is
presented in “Net income (loss) from discontinued operations attributable to noncontrolling interest in subsidiaries” in the Company’s
consolidated statements of operations for the year ended December 31, 2018. Unless otherwise noted, discussion within these Notes to the
Consolidated Financial Statements relates to the Company’s continuing operations. See Note 30—“Discontinued Operations” for more
information.
140
Additionally, the consolidated statements of comprehensive income (loss) and consolidated statements of cash flows have been
adjusted to reflect Newmark as discontinued operations for all periods through the Distribution Date.
Prior to the Spin-Off, the Company’s operations consisted of two reporting segments, Financial Services and Real Estate Services. As
a result of the Spin-Off, the Company operates its businesses in one reportable segment.
Recently Adopted 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 replaced certain previously
existing revenue recognition guidance. The FASB has subsequently issued several additional amendments to the standard, including ASU
No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net), which clarifies the guidance on principal versus agent analysis based on the notion of control and affects recognition of revenue on a
gross or net basis. The Company adopted the new revenue recognition guidance on its required effective date of January 1, 2018 using the
modified retrospective transition approach applied to contracts that were not completed as of the adoption date. Accordingly, the new revenue
standard is applied prospectively in the Company’s financial statements from January 1, 2018 onward and reported financial information for
historical comparable periods is not revised and continues to be reported under the accounting standards in effect during those historical
periods. The new revenue recognition guidance does not apply to revenues associated with financial instruments, including loans and
securities that are accounted for under other U.S. GAAP, and as a result, it did not have a material impact on the elements of the Company’s
consolidated statements of operations most closely associated with financial instruments such as revenues from Principal transactions. As a
result, the adoption of the new revenue recognition guidance as of January 1, 2018 did not have a material impact on the Company’s
consolidated financial statements. Further, the adoption of the new guidance on principal versus agent considerations impacted the
Company’s presentation of revenues versus expenses incurred on behalf of customers for certain commissions contracts. The Company
concluded that it controls the services provided by a third party on behalf of the customers and, therefore, acts as a principal under those
contracts. Accordingly, upon adoption on January 1, 2018 and going forward, for these commission-related contracts the Company began to
present expenses incurred on behalf of its customers along with a corresponding reimbursement revenue on a gross basis in its consolidated
statements of operations, with no impact to Net income (loss) available to common stockholders. See Note 26—“Revenues from Contracts
with Customers” for additional information.
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 (loss)
unless the investments qualify for the new measurement alternative. The guidance also requires entities to record changes in instrument-
specific credit risk for financial liabilities measured under the fair value option in other comprehensive income (loss). In February 2018, the
FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities, to clarify transition and subsequent accounting for equity
investments without a readily determinable fair value, among other aspects of the guidance issued in ASU No. 2016-01. The amendments in
ASU No. 2018-03 were effective for fiscal years beginning January 1, 2018 and interim periods beginning July 1, 2018. The amendments and
technical corrections provided in ASU No. 2018-03 could be adopted concurrently with ASU No. 2016-01, which was effective for the
Company on January 1, 2018. The Company adopted both ASUs on January 1, 2018 using the modified retrospective approach for equity
securities with a readily determinable fair value and the prospective method for equity investments without a readily determinable fair value.
As a result, upon transition the Company recognized a cumulative-effect adjustment as a decrease to both Retained deficit and Accumulated
other comprehensive income (loss) and an increase in Noncontrolling interest in subsidiaries of approximately $2.1 million, $2.9 million, and
$0.8 million, respectively, on a pre-tax basis. The tax effect of the impact of the adoption was an increase to both Retained deficit and
Accumulated other comprehensive income (loss) and a decrease in Noncontrolling interest in subsidiaries of approximately $0.4 million, $0.6
million, and $0.2 million, respectively.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business,
which clarifies the definition of a business with the objective of providing additional guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard became effective for the Company
beginning January 1, 2018 and is applied on a prospective basis. The adoption of this guidance did not have a material impact on the
Company’s consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial
Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,
which clarifies the scope and application of ASC 610-20, Other Income—Gains and Losses from Derecognition of Nonfinancial Assets, and
defines in substance nonfinancial assets. The ASU also impacts the accounting for partial sales of nonfinancial assets (including in substance
real estate). Under this guidance, when an entity transfers its controlling interest in a nonfinancial asset but retains a noncontrolling
ownership interest, the entity is required to measure the retained interest at fair value, which results in a full gain or loss recognition upon the
sale of a controlling interest in a nonfinancial asset. The Company adopted the standard on its required effective date of January 1, 2018. The
adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
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In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification
Accounting, which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types
of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting.
Under this guidance, an entity would not apply modification accounting if the fair value, the vesting conditions, and the classification of the
awards (as equity or liability) are the same immediately before and after the modification. The standard was effective for the Company
beginning January 1, 2018 on a prospective basis for awards modified on or after the adoption date. The adoption of this guidance did not
have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to recognize an ROU asset and
lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on
classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. Accounting guidance
for lessors is mostly unchanged. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify
how to apply certain aspects of the new leases standard. The amendments address the rate implicit in the lease, impairment of the net investment
in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on
an index or rate and certain transition adjustments, among other issues. In addition, in July 2018, the FASB issued ASU No. 2018-11, Leases
(Topic 842), Targeted Improvements, which provided an additional (and optional) transition method to adopt the new leases standard. Under the
new transition method, a reporting entity would initially apply the new lease requirements at the effective date and recognize a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption; continue to report comparative periods presented in the financial
statements in the period of adoption in accordance with legacy U.S. GAAP (i.e., ASC 840, Leases); and provide the required disclosures under
ASC 840 for all periods presented under legacy U.S. GAAP. Further, ASU No. 2018-11 contains a practical expedient that allows lessors to
avoid separating lease and associated non-lease components within a contract if certain criteria are met. In December 2018, the FASB issued
ASU No. 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors, to clarify guidance for lessors on sales taxes and other similar
taxes collected from lessees, certain lessor costs and recognition of variable payments for contracts with lease and non-lease components. In
March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842), Codification Improvements, to clarify certain application and transitional
disclosure aspects of the new leases standard. The amendments address determination of the fair value of the underlying asset by lessors that are
not manufacturers or dealers and clarify interim period transition disclosure requirements, among other issues. The guidance in ASUs No. 2016-
02, 2018-10, 2018-11 and 2018-20 was effective beginning January 1, 2019, with early adoption permitted; whereas the guidance in ASU No.
2019-01 is effective beginning January 1, 2020, with early adoption permitted. The Company adopted the abovementioned standards on
January 1, 2019 using the effective date as the date of initial application. Therefore, pursuant to this transition method financial information
was not updated and the disclosures required under the new leases standards were not provided for dates and periods before January 1, 2019.
The guidance provides a number of optional practical expedients to be utilized by lessees upon transition. Accordingly, BGC elected the
“package of practical expedients,” which permitted the Company not to reassess under the new standard its prior conclusions about lease
identification, lease classification and initial direct costs. BGC did not elect the use-of-hindsight or the practical expedient pertaining to land
easements, with the latter not being applicable to the Company. The standard also provides practical expedients for an entity’s ongoing
accounting as a lessee. BGC elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that
qualify, the Company will not recognize ROU assets and lease liabilities, and this includes not recognizing ROU assets and lease liabilities
for existing short-term leases of those assets upon transition. The Company also elected the practical expedient to not separate lease and non-
lease components for all of leases other than leases of real estate. As a result upon adoption, acting primarily as a lessee, BGC recognized a
$192.4 million ROU asset and a $206.0 million lease liability on its consolidated statements of financial condition for its real estate and
equipment operating leases. The adoption of the guidance did not have a material impact on the Company’s consolidated statements of
operations, consolidated statements of changes in equity and consolidated statements of cash flows. See Note 27—“Leases” for additional
information on the Company’s leasing arrangements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for
Hedging Activities. The guidance intends to better align an entity’s risk management activities and financial reporting for hedging
relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of
hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk
components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial
statements. In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight
Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. Based on concerns
about the sustainability of LIBOR, in 2017, a committee convened by the Federal Reserve Board and the Federal Reserve Bank of New York
identified a broad Treasury repurchase agreement (repo) financing rate referred to as the SOFR as its preferred alternative reference rate. The
guidance in ASU No. 2018-16 adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition
and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge
accounting purposes. The amendments in this ASU were required to be adopted concurrently with the guidance in ASU No. 2017-12. The
guidance became effective for the Company on January 1, 2019 and was required to be applied on a prospective and modified retrospective
basis. The adoption of this guidance did not have a material impact on BGC’s consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance helps organizations address certain
stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act by providing an option to
reclassify these stranded tax effects to retained earnings in each period in which the effect of the change in the U.S. federal corporate income
tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The standard became effective for BGC on January 1, 2019. The
guidance was required to be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the
change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted the guidance starting
on January 1, 2019. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.
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In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting. The guidance largely aligns the accounting for share-based payment awards issued to employees and
nonemployees, whereby the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not
effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of
nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term
will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The standard became effective for
the Company on January 1, 2019. The ASU was required to be applied on a prospective basis to all new awards granted after the date of
adoption. In addition, any liability-classified awards that were not settled and equity-classified awards for which a measurement date had not
been established by the adoption date were remeasured at fair value as of the adoption date with a cumulative effect adjustment to opening
retained earnings in the year of adoption. BGC adopted this standard on its effective date. The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements.
In July 2019, the FASB issued ASU No. 2019-07, Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant
to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company
Reporting Modernization, and Miscellaneous Updates. The guidance clarifies or improves the disclosure and presentation requirements of a
variety of codification topics by aligning them with already effective SEC final rules, thereby eliminating redundancies and making the
codification easier to apply. This ASU was effective upon issuance, and it did not have a material impact on the Company’s consolidated
financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses
on Financial Instruments, which requires financial assets that are measured at amortized cost to be presented, net of an allowance for credit
losses, at the amount expected to be collected over their estimated life. Expected credit losses for newly recognized financial assets, as well as
changes to credit losses during the period, are recognized in earnings. For certain PCD assets, the initial allowance for expected credit losses
is recorded as an increase to the purchase price. Expected credit losses, including losses on off-balance-sheet exposures such as lending
commitments, are measured based on historical experience, current conditions and reasonable and supportable forecasts that affect the
collectability of the reported amount. The new standard became effective for the Company beginning January 1, 2020, under a modified
retrospective approach, and early adoption was permitted. In November 2018, the FASB issued ASU No. 2018-19, Codification
Improvements to Topic 326, Financial Instruments—Credit Losses, to clarify that operating lease receivables accounted for under ASC 842,
Leases, are not in the scope of the new credit losses guidance, and, instead, impairment of receivables arising from operating leases should be
accounted for in accordance with ASC 842, Leases. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic
326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU makes
changes to the guidance introduced or amended by ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of
Credit Losses on Financial Instruments. See below for the description of the amendments stipulated in ASU No. 2019-04. In addition, in May
2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. The amendments
in this ASU allow entities, upon adoption of ASU No. 2016-13, to irrevocably elect the fair value option for financial instruments that were
previously carried at amortized cost and are eligible for the fair value option under ASC 825-10, Financial Instruments: Overall. In November
2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments
in this ASU require entities to include certain expected recoveries of the amortized cost basis previously written off, or expected to be written
off, in the allowance for credit losses for PCD assets; provide transition relief related to troubled debt restructurings; allow entities to exclude
accrued interest amounts from certain required disclosures; and clarify the requirements for applying the collateral maintenance practical
expedient. The amendments in ASUs No. 2018-19, 2019-04, 2019-05 and 2019-11 were required to be adopted concurrently with the
guidance in ASU No. 2016-13. BGC adopted the standards on their required effective date beginning January 1, 2020. The primary effect of
adoption related to the increase in the allowances for credit losses for Accrued commissions receivable, and Loans, forgivable loans and other
receivables from employees and partners. As a result, on a pre-tax basis, the Company recognized a decrease in assets and noncontrolling
interest in subsidiaries, and an increase in retained deficit, of approximately $1.9 million, $0.6 million, and $1.3 million, respectively, as of
January 1, 2020. The tax effect of the impact of the adoption was an increase in assets and noncontrolling interest in subsidiaries, and a
decrease in retained deficit of approximately $0.6 million, $0.2 million, and $0.4 million, respectively.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to
measure goodwill impairment. Under the amendments in the ASU, goodwill impairment testing is performed by comparing the fair value of
the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value. The Company adopted the standard on its required effective date beginning January 1, 2020, and the guidance was
applied on a prospective basis starting with the goodwill impairment test during the year ended December 31, 2020. The adoption of this
standard did not have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement. The guidance is part of the FASB’s disclosure framework project, whose objective
and primary focus are to improve the effectiveness of disclosures in the notes to financial statements. The ASU eliminates, amends and adds
certain disclosure requirements for fair value measurements. The FASB concluded that these changes improve the overall usefulness of the
footnote disclosures for financial statement users and reduce costs for preparers. Certain disclosures are required to be applied prospectively
and other disclosures need to be adopted retrospectively in the period of adoption. As permitted by the transition guidance in the ASU, the
Company early adopted, eliminated and modified disclosure requirements as of September 30, 2018. The early adoption of this guidance did
not have an impact on the Company’s consolidated financial statements. The additional disclosure requirements were adopted by BGC
beginning January 1, 2020, and the adoption of these fair value measurement disclosures did not have an impact on the Company’s
consolidated financial statements. See Note 15—“Fair Value of Financial Assets and Liabilities” for additional information.
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In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of
the FASB Emerging Issues Task Force). The guidance on the accounting for implementation, setup, and other upfront costs (collectively
referred to as implementation costs) applies to entities that are a customer in a hosting arrangement that is a service contract. The
amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include
an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by
the guidance in this ASU. BGC adopted the standard on its effective date beginning January 1, 2020. The adoption of this guidance did not
have a material impact on the Company’s consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance
for Variable Interest Entities. The guidance was issued in response to stakeholders’ observations that Topic 810, Consolidation, could be
improved in the areas of applying the variable interest entity guidance to private companies under common control and in considering
indirect interests held through related parties under common control for determining whether fees paid to decision makers and service
providers are variable interests. BGC adopted the standard on its effective date beginning January 1, 2020. The adoption of this guidance did
not have a material impact on the Company’s consolidated financial statements.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses,
Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU amends guidance introduced or amended by ASU No.
2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, ASU No. 2017-12,
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, and ASU No. 2016-01, Financial
Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments to
ASU No. 2016-13 clarify the scope of the credit losses standard and address guidance related to accrued interest receivable balances,
recoveries, variable interest rates and prepayments, among other issues. With respect to amendments to ASU No. 2017-12, the guidance
addresses partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, along with other issues. The
clarifying guidance pertaining to ASU No. 2016-01 requires an entity to remeasure an equity security without a readily determinable fair
value accounted for under the measurement alternative at fair value in accordance with guidance in ASC 820, Fair Value Measurement;
specifies that equity securities without a readily determinable fair value denominated in nonfunctional currency must be remeasured at
historical exchange rates; and provides fair value measurement disclosure guidance. BGC adopted the standard on the required effective date
beginning January 1, 2020. The adoption of the hedge accounting and the recognition and measurement guidance amendments did not have a
material impact on the Company’s consolidated financial statements. See above for the impact of adoption of the amendments related to the
credit losses standard.
In November 2019, the FASB issued ASU No. 2019-08, Compensation—Stock Compensation (Topic 718) and Revenue from
Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer. The ASU simplifies
and increases comparability of accounting for nonemployee share-based payments, specifically those made to customers. Under the guidance,
such awards will be accounted for as a reduction of the transaction price in revenue, but should be measured and classified following the
stock compensation guidance in ASC 718, Compensation—Stock Compensation. BGC adopted the standard on the required effective date
beginning January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU which makes
narrow-scope amendments related to various aspects pertaining to financial instruments and related disclosures by clarifying or improving the
Codification. For the most part, the guidance was effective upon issuance, and the adoption of the standard did not have a material impact on
the Company’s consolidated financial statements.
New Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The
ASU is part of the FASB’s simplification initiative; and it is expected to reduce cost and complexity related to accounting for income taxes
by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to the approach for intraperiod tax allocation, the
methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The
new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the
accounting for transactions that result in a step-up in the tax basis of goodwill. The new standard became effective for the Company
beginning January 1, 2021 and, with certain exceptions, will be applied prospectively.
In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and
Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic
815 (a consensus of the FASB Emerging Issues Task Force). These amendments improve previous guidance by reducing diversity in practice
and increasing comparability of the accounting for the interactions between these codification topics as they pertain to certain equity
securities, investments under the equity method of accounting and forward contracts or purchased options to purchase securities that, upon
settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the
fair value option. The new standard became effective for the Company beginning January 1, 2021 and will be applied prospectively. The
adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting. The guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be
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required for modifications to agreements (e.g., loans, debt securities, derivatives, and borrowings) necessitated by reference rate reform as
entities transition away from LIBOR and other interbank offered rates to alternative reference rates. This ASU also provides optional
expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform.
Application of the guidance is optional and only available in certain situations. The ASU is effective upon issuance and generally can be
applied through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The
amendments in this standard are elective and principally apply to entities that have derivative instruments that use an interest rate for
margining, discounting, or contract price alignment that is modified as a result of reference rate reform (referred to as the “discounting
transition”). The standard expands the scope of ASC 848, Reference Rate Reform and allows entities to elect optional expedients to derivative
contracts impacted by the discounting transition. Similar to ASU No. 2020-04, provisions of this ASU are effective upon issuance and
generally can be applied through December 31, 2022. Management is evaluating and planning for adoption of the new guidance, including
forming a cross-functional LIBOR transition team to determine the Company’s transition plan and facilitate an orderly transition to
alternative reference rates, and continuing its assessment on the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity. The standard is expected to reduce complexity and improve comparability of financial reporting associated with
accounting for convertible instruments and contracts in an entity’s own equity. The ASU also enhances information transparency by making
targeted improvements to the related disclosures guidance. Additionally, the amendments affect the diluted EPS calculation for instruments
that may be settled in cash or shares and for convertible instruments. The new standard will become effective for the Company beginning
January 1, 2022 and can be applied using either a modified retrospective or a fully retrospective method of transition. Early adoption is
permitted, but no earlier than beginning January 1, 2021. Management is currently evaluating the impact of the new standard on the
Company’s consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements. The standard amends the Codification by moving
existing disclosure requirements to (or adding appropriate references in) the relevant disclosure sections. The ASU also clarifies various
provisions of the Codification by amending and adding new headings, cross-referencing, and refining or correcting terminology. The new
standard became effective for the Company beginning January 1, 2021 and can be applied using either a modified retrospective or a fully
retrospective method of transition. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated
financial statements.
2.
Limited Partnership Interests in BGC Holdings and Newmark Holdings
BGC Partners is a holding company with no direct operations and conducts substantially all of its operations through its operating
subsidiaries. Virtually all of the Company’s consolidated net assets and net income are those of consolidated variable interest entities. BGC
Holdings is a consolidated subsidiary of the Company for which the Company is the general partner. The Company and BGC Holdings
jointly own BGC U.S. OpCo and BGC Global OpCo, the two operating partnerships. In addition, Newmark Holdings is a consolidated
subsidiary of Newmark for which Newmark is the general partner. Newmark and Newmark Holdings jointly own Newmark OpCo, the
operating partnership. Listed below are the limited partnership interests in BGC Holdings and Newmark Holdings. The FPUs, LPUs and
limited partnership interests held by Cantor, each as described below, collectively represent all of the limited partnership interests in BGC
Holdings and Newmark Holdings.
As a result of the Separation, limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership
interests in BGC Holdings, whereby each holder of BGC Holdings limited partnership interests at that time who held a BGC Holdings limited
partnership interest received a corresponding Newmark Holdings limited partnership interest, determined by the Contribution Ratio, which
was equal to a BGC Holdings limited partnership interest multiplied by one divided by 2.2, divided by the Exchange Ratio. Initially, the
Exchange Ratio equaled one, so that each Newmark Holdings limited partnership interest was exchangeable for one share of Newmark Class
A common stock. For reinvestment, acquisition or other purposes, Newmark may determine on a quarterly basis to distribute to its
stockholders a smaller percentage than Newmark Holdings distributes to its equity holders (excluding tax distributions from Newmark
Holdings) of cash that it received from Newmark OpCo. In such circumstances, the Separation and Distribution Agreement provides that the
Exchange Ratio will be reduced to reflect the amount of additional cash retained by Newmark as a result of the distribution of such smaller
percentage, after the payment of taxes. The Exchange Ratio as of December 31, 2020 equaled 0.9379.
Founding/Working Partner Units
Founding/Working Partners have FPUs in BGC Holdings and Newmark Holdings. The Company accounts for FPUs outside of
permanent capital, as “Redeemable partnership interest,” in the Company’s consolidated statements of financial condition. This classification
is applicable to Founding/Working Partner units because these units are redeemable upon termination of a partner, including a termination of
employment, which can be at the option of the partner and not within the control of the issuer.
FPUs are held by limited partners who are employees and generally receive quarterly allocations of net income. Upon termination of
employment or otherwise ceasing to provide substantive services, the FPUs are generally redeemed, and the unit holders are no longer
entitled to participate in the quarterly allocations of net income. Since these allocations of net income are cash distributed on a quarterly basis
and are contingent upon services being provided by the unit holder, they are reflected as a component of compensation expense under
“Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the Company’s consolidated statements
of operations.
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Limited Partnership Units
Certain BGC employees hold LPUs in BGC Holdings and Newmark Holdings (e.g., REUs, RPUs, PSUs, and PSIs). Prior to the
Separation, certain employees of both BGC and Newmark received LPUs in BGC Holdings. As a result of the Separation, these employees
were distributed LPUs in Newmark Holdings equal to a BGC Holdings LPU multiplied by the Contribution Ratio. Subsequent to the
Separation, BGC employees are only granted LPUs in BGC Holdings, and Newmark employees are only granted LPUs in Newmark
Holdings.
Generally, LPUs receive quarterly allocations of net income, which are cash distributed and generally are contingent upon services
being provided by the unit holder. As prescribed in U.S. GAAP guidance, prior to the Spin-Off, the quarterly allocations of net income on
BGC Holdings LPUs held by all employees and the quarterly allocations of net income on Newmark Holdings LPUs held by BGC employees
were reflected as a component of compensation expense under “Equity-based compensation and allocations of net income to limited
partnership units and FPUs” in the Company’s consolidated statements of operations. In addition, prior to the Spin-Off, the quarterly
allocation of net income on such LPUs in Newmark Holdings held by Newmark employees were reflected as a component of “Consolidated
net income (loss) from discontinued operations, net of tax” in the Company’s consolidated statements of operations. Following the Spin-Off,
the quarterly allocations of net income on BGC Holdings and Newmark Holdings LPUs held by BGC employees are reflected as a
component of compensation expense under “Equity-based compensation and allocations of net income to limited partnership units and FPUs”
in the Company’s consolidated statements of operations, and the quarterly allocations of net income on BGC Holdings LPUs held by
Newmark employees are reflected as a component of “Net income (loss) from continuing operations attributable to noncontrolling interest in
subsidiaries” in the Company’s consolidated statements of operations. From time to time, the Company also issues BGC LPUs as part of the
consideration for acquisitions.
Certain of these LPUs in BGC Holdings and Newmark Holdings, such as REUs, entitle the holders to receive post-termination
payments equal to the notional amount of the units in four equal yearly installments after the holder’s termination. These LPUs held by BGC
employees are accounted for as post-termination liability awards, and in accordance with U.S. GAAP guidance, the Company records
compensation expense for the awards based on the change in value at each reporting date in the Company’s consolidated statements of
operations as part of “Equity-based compensation and allocations of net income to limited partnership units and FPUs .”
The Company has also awarded certain Preferred Units. Each quarter, the net profits of BGC Holdings and Newmark Holdings are
allocated to such units at a rate of either 0.6875% (which is 2.75% per calendar year) or such other amount as set forth in the award
documentation. These allocations are deducted before the calculation and distribution of the quarterly partnership distribution for the
remaining partnership interests and are generally contingent upon services being provided by the unit holder. The Preferred Units are not
entitled to participate in partnership distributions other than with respect to the Preferred Distribution. Preferred Units may not be made
exchangeable into Class A common stock, and are only entitled to the Preferred Distribution; accordingly they are not included in the fully
diluted share count. The quarterly allocations of net income on Preferred Units are reflected the same as those of the LPUs described above in
the Company’s consolidated statements of operations. After deduction of the Preferred Distribution, the remaining partnership units generally
receive quarterly allocations of net income based on their weighted-average pro rata share of economic ownership of the operating
subsidiaries. Preferred Units are granted in connection with the grant of certain LPUs, such as PSUs, that may be granted exchangeability or
redeemed in connection with the issuance of shares of common stock to cover the withholding taxes owed by the unit holder, rather than
issuing the gross amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes.
Cantor Units
Cantor holds limited partnership interests in BGC Holdings. Cantor units are reflected as a component of “Noncontrolling interest in
subsidiaries” in the Company’s consolidated statements of financial condition. Cantor receives allocations of net income (loss), which are
cash distributed on a quarterly basis and are reflected as a component of “Net income (loss) from continuing operations attributable to
noncontrolling interest in subsidiaries” in the Company’s consolidated statements of operations. In addition, Cantor holds limited partnership
interests in Newmark Holdings, which were reflected as a component of “Noncontrolling interest in subsidiaries” in the Company’s
consolidated statements of financial condition until the Spin-Off. The allocations of net income (loss) Cantor received for its interests in
Newmark Holdings, which was cash distributed on a quarterly basis, were reflected as a component of “Net income (loss) from discontinued
operations attributable to noncontrolling interest in subsidiaries” in the Company’s consolidated statements of operations until the Spin-Off.
Cantor units in BGC Holdings are generally exchangeable for up to 23.6 million shares of BGC Class B common stock.
General
Certain of the limited partnership interests, described above, have been granted exchangeability into shares of BGC or Newmark Class
A common stock, and additional limited partnership interests may become exchangeable into shares of BGC or Newmark Class A common
stock. In addition, certain limited partnership interests have been granted the right to exchange into a partnership unit with a capital account,
such as HDUs. HDUs have a stated capital account which is initially based on the closing trading price of Class A common stock at the time
the HDU is granted. HDUs participate in quarterly partnership distributions and are generally not exchangeable into shares of Class A
common stock.
Prior to the Separation, BGC Holdings limited partnership interests could become exchangeable for a BGC Class A common stock on
a one-for-one basis (subject to adjustment). Following the Separation and prior to the Spin-Off, in order for a partner or Cantor to exchange a
limited partnership interest in BGC Holdings or Newmark Holdings into a share of BGC Class A or BGC Class B common stock, such
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partner or Cantor was required to exchange both one BGC Holdings limited partnership interest and a number of Newmark Holdings limited
partnership interests equal to a BGC Holdings limited partnership interest multiplied by the quotient obtained by dividing Newmark Class A
and Newmark Class B common stock, Newmark OpCo interests, and Newmark Holdings limited partnership interests held by BGC as of
such time by the number of shares of BGC Class A and BGC Class B common stock outstanding as of such time, referred to as the
“Distribution Ratio”, divided by the Exchange Ratio. Initially the Distribution Ratio was equivalent to the Contribution Ratio (one divided by
2.2 or 0.4545), and at the time of the Spin-Off, the Distribution Ratio equaled 0.463895. As a result of the change in the Distribution Ratio,
certain BGC Holdings limited partnership interests no longer had a corresponding Newmark Holdings limited partnership interest. The
exchangeability of these BGC Holdings limited partnership interests along with any new BGC Holdings limited partnership interests issued
after the Separation (together referred to as “standalone”) into BGC Class A or BGC Class B common stock was contingent upon the Spin-
Off. Following the Spin-Off, a partner or Cantor is no longer required to have paired BGC Holdings and Newmark Holdings limited
partnership interests to exchange into BGC Class A or BGC Class B common stock. Subsequent to the Spin-Off, limited partnership interests
in BGC Holdings held by a partner or Cantor may become exchangeable for BGC Class A or BGC Class B common stock on a one-for-one
basis, and limited partnership interests in Newmark Holdings held by a partner or Cantor may become exchangeable for a number of shares
of Newmark Class A or Newmark Class B common stock equal to the number of limited partnership interests multiplied by the then-current
Exchange Ratio. Therefore, standalone BGC limited partnership interests, which were previously excluded from the Company’s fully diluted
number of shares and units outstanding, are now included in the Company’s fully diluted number of shares and units outstanding if dilutive.
Because limited partnership interests are included in the Company’s fully diluted share count, if dilutive, any exchange of limited partnership
interests into shares of BGC Class A or BGC Class B common stock would not impact the fully diluted number of shares and units
outstanding. Because these limited partnership interests generally receive quarterly allocations of net income, such exchange would have no
significant impact on the cash flows or equity of the Company.
Each quarter, net income (loss) is allocated between the limited partnership interests and the Company’s common stockholders. In
quarterly periods in which the Company has a net loss, the loss allocation for FPUs, LPUs and Cantor units in BGC Holdings is allocated to
Cantor and reflected as a component of “Net income (loss) from continuing operations attributable to noncontrolling interest in subsidiaries”
in the Company’s consolidated statements of operations. In subsequent quarters in which the Company has net income, the initial allocation
of income to the limited partnership interests in BGC Holdings is to Cantor and is recorded as “Net income (loss) from continuing operations
attributable to noncontrolling interests in subsidiaries,” to recover any losses taken in earlier quarters, with the remaining income allocated to
the limited partnership interests. This income (loss) allocation process has no impact on the net income (loss) allocated to common
stockholders. In addition, in quarterly periods in which Newmark has a net loss, the loss allocation for FPUs, LPUs and Cantor units in
Newmark Holdings is allocated to Cantor. In subsequent quarters in which Newmark has net income, the initial allocation of income to
limited partnership interests in Newmark Holdings is allocated to Cantor to recover any losses taken in earlier quarters, with the remaining
income allocated to the limited partnership interests. These income (loss) allocations to Cantor by Newmark have no impact on BGC’s
consolidated statements of operations following the Spin-Off.
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3.
Summary of Significant Accounting Policies
Use of Estimates:
The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of the assets and liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities in these consolidated financial statements. Management believes that the estimates utilized in preparing these
consolidated financial statements are reasonable. Estimates, by their nature, are based on judgment and available information. Actual results
could differ materially from the estimates included in the Company’s consolidated financial statements. Certain reclassifications have been
made to previously reported amounts to conform to the current period presentation.
Revenue Recognition:
BGC derives its revenues primarily through commissions from brokerage services, the spread between the buy and sell prices on
matched principal transactions, fees from related parties, data, software and post-trade services, and other revenues.
The accounting policies described below were updated pursuant to the adoption of the U.S. GAAP standard on Revenue from
Contracts with Customers and related amendments on January 1, 2018. These revenue recognition policy updates have been applied
prospectively in the Company’s consolidated financial statements from January 1, 2018 onward. See Note 26—“Revenue from Contracts
with Customers” for additional information.
Commissions:
The Company derives its commission revenues from securities, commodities and insurance-related transactions, whereby the Company
connects buyers and sellers in the OTC and exchange markets and assists in the negotiation of the price and other material terms. These
transactions result from the provision of service related to executing, settling and clearing transactions for customers. Trade execution and
clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the
context of the contract. Commission revenues are recognized at a point in time on the trade-date, when the customer obtains control of the
service and can direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company records a receivable
between the trade-date and settlement date, when payment is received.
Principal Transactions:
Principal transaction revenues are primarily derived from matched principal transactions, whereby the Company simultaneously agrees
to buy securities from one customer and sell them to another customer. A very limited number of trading businesses are allowed to enter into
unmatched principal transactions to facilitate a customer’s execution needs for transactions initiated by such customers. Revenues earned
from principal transactions represent the spread between the buy and sell price of the brokered security, commodity or derivative. Principal
transaction revenues and related expenses are recognized on a trade-date basis. Positions held as part of a principal transaction are marked-to-
market on a daily basis.
Fees from Related Parties:
Fees from related parties consist of charges for back-office services provided to Cantor and its affiliates, including occupancy of office
space, utilization of fixed assets, accounting, operations, human resources and legal services, and information technology. The services are
satisfied over time and measured using a time-elapsed measure of progress as the customer receives the benefits of the services evenly
throughout the term of the contract. The transaction price is considered variable consideration as the level and type of services fluctuate from
period to period and revenues are recognized only to the extent it is probable that a significant reversal in the amount of cumulative revenues
recognized will not occur when the uncertainty is resolved. Fees from related parties are determined based on the cost incurred by the
Company to perform or provide the service as evidenced by an allocation of employee expenses or a third-party invoice. Net cash settlements
between affiliates are generally performed on a monthly basis.
Data, Software and Post-trade:
Data revenues primarily consist of subscription fees and fees from customized one-time sales provided to customers either directly or
through third-party vendors. Regarding this revenue stream, the Company determined that software implementation, license usage, and
related support services represent a single-performance obligation because the combination of these deliverables is necessary for the customer
to derive benefit from the data. As such, once implementation is complete, monthly subscription fees are billed in advance and recognized on
a straight-line basis over the life of the license period.
The Company also provides software customization services contracted through work orders that each represent a separate
performance obligation. Revenue is recognized over time using an output method as a measure of progress. As circumstances change over
time, the Company updates its measure of progress to reflect any changes in the outcome of the performance obligation. Such updates are
accounted for as a change in accounting estimate. As a practical expedient, when the work-order period is less than 12 months, the Company
recognizes revenue upon acceptance from the customer after work is completed. The contract price is fixed and billed to the customer as
combination of an upfront fee, progress fees, and a post-delivery fee.
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Other Revenues:
Other revenues are earned from various sources, including underwriting and advisory fees.
Other Income (Losses), Net:
Gain (Loss) on Divestiture and Sale of Investments:
Gain (loss) on divestiture and sale of investments is comprised of gains or losses recorded in connection with the divestiture of certain
businesses or sale of investments (see Note 7—“Divestitures”).
Gains (Losses) on Equity Method Investments:
Gains (losses) on equity method investments represent the Company’s pro-rata share of the net gains or losses on investments over
which the Company has significant influence but which it does not control.
Other Income (Loss):
Other income (loss) is primarily comprised of gains or losses associated with the movements related to the changes in fair value and/or
hedges on marketable equity securities and investments carried under the measurement alternative (see Note 12—“Marketable Securities”
and Note 17—“Investments”).
Segments:
Prior to the Spin-Off, the Company’s operations consisted of two reportable segments, Financial Services and Real Estate Services. As
a result of the Spin-Off, the Company has one reportable segment (see Note 25—“Segment, Geographic and Product Information”).
Cash and Cash Equivalents:
The Company considers all highly liquid investments with maturities of 90 days or less at the date of acquisition that are not
segregated under regulatory requirements, other than those used for trading purposes, to be cash equivalents. Cash and cash equivalents
include money market funds, deposits with banks, certificates of deposit, commercial paper, and U.S. Treasury securities.
Cash Segregated Under Regulatory Requirements:
Cash segregated under regulatory requirements represents funds received in connection with customer activities that the Company is
obligated to segregate or set aside to comply with regulations mandated by authorities such as the SEC and FINRA in the U.S. and the FCA
in the U.K. that have been promulgated to protect customer assets.
In addition, BGC premiums collected from insureds but not yet remitted to insurance companies and claims collected from insurance
companies but not yet remitted to insureds are recorded as “Cash segregated under regulatory requirements,” and the corresponding liability
is recorded as “Accounts payable, accrued and other liabilities” in the Company’s consolidated statements of financial condition.
Securities Owned:
Securities owned primarily consist of unencumbered U.S. Treasury bills held for liquidity purposes. Securities owned are classified as
trading and marked-to-market daily based on current listed market prices (or, when applicable, broker or dealer quotes), with the resulting
gains and losses included in operating income in the current period. Unrealized and realized gains and losses from securities owned are
included as part of “Principal transactions” in the Company’s consolidated statements of operations.
Fair Value:
U.S. GAAP defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date and further expands disclosures about such fair value measurements.
The 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.
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Level 3 measurements – Prices or valuations that require inputs that are both significant to the fair value measurement and
unobservable.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement.
In determining fair value, the Company separates financial instruments owned and financial instruments sold, but not yet purchased
into two categories: cash instruments and derivative contracts.
Cash Instruments – Cash instruments are generally classified within Level 1 or Level 2. The types of instruments generally classified
within Level 1 include most U.S. government securities, certain sovereign government obligations, and actively traded listed equities. The
Company does not adjust the quoted price for such instruments. The types of instruments generally classified within Level 2 include agency
securities, most investment-grade and high-yield corporate bonds, certain sovereign government obligations, money market securities, and
less liquid listed equities, and state, municipal and provincial obligations.
Derivative Contracts – Derivative contracts can be exchange-traded or OTC. Exchange-traded derivatives typically fall within Level 1
or Level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values
exchange-traded derivatives using the closing price of the exchange-traded derivatives. OTC derivatives are valued using market transactions
and other market evidence whenever possible, including market-based inputs to models, broker or dealer quotations or alternative pricing
sources with reasonable levels of price transparency. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and
options, model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are
typically classified within Level 2 of the fair value hierarchy.
See Note 15— “Fair Value of Financial Assets and Liabilities” for more information on the fair value of financial assets and liabilities.
Marketable Securities:
Marketable securities comprise equity securities with readily determinable fair value. These securities are held for investment purposes
and accounted for in accordance with the U.S. GAAP guidance, Investments—Debt and Equity Securities. In accordance with the guidance
on recognition and measurement of equity investments, the Company carries its marketable equity securities at fair value and recognizes any
changes in fair value currently within “Other income (loss)” in the Company’s consolidated statements of operations. See Note 12—
“Marketable Securities” for additional information.
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
principal transactions for which the stated settlement dates have not yet been reached and principal transactions which have not settled as of
their stated settlement dates, cash held at clearing organizations and exchanges to facilitate settlement and clearance of matched principal
transactions, and spreads on matched principal transactions that have not yet been remitted from/to clearing organizations and exchanges.
Also included are amounts related to open derivative contracts, which are generally executed on behalf of the Company’s customers. A
portion of the unsettled principal transactions and open derivative contracts that constitute receivables from and payables to broker-dealers,
clearing organizations, customers and related broker-dealers are with related parties (see Note 16—“Related Party Transactions” for more
information regarding these receivables and payables).
Current Expected Credit Losses (CECL)
The accounting policy changes described below were updated pursuant to the adoption of ASU No. 2016-13, Financial Instruments—
Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments and related amendments on January 1, 2020. These policy
updates have been applied using the modified retrospective approach in the Company’s consolidated financial statements from January 1,
2020 onward. Financial information for the historical comparable periods was not revised and continues to be reported under the accounting
standards in effect during those historical periods. In accordance with the guidance in ASC Topic 326, the Company presents its financial
assets that are measured at amortized cost, net of an allowance for credit losses, which represents the amount expected to be collected over their
estimated life. Expected credit losses for newly recognized financial assets carried at amortized cost, as well as changes to expected lifetime
credit losses during the period, are recognized in earnings. The CECL methodology represents a significant change from prior U.S. GAAP and
replaced the prior multiple impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle
of a loan or other financial asset in scope, the methodology generally results in the earlier recognition of the provision for credit losses and the
related allowance for credit losses than under prior U.S. GAAP. The CECL methodology’s impact on expected credit losses, among other things,
reflects the Company’s view of the current state of the economy, forecasted macroeconomic conditions and the Company’s portfolios. Refer to
Note 28—“Current Expected Credit Losses (CECL)” for additional information.
Accrued Commissions and Other Receivables, Net:
The Company has accrued commissions receivable from securities and commodities transactions. Accrued commissions receivable are
presented net of allowance for doubtful accounts of approximately $14.0 million and $10.5 million as of December 31, 2020 and 2019,
respectively. The allowance is based on management’s estimate and reviewed periodically based on the facts and circumstances of each
outstanding receivable.
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The Company’s CECL methodology for Accrued commissions receivable follows a PD/LGD framework with adjustments for the
macroeconomic outlook, with the calculation performed at a counterparty level. The receivable balance for each counterparty is the
outstanding receivable amount adjusted for any volume discounts. Accrued commissions receivable are not subject to an interest income
accrual. The Company writes off a receivable in the period in which such balance is deemed uncollectible.
The PD rate is sourced from Moody’s Annual Default Study for Corporates and it corresponds to the 1983-2020 average 1-year default
rate by rating. The Moody’s quarterly updated data is used as well, if deemed appropriate. A significant number of the Company’s
counterparties are publicly rated, and, therefore, the Moody’s PD rate is used as a proxy based on the counterparty’s external rating. In
addition, the Company maintains internal obligor ratings that map to Moody’s long-term ratings.
The LGD rate is derived from the Basel Committee’s June 2004 Second Basel Accord on international banking laws and regulations.
The Company understands that the LGD assumption is a well-known industry benchmark for unsecured credits, which aligns with the
unsecured nature of these receivables. Management considered that historically the Company has collected on substantially all its receivables,
and, therefore, the LGD assumption is a reasonable benchmark in absence of internal data from which to develop an LGD measure.
The macroeconomic adjustment is based on an average of the outlook scenarios for changes in the Real GDP growth rate for advanced
economies over the next year, including the impact of COVID-19. Historical and forecast data for this metric is obtained from the
International Monetary Fund’s Word Economic Outlook database. The Company believes that changes in expected credit losses for its
counterparties are impacted by changes in broad economic activity and, therefore, determined that the Real GDP growth rate was a
reasonable metric to evaluate for macroeconomic adjustments. Further, given that the Company’s receivables are related to counterparties
with global operations, management sourced the data for this metric as applicable to advanced economies. The Company notes that, given the
short-term nature of these receivables, a forecast beyond 1 year is neither required nor appropriate, and, therefore, the adjustment also covers
the approximated life of these assets with no need for reversion.
In the Company’s capacity as insurance agent and broker, BGC collects premiums from insureds and, after deducting its commission,
remits the premiums to the respective insurers. BGC also collects claims or refunds from insurers on behalf of insureds. Uncollected
premiums from insureds and uncollected claims or refunds from insurers are recorded as “Accrued commissions and other receivables, net”,
and the corresponding unremitted insurance premiums and claims held in a fiduciary capacity are recorded as “Accounts payable, accrued
and other liabilities” in the Company’s consolidated statements of financial condition.
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 distributions that the individuals receive on some or all of their LPUs and from proceeds of
the sale of the employees' shares of BGC Class A common stock, or may be forgiven over a period of time. The forgivable portion of these
loans is not included in the Company’s estimate of expected credit losses when employees meet the conditions for forgiveness through their
continued employment over the specified time period, and is recognized as compensation expense over the life of the loan. The amounts due
from terminated employees that the Company does not expect to collect are included in the allowance for credit losses.
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. The Company reviews
loan balances each reporting period for collectability. If the Company determines that the collectability of a portion of the loan balances is not
expected, the Company recognizes a reserve against the loan balances as compensation expense.
Fixed Assets, Net:
Fixed assets are carried at cost net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis
over the estimated useful lives of the assets. Internal and external direct costs of developing applications and obtaining software for internal
use are capitalized and amortized over three years on a straight-line basis. Computer equipment is depreciated over three to five years.
Leasehold improvements are depreciated over the shorter of their estimated economic useful lives or the remaining lease term. Routine
repairs and maintenance are expensed as incurred. When fixed assets are retired or otherwise disposed of, the related gain or loss is included
in operating income. The Company has asset retirement obligations related to certain of its leasehold improvements, which it accounts for in
accordance with U.S. GAAP guidance, Asset Retirement Obligations. The guidance requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. 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.
Investments:
The Company’s investments in which it has a significant influence but not a controlling financial interest and of which it is not the
primary beneficiary are accounted for under the equity method.
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In accordance with the guidance on recognition and measurement of equity investments, the Company has elected to use a
measurement alternative for its equity investments without a readily determinable fair value, pursuant to which these investments are initially
recognized at cost and remeasured through earnings when there is an observable transaction involving the same or similar investment of the
same issuer, or due to an impairment. See Note 15—“Fair Value of Financial Assets and Liabilities” and Note 17—“Investments” for
additional information.
The Company’s consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned
subsidiaries. The Company’s policy is to consolidate all entities of which it owns more than 50% unless it does not have control over the
entity. In accordance with the U.S. GAAP guidance, Consolidation of Variable Interest Entities, the Company also consolidates any VIE of
which it is the primary beneficiary.
Long-Lived Assets:
The Company periodically evaluates potential impairment of long-lived assets and amortizable intangibles, when a change in
circumstances occurs, by applying the U.S. GAAP guidance, Impairment or Disposal of Long-Lived Assets, and assessing whether the
unamortized carrying amount can be recovered over the remaining life through undiscounted future expected cash flows generated by the
underlying assets. If the undiscounted future cash flows were less than the carrying value of the asset, an impairment charge would be
recorded. The impairment charge would be measured as the excess of the carrying value of the asset over the present value of estimated
expected future cash flows using a discount rate commensurate with the risks involved.
Leases:
The Company enters into leasing arrangements in the ordinary course of business as a lessee of office space, data centers and office
equipment.
The accounting policies described below were updated pursuant to the adoption of the U.S. GAAP standard on Leases and related
amendments on January 1, 2019. These policy updates have been applied using the modified retrospective approach in the Company’s
consolidated financial statements from January 1, 2019 onward. Financial information for the year ended December 31, 2018 was not revised
and continues to be reported under the previous accounting guidance on leases in effect during that historical period.
BGC determines whether an arrangement is a lease at inception. ROU lease assets represent the Company’s right to use an underlying
asset for the lease term, and lease liabilities represent BGC’s obligation to make lease payments arising from the lease. Other than for leases
with an initial term of twelve months or less, operating lease ROU assets and liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. As most leases do not provide an implicit rate, the Company uses an incremental
borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating
lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or
terminate the lease when it is reasonably certain that the Company will exercise those options. Lease expense pertaining to operating leases is
recognized on a straight-line basis over the lease term. Refer to Note 27—“Leases” for additional information.
Goodwill and Other Intangible Assets, Net:
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. As
prescribed in the U.S. GAAP guidance, Intangibles—Goodwill and Other, goodwill and other indefinite-lived intangible assets are not
amortized, but instead are periodically tested for impairment. The Company reviews goodwill and other indefinite-lived intangible assets for
impairment on an annual basis during the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that could
reduce the fair value of a reporting unit below its carrying amount. When reviewing goodwill for impairment, BGC first assesses qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including
goodwill. The Company performed impairment evaluations for the years ended December 31, 2020, 2019 and 2018 and concluded that there
was no impairment of its goodwill during any of these periods. There was no impairment charge recognized for the Company’s indefinite-
lived intangible assets other than goodwill for the years ended December 31, 2020, 2019 and 2018.
Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives. Definite-lived intangible
assets arising from business combinations include customer relationships, internally developed software, and covenants not to compete. Also
included in the definite-lived intangible assets are purchased patents. The costs of acquired patents are amortized over a period not to exceed
the legal life or the remaining useful life of the patent, whichever is shorter, using the straight-line method.
Income Taxes:
The Company accounts for income taxes using the asset and liability method as prescribed in the U.S. GAAP guidance, Income Taxes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and their respective tax basis. Certain of the Company’s entities are taxed as U.S.
partnerships and are subject to the 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 and Newmark Holdings” for a
discussion of partnership interests), rather than the partnership entity. As such, the partners’ tax liability or benefit is not reflected in the
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Company’s consolidated financial statements. The tax-related assets, liabilities, provisions or benefits included in the Company’s
consolidated financial statements also reflect the results of the entities that are taxed as corporations, either in the U.S. or in foreign
jurisdictions. 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. The Company recognizes interest and penalties related to income tax matters in
“Provision (benefit) for income taxes” in the Company’s consolidated statements of operations.
The Company files income tax returns in the United States federal jurisdiction and various states, local and foreign jurisdictions. The
Company is currently open to examination by tax authorities in United States federal, state and local jurisdictions and certain non-U.S.
jurisdictions for tax years beginning 2008, 2009 and 2012, respectively.
On December 22, 2017, the Tax Act was signed into law in the U.S. During 2018, the Treasury and the IRS released proposed
regulations associated with certain provisions of the Tax Act to provide taxpayers with additional guidance. The Tax Act is expected to have
a favorable impact on the Company’s ETR and net income as reported under U.S. GAAP in 2018 and subsequent reporting periods to which
the Tax Act is effective due to the reduction in the Federal income tax rate from 35% to 21%. The impact of the Tax Act may differ from our
estimate for the provision for income taxes, possibly materially, due to, among other things, changes in interpretations, additional guidance
that may be issued, unexpected negative changes in business and market conditions that could reduce certain tax benefits, and actions taken
by the Company as a result of the Tax Act.
The Tax Act includes the GILTI provision, which requires inclusion in the Company’s U.S. income tax return the earnings of certain
foreign subsidiaries. The Company has finalized its accounting policy and has elected to treat taxes associated with the GILTI provision
using the Period Cost Method and thus has not recorded deferred taxes for basis differences under this regime.
Equity-Based and Other Compensation:
The Company accounts for equity-based compensation under the fair value recognition provisions. Equity-based compensation
expense recognized during the period is based on the value of the portion of equity-based payment awards that is ultimately expected to vest.
The grant-date fair value of equity-based awards is amortized to expense ratably over the awards’ vesting periods. As equity-based
compensation expense recognized in the Company’s consolidated statements of operations is based on awards ultimately expected to vest, it
has been reviewed for estimated forfeitures. Further, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
Restricted Stock Units:
RSUs held by certain employees of the Company are accounted for as equity awards, and in accordance with U.S. GAAP, the
Company is required to record an expense for the portion of the RSUs that is ultimately expected to vest. The grant-date fair value of RSUs is
amortized to expense ratably over the awards’ expected vesting periods. The non-cash equity-based amortization expense is reflected as a
component of “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the Company’s
consolidated statements of operations.
Restricted Stock:
Restricted stock provided to certain employees by the Company is accounted for as an equity award, and as per the U.S. GAAP
guidance, the Company is required to record an expense for the portion of the restricted stock that is ultimately expected to vest. The
Company has granted restricted stock that is fully vested and 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. Such shares of restricted stock are generally saleable by partners in five to ten years. Because the restricted stock is
not subject to continued employment or service, the grant-date fair value of the restricted stock is expensed on the date of grant. The non-cash
equity-based expense is reflected as a component of “Equity-based compensation and allocations of net income to limited partnership units
and FPUs” in the Company’s consolidated statements of operations.
153
Limited Partnership Units:
LPUs in BGC Holdings and Newmark Holdings generally are held by employees of both BGC and Newmark and 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. Following the Spin-Off, the quarterly allocations of net income on BGC Holdings and Newmark Holdings LPUs held by BGC
employees are reflected as a component of compensation expense under “Equity-based compensation and allocations of net income to limited
partnership units and FPUs,” and the quarterly allocations of net income on BGC Holdings LPUs held by Newmark employees are reflected
as a component of “Net income (loss) from continuing operations attributable to noncontrolling interest in subsidiaries” in the Company’s
consolidated statements of operations.
Certain of these LPUs in BGC Holdings and Newmark Holdings, such as REUs, entitle the holders to receive post-termination
payments equal to the notional amount in four equal yearly installments after the holder’s termination. These limited partnership units held by
BGC employees are accounted for as post-termination liability awards under the U.S. GAAP guidance, which requires that the Company
record an expense for such awards based on the change in value at each reporting period and include the expense in the Company’s
consolidated statements of operations as part of “Equity-based compensation and allocations of net income to limited partnership units and
FPUs.” The liability for these limited partnership units held by BGC employees with a post-termination payout amount is included in
“Accrued compensation” on the Company’s consolidated statements of financial condition.
Following the Spin-Off, certain limited partnership units in BGC Holdings are granted exchangeability or redeemed in connection with
the grant of shares of BGC Class A common stock on a one-for-one basis (subject to adjustment), and certain limited partnership units in
Newmark Holdings are granted exchangeability or redeemed in connection with the grant of shares of Newmark Class A common stock
based on the exchange ratio at the time. At the time exchangeability or redemption is granted for BGC employees, the Company recognizes
an expense based on the fair value of the award on that date, which is included in “Equity-based compensation and allocations of net income
to limited partnership units and FPUs” in the Company’s consolidated statements of operations.
Further, certain LPUs in BGC Holdings and Newmark Holdings have a stated vesting schedule and do not receive quarterly allocations
of net income. The grant-date fair value of these LPUs is amortized to expense ratably over the awards’ expected vesting periods. The non-
cash equity-based amortization expense is reflected as a component of “Equity-based compensation and allocations of net income to limited
partnership units and FPUs” in the Company’s consolidated statements of operations.
In addition, Preferred Units are granted in connection with the grant of certain LPUs, such as PSUs, that may be granted
exchangeability or redeemed in connection with the grant of shares of common stock to cover the withholding taxes owed by the unit holder,
rather than issuing the gross amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes.
Each quarter, the net profits of BGC Holdings and Newmark Holdings are allocated to Preferred 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 interests and are
generally contingent upon services being provided by the unit holder. The Preferred Units are not entitled to participate in partnership
distributions other than with respect to the Preferred Distribution. Preferred Units may not be made exchangeable into common stock and are
only entitled to the Preferred Distribution, and accordingly they are not included in the fully diluted share count. The quarterly allocations of
net income on Preferred Units are reflected the same as those of the LPUs described above in the Company’s consolidated statements of
operations. After deduction of the Preferred Distribution, the remaining partnership interests generally receive quarterly allocations of net
income based on their weighted-average pro-rata share of economic ownership of the operating subsidiaries.
For additional information, see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings.”
Redeemable Partnership Interest:
Redeemable partnership interest represents limited partnership interests in BGC Holdings held by Founding/Working Partners. See
Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings” for additional information related to the FPUs.
Contingent Class A Common Stock:
In connection with certain acquisitions, the Company committed to issue shares of the Company’s Class A common stock upon the
achievement of certain performance targets. The contingent shares met the criteria for liability classification, are measured at fair value on a
recurring basis and presented in “Accounts payable, accrued and other liabilities” in the Company’s consolidated statements of financial
condition. Realized and unrealized gains (losses) resulting from changes in fair value are reported in “Other income (loss)” in the Company’s
consolidated statements of operations.
Noncontrolling Interest in Subsidiaries:
Noncontrolling interest in subsidiaries represents equity interests in consolidated subsidiaries that are not attributable to the Company,
such as Cantor units and the noncontrolling interest holders’ proportionate share of the profit or loss associated with joint ownership of the
Company’s administrative services company in the U.K. (Tower Bridge).
In addition, prior to the Spin-Off, the Company’s noncontrolling interest in subsidiaries included equity interests in Newmark and its
consolidated subsidiaries that were not attributable to BGC, such as Cantor’s limited partnership interest in Newmark Holdings, the
154
noncontrolling interest holders’ proportionate share of the profit or loss associated with Newmark’s affiliate entities, the portion of Newmark
owned by the public, and the EPUs issued by Newmark OpCo in the Newmark OpCo Preferred Investment.
Foreign Currency Transactions and Translation:
Assets and liabilities denominated in nonfunctional currencies are converted at rates of exchange prevailing on the date of the
Company’s consolidated statements of financial condition, and revenues and expenses are converted at average rates of exchange for the
period. Gains and losses on remeasurement of foreign currency transactions denominated in nonfunctional currencies are recognized within
“Other expenses” in the Company’s consolidated statements of operations. Gains and losses on translation of the financial statements of non-
U.S. operations into U.S. dollar reporting currency of the Company are presented as foreign currency translation adjustments within “Other
comprehensive income (loss), net of tax” in the Company’s consolidated statements of comprehensive income and as part of “Accumulated
other comprehensive income (loss)” in the Company’s consolidated statements of financial condition.
Derivative Financial Instruments:
Derivative contracts are instruments, such as futures, forwards, options or swaps contracts, that derive their value from underlying
assets, indices, reference rates or a combination of these factors. Derivative instruments may be listed and traded on an exchange, or they may
be privately negotiated contracts, which are often referred to as OTC derivatives. Derivatives may involve future commitments to purchase or
sell financial instruments or commodities, or to exchange currency or interest payment streams. The amounts exchanged are based on the
specific terms of the contract with reference to specified rates, securities, commodities, currencies or indices.
U.S. GAAP 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 of offset exists under an enforceable netting agreement. Derivative contracts are recorded as part of receivables from
or payables to broker-dealers, clearing organizations, customers and related broker-dealers in the Company’s consolidated statements of
financial condition.
4.
Prior Periods’ Financial Statement Revisions
During the fourth quarter of 2020, the Company’s management identified the theft of U.K. tax payment related funds from the
Company. The theft, which occurred over several years ending September 2020, was perpetrated by two individuals associated with the
Company, and did not involve the operations or business of the Company. Litigation has commenced against the two individuals seeking
recovery of stolen amounts. The cumulative impact to the Company’s ”Consolidated net income (loss)” as a result of the theft was
determined to be $35.2 million. As a result, the Company has revised its previously issued financial statements as of and for the years ended
December 31, 2019 and 2018, as well as the first three quarters of 2020 and all interim periods of 2019.
The Company assessed the materiality of these revisions on prior periods’ financial statements in accordance with SEC Staff
Accounting Bulletin Topic 1.M, Materiality, codified in ASC Topic 250, Accounting Changes and Error Corrections, and concluded that the
revisions were not material to the prior annual or interim periods. Although the revisions were not material to any previously issued financial
statements, correcting the accumulated revision in 2020 would have been material to the Company’s consolidated financial statements for the
year ended December 31, 2020. Accordingly, the Company has concluded that an amendment of previously filed periodic reports is not
required. Therefore, the Company has revised the historical periods in this Annual Report on Form 10-K, and the historical interim periods
that will be presented in the Company's prospective filings. The Company is revising other prior period financial statements to reflect certain
previously unrecorded immaterial adjustments, primarily related to BGC’s provision (benefit) for income taxes, in the Company’s
consolidated financial statements for the periods stated above. The accompanying notes to the consolidated financial statements further
reflect the impact of these revisions. The Company has also reflected the impact of these revisions in the applicable unaudited quarterly
financial results presented in Note 5—“Quarterly Results of Operations (Unaudited).”
The following table includes the effects of the revisions on the "Additional paid-in capital", "Retained deficit" and “Noncontrolling
interest in subsidiaries” beginning balances as of January 1, 2018 which represents the cumulative impact to periods prior to 2018.
As Reported
$
$
$
1,763,371 $
(859,009 ) $
505,855 $
As of January 1, 2018
Adjustments
As Revised
642 $
(7,866 ) $
(4,647 ) $
1,764,013
(866,875 )
501,208
Additional paid-in capital
Retained deficit
Noncontrolling interest in subsidiaries
155
The following table presents the effect of the resulting revision on the consolidated statements of financial condition as of December
31, 2019.
Assets
Accrued commissions and other receivables, net
Other assets
Total assets
Liabilities, Redeemable Partnership Interest, and Equity
Accounts payable, accrued and other liabilities
Total liabilities
Equity
Stockholders’ equity:
Additional paid-in capital
Retained deficit
Total stockholders’ equity
Noncontrolling interest in subsidiaries
Total equity
As Reported
December 31, 2019
Adjustments
As Revised
778,415
446,371
3,916,120 $
$
9,869
925
10,794 $
788,284
447,296
3,926,914
1,283,046
3,148,745
29,563
29,563
1,312,609
3,178,308
2,271,947
(1,241,754 )
685,826
57,911
743,737
3,916,120 $
156
(11,335 )
(11,179 )
(7,590 )
(18,769 )
10,794 $
2,272,103
(1,253,089 )
674,647
50,321
724,968
3,926,914
Total liabilities, redeemable partnership interest, and equity
$
The following tables present the effect of the resulting revision on the consolidated statements of operations for the years ended
December 31, 2019 and 2018.
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Occupancy and equipment
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock outstanding
As Reported
Year Ended December 31, 2019
Adjustments
As Revised
1,127,911
(2,000 )
1,125,911
165,612
1,293,523
184,807
59,077
107,423
2,021,606
32,953
55,489
138,114
53,171
84,943 $
5,013
3,013
(1,600 )
1,169
11,026
13,608
(2,442 )
(2,442 )
(16,050 )
(3,360 )
(12,690 ) $
29,236
55,707 $
(4,545 )
(8,145 ) $
55,707 $
0.16 $
344,332
83,531 $
0.16 $
524,550
(8,145 ) $
(0.02 ) $
—
(21,477 ) $
(0.03 ) $
(64,807 )
170,625
1,296,536
183,207
60,246
118,449
2,035,214
30,511
53,047
122,064
49,811
72,253
24,691
47,562
47,562
0.14
344,332
62,054
0.13
459,743
$
$
$
$
$
$
156
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Occupancy and equipment
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss) from continuing operations
Consolidated net income (loss) from discontinued operations, net of tax
Consolidated net income (loss)
Less: Net income (loss) from continuing operations attributable to
noncontrolling interest in subsidiaries
Less: Net income (loss) from discontinued operations attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share from continuing operations
Net income (loss) from continuing operations available to common stockholders
Basic earnings (loss) per share from continuing operations
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share from continuing operations
Net income (loss) from continuing operations for fully diluted shares
Fully diluted earnings (loss) per share from continuing operations
Fully diluted weighted-average shares of common stock outstanding
$
$
$
$
$
$
$
As Reported
Year Ended December 31, 2018
Adjustments
As Revised
1,001,623
3,170
1,004,793
205,070
1,206,693
149,594
41,733
64,309
1,815,838
50,468
57,845
179,817
76,120
103,697 $
176,169
279,866 $
(5,013 )
(1,843 )
1,600
761
7,560
8,078
177
177
(7,901 )
(12,352 )
4,451 $
2,293
6,744 $
200,057
1,204,850
151,194
42,494
71,869
1,823,916
50,645
58,022
171,916
63,768
108,148
178,462
286,610
29,993
1,300
31,293
52,353
197,520 $
768
4,676 $
53,121
202,196
73,704 $
0.23 $
322,141
73,704 $
0.23 $
323,844
3,151 $
0.01 $
—
3,151 $
0.01 $
— $
76,855
0.24
322,141
76,855
0.24
323,844
157
The following tables present the effect of the resulting revision on the consolidated statements of cash flows for the years ended
December 31, 2019 and 2018.
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
Adjustments to reconcile consolidated net income (loss) to net cash provided by
(used in) operating activities:
Equity-based compensation and allocations of net income to limited partnership units
and FPUs
Loss (gains) on other investments
Deferred tax provision (benefit)
Consolidated net income (loss), adjusted for non-cash and non-operating items
Decrease (increase) in operating assets:
Accrued commissions receivable, net
Other assets
Increase (decrease) in operating liabilities:
Accrued compensation
Accounts payable, accrued and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities
Effect of exchange rate changes on Cash and cash equivalents,
and Cash segregated under regulatory requirements
Net increase (decrease) in Cash and cash equivalents, and
Cash segregated under regulatory requirements
Cash and cash equivalents, and Cash segregated under
regulatory requirements at beginning of period
Cash and cash equivalents, and Cash segregated under
regulatory requirements at end of period
As Reported
Year Ended December 31, 2019
Adjustments
As Revised
$
84,943 $
(12,690 ) $
72,253
165,612
(22,785 )
(1,803 )
343,605
(12,418 )
3,784
(4,131 )
(34,840 )
239,062 $
5,013
4,622
(2,393 )
(5,448 )
(9,869 )
1,455
(3,100 )
16,962
— $
170,625
(18,163 )
(4,196 )
338,157
(22,287 )
5,239
(7,231 )
(17,878 )
239,062
(40,602 ) $
— $
(40,602 )
18,246 $
— $
18,246
2,630
—
2,630
219,336 $
—
219,336
416,778
—
416,778
$
$
$
$
636,114 $
— $
636,114
158
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
Less: Consolidated net income from discontinued operations, net of tax
Adjustments to reconcile consolidated net income (loss) to net cash provided by
(used in) operating activities:
Employee loan amortization and reserves on employee loans
Equity-based compensation and allocations of net income to limited partnership units
and FPUs
Loss (gains) on other investments
Deferred tax provision (benefit)
Other
Consolidated net income (loss), adjusted for non-cash and non-operating items
Decrease (increase) in operating assets:
Reverse repurchase agreements
Other assets
Increase (decrease) in operating liabilities:
Repurchase agreements
Accrued compensation
Payables to broker-dealers, clearing organizations, customers and related broker-dealers
Accounts payable, accrued and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities
Net cash provided by (used in) operating activities from discontinued operations
Net cash provided by (used in) investing activities from discontinued operations
Net cash provided by (used in) financing activities from discontinued operations
Effect of exchange rate changes on Cash and cash equivalents,
and Cash segregated under regulatory requirements
Net increase (decrease) in Cash and cash equivalents, and
Cash segregated under regulatory requirements
Cash and cash equivalents, and Cash segregated under
regulatory requirements at beginning of period
Cash and cash equivalents, and Cash segregated under
regulatory requirements at end of period
As Reported
Year Ended December 31, 2018
Adjustments
As Revised
$
279,866 $
(176,169 )
6,744 $
(2,293 )
286,610
(178,462 )
13,015
3,445
16,460
205,070
(38,491 )
(22,635 )
—
324,291
986
(30,924 )
—
(52,953 )
165,517
63,214
(67,345 ) $
(5,013 )
(4,622 )
(1,102 )
4,445
1,604
(986 )
5,581
986
3,100
1,926
(12,211 )
— $
200,057
(43,113 )
(23,737 )
4,445
325,895
—
(25,343 )
986
(49,853 )
167,443
51,003
(67,345 )
9,236 $
— $
9,236
50,888 $
(748,231 )
18,347
367,931
— $
—
—
—
50,888
(748,231 )
18,347
367,931
(10,838 )
—
(10,838 )
(380,012 ) $
—
(380,012 )
796,790
—
796,790
$
$
$
$
416,778 $
— $
416,778
The following tables present the effect of the resulting revision on the consolidated statements of changes in equity for the years ended
December 31, 2019 and 2018.
159
As Reported Adjustments As Revised As Reported Adjustments As Revised
As Reported Adjustments As Revised
Reported Adjustments As Revised
BGC Partners, Inc. Stockholders
As
Additional
Paid-in
Capital
$ 2,208,221 $
—
Additional
Paid-in
Capital
Additional
Paid-in
Capital
Retained
Deficit
Retained
Deficit
Retained
Deficit
(4,768 ) $ 2,203,453 $ (1,105,019 ) $
55,707
—
—
(3,190 ) $ (1,108,209 ) $
47,562
(8,145 )
Noncontrolling
Interest in
Subsidiaries
94,801 $
29,236
Noncontrolling
Interest in
Subsidiaries
(5,435 ) $
(4,545 )
Noncontrolling
Interest in
Subsidiaries Total
Total
89,366 $ 863,174 $ (13,393 ) $ 849,781
(12,690 ) 72,253
24,691 84,943
Total
51,531
$ 2,271,947 $
4,924
—
—
156 $ 2,272,103 $ (1,241,754 ) $ (11,335 ) $ (1,253,089 ) $
56,455
—
27,463
57,911 $
2,390
(7,590 ) $
7,314 86,458
29,853 79,144
50,321 $ 743,737 $ (18,769 ) $ 724,968
Balance, January 1, 2019
Consolidated net income (loss)
Grant of exchangeability and
redemption of limited partnership
interests, issuance of
15,008,431 shares
Balance, December 31, 2019
As Reported Adjustments As Revised As Reported Adjustments As Revised
As Reported Adjustments As Revised
As Reported Adjustments As Revised
BGC Partners, Inc. Stockholders
Additional
Paid-in
Capital
$ 1,763,371 $
—
Additional
Paid-in
Capital
Additional
Paid-in
Capital
Retained
Deficit
Retained
Deficit
Retained
Deficit
642 $ 1,764,013 $ (859,009 ) $
197,520
—
—
(7,866 ) $ (866,875 ) $
202,196
4,676
Noncontrolling
Interest in
Subsidiaries
505,855 $
82,346
Noncontrolling
Interest in
Subsidiaries
(4,647 ) $
2,068
Noncontrolling
Interest in
Subsidiaries
Total
Total
Total
501,208 $ 1,139,741 $ (11,871 ) $ 1,127,870
6,744 286,610
84,414 279,866
79,556 245,966
—
(7,314 ) 238,652
(952 )
89,366 $ 863,174 $ (13,393 ) $ 849,781
(952 )
(335 )
Balance, January 1, 2018
Consolidated net income (loss)
Grant of exchangeability
and redemption of limited
partnership interests, issuance
of 18,287,721 shares
Other
Balance, December 31, 2018
163,706
—
$ 2,208,221 $
(4,793 ) 158,913
—
—
(617 )
(4,768 ) $ 2,203,453 $ (1,105,019 ) $
(617 )
—
—
—
—
(3,190 ) $ (1,108,209 ) $
82,077
—
94,801 $
(2,521 )
(335 )
(5,435 ) $
160
Certain prior period line items in the consolidated statements of comprehensive income (loss) were affected by the revisions of
previously issued financial statements. All of the changes in the consolidated statements of comprehensive income were related to the change
in net income, which has been addressed through the preceding disclosures.
5.
Quarterly Results of Operations (Unaudited)
The following tables present the revisions to the Company’s previously issued financial statements for the relevant quarterly periods of
2020 and 2019.
As described in Note 4—“Prior Periods’ Financial Statement Revisions,” during 2020 the Company’s management identified the theft
of U.K. tax payment related funds from the Company. As a result, the Company has revised its previously issued financial statements. The
effect of the revision on the 2020 and 2019 previously issued unaudited quarterly financial results is presented in the tables below. Certain
prior period line items in the consolidated statements of comprehensive income (loss) were affected by the revisions of previously issued
financial statements, in which all of the changes were related to the change in net income.
161
Revenues:
Commissions
Principal transactions
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total expenses
Other income (losses) , net:
Gain (loss) on divestitures and sale of investments
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
December 31,
2020
September 30,
2020
(As Revised)
June 30,
2020
(As Revised)
March 31,
2020
(As Revised)
$
377,146 $
73,687
4,857
20,860
(783 )
3,659
479,426
352,027 $
65,182
8,814
21,523
2,418
5,075
455,039
382,640 $
99,453
6,562
20,139
6,536
3,758
519,088
455,855
113,311
5,521
19,398
4,161
4,921
603,167
258,687
244,419
283,616
344,928
80,515
339,202
45,723
4,954
18,072
30,470
6,891
13,646
21,811
21,574
502,343
403
1,354
1,687
3,444
(19,473 )
(6,729 )
(12,744 ) $
33,007
277,426
45,224
7,610
15,637
30,088
5,943
12,933
19,665
28,348
442,874
(9 )
1,527
4,779
6,297
18,462
8,558
9,904 $
27,819
311,435
47,247
5,194
19,805
30,524
6,634
13,520
17,625
21,480
473,464
—
1,119
1,129
2,248
47,872
8,599
39,273 $
42,204
387,132
51,074
5,435
19,956
30,521
18,699
19,277
17,506
17,531
567,131
—
1,023
(6,015 )
(4,992 )
31,044
10,875
20,169
(10,406 )
(2,338 ) $
251
9,653 $
11,354
27,919 $
6,495
13,674
(2,338 ) $
(0.01 ) $
9,653 $
0.03 $
27,919 $
0.08 $
13,674
0.04
365,259
363,244
360,614
358,001
$
$
$
$
$
$
(2,338 ) $
(0.01 ) $
15,278 $
0.03 $
40,173 $
0.07 $
19,325
0.04
365,259
549,244
546,123
538,442
162
Revenues:
Commissions
Principal transactions
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total expenses
Other income (losses) , net:
Gain (loss) on divestitures and sale of investments
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
(As Revised)
$
382,897 $
71,725
8,218
18,151
2,865
3,300
487,156
409,765 $
75,536
8,208
18,364
3,976
5,288
521,137
422,974 $
90,432
7,221
18,741
7,813
4,006
551,187
430,182
84,230
5,795
17,910
3,665
2,969
544,751
268,696
278,744
290,271
288,200
69,389
338,085
47,387
2,858
27,553
29,715
21,432
16,377
16,354
29,487
529,248
(14 )
1,064
11,642
12,692
(29,400 )
4,075
(33,475 ) $
44,093
322,837
44,709
7,123
21,262
29,882
20,320
15,831
15,403
42,257
519,624
—
1,530
2,095
3,625
5,138
6,691
(1,553 ) $
45,002
335,273
45,109
6,457
23,347
29,974
21,491
16,791
15,136
21,354
514,932
(1,619 )
738
194
(687 )
35,568
13,261
22,307 $
12,141
300,341
46,002
2,927
20,005
30,411
18,402
14,618
13,353
25,351
471,410
20,054
783
16,580
37,417
110,758
25,784
84,974
(12,914 )
(20,561 ) $
4,752
(6,305 ) $
8,335
13,972 $
24,518
60,456
(20,561 ) $
(0.06 ) $
(6,305 ) $
(0.02 ) $
13,972 $
0.04 $
60,456
0.18
351,431
346,060
341,272
338,403
$
$
$
$
$
$
(20,561 ) $
(0.06 ) $
(6,305 ) $
(0.02 ) $
21,549 $
0.04 $
88,670
0.17
351,431
346,060
522,984
516,066
163
Expenses:
Compensation and employee benefits
Total compensation and employee benefits
Interest expense
Other expenses
Total expenses
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
Expenses:
Compensation and employee benefits
Total compensation and employee benefits
Interest expense
Other expenses
Total expenses
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
Three Months Ended September 30, 2020
As Reported
Adjustments
As Revised
244,240
277,247
19,488
18,458
432,628
28,708
3,778
24,930 $
179
179
177
9,890
10,246
(10,246 )
4,780
(15,026 ) $
5,549
19,381 $
(5,298 )
(9,728 ) $
244,419
277,426
19,665
28,348
442,874
18,462
8,558
9,904
251
9,653
19,381 $
0.05 $
(9,728 ) $
(0.02 ) $
9,653
0.03
363,244
—
363,244
29,575 $
0.05 $
(14,297 ) $
(0.02 ) $
15,278
0.03
549,244
—
549,244
Three Months Ended June 30, 2020
As Reported
Adjustments
As Revised
283,437
311,256
17,457
21,499
473,136
48,200
8,641
39,559 $
11,460
28,099 $
179
179
168
(19 )
328
(328 )
(42 )
(286 ) $
(106 )
(180 ) $
283,616
311,435
17,625
21,480
473,464
47,872
8,599
39,273
11,354
27,919
28,099 $
0.08 $
(180 ) $
— $
27,919
0.08
360,614
—
360,614
40,436 $
0.07 $
(263 ) $
— $
40,173
0.07
546,123
—
546,123
$
$
$
$
$
$
$
$
$
$
$
$
164
Three Months Ended March 31, 2020
As Reported
Adjustments
As Revised
344,749
386,953
17,334
19,188
568,437
29,738
8,706
21,032 $
6,718
14,314 $
179
179
172
(1,657 )
(1,306 )
1,306
2,169
(863 ) $
(223 )
(640 ) $
344,928
387,132
17,506
17,531
567,131
31,044
10,875
20,169
6,495
13,674
14,314 $
0.04 $
(640 ) $
— $
13,674
0.04
358,001
—
358,001
20,259 $
0.04 $
(934 ) $
— $
19,325
0.04
538,442
—
538,442
$
$
$
$
$
$
Three Months Ended December 31, 2019
Adjustments
As Revised
As Reported
271,296
340,685
48,987
15,636
18,886
522,129
9,462
10,512
(24,461 )
2,095
(26,556 ) $
(10,313 )
(16,243 ) $
(16,243 ) $
(0.05 ) $
351,431
(16,243 ) $
(0.05 ) $
351,431
(2,600 )
(2,600 )
(1,600 )
718
10,601
7,119
2,180
2,180
(4,939 )
1,980
(6,919 ) $
(2,601 )
(4,318 ) $
(4,318 ) $
(0.01 ) $
—
(4,318 ) $
(0.01 ) $
—
268,696
338,085
47,387
16,354
29,487
529,248
11,642
12,692
(29,400 )
4,075
(33,475 )
(12,914 )
(20,561 )
(20,561 )
(0.06 )
351,431
(20,561 )
(0.06 )
351,431
$
$
$
$
$
$
Expenses:
Compensation and employee benefits
Total compensation and employee benefits
Interest expense
Other expenses
Total expenses
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
Expenses:
Compensation and employee benefits
Total compensation and employee benefits
Occupancy and equipment
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock outstanding
165
Three Months Ended September 30, 2019
As Reported
Adjustments
As Revised
278,544
200
278,744
40,330
318,874
15,258
42,757
516,016
8,746
6,186
2,560 $
6,089
(3,529 ) $
3,763
3,963
145
(500 )
3,608
(3,608 )
505
(4,113 ) $
(1,337 )
(2,776 ) $
44,093
322,837
15,403
42,257
519,624
5,138
6,691
(1,553 )
4,752
(6,305 )
(3,529 ) $
(0.01 ) $
(2,776 ) $
(0.01 ) $
(6,305 )
(0.02 )
346,060
—
346,060
(3,529 ) $
(0.01 ) $
(2,776 ) $
(0.01 ) $
(6,305 )
(0.02 )
346,060
—
346,060
$
$
$
$
$
$
As Reported
Three Months Ended June 30, 2019
Adjustments
As Revised
290,071
200
290,271
43,752
333,823
14,985
21,765
513,742
36,758
14,993
21,765 $
8,154
13,611 $
1,250
1,450
151
(411 )
1,190
(1,190 )
(1,732 )
542 $
181
361 $
45,002
335,273
15,136
21,354
514,932
35,568
13,261
22,307
8,335
13,972
13,611 $
0.04 $
361 $
— $
13,972
0.04
341,272
—
341,272
21,010 $
0.04 $
539 $
— $
21,549
0.04
522,984
—
522,984
$
$
$
$
$
$
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Interest expense
Other expenses
Total expenses
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Interest expense
Other expenses
Total expenses
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
166
As Reported
Three Months Ended March 31, 2019
Adjustments
As Revised
Expenses:
Compensation and employee benefits
Total compensation and employee benefits
Interest expense
Other expenses
Total expenses
Other income (losses) , net:
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) attributable to
noncontrolling interest in subsidiaries
Net income (loss) available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share
Net income (loss) for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock
outstanding
288,000
300,141
13,198
24,015
469,719
21,202
42,039
117,071
29,897
87,174 $
25,306
61,868 $
200
200
155
1,336
1,691
(4,622 )
(4,622 )
(6,313 )
(4,113 )
(2,200 ) $
(788 )
(1,412 ) $
288,200
300,341
13,353
25,351
471,410
16,580
37,417
110,758
25,784
84,974
24,518
60,456
61,868 $
0.18 $
(1,412 ) $
— $
60,456
0.18
338,403
—
338,403
90,765 $
0.18 $
(2,095 ) $
(0.01 ) $
88,670
0.17
516,066
—
516,066
$
$
$
$
$
$
Nine Months Ended September 30, 2020
Adjustments
As Revised
As Reported
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
Adjustments to reconcile consolidated net income (loss) to net cash provided
by (used in) operating activities:
Deferred tax provision (benefit)
Consolidated net income (loss), adjusted for non-cash
and non-operating items
Decrease (increase) in operating assets:
Accrued commissions receivable, net
Other assets
Increase (decrease) in operating liabilities:
Accounts payable, accrued and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities
Effect of exchange rate changes on Cash and cash equivalents and Cash
segregated under regulatory requirements
Net increase (decrease) in Cash and cash equivalents and Cash segregated
under regulatory requirements
Cash and cash equivalents and Cash segregated under regulatory
requirements at beginning of period
Cash and cash equivalents and Cash segregated under regulatory
requirements at end of period
$
85,521 $
(16,175 ) $
69,346
(1,202 )
—
8,000
6,798
306,673
(8,175 )
298,498
92,714
(14,782 )
(900 )
(317 )
91,814
(15,099 )
(48,880 )
141,535 $
9,392
— $
(39,488 )
141,535
(64,749 ) $
— $
(64,749 )
29,830 $
— $
29,830
(6,197 )
—
(6,197 )
100,419
—
100,419
636,114
—
636,114
$
$
$
$
736,533 $
— $
736,533
167
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
Adjustments to reconcile consolidated net income (loss) to net cash provided
by (used in) operating activities:
Impairment of fixed assets, intangible assets and investments
Deferred tax provision (benefit)
Consolidated net income (loss), adjusted for non-cash and non-
operating items
Decrease (increase) in operating assets:
Accrued commissions receivable, net
Other assets
Increase (decrease) in operating liabilities:
Accounts payable, accrued and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities
Effect of exchange rate changes on Cash and cash equivalents and Cash
segregated under regulatory requirements
Net increase (decrease) in Cash and cash equivalents and Cash segregated
under regulatory requirements
Cash and cash equivalents and Cash segregated under regulatory
requirements at beginning of period
Cash and cash equivalents and Cash segregated under regulatory
requirements at end of period
As Reported
Six Months Ended June 30, 2020
Adjustments
As Revised
$
60,591 $
(1,149 ) $
59,442
7,485
722
147
1,900
7,632
2,622
212,363
898
213,261
51,560
8,924
(900 )
(6,808 )
(85,059 )
73,027 $
6,810
— $
50,660
2,116
(78,249 )
73,027
(42,929 ) $
— $
(42,929 )
35,074 $
— $
35,074
(14,286 )
—
(14,286 )
50,886
—
50,886
636,114
—
636,114
$
$
$
$
687,000 $
— $
687,000
As Reported
Three Months Ended March 31, 2020
Adjustments
As Revised
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)
Adjustments to reconcile consolidated net income (loss) to net cash provided
by (used in) operating activities:
Deferred tax provision (benefit)
Consolidated net income (loss), adjusted for non-cash and non-
operating items
Decrease (increase) in operating assets:
Accrued commissions receivable, net
Other assets
Increase (decrease) in operating liabilities:
Accounts payable, accrued and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities
Effect of exchange rate changes on Cash and cash equivalents and Cash
segregated under regulatory requirements
Net increase (decrease) in Cash and cash equivalents and Cash segregated
under regulatory requirements
Cash and cash equivalents and Cash segregated under regulatory
requirements at beginning of period
Cash and cash equivalents and Cash segregated under regulatory
requirements at end of period
$
21,032 $
(863 ) $
20,169
786
1,900
2,686
106,621
1,037
107,658
(59,682 )
7,698
(900 )
(15,626 )
(60,259 )
(71,594 ) $
15,489
— $
(60,582 )
(7,928 )
(44,770 )
(71,594 )
(18,383 ) $
— $
(18,383 )
124,721 $
— $
124,721
(13,496 )
—
(13,496 )
21,248
—
21,248
636,114
—
636,114
$
$
$
$
657,362 $
— $
657,362
168
As
Additional
Paid-in
Capital
Reported Adjustments
Additional
Paid-in
Capital
$ 2,271,947 $
—
$ 2,293,065 $
As
Revised
Additional
Paid-in
Capital
BGC Partners, Inc. Stockholders
As
As
As
Reported Adjustments
Revised As Reported Adjustments As Revised
Reported Adjustments
As
Revised
Retained
Deficit
156 $ 2,272,103 $ (1,241,754 ) $
—
14,314
—
156 $ 2,293,221 $ (1,277,956 ) $
Retained
Deficit
Retained
Deficit
(11,335 ) $ (1,253,089 ) $
13,674
(11,975 ) $ (1,289,931 ) $
(640 )
Noncontrolling
Interest in
Subsidiaries
57,911 $
6,718
56,162 $
Noncontrolling
Interest in
Subsidiaries
(7,590 ) $
(223 )
(7,813 ) $
Noncontrolling
Interest in
Subsidiaries Total
Total
Total
(18,769 ) $ 724,968
(863 ) 20,169
(19,632 ) $ 696,324
BGC Partners, Inc. Stockholders
As
As
As
Revised
Additional
Paid-in
Capital
As
Additional
Paid-in
Capital
Reported Adjustments
Additional
Paid-in
Capital
$ 2,293,065 $
—
$ 2,308,973 $
—
Reported Adjustments
Revised As Reported Adjustments As Revised
Reported Adjustments
Retained
Deficit
156 $ 2,293,221 $ (1,277,956 ) $
Retained
Deficit
Retained
Deficit
(11,975 ) $ (1,289,931 ) $
Noncontrolling
Interest in
Subsidiaries
56,162 $
Noncontrolling
Interest in
Subsidiaries
(7,813 ) $
Noncontrolling
Interest in
Subsidiaries Total
48,349 $ 715,956 $
(19,632 ) $ 696,324
Total
Total
—
28,099
(180 )
27,919
11,460
(106 )
11,354
39,559
(286 ) 39,273
156 $ 2,309,129 $ (1,253,434 ) $
(12,155 ) $ (1,265,589 ) $
64,920 $
(7,919 ) $
57,001 $ 762,678 $
(19,918 ) $ 742,760
As
Revised
50,321 $ 743,737 $
6,495
21,032
48,349 $ 715,956 $
As
As
Additional
Paid-in
Capital
Reported Adjustments
Additional
Paid-in
Capital
$ 2,271,947 $
—
$ 2,308,973 $
As
Revised
Additional
Paid-in
Capital
BGC Partners, Inc. Stockholders
As
As
As
Reported Adjustments
Revised As Reported Adjustments As Revised
Reported Adjustments
As
Revised
Retained
Deficit
156 $ 2,272,103 $ (1,241,754 ) $
—
42,413
—
156 $ 2,309,129 $ (1,253,434 ) $
Retained
Deficit
Retained
Deficit
(11,335 ) $ (1,253,089 ) $
41,593
(12,155 ) $ (1,265,589 ) $
(820 )
Noncontrolling
Interest in
Subsidiaries
57,911 $
18,178
64,920 $
Noncontrolling
Interest in
Subsidiaries
(7,590 ) $
(329 )
(7,919 ) $
Noncontrolling
Interest in
Subsidiaries Total
Total
Total
(18,769 ) $ 724,968
(1,149 ) 59,442
(19,918 ) $ 742,760
BGC Partners, Inc. Stockholders
As
As
As
Revised
Additional
Paid-in
Capital
As
Additional
Paid-in
Capital
Reported Adjustments
Additional
Paid-in
Capital
$ 2,308,973 $
—
$ 2,317,706 $
—
Reported Adjustments
Revised As Reported Adjustments As Revised
Reported Adjustments
Retained
Deficit
156 $ 2,309,129 $ (1,253,434 ) $
Retained
Deficit
Retained
Deficit
(12,155 ) $ (1,265,589 ) $
Noncontrolling
Interest in
Subsidiaries
64,920 $
Noncontrolling
Interest in
Subsidiaries
(7,919 ) $
Noncontrolling
Interest in
Subsidiaries Total
57,001 $ 762,678 $
(19,918 ) $ 742,760
Total
Total
—
19,381
(9,728 )
9,653
5,549
(5,298 )
251
24,930
(15,026 )
9,904
156 $ 2,317,862 $ (1,237,657 ) $
(21,883 ) $ (1,259,540 ) $
73,177 $
(13,217 ) $
59,960 $ 802,625 $
(34,944 ) $ 767,681
As
Revised
50,321 $ 743,737 $
17,849
60,591
57,001 $ 762,678 $
As
BGC Partners, Inc. Stockholders
As
As
As
As
Additional
Paid-in
Capital
Reported Adjustments
Additional
Paid-in
Capital
$ 2,271,947 $
—
$ 2,317,706 $
As
Revised
Additional
Paid-in
Capital
Reported Adjustments
Revised As Reported Adjustments As Revised
Reported Adjustments
Retained
Deficit
156 $ 2,272,103 $ (1,241,754 ) $
61,794
—
—
156 $ 2,317,862 $ (1,237,657 ) $
Retained
Deficit
Retained
Deficit
(11,335 ) $ (1,253,089 ) $
51,246
(10,548 )
(21,883 ) $ (1,259,540 ) $
Noncontrolling
Interest in
Subsidiaries
57,911 $
23,727
73,177 $
Noncontrolling
Interest in
Subsidiaries
(7,590 ) $
(5,627 )
(13,217 ) $
Noncontrolling
Interest in
Subsidiaries Total
50,321 $ 743,737 $
85,521
18,100
59,960 $ 802,625 $
Total
Total
(18,769 ) $ 724,968
(16,175 ) 69,346
(34,944 ) $ 767,681
As
Revised
Balance, January 1, 2020
Consolidated net income (loss)
Balance, March 31, 2020
Balance, April 1, 2020
Consolidated net income (loss)
Balance, June 30, 2020
Balance, January 1, 2020
Consolidated net income (loss)
Balance, June 30, 2020
Balance, July 1, 2020
Consolidated net income (loss)
Balance, September 30, 2020
Balance, January 1, 2020
Consolidated net income (loss)
Balance, September 30, 2020
6.
Acquisitions
Ed Broking
On January 31, 2019, the Company completed the acquisition of Ed Broking, an independent Lloyd's of London insurance broker with a
number of insurance products, including accident and health, aerospace, cargo, energy, financial and political risks, marine, professional and
executive risk, property and casualty, specialty and reinsurance.
Algomi
On March 6, 2020, the Company completed the acquisition of Algomi, a software company that provides technology to bond market
participants to improve their workflow and liquidity by data aggregation, pre-trade information analysis, and execution facilitation.
Other Acquisitions
During the years ended December 31, 2020 and 2019, the Company completed several smaller acquisitions. The aggregate consideration paid
for these acquisitions was not material to the Company’s consolidated financial statements.
169
Total Consideration
The total consideration for all acquisitions during the year ended December 31, 2020 was approximately $9.6 million in total fair value which
was paid in cash. The excess of the consideration over the fair value of the net assets acquired has been recorded as goodwill of approximately $2.8
million. The goodwill figure includes measurement period adjustments of approximately $0.3 million recorded during the year ended December 31,
2020.
The total consideration for all acquisitions during the year ended December 31, 2019 was approximately $102.7 million in total fair value
comprise cash, restricted shares of BGC Class A common stock, and RSUs. The excess of the consideration over the fair value of the net assets
acquired has been recorded as goodwill of approximately $48.7 million.
The results of operations of the Company’s acquisitions have been included in the Company’s consolidated financial statements subsequent to
their respective dates of acquisition. The Company has made preliminary allocations of the consideration to the assets acquired and liabilities assumed
as of the acquisition dates, and expects to finalize its analysis with respect to acquisitions within the first year after the completion of the respective
transaction. Therefore, adjustments to preliminary allocations may occur.
7.
Divestitures
During the year ended December 31, 2019, the Company completed the sale of CSC, which was part of its energy and commodities businesses.
As a result of this sale, the Company recognized a $18.4 million gain, which is included in “Gain (loss) on divestiture and sale of investments” in the
Company’s consolidated statements of operations. The Company had no significant gains or losses from divestitures or sale of investments during the
year ended December 31, 2020. The Company had no gains or losses from divestitures or sale of investments during the year ended December 31,
2018.
170
8.
Earnings Per Share
U.S. GAAP guidance establishes standards for computing and presenting EPS. Basic EPS excludes dilution and is computed by dividing net
income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding and contingent shares for
which all necessary conditions have been satisfied except for the passage of time. Net income (loss) is allocated to the Company’s outstanding
common stock, FPUs, LPUs and Cantor units (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings”). In addition,
the EPUs issued by Newmark OpCo are entitled to a preferred payable-in-kind dividend which are recorded as accretion to the carrying amount of the
EPUs and is a reduction to “Net income (loss) available to common stockholders” for the calculation of the Company’s “Basic earnings (loss) per
share” and “Fully diluted earnings (loss) per share from discontinued operations.”
Basic Earnings Per Share:
The following is the calculation of the Company’s basic EPS from continuing and discontinued operations (in thousands, except per share
data):
Basic earnings (loss) per share:
Net income (loss) from continuing operations
available to common stockholders
Net income (loss) from discontinued operations
available to common stockholders¹
Net income (loss) available to common stockholders
Basic weighted-average shares of common stock
outstanding
Continuing operations
Discontinued operations
Basic earnings (loss) per share
Year Ended December 31,
2019
2018
2020
$
48,908 $
47,562 $
76,855
—
48,908 $
—
47,562 $
121,963
198,818
361,736
344,332
322,141
0.14 $
—
0.14 $
0.14 $
—
0.14 $
0.24
0.38
0.62
$
$
$
1
In accordance with ASC 260, includes a reduction for dividends on preferred stock or units.
Fully Diluted Earnings Per Share:
Fully diluted EPS is calculated utilizing net income (loss) available to common stockholders plus net income allocations to the limited
partnership interests as the numerator. The denominator comprises the Company’s weighted-average number of outstanding BGC shares of common
stock, including contingent shares of BGC common stock, and, if dilutive, the weighted-average number of limited partnership interests, including
contingent units of BGC Holdings, and other contracts to issue shares of BGC common stock, including RSUs. The limited partnership interests
generally are potentially exchangeable into shares of BGC Class A common stock (see Note 2—“Limited Partnership Interests in BGC Holdings and
Newmark Holdings”) and are entitled to their pro-rata share of earnings after the deduction for the Preferred Distribution; as a result, they are
included in the fully diluted EPS computation to the extent that the effect would be dilutive.
171
Continuing Operations
The following is the calculation of the Company’s fully diluted EPS from continuing operations (in thousands, except per share data):
Fully diluted earnings (loss) per share:
Net income (loss) from continuing operations available to
common stockholders
Allocations of net income (loss) to limited partnership
interests, net of tax
Net income (loss) for fully diluted shares
Weighted-average shares:
Common stock outstanding
Partnership units¹
RSUs (Treasury stock method)
Other
Fully diluted weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share from continuing
operations
Year Ended December 31,
2019
2018
2020
$
48,908 $
47,562 $
76,855
21,522
70,430 $
14,492
62,054 $
—
76,855
$
361,736
183,130
737
1,245
344,332
114,006
38
1,367
322,141
—
368
1,335
546,848
459,743
323,844
$
0.13 $
0.13 $
0.24
1
Partnership units collectively include FPUs, LPUs, and Cantor units (see Note 2—“Limited Partnership Interests in BGC Holdings and
Newmark Holdings” for more information).
For the years ended December 31, 2020, 2019 and 2018, approximately 0.7 million, 65.6 million and 163.0 million potentially dilutive
securities, respectively, were excluded from the computation of fully diluted EPS from continuing operations because their effect would have been
anti-dilutive. Anti-dilutive securities for the year ended December 31, 2020 were RSUs. Anti-dilutive securities for the year ended December 31,
2019 included 64.8 million limited partnership interests and 0.8 million RSUs. Anti-dilutive securities for the year ended December 31, 2018 included
162.8 million limited partnership interests and 0.2 million RSUs.
Discontinued Operations
The following is the calculation of the Company’s fully diluted EPS from discontinued operations (in thousands, except per share data):
Fully diluted earnings (loss) per share:
Net income (loss) from discontinued operations available to
common stockholders
Allocations of net income (loss) to limited partnership
interests, net of tax
Net income (loss) for fully diluted shares
Weighted-average shares:
Common stock outstanding
Partnership units¹
RSUs (Treasury stock method)
Other
Fully diluted weighted-average shares of common
stock outstanding
Fully diluted earnings (loss) per share from discontinued
operations
Year Ended
December 31,
2018
$
121,963
$
—
121,963
322,141
—
368
1,335
323,844
$
0.38
1
Partnership units collectively include Founding/Working Partner Units, limited partnership units, and Cantor units (see Note 2—“Limited
Partnership Interests in BGC Holdings and Newmark Holdings” for more information).
For the year ended December 31, 2018 approximately 163.0 million potentially dilutive securities were excluded from the computation of fully
diluted EPS from Discontinued Operations. Anti-dilutive securities for the year ended December 31, 2018 included 162.8 million limited partnership
interests and 0.2 million RSUs.
172
For the years ended year ended December 31, 2020 and 2019, there were no standalone BGC Holdings partnership units excluded from the
fully diluted EPS weighted average computation from continuing and discontinued operations. For the year ended December 31, 2018, there were
approximately 15.6 million of standalone BGC Holdings partnership units excluded from the fully diluted EPS weighted average computation from
continuing and discontinued operations, because the conversion into Class A common stock was contingent on the Spin-Off (see Note 2—“Limited
Partnership Interests in BGC Holdings and Newmark Holdings” for further information on standalone BGC Holdings partnership units). Additionally,
as of December 31, 2020, 2019 and 2018, approximately 27.7 million, 15.8 million and 1.5 million shares, respectively, of contingent shares of BGC
Class A common stock, N units, RSUs, and LPUs were excluded from the fully diluted EPS computations because the conditions for issuance had not
been met by the end of the respective periods.
9.
Stock Transactions and Unit Redemptions
Class A Common Stock
Changes in shares of BGC Class A common stock outstanding for the years ended December 31, 2020 and 2019 were as follows (in
thousands):
Shares outstanding at beginning of period
Share issuances:
Redemptions/exchanges of limited partnership interests¹
Vesting of RSUs
Acquisitions
Other issuances of BGC Class A common stock
Issuance of BGC Class A common stock for general corporate
purposes
Treasury stock repurchases
Forfeitures of restricted BGC Class A common stock
Shares outstanding at end of period
Year Ended December 31,
2019
2020
291,475
307,915
13,190
1,134
391
345
15,008
435
1,039
213
45
(2 )
—
323,018
—
(233 )
(22 )
307,915
1
Included in redemptions/exchanges of limited partnership interests for the year ended December 31, 2020, are 9.5 million shares of BGC Class
A common stock granted in connection with the cancellation of 9.2 million LPUs. Included in redemption/exchanges of limited partnership
interests for the year ended December 31, 2019, are 10.1 million shares of BGC Class A common stock granted in connection with the
cancellation of 11.5 million LPUs. Because LPUs are included in the Company’s fully diluted share count, if dilutive, redemptions/exchanges
in connection with the issuance of BGC Class A common stock would not impact the fully diluted number of shares outstanding.
Class B Common Stock
The Company did not issue any shares of BGC Class B common stock during the years ended December 31, 2020 and 2019. As of December 31,
2020 and 2019, there were 45.9 million shares, respectively, of BGC Class B common stock outstanding.
CEO Program
On April 12, 2017, the Company entered into the April 2017 Sales Agreement, pursuant to which the Company offered and sold up to an
aggregate of 20 million shares of BGC Class A common stock under the CEO Program. Shares of BGC Class A common stock sold under this
Agreement were used for redemptions of limited partnership interests in BGC Holdings and Newmark Holdings, as well as for general corporate
purposes. Under this Agreement, the Company agreed to pay Cantor 2% of the gross proceeds from the sale of shares. As of March 31, 2018, the
Company had sold all 20 million shares of BGC Class A common stock under the April 2017 Sales Agreement.
173
On March 9, 2018, the Company entered into the March 2018 Sales Agreement, pursuant to which the Company may offer and sell up to an
aggregate of $300.0 million of shares of BGC Class A common stock under the CEO Program. Proceeds from shares of BGC Class A common stock
sold under the March 2018 Sales Agreement may be used for the repurchase of shares and the redemptions of limited partnership interests in BGC
Holdings, as well as for general corporate purposes, including acquisitions and the repayment of debt. CF&Co is a wholly-owned subsidiary of Cantor
and an affiliate of the Company. Under the March 2018 Sales Agreement, the Company has agreed to pay CF&Co 2% of the gross proceeds from the
sale of shares. For certain transactions during 2020, the Company paid CF&Co 1% of the gross proceeds from the sale of shares of BGC Class A
common stock in the Company’s CEO program. During the year ended December 31, 2020, the Company sold 0.2 million shares under the March
2018 Sales Agreement for aggregate proceeds of $0.9 million, at a weighted-average price of $4.11 per share. As of December 31, 2020, the
Company had sold 17.6 million shares of BGC Class A common stock (or $210.8 million) under the March 2018 Sales Agreement. For additional
information on the Company’s CEO Program sales agreements, see Note 16—“Related Party Transactions.”
Unit Redemptions and Share Repurchase Program
The Company’s Board and Audit Committee have authorized repurchases of BGC Class A common stock and redemptions of limited
partnership interests or other equity interests in the Company’s subsidiaries. On August 1, 2018, the Company’s Board and Audit Committee
increased the BGC Partners share repurchase and unit redemption authorization to $300.0 million, which may include purchases from Cantor, its
partners or employees or other affiliated persons or entities. As of December 31, 2020, the Company had $249.9 million remaining from its share
repurchase and unit redemption authorization. From time to time, the Company may actively continue to repurchase shares and/or redeem units.
The table below represents the units redeemed and/or shares repurchased for cash and does not include units redeemed/cancelled in connection
with the grant of shares of BGC Class A common stock nor the limited partnership interests exchanged for shares of BGC Class A common stock.
The gross unit redemptions and share repurchases of BGC Class A common stock during the year ended December 31, 2020 were as follows (in
thousands, except for weighted-average price data):
Period
Redemptions1
January 1, 2020—March 31, 2020
April 1, 2020—June 30, 2020
July 1, 2020—September 30, 2020
October 1, 2020—December 31, 2020
Total Redemptions
Repurchases2
January 1, 2020—March 31, 2020
April 1, 2020—June 30, 2020
July 1, 2020—September 30, 2020
October 1, 2020—December 31, 2020
Total Repurchases
Total Redemptions and Repurchases
Total Number
of Units
Redeemed
or Shares
Repurchased
Weighted-
Average Price
Paid per Unit
or Share
Approximate
Dollar Value
of Units and
Shares That May
Yet Be Redeemed/
Purchased
Under the Program
235 $
103
1,481
720
2,539 $
— $
—
2
—
2
2,541 $
4.30
3.05
2.80
1.78
2.67
—
—
2.58
—
2.58
2.67 $
249,908
3
4
During the year ended December 31, 2020, the Company redeemed 1.8 million LPUs at an aggregate redemption price of $5.5 million for a
weighted-average price of $3.03 per unit and 0.7 million FPUs at an aggregate redemption price of $1.3 million for a weighted-average price of
$1.79 per unit. During the year ended December 31, 2019, the Company redeemed 1.4 million LPUs at an aggregate redemption price of
$8.0 million for a weighted-average price of $5.92 per unit and approximately 56.9 thousand FPUs at an aggregate redemption price of $320.6
thousand for a weighted-average price of $5.64 per unit. The table above does not include units redeemed/cancelled in connection with the
grant of 9.5 million shares and 10.1 million shares of BGC Class A common stock during the years ended December 31, 2020 and 2019,
respectively, nor the limited partnership interests exchanged for 3.7 million and 4.4 million shares of BGC Class A common stock during the
years ended December 31, 2020 and 2019, respectively.
During the year ended December 31, 2020, the Company repurchased 2 thousand shares of BGC Class A common stock at an aggregate price
of $6 thousand for a weighted-average price of $2.58 per share. During the year ended December 31, 2019, the Company repurchased
approximately 0.2 million shares of BGC Class A common stock at an aggregate price of $1.2 million for a weighted-average price of $5.30
per share.
174
Redeemable Partnership Interest
The changes in the carrying amount of FPUs for the years ended December 31, 2020 and 2019 were as follows (in thousands):
Balance at beginning of period
Consolidated net income allocated to FPUs
Earnings distributions
FPUs exchanged
FPUs redeemed
Balance at end of period
Year Ended December 31,
2019
2020
$
$
23,638 $
815
(815 )
(1,682 )
(1,282 )
20,674 $
24,706
1,942
(1,942 )
(980 )
(88 )
23,638
10. Securities Owned
Securities owned primarily consist of unencumbered U.S. Treasury bills held for liquidity purposes. Total Securities owned were $58.6 million
and $57.5 million as of December 31, 2020 and 2019, respectively. For additional information, see Note 15—“Fair Value of Financial Assets and
Liabilities.”
11. Collateralized Transactions
Repurchase Agreements
Securities sold under Repurchase Agreements are accounted for as collateralized financing transactions and are recorded at the contractual
amount for which the securities will be repurchased, including accrued interest. As of December 31, 2020 and 2019, Cantor had not facilitated any
Repurchase Agreements between the Company and Cantor.
Securities Loaned
As of December 31, 2020, the Company did not have any Securities loaned transactions with Cantor. As of December 31, 2019, the Company
had Securities loaned transactions of $13.9 million with CF&Co. The fair value of the securities loaned was $13.9 million. As of December 31, 2019,
the cash collateral received from Cantor bore an annual interest rate of 2.45%. These transactions had no stated maturity date.
12. Marketable Securities
Marketable securities consist of the Company’s ownership of equity securities carried at fair value in accordance with ASU 2016-01. The
securities had a fair value of $0.3 million and $14.2 million as of December 31, 2020 and 2019, respectively.
These marketable securities are measured at fair value, with any changes in fair value recognized in earnings and included in “Other income
(loss)” in the Company’s consolidated statements of operations. During the years ended December 31, 2020, 2019 and 2018, the Company recognized
realized and unrealized net gains of $0.4 million, $6.7 million and $9.5 million, respectively, related to sales of shares, the mark-to-market
adjustments on shares and any related hedging transactions, when applicable.
During the years ended December 31, 2020 and 2019, the Company sold marketable securities with a fair value of $14.2 million and $24.6
million, respectively, at the time of sale. The Company did not purchase any marketable securities during the years ended December 31, 2020 and
2019.
175
13. 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
marketable securities (see Note 14—“Derivatives”). As of December 31, 2020 and December 31, 2019, Receivables from and payables to broker-
dealers, clearing organizations, customers and related broker-dealers consisted of the following (in thousands):
Receivables from broker-dealers, clearing organizations,
customers and related broker-dealers:
Contract values of fails to deliver
Receivables from clearing organizations
Other receivables from broker-dealers and customers
Net pending trades
Open derivative contracts
Total
Payables to broker-dealers, clearing organizations, customers
and related broker-dealers:
Contract values of fails to receive
Payables to clearing organizations
Other payables to broker-dealers and customers
Open derivative contracts
Total
December 31,
2020
December 31,
2019
$
$
$
$
158,976 $
126,879
14,237
2,999
931
304,022 $
400,713
134,163
12,769
1,932
1,868
551,445
154,050 $
12,373
11,833
1,460
179,716 $
389,458
11,005
11,950
4,153
416,566
A portion of these receivables and payables are with Cantor. See Note 16—“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 December 31, 2020 have subsequently settled at
the contracted amounts.
14. Derivatives
In the normal course of operations, the Company enters into derivative contracts. These derivative contracts primarily consist of FX swaps,
FX/commodities options, futures and forwards. The Company enters into derivative contracts to facilitate client transactions, hedge principal
positions and facilitate hedging activities of affiliated companies.
Derivative contracts can be exchange-traded or OTC. Exchange-traded derivatives typically fall within Level 1 or Level 2 of the fair value
hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values exchange-traded derivatives using their
closing prices. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to
models, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. For OTC derivatives that trade in
liquid markets, such as forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant
management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.
The Company does not designate any derivative contracts as hedges for accounting purposes. U.S. GAAP guidance requires that an entity
recognize all derivative contracts as either assets or liabilities in the 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 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):
Derivative contract
FX/commodities options
Forwards
FX swaps
Futures
Total
December 31, 2020
Assets
Liabilities
Notional
Amounts1
December 31, 2019
Assets
Liabilities
Notional
Amounts1
$
$
74 $
295
562
—
931 $
— $
4,844 $
215 302,141
319 513,588
6,113,220
926
1,460 $ 6,933,793 $
26 $
564
1,278
—
1,868 $
— $
1,285
2,244
4,487
110,051
555,519
624 11,106,203
4,153 $ 11,776,260
176
1
Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of the Company’s derivative
activity, and do not represent anticipated losses.
Certain of the Company’s FX swaps are with Cantor. See Note 16—“Related Party Transactions” for additional information related to these
transactions.
The replacement costs of contracts in a gain position were $0.9 million and $1.9 million, as of December 31, 2020 and 2019, respectively.
The following tables present information about the offsetting of derivative instruments as of December 31, 2020 and 2019 (in thousands):
Assets
FX/commodities options
Forwards
FX swaps
Futures
Total derivative assets
Liabilities
FX swaps
Forwards
Futures
Total derivative liabilities
Assets
FX/commodities options
Forwards
FX swaps
Futures
Total derivative assets
Liabilities
FX swaps
Forwards
Futures
Total derivative liabilities
December 31, 2020
Gross
Amounts
Gross
Amounts
Offset
Net Amounts
Presented
in the
Statements
of Financial
Condition
74 $
338
583
41,257
42,252 $
340 $
258
42,183
42,781 $
— $
(43 )
(21 )
(41,257 )
(41,321 ) $
(21 )
(43 )
(41,257 )
(41,321 ) $
December 31, 2019
74
295
562
—
931
319
215
926
1,460
Gross
Amounts
Gross
Amounts
Offset
Net Amounts
Presented
in the
Statements
of Financial
Condition
26 $
706
1,672
2,044
4,448 $
2,638 $
1,427
2,668
6,733 $
— $
(142 )
(394 )
(2,044 )
(2,580 ) $
(394 ) $
(142 )
(2,044 )
(2,580 ) $
26
564
1,278
—
1,868
2,244
1,285
624
4,153
$
$
$
$
$
$
$
$
There were no additional balances in gross amounts not offset as of December 31, 2020 and 2019, respectively.
177
The change in fair value of derivative contracts is reported as part of “Principal transactions” in the Company’s consolidated statements of
operations. The change in fair value of equity options related to marketable securities is included as part of “Other income (loss)” in the Company’s
consolidated statements of operations.
The table below summarizes gains and (losses) on derivative contracts for the years ended December 31, 2020, 2019 and 2018 (in thousands):
Derivative contract
Futures
FX swaps
FX/commodities options
Forwards
Equity options
Interest rate swaps
Gains (losses)
2020
Year Ended December 31,
2019
2018
$
$
10,100 $
381
293
97
—
—
10,871 $
15,316 $
2,340
252
(3,597 )
318
—
14,629 $
16,484
1,271
14,657
(222 )
102
(5 )
32,287
15. Fair Value of Financial Assets and Liabilities
Fair Value Measurements on a Recurring Basis
U.S. GAAP guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 measurements—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets
or liabilities.
Level 2 measurements—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable,
either directly or indirectly.
Level 3 measurements—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
As required by U.S. GAAP guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under U.S.
GAAP guidance (in thousands):
Marketable securities
Government debt
FX/commodities options
Securities owned—Equities
Forwards
FX swaps
Futures
Corporate bonds
Total
Assets at Fair Value at December 31, 2020
Level 1
Level 2
Level 3
$
$
349 $
57,918
74
75
—
—
—
—
58,416 $
— $
—
—
—
338
583
41,257
579
42,757 $
Netting and
Collateral
Total
— $
—
—
—
—
—
—
—
— $
— $
—
—
—
(43 )
(21 )
(41,257 )
—
(41,321 ) $
349
57,918
74
75
295
562
—
579
59,852
178
Futures
FX swaps
Forwards
Contingent consideration
Total
Marketable securities
Government debt
FX/commodities options
Securities owned—Equities
Forwards
FX swaps
Futures
Corporate bonds
Total
FX swaps
Forwards
Futures
Contingent consideration
Total
Level 3 Financial Liabilities
$
$
$
$
$
$
Level 1
Liabilities at Fair Value at December 31, 2020
Netting and
Collateral
Level 2
Level 3
— $
—
—
—
— $
42,183 $
340
258
—
42,781 $
— $
—
—
39,791
39,791 $
(41,257 ) $
(21 )
(43 )
—
(41,321 ) $
Assets at Fair Value at December 31, 2019
Total
926
319
215
39,791
41,251
Level 1
Level 2
Level 3
14,228 $
56,761
26
36
—
—
—
—
71,051 $
— $
—
—
—
706
1,672
2,044
728
5,150 $
Netting and
Collateral
Total
— $
—
—
—
—
—
—
—
— $
— $
—
—
—
(142 )
(394 )
(2,044 )
—
(2,580 ) $
14,228
56,761
26
36
564
1,278
—
728
73,621
Level 1
Liabilities at Fair Value at December 31, 2019
Netting and
Collateral
Level 2
Level 3
— $
—
—
—
— $
2,638 $
1,427
2,668
—
6,733 $
— $
—
—
42,159
42,159 $
(394 ) $
(142 )
(2,044 )
—
(2,580 ) $
Total
2,244
1,285
624
42,159
46,312
Changes in Level 3 liabilities measured at fair value on a recurring basis for the year ended December 31, 2020 were as follows (in thousands):
Total realized
and
unrealized
(gains) losses
included in
Net income
(loss)
Unrealized
(gains) losses
included in
Other
comprehensive
income (loss)1
Opening
Balance
as of
January 1,
2020
Purchases/
Issuances
Sales/
Settlements
Closing
Balance at
December 31,
2019
Unrealized (gains) losses
for the period included in:
Other
comprehensive
income (loss)
on Level 3
Assets /
Liabilities
Outstanding
at
December 31,
2020
Net income
(loss) on
Level 3
Assets /
Liabilities
Outstanding
at
December 31,
2020
Liabilities
Accounts payable, accrued and
other liabilities:
Contingent consideration1
$
42,159 $
4,661 $
55 $
2,959 $
(10,043 ) $
39,791 $
4,649 $
—
1
Unrealized gains (losses) are reported in “Foreign currency translation adjustments,” in the Company’s consolidated statements of
comprehensive income (loss).
179
Changes in Level 3 liabilities measured at fair value on a recurring basis for the year ended December 31, 2019 were as follows (in thousands):
Total realized
and
unrealized
(gains) losses
included in
Net income
(loss)
Unrealized
(gains) losses
included in
Other
comprehensive
income (loss)
Opening
Balance
as of
January 1,
2019
Purchases/
Issuances
Sales/
Settlements
Closing
Balance at
December 31,
2019
Unrealized
(gains) losses
for the period
on Level 3
Assets /
Liabilities
Outstanding at
December 31,
2019
Liabilities
Accounts payable, accrued and
other liabilities:
Contingent consideration1
$
45,984 $
5,622 $
(3 ) $
— $
(9,444 ) $
42,159 $
5,622
Quantitative Information About Level 3 Fair Value Measurements on a Recurring Basis
The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value
measurement of Level 3 liabilities measured at fair value on a recurring basis (in thousands):
Fair Value as of December 31, 2020
Assets
Liabilities
Valuation Technique Unobservable Inputs
Contingent consideration
$
— $
39,791
Discount rate1
Present value
of expected
payments
Probability of
meeting earnout
and contingencies
Range
6.8%-10.3%
Weighted Average
9.5%
39%-100%
82.9% (2)
1
2
The discount rate is based on the Company’s calculated weighted-average cost of capital.
The probability of meeting the earnout targets was based on the acquirees’ projected future financial performance, including revenues.
Fair Value as of December 31, 2019
Assets
Liabilities
Valuation Technique Unobservable Inputs
Contingent consideration
$
— $
42,159
Discount rate
Present value
of expected
payments
Probability of
meeting earnout
and contingencies
Range
9.2%-10.3%
Weighted Average
9.8%
70%-100%
90.2% (1)
1
The probability of meeting the earnout targets was based on the acquirees’ projected future financial performance, including revenues.
Information About Uncertainty of Level 3 Fair Value 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 significantly lower (higher) fair value
measurement. Significant increases (decreases) in the forecasted financial information would have resulted in a significantly higher (lower) fair value
measurement. As of December 31, 2020 and 2019, the present value of expected payments related to the Company’s contingent consideration was
$39.8 million and $42.2 million, respectively. The undiscounted value of the payments, assuming that all contingencies are met, would be $53.4
million and $54.0 million, respectively.
Fair Value Measurements on a Non-Recurring Basis
Pursuant to the recognition and measurement guidance for equity investments, effective January 1, 2018, equity investments carried under the
measurement alternative are remeasured at fair value on a non-recurring basis to reflect observable transactions which occurred during the period. The
Company applied the measurement alternative to equity securities with the fair value of approximately $83.0 million and $82.5 million, which were
included in “Other assets” in the Company’s consolidated statements of financial condition as of December 31, 2020 and 2019, respectively. These
investments are classified within Level 2 in the fair value hierarchy, because their estimated fair value is based on valuation methods using the
observable transaction price at the transaction date.
180
16. 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 consolidated statements of financial condition, and
the portion of Tower Bridge’s income attributable to Cantor is included as part of “Net income (loss) from continuing operations attributable to
noncontrolling interest in subsidiaries” in the Company’s 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 years ended December 31, 2020, 2019 and 2018, Cantor’s share of the net profit (loss) in Tower Bridge was $0.8 million, $3.1 million
and $1.1 million, respectively. This net profit is included as part of “Net income (loss) attributable to noncontrolling interest in subsidiaries” in the
Company’s consolidated statements of operations.
On September 21, 2018, the Company entered into agreements to provide a guarantee and related obligation to Tower Bridge in connection
with an office lease for the Company’s headquarters in London. The Company is obligated to guarantee the obligations of Tower Bridge in the event
of certain defaults under the applicable lease and ancillary arrangements. In July 2018, the Audit Committee also authorized management of the
Company to enter into similar guarantees or provide other forms of credit support to Tower Bridge or other affiliates of the Company from time to
time in the future in similar circumstances and on similar terms and conditions.
For the years ended December 31, 2020, 2019 and 2018, the Company recognized related party revenues of $25.8 million, $29.4 million and
$24.1 million, respectively, for the services provided to Cantor. These revenues are included as part of “Fees from related parties” in the Company’s
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
administrative services agreement whereby certain employees of Cantor are deemed leased employees of the Company. For the years ended
December 31, 2020, 2019 and 2018, the Company was charged $62.6 million, $59.1 million and $52.4 million, respectively, for the services provided
by Cantor and its affiliates, of which $39.4 million, $39.8 million and $32.2 million, respectively, were to cover compensation to leased employees
for the years ended December 31, 2020, 2019 and 2018. The fees charged by 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 consolidated statements of operations.
The fees charged by Cantor to cover the compensation costs of leased employees are included as part of “Compensation and employee benefits” in
the Company’s consolidated statements of operations.
Newmark Spin-Off
The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their respective subsidiaries. For
additional information, see Note 1—“Organization and Basis of Presentation.”
As a result of the Separation, the limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership
interests in BGC Holdings, including Cantor, whereby each holder of BGC Holdings limited partnership interests at that time held a BGC Holdings
limited partnership interest and a corresponding Newmark Holdings limited partnership interest, which is equal to a BGC Holdings limited
partnership interest multiplied by the Contribution Ratio, divided by the Exchange Ratio. For additional information, see Note 2— “Limited
Partnership Interests in BGC Holdings and Newmark Holdings.”
In addition, CF&Co, a wholly-owned subsidiary of Cantor, was an underwriter of the Newmark IPO. Pursuant to the underwriting agreement,
Newmark paid CF&Co 5.5% of the gross proceeds from the sale of shares of Newmark Class A common stock sold by Cantor in connection with the
Newmark IPO.
On November 30, 2018, the Company completed the Spin-Off. BGC Partners’ stockholders, including Cantor and CFGM, as of the Record
Date received in the Spin-Off 0.463895 of a share of Newmark Class A common stock for each share of BGC Class A common stock held as of the
Record Date, and 0.463895 of a share of Newmark Class B common stock for each share of BGC Class B common stock held as of the Record Date.
In the aggregate, BGC distributed 131.9 million shares of Newmark Class A common stock and 21.3 million shares of Newmark Class B common to
BGC’s stockholders in the Spin-Off. As Cantor and CFGM held 100% of the shares of BGC Class B common stock as of the Record Date, Cantor
and CFGM were distributed 100% of the shares of Newmark Class B common stock in the Spin-Off. In addition, on November 30, 2018, BGC
Partners also caused its subsidiary BGC Holdings to complete the BGC Holdings Distribution (see “Investment in Newmark” below).
Following the Spin-Off and the BGC Holdings Distribution, BGC Partners ceased to be a controlling stockholder of Newmark, and BGC and
its subsidiaries no longer held any shares of Newmark common stock or equity interests in Newmark or its subsidiaries. Cantor continues to control
Newmark and its subsidiaries following the Spin-Off and the BGC Holdings Distribution. See Note 1—“Organization and Basis of Presentation” for
additional information.
181
Subsequent to the Spin-Off, there are remaining partners who hold limited partnership interests in BGC Holdings who are Newmark
employees, and there are remaining partners who hold limited partnership interests in Newmark Holdings who are BGC employees. These limited
partnership interests represent interests that were held prior to the Newmark IPO or were distributed in connection with the Separation. Following the
Newmark IPO, employees of BGC and Newmark only receive limited partnership interests in BGC Holdings and Newmark Holdings, respectively.
As a result of the Spin-Off, as the existing limited partnership interests in BGC Holdings held by Newmark employees and the existing limited
partnership interests in Newmark Holdings held by BGC employees are exchanged/redeemed, the related capital can be contributed to and from
Cantor, respectively.
Investment in Newmark
On March 7, 2018, in the Investment in Newmark, BGC Partners and its operating subsidiaries purchased 16.6 million newly issued
exchangeable limited partnership interests of Newmark Holdings for approximately $242.0 million. The price per Newmark Holdings interest was
based on the $14.57 closing price of Newmark Class A common stock on March 6, 2018 as reported on the Nasdaq Global Select Market. These
newly-issued Newmark Holdings interests were exchangeable, at BGC’s discretion, into either shares of Newmark Class A common stock or shares
of Newmark Class B common stock. BGC made the Investment in Newmark pursuant to an Investment Agreement dated as of March 6, 2018 by and
among BGC, BGC Holdings, BGC U.S. OpCo, BGC Global OpCo, Newmark, Newmark Holdings and Newmark OpCo. The Investment in Newmark
and related transactions were approved by the Audit Committees and Boards of Directors of BGC and Newmark. BGC and its subsidiaries funded the
Investment in Newmark using the proceeds of its CEO Program. Newmark used the proceeds to repay the balance of the outstanding principal amount
under its unsecured senior term loan credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of lenders, that was
guaranteed by BGC. In addition, in accordance with the Separation and Distribution Agreement, BGC owned 7.0 million limited partnership interests
in the Newmark OpCo immediately prior to the Spin-Off, as a result of other issuances of BGC Class A common stock primarily related to the
redemption of LPUs in BGC Holdings and Newmark Holdings.
Prior to and in connection with the Spin-Off, 15.1 million Newmark Holdings interests held by BGC were exchanged into 9.4 million shares of
Newmark Class A common stock and 5.4 million shares of Newmark Class B common stock, and 7.0 million Newmark OpCo interests, held by BGC
were exchanged into 6.9 million shares of Newmark Class A common stock. These shares of Newmark Class A and Newmark Class B common stock
were distributed to the BGC stockholders in the Spin-Off. On November 30, 2018, BGC Partners also caused its subsidiary, BGC Holdings, to
distribute in the BGC Holdings Distribution pro rata all of the 1.5 million exchangeable interests of Newmark Holdings held by BGC Holdings
immediately prior to the effective time of the BGC Holdings Distribution Date to its limited partners entitled to receive distributions on their BGC
Holdings units who were holders of record of such units as of the Record Date (including Cantor and executive officers of BGC). The Newmark
Holdings interests distributed to BGC Holdings partners in the BGC Holdings Distribution are exchangeable for shares of Newmark Class A common
stock, and, in the case of the 0.4 million Newmark Holdings interests received by Cantor, also into shares of Newmark Class B common stock, at the
current Exchange Ratio of 0.9379 shares of Newmark common stock per Newmark Holdings interest (subject to adjustment). See Note 1—
“Organization and Basis of Presentation” for additional information.
[Lucera]
On October 25, 2016, the Board and Audit Committee authorized the purchase of Class B Units of Lucera, representing all of the issued and
outstanding Class B Units of Lucera not already owned by the Company. On November 4, 2016, the Company completed this transaction. As a result
of this transaction, the Company owns % of the ownership interests in Lucera.
In the purchase agreement, Cantor agreed, subject to certain exceptions, not to solicit certain senior executives of Lucera’s business and
was granted the right to be a customer of Lucera’s businesses on the best terms made available to any other customer. The aggregate
purchase price paid by the Company to Cantor consisted of approximately million in cash plus a million post-closing adjustment
determined after closing based on netting Lucera’s expenses paid by Cantor after May 1, 2016 against accounts receivable owed to Lucera
by Cantor for access to Lucera’s business from May 1, 2016 through the closing date. The Company previously had a % ownership
interest in Lucera and accounted for its investment using the equity method. The purchase has been accounted for as a transaction
between entities under common control.
During the years ended December 31, 2020, 2019 and 2018, respectively, Lucera had $[00] million, $0.4 million and $0.8 million in
related party revenues from Cantor. These revenues are included in “Data, software and post-trade” in the Company’s consolidated
statements of operations.
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 consolidated statements of operations. The costs for these services are included as part of the charges to
BGC for services provided by Cantor and its affiliates as discussed in “Service Agreements” above.
Other Agreements with Cantor
182
The Company is authorized to enter into short-term arrangements with Cantor to cover any delivery failures in connection with U.S. Treasury
securities transactions and to share equally in any net income resulting from such transactions, as well as any similar clearing and settlement issues.
As of December 31, 2020 and 2019, Cantor had not facilitated any Repurchase Agreements between the Company and Cantor.
To more effectively manage the Company’s exposure to changes in FX 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 FX currency hedging between the
Company and Cantor. The amount allocated to each party is based on the total net exposure for the Company and Cantor. The ratio of gross exposures
of the Company and Cantor is utilized to determine the shares of profit or loss allocated to each for the period. During the years ended December 31,
2020, 2019 and 2018, the Company recognized its share of FX gains of $1.5 million, gains of $0.3 million and losses of $1.6 million, respectively.
These gains and losses are included as part of “Other expenses” in the Company’s 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 Audit Committee. During
the years ended December 31, 2020, 2019 and 2018, the Company recorded revenues from Cantor entities of
$0.1 million, $0.2 million and $0.3 million, respectively, related to commissions paid to the Company by Cantor. These revenues are included
as part of “Commissions” in the Company’s consolidated statements of operations.
The Company and Cantor are 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 $350.0 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 December
31, 2020 and December 31, 2019, the Company did not have any investments in the program.
On June 5, 2015, the Company entered into the Exchange Agreement with Cantor providing Cantor, CFGM and other Cantor affiliates entitled
to hold BGC 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 34.6
million shares of BGC Class A common stock now owned or subsequently acquired by such Cantor entities for up to an aggregate of 34.6 million
shares of BGC Class B common stock. Such shares of BGC Class B common stock, which currently can be acquired upon the exchange of Cantor
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 enabled the Cantor entities to acquire the same number of shares of BGC
Class B common stock that they were already entitled to acquire without having to exchange its Cantor units in BGC Holdings. The Audit Committee
and Board 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 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.
On November 23, 2018, in the Class B Issuance, BGC Partners issued 10.3 million shares of BGC Partners Class B common stock to Cantor
and 0.7 million shares of BGC Partners Class B common stock to CFGM, in each case in exchange for shares of BGC Class A common stock owned
by Cantor and CFGM, respectively, on a one-to-one basis pursuant to the Exchange Agreement. Pursuant to the Exchange Agreement, no additional
consideration was paid to BGC Partners by Cantor or CFGM for the Class B Issuance. Following this exchange, Cantor and its affiliates have the
right to exchange under the Exchange Agreement up to an aggregate of 23.6 million shares of BGC Class A common stock, now owned or
subsequently acquired, or its Cantor units in BGC Holdings, into shares of BGC Class B common stock. As of December 31, 2020, Cantor and
CFGM do not own any shares of BGC Class A common stock.
The Company and Cantor have agreed that any shares of BGC Class B common stock issued in connection with the Exchange Agreement
would be deducted from the aggregate number of shares of BGC Class B common stock that may be issued to the Cantor entities upon exchange of
Cantor units in BGC Holdings. Accordingly, the Cantor entities will not be entitled to receive any more shares of BGC Class B common stock under
this agreement than they were previously eligible to receive upon exchange of exchangeable limited partnership units.
On March 19, 2018, the Company entered into the BGC Credit Agreement with Cantor. The BGC Credit Agreement provides for each party
and certain of its subsidiaries to issue loans to the other party or any of its subsidiaries in the lender’s discretion in an aggregate principal amount up
to $250.0 million outstanding at any time. The BGC Credit Agreement replaced the previous Credit Facility between BGC and an affiliate of Cantor.
On August 6, 2018, the Company entered into an amendment to the BGC Credit Agreement, which increased the aggregate principal amount that
could be loaned to the other party or any of its subsidiaries from $250.0 million to $400.0 million that can be outstanding at any time. The BGC
Credit Agreement will mature on the earlier to occur of (a) March 19, 2021, after which the maturity date of the BGC Credit Agreement will continue
to be extended for successive one-year periods unless prior written notice of non-extension is given by a lending party to a borrowing party at least six
months in advance of such renewal date and (b) the termination of the BGC Credit Agreement by either party pursuant to its terms. The outstanding
amounts under the BGC Credit Agreement will bear interest for any rate period at a per annum rate equal to the higher of BGC’s or Cantor’s short-
term borrowing rate in effect at such time plus 1.00%. As of December 31, 2020 and 2019, there were no borrowings by BGC or Cantor outstanding
under this Agreement. The Company recorded interest expense related to the BGC Credit Agreement of $0.4 million for the year ended December 31,
2020. The Company did not record any interest income or interest expense related to the agreement for the year ended December 31, 2019. The
183
Company recorded interest expense related to the BGC Credit Agreement of $3.9 million for the year ended December 31, 2018, of which $3.5
million, was allocated to discontinued operations in the Company’s consolidated statements of operations.
As part of the Company’s cash management process, the Company may enter into tri-party reverse repurchase agreements and other short-term
investments, some of which may be with Cantor. As of December 31, 2020 and 2019, the Company had no reverse repurchase agreements.
Receivables from and Payables to Related Broker-Dealers
Amounts due to or from Cantor and Freedom, one of the Company’s equity method investments, are for transactional revenues under a technology
and services agreement with Freedom, 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 consolidated statements of financial condition. As of December 31, 2020 and 2019, the Company had receivables from
Freedom of $1.4 million and $1.3 million, respectively. As of December 31, 2020 and 2019, the Company had $0.6 million and $1.3 million,
respectively, in receivables from Cantor related to open derivative contracts. As of December 31, 2020 and 2019, the Company had $0.1 million and
$2.0 million, respectively, in payables to Cantor related to open derivative contracts. As of December 31, 2020 and 2019, the Company had $26.0
million and $2.3 million, respectively, in 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 distributions that the individuals receive on some or all of their LPUs and from proceeds of the sale of the
employees' shares of BGC Class A common stock 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 December 31, 2020 and 2019, the aggregate balance of employee loans, net, was $408.1 million and $315.6 million, respectively, and is
included as “Loans, forgivable loans and other receivables from employees and partners, net” in the Company’s consolidated statements of financial
condition. Compensation expense for the above-mentioned employee loans for the years ended December 31, 2020, 2019 and 2018 was $67.0
million, $35.7 million and $16.5 million, respectively. The compensation expense related to these employee loans is included as part of
“Compensation and employee benefits” in the Company’s consolidated statements of operations.
Interest income on the above-mentioned employee loans for the years ended December 31, 2020, 2019 and 2018 was $8.8 million, $4.8 million and
$3.6 million, respectively. The interest income related to these employee loans is included as part of “Interest and dividend income” in the Company’s
consolidated statements of operations.
CEO Program and Other Transactions with CF&Co
As discussed in Note 9—“Stock Transactions and Unit Redemptions,” the Company has entered into the April 2017 and March 2018 Sales
Agreements with CF&Co, as the Company’s sales agent under the CEO Program. During the year ended December 31, 2020, the Company sold 0.2
million shares under the March 2018 Sales Agreement for aggregate proceeds of $0.9 million, at a weighted-average price of $4.11 per share. During
the year ended December 31, 2019, the Company sold 0.9 million shares under the CEO Program with CF&Co for aggregate proceeds of $5.3
million, at a weighted-average price of $6.17 per share. For the years ended December 31, 2020, 2019 and 2018, the Company was charged
approximately $9 thousand, $0.1 million and $9.0 million, respectively, for services provided by CF&Co related to the CEO Program with CF&Co.
The net proceeds of the shares sold are included as part of “Additional paid-in capital” in the Company’s consolidated statements of financial
condition.
The Company has engaged CF&Co and its affiliates to act as financial advisors 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 BGC Class A
common stock in full or partial payment of such fees.
On October 3, 2014, management was granted approval by the Board and Audit Committee to enter into stock loan transactions with CF&Co
utilizing equities securities. Such stock loan transactions will bear market terms and rates. As of December 31, 2020, the Company did not have any
Securities loaned transactions with CF&Co. As of December 31, 2019, the Company had Securities loaned transactions of $13.9 million with
CF&Co. The fair value of the securities loaned was $13.9 million (see Note 11—“Collateralized Transactions”). As of December 31, 2019, the cash
collateral received from CF&Co bore an annual interest rate of 2.45%. These transactions have no stated maturity date. Securities loaned transactions
are included in “Securities loaned” in the Company’s consolidated statements of financial condition.
184
On May 27, 2016, the Company issued an aggregate of $300.0 million principal amount of 5.125% Senior Notes. In connection with this
issuance of the 5.125% Senior Notes, the Company recorded $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 purchased $15.0 million of such senior notes and does not hold such notes as of December 31, 2020.
On July 24, 2018, the Company issued an aggregate of $450.0 million principal amount of 5.375% Senior Notes. The 5.375% Senior Notes are
general senior unsecured obligations of the Company. In connection with this issuance of the 5.375% Senior Notes, the Company recorded
approximately $0.3 million in underwriting fees payable to CF&Co and $41 thousand were underwriting fees paid to CastleOak Securities, L.P. The
Company also paid CF&Co an advisory fee of $0.2 million in connection with the issuance. 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.
On September 27, 2019, the Company issued an aggregate of $300.0 million principal amount of 3.750% Senior Notes. In connection with this
issuance of the 3.750% Senior Notes, the Company recorded $0.2 million in underwriting fees payable to CF&Co and $36 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.
On July 10, 2020, the Company issued an aggregate of $300.0 million principal amount of 4.375% Senior Notes. In connection with this
issuance of the 4.375% Senior Notes, the Company recorded $0.2 million in underwriting fees payable to CF&Co and $36 thousand to CastleOak
Securities, L.P as of December 31, 2020. 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 purchased $14.5 million of such senior notes and still holds such notes as of December 31, 2020.
On June 11, 2020, the Company’s Board of Directors and its Audit Committee authorized a debt repurchase program for the repurchase by the
Company of up to $50.0 million of Company Debt Securities. Repurchases of Company Debt Securities, if any, are expected to reduce future cash
interest payments, as well as future amounts due at maturity or upon redemption. Under the authorization, the Company may make repurchases of
Company Debt Securities for cash from time to time in the open market or in privately negotiated transactions upon such terms and at such prices as
management may determine. Additionally, the Company is authorized to make any such repurchases of Company Debt Securities through CF&Co (or
its affiliates), in its capacity as agent or principal, or such other broker-dealers as management shall determine to utilize from time to time, and such
repurchases shall be subject to brokerage commissions which are no higher than standard market commission rates. As of December 31, 2020, the
Company had $50.0 million remaining from its debt repurchase authorization.
On August 14, 2020, the Company completed the cash tender offer to purchase its 5.125% Senior Notes. As of the expiration time, $44.0
million aggregate principal amount of the Notes (14.66%) were validly tendered. CF&Co acted as one of the dealer managers for the offer. As a result
of this transaction, $14 thousand in dealer management fees were paid to CF&Co as of December 31, 2020.
Under rules adopted by the CFTC, all foreign introducing brokers engaging in transactions with U.S. persons are required to register with the
NFA and either meet financial reporting and net capital requirements on an individual basis or obtain a guarantee agreement from a registered FCM.
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. Mint Brokers has entered into guarantees on behalf of the Company, and the Company is required to
indemnify Mint Brokers for the amounts, if any, paid by Mint Brokers on behalf of the Company pursuant to this arrangement. Effective April 1,
2020, these guarantees were transferred to Mint Brokers from CF&Co. During the years ended December 31, 2020, 2019 and 2018, the Company
recorded fees of $0.1 million with respect to these guarantees. These fees were included in “Fees to related parties” in the Company’s consolidated
statements of operations.
Cantor Rights to Purchase Cantor Units from BGC Holdings
Cantor has the right to purchase 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 Article Eight, Section 8.08, of the Second Amended and
Restated BGC Holdings Limited Partnership Agreement (previously 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 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 23.6 million shares of BGC Class B
common stock or, at Cantor’s election or if there are no such additional shares of BGC Class B common stock, shares of BGC Class A common
stock, in each case on a one-for-one basis (subject to customary anti-dilution adjustments).
As of December 31, 2020, there were 2.7 million FPUs in BGC Holdings remaining, which BGC Holdings had the right to redeem or exchange
and with respect to which Cantor had the right to purchase an equivalent number of Cantor units.
185
Transactions with Executive Officers and Directors
On March 2, 2020, the Company granted Stephen M. Merkel 360,065 exchange rights with respect to 360,065 non-exchangeable LPUs
that were previously granted to Mr. Merkel. The resulting 360,065 exchangeable LPUs were immediately exchangeable by Mr. Merkel for an
aggregate of 360,065 shares of BGC Class A common stock. The grant was approved by the Compensation Committee. On March 20, 2020,
the Company redeemed 185,300 of such 360,065 exchangeable LPUs held by Mr. Merkel at the average price of shares of BGC Class A
common stock sold under BGC’s CEO Program from March 10, 2020 to March 13, 2020 less 1% (approximately $4.0024 per LPU, for an
aggregate redemption price of approximately $741,644). The transaction was approved by the Compensation Committee. Additionally, the
Compensation Committee approved the right to exchange for cash 265,568 non-exchangeable PLPUs held by Mr. Merkel, for a payment of
$1,507,285 for taxes when the LPU units are exchanged. In connection with the redemption of the 185,300 LPUs, 122,579 PLPUs were
redeemed for $661,303 for taxes. On July 30, 2020, the Company redeemed the remaining 174,765 exchangeable LPUs held by Mr. Merkel
at the price of $2.76, the closing price of our Class A Common Stock on July 30, 2020. This transaction was approved by the Compensation
Committee. In connection with the redemption of the 174,765 LPUs on July 30, 2020, 142,989 PLPUs were redeemed for $846,182 for taxes.
On March 2, 2020, the Company granted Shaun D. Lynn 883,348 exchange rights with respect to 883,348 non-exchangeable LPUs
that were previously granted to Mr. Lynn. The resulting 883,348 exchangeable LPUs were immediately exchangeable by Mr. Lynn for an
aggregate of 883,348 shares of BGC Class A common stock. The grant was approved by the Compensation Committee. Additionally, the
Compensation Committee approved the right to exchange for cash 245,140 non-exchangeable PLPUs held by Mr. Lynn, for a payment of $
1,099,599 for taxes when the LPU units are exchanged. On July 30, 2020, the Company redeemed 797,222 exchangeable LPUs held by Mr.
Lynn at the price of $2.76, the closing price of our Class A Common Stock on July 30, 2020. This transaction was approved by the
Compensation Committee. In connection with the redemption of the 797,222 exchangeable LPUs, 221,239 exchangeable PLPUs were
redeemed for $992,388 for taxes. In connection with the redemption, Mr. Lynn’s remaining 86,126 exchangeable LPUs and 23,901
exchangeable PLPUs were redeemed for zero upon exchange in connection with his LLP status.
On March 2, 2020, the Company granted Sean A. Windeatt 519,725 exchange rights with respect to 519,725 non-exchangeable LPUs
that were previously granted to Mr. Windeatt. The resulting 519,725 exchangeable LPUs were immediately exchangeable by Mr. Windeatt
for an aggregate of 519,725 shares of BGC Class A common stock. The grant was approved by the Compensation Committee. Additionally,
the Compensation Committee approved the right to exchange for cash 97,656 non-exchangeable PLPUs held by Mr. Windeatt, for a payment
of
$645,779 for taxes when the LPU units are exchanged. On August 5, 2020, the Company redeemed 436,665 exchangeable LPUs held
by Mr. Windeatt at the price of $2.90, the closing price of our Class A common stock on August 5, 2020. This transaction was approved by
the Compensation Committee. In connection with the redemption of the 436,665 exchangeable LPUs, 96,216 exchangeable PLPUs were
redeemed for $637,866 for taxes. In connection with the redemption, 20,849 exchangeable LPUs and 1,440 exchangeable PLPUs were
redeemed for zero upon exchange in connection with Mr. Windeatt’s LLP status.
Additionally, on August 5, 2020, the Company granted Mr. Windeatt 40,437 exchange rights with respect to 40,437 non-exchangeable
LPUs that were previously granted to Mr. Windeatt. The resulting 40,437 exchangeable LPUs were immediately exchangeable by Mr.
Windeatt for an aggregate of 40,437 shares of BGC Class A common stock. The grant was approved by the Compensation Committee.
Additionally, the Compensation Committee approved the right to exchange for cash 21,774 non-exchangeable PLPUs held by Mr. Windeatt.
On August 5, 2020 the Company redeemed these 40,437 exchangeable LPUs held by Mr. Windeatt at the price of $2.90, the closing price of
our Class A common stock on August 5, 2020. This transaction was approved by the Compensation Committee. In connection with the
redemption of these 40,437 exchangeable LPUs, the 21,774 exchangeable PLPUs were redeemed for $136,305 for taxes.
In addition to the foregoing, on August 6, 2020, Mr. Windeatt was granted exchange rights with respect to 43,890 non-exchangeable
Newmark Holding LPUs that were previously granted to Mr. Windeatt. Additionally, Mr. Windeatt was granted the right to exchange for
cash 17,068 non-exchangeable Newmark Holdings PLPUs held by Mr. Windeatt. As these Newmark Holdings LPUs and PLPUs were
previously non-exchangeable, the Company took a transaction charge of $381,961 upon grant of exchangeability. On August 6, 2020,
Newmark redeemed the 40,209 Newmark Holdings exchangeable LPUs held by Mr. Windeatt for an amount equal to the closing price of
Newmark’s Class A Common Stock on August 6, 2020 ($4.16) multiplied by 37,660 (the amount of shares of Newmark’s Class A Common
Stock the 40,209 Newmark Holdings LPUs were exchangeable into based on the Exchange Ratio at August 6, 2020). In connection with the
redemption of these 40,209 exchangeable Newmark Holdings LPUs, 15,637 exchangeable Newmark Holdings PLPUs were redeemed for
$194,086 for taxes. In connection with the redemption, 3,681 exchangeable Newmark Holding LPUs and 1,431 exchangeable Newmark
Holdings PLPUs were redeemed for zero upon exchange in connection with Mr. Windeatt’s LLP status.
On March 27, 2019, the Audit and Compensation Committees authorized the purchase by the Company from Mr. Merkel of up to
250,000 shares of BGC Class A common stock at the closing price on March 26, 2019. Pursuant to this authorization, 233,172 shares of BGC
Class A common stock were purchased by the Company on March 27, 2019 at $5.30 per share, the closing price on March 26, 2019.
On February 27, 2019, the Audit Committee authorized the purchase by Mr. Lutnick’s retirement plan of up to $56,038 of BGC Class
A common stock at the closing price on March 4, 2019. Pursuant to this authorization, 8,980 shares of BGC Class A common stock were
purchased by the plan on March 5, 2019 at $6.24 per share, the closing price on March 4, 2019.
On October 3, 2018, Mr. Lutnick donated an aggregate of 53,368 shares of BGC Class A common stock from his personal asset trust to
a charitable foundation for which his spouse serves as a director. The Company repurchased the 53,368 shares from the charitable foundation
at a price of $11.73 per share, which was the closing price of BGC Class A common stock on that date. The transaction was approved by the
Audit Committee.
186
On February 16, 2018, the Audit Committee authorized the purchase by Mr. Lutnick’s retirement plan of up to $105,000 of BGC Class
A common stock at the closing price on the date of purchase. Pursuant to this authorization, 7,883 shares of BGC Class A common stock
were purchased by the plan on February 26, 2018 at $13.17 per share, the closing price on the date of purchase.
In connection with the Company’s 2018 executive compensation process, the Company’s executive officers received certain
monetization of prior awards as set forth below.
On December 31, 2018, the Compensation Committee approved the cancellation of 113,032 non-exchangeable PSUs held by Mr.
Merkel, and the cancellation of 89,225 non-exchangeable PPSUs (which had a determination price of $5.36 per unit). In connection with
these transactions, the Company issued $1,062,500 in BGC Class A common stock, less applicable taxes and withholdings at a 45% tax rate,
resulting in 113,032 net shares of BGC Class A common stock at a price of $5.17 per share and the payment of $478,123 for taxes.
On December 31, 2018, the Compensation Committee approved the monetization of 760,797 PPSUs held by Mr. Lutnick (which at an
average determination price of $6.57 per share on such date, had a value of $5,000,000). On February 1, 2019, the Compensation Committee
approved a modification which consisted of the following: (i) the right to exchange 376,651 non-exchangeable PSUs held by Mr. Lutnick
into 376,651 non-exchangeable HDUs (which, based on the closing price of BGC Class A common stock of $6.21 per share on such date,
had a value of $2,339,000); and (ii) the right to exchange for cash 463,969 non-exchangeable PPSUs held by Mr. Lutnick, for a payment of
$2,661,000 for taxes when (i) is exchanged.
On December 31, 2018, the Compensation Committee approved the grant of exchange rights to Mr. Windeatt with respect to 139,265
non-exchangeable U.K. LPUs (which at the closing price of $5.17 per share on such date, had a value of $720,000) and the exchange for cash
(at the average determination price of $4.388 per unit) of 63,814 non-exchangeable PLPUs for a payment of $280,002 for taxes. On February
22, 2019, the Compensation Committee approved the grant of exchange rights to Mr. Windeatt with respect to an additional 22,020 non-
exchangeable U.K. LPUs (which at the closing price of $6.26 per share on such date, had a value of $137,845) and the exchange for cash (at
the average determination price of $5.6457 per unit) of 9,495 non-exchangeable PLPUs for a payment of $53,606 for taxes.
On December 31, 2018, the Compensation Committee approved the grant of exchange rights to Mr. Lynn with respect to 750,308 non-
exchangeable U.K. LPUs (which at the closing price of $5.17 per share on such date, had a value of $3,879,092) and the exchange for cash
(at the average determination price of $3.894 per unit) of 287,888 non-exchangeable PLPUs for a payment of $1,120,909 for taxes. On
February 22, 2019, the Compensation Committee approved the grant of exchange rights to Mr. Lynn with respect to an additional 43,131
non- exchangeable U.K. LPUs (which at the closing price of $6.26 per share on such date, had a value of $270,000) and the exchange for
cash (at the average determination price of $4.1239 per unit) of 25,461 non-exchangeable PLPUs for a payment of $105,000 for taxes.
On March 11, 2018, as part of 2017 year-end compensation, the BGC Compensation Committee authorized the Company to issue Mr.
Lutnick $30.0 million of BGC Class A common stock, less applicable taxes and withholdings, based on a price of $14.33 per share, which
was the closing price of BGC Class A common stock on the trading day prior to the date of issuance, which resulted in the net issuance of
979,344 shares of BGC Class A common stock. In exchange, the following equivalent units were redeemed and cancelled: an aggregate of
2,348,479 non-exchangeable LPUs of BGC Holdings consisting of 1,637,215 non-exchangeable BGC Holdings PSUs and 711,264 BGC
Holdings PPSUs, having various determination prices per unit based on the date of the grant, and associated non-exchangeable LPUs of
Newmark Holdings consisting of 774,566 of non-exchangeable Newmark Holdings PSUs and 336,499 of non-exchangeable Newmark
Holdings PPSUs.
Transactions with the Relief Fund
During the year ended December 31, 2015, the Company committed to make charitable contributions to the Cantor Fitzgerald Relief
Fund in the amount of $40.0 million, which the Company recorded in “Other expenses” in the Company’s consolidated statements of
operations for the year ended December 31, 2015. As of December 31, 2020 and 2019, the remaining liability associated with this
commitment was $1.6 million and $4.0 million, respectively, which is included in “Accounts payable, accrued and other liabilities” in the
Company’s consolidated statements of financial condition. Further, for the year ended December 31, 2020, an additional expense and
associated liability to the Cantor Fitzgerald Relief Fund was recorded in the amount of $1.1 million.
Other Transactions
The Company is authorized to enter into loans, investments or other credit support arrangements for 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 February 5, 2020 and February 25, 2021, the Board and Audit Committee
increased the authorized amount by an additional $2.0 million and $1.0 million, respectively, to an aggregate of $20.2 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. During the years ended December 31, 2020 and
2019, the Company made $1.5 million and $1.7 million, respectively, in contributions to Aqua. These contributions are recorded as part of
“Investments” in the Company’s 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
$980.0 thousand. The scheduled maturity date on the subordinated loan is September 1, 2022, 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 consolidated statements of financial condition.
187
On October 25, 2016, the Board and Audit Committee authorized the purchase of Class B Units of Lucera, representing all of the
issued and outstanding Class B Units of Lucera not already owned by the Company. On November 4, 2016, the Company completed this
transaction. As a result of this transaction, the Company owns % of the ownership interests in Lucera.
In the purchase agreement, by which the Company acquired Cantor’s remaining interest in Lucera, Cantor agreed, subject to certain
exceptions, not to solicit certain senior executives of Lucera’s business and was granted the right to be a customer of Lucera’s businesses on
the best terms made available to any other customer.
During the years ended December 31, 2020, 2019 and 2018, respectively, Lucera recognized $0.7 million, $ million and $ million in
related party revenues from Cantor. These revenues are included in “Data, software and post-trade” in the Company’s consolidated
statements of operations.
On December 13, 2017, BGC and Newmark entered into various agreements to separate the business of Newmark from BGC in
anticipation of the Spin-Off which was consummated on November 30, 2018. Effective on November 9, 2020, in furtherance of the
Separation and Spin-Off, BGC has assigned certain of its assets to Cantor. In consideration of the transfer of the assets to Cantor, BGC has
received payment of $4.5 million from Cantor, which represents the aggregate net book value of the assigned assets as of October 31, 2020.
BGC Sublease From Newmark
In May 2020, BGC U.S. OpCo entered into an arrangement to sublease excess space from RKF Retail Holdings LLC, a subsidiary of
Newmark, which sublease was approved by the Audit Committee. The deal is a one-year sublease of approximately 21,000 rentable square
feet in New York City. Under the terms of the sublease, BGC U.S. OpCo will pay a fixed rent amount of $1.1 million in addition to all
operating and tax expenses attributable to the lease. In connection with the sublease, BGC U.S. OpCo paid $0.8 million for the year ended
December 31, 2020.
17.
Investments
Equity Method Investments and Investments Carried Under the Measurement Alternative
(in thousands)
Advanced Markets Holdings
China Credit BGC Money Broking Company Limited
Freedom International Brokerage
Other
Equity method investments
Investments carried under measurement alternative
Total equity method and investments carried under
measurement alternative
Percent
Ownership1
December 31,
2020
December 31,
2019
43 % $
33 %
45 %
$
8,867 $
15,119
9,800
3,873
37,659 $
349
10,259
12,214
10,142
7,385
40,000
349
$
38,008 $
40,349
1
Represents the Company’s voting interest in the equity method investment as of December 31, 2020.
188
The carrying value of the Company’s equity method investments was $37.7 million and $40.0 million as of December 31, 2020 and
2019, respectively, and is included in “Investments” in the Company’s consolidated statements of financial condition.
The Company recognized gains of $5.0 million, $4.1 million and $7.4 million related to its equity method investments for the years
ended December 31, 2020, 2019 and 2018, respectively. The Company’s share of the net gains or losses is reflected in “Gains (losses) on
equity method investments” in the Company’s consolidated statements of operations. For the year ended December 31, 2020, the Company
recorded impairment charges of $3.9 million, relating to existing equity method investments. The impairment was recorded in “Other income
(loss)” in the Company’s consolidated statements of operations. For the years ended December 31, 2019 and 2018, the Company did not
recognize any impairment charges relating to existing equity method investments.
Summarized financial information for the Company’s equity method investments is as follows (in thousands):
Statements of operations:
Total revenues
Total expenses
Net income
Statements of financial condition:
Cash and cash equivalents
Fixed assets, net
Other assets
Total assets
Payables to related parties
Other liabilities
Total partners’ capital
Total liabilities and partners’ capital
Year Ended December 31,
2019
2018
2020
$
$
94,744 $
71,241
23,503 $
77,211 $
61,680
15,531 $
85,619
72,906
12,713
December 31,
2020
2019
$
$
$
89,627 $
2,806
29,065
121,498 $
2,000
70,020
49,478
121,498 $
64,614
3,120
22,782
90,516
2,000
46,287
42,229
90,516
See Note 16—“Related Party Transactions” for information regarding related party transactions with unconsolidated entities included
in the Company’s consolidated financial statements.
Investments Carried Under Measurement Alternative
The Company has acquired equity investments for which it did not have the ability to exert significant influence over operating and
financial policies of the investees. These investments are accounted for using the measurement alternative in accordance with the guidance on
recognition and measurement. The carrying value of these investments was $0.4 million as of December 31, 2020 and 2019, and they are
included in “Investments” in the Company’s consolidated statements of financial condition. The Company did not recognize any gains,
losses, or impairments relating to investments carried under the measurement alternative for the both the years ended December 31, 2020 and
2019.
In addition, the Company owns membership shares, which are included in “Other assets” in the Company’s consolidated statements of
financial condition as of December 31, 2020 and 2019. Prior to January 1, 2018, the equity investments in this line item were accounted for
using the cost method in accordance with U.S. GAAP guidance, Investments—Other. These equity investments are accounted for using the
measurement alternative in accordance with the guidance on recognition and measurement. The Company recognized $0.4 million of
unrealized losses and $18.2 million of unrealized gains to reflect observable transactions for these shares during the years ended December
31, 2020 and 2019, respectively. The unrealized gains (losses) are reflected in “Other income (loss)” in the Company’s consolidated
statements of operations.
Investments in VIEs
Certain of the Company’s equity method investments included in the tables above are considered 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.
189
The following table sets forth the Company’s investment in its unconsolidated VIEs and the maximum exposure to loss with respect to
such entities (in thousands).
December 31, 2020
December 31, 2019
Variable interest entities1
Maximum
Investment
$
1,258 $
Exposure to Loss Investment
2,238 $
4,699 $
Maximum
Exposure to Loss
5,679
1
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 December 31, 2020 and 2019, 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
The Company is invested in a limited liability company that is focused on developing a proprietary trading technology. The limited
liability company is a VIE, and it was determined that the Company is the primary beneficiary of this VIE because the Company 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 $7.2 million and $7.4 million as of December 31, 2020 and 2019, respectively, which
primarily consisted of clearing margin. There were no material restrictions on the consolidated VIE’s assets. The consolidated VIE had total
liabilities of $1.0 million and $2.1 million as of December 31, 2020 and 2019, respectively. The Company’s exposure to economic loss on
this VIE was $4.8 million and $2.8 million as of December 31, 2020 and 2019, respectively.
18. Fixed Assets, Net
Fixed assets, net consisted of the following (in thousands):
Computer and communications equipment
Software, including software development costs
Leasehold improvements and other fixed assets
Less: accumulated depreciation and amortization
Fixed assets, net
December 31,
2020
December 31,
2019
$
$
92,565 $
259,439
120,951
472,955
(258,173 )
214,782 $
95,115
235,230
116,231
446,576
(241,735 )
204,841
Depreciation expense was $24.1 million, $21.5 million and $19.5 million for the years ended December 31, 2020, 2019 and 2018,
respectively. Depreciation is included as part of “Occupancy and equipment” in the Company’s consolidated statements of operations.
The Company has approximately $5.9 million and $6.4 million of asset retirement obligations related to certain of its leasehold
improvements as of December 31, 2020 and 2019, respectively. 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 years ended December 31, 2020, 2019 and 2018, software development costs totaling $54.0 million, $48.8 million and $49.9
million, respectively, were capitalized. Amortization of software development costs totaled $31.8 million, $28.6 million and $24.7 million for
the years ended December 31, 2020, 2019 and 2018, respectively. Amortization of software development costs is included as part of
“Occupancy and equipment” in the Company’s consolidated statements of operations.
190
Impairment charges of $7.0 million, $4.5 million and $1.1 million were recorded for the years ended December 31, 2020, 2019 and
2018, 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
consolidated statements of operations.
19. Goodwill and Other Intangible Assets, Net
The changes in the carrying amount of goodwill for the year ended December 31, 2019 and 2018 were as follows (in thousands):
Balance at December 31, 2018
Acquisitions
Measurement period adjustments
Cumulative translation adjustment
Balance at December 31, 2019
Acquisitions
Measurement period adjustments
Cumulative translation adjustment
Balance at December 31, 2020
Goodwill
504,646
55,872
(7,130 )
357
553,745
3,065
(301 )
(298 )
556,211
$
$
$
For additional information on Goodwill, see Note 6—“Acquisitions.”
Goodwill is not amortized and is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance
with U.S. GAAP guidance on Goodwill and Other Intangible Assets.
The Company completed its annual goodwill impairment testing during the fourth quarters of 2020 and 2019, respectively, which did
not result in any goodwill impairment. See Note 3—“Summary of Significant Accounting Policies” for more information.
Other intangible assets consisted of the following (in thousands, except weighted-average remaining life):
Definite life intangible assets:
Customer-related
Technology
Noncompete agreements
Patents
All other
Total definite life intangible assets
Indefinite life intangible assets:
Trade names
Licenses
Total indefinite life intangible assets
Total
December 31, 2020
Gross Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-
Average
Remaining Life
(Years)
$
252,241 $
24,025
30,715
10,616
29,566
347,163
77,106 $ 175,135
3,994
20,031
1,119
29,596
393
10,223
24,538
5,028
205,179
141,984
79,570
2,408
81,978
—
—
—
79,570
2,408
81,978
$
429,141 $ 141,984 $ 287,157
10.4
1.2
5.9
1.60
8.3
9.9
N/A
N/A
N/A
9.9
191
Definite life intangible assets:
Customer-related
Technology
Noncompete agreements
Patents
All other
Total definite life intangible assets
Indefinite life intangible assets:
Trade names
Licenses
Total indefinite life intangible assets
Total
December 31, 2019
Gross Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-
Average
Remaining Life
(Years)
$ 250,788 $
24,024
30,378
12,232
7,552
324,974
57,332 $ 193,456
7,416
16,608
2,180
28,198
278
11,954
3,195
4,357
207,687
117,287
93,083
2,454
95,537
—
—
—
93,083
2,454
95,537
$ 420,511 $ 117,287 $ 303,224
11.2
2.2
4.2
0.1
9.4
10.8
N/A
N/A
N/A
10.8
Intangible amortization expense was $28.3 million, $29.4 million and $27.3 million for the years ended December 31, 2020, 2019 and
2018, respectively. Intangible amortization is included as part of “Other expenses” in the Company’s consolidated statements of operations.
The Company completed its annual intangible impairment testing during the fourth quarter of 2020. There were no impairment charges
for the Company’s definite and indefinite life intangibles for the years ended December 31, 2020, 2019 and 2018. See Note 3—“Summary of
Significant Accounting Policies” for more information.
The estimated future amortization expense of definite life intangible assets as of December 31, 2020 is as follows (in millions):
2021
2022
2023
2024
2025
2026 and thereafter
Total
$
$
26.5
23.6
21.7
21.3
21.3
90.8
205.2
20. Notes Payable, Other and Short-Term Borrowings
Notes payable, other and short-term borrowings consisted of the following (in thousands):
December 31,
2020
December 31,
2019
Unsecured senior revolving credit agreement
5.125% Senior Notes
5.375% Senior Notes
3.750% Senior Notes
4.375% Senior Notes
Collateralized borrowings
Total Notes payable and other borrowings
Short-term borrowings
Total Notes payable, other and short-term borrowings
$
— $
255,570
446,577
296,903
297,031
19,854
68,948
298,688
445,247
296,129
—
33,675
1,315,935 1,142,687
4,962
$ 1,319,784 $ 1,147,649
3,849
Unsecured Senior Revolving Credit Agreement
On September 8, 2017, the Company entered into a committed unsecured senior revolving credit agreement with Bank of America,
N.A., as administrative agent, and a syndicate of lenders. The revolving credit agreement provided for revolving loans of up to $400.0
million. The maturity date of the facility was September 8, 2019. On November 22, 2017, the Company and Newmark entered into an
amendment to the unsecured senior revolving credit agreement. Pursuant to the amendment, the then-outstanding borrowings of the Company
under the revolving credit facility were converted into the Converted Term Loan. There was no change in the maturity date or interest rate.
Effective December 13, 2017, Newmark assumed the obligations of the Company as borrower under the Converted Term Loan. The
Company remained a borrower under, and retained access to, the revolving credit facility for any future draws, subject to availability which
increased as Newmark repaid the Converted Term Loan. During the year ended December 31, 2018, the Company borrowed $195.0 million
192
under the committed unsecured senior revolving credit agreement and subsequently repaid the $195.0 million during the year. Therefore,
there were no borrowings outstanding as of December 31, 2018. The Company recorded interest expense of $1.0 million for the year ended
December 31, 2018. The Company did not record any interest expense related to the committed unsecured revolving credit agreement for the
years ended December 31, 2020 and 2019.
On November 28, 2018, the Company entered into a new Revolving Credit Agreement with Bank of America, N.A., as administrative
agent, and a syndicate of lenders, which replaced the existing committed unsecured senior revolving credit agreement. The maturity date of
the new Revolving Credit Agreement was November 28, 2020, and the maximum revolving loan balance is $350.0 million. Borrowings
under this Revolving Credit Agreement bear interest at either LIBOR or a defined base rate plus additional margin. On December 11, 2019,
the Company entered into an amendment to the new Revolving Credit Agreement. Pursuant to the amendment, the maturity date was
extended to February 26, 2021. On February 26, 2020, the Company entered into a second amendment to the new Revolving Credit
Agreement, pursuant to which, the maturity date was extended by two years to February 26, 2023. There was no change to the interest rate or
the maximum revolving loan balance. On July 14, 2020, the Company repaid in full the $225.0 million borrowings outstanding under the new
Revolving Credit Agreement. As of December 31, 2020, there were no borrowings outstanding under the new Revolving Credit Agreement.
As of December 31, 2019, there was $68.9 million of borrowings outstanding, net of deferred financing costs of $1.1 million, under the new
Revolving Credit Agreement. The average interest rate on the outstanding borrowings was 2.88% and 3.88% for the years ended December
31, 2020 and 2019, respectively. The Company recorded interest expense related to the new Revolving Credit Agreement of $5.3 million,
$10.0 million and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
.
Senior Notes
The Company’s Senior Notes are recorded at amortized cost. The carrying amounts and estimated fair values of the Company’s Senior
Notes were as follows (in thousands):
December 31, 2020
December 31, 2019
5.125% Senior Notes
5.375% Senior Notes
3.750% Senior Notes
4.375% Senior Notes
Total
Carrying Amount Fair Value
$
255,570 $ 258,067 $
446,577 486,747
296,903 314,031
297,031 317,466
1,296,081 $ 1,376,311 $
$
Carrying Amount Fair Value
298,688 $ 311,100
445,247 482,099
296,129 300,600
—
1,040,064 $ 1,093,799
—
The fair values of the Senior Notes were determined using observable market prices as these securities are traded, and based on
whether they are deemed to be actively traded, the 5.125% Senior Notes, the 5.375% Senior Notes, the 3.750% Senior Notes, and the 4.375%
Senior Notes are considered Level 2 within the fair value hierarchy.
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. Interest
on these notes was payable, semi-annually in arrears on the 19th of January and July. On July 19, 2018, the Company repaid the $240.0
million principal amount of its 8.375% Senior Notes upon their maturity. The Company did not record any interest expense related to the
8.375% Senior Notes for the year ended December 31, 2020 and 2019, respectively. The Company recorded interest expense related to the
8.375% Senior Notes of $11.1 million for the year ended December 31, 2018.
5.125% Senior Notes
On May 27, 2016, the Company issued an aggregate of $300.0 million principal amount of 5.125% Senior Notes. The 5.125% Senior
Notes are general senior unsecured obligations of the Company. The 5.125% 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. On August 5, 2020, the Company commenced a cash tender offer for any and all $300.0 million outstanding
193
aggregate principal amount of its 5.125% Senior Notes. On August 11, 2020, the Company’s cash tender offer expired at 5:00 p.m., New
York City time. As of the expiration time, $44.0 million aggregate principal amount of the 5.125% Senior Notes were validly tendered. These
notes were redeemed on the settlement date of August 14, 2020. The carrying value of the 5.125% Senior Notes as of December 31, 2020
was $255.6 million. The Company recorded interest expense related to the 5.125% Senior Notes of $16.3 million, $16.2 million, and $16.2
million for the years ended December 31, 2020, 2019 and 2018.
5.375% Senior Notes
On July 24, 2018, the Company issued an aggregate of $450.0 million principal amount of 5.375% Senior Notes. The 5.375% Senior
Notes are general senior unsecured obligations of the Company. The 5.375% Senior Notes bear interest at a rate of 5.375% per year, payable
in cash on January 24 and July 24 of each year, commencing January 24, 2019. The 5.375% Senior Notes will mature on July 24, 2023. The
Company may redeem some or all of the 5.375% Senior Notes at any time or from time to time for cash at certain “make-whole” redemption
prices (as set forth in the Indenture related to the 5.375% Senior). 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 $444.2 million, net of the discount and debt issuance costs of $5.8 million. The issuance costs are amortized as
interest expense and the carrying value of the 5.375% Senior Notes will accrete up to the face amount over the term of the notes. The carrying
value of the 5.375% Senior Notes as of December 31, 2020 was $446.6 million. The Company recorded interest expense related to the
5.375% Senior Notes of $25.5 million, $25.6 million and $11.0 million for the years ended December 31, 2020, 2019 and December 31,
2018, respectively.
3.750% Senior Notes
On September 27, 2019, the Company issued an aggregate of $300.0 million principal amount of 3.750% Senior Notes. The 3.750%
Senior Notes are general unsecured obligations of the Company. The 3.750% Senior Notes bear interest at a rate of 3.750% per year, payable
in cash on April 1 and October 1 of each year, commencing April 1, 2020. The 3.750% Senior Notes will mature on October 1, 2024. The
Company may redeem some or all of the 3.750% Senior 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 3.750% Senior Notes was $296.1
million, net of discount and debt issuance costs of $3.9 million. The issuance costs will be amortized as interest expense and the carrying
value of the 3.750% Senior Notes will accrete up to the face amount over the term of the notes. The carrying value of the 3.750% Senior
Notes was $296.9 million as of December 31, 2020. The Company recorded interest expense related to the 3.750% Senior Notes of $12.1
million and $3.2 million for the years ended December 31, 2020 and 2019, respectively. The Company did not record any interest expense
related to the 3.750% Senior Notes for the year ended December 31, 2018.
4.375% Senior Notes
On July 10, 2020, the Company issued an aggregate of $300.0 million principal amount of 4.375% Senior Notes. The 4.375% Senior
Notes are general unsecured obligations of the Company. The 4.375% Senior Notes bear interest at a rate of 4.375% per year, payable in cash
on June 15 and December 15 of each year, commencing December 15, 2020. The 4.375% Senior Notes will mature on December 15, 2025.
The Company may redeem some or all of the 4.375% Senior Notes at any time or from time to time for cash at certain “make-whole”
redemption prices. If a “Change of Control Triggering Event” 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 4.375% Senior Notes was $296.8 million, net of discount and debt issuance
costs of $3.2 million. The issuance costs will be amortized as interest expense, and the carrying value of the 4.375% Senior Notes will accrete
up to the face amount over the term of the notes. The carrying value of the 4.375% Senior Notes was $297.0 million as of December 31,
2020. The Company recorded interest expense related to the 4.375% Senior Notes of $6.5 million for year ended December 31, 2020. The
Company did not record interest expense related to the 4.375% Senior Notes for years ended December 31, 2019 and 2018.
Collateralized Borrowings
On March 13, 2015, the Company entered into a $28.2 million secured loan arrangement, under which it pledged certain fixed assets as
security for a loan. This arrangement incurred interest at a fixed rate of 3.70% per year and matured on March 13, 2019; therefore, there were
no borrowings outstanding as of December 31, 2020 and 2019. The Company did not record any interest expense related to this secured loan
arrangement for the year ended December 31, 2020. The Company recorded interest expense related to this secured loan arrangement of $30
thousand and $0.3 million for the years ended December 31, 2019 and 2018, respectively.
194
On May 31, 2017, the Company entered into a $29.9 million secured loan arrangement, under which it pledged certain fixed assets as
security for a loan. This arrangement incurs interest at a fixed rate of 3.44% per year and matures on May 31, 2021. As of December 31, 2020
and December 31, 2019, the Company had $4.0 million and $11.7 million, respectively, outstanding related to this secured loan arrangement.
The book value of the fixed assets pledged as of December 31, 2020 was $0.8 million. The book value of the fixed assets pledged as of
December 31, 2019 was $2.3 million. The Company recorded interest expense related to this secured loan arrangement of $0.3 million, $0.5
million and $0.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.
On April 8, 2019, the Company entered into a $15.0 million secured loan arrangement, under which it pledged certain fixed assets as
security for a loan. This arrangement incurs interest at a fixed rate of 3.77% and matures on April 8, 2023. As of December 31, 2020 and
December 31, 2019, the Company had $9.6 million and $13.2 million, respectively, outstanding related to this secured loan arrangement. The
book value of the fixed assets pledged as of December 31, 2020 was $1.2 million. The book value of the fixed assets pledged as of December
31, 2019 was $8.1 million. The Company recorded interest expense related to this secured loan arrangement of $0.4 million for both the years
ended December 31, 2020 and 2019, respectively. The Company did not record any interest expense related to this secured loan arrangement
for the year ended December 31, 2018.
On April 19, 2019, the Company entered into a $10.0 million secured loan arrangement , under which it pledged certain fixed assets as
security for a loan. This arrangement incurs interest at a fixed rate of 3.89% and matures on April 19, 2023. As of December 31, 2020 and
December 31, 2019, the Company had $6.3 million and $8.8 million, respectively, outstanding related to this secured loan arrangement. The
book value of the fixed assets pledged as of December 31, 2020 was $2.7 million. The book value of the fixed assets pledged as of December
31, 2019 was $5.7 million. The Company recorded interest expense related to this secured loan arrangement of $0.3 million for both the years
ended December 31, 2020 and 2019, respectively. The Company did not record any interest expense related to this secured loan arrangement
for the year ended December 31, 2018.
Short-term Borrowings
On August 22, 2017, the Company entered into a committed unsecured loan agreement with Itau Unibanco S.A. The agreement
provides for short-term loans of up to $3.8 million (BRL 20.0 million). The maturity date of the agreement is August 19, 2021. Borrowings
under this agreement bear interest at the Brazilian Interbank offering rate plus 3.30%. As of December 31, 2020 and December 31, 2019,
there were $3.8 million (BRL 20.0 million) and $5.0 million (BRL 20.0 million), respectively, of borrowings outstanding under the
agreement. As of December 31, 2020, the interest rate was 5.3%. The Company recorded interest expense related to the loan of $0.3 million,
$0.5 million and $0.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.
On August 23, 2017, the Company entered into a committed unsecured credit agreement with Itau Unibanco S.A. The agreement
provides for an intra-day overdraft credit line up to $9.6 million (BRL 50.0 million). The maturity date of the agreement is March 9, 2021.
This agreement bears a fee of 1.28% per year. As of December 31, 2020 and December 31, 2019, there were no borrowings outstanding
under this agreement. The Company recorded bank fees related to the agreement of $0.1 million for the years ended December 31, 2020,
2019 and 2018.
195
21. Compensation
The Compensation Committee may grant various equity-based awards, including RSUs, restricted stock, stock options, LPUs and
shares of BGC Class A common stock. Upon vesting of RSUs, issuance of restricted stock, exercise of stock options and
redemption/exchange of LPUs, the Company generally issues new shares of BGC Class A common stock.
On June 22, 2016, at the annual meeting of stockholders, the stockholders approved the Equity Plan to increase from 350 million to
400 million the aggregate number of shares of BGC Class A common stock that may be delivered or cash-settled pursuant to awards granted
during the life of the Equity Plan. As of December 31, 2020, the limit on the aggregate number of shares authorized to be delivered allowed
for the grant of future awards relating to 118.5 million shares.
The Company incurred compensation expense related to Class A common stock, LPUs and RSUs held by BGC employees as follows
(in thousands):
Issuance of common stock and grants of exchangeability
Allocations of net income1
LPU amortization
RSU amortization
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
$
2020
Year Ended December 31,
2019
2018
84,966 $
14,006
74,282
10,291
100,948 $
20,491
41,721
7,465
150,147
38,352
6,346
5,212
$
183,545 $
170,625 $
200,057
1
Certain LPUs generally receive quarterly allocations of net income, including the Preferred Distribution, and are generally contingent
upon services being provided by the unit holders.
Limited Partnership Units
A summary of the activity associated with LPUs held by BGC employees is as follows (in thousands):
Balance at December 31, 2017
Granted
Redeemed/exchanged units
Forfeited units
Balance at December 31, 2018
Granted
Redeemed/exchanged units
Forfeited units
Balance at December 31, 2019
Granted
Redeemed/exchanged units
Forfeited units
Balance at December 31, 2020
BGC
LPUs
58,323
36,821
(14,908 )
(507 )
79,729
47,916
(21,110 )
(4,128 )
102,407
50,269
(14,642 )
(382 )
137,652
Newmark
LPUs2
26,510
2,694
(7,032 )
(59 )
22,113
662
(1,024 )
(7,144 )
14,607
—
(1,300 )
(105 )
13,202
2
The Newmark LPUs were issued as part of the Separation.
196
The LPUs table above includes both regular and Preferred Units. The Preferred Units are not entitled to participate in partnership
distributions other than with respect to the Preferred Distribution (see Note 2—“Limited Partnership Interests in BGC Holdings and
Newmark Holdings” for further information on Preferred Units). Subsequent to the Spin-Off, there are remaining partners who hold limited
partnership interests in BGC Holdings who are Newmark employees, and there are remaining partners who hold limited partnership interests
in Newmark Holdings who are BGC employees. These limited partnership interests represent interests that were held prior to the Newmark
IPO or were distributed in connection with the Separation. Following the Newmark IPO, employees of BGC and Newmark only receive
limited partnership interests in BGC Holdings and Newmark Holdings, respectively. As a result of the Spin-Off, as the existing limited
partnership interests in BGC Holdings held by Newmark employees and the existing limited partnership interests in Newmark Holdings held
by BGC employees are exchanged/redeemed, the related capital can be contributed to and from Cantor, respectively. The compensation
expenses under GAAP related to the limited partnership interests are based on the company where the partner is employed. Therefore,
compensation expenses related to the limited partnership interests of both BGC and Newmark but held by a BGC employee are recognized
by BGC. However, the BGC Holdings limited partnership interests held by Newmark employees are included in the BGC share count and the
Newmark Holdings limited partnership interests held by BGC employees are included in the Newmark share count.
A summary of the BGC Holdings and Newmark Holdings LPUs held by BGC employees is as follows (in thousands):
Regular Units
Preferred Units
Balance at December 31, 2020
BGC
LPUs
92,296
45,356
137,652
Newmark
LPUs
9,480
3,722
13,202
Issuance of Common Stock and Grants of Exchangeability
Compensation expense related to the issuance of BGC or Newmark Class A common stock and grants of exchangeability on BGC
Holdings and Newmark Holdings LPUs held by BGC employees is as follows (in thousands):
Issuance of common stock and grants of exchangeability
$
84,966 $
2020
Year Ended December 31,
2019
100,948 $
2018
150,147
BGC LPUs held by BGC employees may become exchangeable or redeemed for BGC Class A common stock on a one-for-one basis,
and Newmark LPUs held by BGC employees may become exchangeable or redeemed for a number of shares of Newmark Class A common
stock equal to the number of limited partnership interests multiplied by the then-current Exchange Ratio. As of December 31, 2020, the
Exchange Ratio was 0.9373.
A summary of the LPUs redeemed in connection with the issuance of BGC Class A common stock or Newmark Class A common
stock (at the then-current Exchange Ratio) or granted exchangeability for BGC Class A common stock or Newmark Class A common stock
(at the then-current Exchange Ratio) held by BGC employees is as follows (in thousands):
BGC Holdings LPUs
Newmark Holdings LPUs
Total
2020
Year Ended December 31,
2019
2018
16,618
1,164
17,782
17,209
500
17,709
18,227
3,116
21,343
As of December 31, 2020 and 2019, the number of share-equivalent BGC LPUs exchangeable for shares of BGC Class A common
stock at the discretion of the unit holder held by BGC employees was 3.5 million and 3.1 million, respectively. As of December 31, 2020 and
2019, the number of Newmark LPUs exchangeable into shares of Newmark Class A common stock at the discretion of the unit holder held
by BGC employees (at the then-current Exchange Ratio) was 0.5 million and 0.8 million, respectively.
LPU Amortization
Compensation expense related to the amortization of LPUs held by BGC employees is as follows (in thousands):
Stated vesting schedule
Post-termination payout
LPU amortization
2020
Year Ended December 31,
2019
2018
$
$
73,034 $
1,248
74,282 $
42,060 $
(339 )
41,721 $
2,462
3,884
6,346
197
There are certain LPUs that have a stated vesting schedule and do not receive quarterly allocations of net income. These LPUs
generally vest between two and five years from the date of grant. The fair value is determined on the date of grant based on the market value
of an equivalent share of BGC or Newmark Class A common stock (adjusted if appropriate based upon the award’s eligibility to receive
quarterly allocations of net income), and is recognized as compensation expense, net of the effect of estimated forfeitures, ratably over the
vesting period.
A summary of the outstanding LPUs held by BGC employees with a stated vesting schedule that do not receive quarterly allocations of
net income is as follows (in thousands):
BGC Holdings LPUs
Newmark Holdings LPUs
Aggregate estimated grant date fair value – BGC and Newmark Holdings LPUs $
December 31, 2020 December 31, 2019
30,699
1,171
138,324
44,529
353
201,239
$
As of December 31, 2020, there was approximately $70.0 million of total unrecognized compensation expense related to unvested
BGC and Newmark LPUs held by BGC employees with a stated vesting schedule that do not receive quarterly allocations of net income that
is expected to be recognized over 2.32 years.
Compensation expense related to LPUs held by BGC employees with a post-termination pay-out amount, such as REUs, and/or a
stated vesting schedule is recognized over the stated service period. These LPUs generally vest between two and five years from the date of
grant. As of December 31, 2020, there were 1.3 million outstanding BGC LPUs with a post-termination payout, with a notional value of
approximately $12.7 million and an aggregate estimated fair value of $7.5 million, and 0.1 million outstanding Newmark LPUs with a post-
termination payout, with a notional value of approximately $0.8 million and an aggregate estimated fair value of $0.3 million. As of
December 31, 2019, there were 1.2 million outstanding BGC LPUs with a post-termination payout, with a notional value of approximately
$15.3 million and an aggregate estimated fair value of $10.0 million, and 0.1 million outstanding Newmark LPUs with a post-termination
payout, with a notional value of approximately $1.0 million and an aggregate estimated fair value of $0.2 million.
Restricted Stock Units
Compensation expense related to RSUs held by BGC employees is as follows (in thousands):
RSU amortization
2020
Year Ended December 31,
2019
2018
$
10,291 $
7,465 $
5,212
A summary of the activity associated with RSUs held by BGC employees and directors is as follows (RSUs and dollars in thousands):
Balance at December 31, 2017
Granted
Delivered
Forfeited
Balance at December 31, 2018
Granted
Delivered
Forfeited
Balance at December 31, 2019
Granted
Delivered
Forfeited
Balance at December 31, 2020
Weighted-
Average
Grant
Date Fair
Value
Fair Value
Amount
9.08 $
12.05
8.59
11.34
10.83 $
4.61
10.11
5.99
5.25 $
3.25
5.79
4.11
3.75 $
9,651
6,964
(4,753 )
(1,804 )
10,058
19,764
(4,692 )
(1,614 )
23,516
21,506
(9,148 )
(2,292 )
33,582
RSUs
1,063 $
578
(553 )
(159 )
929 $
4,283
(464 )
(270 )
4,478 $
6,618
(1,579 )
(557 )
8,960 $
Weighted-
Average
Remaining
Contractual
Term (Years)
1.63
1.75
2.50
2.46
198
The fair value of RSUs held by BGC employees and directors is determined on the date of grant based on the market value of Class A
common stock adjusted as appropriate based upon the award’s ineligibility to receive dividends. The compensation expense is recognized
ratably over the vesting period, taking into effect estimated forfeitures. 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.
For the RSUs that vested during the years ended December 31, 2020 and 2019, the Company withheld shares of Class A common
stock valued at $1.9 million and $0.5 million to pay taxes due at the time of vesting. As of December 31, 2020, there was approximately
$28.2 million of total unrecognized compensation expense related to unvested RSUs held by BGC employees and directors that is expected to
be recognized over a weighted-average period of 2.46 years.
Acquisitions
In connection with certain of its acquisitions, the Company has granted certain LPUs, RSUs, and other deferred compensation awards.
As of December 31, 2020 and 2019, the aggregate estimated fair value of these acquisition-related LPUs and RSUs was $9.4 million and
$10.7 million, respectively. As of December 31, 2020 and 2019, the aggregate estimated fair value of the deferred compensation awards was
$23.6 million and $22.6 million, respectively. The liability for such acquisition-related LPUs and RSUs is included in “Accounts payable,
accrued and other liabilities” on the Company’s consolidated statements of financial condition.
Restricted Stock
BGC employees hold shares of BGC and Newmark restricted stock. 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 restricted shares of 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 and its affiliates’ customary noncompete obligations.
During the year ended December 31, 2020, there were no BGC or Newmark restricted shares held by BGC employees that were
forfeited in connection with this provision. During the year ended December 31, 2019, approximately 22 thousand BGC or Newmark
restricted shares held by BGC employees were forfeited in connection with this provision. During both the years ended December 31, 2020
and 2019, the Company released the restrictions with respect to 0.7 million of BGC shares held by BGC employees. As of December 31,
2020 and 2019, there were 3.7 million and 4.4 million of restricted BGC shares held by BGC employees outstanding, respectively.
Additionally, during both the years ended December 31, 2020 and 2019, Newmark released the restrictions with respect to 0.3 million of
restricted Newmark shares held by BGC employees. As of December 31, 2020 and 2019, there were 1.7 million and 2.1 million of restricted
Newmark shares held by BGC employees outstanding, respectively.
Deferred Compensation
The Company maintains a deferred cash award program, which 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.
The total compensation expense recognized in relation to the deferred cash compensation awards for the years ended December 31,
2020, 2019 and 2018 was $0.8 million, $5.9 million and $4.7 million respectively. As of December 31, 2020 and 2019, the total liability for
the deferred cash compensation awards was $1.5 million and $3.5 million respectively, which is included in “Accrued compensation” on the
Company’s consolidated statements of financial condition. As of December 31, 2020, total unrecognized compensation cost related to
deferred cash compensation, prior to the consideration of forfeitures, was approximately $0.4 million and is expected to be recognized over a
weighted-average period of 1.61 years.
199
22. Commitments, Contingencies and Guarantees
Contractual Obligations and Commitments
The following table summarizes certain of the Company’s contractual obligations at December 31, 2020 (in thousands):
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
Long-term debt and collateralized borrowings1
Operating leases2
Interest on long-term debt and collateralized borrowings3
Short-term borrowings4
Interest on Short-term borrowings
One-time transition tax5
Other6
Total contractual obligations
$ 1,369,854 $ 310,212 $ 459,642 $ 600,000
39,798
33,833
—
—
9,470
—
—
114,011
—
—
—
—
—
$ 1,823,493 $ 413,390 $ 612,991 $ 683,101 $ 114,011
250,572
177,619
3,849
183
15,817
5,599
36,541
55,566
3,849
183
1,440
5,599
60,222
88,220
—
—
4,907
1
2
3
4
5
6
Long-term debt and collateralized borrowings reflects long-term borrowings of $300.0 million of the 5.125% Senior Notes (the $300.0
million represents the principal amount of the debt; the carrying value of the 5.125% Senior Notes as of December 31, 2020 was
approximately $255.6 million), $450.0 million of the 5.375% Senior Notes (the $450.0 million represents the principal amount of the
debt; the carrying value of the 5.375% Senior Notes as of December 31, 2020 was $446.6 million), $300.0 million of the 3.750%
Senior Notes (the $300.0 million represents the principal amount of the debt; the carrying value of the 3.750% Senior Notes as of
December 31, 2020 was approximately $296.9 million), $300.0 million of the 4.375% Senior Notes (the $300.0 million represents the
principal amount of the debt; the carrying value of the 4.375% Senior Notes as of December 31, 2020 was approximately $297.0
million), $4.0 million of collateralized borrowings due May 31, 2021, $9.6 million of collateralized borrowings due April 8, 2023, and
$6.3 million of collateralized borrowings due April 19, 2023. See Note 20—“Notes Payable, Other and Short-term Borrowings” for
more information regarding these obligations, including timing of payments and compliance with debt covenants.
Operating leases are related to rental payments under various non-cancelable leases, principally for office space, net of sublease
payments to be received. There are no sublease payments to be received over the life of the agreement.
Interest on long-term debt and collateralized borrowings also includes interest on the undrawn portion of the committed unsecured
senior Revolving Credit Agreement which was calculated through the maturity date of the facility, which is February 26, 2023. As of
December 31, 2020, the undrawn portion of the committed unsecured Revolving Credit Agreement was $350.0 million.
Short-term borrowings reflects approximately $3.8 million (BRL 20.0 million) of borrowing under the Company’s committed
unsecured loan agreement. See Note 20—“Notes Payable, Other and Short-term Borrowings” for more information regarding this
obligation.
The Company completed the calculation of the one-time transition tax on the deemed repatriation of foreign subsidiaries’ earnings
pursuant to the Tax Act and previously recorded a net cumulative tax expense of $25.0 million, net of foreign tax credits, with an
election to pay the taxes over eight years with 40% to be paid in equal installments over the first five years and the remaining 60% to
be paid in installments of 15%, 20% and 25% in years six, seven and eight, respectively. The cumulative remaining balance as of
December 31, 2020 is $15.8 million.
Other contractual obligations reflect commitments to make charitable contributions, which are recorded as part of “Accounts payable,
accrued and other liabilities” in the Company’s consolidated statements of financial condition. The amount payable each year reflects
an estimate of future Charity Day obligations.
The Company is obligated for minimum rental payments under various non-cancelable operating leases, principally for office space,
expiring at various dates through 2039. Certain of the leases contain escalation clauses that require payment of additional rent to the extent of
increases in certain operating or other costs.
As of December 31, 2020, minimum lease payments under these arrangements are as follows (in thousands):
2021
2022
2023
2024
2025
2026 and thereafter
Total
200
Net Lease
Commitment
36,541
33,335
26,887
22,235
17,563
114,011
250,572
$
$
The lease obligations shown above are presented net of payments to be received under a non-cancelable sublease. There are no
sublease payments to be received over the life of the agreement.
In addition to the above obligations under non-cancelable operating leases, the Company is also obligated to Cantor for rental
payments under Cantor’s various non-cancelable leases with third parties, principally for office space and computer equipment, expiring at
various dates through 2039. Certain of these leases have renewal terms at the Company’s option and/or escalation clauses (primarily based on
the Consumer Price Index). Cantor allocates a portion of the rental payments to the Company based on square footage used.
The Company also allocates a portion of the rental payments for which it is obligated under non-cancelable operating leases to Cantor
and its affiliates. These allocations are based on square footage used (see Note 16—“Related Party Transactions,” for more information).
Rent expense for the years ended December 31, 2020, 2019 and 2018 was $51.1 million, $56.0 million and $44.3 million, respectively.
Rent expense is included as part of “Occupancy and equipment” in the Company’s consolidated statements of operations.
In the event the Company anticipates incurring costs under any of its leases that exceed anticipated sublease revenues, it recognizes a
loss and records a liability for the present value of the excess lease obligations over the estimated sublease rental income. There was no
liability for future lease payments associated with vacant space as of December 31, 2020, 2019 and 2018.
Contingent Payments Related to Acquisitions
Since 2016, the Company has completed acquisitions whose purchase price included an aggregate of approximately 2.2 million shares
of the Company’s Class A common stock (with an acquisition date fair value of approximately $9.2 million), 0.1 million LPUs (with an
acquisition date fair value of approximately $0.2 million), 0.2 million RSUs (with an acquisition date fair value of approximately $1.2
million) and $37.5 million in cash that may be issued contingent on certain targets being met through 2023.
During the year ended December 31, 2020, the Company completed acquisitions whose purchase price included approximately $3.1
million in cash that may be issued or paid contingent on certain targets being met through 2023. The Company did not issue any contingent
shares of BGC Class A common stock, LPUs or RSUs for acquisitions during the year ended December 31, 2020. The Company did not issue
any contingent shares of Class A common stock, LPUs, RSUs or cash for acquisitions during the year ended December 31, 2019.
During the year ended December 31, 2018, the Company completed acquisitions, whose purchase price included approximately 0.2
million RSUs (with an acquisition date fair value of approximately $1.2 million), and $16.8 million in cash that may be issued or paid
contingent on certain targets being met through 2022. The Company did not issue any contingent LPUs for acquisitions during the year ended
December 31, 2018.
During the year ended December 31, 2020, the contingent cash consideration increased by approximately $3.6 million to $20.6 million
in cash that may be paid due to an increase in probability of payout. During the year ended December 31, 2019, the contingent cash
consideration increased by approximately $4.6 million to $21.4 million in cash that may be paid due to an increase in probability of payout.
As of December 31, 2020, the Company has issued 0.4 million shares of its Class A common stock, 0.1 million of RSUs and paid
$19.2 million in cash related to contingent payments for acquisitions completed since 2016.
As of December 31, 2020, 1.9 million shares of the Company’s Class A common stock and 0.2 million RSUs remain to be issued, and
$26.4 million in cash remains to be paid, net of forfeitures and other adjustments, if the targets are met.
The Company’s contingent considerations are classified as Level 3 liabilities. See Note 15—“Fair Value of Financial Assets and
Liabilities,” for additional information.
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, operations, reporting or other matters, which may result in regulatory, civil and criminal judgments, settlements,
fines, penalties, injunctions, enhanced oversight, remediation, 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, inter alia, 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. The Company is
also involved, from time to time, in other reviews, investigations and proceedings by governmental and self-regulatory agencies (both formal
and informal) regarding the Company’s businesses. Any such actions may result in regulatory, civil or criminal judgments, settlements, fines,
penalties, injunctions, enhanced oversight, remediation, or other relief.
201
In September 2019, the Company settled investigations conducted jointly by the CFTC and the NYAG. The CFTC and NYAG alleged
that, in 2014 and 2015, certain emerging markets foreign exchange options (EFX options) brokers in the U.S. misrepresented that certain
prices posted to their electronic platform were immediately executable when in fact they were not and that such brokers had communicated
that transactions had been matched when they had not. The Company has paid an aggregate of $25.0 million in connection with the
settlements and agreed to a monitor for two years to assess regulatory compliance. The NYAG settlements include a non-prosecution
agreement, and there was no criminal penalty from either agency.
Legal reserves are established in accordance with U.S. GAAP 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 accruals 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 financial condition, results of operations, or cash flows.
Letter of Credit Agreements
The Company has irrevocable uncollateralized letters of credit with various banks, where the beneficiaries are clearing organizations
through which it transacts, that are used in lieu of margin and deposits with those clearing organizations. As of December 31, 2020 and 2019,
the Company was contingently liable for $1.0 million and $2.3 million, respectively, under these letters of credit.
Risk and Uncertainties
The Company generates revenues by providing financial intermediary and brokerage activities to institutional customers and by
executing and, in some cases, clearing transactions for institutional counterparties. Revenues for these services are transaction-based. As a
result, revenues could vary based on the transaction volume of global financial markets. Additionally, financing is sensitive to interest rate
fluctuations, which could have an impact on the Company’s overall profitability.
Insurance
The Company is self-insured for health care claims, up to a stop-loss amount for eligible participating employees and qualified
dependents in the U.S., subject to deductibles and limitations. The Company’s liability for claims incurred but not reported is determined
based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted
periodically as necessary. The Company has accrued $1.2 million and $1.8 million in health care claims as of December 31, 2020 and 2019,
respectively. The Company does not expect health care claims to have a material impact on its financial condition, results of operations, or
cash flows.
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
consolidated statements of financial condition for these agreements.
Indemnifications
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 December 31, 2020, no contingent liability has been recorded in the Company’s
consolidated statements of financial condition for these indemnifications, as the potential for being required to make payments under these
indemnifications is remote.
23.
Income Taxes
The Company’s 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 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 and Newmark
Holdings” for discussion of partnership interests), rather than the partnership entity.
202
The provision for income taxes consisted of the following (in thousands):
$
Current:
U.S. federal
U.S. state and local
Foreign
UBT
Deferred:
U.S. federal
U.S. state and local
Foreign
UBT
Provision for income taxes
$
Year Ended December 31,
2019
2018
2020
239 $
6,828
30,788
(3 )
37,852
(11,050 )
(5,848 )
3,602
(3,253 )
(16,549 )
21,303 $
(4,142 ) $
3,928
52,943
1,278
54,007
(11,565 )
8,537
506
(1,674 )
(4,196 )
49,811 $
36,027
6,449
46,982
(1,953 )
87,505
(32,527 )
149
6,671
1,970
(23,737 )
63,768
The Company had pre-tax income (loss) of $77.9 million, $122.1 million and $171.9 million for the years ended December 31, 2020,
2019 and 2018, respectively.
The Company had pre-tax income (loss) from domestic operations of $(206.3) million, $(201.3) million and $(144.4) million for the
years ended December 31, 2020, 2019 and 2018, respectively. The Company had pre-tax income (loss) from foreign operations of $284.2
million, $323.3 million and $316.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Differences between the Company’s actual income tax expense and the amount calculated utilizing the U.S. federal statutory rates were
as follows (in thousands):
Tax expense at federal statutory rate
Non-controlling interest
Incremental impact of foreign taxes compared to federal tax
rate
Other permanent differences
U.S. state and local taxes, net of U.S. federal benefit
New York City UBT
Other rate changes
Revaluation of deferred taxes related to tax reform
Uncertain tax positions
U.S. tax on foreign earnings, net of tax credits
Return-to-provision adjustments
Valuation allowance
Other
Provision for income taxes
$
Year Ended December 31,
2019
2018
2020
$
16,360 $
73
25,633 $
3,466
36,103
(3,544 )
(476 )
5,337
(321 )
(3,256 )
(12,783 )
—
1,475
2,643
1,076
11,966
(791 )
21,303 $
7,935
3,397
(2,650 )
(392 )
10,509
—
(1,025 )
3,166
(3,937 )
4,015
(306 )
49,811 $
2,739
6,051
(539 )
(514 )
4,024
4,776
2,764
2,163
2,598
2,567
4,580
63,768
The Tax Act was enacted on December 22, 2017. The Tax Act made significant changes to the U.S. corporate income tax system,
including (1) a reduction of the U.S. federal corporate income tax rate from 35% to 21%, (2) transitioning to a territorial tax system and
requiring companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred (3)
implementation of a BEAT, (4) further limitation on deductibility of interest on financing arrangements, (5) and introduction of a new
provision designed to tax a foreign subsidiaries’ GILTI.
As of December 31, 2020, the Company’s intention is to permanently reinvest undistributed foreign pre-tax earnings in the Company’s
foreign operations. While the one-time transition tax eliminated most of the income tax effects of repatriating the undistributed earnings,
there could still be foreign and state and local tax effects on the distribution. Accordingly, no provision has been recorded on foreign and
state and local taxes that would be applicable upon distribution of such earnings to the U.S. Further, determination of an estimate of deferred
tax liability associated with the distribution of foreign earnings is not practicable. However, this policy will be further re-evaluated and
assessed based on the Company’s overall business needs and requirements.
203
The Company has finalized its accounting policy and elect to treat taxes associated with the GILTI provision using the Period Cost
Method and thus have not recorded deferred taxes for basis differences under this regime as of December 31, 2020. Accordingly, the
Company recorded a tax expense of $6.1 million, net of foreign tax credits, for the impact of the GILTI provision on its foreign subsidiaries.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the 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.
Significant components of the Company’s deferred tax asset and liability consisted of the following (in thousands):
Deferred tax asset
Basis difference of investments
Deferred compensation
Excess interest expense
Other deferred and accrued expenses
Net operating loss and credit carry-forwards
Total deferred tax asset1
Valuation allowance
Deferred tax asset, net of valuation allowance
Deferred tax liability
Depreciation and amortization
Total deferred tax liability1
Net deferred tax asset
Year Ended December 31,
2020
2019
$
15,644 $
74,030
26,238
8,835
84,822
209,569
(81,191 )
128,378
7,678
65,794
21,028
17,685
73,072
185,257
(71,931 )
113,326
27,406
27,406
100,972 $
35,346
35,346
77,980
$
1
Before netting within tax jurisdictions.
The Company has deferred tax assets associated with net operating losses in U.S. state and local, and non-U.S. jurisdictions of $7.1
million and $72.9 million, respectively. These losses will begin to expire in 2025 and 2020, respectively. The Company’s change in net
operating losses as well as associated valuation allowance is primarily due to acquisitions that occurred during the year. The Company’s
deferred tax asset and liability are included in the Company’s consolidated statements of financial condition as components of “Other assets”
and “Accounts payable, accrued and other liabilities,” respectively.
Pursuant to U.S. GAAP guidance, Accounting for Uncertainty in Income Taxes, the Company provides for uncertain tax positions as a
component of income tax expense based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon
examination by tax authorities.
A reconciliation of the beginning to the ending amounts of gross unrecognized tax benefits for the years ended December 31, 2020 and
2019 is as follows (in thousands):
Balance, December 31, 2018
Increases for prior year tax positions
Decreases for prior year tax positions
Increases for current year tax positions
Decreases related to settlements with taxing authorities
Decreases related to a lapse of applicable statute of
limitations
Balance, December 31, 2019
Increases for prior year tax positions
Decreases for prior year tax positions
Increases for current year tax positions
Decreases related to settlements with taxing authorities
Decreases related to a lapse of applicable statute of
limitations
Balance, December 31, 2020
$
$
$
10,252
2,500
—
—
(2,271 )
—
10,481
1,706
—
—
—
—
12,187
204
As of December 31, 2020, the Company’s unrecognized tax benefits, excluding related interest and penalties, were $12.2 million, of
which $9.2 million, if recognized, would affect the effective tax rate. The Company is currently open to examination by tax authorities in
U.S. federal, state and local jurisdictions and certain non-U.S. jurisdictions for tax years beginning 2008, 2009 and 2012, respectively. The
Company is currently under examination by tax authorities in the U.S. Federal and certain state and local jurisdictions. The Company does
not believe that the amounts of unrecognized tax benefits will materially change over the next 12 months.
The Company recognizes interest and penalties related to unrecognized tax benefits in “Provision (benefit) for income taxes” in the
Company’s consolidated statements of operations. As of December 31, 2020, the Company had accrued $3.3 million for income tax-related
interest and penalties of which $0.3 million was accrued during 2020.
24. 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 FCMs subject to Rule 15c3-1 of the SEC and Rule
1.17 of the CFTC, 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 December 31, 2020, the Company’s U.S. subsidiaries had net capital in
excess of their minimum capital requirements.
Certain U.K. and European subsidiaries of the Company are regulated by 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 December 31, 2020, the U.K. and 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 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 December 31, 2020, the Company’s regulated subsidiaries held $676.3 million of net assets. These subsidiaries had aggregate
regulatory net capital, as defined, in excess of the aggregate regulatory requirements, as defined, of $373.4 million.
25. Segment, Geographic and Product Information
Segment Information
The Company currently operates its business in one reportable segment, by providing brokerage services to the financial markets,
integrated Voice, Hybrid and Fully Electronic brokerage in a broad range of products, including fixed income (Rates and Credit), FX, Equity
derivatives and cash equities, Insurance, Energy and commodities, and futures. It also provides a wide range of services, including trade
execution, brokerage, clearing, trade compression, post-trade, information, consulting, and other back-office services to a broad range of
financial and non-financial institutions.
Geographic Information
The Company offers products and services in the U.K., U.S., Asia (including Australia), Other Europe, MEA, France, and Other
Americas. Information regarding revenues is as follows (in thousands):
Year Ended December 31,
2019
2018
2020
$
867,066 $
518,770
311,190
192,852
107,679
59,163
811,542
544,887
278,141
170,561
77,992
54,687
$ 2,056,720 $ 2,104,231 $ 1,937,810
864,955 $
564,037
331,328
202,144
83,664
58,103
Revenues:
U.K.
U.S.
Asia
Other Europe/MEA
France
Other Americas
Total revenues
205
Information regarding long-lived assets (defined as loans, forgivable loans and other receivables from employees and partners, net;
fixed assets, net; ROU assets; certain other investments; goodwill; other intangible assets, net of accumulated amortization; and rent and
other deposits) in the geographic areas is as follows (in thousands):
Year Ended December 31,
2020
2019
Long-lived assets:
U.S.
U.K.
Asia
Other Europe/MEA
France
Other Americas
Total long-lived assets
$
767,082 $
655,906
119,619
66,487
28,518
18,236
766,315
595,571
122,564
38,994
21,877
19,595
$ 1,655,848 $ 1,564,916
Product Information
The Company’s business is based on the products and services provided and reflect the manner in which financial information is
evaluated by management.
The Company specializes in the brokerage of a broad range of products, including fixed income (Rates and Credit), FX, Equity
derivatives and cash equities, Insurance, 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, consulting, and other back-office services to a broad
range of financial and non-financial institutions.
Product information regarding revenues is as follows (in thousands):
Year Ended December 31,
2019
2018
2020
$
544,094 $
329,904
315,253
292,641
254,702
182,707
594,884 $
306,713
370,318
288,697
251,339
155,790
549,825
292,171
396,256
229,121
288,265
68,937
$ 1,919,301 $ 1,967,741 $ 1,824,575
113,235
$ 2,056,720 $ 2,104,231 $ 1,937,810
136,490
137,419
Revenues:
Rates
Credit
FX
Energy and commodities
Equities derivatives and cash equities
Insurance
Total brokerage revenues
All other revenues
Total revenues
206
26. Revenues from Contracts with Customers
The following table presents the Company’s total revenues separated between revenues from contracts with customers and other
sources of revenues (in thousands):
Revenues from contracts with customers:
Commissions
Data, software, and post-trade
Fees from related parties
Other revenues
Total revenues from contracts with customers
Other sources of revenues:
Principal transactions
Interest and dividend income
Other revenues
Total revenues
Year Ended
December 31,
2020
Year Ended
December 31,
2019
$ 1,567,668 $ 1,645,818
73,166
29,442
12,806
1,761,232
81,920
25,754
14,948
1,690,290
351,633
12,332
2,465
321,923
18,319
2,757
$ 2,056,720 $ 2,104,231
As discussed in Note 1—“Organization and Basis of Presentation”, the Company adopted the new revenue recognition standard as of
January 1, 2018. There was no significant impact to the Company’s consolidated financial statements for the periods presented as a result of
applying the new revenue recognition standard.
Refer to Note 3—“Summary of Significant Accounting Policies” for detailed information on the recognition of the Company’s
revenues from contracts with customers.
Disaggregation of Revenue
Refer to Note 25—“Segment, Geographic and Product Information” for a further discussion on the allocation of revenues to
geographic regions.
Contract Balances
The timing of our revenue recognition may differ from the timing of payment by our customers. The Company records a receivable
when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes
the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.
The Company had receivables related to revenues from contracts with customers of $629.4 million and $778.4 million at December 31,
2020 and December 31, 2019 respectively. The Company had no impairments related to these receivables during the years ended December
31, 2020 and 2019.
The Company’s deferred revenue primarily relates to customers paying in advance or billed in advance where the performance
obligation has not yet been satisfied. Deferred revenue at December 31, 2020 and December 31, 2019 was $15.0 million and $12.9 million,
respectively. During the years ended December 31, 2020 and 2019, the Company recognized revenue of $8.3 million and $9.1 million,
respectively, that was recorded as deferred revenue at the beginning of the period.
Contract Costs
The Company capitalizes costs to fulfill contracts associated with different lines of its business where the revenue is recognized at a
point in time and the costs are determined to be recoverable. Capitalized costs to fulfill a contract are recognized at the point in time that the
related revenue is recognized. At December 31, 2020, there were $1.7 million of capitalized costs recognized to fulfill a contract. At
December 31, 2019, there were $1.4 million of capitalized costs recognized to fulfill a contract.
207
27.
Leases
The Company, acting as a lessee, has operating leases primarily relating to office space, data centers and office equipment. The leases
have remaining lease terms of 0.1 year to 18.6 years, some of which include options to extend the leases in 1 to 10 year increments for up to
10 years. Renewal periods are included in the lease term only when renewal is reasonably certain, which is a high threshold and requires
management to apply judgment to determine the appropriate lease term. Certain leases also include periods covered by an option to terminate
the lease if the Company is reasonably certain not to exercise the termination option. The Company measures its lease payments by including
fixed rental payments and, where relevant, variable rental payments tied to an index, such as the Consumer Price Index. Payments for leases
in place before the date of adoption of ASC 842, Leases were determined based on previous leases guidance. The Company recognizes lease
expense for its operating leases on a straight-line basis over the lease term and variable lease expense not included in the lease payment
measurement is recognized as incurred. All leases were classified as operating leases as of December 31, 2020.
Pursuant to the accounting policy election, leases with an initial term of twelve months or less are not recognized on the balance sheet.
The short-term lease expense over the period reasonably reflects the Company’s short-term lease commitments.
ASC 842, Leases requires the Company to make certain assumptions and judgments in applying the guidance, including determining
whether an arrangement includes a lease, determining the term of a lease when the contract has renewal or cancelation provisions, and
determining the discount rate.
The Company determines whether an arrangement is a lease or includes a lease at the contract inception by evaluating whether the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the Company has the
right to obtain substantially all of the economic benefits from, and can direct the use of, the identified asset for a period of time, the Company
accounts for the identified asset as a lease. The Company has elected the practical expedient to not separate lease and non-lease components
for all leases other than real estate leases. The primary non-lease component that is combined with a lease component represents operating
expenses such as utilities, maintenance or management fees.
As the rate implicit in the lease is not usually available, the Company used an incremental borrowing rate based on the information
available at the adoption date of the new Leases standard in determining the present value of lease payments for existing leases. The
Company has elected to use a portfolio approach for the incremental borrowing rate, applying corporate bond rates to the leases. The
Company calculated the appropriate rates with reference to the lease term and lease currency. The Company uses information available at the
lease commencement date to determine the discount rate for any new leases.
The Company subleases certain real estate to its affiliates and to third parties. The value of these commitments is not material to the
Company’s consolidated financial statements.
As of December 31, 2020, the Company did not have any leases that have not yet commenced but that create significant rights and
obligations.
Supplemental information related to the Company’s operating leases is as follows (in thousands):
Assets
Operating lease ROU assets
Liabilities
Operating lease liabilities
Weighted-average remaining lease term
Operating leases (years)
Weighted-average discount rate
Operating leases
The components of lease expense are as follows (in thousands):
Classification in
Consolidated Statements
of Financial Condition
December 31, 2020
December 31, 2019
Other assets
$
165,969 $
169,065
Accounts payable,
accrued and other
liabilities
$
190,207
$
187,398
December 31, 2020
December 31, 2019
10.5
4.9 %
7.3
4.9 %
Operating lease cost
Short-term lease expense is not material.
Classification in
Consolidated Statements
of Operations
Occupancy and
equipment
For the Year Ended
December 31, 2020
For the Year Ended
December 31, 2019
$
43,726
$
47,908
208
The following table shows the Company’s maturity analysis of its operating lease liabilities as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
Interest
Total
$
$
$
36,541
33,335
26,887
22,235
17,563
114,011
250,572
(60,365 )
190,207
The following table shows cash flow information related to lease liabilities (in thousands):
Cash paid for obligations included in the
measurement of lease liabilities
28. Current Expected Credit Losses (CECL)
For the Year Ended
December 31, 2020
For the Year Ended
December 31, 2019
$
37,552 $
44,964
The CECL reserve reflects management’s current estimate of potential credit losses related to the receivable balances included in the
Company’s consolidated statements of financial condition. See Note 3—“Summary of Significant Accounting Policies” for further discussion
of the CECL reserve methodology.
As described in Note 1—“Organization and Basis of Presentation,” upon adoption of the new CECL guidance on January 1, 2020, the
Company recognized an initial CECL reserve of $1.9 million, of which, $1.1 million was in “Loans, forgivable loans and other receivables
from employees and partners, net,” and $0.8 million was in “Accrued commissions and other receivables, net,” against its receivables
portfolio with a corresponding charge to “Retained deficit” on the Company’s consolidated statements of changes in equity.
As required, any subsequent changes to the CECL reserve are recognized in “Net income (loss) available to common stockholders” in
the Company’s consolidated statements of operations. During the year ended December 31, 2020, the Company recorded an increase of $0.7
million in the CECL reserve against the receivables portfolio, bringing the Company’s total CECL reserve to $2.6 million as of December 31,
2020. This total CECL reserve is comprised of $1.6 million for “Loans, forgivable loans and other receivables from employees and partners,
net” and $1.0 million for “Accrued commissions and other receivables, net.” For the year ended December 31, 2020, there was an increase of
$0.5 million, in the CECL reserve pertaining to “Loans, forgivable loans and other receivables from employees and partners, net” as a result
of employee terminations, bringing the CECL reserve recorded pertaining to “Loans, forgivable loans and other receivables from employees
and partners, net” to $1.6 million as of December 31, 2020. For the year ended December 31, 2020, there was an increase of $0.2 million in
the CECL reserve against “Accrued commissions and other receivables, net,” due to the updated macroeconomic assumptions resulting from
COVID-19, and the downward credit rating migration of certain receivables in the portfolio, bringing the CECL reserve recorded pertaining
to “Accrued commissions and other receivables, net” to $1.0 million as of December 31, 2020.
29. Supplemental Balance Sheet Information
The components of certain balance sheet accounts are as follows (in thousands):
Year Ended December 31,
2020
2019
Other assets:
Operating lease ROU assets1
Deferred tax asset
Equity securities carried under measurement alternative
Prepaid expenses
Other taxes
Rent and other deposits
Other
Total other assets
$
$
165,969 $
125,292
81,758
35,210
27,450
16,355
28,384
480,418 $
169,065
96,051
83,668
24,722
17,962
15,720
40,108
447,296
209
Accounts payable, accrued and other liabilities:
Accrued expenses and other liabilities2
Taxes payable
Operating lease liabilities1
Deferred tax liability
Charitable contribution liability
Total accounts payable, accrued and other liabilities
Year Ended December 31,
2020
2019
$
890,690 $
255,944
190,207
24,320
2,758
890,653
212,488
187,398
18,071
3,999
$ 1,363,919 $ 1,312,609
1
2
As of December 31, 2020, $166.0 million and $190.2 million, relating to lease ROU assets and lease liabilities, respectively, is
attributable to the adoption of ASU No. 2016-02, Leases (Topic 842). As of December 31, 2019, $169.1 million and $187.4 million,
relating to lease ROU assets and lease liabilities, respectively, is attributable to the adoption of ASU No. 2016-02, Leases (Topic 842).
See Note 27—“Leases”, in addition to the information under the heading “Recently Adopted Accounting Pronouncements” included in
Note 1—“Organization and Basis of Presentation” for additional information.
As of December 31, 2020, $607.3 million is attributable to Besso and Ed Broking. As of December 31, 2019, $594.0 million is
attributable to Besso and Ed Broking. See “Cash Segregated Under Regulatory Requirements” and “Accrued Commissions and Other
Receivables, Net” in Note 3—“Summary of Significant Accounting Policies” for additional information.
30. Discontinued Operations
On November 30, 2018, the Company completed the Spin-Off, and distributed to its stockholders all of the shares of Newmark Class A
common stock and Newmark Class B common stock that the Company then owned in a manner that is intended to qualify as generally tax-
free for U.S. federal income tax purposes. The shares of Newmark Class A common stock held by the Company were distributed to the
holders of shares of BGC Class A common stock, and the shares of Newmark Class B common stock held by the Company were distributed
to the holders of shares of BGC Class B common stock. Therefore, the Company no longer consolidates Newmark within its financial results
subsequent to the Spin-Off.
The Company has determined that the Spin-Off met the criteria for reporting the financial results of Newmark as discontinued
operations within BGC’s consolidated results for all periods through the Distribution Date. Newmark’s results are presented in “Consolidated
net income (loss) from discontinued operations, net of tax” and the related noncontrolling interest in Newmark and its subsidiaries is
presented in “Net income (loss) from discontinued operations attributable to noncontrolling interest in subsidiaries” in the Company’s
consolidated statements of operations for the year ended December 31, 2018.
210
The following table provides the components of “Consolidated net income (loss) from discontinued operations, net of tax” and “Net
income (loss) from discontinued operations attributable to noncontrolling interest in subsidiaries” for the year ended December 31, 2018 (in
thousands):
Year Ended December 31,
2018
Revenues:
Commissions
Gains from mortgage banking activities/originations, net
Real estate management and other services
Servicing fees
Fees from related parties
Interest income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Total compensation and employee benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total expenses
Other income (losses), net:
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
Income (loss) from operations before income taxes
Provision (benefit) for income taxes
Consolidated net income (loss) from discontinued operations, net of tax
Less: Net income (loss) from discontinued operations attributable
to noncontrolling interest in subsidiaries
Net income (loss) from discontinued operations available to
common stockholders1
$
$
1,112,629
160,688
375,428
119,587
1,055
35,238
607
1,805,232
1,049,903
141,965
1,191,868
69,368
15,999
31,699
11,328
54,650
1,087
79,732
197,144
1,652,875
2,759
110,145
112,904
265,261
86,799
178,462
53,121
125,341
1
This amount excludes EPU payable-in-kind dividends, which is a reduction to “Net income (loss) from discontinued operations
available to common stockholders” for the calculation of the Company’s “Basic earnings (loss) per share and Fully diluted earnings
(loss) per share from discontinued operations.”
Total net cash provided by (used in) operating activities from discontinued operations was $(748.2) million for the year ended
December 31, 2018. Total net cash provided by (used in) investing activities from discontinued operations was $18.3 million for the year
ended December 31, 2018.
Through the Distribution Date, exchangeability was granted on 8.4 million and 3.9 million LPUs in BGC Holdings and Newmark
Holdings, respectively, held by Newmark employees, and Newmark incurred compensation expense related to the grant of exchangeability of
$111.1 million for the year ended December 31, 2018. These expenses are recorded as part of “Equity-based compensation and allocations of
net income to limited partnership units and FPUs” in the table above, and are included in “Consolidated net income (loss) from discontinued
operations, net of tax” in the Company’s consolidated statements of operations.
211
Certain LPUs and FPUs generally receive quarterly allocations of net income, which are cash distributed on a quarterly basis and
generally contingent upon services provided by the unit holder. Newmark’s allocation of income through the Distribution Date to Newmark
Holdings LPUs and FPUs held by Newmark employees was $37.0 million for the year ended December 31, 2018. This expense was recorded
as part of “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the table above, and is
included in “Consolidated net income (loss) from discontinued operations, net of tax” in the Company’s consolidated statements of
operations.
In connection with the Separation, on December 13, 2017, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations
under the 2042 Promissory Note in relation to the 8.125% Senior Notes and the 2019 Promissory Note in relation to the 5.375% Senior
Notes. Newmark repaid the $112.5 million outstanding principal amount under the 2042 Promissory Note on September 5, 2018, and repaid
the $300.0 million outstanding principal amount under the 2019 Promissory Note on November 23, 2018. In addition, as part of the
Separation, Newmark assumed the obligations of BGC as borrower under the Term Loan and Converted Term Loan. Newmark repaid the
outstanding balance of the Term Loan as of March 31, 2018, and repaid the outstanding balance of the Converted Term Loan on November 6,
2018. For the year ended December 31, 2018, $46.1 million of interest expense on the obligations assumed as part of the Separation was
included as part of discontinued operations in the table above. In addition, on March 19, 2018, the Company borrowed $150.0 million under
the BGC Credit Agreement from Cantor, and loaned Newmark $150.0 million under the Intercompany Credit Agreement on the same day.
All borrowings outstanding under the Intercompany Credit Agreement were repaid on November 7, 2018. The interest expense for the year
ended December 31, 2018 related to the $150.0 million borrowed under the BGC Credit Agreement was $3.5 million and was allocated to
discontinued operations in the table above.
31. Subsequent Events
Fourth Quarter 2020 Dividend
On February 23, 2021, the Company’s Board declared a quarterly cash dividend of $0.01 per share for the fourth quarter of 2020,
payable on March 30, 2021 to Class A and Class B common stockholders of record as of March 16, 2021.
212
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
BGC Partners maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by
BGC Partners is recorded, processed, accumulated, summarized and communicated to its management, including its Chairman and Chief
Executive Officer and its Chief Financial Officer, to allow timely decisions regarding required disclosures, and reported within the time
periods specified in the SEC’s rules and forms. The Chairman and Chief Executive Officer and the Chief Financial Officer have performed
an evaluation of the effectiveness of the design and operation of BGC Partners disclosure controls and procedures as of December 31, 2020.
Based on that evaluation, as a result of the material weakness in internal control over financial reporting described below, the Chairman and
Chief Executive Officer and the Chief Financial Officer concluded that BGC Partners’ disclosure controls and procedures were not effective
as of December 31, 2020.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our
Chairman and Chief Executive Officer, and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting as of December 31, 2020 based upon criteria set forth in the Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO). Our internal control over financial
reporting includes policies and procedures that are intended to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a
timely basis.
Management has identified the following control deficiencies that in combination constitute a material weakness in our internal
control over financial reporting as of December 31, 2020:
• We did not design an effective control over wire payments in the UK to vendors, including taxing authorities. Specifically,
we did not require independent validation of vendor banking details for wire payments where vendors had requested
remittance be made to a different account than the one recorded within the vendor master listing.
• We did not operate an effective control in the UK to validate bank information to the vendor master listing when effecting
wire payments.
• We did not design an effective control over the reconciliation of receipts and disbursements for certain UK partnerships in
relation to partner related payments.
This material weakness resulted in payments being made to incorrect bank accounts. The above material weakness resulted in
misstatements to expenses and accounts payable, accrued and other liabilities.
Because of this material weakness, our management concluded that our internal control over financial reporting was not effective as
of December 31, 2020. We reviewed the results of management’s assessment with our Audit Committee.
In response to the identified material weakness, our management, with the oversight of the Audit Committee of our Board of
Directors, has taken immediate action to remediate the material weakness identified. While certain remedial actions have been completed,
others are in process.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP
an independent registered public accounting firm, as stated in their report, which is included in this Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
Not Applicable
213
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information appearing under “Election of Directors,” “Information about our Executive Officers,” “Section 16(a) Beneficial
Ownership Reporting Compliance,” and “Code of Ethics and Whistleblower Procedures” in the 2021 Proxy Statement is hereby incorporated
by reference in response to this Item 10.
ITEM 11.
EXECUTIVE COMPENSATION
The information appearing under “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive
Compensation” and “Compensation Committee Interlocks and Insider Participation” in the 2021 Proxy Statement is hereby incorporated by
reference in response to this Item 11.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information appearing under “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation
Plan Information as of December 31, 2020” in the 2021 Proxy Statement is hereby incorporated by reference in response to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information appearing under “Certain Relationships and Related Transactions and Director Independence” and “Election of
Directors—Independence of Directors” in the 2021 Proxy Statement is hereby incorporated by reference in response to this Item 13.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information appearing under “Independent Registered Public Accounting Firm Fees” and “Audit Committee Pre-Approval
Policies and Procedures” in the 2021 Proxy Statement is hereby incorporated by reference in response to this Item 14.
214
PART IV—OTHER INFORMATION
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements. The consolidated financial statements required to be filed in this Annual Report on Form 10-K are
included in Part II, Item 8 hereof.
(a) (2) Schedule I, Parent Company Only Financial Statements. All other schedules are omitted because they are not applicable or
not required, or the required information is in the financial statements or the notes thereto.
(a) (3) The Exhibit Index set forth below is incorporated by reference in response to this Item 15.
The following Exhibits are filed as part of this Report as required by Regulation S-K. The Exhibits designated by an asterisk (*) are
management contracts and compensation plans and arrangements required to be filed as Exhibits to this Report. Certain exhibits have been
previously filed with the SEC pursuant to the Securities Exchange Act of 1934 (Commission File Number 0-28191).
Exhibit
Number
EXHIBIT INDEX
Exhibit Title
1.1
Controlled Equity Offering SM Sales Agreement between BGC Partners, Inc. and Cantor Fitzgerald & Co., dated
March 9, 2018 (incorporated by reference to Exhibit 1.1 to the Registrant’s Registration Statement on Form S-3 filed
with the SEC on March 9, 2018)
2.1
Agreement and Plan of Merger, dated as of May 29, 2007, by and among eSpeed, Inc., BGC Partners, Inc., Cantor
Fitzgerald, L.P., BGC Partners, L.P., BGC Global Holdings, L.P. and BGC Holdings, L.P. (incorporated by reference to
the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the SEC on February 11, 2008)
2.2
2.3
2.4
2.5
2.6
Amendment No. 1, dated as of November 5, 2007, to the Agreement and Plan of Merger, dated as of May 29, 2007, by
and among eSpeed, Inc., BGC Partners, Inc., Cantor Fitzgerald, L.P., BGC Partners, L.P., BGC Global Holdings, L.P.
and BGC Holdings, L.P. (incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A
filed with the SEC on February 11, 2008)
Amendment No. 2, dated as of February 1, 2008, to the Agreement and Plan of Merger, dated as of May 29, 2007, by
and among eSpeed, Inc., BGC Partners, Inc., Cantor Fitzgerald, L.P., BGC Partners, L.P., BGC Global Holdings, L.P.
and BGC Holdings, L.P. (incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A
filed with the SEC on February 11, 2008)
Separation Agreement, dated as of March 31, 2008, by and among Cantor Fitzgerald, L.P., BGC Partners, LLC, BGC
Partners, L.P., BGC Global Holdings, L.P. and BGC Holdings, L.P. (incorporated by reference to Exhibit 2.4 to the
Registrant’s Current Report on Form 8-K filed with the SEC on April 7, 2008)
Purchase Agreement, dated as of April 1, 2013, by and among BGC Partners, Inc., BGC Partners, L.P., The NASDAQ
OMX Group, Inc., and for certain limited purposes, Cantor Fitzgerald, L.P. (incorporated by reference to Exhibit 2.1 to
the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2013)
Tender Offer Agreement executed by BGC Partners, Inc., BGC Partners, L.P. and GFI Group Inc., dated February 19,
2015 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
February 25, 2015)
2.7
Stock Purchase Agreement by and among GFINet, Inc., GFI TP Holdings Pte Ltd, Intercontinental Exchange, Inc., and,
solely for the purposes set forth therein, GFI Group Inc. and BGC Partners, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 18, 2015)
2.8
Agreement and Plan of Merger, dated December 22, 2015, by and among BGC Partners, Inc., JPI Merger Sub 1, Inc.,
JPI Merger Sub 2, LLC, Jersey Partners Inc., New JP Inc., Michael Gooch and Colin Heffron (incorporated by
reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 23, 2015)
2.9
Transaction Agreement, dated as of July 17, 2017, by and among BGC Partners, Inc. BGC Partners, L.P., Cantor
Fitzgerald, L.P., Cantor Commercial Real Estate Company, L.P., Cantor Sponsor, L.P., CF Real Estate Finance
Holdings, L.P. and CF Real Estate Finance Holdings GP, LLC (incorporated by reference to Exhibit 2.1 to the
Registrant’s Current Report on Form 8-K filed with the SEC on July 21, 2017)
2.10
Amended and Restated Separation and Distribution Agreement, dated as of November 23, 2018, by and among Cantor
Fitzgerald, L.P., BGC Partners, Inc., BGC Holdings, L.P., BGC Partners, L.P., BGC Global Holdings, L.P., Newmark
215
Exhibit
Number
Exhibit Title
Group, Inc., Newmark Holdings, L.P. and Newmark Partners, L.P. (incorporated by reference to Exhibit 2.1 to the
Registrant’s Current Report on Form 8-K filed on November 27, 2018)
3.1
Restated Certificate of Incorporation of BGC Partners, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s
Quarterly Report on Form 10-Q filed with the SEC on August 8, 2016)
3.2
Amended and Restated Bylaws of BGC Partners, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s
Current Report on Form 8-K filed with the SEC on April 7, 2008)
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Description of Registrant’s Securities Registered under Section 12 of the Securities Exchange Act of 1934, as amended
Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration
Statement on Form S-1 filed with the SEC on April 18, 2008)
Indenture, dated as of June 26, 2012, between BGC Partners, Inc. and U.S. Bank National Association, as Trustee,
(incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
June 27, 2012)
Third Supplemental Indenture, dated as of May 27, 2016, by and between BGC Partners, Inc. and U.S. Bank National
Association, as Trustee, relating to the 5.125% Senior Notes due 2021 (incorporated by reference to Exhibit 4.2 to the
Registrant’s Form 8-K filed with the SEC on May 31, 2016)
Form of 5.125% Senior Notes due 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K filed with the SEC on May 31, 2016)
Fourth Supplemental Indenture, dated as of July 24, 2018, by and between BGC Partners, Inc. and U.S. Bank National
Association, as Trustee, relating to the 5.375% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 to the
Registrant’s Form 8-K filed with the SEC on July 25, 2018)
Form of 5.375% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K filed with the SEC on July 25, 2018)
Indenture, dated as of September 27, 2019, between BGC Partners, Inc. and Wells Fargo Bank, National Association,
as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the SEC on September 30,
2019)
4.9
First Supplemental Indenture, dated as of September 27, 2019, between BGC Partners, Inc. and Wells Fargo Bank,
National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the
SEC on September 30, 2019)
4.10
Form of BGC Partners, Inc. 3.750% Senior Notes due 2024 (incorporated by reference to Exhibit 4.3 to the Registrant’s
Form 8-K filed with the SEC on September 30, 2019)
4.11
Second Supplemental Indenture, dated as of July 10, 2020, between BGC Partners, Inc. and Wells Fargo Bank,
National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-
K filed with the SEC on July 14, 2020)
4.12
Form of BGC Partners, Inc. 4.375% Senior Notes due 2025 (incorporated by reference to Exhibit 4.3 to the Registrant’s
Current Report on Form 8-K filed with the SEC on July 14, 2020)
10.1
Registration Rights Agreement, dated as of December 9, 1999, by and among eSpeed, Inc. and the Investors named
therein (incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 1999)
10.2
Registration Rights Agreement by and between Cantor Fitzgerald, L.P. and BGC Partners, LLC, dated as of March 31,
2008 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on
April 7, 2008)
10.3
Administrative Services Agreement, dated as of March 6, 2008, by and between Cantor Fitzgerald, L.P. and BGC
Partners, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the
SEC on April 7, 2008)
10.4
Administrative Services Agreement, dated as of August 9, 2007, by and among Tower Bridge International Services
L.P. and BGC International (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K
216
Exhibit
Number
Exhibit Title
filed with the SEC on April 7, 2008)
10.5
BGC Holdings, L.P. Participation Plan, effective as of April 1, 2008 (incorporated by reference to Exhibit 10.8 to the
Registrant’s Current Report on Form 8-K filed with the SEC on April 7, 2008)*
10.6
Tax Receivable Agreement, dated as of March 31, 2008, by and between BGC Partners, LLC and Cantor Fitzgerald,
L.P. (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the SEC on
April 7, 2008)
10.7
License Agreement, dated as of April 1, 2008, by and between BGC Partners, Inc. and Cantor Fitzgerald, L.P.
(incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed with the SEC on
April 7, 2008)
10.8
Clearing Services Agreement, dated May 9, 2006, between Cantor Fitzgerald & Co. and BGC Financial, Inc. (incorporated by
reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 11, 2008)
10.9
Amendment to Clearing Services Agreement, dated November 7, 2008, between Cantor Fitzgerald & Co. and BGC
Financial, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with
the SEC on November 11, 2008)
10.10
10.11
10.12
10.13
10.14
10.15
10.16
Second Amendment, dated August 16, 2010, to the Clearing Services Agreement, dated May 9, 2006, between Cantor
Fitzgerald & Co. and BGC Financial, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on
Form 10-Q filed with the SEC on August 7, 2020)
Third Amendment , dated June 16, 2020, to the Clearing Services Agreement, dated May 9, 2006, between Cantor
Fitzgerald & Co. and BGC Financial, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on
Form 10-Q filed with the SEC on August 7, 2020)
Agreement dated November 5, 2008 between BGC Partners, Inc. and Cantor Fitzgerald, L.P. regarding clearing capital
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on
November 11, 2008)
First Amendment, dated June 16, 2020, to the Agreement between BGC Partners, Inc. and Cantor Fitzgerald, L.P. regarding
clearing capital, dated November 5, 2008 (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on
Form 10-Q filed with the SEC on August 7, 2020)
Subscription Agreement, dated March 16, 2010, among BGC Partners, Inc., BGC Holdings, L.P. and Cantor Fitzgerald,
L.P. (incorporated by reference to Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K filed with the SEC on
March 16, 2010)
Registration Rights Agreement, dated as of April 1, 2010, by and between BGC Partners, Inc. and Cantor Fitzgerald,
L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
April 7, 2010)
Tower Bridge International Services L.P. and BGC Brokers L.P. Administrative Services Agreement dated January 9,
2012 (incorporated by reference to Exhibit 10.60 to the Registrant’s Annual Report on Form 10-K filed with the SEC
on March 15, 2012)
10.17
Tower Bridge International Services L.P. and Cantor Fitzgerald Europe Administrative Services Agreement dated
January 9, 2012 (incorporated by reference to Exhibit 10.61 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on March 15, 2012)
10.18
Tower Bridge International Services L.P. and Cantor Index Limited Administrative Services Agreement dated
January 9, 2012 (incorporated by reference to Exhibit 10.62 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on March 15, 2012)
10.19
Tower Bridge International Services L.P. and BGC International Administrative Services Agreement dated January 9,
2012 (incorporated by reference to Exhibit 10.63 to the Registrant’s Annual Report on Form 10-K filed with the SEC
on March 15, 2012)
10.20
Tower Bridge International Services L.P. and eSpeed International Limited Administrative Services Agreement dated
January 9, 2012 (incorporated by reference to Exhibit 10.64 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on March 15, 2012)
217
Exhibit
Number
10.21
Tower Bridge International Services L.P. and eSpeed Support Services Limited Administrative Services Agreement
dated January 9, 2012 (incorporated by reference to Exhibit 10.65 to the Registrant’s Annual Report on Form 10-K
filed with the SEC on March 15, 2012)
Exhibit Title
10.22
Amended and Restated Change in Control Agreement dated August 3, 2011 between Howard W. Lutnick and BGC
Partners, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with
the SEC on August 8, 2011)*
10.23
Amended and Restated Change in Control Agreement dated August 3, 2011 between Stephen M. Merkel and BGC
Partners, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with
the SEC on August 8, 2011)*
10.24
Deed of Amendment, dated August 14, 2020, between Shaun D. Lynn and BGC Services (Holdings) LLP (incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 14, 2020)*
10.25
10.26
10.27
Amended and Restated Deed of Adherence, dated as of January 22, 2014, between Sean Windeatt and BGC Services
(Holdings) LLP (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the SEC on January 28, 2014)*
Deed of Amendment, dated February 24, 2017, to the Amended and Restated Deed of Adherence, between Sean A.
Windeatt and BGC Services (Holdings) LLP (incorporated by reference to Exhibit 10.86 to the Registrant’s Annual
Report on Form 10-K filed with the SEC on February 28, 2017)*
Deed of Amendment, dated November 5, 2020, to the Amended and Restated Deed of Adherence, between Sean A. Windeatt
and BGC Services (Holdings) LLP (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form
10-Q filed with the SEC on November 6, 2020)*
10.28
Consultancy Agreement, dated February 24, 2017, between Sean A. Windeatt and BGC Services (Holdings) LLP
(incorporated by reference to Exhibit 10.87 to the Registrant’s Annual Report on Form 10-K filed with the SEC on
February 28, 2017)*
10.29
10.30
Amendment, dated November 5, 2020, to the Consultancy Agreement, dated February 24, 2017, between Sean A. Windeatt
and BGC Services (Holdings) LLP (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form
10-Q filed with the SEC on November 6, 2020)*
Letter Agreement, dated as of August 24, 2015, among BGC Partners, Inc., BGC Partners, L.P. and GFI Group Inc.,
relating to shareholder litigation and the Tender Offer Agreement (incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2015)
10.31
Seventh Amended and Restated Long Term Incentive Plan, dated as of June 22, 2016 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 24, 2016)*
10.32
Second Amended and Restated BGC Partners, Inc. Incentive Bonus Compensation Plan (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 9, 2017)*
10.33
Amended and Restated Agreement of Limited Partnership of CF Real Estate Finance Holdings, L.P., dated as of
September 8, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the SEC on September 8, 2017)
10.34
Second Amended and Restated Agreement of Limited Partnership of BGC Holdings, L.P., dated as of December 13,
2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
December 19, 2017)
10.35
Amendment No. 1, dated November 8, 2018, to the Second Amended and Restated Agreement of Limited Partnership
of BGC Holdings, L.P (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed
with the SEC on November 8, 2018).
10.36
Second Amended and Restated Agreement of Limited Partnership of BGC Partners, L.P., dated as of December 13,
2017 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on
December 19, 2017)
10.37
Second Amended and Restated Agreement of Limited Partnership of BGC Global Holdings, L.P., dated as of
218
Exhibit
Number
10.38
10.39
10.40
10.41
10.42
Exhibit Title
December 13, 2017 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed
with the SEC on December 19, 2017)
Registration Rights Agreement, dated as of December 13, 2017, by and among Cantor Fitzgerald, L.P., BGC Partners,
Inc. and Newmark Group, Inc. (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-
K filed with the SEC on December 19, 2017)
Tax Matters Agreement, dated as of December 13, 2017, by and among BGC Partners, Inc., BGC Holdings, L.P., BGC
Partners, L.P., Newmark Group, Inc., Newmark Holdings, L.P. and Newmark Partners, L.P. (incorporated by reference
to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2017)
Amended and Restated Tax Receivable Agreement, dated as of December 13, 2017, by and between Cantor Fitzgerald,
L.P. and BGC Partners, Inc. (incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K
filed with the SEC on December 19, 2017)
Registration Rights Agreement, dated as of July 10, 2020, between BGC Partners, Inc. and the parties named therein
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July
14, 2020)
Credit Agreement, dated as of March 19, 2018, by and between BGC Partners, Inc. and Cantor Fitzgerald, L.P.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March
23, 2018)
10.43
Amendment, dated August 6, 2018, to the Credit Agreement, dated as of March 19, 2018, by and between BGC
Partners, Inc. and Cantor Fitzgerald, L.P (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed with the SEC on August 7, 2018)
10.44
Amended and Restated Credit Agreement, dated as of March 19, 2018, by and between BGC Partners, Inc. and
Newmark Group, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed
with the SEC on March 23, 2018)
10.45
Credit Agreement, dated as of November 28, 2018, by and among BGC Partners, Inc., as the Borrower, certain
subsidiaries of the Borrower, as Guarantors, the several financial institutions from time to time as parties thereto, as
Lenders, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the SEC on November 27, 2018)
10.46
First Amendment, dated December 11, 2019, to the Credit Agreement, dated as of November 28, 2018, by and among
BGC Partners, Inc., as the Borrower, certain subsidiaries of the Borrower, as Guarantors, the several financial
institutions from time to time as parties thereto, as Lenders, and Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
December 13, 2019)
10.47
Second Amendment, dated February 26, 2020, to the Credit Agreement, dated as of November 28, 2018, by and among
BGC Partners, Inc., as the Borrower, certain subsidiaries of the Borrower, as Guarantors, the several financial
institutions from time to time as parties thereto, as Lenders, and Bank of America, N.A., as the Administrative Agent.
21.1
23.1
31.1
31.2
32.1
List of subsidiaries of BGC Partners, Inc.
Consent of Ernst & Young LLP
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification by the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
101
The following materials from BGC Partners’ Annual Report on Form 10-K for the period ended December 31, 2020 are
formatted in inline eXtensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Financial
Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income
(Loss), (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Equity,
(vi) Notes to the Consolidated Financial Statements, and (vii) Schedule I, Parent Company Only Financial Statements.
The XBRL Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within
219
Exhibit
Number
the iXBRL document.
Exhibit Title
104
The cover page from this Annual Report on Form 10-K, formatted in inline XBRL (included in Exhibit 101).
ITEM 16. FORM 10-K SUMMARY
Not Applicable
220
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual
Report on Form 10-K for the fiscal year ended December 31, 2020 to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 1st day of March, 2021.
BGC Partners, Inc.
By:
Name:
Title: Chairman of the Board and Chief Executive
/S/ HOWARD W. LUTNICK
Howard W. Lutnick
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the
following persons on behalf of the registrant, BGC Partners, Inc., in the capacities and on the date or dates indicated.
Signature
Capacity in Which Signed
/S/ HOWARD W. LUTNICK
Howard W. Lutnick
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/S/ STEVEN BISGAY
Steven Bisgay
/S/ LINDA A. BELL
Linda A. Bell
/S/ STEPHEN T. CURWOOD
Stephen T. Curwood
/S/ WILLIAM J. MORAN
William J. Moran
/S/ DAVID P. RICHARDS
David P. Richards
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Date
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
221
BGC PARTNERS, INC.
(Parent Company Only)
STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share and per share data)
Assets
Cash and cash equivalents
Investments in subsidiaries
Receivables from related parties
Note receivable from related party
Other assets
Total assets
Liabilities and Stockholders’ Equity
Accounts payable, accrued and other liabilities
Notes payable
Total liabilities
Commitments and contingencies (Note 3)
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31, 2020
December 31, 2019
$
$
$
24 $
732,658
2,758
1,296,082
64,498
2,096,020 $
50,999 $
1,296,082
1,347,081
44
657,961
3,999
1,109,013
49,347
1,820,364
36,704
1,109,013
1,145,717
$
748,939
2,096,020 $
674,647
1,820,364
See accompanying Notes to Financial Statements.
222
BGC PARTNERS, INC.
(Parent Company Only)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
2020
Year Ended December 31,
2019
2018
Revenues:
Other revenues
Interest and dividend income
Total revenue
Expenses:
Interest expense
Total expenses
Income from operations before income taxes
Equity income (loss) of subsidiaries
Equity income of discontinued operations, net
Provision (benefit) for income taxes
Net income available to common stockholders
Per share data:
Basic earnings (loss) per share from continuing operations
Net income (loss) from continuing operations
Basic earnings (loss) per share from continuing operations
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share from continuing operations
$
$
$
$
450
65,762
66,212
65,762
65,762
450
41,876
—
(6,582 )
48,908 $
— $
55,044
55,044
55,044
55,044
—
50,413
—
2,851
47,562 $
48,908 $
0.14 $
361,736
47,562 $
0.14 $
344,332
Net income (loss) from continuing operations for fully diluted shares
Fully diluted earnings (loss) per share from continuing operations
Fully diluted weighted-average shares of common stock outstanding
$
$
70,430 $
0.13 $
546,848
62,054 $
0.13 $
459,743
See accompanying Notes to Financial Statements.
36,944
68,382
105,326
68,382
68,382
36,944
49,087
125,341
9,176
202,196
76,855
0.24
322,141
76,855
0.24
323,844
223
BGC PARTNERS, INC.
(Parent Company Only)
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income available to common stockholders
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Benefit plans
Total other comprehensive (loss) income, net of tax
Comprehensive income attributable to common stockholders
$
2020
Year Ended December 31,
2019
2018
$
48,908 $
47,562 $
202,196
5,382
(1,210 )
4,172
53,080 $
96
(8,733 )
(8,637 )
38,925 $
(11,686 )
—
(11,686 )
190,510
See accompanying Notes to Financial Statements.
224
BGC PARTNERS, INC.
(Parent Company Only)
STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to common stockholders
Less: Equity income of discontinued operations
Adjustments to reconcile net income to net cash used
in operating activities:
Amortization of deferred financing costs
Equity in net gains (losses) of unconsolidated investments
Deferred tax (benefit) expense
Decrease (increase) in operating assets:
Investments in subsidiaries
Receivables from related parties
Note receivable from related party
Other assets
(Decrease) increase in operating liabilities:
Accounts payable, accrued and other liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders
Repurchase of Class A common stock
Issuance of senior notes, net of deferred issuance costs
Repayments of senior notes
Unsecured revolving credit agreement borrows
Unsecured revolving credit agreement repayments
Distributions from subsidiaries
Proceeds from offering of Class A common stock, net
Net cash provided by financing activities
Net cash provided by (used in) operating activities from
discontinued operations
Net cash provided by (used in) investing activities from
discontinued operations
Net cash provided by (used in) financing activities from
discontinued operations
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash information:
Cash paid (refund) during the period for taxes
Cash paid during the period for interest
Supplemental non-cash information:
Issuance of Class A common stock upon exchange
of limited partnership interests
Issuance of Class A and contingent Class A common stock
and limited partnership interests for acquisitions
2020
Year Ended December 31,
2019
2018
$
48,908 $
—
47,562 $
—
202,196
(125,341 )
4,188
(41,876 )
(13,585 )
3,206
(50,413 )
(20,042 )
(11,480 )
1,241
(187,069 )
887
12,400
16,029
(366,496 )
861
4,012
(49,087 )
(12,449 )
(368,509 )
10,686
(450,000 )
39
14,295
(184,491 )
(4,125 )
(361,018 )
3,321
(785,132 )
—
—
—
(60,440 )
(5 )
294,396
(43,968 )
230,000
(300,000 )
61,972
2,516
184,471
(192,442 )
(970 )
294,845
—
390,000
(320,000 )
184,545
4,929
360,907
—
—
—
(20 )
44
24 $
—
—
—
(111 )
155
44 $
(231,446 )
(8,185 )
444,196
—
195,000
(195,000 )
199,062
345,974
749,601
—
—
35,487
(44 )
199
155
(5,919 ) $
60,594
5,422 $
47,329
20,598
15,375
$
$
$
11,388 $
26,146 $
143,232
1,578
3,040
21,899
See accompanying Notes to Financial Statements.
225
BGC PARTNERS, INC.
(Parent Company Only)
NOTES TO FINANCIAL STATEMENTS
1.
Organization and Basis of Presentation
The accompanying Parent Company Only Financial Statements of BGC Partners should be read in conjunction with the consolidated
financial statements of BGC Partners and subsidiaries and the notes thereto. In addition, certain reclassifications have been made to
previously reported amounts to conform to the current presentation.
For the year ended December 31, 2020, the Company declared and paid cash dividends of $0.17 per share to BGC Class A and Class B
common stockholders. For the year ended December 31, 2019 and 2018, the comparable cash dividend amounts were $0.56 per share and
$0.72 per share, respectively.
Revisions of Previously Issued Financial Statements
During the fourth quarter of 2020, the Company’s management identified the theft of U.K. tax payment related funds from the
Company. The theft, which occurred over several years ending September 2020, was perpetrated by two individuals associated with the
Company, and did not involve the operations or business of the Company. Litigation has commenced against the two individuals seeking
recovery of stolen amounts. The cumulative impact to the Company’s “Consolidated net income (loss)” as a result of the theft was
determined to be $35.2 million. As a result, the Company has revised its previously issued financial statements as of and for the years ended
December 31, 2019 and 2018. The Company believes that these revisions are not material to any of the Company’s previously issued
financial statements based on an analysis of quantitative and qualitative factors in accordance with the SEC Staff Bulletin Nos. 99 and 108.
Accordingly, the Company has concluded that an amendment of previously filed periodic reports is not required. However, though the
revisions were not material to any previously issued financial statements, correcting the accumulated adjustment in 2020 would have been
material to the Company’s consolidated financial statements for the year ended December 31, 2020. Therefore, the company has revised the
historical periods in this Annual Report on Form 10-K.
For more information about the revisions to our previously issued financial statements, see Note 4—“Prior Periods’ Financial
Statement Revisions” in the Company’s consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
2.
Prior Periods’ Financial Statement Revisions
During the fourth quarter of 2020, the Company’s management identified the theft of U.K. tax payment related funds from the
Company. The theft, which occurred over several years ending September 2020, was perpetrated by two individuals associated with the
Company, and did not involve the operations or business of the Company. Litigation has commenced against the two individuals seeking
recovery of stolen amounts. The cumulative impact to the Company’s ”Consolidated net income (loss)” as a result of the theft was
determined to be $35.2 million. As a result, the Company has revised its previously issued financial statements as of and for the years ended
December 31, 2019 and 2018.
The Company assessed the materiality of these revisions on prior periods’ financial statements in accordance with SEC Staff
Accounting Bulletin Topic 1.M, Materiality, codified in ASC Topic 250, Accounting Changes and Error Corrections, and concluded that the
revisions were not material to the prior annual periods. Although the revisions were not material to any previously issued financial
statements, correcting the accumulated revision in 2020 would have been material to the Company’s consolidated financial statements for the
year ended December 31, 2020. Accordingly, the Company has concluded that an amendment of previously filed periodic reports is not
required. Therefore, the Company has revised the historical periods in this Annual Report on Form 10-K. The Company is revising other
prior period financial statements to reflect certain previously unrecorded immaterial adjustments, primarily related to BGC’s provision
(benefit) for income taxes, in the Company’s consolidated financial statements for the periods stated above. The accompanying notes to the
consolidated financial statements further reflect the impact of these revisions.
The following table presents the effect of the resulting revision on the statements of financial condition as of December 31, 2019.
226
Assets
Cash and cash equivalents
Investments in subsidiaries
Receivables from related parties
Note receivable from related party
Other assets
Total assets
Liabilities and Stockholders’ Equity
Accounts payable, accrued and other liabilities
Notes payable
Total liabilities
Commitments and contingencies (Note 3)
Total stockholders’ equity
Total liabilities and stockholders’ equity
As Reported
December 31, 2019
Adjustments
As Revised
$
$
$
44 $
669,402
3,999
1,109,013
49,252
1,831,710 $
36,871 $
1,109,013
1,145,884
— $
(11,441 )
—
—
95
(11,346 ) $
44
657,961
3,999
1,109,013
49,347
1,820,364
(167 ) $
—
(167 )
36,704
1,109,013
1,145,717
685,826
1,831,710 $
$
(11,179 )
(11,346 ) $
674,647
1,820,364
The following tables present the effect of the resulting revision on the statements of operations for the years ended December 31, 2019
and 2018.
Revenues:
Interest and dividend income
Total revenue
Expenses:
Interest expense
Total expenses
Income from operations before income taxes
Equity income (loss) of subsidiaries
Provision (benefit) for income taxes
Net income available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income (loss) available to common stockholders
Basic earnings (loss) per share
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share
Net income for fully diluted shares
Fully diluted earnings (loss) per share
Fully diluted weighted-average shares of common stock outstanding
As Reported
Year Ended December 31, 2019
Adjustments
As Revised
$
$
$
$
$
$
55,044 $
55,044
55,044
55,044
—
58,819
3,112
55,707 $
55,707 $
0.16 $
344,332
83,531 $
0.16 $
524,550
— $
—
—
—
—
(8,406 )
(261 )
(8,145 ) $
(8,145 ) $
(0.02 ) $
—
(21,477 ) $
(0.03 ) $
(64,807 )
55,044
55,044
55,044
55,044
—
50,413
2,851
47,562
47,562
0.14
344,332
62,054
0.13
459,743
227
As Reported
Year Ended December 31, 2018
Adjustments
As Revised
Revenues:
Other revenues
Interest and dividend income
Total revenue
Expenses:
Interest expense
Total expenses
Income from operations before income taxes
Equity income (loss) of subsidiaries
Equity income of discontinued operations, net
Provision (benefit) for income taxes
Net income available to common stockholders
Per share data:
Basic earnings (loss) per share from continuing operations
Net income (loss) from continuing operations
Basic earnings (loss) per share from continuing operations
Basic weighted-average shares of common stock outstanding
Fully diluted earnings (loss) per share from continuing operations
$
$
$
$
Net income (loss) from continuing operations for fully diluted shares
Fully diluted earnings (loss) per share from continuing operations
Fully diluted weighted-average shares of common stock outstanding
$
$
36,944 $
68,382
105,326
68,382
68,382
36,944
49,472
123,816
12,712
197,520 $
73,704 $
0.23 $
322,141
73,704 $
0.23 $
323,844
— $
—
—
—
—
—
(385 )
1,525
(3,536 )
4,676 $
3,151 $
0.01 $
—
3,151 $
0.01 $
—
36,944
68,382
105,326
68,382
68,382
36,944
49,087
125,341
9,176
202,196
76,855
0.24
322,141
76,855
0.24
323,844
228
The following tables present the effect of the resulting revision on the consolidated statements of cash flows for the years ended
December 31, 2019 and 2018.
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to common stockholders
Adjustments to reconcile net income to net cash used
in operating activities:
Equity in net gains (losses) of unconsolidated investments
Deferred tax (benefit) expense
Decrease (increase) in operating assets:
Investments in subsidiaries
(Decrease) increase in operating liabilities:
Accounts payable, accrued and other liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to common stockholders
Less: Equity income of discontinued operations
Adjustments to reconcile net income to net cash used
in operating activities:
Equity in net gains (losses) of unconsolidated investments
Decrease (increase) in operating assets:
Investments in subsidiaries
(Decrease) increase in operating liabilities:
Accounts payable, accrued and other liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
As Reported
Year Ended December 31, 2019
Adjustments
As Revised
$
55,707 $
(8,145 ) $
47,562
(58,819 )
(19,947 )
8,406
(95 )
(50,413 )
(20,042 )
12,399
1
12,400
(3,958 )
(361,018 )
(167 )
—
(4,125 )
(361,018 )
$
$
$
— $
360,907 $
(111 )
155
44 $
— $
— $
—
—
— $
—
360,907
(111 )
155
44
As Reported
Year Ended December 31, 2018
Adjustments
As Revised
$
197,520 $
(123,816 )
4,676 $
(1,525 )
202,196
(125,341 )
(49,472 )
385
(49,087 )
(365,405 )
(3,104 )
(368,509 )
3,753
(785,132 )
(432 )
—
3,321
(785,132 )
$
$
$
— $
749,601 $
(44 )
199
155 $
— $
— $
—
—
— $
—
749,601
(44 )
199
155
Certain prior period line items in the statements of comprehensive income (loss) were affected by the revisions of previously issued
financial statements. All of the changes in the statements of comprehensive income were isolated to the net income line, which has been
addressed through the preceding disclosures.
229
3.
Commitments, Contingencies and Guarantees
On March 13, 2015, subsidiaries of 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 was guaranteed by the Parent Company, incurred interest at a fixed rate of 3.70%
and matured on March 13, 2019, therefore there were no borrowings outstanding as of December 31, 2020 and 2019.
On July 10, 2015, the Company and GFI entered into a guarantee pursuant to which the Parent Company has guaranteed the
obligations of GFI under GFI’s 8.375% Senior notes due in the remaining aggregate principal amount of $240.0 million and the indenture for
the notes, dated as of July 19, 2011, between GFI and The Bank of New York Mellon Trust Company, N.A., as Trustee. Pursuant to the terms
of the indenture, the interest rate on the notes was reduced effective July 19, 2015 as a result of prior ratings increases following the
acquisition of GFI by BGC Partners. In addition, on January 13, 2016 the interest rate was further reduced as a result of another ratings
increase. The Company and GFI will share any cost savings, including interest and other costs, resulting from the credit enhancement
provided by BGC Partners.
On May 31, 2017, the Company entered into a secured loan arrangement of $29.9 million, under which it pledged certain fixed assets
as security for a loan. This arrangement is guaranteed by the Parent Company, incurs interest at a fixed rate of 3.44% per year and matures on
May 31, 2021. As of December 31, 2020 and December 31, 2019, the Company had $4.0 million and $11.7 million, respectively, outstanding
related to this secured loan arrangement. The book value of the fixed assets pledged as of December 31, 2020 was $0.8 million. The book
value of the fixed assets pledged as of December 31, 2019 was $2.3 million.
On April 8, 2019, the Company entered into a secured loan arrangement of $15.0 million, under which it pledged certain fixed assets as
security for a loan. This arrangement is guaranteed by the Parent Company, incurs interest at a fixed rate of 3.77% and matures on April 8,
2023. As of December 31, 2020 and 2019, the Company had $9.6 million and $13.2 million outstanding related to this secured loan
arrangement, respectively. The book value of the fixed assets pledged as of December 31, 2020 was $1.2 million. The book value of the fixed
assets pledged as of December 31, 2019 was $8.1 million.
On April 19, 2019, the Company entered into a $10.0 million secured loan arrangement , under which it pledged certain fixed assets as
security for a loan. This arrangement incurs interest at a fixed rate of 3.89% and matures on April 19, 2023. As of December 31, 2020 and
December 31, 2019, the Company had $6.3 million and $8.8 million, respectively, outstanding related to this secured loan arrangement. The
book value of the fixed assets pledged as of December 31, 2020 was $2.7 million. The book value of the fixed assets pledged as of December
31, 2019 was $5.7 million.
4.
Long-Term Debt
Unsecured Senior Revolving Credit and Converted Term Loan Agreement
On September 8, 2017, the Company entered into a committed unsecured senior revolving credit agreement with Bank of America,
N.A., as administrative agent, and a syndicate of lenders. The revolving credit agreement provided for revolving loans of up to $400.0
million. The maturity date of the facility was September 8, 2019. On November 22, 2017, the Company and Newmark entered into an
amendment to the unsecured senior revolving credit agreement. Pursuant to the amendment, the then-outstanding borrowings of the Company
under the revolving credit facility were converted into a term loan. There was no change in the maturity date or interest rate. Effective
December 13, 2017, Newmark assumed the obligations of the Company as borrower under the converted term loan. The Company remained
a borrower under, and retained access to, the revolving credit facility for any future draws, subject to availability which increased as
Newmark repaid the converted term loan. During the year ended December 31, 2018, Newmark repaid the outstanding balance of the
converted term loan. During the year ended December 31, 2018, the Company borrowed $195.0 million under the committed unsecured
senior revolving credit agreement and subsequently repaid the $195.0 million during the year. Therefore, there were no borrowings
outstanding as of December 31, 2018. The Company recorded interest expense of $1.0 million for the year ended December 31, 2018. The
Company did not record any interest expense related to the committed unsecured revolving credit agreement for the years ended December
31, 2020 and 2019.
230
On November 28, 2018, the Company entered into a new Revolving Credit Agreement which replaced the existing committed
unsecured senior revolving credit agreement. The maturity date of the new Revolving Credit Agreement was November 28, 2020 and the
maximum revolving loan balance has been reduced from $400.0 million to $350.0 million. Borrowings under this agreement bore interest at
either LIBOR or a defined base rate plus additional margin. On December 11, 2019, the Company entered into an amendment to the new
unsecured Revolving Credit Agreement. Pursuant to the amendment, the maturity date was extended to February 26, 2021. On February 26,
2020, the Company entered into a second amendment to the new Revolving Credit Agreement, pursuant to which, the maturity date was
extended by two years to February 26, 2023. There was no change to the interest rate or the maximum revolving loan balance. On July 14,
2020, the Company repaid in full the $225.0 million borrowings outstanding under the new Revolving Credit Agreement. As of December
31, 2020, there were no borrowings outstanding under the new Revolving Credit Agreement. As of December 31, 2019, there was $68.9
million of borrowings outstanding, net of deferred financing costs of $1.1 million, under the new unsecured Revolving Credit Agreement.
The average interest rate on the outstanding borrowings was 2.88% and 3.88% for the years ended December 31, 2020 and 2019,
respectively. The Company recorded interest expense related to the unsecured senior Revolving Credit Agreement of $5.3 million, $10.0
million and $0.3 million for the years ended December 31, 2020, 2019 and 2018, 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 are general senior unsecured obligations of the Company. These 5.125% 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. On August 5, 2020, the Company commenced a cash tender offer for any and all $300.0 million outstanding
aggregate principal amount of its 5.125% Senior Notes. On August 11, 2020, the Company’s cash tender offer expired at 5:00 p.m., New
York City time. As of the expiration time, $44.0 million aggregate principal amount of the 5.125% Senior Notes were validly tendered. These
notes were redeemed on the settlement date of August 14, 2020. The carrying value of the 5.125% Senior Notes as of December 31, 2020
was $255.6 million. The Company recorded interest expense related to the 5.125% Senior Notes of $16.3 million, $16.2 million, and $16.2
million for the years ended December 31, 2020, 2019, and 2018.
5.375% Senior Notes
On July 24, 2018, the Company issued an aggregate of $450.0 million principal amount of 5.375% Senior Notes. The 5.375% Senior
Notes are general senior unsecured obligations of the Company. These 5.375% Senior Notes bear interest at a rate of 5.375% per year,
payable in cash on January 24 and July 24 of each year, commencing January 24, 2019. The 5.375% Senior Notes will mature on July 24,
2023. The Company may redeem some or all of the 5.375% Senior Notes at any time or from time to time for cash at certain “make-whole”
redemption prices (as set forth in the indenture related to the 5.375% Senior Notes ). If a “Change of Control Triggering Event” (as defined in
the indenture related to the 5.375% Senior Notes ) 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 $444.2 million, net of the discount and debt issuance costs of $5.8
million. The issuance costs are amortized as interest expense and the carrying value of the 5.375% Senior Notes will accrete up to the face
amount over the term of the notes. The carrying value of the 5.375% Senior Notes as of December 31, 2020 was $446.6 million. The
Company recorded interest expense related to the 5.375% Senior Notes of $25.5 million, $25.6 million and $11.0 million for the years ended
December 31, 2020, 2019 and 2018, respectively.
3.750% Senior Notes
On September 27, 2019, the Company issued an aggregate of $300.0 million principal amount of 3.750% Senior Notes due October 1,
2024. The 3.750% Senior Notes are general unsecured obligations of the Company. The 3.750% Senior Notes bear interest at a rate of
3.750% per annum, payable on each April 1 and October 1, commencing April 1, 2020. The 3.750% Senior Notes will mature on October 1,
2024. The Company may redeem some or all of the 3.750% Senior 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 3.750% Senior Notes
was $296.1 million, net of discount and debt issuance costs of $3.9 million. The issuance costs will be amortized as interest expense and the
carrying value of the 3.750% Senior Notes will accrete up to the face amount over the term of the notes. The carrying value of the 3.750%
Senior Notes was $296.9 million as of December 31, 2020. The Company recorded interest expense related to the 3.750% Senior Notes of
$12.1 million and $3.2 million for the years ended December 31, 2020 and 2019, respectively. The Company did not record any interest
expense related to the 3.750% Senior Notes for the year ended December 31, 2018.
231
4.375% Senior Notes
On July 10, 2020, the Company issued an aggregate of $300.0 million principal amount of 4.375% Senior Notes. The 4.375% Senior
Notes are general unsecured obligations of the Company. The 4.375% Senior Notes bear interest at a rate of 4.375% per year, payable in cash
on June 15 and December 15 of each year, commencing December 15, 2020. The 4.375% Senior Notes will mature on December 15, 2025.
The Company may redeem some or all of the 4.375% Senior Notes at any time or from time to time for cash at certain “make-whole”
redemption prices. If a “Change of Control Triggering Event” 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 4.375% Senior Notes was $296.8 million, net of discount and debt issuance
costs of $3.2 million. The issuance costs will be amortized as interest expense, and the carrying value of the 4.375% Senior Notes will accrete
up to the face amount over the term of the notes. The carrying value of the 4.375% Senior Notes was $297.0 million as of December 31,
2020. The Company recorded interest expense related to the 4.375% Senior Notes of $6.5 million for year ended December 31, 2020. The
Company did not record interest expense related to the 4.375% Senior Notes for years ended December 31, 2019 and 2018.
232
THE EXHIBITS LISTED UNDER “ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES”
ARE AVAILABLE IN BGC’S STAND-ALONE FORM 10-K, WHICH IS AVAILABLE ON OUR
WEBSITE. THE FOLLOWING PAGES WERE NOT INCLUDED IN BGC’S 2020 10-K FILING.
233
Non-GAAP Financial Measures
This document contains non-GAAP financial measures that differ from the most directly comparable measures
calculated and presented in accordance with Generally Accepted Accounting Principles in the United States
(“GAAP”). Non-GAAP financial measures used by the Company include “Adjusted Earnings before
noncontrolling interests and taxes”, which is used interchangeably with “pre-tax Adjusted Earnings”; “Post-tax
Adjusted Earnings to fully diluted shareholders”, which is used interchangeably with “post-tax Adjusted
Earnings”; “Adjusted EBITDA”; and “Liquidity”. The definitions of these terms are below.
Adjusted Earnings Defined
BGC uses non-GAAP financial measures, including “Adjusted Earnings before noncontrolling interests and
taxes” and “Post-tax Adjusted Earnings to fully diluted shareholders”, which are supplemental measures of
operating results used by management to evaluate the financial performance of the Company and its
consolidated subsidiaries. BGC believes that Adjusted Earnings best reflect the operating earnings generated by
the Company on a consolidated basis and are the earnings which management considers when managing its
business.
As compared with “Income (loss) from operations before income taxes” and “Net income (loss) for fully diluted
shares”, both prepared in accordance with GAAP, Adjusted Earnings calculations primarily exclude certain
non-cash items and other expenses that generally do not involve the receipt or outlay of cash by the Company
and/or which do not dilute existing stockholders. In addition, Adjusted Earnings calculations exclude certain
gains and charges that management believes do not best reflect the ordinary results of BGC. Adjusted Earnings
is calculated by taking the most comparable GAAP measures and adjusting for certain items with respect to
compensation expenses, non-compensation expenses, and other income, as discussed below.
Calculations of Compensation Adjustments for Adjusted Earnings and Adjusted EBITDA
Treatment of Equity-Based Compensation Line Item for Adjusted Earnings and Adjusted EBITDA
The Company’s Adjusted Earnings and Adjusted EBITDA measures exclude all GAAP charges included in
the line item “Equity-based compensation and allocations of net income to limited partnership units and
FPUs” (or “equity-based compensation” for purposes of defining the Company’s non-GAAP results) as
recorded on the Company’s GAAP Consolidated Statements of Operations and GAAP Consolidated
Statements of Cash Flows. These GAAP equity-based compensation charges reflect the following items:
∗ Charges with respect to grants of exchangeability, which reflect the right of holders of limited partnership
units with no capital accounts, such as LPUs and PSUs, to exchange these units into shares of common
stock, or into partnership units with capital accounts, such as HDUs, as well as cash paid with respect to
taxes withheld or expected to be owed by the unit holder upon such exchange. The withholding taxes related
to the exchange of certain non-exchangeable units without a capital account into either common shares or
units with a capital account may be funded by the redemption of preferred units such as PPSUs.
∗ Charges with respect to preferred units. Any preferred units would not be included in the Company’s fully
diluted share count because they cannot be made exchangeable into shares of common stock and are entitled
only to a fixed distribution. Preferred units are granted in connection with the grant of certain limited
partnership units that may be granted exchangeability or redeemed in connection with the grant of shares of
common stock at ratios designed to cover any withholding taxes expected to be paid. This is an alternative
to the common practice among public companies of issuing the gross amount of shares to employees,
subject to cashless withholding of shares, to pay applicable withholding taxes.
∗ GAAP equity-based compensation charges with respect to the grant of an offsetting amount of common
stock or partnership units with capital accounts in connection with the redemption of non-exchangeable
234
units, including PSUs and LPUs.
∗ Charges related to amortization of RSUs and limited partnership units.
∗ Charges related to grants of equity awards, including common stock or partnership units with capital
accounts.
∗ Allocations of net income to limited partnership units and FPUs. Such allocations represent the pro-rata
portion of post-tax GAAP earnings available to such unit holders.
The amounts of certain quarterly equity-based compensation charges are based upon the Company’s estimate
of such expected charges during the annual period, as described further below under “Methodology for
Calculating Adjusted Earnings Taxes.”
Virtually all of BGC’s key executives and producers have equity or partnership stakes in the Company and
its subsidiaries and generally receive deferred equity or limited partnership units as part of their
compensation. A significant percentage of BGC’s fully diluted shares are owned by its executives, partners
and employees. The Company issues limited partnership units as well as other forms of equity-based
compensation, including grants of exchangeability into shares of common stock, to provide liquidity to its
employees, to align the interests of its employees and management with those of common stockholders, to
help motivate and retain key employees, and to encourage a collaborative culture that drives cross-selling
and revenue growth.
All share equivalents that are part of the Company’s equity-based compensation program, including REUs,
PSUs, LPUs, HDUs, and other units that may be made exchangeable into common stock, as well as RSUs
(which are recorded using the treasury stock method), are included in the fully diluted share count when
issued or at the beginning of the subsequent quarter after the date of grant. Generally, limited partnership
units other than preferred units are expected to be paid a pro-rata distribution based on BGC’s calculation of
Adjusted Earnings per fully diluted share. However, out of an abundance of caution and in order to
strengthen the Company’s balance sheet due the uncertain macroeconomic conditions with respect to the
COVID-19 pandemic, BGC Holdings, L.P. has reduced its distributions of income from the operations of
BGC’s businesses to its partners.
Compensation charges are also adjusted for certain other cash and non-cash items, including those related to
the amortization of GFI employee forgivable loans granted prior to the closing of the January 11, 2016 back-
end merger with GFI.
Certain Other Compensation-Related Adjustments for Adjusted Earnings
BGC also excludes various other GAAP items that management views as not reflective of the Company’s
underlying performance in a given period from its calculation of Adjusted Earnings. These may include
compensation-related items with respect to cost-saving initiatives, such as severance charges incurred in
connection with headcount reductions as part of broad restructuring and/or cost savings plans.
Calculation of Non-Compensation Adjustments for Adjusted Earnings
Adjusted Earnings calculations may also exclude items such as:
∗ Non-cash GAAP charges related to the amortization of intangibles with respect to acquisitions;
∗ Acquisition related costs;
∗ Certain rent charges;
235
∗ Non-cash GAAP asset impairment charges; and
∗ Various other GAAP items that management views as not reflective of the Company’s underlying
performance in a given period, including non-compensation-related charges incurred as part of broad
restructuring and/or cost savings plans. Such GAAP items may include charges for exiting leases and/or
other long-term contracts as part of cost-saving initiatives, as well as non-cash impairment charges related to
assets, goodwill and/or intangibles created from acquisitions.
Calculation of Adjustments for Other (income) losses for Adjusted Earnings
Adjusted Earnings calculations also exclude certain other non-cash, non-dilutive, and/or non-economic
items, which may, in some periods, include:
∗ Gains or losses on divestitures;
∗ Fair value adjustment of investments;
∗ Certain other GAAP items, including gains or losses related to BGC's investments accounted for under the
equity method; and
∗ Any unusual, one-time, non-ordinary, or non-recurring gains or losses.
Methodology for Calculating Adjusted Earnings Taxes
Although Adjusted Earnings are calculated on a pre-tax basis, BGC also reports post-tax Adjusted Earnings to
fully diluted shareholders. The Company defines post-tax Adjusted Earnings to fully diluted shareholders as
pre-tax Adjusted Earnings reduced by the non-GAAP tax provision described below and net income (loss)
attributable to noncontrolling interest for Adjusted Earnings.
The Company calculates its tax provision for post-tax Adjusted Earnings using an annual estimate similar to
how it accounts for its income tax provision under GAAP. To calculate the quarterly tax provision under
GAAP, BGC estimates its full fiscal year GAAP income (loss) from operations before income taxes and
noncontrolling interests in subsidiaries and the expected inclusions and deductions for income tax purposes,
including expected equity-based compensation during the annual period. The resulting annualized tax rate is
applied to BGC’s quarterly GAAP income (loss) from operations before income taxes and noncontrolling
interests in subsidiaries. At the end of the annual period, the Company updates its estimate to reflect the actual
tax amounts owed for the period.
To determine the non-GAAP tax provision, BGC first adjusts pre-tax Adjusted Earnings by recognizing any,
and only, amounts for which a tax deduction applies under applicable law. The amounts include charges with
respect to equity-based compensation; certain charges related to employee loan forgiveness; certain net
operating loss carryforwards when taken for statutory purposes; and certain charges related to tax goodwill
amortization. These adjustments may also reflect timing and measurement differences, including treatment of
employee loans; changes in the value of units between the dates of grants of exchangeability and the date of
actual unit exchange; variations in the value of certain deferred tax assets; and liabilities and the different timing
of permitted deductions for tax under GAAP and statutory tax requirements.
After application of these adjustments, the result is the Company’s taxable income for its pre-tax Adjusted
Earnings, to which BGC then applies the statutory tax rates to determine its non-GAAP tax provision. BGC
views the effective tax rate on pre-tax Adjusted Earnings as equal to the amount of its non-GAAP tax provision
divided by the amount of pre-tax Adjusted Earnings.
236
Generally, the most significant factor affecting this non-GAAP tax provision is the amount of charges relating
to equity-based compensation. Because the charges relating to equity-based compensation are deductible in
accordance with applicable tax laws, increases in such charges have the effect of lowering the Company’s non-
GAAP effective tax rate and thereby increasing its post-tax Adjusted Earnings.
BGC incurs income tax expenses based on the location, legal structure and jurisdictional taxing authorities of
each of its subsidiaries. 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. Any U.S. federal and state income tax liability or
benefit related to the partnership income or loss, with the exception of UBT, rests with the unit holders rather
than with the partnership entity. The Company’s 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. Outside of the U.S.,
BGC is expected to operate principally through subsidiary corporations subject to local income taxes. For these
reasons, taxes for Adjusted Earnings are expected to be presented to show the tax provision the consolidated
Company would expect to pay if 100 percent of earnings were taxed at global corporate rates.
Calculations of Pre- and Post-Tax Adjusted Earnings per Share
BGC’s pre- and post-tax Adjusted Earnings per share calculations assume either that:
∗ The fully diluted share count includes the shares related to any dilutive instruments, but excludes the
associated expense, net of tax, when the impact would be dilutive; or
∗ The fully diluted share count excludes the shares related to these instruments, but includes the associated
expense, net of tax.
The share count for Adjusted Earnings excludes certain shares and share equivalents expected to be issued in
future periods but not yet eligible to receive dividends and/or distributions. Each quarter, the dividend payable
to BGC’s stockholders, if any, is expected to be determined by the Company’s Board of Directors with
reference to a number of factors, including post-tax Adjusted Earnings per share. BGC may also pay a pro-rata
distribution of net income to limited partnership units, as well as to Cantor for its noncontrolling interest. The
amount of this net income, and therefore of these payments per unit, would be determined using the above
definition of Adjusted Earnings per share on a pre-tax basis.
The declaration, payment, timing, and amount of any future dividends payable by the Company will be at the
discretion of its Board of Directors using the fully diluted share count. For more information on any share count
adjustments, see the table titled “Fully Diluted Weighted-Average Share Count under GAAP and for Adjusted
Earnings”.
Management Rationale for Using Adjusted Earnings
BGC’s calculation of Adjusted Earnings excludes the items discussed above because they are either non-cash in
nature, because the anticipated benefits from the expenditures are not expected to be fully realized until future
periods, or because the Company views results excluding these items as a better reflection of the underlying
performance of BGC’s ongoing operations. Management uses Adjusted Earnings in part to help it evaluate,
among other things, the overall performance of the Company’s business, to make decisions with respect to the
Company’s operations, and to determine the amount of dividends payable to common stockholders and
distributions payable to holders of limited partnership units. Dividends payable to common stockholders and
distributions payable to holders of limited partnership units are included within “Dividends to stockholders” and
“Earnings distributions to limited partnership interests and noncontrolling interests,” respectively, in our
unaudited, condensed, consolidated statements of cash flows.
237
The term “Adjusted Earnings” should not be considered in isolation or as an alternative to GAAP net income
(loss). The Company views Adjusted Earnings as a metric that is not indicative of liquidity, or the cash
available to fund its operations, but rather as a performance measure. Pre- and post-tax Adjusted Earnings, as
well as related measures, are not intended to replace the Company’s presentation of its GAAP financial results.
However, management believes that these measures help provide investors with a clearer understanding of
BGC’s financial performance and offer useful information to both management and investors regarding certain
financial and business trends related to the Company’s financial condition and results of operations.
Management believes that the GAAP and Adjusted Earnings measures of financial performance should be
considered together.
For more information regarding Adjusted Earnings, see the sections of this document and/or the Company’s
most recent financial results press release titled “Reconciliation of GAAP Income (Loss) from Operations
before Income Taxes to Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS”, including
the related footnotes, for details about how BGC’s non-GAAP results are reconciled to those under GAAP.
Adjusted EBITDA Defined
BGC also provides an additional non-GAAP financial performance measure, “Adjusted EBITDA”, which it
defines as GAAP “Net income (loss) available to common stockholders”, adjusted to add back the following
items:
∗ Provision (benefit) for income taxes;
∗ Net income (loss) attributable to noncontrolling interest in subsidiaries;
∗
Interest expense;
∗ Fixed asset depreciation and intangible asset amortization;
∗ Equity-based compensation and allocations of net income to limited partnership units and FPUs;
∗
∗
Impairment of long-lived assets;
(Gains) losses on equity method investments; and
∗ Certain other non-cash GAAP items, such as non-cash charges of amortized rents incurred by the Company
for its new UK based headquarters.
The Company’s management believes that its Adjusted EBITDA measure is useful in evaluating BGC’s
operating performance, because the calculation of this measure generally eliminates the effects of financing and
income taxes and the accounting effects of capital spending and acquisitions, which would include impairment
charges of goodwill and intangibles created from acquisitions. Such items may vary for different companies for
reasons unrelated to overall operating performance. As a result, the Company’s management uses this measure
to evaluate operating performance and for other discretionary purposes. BGC believes that Adjusted EBITDA is
useful to investors to assist them in getting a more complete picture of the Company’s financial results and
operations.
Since BGC’s Adjusted EBITDA is not a recognized measurement under GAAP, investors should use this
measure in addition to GAAP measures of net income when analyzing BGC’s operating performance. Because
not all companies use identical EBITDA calculations, the Company’s presentation of Adjusted EBITDA may
not be comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA is not
intended to be a measure of free cash flow or GAAP cash flow from operations because the Company’s
Adjusted EBITDA does not consider certain cash requirements, such as tax and debt service payments.
238
For more information regarding Adjusted EBITDA, see the section of this document and/or the Company’s
most recent financial results press release titled “Reconciliation of GAAP Net Income (Loss) Available to
Common Stockholders to Adjusted EBITDA”, including the footnotes to the same, for details about how BGC’s
non-GAAP results are reconciled to those under GAAP.
Timing of Outlook for Certain GAAP and Non-GAAP Items
BGC anticipates providing forward-looking guidance for GAAP revenues and for certain non-GAAP measures
from time to time. However, the Company does not anticipate providing an outlook for other GAAP results.
This is because certain GAAP items, which are excluded from Adjusted Earnings and/or Adjusted EBITDA, are
difficult to forecast with precision before the end of each period. The Company therefore believes that it is not
possible for it to have the required information necessary to forecast GAAP results or to quantitatively reconcile
GAAP forecasts to non-GAAP forecasts with sufficient precision without unreasonable efforts. For the same
reasons, the Company is unable to address the probable significance of the unavailable information. The
relevant items that are difficult to predict on a quarterly and/or annual basis with precision and may materially
impact the Company’s GAAP results include, but are not limited, to the following:
∗ Certain equity-based compensation charges that may be determined at the discretion of management
throughout and up to the period-end;
∗ Unusual, one-time, non-ordinary, or non-recurring items;
∗ The impact of gains or losses on certain marketable securities, as well as any gains or losses related to
associated mark-to- market movements and/or hedging. These items are calculated using period-end closing
prices;
∗ Non-cash asset impairment charges, which are calculated and analyzed based on the period-end values of
the underlying assets. These amounts may not be known until after period-end;
∗ Acquisitions, dispositions and/or resolutions of litigation, which are fluid and unpredictable in nature.
Liquidity Defined
BGC may also use a non-GAAP measure called “liquidity”. The Company considers liquidity to be comprised
of the sum of cash and cash equivalents, reverse repurchase agreements (if any), securities owned, and
marketable securities, less securities lent out in securities loaned transactions and repurchase agreements (if
any). The Company considers liquidity to be an important metric for determining the amount of cash that is
available or that could be readily available to the Company on short notice.
For more information regarding Liquidity, see the section of this document and/or the Company’s most recent
financial results press release titled “Liquidity Analysis”, including any footnotes to the same, for details about
how BGC’s non-GAAP results are reconciled to those under GAAP.
Other Items of Note
Certain reclassifications may have been made to previously reported amounts to conform to the current
presentation and to show results on a consistent basis across periods. With the exception of reporting Newmark
as a discontinued operation and the previously announced non-GAAP presentation, any such reclassifications
would have had no impact on consolidated revenues or earnings under GAAP and would leave consolidated
pre- and post-tax Adjusted Earnings for the prior periods essentially unchanged all else being equal. Certain
numbers and percentage changes listed throughout this document may not sum due to rounding.
239
BGC PARTNERS, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS TO ADJUSTED
EBITDA
(in thousands)
(unaudited)
GAAP net income (loss) available to common stockholders
$
48,908 $
47,562
FY 2020
FY 2019
Add back:
Provision (benefit) for income taxes
21,303
49,811
Net income (loss) attributable to noncontrolling interest in
subsidiaries (1)
Interest expense
7,694
24,691
76,607
60,246
Fixed asset depreciation and intangible asset amortization
84,115
79,188
Impairment of long-lived assets
9,396
4,638
Equity-based compensation and allocations of net income to limited
partnership units and FPUs (2)
183,545
170,625
(Gains) losses on equity method investments (3)
(1,091 )
(4,115)
Other non-cash GAAP items (4)
—
5,443
Adjusted EBITDA
$
430,477 $
438,089
(1) Primarily represents Cantor's pro-rata portion of net income.
(2) Represents BGC employees' pro-rata portion of net income and non-cash and non-dilutive charges relating to equity-based
compensation. See Footnote 1 to the table titled “Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to
Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS” for more information.
(3) For the full years 2020 and 2019, includes non-cash gains of $5.0 million and $4.1 million, respectively, related to BGC’s
investments accounted for under the equity method. The full year 2020 also included a net loss of $3.9 million related to investment
impairment.
(4) Non-cash charges of amortized rents incurred by the Company during the build-out phase of the Company’s new UK based
headquarters.
Note: BGC’s Adjusted EBITDA for Financial Covenants is defined under the amended Revolving Credit Agreement, which the
Company entered into on February 26, 2020. For FY 2020, Adjusted EBITDA for Financial Covenants was $540 million.
240
BGC PARTNERS, INC.
RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES TO ADJUSTED
EARNINGS AND GAAP FULLY DILUTED EPS TO POST-TAX ADJUSTED EPS
(in thousands, except per share data)
(unaudited)
GAAP income (loss) from operations before income taxes
FY 2020
FY 2019
$
77,905
$
122,064
Pre-tax adjustments:
Compensation adjustments:
Equity-based compensation and allocations of net income
to limited partnership units and FPUs (1)
Other Compensation charges (2)
Total Compensation adjustments
Non-Compensation adjustments:
Amortization of intangibles (3)
Acquisition related costs
Certain rent charges (4)
Impairment charges
Other (5)
Total Non-Compensation adjustments
Other income (losses), net adjustments:
Losses (gains) on divestitures
Fair value adjustment of investments (6)
Other net (gains) losses (7)
Total other income (losses), net adjustments
183,545
37,209
220,754
28,251
2,880
—
9,397
18,150
58,678
(394 )
431
(3,909 )
(3,872 )
170,625
14,868
185,493
29,085
1,941
10,292
4,450
58,959
104,727
(18,421)
(20,324)
(4,169)
(42,914)
Total pre-tax adjustments
275,560
247,306
Adjusted Earnings before noncontrolling interest in subsidiaries and
taxes
GAAP net income (loss) available to common stockholders
$
$
353,465
$
369,370
48,908
$
47,562
Allocation of net income (loss) to noncontrolling interest in subsidiaries (8)
Total pre-tax adjustments (from above)
Income tax adjustment to reflect adjusted earnings taxes (9)
8,459
275,560
(17,507 )
19,278
247,306
8,848
Post-tax adjusted earnings
$
315,420
$
322,994
Per Share Data
GAAP fully diluted earnings (loss) per share
$
0.13
$
0.13
Less: Allocations of net income (loss) to limited partnership units,
FPUs, and noncontrolling interest in subsidiaries, net of tax
Total pre-tax adjustments (from above)
Income tax adjustment to reflect adjusted earnings taxes
Post-tax adjusted earnings per share
(0.02 )
0.50
(0.03 )
0.58
—
0.47
0.02
0.62
Fully diluted weighted-average shares of common stock outstanding
546,848
524,550
Dividends declared per share of common stock
Dividends declared and paid per share of common stock
$
$
0.17
0.17
$
$
0.56
0.56
Please see footnotes to this table on the next page.
241
(1) The components of equity-based compensation and allocations of net income to limited partnership units and FPUs are as follows
(in thousands):
Issuance of common stock and grants of exchangeability
Allocations of net income
LPU amortization
RSU amortization
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
FY 2020
$
FY 2019
84,966 $
14,006
74,282
10,291
183,545 $
100,948
20,491
41,721
7,465
170,625
$
(2) GAAP expenses for the full years 2020 and 2019 included certain one-off costs associated with the cost reduction program of
$22.8 million and $2.0 million, respectively. The full year 2020 also included certain loan impairments related to the cost reduction
program of $10.6 million. GAAP expenses for the full years 2020 and 2019 included certain acquisition-related compensation
expenses of $3.1 million and $14.9 million, respectively.
(3) Includes non-cash GAAP charges related to the amortization of intangibles with respect to acquisitions.
(4) Includes certain rent charges incurred by the Company during the build-out phase of the Company’s new UK based headquarters.
(5) Includes various other GAAP items. Pre-tax Adjusted Earnings in each presented period of 2020 and 2019 excludes the impact of
the employee theft of funds, including penalties and interest, and other immaterial revisions that have been made to previously issued
financial statements. Adjusted Earnings for the full year of 2019 also exclude the impact of certain GAAP charges recorded in the
third quarter of 2019 as part of “Other expenses”, primarily related to litigation matters such as the Company’s settlement with the
Commodity Futures Trading Commission and the New York Attorney General’s Office. Each of the above-referenced items are
consistent with BGC’s normal practice of excluding certain GAAP gains and charges from Adjusted Earnings that management
believes do not best reflect the ordinary results of the Company, including with respect to non-recurring or unusual gains or losses, as
well as resolutions of litigation.
(6) Includes non-cash gains of ($0.4) million and $20.3 million, respectively, related to fair value adjustments of investments held by
BGC for the full years 2020 and 2019.
(7) For the full years 2020 and 2019, includes non-cash gains of $5.0 million and $4.1 million, respectively, related to BGC's
investments accounted for under the equity method. The full years 2020 and 2019 also include a net gain of $2.8 million and a net gain
of $0.1 million, respectively for various other GAAP items. The full year 2020 also included a net loss of $3.9 million related to
investment impairment.
(8) Primarily represents Cantor's pro-rata portion of net income.
(9) BGC's GAAP provision for income taxes is calculated based on an annualized methodology. The Company's GAAP provision for
income taxes were $21.3 million and $49.8 million for the full years 2020 and 2019, respectively. The Company includes additional
tax-deductible items when calculating the provision for taxes with respect to Adjusted Earnings using an annualized methodology.
These include tax-deductions related to equity-based compensation with respect to limited partnership unit exchange, employee loan
amortization, and certain net-operating loss carryforwards. The non-GAAP provision for income taxes was adjusted ($17.5) million
and $8.8 million for the full years 2020 and 2019, respectively. As a result, the provision for income taxes with respect to Adjusted
Earnings were $38.8 million and $41.0 million for the full years 2020 and 2019, respectively. The calculation of taxes for Adjusted
Earnings excluded the effect of the 2017 U.S. Tax Cuts and Jobs Act.
Note: Certain numbers may not add due to rounding.
242
BGC PARTNERS, INC.
LIQUIDITY ANALYSIS
(in thousands)
(unaudited)
Cash and cash equivalents
Securities owned
Marketable securities (1)
Total Liquidity
December 31, 2020
December 31, 2019
$
$
593,646 $
58,572
349
652,567 $
415,379
57,525
326
473,230
(1) As of December 31, 2019, $13.9 million of Marketable securities on our balance sheet had been lent in a Securities loaned
transaction and, therefore, are not included in this Liquidity Analysis.
243
PRIOR PERIODS’ FINANCIAL STATEMENT REVISIONS
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Revenues:
Commissions
Principal transactions
Total brokerage revenues
Fees from related parties
Data, software and post-trade
Interest and dividend income
Other revenues
Total revenues
Expenses:
Compensation and employee benefits
Equity-based compensation and allocations of net income to limited partnership units
and FPUs
Total compensation and employee benefits
Occupancy and equipment
Fees to related parties
Professional and consulting fees
Communications
Selling and promotion
Commissions and floor brokerage
Interest expense
Other expenses
Total non-compensation expenses
Total expenses
Other income (losses), net:
Gains (losses) on divestitures and sale of investments
Gains (losses) on equity method investments
Other income (loss)
Total other income (losses), net
As
Reported
FY 2019
As Revised
Adjustments FY 2019
$ 1,645,818
321,923
1,967,741
29,442
73,166
18,319
15,563
2,104,231
— $ 1,645,818
—
321,923
— 1,967,741
29,442
—
73,166
—
18,319
—
—
15,563
— 2,104,231
1,127,911
(2,000 ) 1,125,911
165,612
1,293,523
184,807
19,365
92,167
119,982
81,645
63,617
59,077
107,423
728,083
2,021,606
5,013
170,625
3,013 1,296,536
183,207
(1,600 )
19,365
—
—
92,167
119,982
—
81,645
—
63,617
—
1,169
60,246
118,449
11,026
10,595
738,678
13,608 2,035,214
18,421
4,115
32,953
55,489
—
—
(2,442 )
(2,442 )
18,421
4,115
30,511
53,047
Income (loss) from operations before income taxes
138,114
(16,050 )
122,064
Provision for income taxes
Consolidated net income (loss)
$
53,171
84,943 $
(3,360 )
(12,690 ) $
49,811
72,253
Less: Net income (loss) attributable to noncontrolling interest in subsidiaries
29,236
(4,545 )
24,691
Net income (loss) available to common stockholders
$
55,707 $
(8,145 ) $
47,562
244
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except per share data)
(unaudited)
As Reported
December 31,
2019
Adjustments
As Revised
December 31,
2019
Assets
Cash and cash equivalents
Cash segregated under regulatory requirements
Securities owned
Marketable securities
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers
Accrued commissions and other receivables, net
Loans, forgivable loans and other receivables from employees and partners, net
Fixed assets, net
Investments
Goodwill
Other intangible assets, net
Receivables from related parties
Other assets
Total assets
Liabilities, Redeemable Partnership Interest, and Equity
Short-term borrowings
Accrued compensation
Securities loaned
Payables to broker-dealers, clearing organizations, customers and related broker-dealers
Payables to related parties
Accounts payable, accrued and other liabilities
Long-term debt
Total liabilities
Redeemable partnership interest
Equity
$
$
$
415,379
220,735
57,525
14,228
551,445
778,415
315,590
204,841
40,349
553,745
303,224
14,273
446,371
3,916,120 $
4,962
215,085
13,902
416,566
72,497
1,283,046
1,142,687
3,148,745
23,638
— $
—
—
—
—
9,869
—
—
—
—
—
—
925
10,794 $
— $
—
—
—
—
29,563
—
29,563
—
415,379
220,735
57,525
14,228
551,445
788,284
315,590
204,841
40,349
553,745
303,224
14,273
447,296
3,926,914
4,962
215,085
13,902
416,566
72,497
1,312,609
1,142,687
3,178,308
23,638
Stockholders' equity:
Class A common stock, par value $0.01 per share; 750,000 shares authorized; 358,440 shares
issued at December 31, 2019; and 307,915 shares outstanding at December 31, 2019
Class B common stock, par value $0.01 per share; 150,000 shares authorized; 45,884 shares issued and
outstanding at December 31, 2019, convertible into Class A common stock
Additional paid-in capital
Treasury stock, at cost: 50,525 shares of Class A common stock at December 31, 2019
Retained deficit
Accumulated other comprehensive income (loss)
Total stockholders' equity
Noncontrolling interest in subsidiaries
Total equity
Total liabilities, redeemable partnership interest and equity
$
3,584
—
3,584
459
2,271,947
(315,308 )
(1,241,754 )
(33,102 )
685,826
57,911
743,737
3,916,120 $
—
156
—
(11,335 )
—
(11,179 )
(7,590 )
(18,769 )
10,794 $
459
2,272,103
(315,308 )
(1,253,089 )
(33,102 )
674,647
50,321
724,968
3,926,914
245
BGC PARTNERS, INC.
RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES TO ADJUSTED
EARNINGS AND GAAP FULLY DILUTED EPS TO POST-TAX ADJUSTED EPS
(in thousands, except per share data)
(unaudited)
As
Reported
As Revised
FY 2019 Adjustments FY 2019
GAAP income (loss) before income taxes
$ 138,114 $
(16,050 ) $
122,064
Pre-tax adjustments:
Compensation adjustments:
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
Other Compensation charges
Total Compensation adjustments
$ 165,612 $
16,868
182,480
5,013 $
(2,000 )
3,013
170,625
14,868
185,493
Non-Compensation adjustments:
Amortization of intangibles
Acquisition related costs
Certain rent charges
Impairment charges
Other
Total Non-Compensation adjustments
Other income (losses), net adjustments:
Losses (gains) on divestitures
Fair value adjustment of investments
Other net (gains) losses
Total other income (losses), net adjustments
29,085
1,941
10,292
4,450
48,364
94,132
—
—
—
—
10,595
10,595
29,085
1,941
10,292
4,450
58,959
104,727
$ (18,421 )
(22,766 )
(4,169 )
(45,356 )
— $
2,442
2,442
(18,421)
(20,324)
(4,169)
(42,914)
Total pre-tax adjustments
231,256
16,050
247,306
Pre-tax adjusted earnings
$ 369,370 $
— $
369,370
GAAP net income (loss) available to common stockholders
55,707
(8,145 )
47,562
Allocation of net income (loss) to noncontrolling interest in subsidiaries
23,823
(4,545 )
19,278
Total pre-tax adjustments (from above)
231,256
16,050
247,306
Income tax adjustment to reflect adjusted earnings taxes
11,247
(2,399 )
8,848
Post-tax adjusted earnings
$ 322,033 $
961 $
322,994
Per Share Data
GAAP fully diluted earnings (loss) per share
$
0.16
(0.03 ) $
0.13
Less: Allocations of net income (loss) to limited partnership units,
FPUs, and noncontrolling interest in subsidiaries, net of tax
Total pre-tax adjustments (from above)
Income tax adjustment to reflect adjusted earnings taxes
Post-tax adjusted earnings per share
(0.01 )
0.44
0.02
0.01
0.03
(0.00 )
0.61
0.01
—
0.47
0.02
0.62
Fully diluted weighted-average shares of common stock outstanding
524,550
—
524,550
246
BGC PARTNERS, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS TO ADJUSTED
EBITDA
(in thousands)
(unaudited)
As Reported
FY 2019
As Revised
Adjustments
FY 2019
GAAP net income (loss) available to common stockholders
$
55,707 $
(8,145 ) $
47,562
Add back:
Provision (benefit) for income taxes
53,171
(3,360 )
49,811
Net income (loss) attributable to noncontrolling interest in
subsidiaries (1)
29,236
(4,545 )
24,691
Interest expense
59,077
1,169
60,246
Fixed asset depreciation and intangible asset amortization
79,188
—
79,188
Impairment of long-lived assets
4,638
—
4,638
Equity-based compensation and allocations of net income to
limited partnership units and FPUs (2)
165,612
5,013
170,625
(Gains) losses on equity method investments (3)
(4,115 )
—
(4,115)
Other non-cash GAAP items (4)
5,443
—
5,443
Adjusted EBITDA
$
447,957 $
(9,868 ) $
438,089
(1) Primarily represents Cantor's pro-rata portion of net income.
(2) Represents BGC employees' pro-rata portion of net income and non-cash and non-dilutive charges relating to equity-based
compensation. See Footnote 1 to the table titled “Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to
Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS” for more information.
(3) For the full year 2019, includes non-cash gains of $4.1 million, related to BGC's investments accounted for under the equity
method.
(4) Non-cash charges of amortized rents incurred by the Company during the build-out phase of the Company’s new UK based
headquarters.
247
CORPORATE INFORMATION
27
BGC PARTNERS, INC.
BOARD OF DIRECTORS
Howard W. Lutnick
Chairman of the Board of Directors
and Chief Executive Officer
Linda A. Bell
Director
Stephen T. Curwood
Director
William J. Moran
Director
David P. Richards
Director
BGC PARTNERS, INC.
MANAGEMENT
Howard W. Lutnick
Chairman of the Board of Directors
and Chief Executive Officer
Stephen M. Merkel
Executive Vice President and
General Counsel
Sean A. Windeatt
Chief Operating Officer
Steven Bisgay
Chief Financial Officer
Caroline A. Koster
Managing Director, Chief Counsel, Securities
and Corporate Governance and Corporate
Secretary
CORPORATE HEADQUARTERS
499 Park Avenue
New York, NY 10022
T: +1 212 610 2200
INTERNATIONAL HEADQUARTERS
Five Churchill Place
Canary Wharf
London E14 5RD
United Kingdom
T: +44 20 7894 7700
INVESTOR RELATIONS &
REQUESTS FOR ANNUAL REPORT
ON FORM 10-K
Jason Chryssicas
Head of Investor Relations
Copies of the Company’s Annual Report
on Form 10-K, along with news releases,
other recent SEC filings, and general stock
information are available without charge
by going to ir.bgcpartners.com, or by call-
ing Investor Relations at +1 212 610 2426,
or by writing to Investor Relations at BGC
Partners’ corporate headquarters.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178-0060
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
One Manhattan West
New York, NY 10001
STOCK LISTING
NASDAQ: BGCP
TRANSFER AGENT
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
T: +1 718 921 8124
www.amstock.com
ABOUT BGC PARTNERS, INC.
BGC Partners, Inc. (“BGC”) is a leading
global brokerage and financial technology
company. BGC, through its various
affiliates, specializes in the brokerage of a
broad range of products, including Fixed
Income (Rates and Credit), Foreign
Exchange, Equities, Energy and
Commodities, Shipping, Insurance, and
Futures. BGC also provides a wide variety
of services, including trade execution,
brokerage, clearing, trade compression,
post-trade, information, and other back-
office services to a broad range of
financial and non-financial institutions.
Through its brands, including Fenics®,
Fenics Market Data™, Fenics GO™,
BGC®, BGC Trader™, Capitalab®,
Lucera®, BGC offers financial technology
solutions, market data, and analytics
related to numerous financial instruments
and markets. BGC, BGC Trader, GFI,
Fenics, Fenics Market Data, Capitalab,
Lucera, Corant Global, Corant, and Piiq are
trademarks/service marks and/or
registered trademarks/service marks of
BGC and/or its affiliates.
BGC’s customers include many of the
world’s largest banks, broker-dealers,
investment banks, trading firms, hedge
funds, governments, corporations, and
investment firms. BGC’s Class A common
stock trades on the NASDAQ Global Select
Market under the ticker symbol “BGCP”.
BGC is led by Chairman of the Board and
Chief Executive Officer Howard W.
Lutnick. For more information, please visit
http://www.bgcpartners.com. You can also
follow BGC at https://twitter.com/
bgcpartners, https://www.linkedin.com/
company/bgc-partners and/or http://ir.
bgcpartners.com/Investors/default.aspx.
© 2021 BGC Partners, Inc. All rights reserved.