ANNUAL REPORT
2021
“ BGC SET UP ITS BUSINESS FOR
SUCCESS IN 2021. WE SOLD
OUR INSURANCE BROKERAGE
BUSINESS FOR $535 MILLION OF
GROSS PROCEEDS, GENERATING
A STRONG INTERNAL RATE OF
RETURN OF 21.2 PERCENT FOR
OUR SHAREHOLDERS. WE USED
THESE PROCEEDS TO REDUCE
OUR FULLY DILUTED SHARE
COUNT BY OVER 10 PERCENT.”
HOWARD W. LUTNICK
Chairman and Chief Executive Officer
BGC Partners, Inc.
BGC Partners Annual Report 2021
03
FY 2021 REVENUES
BY GEOGRAPHY
56%
EMEA
29%
Americas
15%
Asia Pacific
2021
BUSINESS
AWARDS
04
• Fenics Market Data named Best Market
Data Newcomer (Vendor or Product) at
WatersTechnology Inside Market Data &
Inside Reference Data Awards 2021
• Fenics Market Data named Best Market
Data Provider at FX Markets e-FX
Awards 2021
• Fenics GO named OTC Trading Platform
of the Year by Risk.net and Risk magazine
at the Risk Awards 2021
• Capitalab named Compression Service
of the Year at the GlobalCapital Americas
Derivatives Awards 2021
• Capitalab named OTC Infrastructure
Service of the Year by Risk.net and Risk
magazine at the Risk Awards 2021
• BGC won Best Broker for Options at the
FX Markets Best Banks Awards 2021
1 On November 1, 2021, BGC closed the sale of its Insurance business to The Ardonagh Group receiving approximately $535 million in gross
proceeds, subject to limited post-closing adjustments. For additional information, please see press release titled “BGC Completes Sale of Insurance
Brokerage Business to The Ardonagh Group” dated November 1, 2021.
FY 2021 REVENUES
BY GEOGRAPHY1
(excluding Insurance)
53%
EMEA
31%
Americas
16%
Asia Pacific
2021
BGC Partners Annual Report 2021
FY 2021 REVENUES
BY ASSET CLASS
7%
Data, Software &
Post-trade, and Other1
12%
Equities
15%
Energy and
Commodities
14%
Credit
2021
9%
Insurance
28%
Rates
15%
Foreign
Exchange
06
1 Other includes fees from related par ties, interest and dividend income, and other revenues.
FY 2021 REVENUES
BY ASSET CLASS
(excluding Insurance)
30%
Rates
8%
Data, Software &
Post-trade, and Other1
14%
Equities
16%
Energy and
Commodities
16%
Credit
16%
Foreign
Exchange
2021
BGC Partners Annual Report 2021
401
REVENUE GROWTH
(USD millions)
278
19%
CAGR
223
192
71
81
2011
2013
2015
2017
2019
2021
PERCENTAGE OF
TOTAL REVENUE1
22%
13%
14 %
12%
7%
5%
2011
2013
2015
2017
2019
2021
08
1 Excludes Insurance Brokerage revenue and historical Newmark Group, Inc. revenue prior to 2018 spin-off.
FY 2021 FENICS REVENUES
BY ASSET CLASS
41%
Rates
22%
Data, Software &
Post-trade, and Other
2%
Equities
16%
Credit
19%
Foreign
Exchange
2021
BGC Partners Annual Report 2021
BGC PARTNERS, INC. SELECTED
CONSOLIDATED FINANCIAL DATA
(in USD 000s except per share data)
Revenues
Rates
Foreign Exchange
Credit
Energy and Commodities
Equities
Data, Software, and Post-trade
Other1
2021
2020
$558,507
$544,094
%
Change
3%
301,328
315,253
(4%)
287,608
329,904
(13%)
296,458
292,641
1%
247,673
254,702
(3%)
89,963
55,492
81,920
10%
54,869
1%
Total Revenues (excluding Insurance)
$1,837,029
$1,873,383
(2%)
Insurance
Total Revenues
GAAP
178,335
183,378
(3%)
$2,015,364
$2,056,761
(2%)
Income from operations before income taxes
Net income for fully diluted shares
$176,501
$72,221
144%
173,995
64,787
169%
Adjusted Earnings
Adjusted Earnings before noncontrolling interest in subsidiaries and taxes
Post-tax adjusted earnings
Per Share Data
GAAP fully diluted earnings per share
Post-tax adjusted earnings per share
Adjusted EBITDA
Adjusted EBITDA
Balance Sheet
Liquidity
Notes payable and other borrowings
Total capital2
$376,953
$349,816
350,408
312,841
8%
12%
$0.32
$0.65
$0.12
167%
$0.57
14%
$588,342
$428,135
37%
$594,842
$655,212
(9%)
1,052,831
1,315,935
(20%)
682,076
831,971
(18%)
1 Other includes fees from related parties, interest and dividend income, not related to Insurance, and other revenues.
2 Defined as redeemable partnership interest, stockholders’ equity, and noncontrolling interest in subsidiaries.
Note: Certain numbers and percentage changes may not sum due to rounding.
10
BGC
PARTNERS, INC.
BGC Partners Annual Report 2021
2021
TO MY FELLOW
S
T
O
C
K
H
O
L
D
E
R
S
2021 IN REVIEW
BGC set up its business for success in 2021. We sold our Insurance Brokerage
business for $535 million of gross proceeds, generating a strong internal rate of
return of 21.2 percent for our shareholders.1 We used these proceeds to
reduce our fully diluted share count by over 10 percent.
Fenics, our high margin, technology-driven business, had an outstanding year in
2021, growing over 26 percent and exceeding over $400 million of annual
revenue for the first time. Our Fenics Growth Platforms grew by over 60
percent, led by Fenics UST, Lucera, Fenics FX, and Fenics GO.
We remain driven to grow the Company’s profitability and margins. Our
relentless focus on automating BGC’s overall business, along with cost-savings
initiatives, resulted in each of our Adjusted Earnings metrics improving, led by
Adjusted EBITDA, which grew by over 37 percent. Increased automation also
drove average productivity of our front office staff up over 8 percent to its
highest level since the 2008 financial crisis.
In November 2021, we announced the creation of Fenics Markets Xchange
(“FMX”), which combines our leading Fenics UST cash Treasury platform with
our new U.S. Interest Rates Futures exchange. U.S. Interest Rates futures are
the largest futures contracts in the world by trading volume and are
substantially larger than S&P 500 and Nasdaq 100 equity futures contracts. U.S.
Interest Rate futures present an enormous opportunity for BGC and represent
one of the most valuable marketplaces in the world, which has been
dominated by a single exchange.
We have designed our strategy to compete and win market share against an
entrenched monopoly. This strategy starts with having the best front-end
trading system and a world-class clearing solution. Our clearing partnership with
LCH, the world’s largest holder of interest rate initial margin provides highly
efficient cross margining across interest rate products. Clients executing U.S.
Interest Rate futures on FMX will save on margin, clearing, and execution costs.
We are working closely with the world’s largest market participants and
liquidity providers in the Rates space. We expect these strategic partners to
both invest in FMX and support our platform, as they seek
a more optimal way to transact both U.S. Interest Rate
futures and cash U.S. Treasuries, under one roof, at the
best prices.
Our FMX strategy is unlike any prior attempt to compete
in the U.S. Interest Rate futures market. Marrying our
highly successful Fenics UST platform with our FMX
Futures Exchange, and partnering with LCH creates a
highly synergistic U.S. Interest Rates trading ecosystem that
utilizes state-of-the-art technology, delivers highly efficient
clearing, all at more competitive prices. I could not be
more excited for our launch in the second quarter of 2023.
FENICS: A VALUE DRIVER FOR ALL
STAKEHOLDERS
Fenics is leading the automation of the wholesale capital
markets by offering our customers comprehensive
automated solutions that span the entire trade lifecycle,
including market data, execution, connectivity, and post-
trade. Fenics continues to introduce innovative products
and services that meet our clients’ needs.
Fenics represented 22 percent of BGC’s overall revenue,
excluding Insurance, for the full year 2021. This is up from
14 percent in 2019, a testament to the continued success of
our electronic offerings.
BGC is critical market infrastructure to the capital markets,
and Fenics provides the digital rails in which global
wholesale trade activity flows. Our Fenics offering is both
comprehensive and highly advanced. Our electronic trading
platforms, market data, software, connectivity, and post-
trade businesses have been purpose-built to accommodate
continued shifts in trading behavior to more efficient and
automated forms of trade execution, processing, and
settlement.
As of the third quarter 2022, Fenics surpassed 25 percent
of BGC’s total revenue, a major milestone. This however, is
only the beginning, as we aim to convert even more of our
existing $1.4 billion Voice / Hybrid business to Fenics,
driving significant value for our shareholders.
LOOKING AHEAD
While rising global interest rates have varying impact on
certain industries and companies, the new global interest
rates environment is incredibly helpful to BGC’s largest
businesses: Rates, Credit, and Foreign Exchange.
The combination of higher interest rates, quantitative
tightening, and record debt issuance has set the stage for
what I believe will be one of the most robust trading
environments for the next decade. Many forget that there
is an entire generation of traders that has never
experienced interest rates above 2 percent.
Prior to the 2008 financial crisis, the historic relationship
between trading volumes and issuance was highly
correlated. For example, average daily trading volume
(“ADV”) of U.S. Treasuries represented 60 percent to 68
percent of issuance. However, since 2008, where U.S.
interest rates have been pinned at, or near zero, for well
over a decade, the relationship between ADV and issuance
has continually declined to all-time lows of 9 percent in
2021. This is also true for U.S. corporate bonds, where
ADV represented between 21 percent to 24 percent of
issuance pre-financial crisis, compared to 5 percent in
BGC Partners Annual Report 2021
13
2021.2 With the return of historically normal interest
rates, we expect these highly correlated relationships
to return.
As volatility is reintroduced to the markets and credit
spreads widen, profitability is returning to fixed income
and foreign exchange trading, which will have the effect
of increasing trading volumes across the capital markets.
While the ascent may be uneven across parts of the
industry and our business, I expect this new
macroenvironment to be highly supportive of robust
growth for BGC.
CORPORATE CONVERSION, NEW
COMPANY NAME, AND NEW TICKER
In 2022, we announced that we had entered into a
Corporate Conversion Agreement to reorganize and
simplify our organizational structure into a full
C-corporation structure. We also announced that we
plan to change the Company name from “BGC
Partners, Inc.” to “BGC Group, Inc.”, and that we also
expect to change our ticker symbol from “BGCP” to
“BGC”, at the closing of the Corporate Conversion.
We believe simplifying our corporate structure, while
reducing operational complexity, will deliver value to
BGC’s shareholders.
IN CONCLUSION
We ended 2021 as a stronger company. Fenics revenue
reached all-time highs, driving Adjusted Earnings growth
and expanding margins, all while reducing our fully
diluted share count by over 10 percent and reducing
our debt outstanding by over $260 million. We have
carried this momentum forward into 2022 with a clear
path to achieve our stated objectives, which include:
1 On November 1, 2021, BGC closed the sale of its Insurance business to The Ardonagh Group receiving approximately $535 million in gross proceeds, subject to limited post-closing adjustments.
For additional information, please see press release titled “BGC Completes Sale of Insurance Brokerage Business to The Ardonagh Group” dated November 1, 2021.
2 Sources: Bloomberg and SIFMA; U.S. Treasuries statistics are based on primary dealer average daily volume for U.S. Government Coupon Securities from Bloomberg and Gross Issuance for U.S.
Treasury Notes and Bonds from SIFMA. U.S. Corporate Bonds statistics are based on primary dealer average daily volume for U.S. Corporate Securities from Bloomberg and Issuance for U.S.
Corporate Nonconvertible bonds from SIFMA.
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.
Note: This letter was finalized on December 2, 2022. 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”.
• Growing our revenues and profits;
• Automating our business;
• Further reducing our fully diluted share count;
• Executing our corporate conversion, and;
• Launching our FMX Futures Exchange.
I would like to thank all of our investors, clients, partners,
and employees for your continued support. We
continually think about how to deliver value to all of our
stakeholders. I am honored to lead this great Company
and excited for the new market environment and BGC’s
success in it.
Sincerely,
HOWARD W. LUTNICK
Chairman of the Board and
Chief Executive Officer
BGC Partners Annual Report 2021
15
Hillary Clinton
CHARITY DAY IS OUR WAY OF HONORING
THE 658 CANTOR AND 61 EUROBROKERS
COLLEAGUES AND FRIENDS WHO PERISHED
IN THE WORLD TRADE CENTER ATTACKS
ON SEPTEMBER 11, 2001. EACH YEAR, BGC,
CANTOR FITZGERALD, AND GFI DONATE 100%
OF THE 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.
Spencer Dinwiddie
VIRTUAL
CHARITY DAY 2021
20 YEARS 9.11.2001.
NEVER FORGET. GIVE BACK.
Matthew McConaughey
To make a donation to the Cantor Fitzgerald Relief Fund, please call
+1 (212) 829-4770 or visit cantorrelief.org/donate-now
BGC Partners Annual Report 2021
17
VIRTUAL
CHARITY DAY 2021
100%
OF GLOBAL REVENUES FROM
CHARITY DAY DONATED.
Sean Penn
18
BGC Partners Annual Report 2021
President Bill Clinton
This 2021 event was particularly meaningful, as it marked the 20-year anniversary of 9/11. It was a time to
remember those we lost and hold them in our hearts, as well as to think of those left behind. It was also a time
to reflect on the incredible progress made by the Cantor Fitzgerald Relief Fund. It was set up on September 12,
2001, to provide immediate help for the families impacted by the tragedy. On that day, the founders pledged that
help would always be there, not just to assist those affected by 9/11, but to provide hope and support around the
globe. Since then, the Cantor Fitzgerald Relief Fund has raised and distributed approximately $369 million globally
and has grown to support more than 150 charities.
“The lesson we learned from 9/11 – 20 years later and hopefully 20 years in the future – is this: Never forget.
Give back,” says Howard W. Lutnick, Chairman and Chief Executive Officer of Cantor Fitzgerald, L.P. and BGC
Partners, Inc.
Each year on Charity Day, celebrities and licensed brokers team up on trading floors to conduct transactions.
Charity Day 2021 was the second consecutive year that it was held virtually, in order to uphold COVID-19 safety
measures. Despite this, it was a great success and we were able to help many charities that had been hit hard by
the pandemic. As Edie Lutnick, President and Co-Founder of the Cantor Fitzgerald Relief Fund, commented, “We
are fuelled by a desire to spread hope and unity more broadly. We are honored to help charities that are doing
great work to ensure families are set up for success.”
Eli Manning
Alesha Dixon
In 2021, we were delighted to welcome, among others, Sean Penn, Jennifer Garner, Matthew McConaughey,
Camila Alves McConaughey, Pete Davidson, Alec Baldwin, Julian Edelman, Andrea Bocelli, Gloria Estefan, Eli
Manning, Henrik Lundqvist, Tony Blair, Olivia Coleman, Sir Alex Ferguson, Damian Lewis, and Usher, among
others. It was also a chance for the Lutnick family and the wider Cantor Fitzgerald community to pay forward
the incredible support shown following 9/11.
The actress Jennifer Garner shared these sentiments: “Due to the generosity of the Lutnick family and the
Cantor Fitzgerald Relief Fund, hundreds of charities have benefited, like Save the Children, a humanitarian aid
organization near and dear to my heart. By distributing over $300 million to those who need it the most, the
Cantor Fitzgerald Relief Fund continues to impact so many lives in a positive way.”
Meanwhile, Thomas Richardson, former chief of the Fire Department of New York, had this to say: “I wanted
to take this opportunity on behalf of all 15,000 uniformed members of the NYC Fire Department to thank
BGC and their charity for all of the wonderful work they have done over these last 20 years. Our Fire Family
Transport Foundation was born and has evolved and grown tremendously since 9/11. Its mission is to transport
members and their families that require hospital treatment, whether it be from cancer or other diseases.”
David Walliams Davina McCall
WE ARE GRATEFUL TO THE LUMINARIES FROM THE WORLDS
OF SPORTS, ENTERTAINMENT, AND GOVERNMENT FOR THEIR
ENDURING ENTHUSIASM AND SUPPORT.
$192M
The figure raised globally by
Charity Day since its inception.
CHARITY DAY UK 2021
Damian Lewis
BGC Partners Annual Report 2021
21
The Network of Women (“NOW”) was introduced globally in 2014 to support the recruitment, development, and retention of
women across our organization. The NOW strives to help our members make new professional contacts, find mentors, and develop
their careers, with the goals of advancing our businesses, improving diversity, and helping women fulfill their potential across BGC
Partners and affiliates.
Throughout 2021, the Network of Women hosted a series of virtual events featuring various high-performing women from across our
organization. In March, we launched our Women’s History Month series. First, Caroline Koster, Managing Director & Chief Counsel
based in New York, interviewed the inimitable Sandie Okoro, Senior VP and World Bank Group General Counsel. She spoke about her
early challenges, her career in the City and her transition to becoming the first black woman to hold the position of General Counsel
at the World Bank. Her key takeaway: “Don’t be afraid of change – and be your authentic self!” Next, Dr. Linda A. Bell, Provost and
Dean of the Faculty at Barnard College in New York and also the Claire Tow Professor of Economics, spoke about her distinguished
career, including work in economics and with non-profit organizations.
In July, Kathryn Zhao joined Microsoft for an intimate discussion with data science and analytics leaders across technology, capital
markets, and banking. Finally, in November, Jean Crew, a personal development trainer with more than 20 years of experience,
OTHER NOTABLE EFFORTS:
In 2021, BGC Partners joined the Women in Finance Charter, an HM Treasury initiative that supports the UK
government’s aspirations in creating gender balance across the financial services industry.
Samantha Bussey, Global Head of NDF & FX Reset Risk Mitigation at Capitalab, won the Positive Impact Award
at the Markets Media & Best Execution’s European Women in Finance Awards 2021.
discussed communicating and leading across generations, communicating with different personality styles, and the secrets to
leading with assertiveness.
Finally, the NOW expanded its mentorship program in London, which took place over the course of six months, where mentors
and mentees met virtually every four to six weeks. Mentorship is an important tool for achieving the Network of Women’s goals
of creating a culture of inclusion and cultivating the next generation of leaders at the organization.
Mentorship deepens and reinforces relationships created through the NOW and the wider business, and allows experienced
professionals (mentors) at our company to share strategies for business and professional success with less experienced
colleagues (mentees).
Mentoring also allows mentors to understand some of the hurdles or challenges faced by their mentees, which can benefit the
company as we continue to improve our diversity and reinforce our vision and values.
BGC Partners Annual Report 2021
23
24
BGC Partners Annual Report 2021
THE HOWARD W. LUTNICK FUND
In October 2021, Chairman and CEO Howard W. Lutnick faced his greatest
challenge since 9/11 when he was diagnosed with non-Hodgkin’s lymphoma.
After a brave battle, on January 31, 2022, Mr. Lutnick completed his sixth
and final chemotherapy treatment. Throughout the treatments he continued
business as usual, motivated by the notes and emails from his employees.
Finally, on March 3, 2022, he announced he was cancer free.
“CANCER FREE. I will forever replay those two words in my head. Thank you
to my family, friends, and employees for all your support along the way.
I am grateful for every note and message that helped keep my spirits high. My
companies are my family, and that’s why I stayed at it. Thank you for being
part of my family, thank you for supporting me, and thank you for taking care
of me.” – Howard W. Lutnick
As he did in September 2001, in times of crisis, he moved to help others.
On October 28, 2021, Mr. Lutnick announced the Howard W. Lutnick Fund,
pledging to donate up to $10 million to eligible employees suffering from a
catastrophic illness, to express his gratitude and appreciation for the support
of his employees throughout his fight.
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)
(cid:31) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
(cid:31) 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 (cid:31) No (cid:31)
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 (cid:31) No (cid:31)
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 (cid:31) No (cid:31)
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 (cid:31) No (cid:31)
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
(cid:31)(cid:3)
(cid:31)(cid:3)
(cid:31)(cid:3)
Accelerated Filer
Smaller Reporting Company
(cid:31)(cid:3)
(cid:31)(cid:3)
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 financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:31)
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. (cid:31)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:31) No (cid:31)
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, 2021 as reported on NASDAQ, was approximately $1,929,824,116.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
On February 24, 2022, the registrant had 321,093,235 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.
_______________________________________________
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the registrant’s definitive proxy statement for its 2022 annual meeting of stockholders (the “2022 Proxy Statement”) are
incorporated by reference in Part III of this Annual Report on Form 10-K. We anticipate that we will file the 2022 Proxy Statement with the SEC on
or before May 2, 2022.
BGC Partners, Inc.
2021 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
PART I
ITEM 1.
Business
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
ITEM 7.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 8.
ITEM 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11.
Executive Compensation
ITEM 12.
ITEM 13.
ITEM 14.
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
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
ITEM 16.
Form 10-K Summary
Page
2
10
10
11
12
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78
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86
139
143
218
218
219
219
220
220
220
220
220
221
226
GLOSSARY OF TERMS, ABBREVIATIONS AND ACRONYMS
The following terms, abbreviations and acronyms are used to identify frequently used terms and phrases that may be
used in this report:
TERM
3.750% Senior Notes
4.375% Senior Notes
5.125% Senior Notes
5.375% Senior Notes
Adjusted Earnings
DEFINITION
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 which matured
on May 27, 2021 and were 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
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
ADV
Algomi
API
Average daily volume
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
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
Base Erosion and Anti-abuse Tax
Berkeley Point
Berkeley Point Financial LLC, a wholly owned subsidiary of the Company acquired on
September 8, 2017 and contributed to Newmark in the Separation
Besso
BGC
BGC or our Class A
common stock
Besso Insurance Group Limited, formerly a wholly owned subsidiary of the Company, acquired
on February 28, 2017 and sold to The Ardonagh Group on November 1, 2021 as part of the
Insurance Business Disposition
BGC Partners, Inc. and, where applicable, its consolidated subsidiaries
BGC Partners Class A common stock, par value $0.01 per share
2
TERM
BGC or our Class B
common stock
BGC Credit Agreement
BGC Partners Class B common stock, par value $0.01 per share
DEFINITION
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 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 Group
BGC Holdings
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 U.S. OpCo and BGC Global OpCo, collectively
BGC Partners
BGC Partners, Inc. and, where applicable, its consolidated subsidiaries
BGC U.S. OpCo
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
Brexit
Cantor
Cantor group
Cantor units
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, including Newmark
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
CCRE
CECL
Cantor Commercial Real Estate Company, L.P.
Current Expected Credit Losses
CEO Program
Controlled equity offering program
CF&Co
CFGM
CFS
CFTC
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
3
TERM
Charity Day
Class B Issuance
CLOB
CME
DEFINITION
BGC’s annual event held on September 11th where employees of the Company raise proceeds
for charity
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 an aggregate of 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
Company
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)
Corant
Corant Global Limited, BGC's former Insurance brokerage business
Corporate Conversion
The Company's exploration of converting its umbrella partnership C corporation (Up-C) into a
simpler corporate structure
COVID-19
Coronavirus Disease 2019
CRD
Capital Requirements Directive
Credit Facility
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
CSC Commodities UK Limited
Distribution Date
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
Equity Plan
ESG
eSpeed
European Central Bank
Ed Broking Group Limited, formerly a wholly owned subsidiary of the Company, acquired on
January 31, 2019 and sold to The Ardonagh Group on November 1, 2021 as part of the Insurance
Business Disposition
European Market Infrastructure Regulation
Earnings Per Share
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, including sustainability or similar items
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
4
TERM
DEFINITION
ETR
EU
Effective Tax Rate
European Union
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
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; comprised of Fenics Growth Platforms and Fenics Markets
Fenics Growth Platforms
Consists of Fenics UST, Fenics GO, Lucera, Fenics FX and other newer standalone platforms
Fenics Integrated
Fenics Markets
FINRA
FMX
Founding Partners
Represents Fenics businesses that 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%
Consists of the Fully Electronic portions of BGC’s brokerage businesses, data, software and post-
trade revenues that are unrelated to Fenics Growth Platforms, as well as Fenics Integrated
revenues
Financial Industry Regulatory Authority
BGC's combined U.S. Treasury and Futures electronic marketplace
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
5
TERM
Fully Electronic
Futures Exchange Group
DEFINITION
Broking transactions intermediated on a solely electronic basis rather than by Voice or Hybrid
broking
CFLP CX Futures Exchange Holdings, LLC, CFLP CX Futures Exchange Holdings, L.P., CX
Futures Exchange Holdings, LLC, CX Clearinghouse Holdings, LLC, CX Futures Exchange, L.P.
and CX Clearinghouse, L.P.
FX
GDPR
GFI
GILTI
Foreign exchange
General Data Protection Regulation
GFI Group Inc., a wholly owned subsidiary of the Company, acquired on January 12, 2016
Global Intangible Low-Taxed Income
Ginga Petroleum
Ginga Petroleum (Singapore) Pte Ltd, a wholly owned subsidiary of the Company, acquired on
March 12, 2019
GUI
HDUs
Hybrid
ICAP
ICE
IMO
Graphical User Interface
LPUs with capital accounts, which are liability awards recorded in “Accrued compensation” in
the Company’s statements of financial condition
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
Insurance brokerage
business
The insurance brokerage business of BGC, including Corant, Ed Broking, Besso, Piiq Risk
Partners, Junge, Cooper Gay, Global Underwriting and Episilon, which business was sold to The
Ardonagh Group on November 1, 2021
Insurance Business
Disposition
The sale of the Insurance brokerage business for $534.9 million in gross cash proceeds after
closing adjustments, subject to limited post-closing adjustments, completed on November 1, 2021
LCH
London Clearing House
Legacy BGC Holdings
Units
Legacy Newmark Holdings
Units
BGC Holdings LPUs outstanding immediately prior to the Separation
Newmark Holdings LPUs issued in connection with the Separation
LGD
LIBOR
Loss Given Default
London Interbank Offering Rate
6
TERM
LPUs
Lucera
March 2018 Sales
Agreement
MEA
MiFID II
Mint Brokers
Nasdaq
NDF
Newmark
Newmark Class A common
stock
Newmark Class B common
stock
Newmark Group
DEFINITION
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, also known as “LFI Holdings, LLC” or “LFI,” is a
software defined network offering the trading community direct connectivity
CEO sales agreement, by and between the Company and CF&Co, dated March 9, 2018, pursuant
to which the Company could offer and sell up to an aggregate of $300.0 million of shares of BGC
Class A common stock, which agreement expired in September 2021
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 the NFA
Nasdaq, Inc., formerly known as NASDAQ OMX Group, Inc.
Non-deliverable forwards
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, par value $0.01 per share
Newmark Class B common stock, par value $0.01 per share
Newmark, Newmark Holdings, and Newmark OpCo and their respective subsidiaries,
collectively
Newmark Holdings
Newmark Holdings, L.P.
Newmark IPO
Newmark OpCo
NYAG
NEX
NFA
Non-GAAP
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
Newmark Partners, L.P., an operating partnership, which is owned jointly by Newmark and
Newmark Holdings and holds the business of Newmark
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
7
TERM
N Units
DEFINITION
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
OCI
OECD
OTC
OTF
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
PCD assets
Purchased financial assets with deterioration in credit quality since origination
PD
Probability of Default
Period Cost Method
Poten & Partners
Preferred Distribution
Preferred Units
Real Estate L.P.
Real GDP
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
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
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
Right-of-Use
8
TERM
RSUs
DEFINITION
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
SaaS
SEC
Software as a Service
U.S. Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
SEF
Separation
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
SOFR
SPAC
Senior Managers Certification Regime
Secured Overnight Financing Rate
Special Purpose Acquisition Company
SPAC Investment Banking
Activities
Spin-Off
Aurel's investment banking activities with respect to SPACs
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 Act
Tax Cuts and Jobs Act enacted on December 22, 2017
The Ardonagh Group
The Ardonagh Group Limited; the U.K.'s largest independent insurance broker and purchaser of
BGC's Insurance brokerage business completed on November 1, 2021
Tower Bridge
TP ICAP
Tradition
Tullett
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
9
TERM
U.K.
United Kingdom
DEFINITION
U.S. GAAP or GAAP
Generally Accepted Accounting Principles in the United States of America
UBT
VIE
Voice
Unincorporated Business Tax
Variable Interest Entity
Voice-only broking transactions executed by brokers over the telephone
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 ongoing COVID-19 pandemic has significantly disrupted and adversely affected the environment in which we
and our customers and competitors operate, including the global economy, the U.S. economy, the global financial
markets, our businesses, financial condition, results of operations and prospects.
• 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 opportunities, including 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 such opportunities.
• We may be adversely affected by the transition away from LIBOR and the use of SOFR or other alternative reference
rates.
• 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.
10
• The loss of one or more of our key executives, the development of future talent and the ability of certain key employees
to devote adequate time and attention to us are a key part of the success of our businesses, and failure to continue to
employ and have the benefit of these executives, may adversely affect our businesses and prospects.
•
If we 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.
• 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, technology professionals and other front-
office personnel, 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.
• 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
PART I
ITEM 1.
BUSINESS
Throughout this document, BGC Partners, Inc. is referred to as “BGC” and, together with its subsidiaries, as the
“Company,” “BGC Partners,” “we,” “us,” or “our.”
Our Businesses
We are a leading global financial brokerage and technology company servicing the global financial markets.
Through brands including BGC®, GFI®, Sunrise Brokers™, Poten & Partners®, RP Martin™ and Fenics® 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 and futures and options. We have
also recently announced the leveraging of our infrastructure and assets for cryptocurrency initiatives. Our businesses also provide
a wide variety of services, including trade execution, connectivity solutions, brokerage services, clearing, trade 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 includes fully electronic
and hybrid 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 also operate under the
names Fenics®, FMX™, BGC Trader™, CreditMatch®, Fenics Market Data™, Fenics GO™, BGC Market Data™, kACE2®,
Capitalab®, Swaptioniser®, CBID®, Lucera® and LumeAlfa™.
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, FMX, Sunrise Brokers, Poten &
Partners, RP Martin, kACE2, Capitalab, Swaptioniser, CBID, Aqua, Lucera and LumeAlfa 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, Miami, Milan, Monaco,
Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tel Aviv, Tokyo, Toronto, and
Zurich.
As of December 31, 2021, we had approximately 2,100 brokers, salespeople, managers, technology professionals and
other front-office professional personnel across our businesses.
Our History
Our businesses originated 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
12
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, we sold certain assets relating to our U.S. Treasury benchmark business and the name “eSpeed” to Nasdaq.
In 2011, we also acquired and built up a commercial real estate services business called “Newmark,” which we spun-off to BGC’s
stockholders in November 2018. In addition, we acquired and built-up an insurance brokerage business, which we sold in
November 2021. We also acquired the Futures Exchange Group from Cantor in July 2021, which represents our futures exchange
and related clearinghouse.
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 2001, 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., Sunrise Brokers Group, Poten & Partners, Perimeter Markets Inc., Lucera, Micromega
Securities Proprietary Limited, Ginga Petroleum, Emerging Markets Bond Exchange Ltd, Kalahari Ltd and Algomi.
Since the founding of eSpeed, we have continued to pioneer advances in electronic trading across the wholesale capital
markets. Fenics, BGC’s financial brokerage and technology businesses, has grown significantly, supported by our investment in
new trading technologies and platforms, as well as from trends of proliferating electronic execution across the capital markets
and the demand for electronic data services.
Fenics is the 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 financial brokerage products and services, as well as offerings in market data,
software solutions, and post-trade services across the Company.
We currently operate 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. We also operate a number of newer standalone, fully electronic platforms such as Fenics
UST, Fenics FX, Fenics GO, and Portfolio Match, among others. These electronic marketplaces offer electronic trading of
numerous OTC and listed financial products, including government bonds, 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/Hybrid trading to fully electronic execution and additional electronic data services. We intend to continue to invest in these
fully electronic businesses. 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.
In recent years, we have been adversely affected as a result of COVID-19 and its impact on the macroeconomic
environment. For example, surges in global COVID-19 cases caused market-wide disruptions, particularly across our
Voice/Hybrid business in December 2021. During the COVID-19 pandemic, our fully electronic businesses have been a key
growth driver and competitive advantage as many of our brokers and clients have adapted to working remotely. Additional
information with respect to the impact of COVID-19 on our businesses, results of operations and human capital resources is
contained elsewhere in this Annual Report on Form 10-K.
Overview of Our Products and Services
Financial Brokerage and Technology
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Financial Brokerage
While Voice/Hybrid brokerage revenues still represent the majority of BGC’s overall revenues, we continue to convert
our Voice/Hybrid brokerage to our higher margin, technology-driven Fenics brokerage, which has grown to represent 23% of
total BGC revenues, excluding the Insurance brokerage business, during the fourth quarter of 2021. Over the past several years,
we have invested in, and developed, new state-of-the-art trading platforms, including Fenics UST, Fenics FX, Fenics GO, and
Portfolio Match, across Rates, FX, Equities, and Credit, respectively. We have also invested in, and deployed, trading technology
solutions across our entire business, including our Voice/Hybrid brokerage desks, with an aim to increase our average broker
productivity and to accelerate trends of electronic conversion. Underpinning our efforts to automate and electronify our overall
brokerage businesses are macro trends across the capital markets, where the adoption of electronic trading has accelerated in
recent years.
In the first quarter of 2021, we began to categorize our Fenics business as Fenics Markets and Fenics Growth Platforms:
•
•
Fenics Markets includes the fully electronic portion of BGC’s brokerage businesses, data, software and post-
trade revenues that are unrelated to Fenics Growth Platforms, as well as Fenics Integrated revenues. Fenics
Integrated, introduced during the second quarter of 2020, 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 Growth Platforms includes Fenics UST, Fenics GO, Lucera, Fenics FX and other newer standalone
platforms. Revenues generated from data, software and post-trade attributable to Fenics Growth Platforms are
included within their related businesses.
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.
On November 3, 2021, the Company announced FMX, which combines Fenics UST’s leading U.S. Treasury business
with a state-of-the-art U.S. Rates futures platform in development. Following the announcement and consultation with BGC’s
global clients and strategic partners, FMX will expand the scope of its futures product offering to cover the entire U.S. Rates
Futures complex. For more information about FMX, see “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Overview and Business Environment.”
During the quarter, the Company continued to expand its cryptocurrency offerings within Lucera and kACE.
Furthermore, we will be launching additional cryptocurrency and digital asset trading offerings throughout 2022, which will be
underpinned by Fenics’ state-of-the-art technology. BGC’s futures exchange, acquired during the third quarter, was among the
first exchanges to be permitted to list cryptocurrency derivative contracts. For more information about our cryptocurrency
initiatives as well as the Futures Exchange Group acquisition, see “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Overview and Business Environment.”
The following table identifies some of the key products that we broker:
Rates
Interest rate derivatives
Benchmark U.S. Treasuries
Off-the-run U.S. Treasuries
Other global government bonds
Agencies
Futures
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Credit
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
Soft commodities
Shipping brokerage
Equity derivatives
Cash equities
Index futures
Other derivatives and futures
Equity Derivatives and Cash Equities
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
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(“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.
Technology Offerings
Our market data, software, and post-trade offerings provide a range of trade lifecycle services which include market data
and analytics services, infrastructure and connectivity solutions, and post-trade services, such as trade compression, matching
and other post-trade optimization services. These businesses have highly recurring and compounding revenue bases, which are
reported within our overall Fenics business. We have invested in the growth of our Data, Software and Post-trade businesses,
which continues to scale and represent record levels of overall revenue contribution to our overall business.
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, RP Martin
and Fenics, 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.
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.
Through kACE2, our analytics brand, we offer a derivative price discovery, pricing analysis, risk management and
trading software used by over 200 institutions across over 20 countries. Our clients include mid-tier banks, financial institutions
and corporate clients. 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.
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). 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) that was
folded into Lucera and rebranded as LumeAlfa.
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.
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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.
Energy Brokerage
In March 2019, we acquired Ginga Petroleum, which complements our existing energy brokerage businesses within
BGC, GFI, and Poten & Partners. 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.
Disposition of Insurance Brokerage (Corant)
On November 1, 2021, the Company successfully completed the Insurance Business Disposition and, after closing
adjustments, received $534.9 million in gross cash proceeds, subject to limited post-closing adjustments. The investment in the
Insurance brokerage business generated an internal rate of return of 21.2% for our shareholders.
Industry Recognition
Our businesses have consistently won global industry awards and accolades in recognition of their performance and
achievements. Recent examples include:
• BGC won Best Broker for Options at the FX Markets Best Bank Awards 2021
• Capitalab was named Compression Service of the Year at the GlobalCapital Americas Derivatives Awards 2021
•
Fenics Market Data was named Best Market Data Newcomer (Vendor or Product) at Inside Market Data & Inside
Reference Data Awards 2021
Fenics Market Data named Best Market Data Provider at FX Markets e-FX Awards 2021
•
•
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
Customers and Clients
We primarily serve the wholesale financial markets, with clients including many of the world’s largest banks, brokerage
houses, investment firms, hedge funds, and investment banks. Customers using our 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, 2021, our top ten customers, collectively, accounted for approximately
41.9% of our total revenue on a consolidated basis, and our largest customer accounted for approximately 8.4% 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.
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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 CreditMatch, 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 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®, FMX™ 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
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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 businesses. 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.
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.”
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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 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, 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
We primarily compete with three publicly traded, diversified inter-dealer and/or wholesale financial brokers. These are
TP ICAP, Tradition, and Dealerweb, an inter-dealer and wholesale financial brokerage business within Tradeweb Markets, Inc.
(“Tradeweb”). 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.
Demand for wholesale brokerage services is directly affected by the overall level of economic activity, international and
domestic economic and political conditions, including central bank policies, 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 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, Financial Software and Post-Trade Solution 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, (“LSEG”), which also sells proprietary market data
and information.
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Growth in new trading venues has led to fragmentation of liquidity across the financial markets. Our software solutions
business helps aggregate liquidity and connect counterparties across these marketplaces. We compete with other market
infrastructure and connectivity providers, such as ION Group, in this space.
Our post-trade services that offer derivative compression, matching and optimization services operate in an industry
which has benefitted from increased regulatory requirements. Competition in this space includes OSSTRA, a joint venture
between CME Group Inc. and IHS Markit Ltd, Parameta Solutions, TP ICAP’s data and analytics business, Quantile Group
Limited (“Quantile”) and Capitolis. Quantile was acquired by the LSEG in December 2020 for a maximum aggregate
consideration of £274 million.
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 and our expected launch of U.S.
Rates Futures in the fourth quarter of 2022. 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 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 LSEG
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 previously said
that it would like to further expand into other inter-dealer markets, and in June 2021, it acquired 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 acquisition of Liquidnet in March 2021.
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 2021, we earned approximately 28.2% of our revenues
in the first quarter, while in 2020 we earned 29.3% of such revenues in the first quarter.
Partnership Overview
Many of our key brokers, salespeople, managers, technology professionals 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, HDUs, 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 us and our 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.”
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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.
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.
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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.
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 and in July 2021, we
completed the purchase of the Futures Exchange Group from Cantor, which represents our futures exchange and related
clearinghouse. 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.
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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Recent Settlements
In September 2019, two of the Company’s subsidiaries, BGCF and GFI Securities LLC, 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, which monitorship concluded in October 2021. 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 financial and operational resilience, and promoting market integrity. 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., and GFI
Brokers Limited.).
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.
The FCA has in the past 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 previously given such attestations or
undertakings, 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 for FCA solo-regulated firms. Personal accountability requirements fall on senior managers, and a wider
population of U.K. staff are subject to certification requirements and conduct rules. SMCR has increased the cost of compliance,
and will potentially increase financial penalties for non-compliance.
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
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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 marketplaces 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 and equivalence arrangements 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.
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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.
Brexit
On January 1, 2021, the U.K. formally left the EU and U.K.-EU trade became subject to a new agreement that was
concluded in December of 2020. The exit from the EU is commonly referred to as Brexit. Financial services fall 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 March 2021, the U.K. and EU agreed a Memorandum of Understanding on Financial Services Regulatory Cooperation
which creates a structure for dialogue but does not include commitments on equivalence.
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 implemented plans to ensure continuity of service in Europe and continue to have regulated offices 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. We have been generally increasing our footprint in the EU which includes the establishment of a new branch office
of Aurel BGC SAS in Milan and a new office in Monaco under a new local Monaco subsidiary.
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.
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
Bermuda
Brazil
Canada
Cayman
Regulatory Authorities/Self-Regulatory
Organizations
Comisión Nacional de Valores
Australian Securities and Investments Commission and Australian Securities Exchange
The Central Bank of Bahrain
Bermuda Monetary Authority
Brazilian Securities and Exchange Commission, the Central Bank of Brazil, BM&F
BOVESPA and Superintendencia de Seguors Privados
Ontario Securities Commission, Autorite des Marches Financiers (Quebec), Investment
Industry Regulatory Organization of Canada (IIROC)
Cayman Islands Monetary Authority
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Chile
China
Columbia
Cyprus
Denmark
Dubai
France
Germany
Hong Kong
Ireland
Italy
Japan
Mexico
Peru
Philippines
Russia
Singapore
South Africa
South Korea
Spain
Switzerland
Turkey
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)
Hong Kong Securities and Futures Commission and The Hong Kong Monetary Authority
Central Bank of Ireland
Commissione Nazionale Per Le Societa E La Borsa (CONSOB)
Japanese Financial Services Agency, Japan Securities Dealers Association and the Securities
and Exchange Surveillance 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
Johannesburg Stock Exchange
Ministry of Strategy and Finance, The Bank of Korea, The Financial Services Commission
and 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
Authority
United Kingdom
Financial Conduct Authority
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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.”
Four of our subsidiaries, BGCF, GFI Securities LLC, Fenics Execution, 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. The Company also operates a designated contract market (DCM) and derivatives clearing organization (DCO) through the
Futures Exchange Group, which 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. BGC Brokers L.P., BGC
European Holdings, L.P, GFI Brokers Limited, and GFI Securities Limited, 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
has commenced a phased implementation beginning in January 2022.
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.
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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 Securities (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.
We had net assets in our regulated subsidiaries of $667.2 million and $326.9 million for the years ended December 31,
2021 and 2020, respectively.
Human Capital Management
Human Capital Resources
As of December 31, 2021, we employed approximately 3,920 employees in 27 countries spread across five continents.
Within this total, 99% of our employee base was comprised of full-time employees. Brokers, salespeople, managers, technology
professionals and other front-office personnel across our businesses comprise approximately 2,100 employees, representing 54%
of the total workforce. Approximately 27% of our brokers, salespeople, managers, technology professionals and other front-office
personnel were based in the Americas, and approximately 50% were based in Europe, the Middle East and Africa, with the
remaining approximately 23% based in the Asia-Pacific region. On November 1, 2021, we completed the Insurance Business
Disposition and approximately 519 front and back office employees in our insurance brokerage business were transferred in
connection with the transaction. Various of our employees also work for Cantor and its affiliates and provide services to us
pursuant to the Administrative Services Agreement and devote only a portion of their time to our business, and therefore have not
been included in the counts above. 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, technology
professionals 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, technology professionals 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. We believe that 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 geographical regions and to grow
our Fully Electronic businesses while seeking to manage our human capital resources to maximize our profitability in the face of
shifting demands and conditions.
Our key human capital measures and objectives include front-office employee headcount (described above) and average
revenue per front-office employee. Our average revenue per front-office employee has historically declined for the 12-month
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. While during 2021 and into the first
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quarter of 2022 we have experienced higher than normal turnover for our back office and operational employees due to recent
wage pressures and the effects of COVID-19, our front office headcount taking into account the sale of our Insurance brokerage
business has not been affected by these factors. As of December 31, 2021, our front-office revenue-generating headcount was
approximately 2,100 brokers and salespeople, down 8% from 2,297 a year ago as we selectively reduced less productive front
office headcount. These reductions were made alongside increased migration toward Fenics technology solutions, which helped
drive average productivity. Compared to the prior year period, average revenue per front-office employee for the year ended
December 31, 2021, increased by 8.1% to approximately $811,000.
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 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
average front office productivity increasing by 8.1% for the year ended December 31, 2021 compared to the prior year. From
time to time, we also engage in cost-savings initiatives and restructurings in order to improve our margins.
Retention Measures
In order to retain and hire additional workforce, we have increased our flexible work arrangements, where appropriate,
and made compensation adjustments, established additional corporate opportunities and provided additional benefits including a
401(k) match for many of our U.S. support employees.
We have taken significant measures to develop a safe work environment which is conducive to work in our office
locations, particularly for front-office brokers and revenue generating employees, subject to applicable state and local regulatory
requirements. We have established a more flexible hybrid approach in many instances for non-revenue generating roles or for
roles which are not office dependent, where appropriate. We have established vaccination requirements in accordance with
applicable laws, including time-off for vaccines, coverage for COVID-19 testing and enhanced sick leave. We continue to offer
employee assistance programs and additional avenues for mental health consultation and wellness. We continue to take significant
steps to protect our employees and encourage them all to get vaccinated.
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. As of December 31, 2021, our
employees, partners, executive officers and directors owned approximately 20% of our equity, on a fully diluted basis.
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 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 enter 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 distributions that these 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. 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.
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Human Capital and Social Policies and Practices
We have a variety of programs to incentivize and support our employees, from employee ownership to comprehensive
benefits and training. We are also committed to equal opportunity, diversity and other policies and practices designed to fulfill
our commitment to social and human capital development.
Employee Diversity, Inclusion and Equal Opportunity
We are committed to equal opportunity, diversity and other policies and practices that seek to further our development
of a diverse and inclusive workplace. We consider all qualified applicants for job openings and promotions without regard to race,
color, religion or belief, sex, sexual orientation, gender identity or reassignment, national origin or ancestry, age, disability, service
in the armed forces, pregnancy or maternity, familial status, marriage and civil partnership, genetic information or any other
characteristic that has no bearing on the ability of employees to do their jobs well. We continue to develop initiatives to support
these values.
Our recruitment, promotion and compensation processes are designed to enable us to treat employees fairly, and our
compensation decisions are differentiated based on performance.
Talent remains at the core of who we are as a company, and we remain committed to having a culture built around
inclusion and developing a diverse workforce. We continue to work to enhance our ability to attract, develop and retain top talent
with an emphasis on increasing representation of traditionally underrepresented groups at all levels of the organization,
encompassing early careers to experienced hiring, retention and development initiatives with a focus on diversity and inclusion.
Our goal is to build an even more successful organization that more closely reflects the population at large.
Our Network of Women (“NOW”) program supports the recruitment, development and retention of women across our
organization to advance our businesses and reputation. NOW offers a variety of opportunities, tools, events and workshops to
help our employees make new professional contacts, find mentors, gain knowledge and develop their careers. These events and
activities also allow our employees to support one another through a valuable exchange of experiences, advice and best practices
for career success.
A number of initiatives across our geographic regions are in place to promote our corporate values and foster greater
diversity and inclusion. Such examples include early career work experiences and internship programs focusing on diverse talent,
mentorship programs, and initiatives to foster women’s leadership. In the U.K., we have signed up to HM Treasury’s Women in
Finance Charter, which commits signatory firms to set percentage targets to increase the proportion of women in senior roles and
publicly report on their progress in seeking to meet these targets.
Employee Engagement, Communication, Management and Leadership Training and Development
We are investing in our employees’ long-term development and engagement by delivering training and development
programs and a culture where our people can thrive and maximize their potential. We require annual regulatory training in anti-
money laundering and anti-crime, cyber-security and workplace respect and inclusion, among other topics. We also provide or
support periodic job-specific and other developmental training and support for our employees so they can maximize their
potential, as well as a tuition reimbursement program to eligible employees.
We provide leadership training to managers on topics including management effectiveness, communication skills and
delivering effective performance evaluations, unconscious bias and various other topics. This training is supplemented by a library
of online training courses that managers and employees may access. Our individual business lines offer ongoing learning and
development opportunities tied to deepening the subject matter expertise of their professionals. Further, we offer summer and fall
intern and early career programs in various parts of our businesses, including technology, and within the businesses regionally.
Our success depends on employees understanding of how their work and engagement contribute to our strategy, culture,
values, and regulatory environment. We use various channels to facilitate open and direct communication, including internal calls
and meetings with employees, training and policy updates, employee resource groups, such as NOW, and social and family
outings and events.
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Succession Planning
From time to time, the Board discusses succession planning, including our consideration of succession strategy, the
impact of any potential absence due to illness or leave of certain key executive officers or employees, as well as competing
demands on the time of certain of our executive officers who also provide services to Cantor, Newmark, and various other ventures
and investments sponsored by Cantor. Our Board also discusses from time to time, as part of its succession planning, engagement
and encouragement of future business leaders and the process of introducing directors to leaders in the Company’s business lines.
The Board also considers hiring and retention of leaders required for the changing business landscape and to lead future business
lines. At the business and departmental levels, managers discuss and identify potential talent, opportunities for employee growth,
successors, and future leaders.
Environmental, Social and Governance (ESG) / Sustainability Information
We believe that our environmental, social and governance (“ESG”) policies and practices will create sustainable long-
term value for BGC, our stockholders and other stakeholders, our clients and our employees while also helping us mitigate risks,
reduce costs, protect brand value, and identify market opportunities. We are embedding social and human capital, employment,
environmental, sustainability, charitable and corporate governance policies and practices into our corporate strategy,
compensation, disclosure, and goals to maintain and advance long-term stockholder value.
Our Environmental Focus, Environmental Markets and Sustainable Business Practices
We are focused on the environment and recognize the importance of treating our natural resources with the greatest
respect, so that they are available to future generations. As a socially responsible business operating within financial services, we
are actively aware of climate change and other major issues affecting the environment. Our BGC Environmental Brokerage
Services is a leader in the world’s environmental and green energy markets. Our environmental brokerage services business
provides expert innovative carbon offset solutions and advice to the world’s green energy markets, from transactions and financing
to technology and consulting. For decades, we have helped clients worldwide navigate the complex financial requirements in
order to achieve their environmental initiatives, in the process contributing to dramatically reduced emissions and the promotion
of renewable energy. For more information on BGC Environmental Brokerage Services, please visit www.bgcebs.com.
In our workplaces, we are studying how to make our own contribution to state, national and global environmental
initiatives and to require the same of our vendors and suppliers when doing business with us. As part of this, we are considering
how to minimize our future carbon footprint when planning office renovations and will continue to focus our attention in the near
term on methods of reducing our greenhouse gas emissions, increasing use of renewable energy, conserving water, and reducing
waste generation.
BGC supports sustainable business practices and is focused on the steps necessary to establish a sustainability program
internally as we focus on our own real estate usage. Building operations have a significant impact on the environment, and as
technology continues to place greater demands on building systems for power and cooling, energy consumption is expected to
continue to rise at an unsustainable rate. We believe it is our responsibility to improve energy efficiency and reduce energy
consumption to protect the environment through continuous improvement of building practices. We understand that sustainable
buildings provide a better work environment, increase building efficiency and reduce the environmental impact of our own
building operations. We continue to work on these initiatives.
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
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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, 2021, there were 317.0 million shares of BGC Class A common stock outstanding. On June 21,
2017, Cantor pledged 10.0 million 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 10.0 million shares of BGC Class B
common stock and remain pledged in connection with the partner loan program. On November 23, 2018, BGC Partners issued
10.3 million shares of BGC Class B common stock to Cantor and 0.7 million 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, 2021, 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, 2021, Cantor and CFGM held 45.9 million shares of BGC Class B common stock (which
represents all of the outstanding shares of BGC Class B common stock), representing approximately 59.1% 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, 2021, Cantor has distributed to its current and former partners an aggregate of 20.9 million shares
of BGC Class A common stock, consisting of (i) 19.4 million April 2008 distribution rights shares, and (ii) 1.5 million February
2012 distribution rights shares. As of December 31, 2021, Cantor is still obligated to distribute to its current and former partners
an aggregate of 15.8 million shares of BGC Class A common stock, consisting of 14.0 million April 2008 distribution rights
shares and 1.8 million February 2012 distribution rights shares.
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.
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, 2021, we held directly and indirectly, through wholly-owned subsidiaries, 362.9 million BGC U.S.
OpCo limited partnership units and 362.9 million BGC Global OpCo limited partnership units, representing approximately 75.8%
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of the outstanding limited partnership units in both BGC U.S. OpCo and BGC Global OpCo. As of that date, BGC Holdings held
116.0 million BGC U.S. OpCo limited partnership units and 116.0 million BGC Global OpCo limited partnership units,
representing approximately 24.2% 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, 2021, excluding Preferred Units and NPSUs described below, outstanding BGC Holdings
partnership interests included 62.4 million LPUs, 8.1 million FPUs and 56.8 million 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 23.6 million 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, 2021, there were no 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 following such redemption or
exchange. On October 28, 2021, Cantor purchased from BGC Holdings an aggregate of 460,929 Cantor units for an aggregate
consideration of $715,605 as a result of the redemption of 460,929 FPUs, and 1,179,942 Cantor units for aggregate consideration
of $2,033,838 as a result of the exchange of 1,179,942 FPUs. On March 31, 2021, Cantor purchased from BGC Holdings an
aggregate of 1,149,684 Cantor units for aggregate consideration of $2,104,433 as a result of the redemption of 1,149,684 FPUs,
and 1,618,376 Cantor units for aggregate consideration of $3,040,411 as a result of the exchange of 1,618,376 FPUs. Each Cantor
unit in BGC Holdings held by Cantor is exchangeable by Cantor at any time on a one-for-one basis (subject to adjustment) for
shares of BGC Class A common stock.
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, 2021, there were 20.1 million such units granted and outstanding
in BGC Holdings.
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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 34.6 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 exchangeable LPUs owned in our Holdings, are already included in the
Company’s fully diluted share count and will not increase Cantor’s current maximum potential voting power in the common
equity. The Exchange Agreement will enable the Cantor entities to acquire the same number of shares of 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, 2021, 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 23.6 million
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.
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The following diagram illustrates our organizational structure as of December 31, 2021. 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.*
STRUCTURE OF BGC PARTNERS, INC. AS OF DECEMBER 31, 2021
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* 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 12.4% of the voting power, CFGM would hold 0.2% of the voting
power, and the public stockholders would hold 87.4% 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) 20.1 million Preferred Units granted and outstanding to
BGC Holdings partners (see “BGC Partners, Inc. Partnership Structure” herein); and (c) 54.7 million 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, 2021
through December 31, 2021 as follows: (a) 68.3 million shares of BGC Class A common stock repurchased by us; (b) 8.3 million
LPUs redeemed for Newmark employees and executives; (c) 12.1 million LPUs for vested N Units; (d) 11.5 million LPUs granted
by BGC Holdings; (e) 4.8 million LPUs and FPUs redeemed or repurchased by us for cash; (f) 4.5 million LPUs forfeited; (g)
2.2 million shares of BGC Class A common stock issued for vested restricted stock units; (h) 0.9 million LPUs related to prior
period adjustments; (i) 1.8 million 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 4.0 million of such shares remaining available for issuance by us under
such Registration Statement; and (j) 17 thousand 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 9.2 million of such shares remaining
available for issuance by us under shelf Registration Statement on Form S-3 (Registration No. 333-196999). No shares of BGC
Class A common stock were sold by us during the year ended December 31, 2021 under the March 2018 Sales Agreement pursuant
to our previous Registration Statement on Form S-3 (Registration No. 333-223550). The March 2018 Sales Agreement expired
in September 2021. As December 31, 2021, 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. Our board and committees
have hired advisors and are reviewing the potential structure and details of such conversion.
ITEM 1A.
RISK FACTORS
Any investment in shares of our Class A common stock, 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 5.375% 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 ongoing COVID-19 pandemic has significantly disrupted and adversely affected the environment in which
we and our customers and competitors operate, including the global economy, the U.S. economy, the global financial
markets, and our businesses, financial condition, results of operations and prospects.
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The ongoing COVID-19 pandemic has significantly disrupted and adversely affected the environment in which we and
our customers and competitors operate, including the global economy, the U.S. economy, the global financial markets, and our
businesses, financial condition, results of operations and prospects. The spread of COVID-19 has caused illness, quarantines,
cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor
shortages, supply chain disruptions and overall economic and financial market instability. The ongoing effects of COVID-19
remain challenging to predict due to multiple uncertainties, including the transmissibility, severity, duration and resurgences of
the outbreak; new virus variants and the potential extent of their spread; the application and effectiveness of health and safety
measures that are voluntarily adopted by the public or required by government or public health authorities, including vaccines
and treatments and public resistance thereto; the speed and strength of an economic recovery and the effect thereon of rising
inflation and the increase in interest rates in response thereto; and the impact on our employees, operations, suppliers, and vendors,
and our clients’ operations.
We have taken, and continue to take, necessary and recommended precautions to protect the safety and well-being of
our employees, including by means of conducting certain business activities and operations remotely. However, no assurance can
be given that the steps being taken will be adequate, nor can we predict the level of disruption which will occur to our employees'
ability to provide client support and service. We will continue to evaluate the nature and extent of the impact on our businesses.
The COVID-19 pandemic has continued to adversely affect us in certain respects. The full extent to which the COVID-
19 pandemic, or the emergence of new variants or 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, financial condition, results of operations and prospects will depend on future developments, which are
highly uncertain and cannot be predicted. Any increase in the duration or impact of the pandemic, including any new variants or
another pandemic, as well as measures taken in response thereto, could have a material adverse effect on our businesses, financial
condition, results of operations and prospects.
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 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,
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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, such as Russia's invasion of Ukraine and the impact of it and
measures taken in response thereto, including sanctions imposed by governments and related counter-sanctions;
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.
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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.
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.
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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 41.5%
and approximately 25.7% of our total revenues on a consolidated basis for the year ended December 31, 2021 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 January 1, 2021, the U.K. formally left the EU and U.K.-EU trade became subject to a new agreement that was
concluded in December of 2020. The exit from the EU is commonly referred to as Brexit. Financial services fall 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 March 2021, the U.K. and EU agreed a Memorandum of Understanding on Financial Services Regulatory Cooperation
which creates a structure for dialogue but does not include commitments on equivalence.
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 implemented plans to ensure continuity of service in Europe and continue to have regulated offices 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. We have been generally increasing our footprint in the EU which includes the establishment of a new branch office
of Aurel BGC SAS in Milan and a new office in Monaco under a new local Monaco subsidiary.
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, financial condition, results of operations and prospects. 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, technology professionals and other front-office personnel, 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, technology
professionals or other front-office personnel 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.
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We may pursue opportunities including 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 such opportunities.
We have explored and continue to explore 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. 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.
These opportunities and activities 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 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 these 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 these opportunities;
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;
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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.
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. As we grow internationally, 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 and regulated subsidiaries are domiciled. 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. 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.
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. Any of these factors could have a material adverse effect on our businesses, financial condition, results
of operations and prospects.
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We have offerings linked to cryptocurrencies that could expose us to technology, regulatory and financial risks.
We have offerings linked to cryptocurrencies in certain jurisdictions, and may expand the types of these offerings, the
associated types of cryptocurrencies and the jurisdictions in which these offerings are offered. Specifically, BGC continues to
expand its cryptocurrency offerings through Lucera by providing connectivity and through kACE, its Analytics, Pricing and
Distribution software. Furthermore, BGC intends to launch additional cryptocurrency and digital asset trading offerings in 2022.
The distributed ledger technology underlying cryptocurrencies and other similar financial assets is evolving at a rapid
pace and may be vulnerable to cyberattacks or have other inherent weaknesses that are not yet apparent. There is currently no
broadly accepted regulatory framework for cryptocurrencies, and the regulation of cryptocurrencies is developing and changing
rapidly in the U.S. and other countries around the world. If any of the offerings we transact in are linked to cryptocurrencies and
there is a new regulatory framework, it may delay, harm or change our opportunity or outlook. In addition, cryptocurrency
markets, including Bitcoin, have experienced significant historical material price fluctuations, and if markets for any
cryptocurrencies linked to the offerings we transact in suffer severe fluctuations, our customers could experience significant losses
and we could lose their business.
In the U.S. the SEC, CFTC state and federal agencies are reviewing virtual currency business and have and or may enact
regulations that restrict the business and or require additional licenses to conduct certain businesses. In addition, many foreign
regulators and legislatures have taken action against virtual currency businesses or have enacted restrictive regulations. These
regulations may negatively impact our ability to offer different products in different regions and/or negatively impact our ability
to deal with certain customers depending on where they are located. If licenses are required, it may take a considerable amount
of time to obtain the necessary approvals from the respective regimes. Any of these factors could have a material adverse effect
on our businesses, financial condition, results of operations and prospects in the future.
Risks Related to Change in LIBOR
We may be adversely affected by the transition away from LIBOR and the use of SOFR or other alternative
reference rates.
Our $350 million Revolving Credit Agreement is indexed to LIBOR. LIBOR is a basic rate of interest used in lending
between banks on the London interbank market and historically has been widely used as a reference for setting the interest rate
on loans globally. The United Kingdom’s Financial Conduct Authority and the administrator of LIBOR have announced that the
publication of the most commonly used U.S. dollar LIBOR settings will cease to be published or cease to be representative after
June 30, 2023, and the publication of all other LIBOR settings will cease to be published as of December 31, 2021. Starting
January 1, 2022, banks in the United States have ceased entering into new credit and other contractual agreements using US dollar
LIBOR as a reference rate, and instead began incorporating alternative reference rates, such as SOFR, within such agreements.
We have begun working and will continue to work with our funding providers to incorporate alternative reference rates (such as
SOFR) within our credit facility and other funding arrangements, as opportunities arise to do so.
The expected withdrawal and replacement of LIBOR with alternative benchmarks also introduces risks for our clients
and the financial services industry. Various financial instruments are linked to the LIBOR benchmark, and any failure by market
participants and regulators to successfully introduce benchmark rates to replace LIBOR and implement effective transitional
arrangements to address the discontinuation of LIBOR could negatively affect our clients and the global financial markets. While
we have taken steps to minimize the consequences of the transition from LIBOR on our businesses and believe that this transition
has currently not had nor is expected to have a material effect on us, there can be no assurance that the withdrawal and replacement
of LIBOR will not have a material adverse effect on our businesses, financial condition, results of operations and prospects in the
future.
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.
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Our indebtedness, which at December 31, 2021 was $1,052.8 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 amended in June 2020. Our next bond maturity is in July 2023 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.
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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.
As of December 31, 2021, 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
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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 5.375% 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 5.375% 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 5.375% 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 5.375% 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 5.375% 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 5.375% 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
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(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 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 brands. 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
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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.
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
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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. Malicious actors may also attempt to compromise or induce our employees, clients or other users of our
systems to disclose sensitive information or provide access to our data, and these types of risks may be difficult to detect or
prevent.
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.
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
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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 GDPR in the EU requires entities both in the European Economic Area and outside to comply with 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.
Risks Relating to Our Key Personnel and Employee Turnover
The loss of one or more of our key executives, the development of future talent and the ability of certain key
employees to devote adequate time and attention to us are a key part of the success of our businesses, and failure to
continue to employ and have the benefit of these executives may adversely affect our businesses 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. Further, as we diversify into future business lines or geographic
regions, hiring and engagement of effective management in these areas will impact our future success. In addition, like other
companies, we are experiencing turnover among operational and support staff as a result of wage pressures occurring throughout
the economy. See “Item 1-Business-Human Capital Management.” If our retention efforts are not successful or our turnover rate
continues to increase in the future, our business, results of operations and financial condition could be materially adversely
affected.
Effective succession planning is also important to our long-term success. Failure to transition smoothly and effectively
transfer knowledge to future executive officers and key employees could hinder our strategic planning and execution. From time
to time, senior management, outside directors or other key employees may leave our Company or be absent due to illness or other
factors. While we strive to reduce the negative impact of such changes, losing certain key employees could result in significant
disruptions to our operations. Hiring, training, and successfully integrating replacement critical personnel is time consuming and,
if unsuccessful could disrupt our operations, and as a result could materially adversely affect our business, financial condition,
results of operations and prospects.
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 general partner
of Cantor. Stephen M. Merkel, 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. Steven Bisgay, our
Chief Financial Officer, is also employed as Chief Financial Officer of Cantor. In addition, Messrs. Lutnick, Merkel and Bisgay
also hold offices at various other affiliates of Cantor. These three key employees are not subject to employment agreements with
us or any of our subsidiaries.
Currently, Mr. Lutnick and Mr. Merkel each typically spends at least 50% of his time on our matters, and Mr. Bisgay
spends approximately 80% of his time on BGC 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. As a result, these key employees 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,
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whose employment by Cantor is not subject to these provisions in the limited partnership agreement, from resigning or competing
against us.
In addition, our success has largely been dependent on the efforts of Mr. Lutnick and other executive officers. Should
Mr. Lutnick or our other most senior executives leave or otherwise become unavailable to render services to us, their loss could
disrupt our operations, adversely impact employee retention and morale, and seriously harm our businesses.
Should any of our key employees 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
If we 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.
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 ensure compliance with Section 404,
we will continue to evaluate our internal control over financial reporting, including with respect to acquisitions, which could be
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. Any material failure to ensure full compliance with control and financial
reporting requirements could result in restatement, delay or prevent us from accessing the capital markets, and harm our reputation
and the market price for our Class A common stock.
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.
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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.
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 June
2021, Tradeweb acquired 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 its ability to hire and acquire in competition with us. Finally,
in March 2021, TP ICAP acquired Liquidnet, an electronic trading network. 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 5, 2022, the U.S. Federal Reserve held approximately $6.8 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.
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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.
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.
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 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. Four of our subsidiaries, BGCF, GFI Securities LLC, Fenics Execution 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. BGCF
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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 and GFI Securities Limited, 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
introduced a new capital regime applicable to EU Investment Firms with a phased implementation that began 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
entered 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.
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.
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.
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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.
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.
In the U.S., the SEC has proposed rules to expand Regulation ATS to cover ATS trading government securities. In
addition, the proposed rules extend Regulation SCI to ATSs trading government securities.
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, technology professionals and other front-office personnel.
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
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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.
In addition, we are subject to tax risks inherent in operating a global business in various jurisdictions, including increased
taxes and levies and future changes in income tax regulations.
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 now fall on senior managers, and a wider population of U.K. staff
are subject to certification requirements. SMCR has increased 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.
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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.
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 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. During the fourth quarter of 2020, 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, technology professionals and other front-
office personnel, 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.
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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, technology professionals and other front-office
personnel. 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, including
costs and management time associated with litigation, arbitration or other claims related to employee hires and/or departures.
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 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, technology professionals and other front-office personnel;
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;
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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 or we may enter new businesses, including crypto-
currency and similar opportunities for which there are high barriers to entry or for which we may be regulated. 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.
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 74% of total revenues for the year ended December 31, 2021. 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;
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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.
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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.
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
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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.
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.
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We offer our brokerage services in five broad product categories: rates, credit, FX, energy and commodities, and equity
derivatives and cash equities. Our brokerage revenues are strongest in our rates products, which accounted for approximately
29.9% of our total brokerage revenues on a consolidated basis for the year ended December 31, 2021. 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, 2021, on a consolidated basis, our top ten customers, collectively, accounted for
approximately 41.9% 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.
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
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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 24, 2022, Cantor (including CFGM) beneficially owned all of the outstanding shares of our Class B
addition, Cantor has the right to exchange
common stock, representing approximately 58.8% of our total voting power. In
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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.
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. Our board and committees have hired
advisors and are reviewing the potential structure and details of such conversion.
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
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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:
•
•
•
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 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.
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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.
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 and 2021, 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 to prioritize share and unit repurchases over dividends and distributions. 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.
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
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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 3, 2021, the Company's Board and Audit Committee increased our share
repurchase and unit redemption authorization to $400.0 million, which may include purchases from Cantor, its partners or
employees or other affiliated persons or entities. As of December 31, 2021, we had approximately $191.8 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.
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
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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.
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 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:
•
•
•
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;
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•
•
•
•
•
•
•
•
•
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, which 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.
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
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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 L.P. were unfair to us. While the
Company believes that these allegations are without merit and is defending against them vigorously, as in any litigated matter,
the outcome cannot be determined with certainty.
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, and received fees in connection therewith. We may enter into
similar agreements in the future.
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 the disposition of the Insurance brokerage
business, and placing or recommending to us various investments, stock loans or cash management vehicles. They receive
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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 a 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, as well as the application of the net proceeds of any such sales.
As we have done in the past, we may enter into a sales agreement with CF&Co 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.
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, 2021, we have issued an aggregate of 16.0 million shares of BGC Class A common stock under the 2010 Form
S-4 Registration Statement. Additionally, on 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, 2021, 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, 2021, we have issued 0.8 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, 2021, there were 164.5 million shares remaining for
sale under such registration statements.
Because 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 in 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 in any
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.
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Because we 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 in future offerings and the liquidity and depth
of our market, we may sell a greater aggregate number of shares, at a lower average price per share in future offerings
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 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, 2021 to December
31, 2021, we repurchased an aggregate of 68.3 million shares of our Class A common stock at an aggregate purchase price of
approximately $365.4 million, with a weighted-average repurchase price of $5.35 per share. During that period, we redeemed for
cash an aggregate of 4.7 million limited partnership units at a weighted-average price of $5.83 per unit and an aggregate of 0.1
million founding/working partner units at a weighted-average price of $4.86 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.
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 space at 199 Water
Street, New York, New York and space at 55 Water Street, New York, New York. 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 Iselin, New Jersey, Palm Beach Gardens, Florida, Garden
City, New York, Sugar Land, Texas, Louisville, Kentucky and Chicago, Illinois.
ITEM 3.
LEGAL PROCEEDINGS
See Note 20—“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.
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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 24, 2022, there were 960 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 2022 capital allocation priorities are to use the remaining proceeds from the Insurance Business Disposition and
other sources of liquidity 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. We have repurchased or redeemed 73.1 million
shares or units during the year ended December 31, 2021.
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 and 2021, 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 and 2021, BGC Holdings, L.P. reduced its distributions to or on behalf of its partners. We
plan to continue to prioritize share and unit repurchases over dividends and distributions. The Board will reevaluate whether to
increase the dividend in the first quarter of 2022. 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 2021 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 3, 2021, our
Board of Directors and Audit Committee increased the authorized repurchases of stock or units, including from Cantor employees
and partners to $400 million. As of December 31, 2021 we had approximately $191.8 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.
We have not purchased shares in the open market in 2022 and have redeemed an immaterial amount of units in the normal course
of business.
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During the year ended December 31, 2021, we repurchased 68.3 million shares of our Class A common stock at an
aggregate price of $365.4 million for a weighted-average price of $5.35 per share. During the year ended December 31, 2021, we
redeemed 4.8 million limited partnership interests at an aggregate price of $28.1 million for a weighted-average price of $5.80
per unit.
During the fourth quarter of 2021, we repurchased 26.3 million shares of our Class A common stock at an aggregate
price of $130.8 million for a weighted-average price of $4.97 per share. During the fourth quarter of 2021, we redeemed 38
thousand limited partnership interests at an aggregate price of $203 thousand for a weighted-average price of $5.37 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 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, 2016, measured on December 31,
2017, December 31, 2018, December 31, 2019, December 31, 2020, and December 31, 2021. The Peer Group consists of
Compagnie Financière Tradition SA and TP ICAP 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.
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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.
Note: The above chart reflects $100 invested on 12/31/16 in stock or index, including reinvestment of dividends.
An alternate scenario that is not depicted in the above chart represents a hypothetical situation in which BGC Partners,
Inc. stockholders re-invested the dividends they received from both companies (the “Alternate Scenario”). In the Alternate
Scenario, the total BGC Partners, Inc. return on $100 would have resulted in approximately $160 from 12/31/2016 - 12/31/2021.
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 12/31/2011 through 12/31/2021 would have resulted in
approximately $237.
The 10-year total return for BGC Partners, Inc. under the Alternate Scenario would have resulted in
approximately $412 from 12/31/2011 through 12/31/2021.
In comparison, the 10-year total return for $100 invested in the Peer Group, Russell 2000 Index, and S&P 500
Index from 12/31/2011 through 12/31/2021 would have resulted in approximately in $120, $347, and $463,
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 1980-2022. Index data provided
by Copyright Standard and Poor's Inc. and Copyright Russell Investments. Used with permission. All rights reserved. The
Alternate Scenario above was calculated by S&P Global.
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Certain Definitions
We use non-GAAP financial measures that differ from the most directly comparable measures calculated and presented
in accordance with U.S. 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:
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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 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.
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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:
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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:
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Gains or losses on divestitures;
Fair value adjustment of investments;
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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.
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 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% 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:
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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.
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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 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 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:
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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 U.K. based headquarters.
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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.
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:
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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; and
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.
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ITEM 6.
[RESERVED]
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.
The objective of this Management’s Discussion and Analysis is to allow investors to view the Company from
management’s perspective, considering items that would have a material impact on future operations. This discussion summarizes
the significant factors affecting our results of operations and financial condition as of and during the years ended December 31,
2021, 2020, and 2019. 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.
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:
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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
distribution of effective vaccines, public acceptance of the vaccines, and governmental and public reactions
thereto, the U.S. and global economies, financial 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, 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,
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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 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;
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 governmental responses, and restrictions on business and
commercial activity, 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,
Russia, Ukraine or other jurisdictions, 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, 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 transition away
from 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;
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certain financial risks, including the possibility of future losses, reduced cash flows from operations, increased
leverage, and the need for short- or long-term borrowings, including from Cantor, our ability to refinance our
indebtedness, 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, offerings, trading desks, marketplaces, or services
for existing or new clients, including our ability to expand our cryptocurrency offerings including the launch
of additional cryptocurrency and digital asset trading offerings in 2022 and 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 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, including with respect to the accuracy of the assumptions or the valuation models or multiples
used;
our ability to manage turnover and hire and retain personnel, including brokers, salespeople, managers,
technology professionals and other front-office personnel, and 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 identify and remediate any 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, technology professionals and other front-office personnel;
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;
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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 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 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 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.
OVERVIEW AND BUSINESS ENVIRONMENT
We are a leading global financial brokerage and technology company servicing the global financial markets.
Through brands including BGC®, GFI®, Sunrise Brokers™, Poten & Partners®, RP Martin™, and Fenics®, 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, and futures and options. We have
also recently announced our plans to develop new and comprehensive cryptocurrency brokerage offerings. Our businesses also
provide a wide variety of services, including trade execution, connectivity solutions, brokerage services, clearing, trade
compression, and other post-trade services, information, and other back-office services to a broad assortment of financial and
non-financial institutions.
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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 includes fully electronic
and hybrid 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 also operate under the
names Fenics®, FMX™, BGC Trader™, CreditMatch®, Fenics Market Data™, Fenics GO™, BGC Market Data™, kACE2®,
Capitalab®, Swaptioniser®, CBID®, Lucera® and LumeAlfa™.
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, FMX, Sunrise Brokers, Poten &
Partners, RP Martin, kACE2, Capitalab, Swaptioniser, CBID, Aqua, Lucera and LumeAlfa 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, Miami, Milan, Monaco,
Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tel Aviv, Tokyo, Toronto, and
Zurich.
As of December 31, 2021, we had approximately 2,100 brokers, salespeople, managers, technology professionals and
other front-office personnel across our businesses.
Futures Exchange Group
On July 30, 2021, the Company completed the purchase of the Futures Exchange Group for a purchase price of
$4.9 million at closing, plus the cash held at closing by the Futures Exchange Group, and an earn-out, only payable out of our
portion of the profits of the Futures Exchange Group, capped at the amount Cantor contributed to the Futures Exchange Group
prior to closing.
The Futures Exchange Group acquisition has been determined to be a combination of entities under common control
that resulted in a change in the reporting entity. Accordingly, the financial results of the Company have been recast to include the
financial results of the Futures Exchange Group in the current and prior periods as if the Futures Exchange Group had always
been consolidated. The assets and liabilities of the Futures Exchange Group have been recorded in the Company's consolidated
statements of financial condition at the seller's historical carrying value. The purchase of the Futures Exchange Group was
accounted for as an equity transaction for the period ended September 30, 2021 (the period in which the transaction occurred).
The following tables summarize the impact of the Futures Exchange Group acquisition to the Company's consolidated
statement of financial condition as of December 31, 2020, and to the Company's consolidated statements of operations for the
years ended December 31, 2020 and 2019 (in thousands, except per share amounts):
Total assets
Total liabilities
Total equity
Total liabilities, redeemable partnership interest, and equity
As Previously
Reported
December 31, 2020
Retrospective
Adjustments
As Adjusted
$
$
$
$
3,949,300 $
3,120,397 $
808,229 $
3,949,300 $
3,942 $
874 $
3,068 $
3,942 $
3,953,242
3,121,271
811,297
3,953,242
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Year Ended December 31, 2020
Retrospective
Adjustments As Adjusted
As Previously
Reported
Year Ended December 31, 2019
Retrospective
Adjustments As Adjusted
As Previously
Reported
Income (loss) from operations
before income taxes
Consolidated net income (loss)
$
$
77,905 $
(5,684) $
72,221 $
122,064 $
(5,437) $
116,627
56,602 $
(5,684) $
50,918 $
72,253 $
(5,437) $
66,816
$
Net income (loss) attributable
to noncontrolling interest in
subsidiaries
Net income (loss) available to
$
common stockholders
Basic earnings (loss) per share $
Diluted earnings (loss) per
share
$
7,694 $
(1,838) $
5,856 $
24,691 $
(1,776) $
22,915
48,908 $
0.14 $
(3,846) $
(0.02) $
45,062 $
0.12 $
47,562 $
0.14 $
(3,661) $
(0.01) $
43,901
0.13
0.13 $
(0.01) $
0.12 $
0.13 $
(0.01) $
0.12
Additionally, the consolidated statements of comprehensive income (loss), consolidated statements of cash flows and
consolidated statements of changes in equity have been adjusted to reflect these retrospective adjustments.
Fenics
For the purposes of this document and subsequent SEC filings, all of our higher margin, technology driven businesses
are referred to as Fenics. In the first quarter of 2021, we began to categorize our Fenics businesses as Fenics Markets and Fenics
Growth Platforms and we have conformed our prior period comparisons of the components of our Fenics business to this new
categorization. Fenics Markets includes the fully electronic portion of BGC's brokerage businesses, data, software and post-trade
revenues that are unrelated to Fenics Growth Platforms, as well as Fenics Integrated revenues. Fenics Growth Platforms includes
Fenics UST, Fenics GO, Lucera, Fenics FX and other newer standalone platforms. Revenue generated from data, software and
post-trade attributable to Fenics Growth Platforms are included within their related businesses.
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 often lead 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, 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 customers. Regulation across 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 our
high-growth, high-margin, technology-driven businesses, including our standalone fully electronic Fenics Growth Platforms.
Fenics has exhibited strong growth over the past several years, and we believe that this growth has outpaced the wholesale
brokerage industry. We expect this trend to accelerate as we continue to convert more of our Voice/Hybrid execution into higher-
margin, technology-driven execution across our Fenics platforms and grow our Fenics Growth Platforms.
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We expect to benefit from the 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 execution
platforms across more products and geographies with the goal of seamlessly integrating voice liquidity with customer electronic
orders either by a GUI, API, or web-based interface. We expect to have continued success converting Voice/Hybrid desks over
time as we roll out these platforms across more products and geographies.
We continue to invest in our Fenics Growth Platforms, which currently include:
•
•
•
•
•
Fenics UST, one of the largest CLOB platforms for U.S. Treasuries, had ADV growth of 65% during the fourth
quarter of 2021, outpacing the overall market. Fenics UST CLOB market share increased approximately 600
basis points from a year ago to over 20% in the fourth quarter, and represented 21% of the CLOB market in
December 2021. CLOB market share is from Greenwich Associates and BGC’s internal estimates. From the
third quarter onward, Greenwich Associates updated its methodology for calculating CLOB market share to
more accurately reflect CLOB-only trading volumes. Fenics UST is estimated to have saved our clients over
$30 million in the fourth quarter and over $269 million from January 2019 through December 2021. Fenics
UST's revenue growth was driven by new product offerings, more traders using the platform and higher
volumes. Additionally, Fenics UST saw robust demand for its newer electronic T-bills offering, with a five-fold
increase in ADV quarter-over-quarter, which represented as estimated 15% of the electronic U.S. Treasury Bill
market.
Fenics GO, our global options electronic trading platform, 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, Nikkei 225 Index Options, Hang Seng Chinese Enterprise Index Options (HSCEI),
DAX Index Options, and Korea Composite Stock Price Index Options (KOSPI). Fenics GO electronic liquidity
providers include Susquehanna International Securities (SIG), which joined DRW, Lighthouse, Citadel
Securities, IMC, Maven Securities, Optiver and Akuna Capital as electronic liquidity providers. Fenics GO has
integrated Fenics' existing electronic platform MatchBox into its client offering. MatchBox is an online
platform that automates the trading, booking, and lifecycle management of global equity derivatives contracts.
The integration of these two electronic platforms provides Fenics GO's clients with a comprehensive electronic
equity solution. 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.
Additionally, Fenics GO launched new MSCI index options products in January 2022, and expects to launch
new cryptocurrency options later in the year.
Lucera, our infrastructure and software business, offers 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 days, as opposed to months, and at a significantly lower cost. Lucera is comprised of two
main business lines, LUMEMarkets and LuceraConnect. LUMEMarkets is our low latency aggregator,
providing a single access point across multiple fragmented marketplaces and exchanges (FX, Rates, Futures
and Credit markets). LuceraConnect provides on-demand connectivity to over one thousand endpoints across
buy-side clients, trading firms, marketplaces, and exchanges. LuceraConnect has quickly become the industry
standard for the FX market and is rapidly expanding in other asset classes. Lucera also supports the distribution
of Fenics trading platforms, including Fenics UST, Fenics FX and Fenics MIDFX. In the fourth quarter, Lucera
onboarded new institutional and large bank clients, including in Lucera's cryptocurrency infrastructure
business, which launched in the third quarter. Winning new clients and expanding existing relationships adds
to Lucera's highly recurring and compounding subscription revenue model. Lucera is providing connectivity to
the world's deepest crypto liquidity pools via its world-class infrastructure.
Fenics' Credit offering, Portfolio Match, our recently deployed session-based, matching platform, currently
supports U.S. and European investment grade credit, as well as European high yield credit sessions.
Fenics FX, our ultra-low latency electronic FX trading platform, generated strong double-digit volume and
revenue growth during the quarter, outpacing FX ECN peers and the overall market.
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•
•
Our expanded Fenics FX platforms, which has businesses included under both Fenics Markets and Fenics
Growth Platforms, including MIDFX, Spot FX and FX Options, and non deliverable forwards.
Capitalab, which has businesses included under both Fenics Markets and Fenics Growth Platforms.
Revenue growth from Fenics Growth Platforms continued to significantly outpace the overall business. Fenics Growth
Platforms revenue grew 89.3% to $13.7 million in the fourth quarter of 2021 compared to the year prior and 60.2% to $45.5
million for the year ended December 31, 2021. Collectively, our newer Fenics Growth Platform offerings, such as those listed
above, are not yet fully up to scale, and are not yet generating significant revenues. Over time, we expect these new products and
services to become profitable, high-margin businesses as their scale and revenues increase, all else equal.
Fenics Markets highlights for the fourth quarter of 2021 include:
•
•
•
Fenics MIDFX, our leading wholesale FX hedging platform, grew its revenue by 20% versus the prior year,
driven by strong volumes across spot FX and Asian NDFs. Fenics MID technology provides a highly efficient
fully electronic platform for large global broker-dealers to hedge risk in a neutral environment.
Fenics Market Data signed over 40 new contracts during the fourth quarter, with the total contracted value more
than doubling compared to last year. Fenics Market Data has seen continued success in its new Regulatory
Services offering, with a robust pipeline leading into 2022. Fenics Market Data which has a highly recurring
and compounding subscription revenue model, continues to grow at a solid double-digit pace.
Capitalab's NDF Match business, our advanced web-based matching platform that helps clients reduce foreign
exchange exposure, more than doubled its ADV and revenue in the fourth quarter versus the prior year.
Fenics Markets revenue grew 13.7% to $87.7 million in the fourth quarter of 2021 compared to the year prior and 22.6%
to $355.8 million for the year ended December 31, 2021.
Net Revenues in our Fenics businesses increased 20.2% to $101.4 million in the fourth quarter and 25.9% to $401.3
million for the year ended December 31, 2021 compared to the prior year period. Fenics revenue comprised 23.0% and 21.8% of
overall revenue, excluding Insurance brokerage, for the fourth quarter of 2021 and for the year ended December 31, 2021,
respectively.
Total revenues from our high-margin data, software, and post-trade business, which is predominately comprised of
recurring revenue, were up 15.7% to $24.1 million in the fourth quarter of 2021 and 9.8% to $90.0 million for the year ended
December 31, 2021 over the prior year period. Fenics brokerage revenues increased by 31.4% to $311.2 million for the year
ended December 31, 2021. 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.
FMX
On November 3, 2021, we announced FMX, which combines Fenics UST’s leading cash U.S. Treasury business with a
state-of-the-art U.S. Rates futures platform in development. Following the announcement and consultation with our global clients
and potential strategic partners, FMX has expanded the scope of its futures product offering to cover the entire U.S. Rates Futures
complex. This includes launching U.S. Treasury, Eurodollar, and SOFR futures contracts, concurrently, in the fourth quarter of
2022.
Cryptocurrency Initiatives
We continued to expand our cryptocurrency offerings during the quarter. Lucera onboarded new clients to its
cryptocurrency connectivity and trade aggregation software. kACE, leveraging its award-winning Analytics, Pricing and
Distribution software, onboarded new clients to its new cryptocurrency options offering. Furthermore, we will be launching
additional cryptocurrency and digital asset trading products throughout 2022, which will be underpinned by Fenics' state-of-the-
art technology. Our futures exchange was among the first exchanges to be permitted to list cryptocurrency derivative contracts.
We are uniquely positioned to capitalize on the significant and growing cryptocurrency opportunity.
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Possible Corporate Conversion
The Company continues to explore a possible conversion into a simpler corporate structure. Our board and committees
have hired advisors and are reviewing the potential structure and details of such conversion.
Cost Reduction Program
The Company is continuing to examine how best to operate our business with the goal of creating efficiencies and
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. In addition, the Company incurred $32.1 million of
U.S. GAAP compensation charges in the year ended December 31, 2021, as a result of continuing to examine how best to operate
our business and working to further streamline our operations. U.S. GAAP items recorded include:
•
•
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.
Insurance Disposition
On November 1, 2021, the Company successfully completed the Insurance Business Disposition and, after closing
adjustments, received $534.9 million in gross cash proceeds, subject to limited post-closing adjustments. The investment in the
Insurance brokerage business generated an internal rate of return of 21.2% for our shareholders. As of December 31, 2021, we
have repurchased and redeemed 71.5 million shares and units since announcing the sale on May 26, 2021. The sale of the business
did not represent a strategic shift that would have a major effect on the Company’s operations and financial results and was,
therefore, not classified as discontinued operations. CF&Co served as advisor to the Company in connection with the transaction,
and as a result, $4.4 million of banking fees was paid to Cantor upon closing of the transaction. For further information regarding
the sale of our Insurance brokerage business, please see our Current Report on Form 8-K filed with the SEC on November 1,
2021, as well as Note 5—"Divestitures" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form
10-K.
The Insurance brokerage business contributed $19.9 million and $178.3 million in total revenues for the three and twelve
months ended December 31, 2021, respectively. No impairment charge was recorded for the sale of the Insurance brokerage
business for the three and twelve months ended December 31, 2021 as the carrying amount of the net assets was less than the fair
value less costs to sell.
Unvested equity and other awards previously granted by BGC to employees of its Insurance brokerage business were
converted into the right to receive a cash payment from BGC; a significant portion of these awards was 50% vested and paid in
cash at closing, with the remaining 50% vesting and to be paid in cash two years after closing. The remaining portion of these
awards will have been 100% vested and paid in cash by two years after the closing. The payments after closing are only made if
the applicable employee remains an employee of the Insurance brokerage business.
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.
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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 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 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. The 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, inflation expectation impact on U.S. rates volumes, and an increase in trade protectionism
were tempered by monetary and fiscal stimulus. In addition, during 2021, as the global economy recovered from the COVID-19
pandemic, higher inflation across the U.S. and other G8 countries led central banks to begin and/or announce tapering of asset
purchases under quantitative easing programs, as well as drive market expectations of future central bank rate hikes.
Impact of COVID-19
In recent years, we have been adversely affected as a result of COVID-19 and its impact on the macroeconomic
environment. For example, surges in global COVID-19 cases caused market-wide disruptions, particularly across our
Voice/Hybrid business in December 2021. During the COVID-19 pandemic, our fully electronic businesses have been a key
growth driver and competitive advantage as many of our brokers and clients have adapted to working remotely. Additional
information with respect to the impact of COVID-19 on our businesses, results of operations and human capital resources is
contained elsewhere in this Annual Report on Form 10-K.
Impact of COVID-19 on Employees
As a global intermediary to financial markets, BGC is 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:
•
•
•
•
•
We activated our Business Continuity Plan in the first quarter of 2020. The vast majority of front-office
personnel are working in a firm office and most BGC staff members are attending work in the office several
days a week, while working remotely the other part of the week. We follow all applicable laws and regulations
to ensure both compliance with the COVID-19 requirements and the safety of our employees.
We provide ongoing informational COVID-19-related messages and notices. We disseminated our COVID-19
policies and FAQs on a regular basis; they are also posted on the Company's intranet sites.
Where applicable, we are applying more frequent and vigorous cleaning and sanitation measures and providing
personal protective equipment (PPE).
Internal and external meetings are sometimes held in person, as well as conducted virtually and via phone calls.
We have deferred some corporate events and participation in industry conferences.
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•
•
•
Our medical plans have waived applicable member cost sharing for all medically necessary 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.
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 and encourage them all to get vaccinated.
Impact of COVID-19 on the Company’s Results
Revenues
Voice/Hybrid and/or Higher-Margin, Technology-Driven Fenics Businesses
We recorded total revenue of $2,015.4 million for the year ended December 31, 2021, 2.0% lower than a year ago.
For the year ended December 31, 2021, Fenics net revenues of $401.3 million, increased 25.9% driven by a $65.5
million, or 22.6%, increase in Fenics Markets and a $17.1 million, or 60.2%, increase in Fenics Growth Platforms.
Certain key items are summarized below:
•
•
•
•
•
•
Revenues across Rates, Credit, FX, Equity derivatives and cash equities, Energy and commodities are generally
correlated with corresponding industry volumes.
Rates benefited from strong growth across BGC's U.S. government bonds, inflation products, listed rates, and
emerging market rates.
Energy & Commodities generated revenue growth, driven by strong performance in BGC's environmental
brokerage business and heightened volatility across the energy markets.
Concerns around U.S. inflation and the ease of asset purchases in the fourth quarter by the Federal Reserve,
drove interest rate volatility higher and supported global Rates trading volumes.
Conversely, quantitative easing measures taken by central banks around the world have lowered market
volumes.
Uncertainty around global energy supplies led to large price rallies and volatility in these products, which
increased secondary market trading volumes.
We expect record levels of global debt issuance, interest rate volatility, tapering of central bank asset purchases, and an
improving U.S. and global economy to provide tailwinds to our Rates business going forward.
Overall Fenics
•
•
•
•
•
BGC’s Fenics net revenues increased 25.9% for the year ended December 31, 2021 compared to the prior year.
Fenics has benefited and is expected to continue to benefit from trends 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.
BGC’s data, software, and post-trade businesses are predominantly comprised of recurring revenues.
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Expenses
BGC’s compensation expenses increased for the year ended December 31, 2021, due to the sale of the Insurance
brokerage business, which included one-off compensation charges and sale-related expenses totaling $168.6 million, the majority
of which was non-cash. BGC’s non-compensation expenses decreased due to lower interest expense, professional and consulting
fees, and other expenses. These expense reductions were partially offset by higher selling and promotion charges, as COVID-19
restrictions have relaxed across many of the major geographies in which BGC operates.
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:
•
•
•
•
•
•
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
On February 15, 2022, our Board declared a $0.01 dividend for the fourth quarter of 2021. Additionally, BGC Holdings
continues to have reduced 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. Our 2022 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. The Board will
reevaluate whether to increase the dividend in the first quarter of 2022.
For further information on the balance sheet, liquidity and capital, see "Liquidity and Capital Resources" herein.
Brexit
On January 1, 2021, the U.K. formally left the EU and U.K.-EU trade became subject to a new agreement that was
concluded in December of 2020. The exit from the EU is commonly referred to as Brexit. Financial services fall 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 March 2021, the U.K. and EU agreed a Memorandum of Understanding on Financial Services Regulatory Cooperation
which creates a structure for dialogue but does not include commitments on equivalence.
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 implemented plans to ensure continuity of service in Europe and continue to have regulated offices 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. We have been generally increasing our footprint in the EU which includes the establishment of a new branch office
of Aurel BGC SAS in Milan and a new office in Monaco under a new local Monaco subsidiary.
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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.
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.
Additionally, there has been an increase in acquisitions of OTC trading platforms by exchanges and electronic
marketplaces such as ICE buying BondPoint, Deutsche Börse buying 360T, and CBOE buying Hotspot, MarketAxess buying
LiquidityEdge, Tradeweb buying Nasdaq U.S. Fixed Income Electronic Trading Platform, etc. 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, technology professionals 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, 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 restarted quantitative easing programs in 2020, and continue to maintain historically low interest rates,
keep key short-term interest rates low, or a combination of both. Recent heightened levels of inflation in 2020, meant major
central banks have begun and/or expect to begin tapering asset purchases and plan to hike interest rates, which historically has
led to an increase in rates volumes.
Additional factors have weighed on 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 will take effect on January 1, 2023, has already required
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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, 2021, industry volumes were higher year-over-year across Rates and Energy and
Commodities, mixed across Equity derivatives and cash equities and generally lower across FX and Credit. BGC’s brokerage
revenues, excluding Insurance, were down by 2.6% 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 at very high levels;
the level of secondary trading and related hedging activity was higher during 2021, as the prior year was severely impacted by
the COVID-19 pandemic, which led to the dislocations of traders and lower risk appetites. In addition, according to SIFMA and
the Federal Reserve Bank of New York, the average daily volume of various U.S. Treasuries and Treasury bills, among primary
dealers was 3% higher in 2021 as compared to a year earlier. Additionally, interest rate derivative volumes were up 13% and 15%
at ICE and the CME, respectively, all according to company press releases. In comparison, our revenue from Fenics Rates
increased 43.7%, while our overall Rates revenues were up 2.6% as compared to a year earlier to $558.5 million.
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. Additionally, yields on
benchmark U.S. Treasuries exhibited volatility during the fourth quarter of 2021 on inflation concerns and central bank tapering
plans. While most economists expect that the effects of various forms of quantitative easing being undertaken by the various
major central banks will continue to negatively impact financial market volumes, the tapering of asset purchases by central banks,
interest rate hikes, along with elevated levels of government debt issuance, are expected to provide tailwinds to our Rates business.
FX Volumes and Volatility
Global FX volumes were generally lower during 2021. Volumes for CME FX futures and options and CME EBS spot
FX were down 7%, and 14%, respectively. In comparison, revenue from our Fenics FX platforms increased 47.3%, while our
overall FX revenues decreased by 4.4% to $301.3 million.
Insurance Brokerage
The overall Insurance brokerage business, which we sold to The Ardonagh Group on November 1, 2021, included Ed
Broking and Besso, as well as our aviation and space insurance brokerage business, Piiq. The pre-tax loss relating to Insurance
was $53.9 million and $25.6 million for the years ended December 31, 2021 and 2020, respectively. Insurance posted total
revenues of $19.9 million and $178.3 million, respectively, for both the fourth quarter and full year 2021.
Equity derivatives and cash equities
Global equity volumes were higher during 2021. Research from Raymond James indicated that the average daily
volumes of U.S. cash equities and U.S. options were up 4% and 33%, respectively, as compared to a year earlier, while average
daily volume of European cash equities shares were down 6% (in notional value). Over the same timeframe, Eurex average daily
volumes of equity derivatives were up 10%, while Euronext equity derivative index volumes decreased by 10%. BGC’s equity
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business primarily consists of equity derivatives. Our overall revenues from Equity derivatives and cash equities decreased by
2.8% to $247.7 million.
Credit Volumes
Our Credit business is impacted by the level of global corporate bond issuance and the direction of interest rates. 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 2021, primary dealer average daily volume for
corporate bonds (excluding commercial paper) was down by 10% 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 down by 2%, from a year earlier. In comparison, our overall Credit revenues decreased
by 12.8% to $287.6 million.
Energy and Commodities
Energy and commodities volumes were generally higher during 2021 compared with the year earlier. CME and ICE
energy futures and options volumes were up 16% and 7%, respectively, driven by heightened volatility across the energy markets.
In comparison, BGC’s energy and commodities revenues increased by 1.3% to $296.5 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 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 five broad product categories: Rates, FX, Credit, Energy & commodities, Equity
derivatives and cash equities classes. We previously offered Insurance brokerage services, however, we sold our Insurance
brokerage business to The Ardonagh Group on November 1, 2021. The chart below details brokerage revenues by product
category and by Voice/Hybrid versus Fully Electronic (in thousands):
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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
For the Year Ended December 31,
2020
2019
2021
$
558,507
301,328
296,458
287,608
247,673
178,087
$ 1,869,661
$
544,094
315,253
292,641
329,904
254,702
182,707
$ 1,919,301
$
594,884
370,318
288,697
306,713
251,339
155,790
$ 1,967,741
29.9 %
16.1
15.9
15.4
13.2
9.5
100.0 %
28.3 %
16.4
15.2
17.2
13.3
9.6
100.0 %
30.2 %
18.8
14.7
15.6
12.8
7.9
100.0 %
$ 1,558,503
311,158
$ 1,869,661
$ 1,682,521
236,780
$ 1,919,301
$ 1,763,114
204,627
$ 1,967,741
83.4 %
16.6
100.0 %
87.7 %
12.3
100.0 %
89.6 %
10.4
100.0 %
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 are traded. We provide full execution OTC brokerage services in most major currencies, including all G8
currencies, emerging market, cross and exotic options currencies.
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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 provided 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. We sold our Insurance brokerage business on November 1, 2021
(see Note 5—"Divestitures" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for
additional information).
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, GFI, and
Fenics trading systems.
Our Capitalab NDF Match business is an advanced matching platform that helps clients offset their fixing risk in non-
deliverable forward portfolios. Additionally, Capitalab provides compression services that are designed to bring greater capital
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and operational efficiency to the global derivatives market. It 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 Bilateral
and Cleared Interest Rate Swaptions, Interest Rate Swaps, Caps and Floors and FX Products, Capitalab looks to simplify the
complexities of managing large quantities of derivatives, to help promote sustainable growth, lower systemic risk and improve
resiliency in the industry. Furthermore, as an approved compression services provider at LCH, a combined multiproduct Rates
solution is provided across the entire cleared and non-cleared portfolio, increasing the overall efficiency, where delta offsets can
be leveraged across Rates products and desks. Additionally, Capitalab’s Initial Margin Optimization service allows participants
to reduce their bilateral initial margin and CCP IM with the efficiency of automated trade processing.
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.
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 or are redeemed in connection with the grant of shares of our Class A common
stock on a one-for-one basis (subject to adjustment). At the time exchangeability or redemption 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.
Certain LPUs 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 our consolidated statements of operations.
In addition, Preferred Units are granted in connection with the grant of certain LPUs, such as PSUs, which may be
granted exchangeability or redemption in connection with the grant of shares of common stock to cover the withholding taxes
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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.
In addition, as part of our compensation plan, certain employees are granted RSUs. The grant-date fair value of RSUs is
amortized to expense ratably over the awards’ stated 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 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 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, 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 19—“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.
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.
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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 grow at a faster rate than our largest competitors since our formation in 2004. We reduced front office headcount with
a focus on underperforming or less profitable brokers, which helped improve our average revenue per producer.
We have invested significantly through acquisitions and the hiring of new brokers, salespeople, managers, technology
professionals 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, technology professionals and other front-office personnel to our platform as we believe they recognize that we have
the scale, technology, experience and expertise to succeed.
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 Insurance brokerage, as of December 31, 2021, our
front-office headcount was approximately 2,100 brokers, salespeople, managers, technology professionals and other front-office
personnel, down 8.1% from 2,297 a year ago. Compared to the prior year, average revenue per front-office employee for the year
ended December 31, 2021 increased by 8.1% to $811 thousand from $750 thousand.
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 2019, our acquisitions have included Ed Broking, Ginga Petroleum, Algomi and the Futures Exchange Group.
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On July 30, 2021, we completed the purchase of the Futures Exchange Group from Cantor, which represents our futures
exchange and related clearinghouse.
On March 6, 2020, we completed the acquisition of Algomi, a software company operating under a SaaS model that
provides technology to bond market participants to improve their workflow and liquidity by data aggregation, pre-trade
information analysis and execution facilitation.
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 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 became part of the overall Insurance brokerage
business and was subsequently sold to The Ardonagh Group on November 1, 2021 as part of the Insurance Business Disposition.
FINANCIAL HIGHLIGHTS
For the year ended December 31, 2021, income from operations before income taxes increased by $104.3 million, or
144.4%, to $176.5 million compared to the prior year period, primarily due to a $312.9 million gain on the sale of the Insurance
brokerage business in the fourth quarter of 2021. Total revenues for the year ended December 31, 2021 decreased $41.4 million,
or 2.0%, to $2,015.4 million compared to the prior year period. The first quarter of 2020 was unique in that it reflected record
market volatility and volumes driven by the onset of the COVID-19 pandemic. We continued to make excellent progress this year
with respect to our investments in Fenics. Our Fenics growth accelerated during the year ended December 31, 2021, with revenues
increasing by 25.9%, to $401.3 million and represented a record 21.8% of our total revenues, excluding the Insurance brokerage
business, increasing from 17.0% for the year ended December 31, 2020. The growth in our Fenics platforms continued to
significantly outpace the overall business as we added new clients and expanded our product offerings. As we continue to grow
our higher margin businesses, we are well positioned for increased profitability.
Brokerage revenues for the year ended December 31, 2021 decreased by $49.6 million, or 2.6%, to $1,869.7 million
compared to the prior year period, which was primarily driven by Credit revenues, which decreased by $42.3 million, to $287.6
million, for the year ended December 31, 2021, due to significantly lower industry-wide trading volumes. For the year ended
December 31, 2021, our FX revenues decreased $13.9 million, to $301.3 million, and revenues from Equity derivatives and cash
equities decreased by $7.0 million, to $247.7 million. The Insurance brokerage business revenues decreased by $4.6 million, or
2.5%, to $178.1 million, for the year ended December 31, 2021, primarily due to the sale of the Insurance brokerage business
during the fourth quarter of 2021. Rates revenues increased by $14.4 million, to $558.5 million, for the year ended December 31,
2021 as compared to the prior year period, driven by favorable trading environment across many of the Rates products BGC
brokers, and revenues from Energy and commodities increased by $3.8 million, to $296.5 million for the year ended December
31, 2021, led by BGC's leading environmental brokerage business and heightened volatility across the energy complex. Revenues
in our Fenics business increased 25.9% to $401.3 million for the year ended December 31, 2021, compared to the prior year
period, driven by strong growth across both Fenics Markets and Fenics Growth Platforms.
Beginning in the first quarter of 2021, BGC categorized its Fenics businesses as Fenics Markets and Fenics Growth
Platforms. Fenics Markets includes the Fully Electronic portions of BGC’s brokerage businesses, data, software and post-trade
revenues that are unrelated to Fenics Growth Platforms, as well as Fenics Integrated revenues. Fenics Growth Platforms includes
Fenics UST, Fenics GO, Lucera, Fenics FX and other newer standalone platforms. Revenues generated from data, software and
post-trade attributable to Fenics Growth Platforms are included within their related businesses. Fenics Markets and Fenics Growth
Platforms compete with companies such as CME, Tradeweb and MarketAxess. Fenics Markets revenues comprised $355.8
million, an improvement of $65.5 million, or 22.6%, which reflected higher conversion of Voice and Hybrid execution to Fenics
brokerage, increased contribution from Fenics Integrated, and strong growth across Rates, FX and Market Data. Fenics Growth
Platforms revenues comprised $45.5 million, an increase of $17.1 million, or 60.2%, driven by strong growth in Fenics UST,
Lucera and Fenics GO. 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
106
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 Growth Platforms, which includes Fenics UST, Fenics GO, Lucera, Fenics FX and other
newer standalone platforms. During the quarter we announced FMX, which combines Fenics UST's leading U.S. Treasury
business with a state-of-the-art U.S. Rates futures platform in development. Following the announcement and consultation with
our global clients and strategic partners, FMX will expand the scope of its futures product offering to cover the entire U.S. Rates
Futures complex. This includes launching U.S. Treasury, Eurodollar, and SOFR futures contracts, concurrently, in the fourth
quarter of 2022.
Total expenses for the year ended December 31, 2021 increased by $186.7 million to $2,178.2 million compared to the
prior year period, primarily driven by a $211.4 million increase in total compensation expenses. Within total compensation, our
Equity-based compensation and allocations of net income to limited partnership units and FPUs increased by $72.6 million due
to an increase in charges related to grants of exchangeability and issuance of shares of BGC Class A common stock, while
expenses for Compensation and employee benefits increased by $138.8 million, primarily due to the sale of the Insurance
brokerage business, which included one-off compensation charges and sale related expenses totaling $168.6 million, the majority
of which was non-cash, partially offset by the impact of lower commission revenues on variable compensation. Our non-
compensation expenses decreased by $24.7 million, or 3.7%, primarily driven by a continued focus on tighter cost management
as well as the impact of COVID-19, including lower occupancy and equipment expenses and reduced professional and consulting
fees. There was also a decrease in other expenses related to a decrease in amortization expense on intangible assets, a decrease in
other provisions, and a decrease in expenses due to the sale of the Insurance brokerage business, partially offset by an increase in
legal settlement and litigation costs, as well as an increase related to Charity Day contributions. Further, there was a decrease in
interest expense related to the 5.125% Senior Notes, which were repaid in May 2021, lower interest expense related to the
borrowings on the Revolving Credit Agreement, partially offset by interest expense related to the 4.375% Senior Notes issued in
July 2020.
Total other income (losses), net for the year ended December 31, 2021 increased $332.4 million to $339.4 million
compared to the prior year period, primarily due to a $312.9 million gain on the sale of the Insurance brokerage business in the
fourth quarter of 2021, an increase related to mark-to-market movements on other assets, a gain recognized on a litigation
resolution in the first quarter of 2021, an increase due to an impairment of an equity-method investment recorded in the first
quarter of 2020 compared to no impairment recorded in the year ended December 31, 2021, an increase in other recoveries related
to a settlement recognized in the fourth quarter of 2021, an increase related to gains on equity method investments, and an increase
related to fair value adjustments on investments held recorded in the year ended December 31, 2020, partially offset by a decrease
related to COVID-19 recoveries in the year ended December 31, 2020.
On February 15, 2022, our Board declared a 0.01 dividend for the fourth quarter. Effective with the first quarter of 2020
dividend, and for all quarterly periods in 2020 and 2021, the Board reduced the quarterly dividend 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, BGC Holdings continues to have reduced 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 2022 capital allocation priorities are to use the remaining proceeds from the Insurance Business
Disposition and other sources of liquidity to return capital to stockholders and to continue investing in its high growth Fenics
businesses. We plan to prioritize share and unit repurchases over dividends and distributions.
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):
107
2021
Actual
Results
Percentage
of Total
Revenues
Year Ended December 31,
2020
2019
Actual
Results
Percentage
of Total
Revenues
Actual
Results
Percentage
of Total
Revenues
1,541,900
327,761
1,869,661
14,856
89,963
21,977
18,907
2,015,364
1,271,340
256,164
1,527,504
188,322
24,030
67,884
117,502
38,048
64,708
69,329
80,888
2,178,215
312,941
6,706
19,705
339,352
176,501
23,013
153,488
29,481
124,007
76.5 % $
16.3
92.8
0.7
4.5
1.1
0.9
100.0
63.1
12.7
75.8
9.3
1.2
3.4
5.8
1.9
3.2
3.5
4.0
108.1
15.5
0.3
1.0
16.8
8.7
1.1
7.6 % $
1.4
6.2 % $
1,567,668
351,633
1,919,301
25,754
81,920
12,332
17,454
2,056,761
1,132,557
183,545
1,316,102
192,837
23,618
74,072
121,646
38,234
59,376
76,607
89,045
1,991,537
394
5,023
1,580
6,997
72,221
21,303
50,918
5,856
45,062
76.2 % $
17.1
93.3
1.3
4.0
0.6
0.8
100.0
55.1
8.9
64.0
9.4
1.1
3.6
5.9
1.9
2.9
3.7
4.3
96.8
0.0
0.2
0.1
0.3
3.5
1.0
2.5 % $
0.3
1,645,818
321,923
1,967,741
29,442
73,166
18,319
15,938
2,104,606
1,127,041
170,625
1,297,666
186,111
19,778
93,071
120,037
81,829
63,617
60,246
118,671
2,041,026
18,421
4,115
30,511
53,047
116,627
49,811
66,816
22,915
2.2 % $
43,901
78.2 %
15.3
93.5
1.4
3.5
0.9
0.7
100.0
53.6
8.1
61.7
8.8
0.9
4.4
5.7
3.9
3.0
2.9
5.7
97.0
0.9
0.2
1.4
2.5
5.5
2.3
3.2 %
1.1
2.1 %
$
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 operations before income
taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Less: Net income (loss) operations
attributable to noncontrolling interest in
Net income (loss) available to common
stockholders
$
$
________________________
1
The components of Equity-based compensation and allocations of net income to limited partnership units and FPUs are as follows (in
thousands):
108
2021
Actual
Results
Percentage
of Total
Revenues
Year Ended December 31,
2020
2019
Actual
Results
Percentage
of Total
Revenues
Actual
Results
Percentage
of Total
Revenues
128,107
34,335
78,596
15,126
6.4 % $
1.7
3.9
0.7
84,966
14,006
74,282
10,291
4.1 % $
0.7
3.6
0.5
100,948
20,491
41,721
7,465
4.8 %
1.0
2.0
0.3
$
256,164
12.7 % $
183,545
8.9 % $
170,625
8.1 %
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
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenues
Brokerage Revenues
Total brokerage revenues decreased by $49.6 million, or 2.6%, to $1,869.7 million for the year ended December 31,
2021 as compared to the year ended December 31, 2020. Commission revenues decreased by $25.8 million, or 1.6%, to
$1,541.9 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020. Principal transactions
revenues decreased by $23.9 million, or 6.8%, to $327.8 million for the year ended December 31, 2021 as compared to the
year ended December 31, 2020.
The decrease in total brokerage revenues was primarily driven by decreases in Credit, FX, Equity derivatives and cash
equities, and Insurance, partially offset by an increase in revenues from Rates, and Energy and commodities.
Our Credit revenues decreased by $42.3 million, or 12.8%, to $287.6 million for the year ended December 31, 2021, as
compared to the year ended December 31, 2020. This decrease was mainly due to lower industry wide volumes.
Our FX revenues decreased by $13.9 million, or 4.4%, to $301.3 million for the year ended December 31, 2021, as
compared to the year ended December 31, 2020. This decrease was primarily driven by lower industry volumes.
Our brokerage revenues from Equity derivatives and cash equities decreased by $7.0 million, or 2.8%, to $247.7 million
for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This decrease was primarily driven
by lower volumes across European equity derivatives.
Our brokerage revenues from Insurance decreased by $4.6 million, or 2.5%, to $178.1 million for the year ended
December 31, 2021, as compared to the year ended December 31, 2020. This decrease was primarily due to the sale of the
Insurance brokerage business on November 1, 2021.
Our brokerage revenues from Rates increased by $14.4 million, or 2.6%, to $558.5 million for the year ended
December 31, 2021, as compared to the year ended December 31, 2020. The increase in Rates revenues was primarily driven by
improved activity across U.S. government bonds, inflation products, listed rates, and emerging market rates.
Our brokerage revenues from Energy and commodities increased by $3.8 million, or 1.3%, to $296.5 million for the
year ended December 31, 2021, as compared to the year ended December 31, 2020. This increase was primarily driven by BGC's
leading environmental brokerage business and heightened volatility across the energy complex.
Fees from Related Parties
Fees from related parties decreased by $10.9 million, or 42.3% to $14.9 million for the year ended December 31, 2021
as compared to the year ended December 31, 2020. This was primarily driven by a decrease in technology service revenues in
connection with services provided to Cantor.
109
Data, Software and Post-Trade
Data, software and post-trade revenues increased by $8.0 million, or 9.8%, to $90.0 million for the year ended
December 31, 2021 as compared to the year ended December 31, 2020. This increase was primarily driven by new business
contracts and Lucera expanding its client base.
Interest and Dividend Income
Interest and dividend income increased by $9.6 million, or 78.2%, to $22.0 million for the year ended December 31,
2021 as compared to the year ended December 31, 2020. This increase was primarily driven by an increase in dividend income
and higher interest income earned on employee loans.
Other Revenues
Other revenues increased by $1.5 million, or 8.3% to $18.9 million for the year ended December 31, 2021 as compared
to the year ended December 31, 2020. This increase was primarily driven by an increase in revenues from underwriting fees,
partially offset by a decrease in both consulting and sublease income for Poten & Partners.
Expenses
Compensation and Employee Benefits
Compensation and employee benefits expense increased by $138.8 million, or 12.3%, to $1,271.3 million for the
year ended December 31, 2021 as compared to the year ended December 31, 2020. This increase was primarily due to the sale of
the Insurance brokerage business, which included one-off compensation charges and sale related expenses totaling $168.6 million,
the majority of which was non-cash, partially offset by the impact of lower commission 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
$72.6 million, or 39.6%, to $256.2 million for the year ended December 31, 2021 as compared to the year ended December 31,
2020. This was primarily driven by an increase in grants of exchangeability and issuance of Class A common stock and an increase
in allocations of net income to limited partnership units and FPUs due to the gain on sale of the Insurance brokerage business.
Occupancy and Equipment
Occupancy and equipment expense decreased by $4.5 million, or 2.3%, to $188.3 million for the year ended
December 31, 2021 as compared to the year ended December 31, 2020. This decrease was primarily driven by a decrease in rent
and occupancy expenses, software licenses and maintenance, and decreases in office and utilities expenses, partially offset by an
increase in fixed asset impairments and an increase in amortization expense on developed software.
Fees to Related Parties
Fees to related parties increased by $0.4 million, or 1.7%, to $24.0 million for the year ended December 31, 2021 as
compared to the year ended December 31, 2020. Fees to related parties are allocations paid to Cantor for administrative and
support services.
Professional and Consulting Fees
Professional and consulting fees decreased by $6.2 million, or 8.4%, to $67.9 million for the year ended December 31,
2021 as compared to the year ended December 31, 2020. This decrease was primarily driven by a decrease in consulting fees,
partially offset by an increase in legal fees.
110
Communications
Communications expense decreased by $4.1 million, or 3.4%, to $117.5 million for the year ended December 31, 2021
as compared to the year ended December 31, 2020. As a percentage of total revenues, communications expense remained
relatively unchanged from the prior year period.
Selling and Promotion
Selling and promotion expense decreased by $0.2 million, or 0.5%, to $38.0 million for the year ended December 31,
2021 as compared to the year ended December 31, 2020.
Commissions and Floor Brokerage
Commissions and floor brokerage expense increased by $5.3 million, or 9.0%, to $64.7 million for the year ended
December 31, 2021 as compared to the year ended December 31, 2020. This increase was primarily driven by higher exchange
fees in the year ended December 31, 2021 and an increase in trades executed compared to the year ended December 31, 2020.
Interest Expense
Interest expense decreased by $7.3 million, or 9.5%, to $69.3 million for the year ended December 31, 2021 as compared
to the year ended December 31, 2020. This decrease was primarily driven by lower interest expense related to the 5.125% Senior
Notes, which were repaid in May 2021, lower interest expense related to borrowings on the Revolving Credit Agreement, partially
offset by interest expense related to the 4.375% Senior Notes issued in July 2020.
Other Expenses
Other expenses decreased by $8.2 million, or 9.2%, to $80.9 million for the year ended December 31, 2021 as compared
to the year ended December 31, 2020, which was primarily related to a decrease in amortization expense on intangible assets, a
decrease in other provisions, and a decrease in expenses related to the sale of the Insurance brokerage business during the fourth
quarter of 2021, partially offset by an increase in settlements and an increase related to Charity Day contributions.
Other Income (Losses), Net
Gains (Losses) on Divestitures and Sale of Investments
For the year ended December 31, 2021 we had a gain of $312.9 million as a result of the sale of the Insurance brokerage
business. For the year ended December 31, 2020, we had a gain of $394 thousand on divestitures.
Gains (Losses) on Equity Method Investments
Gains (losses) on equity method investments increased by $1.7 million, to a gain of $6.7 million, for the year ended
December 31, 2021 as compared to a gain of $5.0 million for the year ended December 31, 2020. 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) increased by $18.1 million, to $19.7 million for the year ended December 31, 2021 as compared to
the year ended December 31, 2020. This was primarily driven by an increase related to mark-to-market movements on other
assets, a gain recognized on a litigation resolution during the year ended December 31, 2021, an increase due to an impairment
of an equity method investment recorded in the year ended December 31, 2020 compared to no impairment recorded in the year
ended December 31, 2021, an increase in recoveries related to a settlement recognized in the fourth quarter of 2021, and an
increase related to fair value adjustments on investments carried under the measurement alternative. These increases were partially
offset by a decrease related to COVID-19 recoveries in the year ended December 31, 2020.
111
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes increased by $1.7 million, or 8.0%, to $23.0 million for the year ended
December 31, 2021 as compared to the year ended December 31, 2020. This increase was primarily driven by an increase in both
pre-tax earnings and the ownership interest in the operating partnership, partially offset by the nontaxable gain on the disposition
of the Insurance brokerage business as well as the release of historical tax positions related to periods for which the statute of
limitations has expired. In addition, the change in the geographical and business mix of earnings can impact our consolidated
effective tax rate from period-to-period.
Net Income (Loss) Attributable to Noncontrolling Interest in Subsidiaries
Net income (loss) attributable to noncontrolling interest in subsidiaries increased by $23.6 million, to $29.5 million for
the year ended December 31, 2021 as compared to the year ended December 31, 2020.
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.
112
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.
Other Revenues
Other revenues increased by $1.5 million, or 9.5% to $17.5 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 consulting income for Poten &
Partners.
Expenses
Compensation and Employee Benefits
Compensation and employee benefits expense increased by $5.5 million, or 0.5%, to $1,132.6 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 $6.7 million, or 3.6%, to $192.8 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 19.4%, to $23.6 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 $19.0 million, or 20.4%, to $74.1 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 1.3%, to $121.6 million for the year ended December 31, 2020
as compared to the year ended December 31, 2019.
113
Selling and Promotion
Selling and promotion expense decreased by $43.6 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.
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 Revolving Credit Agreement.
Other Expenses
Other expenses decreased by $29.6 million, or 25.0%, to $89.0 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 addition, our consolidated effective tax rate
can vary from period-to-period depending on, among other factors, the geographic and business mix of our earnings.
114
Net Income (Loss) Attributable to Noncontrolling Interest in Subsidiaries
Net income (loss) attributable to noncontrolling interest in subsidiaries decreased by $17.1 million, or 74.4%, to
$5.9 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.
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, 2021
September
30, 2021
June 30,
2021
March 31,
2021
December
31, 2020
September
30, 2020
June 30,
2020
March 31,
2020
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
Less: Net income (loss)
attributable to noncontrolling
interest in subsidiaries
Net income (loss) available
to common stockholders
$ 349,896 $ 367,016 $ 389,768 $ 435,220 $ 377,146 $ 352,027 $ 382,640 $ 455,855
99,453 113,311
5,521
6,562
19,398
20,139
4,161
6,536
4,941
3,776
461,591 473,747 512,450 567,576 479,426 455,042 519,106 603,187
65,182
8,814
21,523
2,418
5,078
73,004
3,356
24,137
4,442
6,756
73,687
4,857
20,860
(783)
3,659
81,997
4,245
21,602
11,455
3,383
98,763
3,785
21,986
3,038
4,784
73,997
3,470
22,238
3,042
3,984
434,807 257,604 270,586 308,343 258,866 244,648 283,949 345,094
85,889
78,490
58,290
33,495
80,515
33,007
27,819
42,204
520,696 336,094 328,876 341,838 339,381 277,655 311,768 387,298
51,498
5,527
20,090
30,530
18,723
45,924
7,728
15,755
30,097
5,942
46,724
8,456
14,813
27,611
12,356
47,652
5,335
19,994
30,538
6,673
47,763
5,028
18,233
30,481
6,896
47,159
4,518
20,029
30,776
8,618
46,049
5,674
16,836
29,305
9,586
48,390
5,382
16,206
29,810
7,488
16,563
16,061
16,465
19,277
17,506
17,570
679,745 500,801 496,736 500,933 504,839 444,066 474,613 568,019
12,933
19,665
28,367
13,520
17,625
21,508
13,646
21,811
21,600
14,308
18,680
23,772
15,908
16,735
24,614
17,929
17,853
16,037
312,941
92
(92)
—
403
(9)
—
—
2,101
7,862
1,816
4,513
1,323
1,924
1,466
5,406
1,354
1,687
1,527
4,779
1,119
1,129
1,023
(6,015)
322,904
6,421
3,155
6,872
3,444
6,297
2,248
(4,992)
104,750
(20,633)
18,869
73,515
(21,969)
17,273
46,741
30,176
15,957
(6,729)
(1,191)
$ 88,793 $ (13,941) $ 20,060 $ 58,576 $ (15,240) $
14,939
(6,692)
8,558
8,599
10,875
8,715 $ 38,142 $ 19,301
12,340
(2,539)
3,820
15,860
(11,211)
(135)
10,986
6,216
$ 76,453 $ (11,402) $ 16,240 $ 42,716 $
(4,029) $
8,850 $ 27,156 $ 13,085
115
The table below details our brokerage revenues by product category for the indicated periods (in thousands):
December 31,
2021
September 30,
2021
June 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
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
$ 131,732
72,112
$ 128,508
72,976
$ 136,474
72,807
$ 161,793
83,433
$ 124,495
73,213
$ 119,325
73,281
$ 133,034
74,393
$ 167,240
94,366
71,527
65,969
61,671
19,889
74,328
58,983
54,715
51,503
74,735
72,609
60,825
54,315
75,868
90,047
70,462
52,380
71,706
68,882
63,718
48,819
65,871
68,053
47,410
43,269
71,326
95,780
61,777
45,783
83,738
97,189
81,797
44,836
$ 422,900
$ 441,013
$ 471,765
$ 533,983
$ 450,833
$ 417,209
$ 482,093
$ 569,166
31.1 %
17.1
29.1 %
16.5
28.9 %
15.4
30.3 %
15.6
27.6 %
16.2
28.6 %
17.6
27.6 %
15.4
29.4 %
16.6
16.9
15.6
14.6
4.7
16.9
13.4
12.4
11.7
15.8
15.4
12.9
11.6
14.2
16.9
13.2
9.8
15.9
15.3
14.2
10.8
15.8
16.3
11.3
10.4
14.8
19.9
12.8
9.5
14.6
17.1
14.4
7.9
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
$ 345,681
77,219
$ 367,992
73,021
$ 396,480
75,285
$ 448,350
85,633
$ 387,305
63,528
$ 358,418
58,791
$ 423,697
58,396
$ 513,101
56,065
$ 422,900
$ 441,013
$ 471,765
$ 533,983
$ 450,833
$ 417,209
$ 482,093
$ 569,166
81.7 %
18.3
83.4 %
16.6
84.0 %
16.0
84.0 %
16.0
85.9 %
14.1
85.9 %
14.1
87.9 %
12.1
90.1 %
9.9
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
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 business. 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, 2021 were $3.3 billion, a decrease of 15.5% as compared to December 31, 2020. The decrease in total
assets was driven by a decrease in Cash segregated under regulatory requirements as well as Accrued commissions and other
receivables, net primarily due to the Insurance Business Disposition. 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,
2021 of $594.8 million. See “Liquidity Analysis” below for a further discussion of our liquidity. Our Securities owned were $40.8
million as of December 31, 2021, compared to $58.6 million as of December 31, 2020. Our Marketable securities were $0.4
million as of December 31, 2021 compared to $0.3 million as of December 31, 2020. We had no Repurchase agreements as of
December 31, 2021 and 2020. Further, we did not have any Securities loaned or Reverse repurchase agreements as of
December 31, 2021 and 2020.
116
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, 2021 and 2020, 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, 2021 and 2020, 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. 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 financing of fails. 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 growth and to 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 our costs of borrowing. 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, technology professionals
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, potentially reducing our access to the capital markets or increasing our cost of capital.
As discussed above, our liquidity remains strong at $594.8 million as of December 31, 2021, which reflects, gross cash
proceeds received for the Insurance Business Disposition, ordinary movements in working capital, repurchases of BGC Class A
common stock and LPUs, cash paid with respect to employee bonuses, tax payments, our continued investment in Fenics Growth
Platforms, and the maturity of the 5.125% Senior Notes paid in full.
On November 1, 2021, BGC closed the sale of its Insurance brokerage business to the Ardonagh Group for gross
proceeds of $534.9 million, subject to limited post-closing adjustments. The investment in the Insurance brokerage business
generated an internal rate of return of 21.2% for our shareholders. The proceeds from the Insurance Business Disposition provides
117
us with significant resources to continue repurchasing shares and to accelerate Fenics growth. Since the announced sale of the
Insurance brokerage business in May 2021, BGC has repurchased and redeemed 71.5 million shares of BGC Class A common
stock and LPUs as of December 31, 2021. In addition, a portion of these proceeds was used to fully repay the $300.0 million
outstanding borrowings under the Company's Revolving Credit Agreement on November 1, 2021, which had been borrowed
during the year. This repayment along with the maturity of the 5.125% Senior Notes, which were paid in full on May 27, 2021,
reduced our outstanding Notes payable and other borrowings by $263.1 million as of December 31, 2021 compared to the prior
year.
On February 15, 2022, our Board declared a $0.01 dividend for the fourth quarter of 2021. Additionally, BGC Holdings
continues to have reduced 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 2022 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. The Board will reevaluate whether to increase the dividend
in the first quarter of 2022.
Notes Payable, Other and Short-term Borrowings
Unsecured Senior Revolving Credit Agreement
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 November 1, 2021, the Company repaid in full the $300.0 million borrowings outstanding under the
Revolving Credit Agreement, which had been borrowed during the year. As of December 31, 2021 and 2020, there were no
borrowings outstanding under the new unsecured Revolving Credit Agreement. The average interest rate on the outstanding
borrowings was 2.09% and 2.88% for the years ended December 31, 2021 and 2020, respectively. We may draw down on the
Revolving Credit Agreement to provide flexibility in the normal course to meet ongoing operational cash needs, and other general
corporate purposes 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 $594.8 million as of December 31, 2021, as discussed
below.
5.125% Senior Notes
On May 27, 2016, we issued an aggregate of $300.0 million principal amount of 5.125% Senior Notes, which matured
on May 27, 2021. The 5.125% Senior Notes were general senior unsecured obligations of the Company. The 5.125% Senior Notes
bore 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 and ending on the maturity date. Prior to maturity, 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. Cantor tendered $15.0 million of such senior notes in the tender offer, and did not
hold such notes as of December 31, 2021.
118
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.
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. On May 27, 2021, we repaid the remaining $256.0 million principal plus
accrued interest on our 5.125% Senior Notes.
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. 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, 2021 was $447.9 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 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 $297.7 million as of December 31, 2021.
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.
119
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, 2021. 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. The carrying value of the 4.375%
Senior Notes was $297.5 million as of December 31, 2021.
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 May 31, 2017, we entered into a secured loan arrangement of $29.9 million under which we pledged certain fixed
assets as security for a loan. This arrangement incurs interest at a fixed rate of 3.44% per year and matured on May 31, 2021,
therefore, there were no borrowings outstanding as of December 31, 2021. As of December 31, 2020, we had $4.0 million
outstanding related to this secured loan arrangement. The book value of the fixed assets pledged as of December 31, 2020 was
$0.8 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, 2021 and 2020, the Company had $5.9 million and $9.6 million, respectively, outstanding related to this secured
loan arrangement. The book value of the fixed assets pledged as of December 31, 2021 and 2020, was $0.1 million and $1.2
million, respectively.
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, 2021 and 2020, we had $3.8 million and $6.3 million, respectively, outstanding related to this secured loan
arrangement. The book value of the fixed assets pledged as of December 31, 2021 and 2020, was $1.0 million and $2.7 million,
respectively.
Weighted-average Interest Rate
For the years ended December 31, 2021 and 2020, 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 4.62% and 4.71%, respectively.
Short-term Borrowings
On August 22, 2017, we entered into a committed unsecured loan agreement with Itau Unibanco S.A. The credit
agreement provided for short-term loans of up to $3.6 million (BRL 20.0 million). The agreement was automatically renewed
every 180 days until August 13, 2021, when it was repaid in full. Borrowings under this agreement bore interest at the Brazilian
Interbank offering rate plus 4.75%. As of December 31, 2021 there were no borrowings outstanding under the facility. As of
December 31, 2020, there were $3.8 million (BRL 20.0 million) of borrowings outstanding under the facility. As of December 31,
2021, the interest rate was 14.0%.
120
On August 23, 2017, we entered into a committed unsecured credit agreement with Itau Unibanco S.A. The credit
agreement provided for an intra-day overdraft credit line up to $9.0 million (BRL 50.0 million). On August 20, 2021, the
agreement was renegotiated, increasing the credit line to $10.8 million (BRL 60.0 million). The maturity date of the agreement
is March 9, 2022. This agreement bears a fee of 1.75% per year. As of December 31, 2021 and December 31, 2020, there were
no borrowings outstanding under this agreement
On January 25, 2021, we entered into a committed unsecured loan agreement with Banco Daycoval S.A., which provided
for short-term loans of up to $1.8 million (BRL 10.0 million) and was renegotiated on June 1, 2021. The amended agreement
provides for short-term loans of up to $3.6 million (BRL 20.0 million). The maturity date of the agreement is January 17, 2023.
Borrowings under this agreement bear interest at the Brazilian Interbank offering rate plus 3.66%. As of December 31, 2021,
there were $3.6 million (BRL 20.0 million) of borrowings outstanding under the agreement. As of December 31, 2021, the interest
rate was 12.90%.
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, 2022, 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, 2021, there were no borrowings by BGC or Cantor outstanding under this Agreement.
CREDIT RATINGS
As of December 31, 2021, 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 downgrade 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
121
the key components of our liquidity analysis. Our cash, cash flows, and financing arrangements are sufficient to support our cash
requirements for the next twelve months and beyond.
We consider the following in analyzing changes in our liquidity.
Our liquidity analysis includes a comparison of our Consolidated net income (loss) adjusted for 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.
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 $28.6 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, 2021 is $20.2 million.
As of December 31, 2021, the Company and its consolidated subsidiaries had $553.6 million of Cash and cash
equivalents. In addition, the Company and its consolidated subsidiaries also held securities of $41.2 million within their Liquidity
position as of December 31, 2021.
Discussion of the year ended December 31, 2021
The table below presents our Liquidity Analysis as of December 31, 2021 and December 31, 2020:
(in thousands)
Cash and cash equivalents
Securities owned
Marketable securities
Repurchase agreements
Total
December 31, 2021 December 31, 2020
$
$
553,598 $
40,838
406
—
594,842 $
596,291
58,572
349
—
655,212
The $60.4 million decrease in our liquidity position from $655.2 million as of December 31, 2020 to $594.8 million as
of December 31, 2021 was primarily related to 72.9 million repurchases of Class A common stock and LPUs, cash paid with
respect to annual employee bonuses, tax payments, our continued investment in Fenics Growth Platforms, and the maturity of the
5.125% Senior Notes paid in full, partially offset by the gross cash proceeds received for the Insurance Business Disposition,
earnings, and other ordinary movements in working capital.
122
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
$
$
596,291 $
58,572
349
655,212 $
419,328
57,525
326
477,179
__________________________
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.
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 collateral acceptable to Cantor in the amount reasonably requested by Cantor under the clearing capital agreement
or Cantor will post cash or other collateral 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, 2021.
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.
123
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; in Philippines GFI Group (Philippines) Inc. 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, which result in a
significant reduction in their regulatory capital position without prior notification or approval from their principal regulator. See
Note 22—“Regulatory Requirements” to our consolidated financial statements for further details on our regulatory requirements.
As of December 31, 2021, $667.2 million of net assets were held by regulated subsidiaries. As of December 31, 2021,
these subsidiaries had aggregate regulatory net capital, as defined, in excess of the aggregate regulatory requirements, as defined,
of $326.9 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. In 2020, the
introducing broker guarantees were moved from CF&Co to Mint Brokers for the firm's stand alone and foreign NFA registered
introducing brokers.
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 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.
124
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 and equivalence arrangements between the U.K. and EU member
states (for further information see "Overview and Business Environment—Brexit" herein).
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
__________________________
1
Year Ended December 31,
2020
2021
307,915
323,018
58,025
2,167
1,789
417
—
(68,253)
(140)
317,023
13,190
1,134
391
345
45
(2)
—
323,018
Included in redemptions/exchanges of limited partnership interests for the year ended December 31, 2021, are 27.5 million shares of
BGC Class A common stock granted in connection with the cancellation of 29.7 million LPUs. Included in redemption/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. 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, 2021 and
2020. As of December 31, 2021 and 2020, there were 45.9 million shares of BGC Class B common stock outstanding.
125
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 3, 2021, the Board and Audit Committee increased
the Company’s share repurchase and unit redemption authorization to $400.0 million, which may include purchases from Cantor,
its partners or employees or other affiliated persons or entities. As of December 31, 2021, the Company had $191.8 million
remaining from its share repurchase and unit redemption authorization. From time to time, the Company may actively continue
to repurchase shares and/or redeem units.
The table below represents 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, 2021 were as follows (in thousands, except for weighted-average price data):
Period
Redemptions1
January 1, 2021—March 31, 2021
April 1, 2021—June 30, 2021
July 1, 2021—September 30, 2021
October 1, 2021—December 31, 2021
Total Redemptions
Repurchases2
January 1, 2021—March 31, 2021
April 1, 2021—June 30, 2021
July 1, 2021—September 30, 2021
October 1, 2021—December 31, 2021
Total Repurchases
Total Redemptions and Repurchases
__________________________
1
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
th P
U d
20 $
4,715
73
38
4,846 $
965 $
16,542
24,433
26,313
68,253
73,099 $
4.40
5.82
5.14
5.37
5.80
4.56
6.25
5.19
4.97
5.35
5.38 $
191,809
During the year ended December 31, 2021, the Company redeemed 4.7 million LPUs at an aggregate redemption price of $27.5
million for a weighted-average price of $5.83 per unit and 0.1 million FPUs at an aggregate redemption price of $0.6 million for a
weighted-average price of $4.86 per unit. 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. The table above does not include units
redeemed/cancelled in connection with the grant of 27.5 million shares and 9.5 million shares of BGC Class A common stock during
the years ended December 31, 2021 and 2020, respectively, nor the limited partnership interests exchanged for 32.2 million and 3.7
million shares of BGC Class A common stock during the years ended December 31, 2021 and 2020, respectively.
2
During the year ended December 31, 2021, the Company repurchased 68.3 million shares of BGC Class A common stock at an
aggregate price of $365.4 million for a weighted-average price of $5.35 per share. 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.
The weighted-average share counts, including securities that were anti-dilutive for our earnings per share calculations,
for the three months and year ended December 31, 2021 were as follows (in thousands):
126
Common stock outstanding1
Partnership units2
RSUs (Treasury stock method)
Other
Total3
Three Months Ended
December 31, 2021
Year Ended
December 31, 2021
370,476
132,841
4,399
1,437
509,153
379,215
155,356
4,074
1,375
540,020
__________________________
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, 2021, the weighted-average number shares of BGC Class A common stock was 324.6 million and Class B shares was
45.9 million. For the year ended December 31, 2021, the weighted-average number shares of BGC Class A common stock was 333.3
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, 2021, approximately 0.1 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, 2021 included, on a weighted-average basis, approximately 0.1 million RSUs. For the year ended December 31, 2021,
approximately 0.1 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, 2021 included, approximately 0.1 million
RSUs. As of December 31, 2021, approximately 36.4 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, 2021.
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, 2021
362,907
127,301
4,097
3,196
497,501
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 34.6 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 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 10.3 million shares of BGC Class B common stock to Cantor and 0.7 million 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 23.6 million shares
127
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, 2021, 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.
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.
128
Registration Statements
We had 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 (the "March 2018 Form S-3"). On March 9, 2018, we entered into the March 2018 Sales Agreement, pursuant
to which we could 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 could 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. The March 2018
Form S-3 and the March 2018 Sales Agreement expired in September 2021. As of the date of expiration, we had 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
remained unsold by us under the March 2018 Sales Agreement. For additional information on the Company’s CEO Program sales
agreements, see Note 14—“Related Party Transactions” to our consolidated financial statements in Part 8, Item II of this Annual
Report on Form 10-K. On March 8, 2021, we filed a replacement CEO Program shelf registration statement on Form S-3, which
has not yet been declared effective, with respect to the issuance and sale of up to an aggregate of $300.0 million of shares of BGC
Class A common stock from time to time on a delayed or continuous basis.
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
replacement CEO Program shelf registration statement on Form S-3, which has not yet been declared effective.
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, 2021, we have issued
an aggregate of 16.0 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, 2021, 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, 2021, we have issued 0.8 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 November 22, 2021, at our Annual Meeting of Stockholders, our
stockholders approved our Equity Plan to increase from 400 million to 500 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, subject
to adjustment, and to remove the annual per-participant limit of 15 million awards that may be granted under the Plan. As of
December 31, 2021, the limit on the aggregate number of shares authorized to be delivered allowed for the grant of future awards
relating to 164.5 million shares of BGC Class A common stock.
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
129
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, 2021, the Company has issued 0.5 million shares of BGC Class A common stock, 0.2 million of
RSUs, and paid $30.4 million in cash related to such contingent payments.
As of December 31, 2021, 1.8 million shares of BGC Class A common stock, 0.1 million RSUs, and $20.9 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, as well as 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
were 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.
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. On February 11, 2021,
following the close of discovery, the Company and the independent directors of the Board filed motions for summary judgment
seeking dismissal of the case based on the discovery record, which plaintiffs opposed. Argument was held on defendants’
summary judgment motions on June 22, 2021. On September 20, 2021, the Court partially granted the summary judgment
motions, dismissing directors Stephen Curwood and Linda Bell and permitting the trial to move forward against the remaining
defendants. A trial was held before Vice Chancellor Lori Will on October 11, 2021, which concluded on October 15, 2021. The
parties will submit post-trial briefing, after which the Court is expected to rule on all pending matters in or around the second
quarter of 2022.
The Company continues to believe that the claims against the defendants are without merit and will continue to defend
against them vigorously. However, as in any litigated matter, the outcome cannot be determined with certainty.
130
PURCHASE OF LIMITED PARTNERSHIP INTERESTS
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 Cantor units had the Company
redeemed the FPUs. If Cantor acquires any Cantor units as a result of the purchase or redemption by BGC Holdings of any FPUs,
Cantor will be entitled to the benefits (including distributions) of such units it acquires from the date of termination or bankruptcy
of the applicable Founding/Working Partner. In addition, 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).
On March 31, 2021, Cantor purchased from BGC Holdings an aggregate of 1,149,684 Cantor units for aggregate
consideration of $2,104,433 as a result of the redemption of 1,149,684 FPUs, and 1,618,376 Cantor units for aggregate
consideration of $3,040,411 as a result of the exchange of 1,618,376 FPUs. Each Cantor unit in BGC Holdings held by Cantor is
exchangeable by Cantor at any time on a one-for-one basis (subject to adjustment) for shares of BGC Class A common stock.
On October 28, 2021, Cantor purchased from BGC Holdings an aggregate of 460,929 Cantor units for an aggregate
consideration of $715,605 as a result of the redemption of 460,929 FPUs, and 1,179,942 Cantor units for aggregate consideration
of $2,033,838 as a result of the exchange of 1,179,942 FPUs. Each Cantor unit in BGC Holdings held by Cantor is exchangeable
by Cantor at any time on a one-for-one basis (subject to adjustment) for shares of BGC Class A common stock.
As of December 31, 2021, there were no FPUs in BGC Holdings remaining, which BGC Holdings had the right to
redeem or exchange and with respect to which Cantor will have the right to purchase an equivalent number of Cantor units
following such redemption or exchange.
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, 2021 and 2020, the Company recorded expenses
of $0.1 million 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 paid a fixed rent amount of $1.1
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million in addition to all operating and tax expenses attributable to the lease. In May 2021, the sublease was amended to provide
for a rate of $15 thousand per month based on the size of utilized space, with terms extending on a month-to-month basis. In
connection with the sublease, BGC U.S. OpCo paid $0.5 million and $0.8 million for the years ended December 31, 2021 and
2020, respectively.
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 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, 2021, 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 14—“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 April 8, 2021, the Compensation Committee approved the repurchase by the Company on April 23, 2021 of 123,713
exchangeable BGC Holdings LPU-NEWs held by Mr. Windeatt at the price of $5.65, which was the closing price of our Class A
common stock on April 23, 2021, and the redemption of 28,477 exchangeable BGC Holdings PLPU-NEWs held by Mr. Windeatt
for $178,266, less applicable taxes and withholdings.
On April 8, 2021, the Compensation Committee approved the repurchase by the Company of the remaining 62,211
exchangeable BGC Holdings LPUs held by Mr. Windeatt that were granted exchangeability on March 2, 2020 at the price of
$5.38, the closing price of Class A common stock on April 8, 2020.
On April 28, 2021, the Compensation Committee approved an additional monetization opportunity for Mr. Merkel.
Effective April 29, 2021, 108,350 of Mr. Merkel’s 273,612 non-exchangeable BGC Holdings PSUs were redeemed for zero,
101,358 of Mr. Merkel’s 250,659 non- exchangeable BGC Holdings PPSUs were redeemed for a cash payment of $575,687, and
108,350 shares of BGC Class A common stock were issued to Mr. Merkel. On April 29, 2021, the 108,350 shares of BGC Class
A common stock were repurchased from Mr. Merkel at the closing price of our Class A common stock on that date, under our
stock buyback program.
132
On June 28, 2021, (i) the Company exchanged 520,380 exchangeable LPUs held by Mr. Lutnick at the price of $5.86,
which was the closing price of the Company's Class A common stock on June 28, 2021, for 520,380 shares of BGC Class A
common stock, less applicable taxes and withholdings, resulting in the delivery of 365,229 net shares of BGC Class A common
stock to Mr. Lutnick, and in connection with the exchange of these 520,380 exchangeable LPUs, 425,765 exchangeable PLPUs
were redeemed for a cash payment of $1,525,705 towards taxes; (ii) 88,636 non-exchangeable LPUs were redeemed for zero,
and in connection therewith the Company issued Mr. Lutnick 88,636 shares of BGC Class A common stock, less applicable taxes
and withholdings, resulting in the delivery of 41,464 net shares of BGC Class A common stock to Mr. Lutnick; and (iii) 1,131,774
H Units held by Mr. Lutnick were redeemed for 1,131,774 HDUs with a capital account of $7,017,000, and in connection with
the redemption of these 1,131,774 H Units, 1,018,390 Preferred H Units were redeemed for $7,983,000 for taxes.
On December 21, 2021, the Compensation Committee approved a monetization opportunity for Mr. Lutnick. Effective
December 21, 2021, 1,939,896 of Mr. Lutnick’s non-exchangeable BGC Holding PPSUs were redeemed for a payment of
$10,851,803. Mr. Lutnick also elected to redeem all of his 425,766 exchangeable BGC Holdings PPSUs for a payment of
$1,525,706. In connection with the foregoing, Mr. Lutnick’s 2,011,731 non-exchangeable BGC Holdings PSUs were redeemed
for zero and 2,011,731 shares of BGC Class A common stock were issued to Mr. Lutnick. In addition, 376,651 H Units held by
Mr. Lutnick were redeemed for 376,651 HDUs with a capital account of $2,339,003, and in connection with the redemption of
these 376,651 H Units, 463,969 Preferred H Units were redeemed for $2,661,000 for taxes.
On December 21, 2021, the Compensation Committee approved a monetization opportunity for Mr. Merkel. Effective
December 21, 2021, 90,366 non-exchangeable BGC Holdings PSUs were redeemed for zero, 149,301 of Mr. Merkel’s non-
exchangeable BGC Holdings PPSUs were redeemed for a cash payment of $555,990, and 90,366 shares of BGC Class A common
stock were issued to Mr. Merkel.
On March 2, 2020, the Company granted Stephen M. Merkel 360,065 exchange rights with respect to 360,065 non-
exchangeable PSUs that were previously granted to Mr. Merkel. The resulting 360,065 exchangeable PSUs 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 PPSUs held by Mr. Merkel, for a payment of $1,507,285 for taxes when the PSU units were exchanged. On March
20, 2020, the Company redeemed 185,300 of such 360,065 exchangeable PSUs 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 PSU, 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 PSUs 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 PSUs on March 20, 2020, 122,579
PPSUs were redeemed for $661,303 for taxes. In connection with the redemption of the 174,765 PSUs on July 30, 2020, 142,989
PPSUs 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
133
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.
MARKET SUMMARY
The following table provides certain volume and transaction count information for the quarterly periods indicated:
September 30,
2021
December 31,
2021
December 31,
2020
March 31,
2021
June 30,
2021
$
$
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
10,908 $
61,846
10,059 $
62,859
10,049 $
62,345
11,605 $
68,113
8,736
59,165
72,754 $
72,918 $
72,394 $
79,718 $
67,901
3,816
1,205
3,366
1,070
3,212
1,113
3,746
1,348
2,895
1,129
Trading days
_________________________
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.
5,021
64
4,436
64
4,325
63
5,094
61
4,024
64
134
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 $42.6 trillion for the year ended December 31, 2021, compared
to $32.4 trillion for the year ended December 31, 2020. Our Hybrid volume for the year ended December 31, 2021 was $255.2
trillion, compared to $263.7 trillion for the year ended December 31, 2020.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes certain of our contractual obligations at December 31, 2021 (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
_________________________________
$
$
1,059,642 $
221,937
122,034
3,584
505
20,231
21,776
1,449,709 $
6,391 $
32,288
49,906
3,584
484
2,709
10,038
105,400 $
753,251 $
51,751
59,732
—
21
7,385
11,738
883,878 $
300,000 $
34,684
12,396
—
—
10,137
—
357,217 $
—
103,214
—
—
—
—
—
103,214
1
2
3
4
5
6
Long-term debt and collateralized borrowings reflects long-term borrowings of $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, 2021 was
$447.9 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, 2021 was approximately $297.7 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, 2021 was approximately $297.5 million), $5.9 million of collateralized borrowings due April 8, 2023, and $3.8 million
of collateralized borrowings due April 19, 2023. See Note 18—“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, 2021, the undrawn portion of the committed unsecured Revolving Credit Agreement was $350.0 million.
Short-term borrowings reflects approximately $3.6 million (BRL 20.0 million) of borrowing under the Company’s committed
unsecured loan agreement. See Note 18—“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 $28.6 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, 2021 is $20.2 million.
Other contractual obligations reflect commitments of $10.0 million 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. In addition, as part of the Insurance Business Disposition,
unvested equity and other awards previously granted by BGC to employees of its Insurance brokerage business were converted into
the right to receive a cash payment from BGC; a significant portion of these awards was 50% vested and paid in cash at closing, with
the remaining 50% vesting and to be paid in cash two years after closing. The remaining portion of these awards will have been 100%
vested and paid in cash by two years after the closing. The payments after closing are only made if the applicable employee remains
an employee of the Insurance brokerage business. The remaining portion of these awards is reflected as other contractual obligations,
135
and is recorded as part of “Accounts payable, accrued and other liabilities” in the Company’s consolidated statements of financial
condition.
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business, we enter into arrangements with unconsolidated entities, including variable interest
entities. See Note 15—“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. Management bases its estimates on
historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments, and we evaluate these estimates on an ongoing basis. 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.
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
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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, which 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, 2021, 2020 and 2019, we incurred equity-based compensation expense of $128.1 million,
$85.0 million and $100.9 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, 2021, 2020 and 2019, we incurred equity-based compensation expense related to
these LPUs of $78.6 million, $74.3 million, and $41.7 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, 2021 and 2020 , the aggregate balance of employee loans, net of reserve, was $287.0 million and
$408.1 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
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for the years ended December 31, 2021, 2020 and 2019 was $217.7 million, $67.0 million and $35.7 million, respectively. The
compensation expense related to these loans was included as part of “Compensation and employee benefits” in our consolidated
statements of operations.
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; and changes to these estimates and assumptions, as a result of changing economic and competitive
conditions, could materially affect the determination of fair value and/or impairment.
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 became effective for the Company on January 1, 2020, due to the adoption of the new FASB guidance on credit
losses. The 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. The amount of the allowance is based on significant
estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change.
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” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form
10-K 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.
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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.
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.
There have been no other significant changes to the Company's critical accounting policies and estimates during fiscal
year 2021.
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.
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.
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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 $0.4
million as of December 31, 2021. 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 10—“Marketable Securities” and Note 12—“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.
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
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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
stress tested scenario as the U.S. Dollar strengthening against the Euro and weakening against the British Pound. If as of December
31, 2021, the U.S. Dollar had strengthened against the Euro and weakened against the British Pound by 10%, the currency
movements would have had an aggregate negative impact on our net income of approximately $1.7 million.
Interest Rate Risk
BGC Partners had $1,052.8 million in fixed-rate debt outstanding as of December 31, 2021. 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, 2021, 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, led us to implement operational changes as we executed our business
continuity plan. We took significant steps to protect our employees. A majority of BGC staff members are attending work in the
office several days a week, while working remotely the other part of the week. Unvaccinated employees are required to wear
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masks in common spaces and when not able to maintain six feet of distance. We have deferred some corporate events and
participation in industry conferences. 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.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BGC Partners, Inc. and Subsidiaries
Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019
Reports of Independent Registered Public Accounting Firm and Independent Auditor (PCAOB ID 42)
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
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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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2021, 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, 2021, 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 February 28, 2022 expressed an unqualified 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.
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Accounting for Income Taxes
Description of the Matter As discussed in Notes 3 and 21 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, 2021, the Company recognized a consolidated provision for income taxes of $23.0
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
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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.
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How We Addressed the
Matter in Our Audit
To test the Company’s provision for income taxes and to address the risks associated with the
complexity of 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,
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
New York, New York
February 28, 2022
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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, 2021, 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, BGC Partners, Inc. (the “Company”) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
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, 2021 and 2020, 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, 2021, and the related notes and the financial statement schedule listed in the Index
at Item 15(a)(2) and our report dated February 28, 2022 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
February 28, 2022
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BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except per share data)
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
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 20)
Redeemable partnership interest
Equity
December 31,
2021
December 31,
2020
$
$
$
553,598 $
13,201
40,838
406
782,446
296,423
286,967
190,112
33,039
486,919
207,747
5,237
445,233
3,342,166 $
3,584 $
214,379
656,278
53,764
679,254
1,052,831
2,660,090
596,291
257,115
58,572
349
304,022
739,009
408,142
216,024
38,008
556,211
287,157
11,915
480,427
3,953,242
3,849
220,726
179,721
36,921
1,364,119
1,315,935
3,121,271
18,761
20,674
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 750,000 shares authorized; 435,944 and
373,545 shares issued at December 31, 2021 and December 31, 2020, respectively; and
317,023 and 323,018 shares outstanding at December 31, 2021 and December 31, 2020,
respecti el
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, 2021 and December 31, 2020, convertible
into Class A common stock
Additional paid-in capital
Treasury stock, at cost: 118,921 and 50,527 shares of Class A common stock at December 31,
2021 and December 31, 2020, respectively
Retained deficit
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Noncontrolling interest in subsidiaries
Total equity
Total liabilities, redeemable partnership interest, and equity
$
4,359
3,735
459
2,451,135
(623,734)
(1,171,919)
(40,548)
619,752
43,563
663,315
3,342,166 $
459
2,375,113
(315,313)
(1,280,828)
(28,930)
754,236
57,061
811,297
3,953,242
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
147
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:
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 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
Year Ended December 31,
2020
2021
2019
1,541,900 $
327,761
14,856
89,963
21,977
18,907
2,015,364
1,567,668 $
351,633
25,754
81,920
12,332
17,454
2,056,761
1,271,340
1,132,557
256,164
183,545
1,527,504
188,322
24,030
67,884
117,502
38,048
64,708
69,329
80,888
2,178,215
1,316,102
192,837
23,618
74,072
121,646
38,234
59,376
76,607
89,045
1,991,537
312,941
6,706
19,705
339,352
176,501
23,013
153,488 $
29,481
124,007 $
124,007 $
0.33 $
379,215
173,995 $
0.32 $
540,020
394
5,023
1,580
6,997
72,221
21,303
50,918 $
5,856
45,062 $
45,062 $
0.12 $
361,736
64,787 $
0.12 $
546,848
1,645,818
321,923
29,442
73,166
18,319
15,938
2,104,606
1,127,041
170,625
1,297,666
186,111
19,778
93,071
120,037
81,829
63,617
60,246
118,671
2,041,026
18,421
4,115
30,511
53,047
116,627
49,811
66,816
22,915
43,901
43,901
0.13
344,332
58,871
0.12
472,187
$
$
$
$
$
$
$
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
148
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) attributable to noncontrolling interest
in subsidiaries, net of tax
Comprehensive income (loss) attributable to common stockholders
$
Year Ended December 31,
2020
2019
50,918 $
66,816
2021
153,488 $
(13,747)
301
(13,446)
140,042
6,457
(1,840)
4,617
55,535
27,653
112,389 $
6,301
49,234 $
(86)
(12,928)
(13,014)
53,802
18,538
35,264
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
149
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS—
(Continued)
(in thousands)
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:
Gain on Insurance Business Disposition
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:
Gross proceeds from Insurance Business Disposition
Cash and restricted cash transferred as part of Insurance Business Disposition
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
150
$
$
$
Year Ended December 31,
2020
2021
2019
$
153,488 $
50,918 $
66,816
(312,941)
81,874
217,655
256,164
347
(6,706)
—
(56)
73
3,592
11,246
(11,947)
4,285
(553)
(4,915)
391,606
17,626
(482,669)
(101,314)
(38,571)
8,377
1,543
—
—
17,989
477,083
18,596
106,919
417,185 $
534,916 $
(369,407)
(10,112)
(43,178)
(1,115)
10,029
—
—
—
121,133 $
—
85,422
67,032
183,545
630
(1,126)
(289)
(69)
431
4,187
11,431
(16,549)
4,661
—
2,730
392,954
(1,346)
246,498
44,389
(149,145)
5,465
(20,074)
—
(13,902)
13,752
(236,314)
(37,613)
57,949
302,613 $
— $
—
(30,829)
(54,342)
(1,458)
4,326
(7,871)
14,237
(2,000)
(77,937) $
—
81,868
35,650
170,625
5,879
(4,115)
(3,528)
(3,204)
(18,163)
3,223
4,536
(4,196)
5,622
(139)
(5,682)
335,192
883
389,058
(22,287)
(119,469)
(4,215)
5,239
(986)
(1,238)
(7,231)
(353,281)
36,855
(17,420)
241,100
—
—
(46,665)
(50,833)
(1,715)
3,737
28,261
24,626
—
(42,589)
BGC PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(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 sale of Cantor Units in BGC Holdings
Pre-acquisition cash capital contribution to Futures Exchange Group
Acquisition of Futures Exchange Group
Payments on acquisition earn-outs
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
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
$
$
$
Year Ended December 31,
2020
2021
2019
(566,244) $
298,419
(52,169)
(110,565)
(15,098)
(365,398)
—
7,894
3,845
(9,022)
(11,199)
(819,537) $
(357,789) $
524,396
(63,109)
(47,613)
(60,440)
(6)
—
—
—
—
(8,540)
(13,101) $
(5,388)
993
(332,378)
709,849
(113,673)
(43,270)
(192,442)
(1,236)
(458)
—
—
—
(8,146)
18,246
2,630
(286,607)
212,568
219,387
853,406
640,838
421,451
566,799 $
853,406 $
640,838
43,357 $
41,910 $
66,450
69,572
47,997
51,776
157,547 $
11,388
$
26,146
1,160
7,367
1,578
34,456
3,040
169,065
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.
151
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T
BGC PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Basis of Presentation
Business Overview
BGC Partners, Inc. is a leading global financial brokerage and technology company servicing the global financial
markets. Through brands including BGC, GFI, Sunrise Brokers, Poten & Partners, RP Martin and Fenics, 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 and futures and options. The
Company’s businesses also provide a wide variety of services, including trade execution, connectivity solutions, brokerage
services, clearing, trade 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 includes Fully Electronic and Hybrid 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 also operate under the names Fenics, FMX, BGC Trader, CreditMatch, Fenics Market Data, Fenics GO,
BGC Market Data, kACE2, Capitalab, Swaptioniser, CBID, Lucera and LumeAlfa.
BGC, BGC Partners, BGC Trader, GFI, GFI Ginga, CreditMatch, Fenics, Fenics.com, FMX, Sunrise Brokers, Poten &
Partners, RP Martin, kACE2, Capitalab, Swaptioniser, CBID, Aqua, Lucera and LumeAlfa are trademarks/service marks, and/or
registered trademarks/service marks of BGC Partners, Inc. and/or its affiliates.
The Company’s customers include many of the world’s largest banks, broker-dealers, investment banks, trading firms,
hedge funds, governments, corporations, and investment firms. BGC Partners has dozens of offices globally in major markets
including New York and London, as well as in Bahrain, Beijing, Bermuda, Bogotá, Brisbane, Buenos Aires, Chicago,
Copenhagen, Dubai, Dublin, Frankfurt, Geneva, Hong Kong, Houston, Istanbul, Johannesburg, Madrid, Melbourne, Mexico City,
Miami, Milan, Monaco, Moscow, Nyon, Paris, Rio de Janeiro, Santiago, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tel
Aviv, Tokyo, Toronto, and Zurich.
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.
On November 1, 2021, the Company completed the Insurance Business Disposition (see Note 5—"Divestitures" for
additional information).
On July 30, 2021, the Company completed the purchase of the Futures Exchange Group for a purchase price of
$4.9 million at closing, plus the cash held at closing by the Futures Exchange Group, and an earn-out, only payable out of the
Company's portion of the profits of the Futures Exchange Group, capped at the amount Cantor contributed to the Futures
Exchange Group prior to closing.
The Futures Exchange Group acquisition has been determined to be a combination of entities under common control
that resulted in a change in the reporting entity. Accordingly, the financial results of the Company have been recast to include the
financial results of the Futures Exchange Group in the current and prior periods as if the Futures Exchange Group had always
155
been consolidated. The assets and liabilities of the Futures Exchange Group have been recorded in the Company's consolidated
statements of financial condition at the seller's historical carrying value. The purchase of the Futures Exchange Group was
accounted for as an equity transaction for the period ended September 30, 2021 (the period in which the transaction occurred).
The following tables summarize the impact of the Futures Exchange Group acquisition to the Company's consolidated
statement of financial condition as of December 31, 2020, and to the Company's consolidated statements of operations for the
years ended December 31, 2020 and 2019 (in thousands, except per share amounts):
Total assets
Total liabilities
Total equity
Total liabilities, redeemable partnership interest, and equity
As Previously
Reported
December 31, 2020
Retrospective
Adjustments
As Adjusted
$
$
$
$
3,949,300 $
3,120,397 $
808,229 $
3,949,300 $
3,942 $
874 $
3,068 $
3,942 $
3,953,242
3,121,271
811,297
3,953,242
Year Ended December 31, 2020
Retrospective
Adjustments As Adjusted
As Previously
Reported
Year Ended December 31, 2019
Retrospective
Adjustments As Adjusted
As Previously
Reported
$
$
Income (loss) from operations
before income taxes
Consolidated net income
(loss)
Net income (loss) attributable
to noncontrolling interest in
subsidiaries
Net income (loss) available to
$
common stockholders
Basic earnings (loss) per share $
Diluted earnings (loss) per
share
$
$
77,905 $
(5,684) $
72,221 $
122,064 $
(5,437) $
116,627
56,602 $
(5,684) $
50,918 $
72,253 $
(5,437) $
66,816
7,694 $
(1,838) $
5,856 $
24,691 $
(1,776) $
22,915
48,908 $
0.14 $
(3,846) $
(0.02) $
45,062 $
0.12 $
47,562 $
0.14 $
(3,661) $
(0.01) $
43,901
0.13
0.13 $
(0.01) $
0.12 $
0.13 $
(0.01) $
0.12
Additionally, the consolidated statements of comprehensive income (loss), consolidated statements of cash flows and
consolidated statements of changes in equity have been adjusted to reflect these retrospective adjustments.
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.
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.”
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.
156
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to recognize
an ROU asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of
expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and
qualitative disclosures. Accounting guidance for lessors is mostly unchanged. In July 2018, the FASB issued ASU No. 2018-10,
Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. The
amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease
classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and
certain transition adjustments, among other issues. In addition, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic
842), Targeted Improvements, which provided an additional (and optional) transition method to adopt the new leases standard.
Under the new transition method, a reporting entity would initially apply the new lease requirements at the effective date and
recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption; continue to report
comparative periods presented in the financial statements in the period of adoption in accordance with legacy U.S. GAAP (i.e.,
ASC 840, Leases); and provide the required disclosures under ASC 840 for all periods presented under legacy U.S. GAAP.
Further, ASU No. 2018-11 contains a practical expedient that allows lessors to avoid separating lease and associated non-lease
components within a contract if certain criteria are met. In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic
842), Narrow-Scope Improvements for Lessors, to clarify guidance for lessors on sales taxes and other similar taxes collected
from lessees, certain lessor costs and recognition of variable payments for contracts with lease and non-lease components. In
March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842), Codification Improvements, to clarify certain application
and transitional disclosure aspects of the new leases standard. The amendments address determination of the fair value of the
underlying asset by lessors that are not manufacturers or dealers and clarify interim period transition disclosure requirements,
among other issues. The guidance in ASUs No. 2016-02, 2018-10, 2018-11 and 2018-20 was effective beginning January 1, 2019,
with early adoption permitted; whereas the guidance in ASU No. 2019-01 was effective beginning January 1, 2020, with early
adoption permitted. The Company adopted the above-mentioned 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 25—“Leases” for additional information on the Company’s
leasing arrangements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities. The guidance intends to better align an entity’s risk management activities and financial
reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging
relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting
for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging
instrument and the hedged item in the financial statements. In October 2018, the FASB issued ASU No. 2018-16, Derivatives and
Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a
Benchmark Interest Rate for Hedge Accounting Purposes. Based on concerns about the sustainability of LIBOR, in 2017, a
committee convened by the Federal Reserve Board and the Federal Reserve Bank of New York identified a broad Treasury
repurchase agreement (repo) financing rate referred to as the SOFR as its preferred alternative reference rate. The guidance in
ASU No. 2018-16 adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition
157
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.
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
158
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 13—“Fair Value of Financial Assets and Liabilities” for additional information.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a
Service Contract (a consensus of the FASB Emerging Issues Task Force). The guidance on the accounting for implementation,
setup, and other upfront costs (collectively referred to as implementation costs) applies to entities that are a customer in a hosting
arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in
a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop
or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the
service element of a hosting arrangement that is a service contract is not affected by the guidance in this ASU. BGC adopted the
standard on its effective date beginning January 1, 2020. The adoption of this guidance did not have a material impact on the
Company’s 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.
159
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 December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes. The ASU is part of the FASB’s simplification initiative, and it is expected to reduce cost and complexity related to
accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to the approach
for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred
tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted
changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. BGC
adopted the standard on the required effective date beginning January 1, 2021 on a prospective basis. The adoption of the standard
did not have a material impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity
Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic
321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). These amendments improve previous
guidance by reducing diversity in practice and increasing comparability of the accounting for the interactions between these
codification topics as they pertain to certain equity securities, investments under the equity method of accounting and forward
contracts or purchased options to purchase securities that, upon settlement of the forward contract or exercise of the purchased
option, would be accounted for under the equity method of accounting or the fair value option. BGC adopted the standard on the
required effective date beginning January 1, 2021 on a prospective basis. The adoption of this guidance did not have a material
impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU
makes narrow-scope amendments related to various aspects pertaining to financial instruments and related disclosures by
clarifying or improving the Codification. For the most part, the guidance was effective upon issuance, and the adoption of the
standard did not have a material impact on the Company’s consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements. The standard amends the Codification
by moving existing disclosure requirements to (or adding appropriate references in) the relevant disclosure sections. The ASU
also clarifies various provisions of the Codification by amending and adding new headings, cross-referencing, and refining or
correcting terminology. BGC adopted the standard on the required effective date beginning January 1, 2021 and it was applied
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using a modified retrospective method of transition. The adoption of this guidance did not have an impact on the Company’s
consolidated financial statements.
New Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting. The guidance is designed to provide relief from the accounting analysis and
impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, and borrowings)
necessitated by reference rate reform as entities transition away from LIBOR and other interbank offered rates to alternative
reference rates. This ASU also provides optional expedients to enable companies to continue to apply hedge accounting to certain
hedging relationships impacted by reference rate reform. Application of the guidance is optional and only available in certain
situations. The ASU is effective upon issuance and generally can be applied through December 31, 2022. In January 2021, the
FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this standard are elective and
principally apply to entities that have derivative instruments that use an interest rate for margining, discounting, or contract price
alignment that is modified as a result of reference rate reform (referred to as the “discounting transition”). The standard expands
the scope of ASC 848, Reference Rate Reform and allows entities to elect optional expedients to derivative contracts impacted by
the discounting transition. Similar to ASU No. 2020-04, provisions of this ASU are effective upon issuance and generally can be
applied through December 31, 2022. Management is evaluating and planning for adoption of the new guidance, including forming
a cross-functional LIBOR transition team to determine the Company’s transition plan and facilitate an orderly transition to
alternative reference rates, and continuing its assessment on the Company’s 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 became effective for the Company beginning January 1, 2022 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.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract
Assets and Contract Liabilities from Contracts with Customers. The standard improves the accounting for acquired revenue
contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition
of an acquired contract liability, as well as payment terms and their effect on subsequent revenue recognized by the acquirer. The
ASU requires companies to apply guidance in ASC 606, Revenue from Contracts with Customers, to recognize and measure
contract assets and contract liabilities from contracts with customers acquired in a business combination, and, thus, creates an
exception to the general recognition and measurement principle in ASC 805, Business Combinations. The new standard will
become effective for the Company beginning January 1, 2023, can be applied prospectively for business combinations occurring
on or after the effective date, and early adoption is permitted. Management is currently evaluating the impact of the new standard
on the Company’s consolidated financial statements.
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business
Entities about Government Assistance. The standard requires business entities to make annual disclosures about transactions with
a government they account for by analogizing to a grant or contribution accounting model. The guidance is aimed at increasing
transparency about government assistance transactions that are not in the scope of other U.S. GAAP guidance. The ASU requires
disclosure of the nature and significant terms and considerations of the transactions, the accounting policies used and the effects
of those transactions on an entity’s financial statements. The new standard will become effective for the Company’s financial
statements issued for annual reporting periods beginning on January 1, 2022, can be applied prospectively or retrospectively, and
early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company’s consolidated
financial statements.
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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, 2021 equaled 0.9444.
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.
Limited Partnership Units
Certain BGC employees hold LPUs in BGC Holdings and Newmark Holdings (e.g., REUs, RPUs, PSUs, and PSIs).
Prior to the Separation, certain employees of both BGC and Newmark received LPUs in BGC Holdings. As a result of the
Separation, these employees were distributed LPUs in Newmark Holdings equal to a BGC Holdings LPU multiplied by the
Contribution Ratio. Subsequent to the Separation, BGC employees are only granted LPUs in BGC Holdings, and Newmark
employees are only granted LPUs in Newmark Holdings.
Generally, LPUs receive quarterly allocations of net income, which are cash distributed and generally are contingent
upon services being provided by the unit holder. As prescribed in U.S. GAAP guidance, following the Spin-Off, the quarterly
allocations of net income on BGC Holdings and Newmark Holdings LPUs held by BGC employees are reflected as a component
of compensation expense under “Equity-based compensation and allocations of net income to limited partnership units and FPUs”
in the Company’s consolidated statements of operations, and the quarterly allocations of net income on BGC Holdings LPUs held
by Newmark employees are reflected as a component of “Net income (loss) attributable to noncontrolling interest in subsidiaries”
in the Company’s consolidated statements of operations. From time to time, the Company also issues BGC LPUs as part of the
consideration for acquisitions.
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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, which 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) attributable to noncontrolling interest in subsidiaries” in the Company’s consolidated statements of operations. Cantor units
in BGC Holdings are generally exchangeable for up to 23.6 million shares of BGC Class B common stock.
General
Certain of the limited partnership interests, described above, have been granted exchangeability into shares of BGC or
Newmark Class A common stock, and additional limited partnership interests may become exchangeable into shares of BGC or
Newmark Class A common stock. In addition, certain limited partnership interests have been granted the right to exchange into
or have been exchanged into a partnership unit with a capital account, such as HDUs. HDUs have a stated capital account which
is initially based on the closing trading price of Class A common stock at the time the HDU is granted. HDUs participate in
quarterly partnership distributions and are generally not exchangeable into shares of Class A common stock.
Subsequent to the Spin-Off, limited partnership interests in BGC Holdings held by a partner or Cantor may become
exchangeable for BGC Class A or BGC Class B common stock on a one-for-one basis, and limited partnership interests in
Newmark Holdings held by a partner or Cantor may become exchangeable for a number of shares of Newmark Class A or
Newmark Class B common stock equal to the number of limited partnership interests multiplied by the then-current Exchange
Ratio. Because limited partnership interests are included in the Company’s fully diluted share count, if dilutive, any exchange of
limited partnership interests into shares of BGC Class A or BGC Class B common stock would not impact the fully diluted number
of shares and units outstanding. Because these limited partnership interests generally receive quarterly allocations of net income,
such exchange would have no significant impact on the cash flows or equity of the Company.
Each quarter, net income (loss) is allocated between the limited partnership interests and the Company’s common
stockholders. In quarterly periods in which the Company has a net loss, the loss allocation for FPUs, LPUs and Cantor units in
BGC Holdings is allocated to Cantor and reflected as a component of “Net income (loss) attributable to noncontrolling interest
in subsidiaries” in the Company’s consolidated statements of operations. In subsequent quarters in which the Company has net
income, the initial allocation of income to the limited partnership interests in BGC Holdings is to Cantor and is recorded as “Net
income (loss) attributable to noncontrolling interests in subsidiaries,” to recover any losses taken in earlier quarters, with the
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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.
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.
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.
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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.
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 5—“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
10—“Marketable Securities” and Note 15—“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 23—“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.
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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. The Company sold its Insurance brokerage business on November 1, 2021 (see Note 5—
"Divestitures" for additional information).
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.
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
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model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of
the fair value hierarchy.
See Note 13—“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 10—“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 14—“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 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’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 26—
“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 $9.9 million and $14.0 million as of
December 31, 2021 and 2020, respectively. The allowance is based on management’s estimate and reviewed periodically based
on the facts and circumstances of each outstanding receivable.
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 1983-2021 average
1-year default rate by rating. The Moody’s quarterly updated data is used as well, if deemed appropriate. A significant number of
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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 World 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 an insurance agent and broker, BGC collected premiums from insureds and, after deducting
its commission, remited the premiums to the respective insurers. BGC also collected claims or refunds from insurers on behalf
of insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers were recorded as “Accrued
commissions and other receivables, net”, and the corresponding unremitted insurance premiums and claims held in a fiduciary
capacity were recorded as “Accounts payable, accrued and other liabilities” in the Company’s consolidated statements of financial
condition. The Company sold its Insurance brokerage business on November 1, 2021 (see Note 5—"Divestitures" for additional
information).
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
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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.
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 13—“Fair Value of Financial Assets and
Liabilities” and Note 15—“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.
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 25—“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
169
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, 2021, 2020 and 2019 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, 2021, 2020 and 2019.
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 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 2017, 2009 and 2016, respectively.
The Company has finalized its accounting policy with respect to taxes on Global Intangible Low-Taxed Income (GILTI)
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 Compensation:
The Company accounts for equity-based compensation under the fair value recognition provisions. Equity-based
compensation expense recognized during the period, for equity-based awards with a stated vesting schedule, 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
with a stated vesting schedule is amortized to expense ratably over the awards’ vesting periods. As this 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. In addition, equity-based compensation for LPU awards with
no stated vesting schedule, is recognized at fair value on the date the award is granted exchangeability or is redeemed in
connection with the issuance of shares of common stock.
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
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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.
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) 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, which 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
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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).
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, which 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
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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.
Acquisitions
Futures Exchange Group
On July 30, 2021, the Company completed the purchase of the Futures Exchange Group for a purchase price of
$4.9 million at closing, plus the cash held at closing by the Futures Exchange Group, and an earn-out, only payable out of the
Company's portion of the profits of the Futures Exchange Group, capped at the amount Cantor contributed to the Futures
Exchange Group prior to closing. For additional information, see Note 1—“Organization and Basis of Presentation.”
Algomi
On March 6, 2020, the Company completed the acquisition of Algomi, a software company operating under a SaaS
model that provides technology to bond market participants to improve their workflow and liquidity by data aggregation, pre-
trade information analysis, and execution facilitation.
Other Acquisitions
During the year ended December 31, 2020, the Company completed several smaller acquisitions. The aggregate
consideration paid for these acquisitions was not material to the Company’s consolidated financial statements. There were no
other acquisitions completed by the Company for the year ended December 31, 2021.
Total Consideration
The total consideration for all acquisitions during the year ended December 31, 2021 was approximately $4.9 million in
cash, plus the cash held at closing, for the Futures Exchange Group acquisition, and an earn-out payable out of the Company's
portion of the profits of the Futures Exchange Group, capped at the amount Cantor contributed to the Futures Exchange Group
prior to closing. There was no other consideration paid during the year ended December 31, 2021.
The total consideration for acquisitions during the year ended December 31, 2020 was approximately $9.6 million in
total fair value which was paid in cash. The excess of the consideration over the fair value of the net assets acquired has been
recorded as goodwill of approximately $2.8 million.
Except where otherwise noted, 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.
5.
Divestitures
On November 1, 2021, the Company successfully completed the Insurance Business Disposition and, after closing
adjustments, received $534.9 million in gross cash proceeds, subject to limited post-closing adjustments. As a result of this sale,
the Company recognized a $312.9 million gain, net of banking fees, other professional fees, and compensation expenses, which
is included in “Gain (loss) on divestiture and sale of investments” in the Company's consolidated statements of operations. CF&Co
served as advisor to the Company in connection with the transaction, and as a result, the banking fees included $4.4 million paid
to Cantor upon closing of the transaction. The Company had no significant gains or losses from divestitures or sale of investments
during the year ended December 31, 2020. 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.
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6.
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”).
Basic Earnings Per Share:
The following is the calculation of the Company’s basic EPS (in thousands, except per share data):
Basic earnings (loss) per share:
Net income (loss) available to common stockholders
Basic weighted-average shares of common stock outstanding
Basic earnings (loss) per share
Fully Diluted Earnings Per Share:
Year Ended December 31,
2020
2019
2021
$
$
124,007 $
379,215
0.33 $
45,062 $
361,736
0.12 $
43,901
344,332
0.13
Fully diluted EPS is calculated utilizing net income (loss) available to common stockholders plus net income allocations
to the limited partnership interests as the numerator. The denominator comprises the Company’s weighted-average number of
outstanding BGC shares of common stock, including contingent shares of BGC common stock, and, if dilutive, the weighted-
average number of limited partnership interests, including contingent units of BGC Holdings, and other contracts to issue shares
of BGC common stock, including RSUs. The limited partnership interests generally are potentially exchangeable into shares of
BGC Class A common stock (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings”) and are
entitled to their pro-rata share of earnings after the deduction for the Preferred Distribution; as a result, they are included in the
fully diluted EPS computation to the extent that the effect would be dilutive.
The following is the calculation of the Company’s fully diluted EPS (in thousands, except per share data):
Fully diluted earnings (loss) per share:
Net income (loss) 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
____________________________________
1
Year Ended December 31,
2020
2019
2021
$
$
$
124,007 $
49,988
173,995 $
379,215
155,356
4,074
1,375
540,020
0.32 $
45,062 $
19,725
64,787 $
361,736
183,130
737
1,245
546,848
0.12 $
43,901
14,970
58,871
344,332
126,450
38
1,367
472,187
0.12
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, 2021, 2020 and 2019, approximately 0.1 million, 0.7 million and 53.1 million
potentially dilutive securities, respectively, were excluded from the computation of fully diluted EPS because their effect would
174
have been anti-dilutive. Anti-dilutive securities for the year ended December 31, 2021 included 0.1 million RSUs. Anti-dilutive
securities for the year ended December 31, 2020 included 0.7 million RSUs. Anti-dilutive securities for the year ended
December 31, 2019 included 52.3 million limited partnership interests and 0.8 million RSUs.
As of December 31, 2021, 2020 and 2019, approximately 36.4 million, 27.7 million and 15.8 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.
7.
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, 2021 and 2020 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,
2020
2021
307,915
323,018
58,025
2,167
1,789
417
—
(68,253)
(140)
317,023
13,190
1,134
391
345
45
(2)
—
323,018
1.
Included in redemptions/exchanges of limited partnership interests for the year ended December 31, 2021 are 27.5 million shares of
BGC Class A common stock granted in connection with the cancellation of 29.7 million LPUs. Included in redemption/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. 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, 2021 and
2020. As of December 31, 2021 and 2020, there were 45.9 million shares, respectively, of BGC Class B common stock
outstanding.
CEO Program
On March 9, 2018, the Company filed a CEO program shelf registration statement on Form S-3 (the "March 2018 Form
S-3") and entered into the March 2018 Sales Agreement, pursuant to which the Company could 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 could 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 agreed to pay CF&Co 2% of the gross proceeds from the sale of shares. The Company did not sell any shares under
the March 2018 Sales Agreement during the year ended December 31, 2021. The March 2018 Form S-3 and the March 2018
Sales Agreement expired in September 2021. As of the date of expiration, 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
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CEO Program sales agreements, see Note 14—“Related Party Transactions.” On March 8, 2021, we filed a replacement CEO
Program shelf registration statement on Form S-3, which has not yet been declared effective, with respect to the issuance and sale
of up to an aggregate of $300.0 million of shares of BGC Class A common stock from time to time on a delayed or continuous
basis.
Unit Redemptions and Share Repurchase Program
The Company’s Board and Audit Committee have authorized repurchases of BGC Class A common stock and
redemptions of limited partnership interests or other equity interests in the Company’s subsidiaries. On August 3, 2021, the
Company’s Board and Audit Committee increased the BGC Partners share repurchase and unit redemption authorization to $400.0
million, which may include purchases from Cantor, its partners or employees or other affiliated persons or entities. As of
December 31, 2021, the Company had $191.8 million remaining from its share repurchase and unit redemption authorization.
From time to time, the Company may actively continue to repurchase shares and/or redeem units.
The table below represents 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, 2021 were as follows (in thousands, except for weighted-average price data):
Period
Redemptions1
January 1, 2021—March 31, 2021
April 1, 2021—June 30, 2021
July 1, 2021—September 30, 2021
October 1, 2021—December 31, 2021
Total Redemptions
Repurchases2
January 1, 2021—March 31, 2021
April 1, 2021—June 30, 2021
July 1, 2021—September 30, 2021
October 1, 2021—December 31, 2021
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
th P
U d
20 $
4,715
73
38
4,846 $
965 $
16,542
24,433
26,313
68,253
73,099 $
4.40
5.82
5.14
5.37
5.80
4.56
6.25
5.19
4.97
5.35
5.38 $
191,809
1.
2.
During the year ended December 31, 2021, the Company redeemed 4.7 million LPUs at an aggregate redemption price of $27.5
million for a weighted-average price of $5.83 per unit and 0.1 million FPUs at an aggregate redemption price of $0.6 million for a
weighted-average price of $4.86 per unit. 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 approximately 0.7 million FPUs at an
aggregate redemption price of $1.3 million for a weighted-average price of $1.79 per unit. The table above does not include units
redeemed/cancelled in connection with the grant of 27.5 million shares and 9.5 million shares of BGC Class A common stock during
the years ended December 31, 2021 and 2020, respectively, nor the limited partnership interests exchanged for 32.2 million and 3.7
million shares of BGC Class A common stock during the years ended December 31, 2021 and 2020, respectively.
During the year ended December 31, 2021, the Company repurchased 68.3 million shares of BGC Class A common stock at an
aggregate price of $365.4 million for a weighted-average price of $5.35 per share. During the year ended December 31, 2020, the
Company repurchased approximately 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.
176
Redeemable Partnership Interest
The changes in the carrying amount of FPUs for the years ended December 31, 2021 and 2020 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
8.
Securities Owned
Year Ended December 31,
2020
2021
20,674 $
2,031
(957)
(1,129)
(1,858)
18,761 $
23,638
815
(815)
(1,682)
(1,282)
20,674
$
$
Securities owned primarily consist of unencumbered U.S. Treasury bills held for liquidity purposes. Total securities
owned were $40.8 million and $58.6 million as of December 31, 2021 and 2020, respectively. For additional information, see
Note 13—“Fair Value of Financial Assets and Liabilities.”
9.
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, 2021 and
2020, the Company had not facilitated any Repurchase Agreements for the purpose of financing fails.
10.
Marketable Securities
Marketable securities consist of the Company’s ownership of equity securities carried at fair value in accordance with
ASU 2016-01. The securities had a fair value of $0.4 million and $0.3 million as of December 31, 2021 and 2020, respectively.
These marketable securities are measured at fair value, with any changes in fair value recognized in earnings and
included in “Other income (loss)” in the Company’s consolidated statements of operations. During the years ended December 31,
2021, 2020 and 2019, the Company recognized realized and unrealized net gains of $0.1 million, $0.4 million and $6.7 million,
respectively, related to sales of shares, the mark-to-market adjustments on shares, and any related hedging transactions, when
applicable.
During the year ended December 31, 2021, the Company did not sell any marketable securities. During the year ended
December 31, 2020, the Company sold marketable securities with a fair value of $14.2 million at the time of sale. The Company
did not purchase any marketable securities during the years ended December 31, 2021 and 2020.
Receivables from and Payables to Broker-Dealers, Clearing Organizations, Customers and Related Broker-
11.
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 (see Note 12—“Derivatives”). As of
December 31, 2021 and December 31, 2020, Receivables from and payables to broker-dealers, clearing organizations, customers
and related broker-dealers consisted of the following (in thousands):
177
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,
2021
December 31,
2020
$
$
$
$
640,696 $
118,979
14,386
5,506
2,879
782,446 $
617,018 $
22,679
13,732
2,849
656,278 $
158,976
126,879
14,237
2,999
931
304,022
154,050
12,373
11,838
1,460
179,721
A portion of these receivables and payables are with Cantor. See Note 14—“Related Party Transactions” for additional
information related to these receivables and payables.
Substantially all open fails to deliver, open fails to receive and pending trade transactions as of December 31, 2021 have
subsequently settled at the contracted amounts.
12.
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.
178
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, 2021
December 31, 2020
Assets
Liabilities
Notional
Amounts1
Assets
Liabilities
Notional
Amounts1
$
$
— $
392
2,487
—
2,879 $
— $
419
1,490
940
— $
207,966
571,280
3,914,813
2,849 $ 4,694,059 $
74 $
295
562
—
931 $
— $
215
319
926
4,844
302,141
513,588
6,113,220
1,460 $ 6,933,793
____________________________________
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 14—“Related Party Transactions” for additional
information related to these transactions.
The replacement costs of contracts in a gain position were $2.9 million and $0.9 million, as of December 31, 2021 and
2020, respectively.
The following tables present information about the offsetting of derivative instruments as of December 31, 2021 and
2020 (in thousands):
Assets
Forwards
FX swaps
Futures
Total derivative assets
Liabilities
FX swaps
Forwards
Futures
Total derivative liabilities
December 31, 2021
Gross Amounts
Gross Amounts
Offset
Net Amounts
Presented in the
Statements of
Financial
Condition
$
$
$
$
452 $
3,025
70,497
73,974 $
2,028 $
479
71,437
73,944 $
(60) $
(538)
(70,497)
(71,095) $
(538) $
(60)
(70,497)
(71,095) $
392
2,487
—
2,879
1,490
419
940
2,849
179
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) $
74
295
562
—
931
319
215
926
1,460
There were no additional balances in gross amounts not offset as of December 31, 2021 and 2020, respectively.
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, 2021, 2020
and 2019 (in thousands):
Derivative contract
Futures
FX/commodities options
FX swaps
Forwards
Equity options
Gains (losses)
Year Ended December 31, 2021
2020
2019
2021
$
$
10,902 $
225
182
(43)
—
11,266 $
10,100 $
293
381
97
—
10,871 $
15,316
252
2,340
(3,597)
318
14,629
13.
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.
180
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
Securities owned—Government debt
Securities owned—Equities
Forwards
FX swaps
Futures
Securities owned—Corporate bonds
Total
Futures
FX swaps
Forwards
Contingent consideration
Total
Marketable securities
Securities owned—Government debt
Securities owned—Equities
FX/commodities options
Forwards
FX swaps
Futures
Securities owned—Corporate bonds
Total
Futures
FX swaps
Forwards
Contingent consideration
Total
$
$
$
$
$
$
$
$
Assets at Fair Value at December 31, 2021
Level 1
Level 2
Level 3
Netting and
Collateral
Total
406 $
40,602
235
—
—
—
—
41,243 $
— $
—
—
452
3,025
70,497
1
73,975 $
— $
—
—
—
—
—
—
— $
— $
—
—
(60)
(538)
(70,497)
—
(71,095) $
406
40,602
235
392
2,487
—
1
44,123
Level 1
Liabilities at Fair Value at December 31, 2021
Netting and
Collateral
Level 3
Level 2
— $
—
—
—
— $
71,437 $
2,028
479
—
73,944 $
— $
—
—
29,756
29,756 $
(70,497) $
(538)
(60)
—
(71,095) $
Total
940
1,490
419
29,756
32,605
Assets at Fair Value at December 31, 2020
Level 1
Level 2
Level 3
Netting and
Collateral
Total
349 $
57,918
75
74
—
—
—
—
58,416 $
— $
—
—
—
338
583
41,257
579
42,757 $
— $
—
—
—
—
—
—
—
— $
— $
—
—
—
(43)
(21)
(41,257)
—
(41,321) $
349
57,918
75
74
295
562
—
579
59,852
Total
926
319
215
39,791
41,251
Level 1
Liabilities at Fair Value at December 31, 2020
Netting and
Collateral
Level 3
Level 2
— $
—
—
—
— $
42,183 $
340
258
—
42,781 $
— $
—
—
39,791
39,791 $
(41,257) $
(21)
(43)
—
(41,321) $
181
Level 3 Financial Liabilities
Changes in Level 3 liabilities measured at fair value on a recurring basis for the year ended December 31, 2021 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,
2021
Purchases/
Issuances
Sales/
Settlements
Closing
Balance at
December
31, 2021
Unrealized (gains) Losses for the
period included in:
Net income
(loss) on Level
3 Assets /
Liabilities
Outstanding at
December 31,
2021
Other
comprehensive
income (loss)
on Level 3
Assets /
Liabilities
Outstanding at
December 31,
2021
Liabilities
Accounts payable, accrued and
other liabilities:
Contingent consideration
$
39,791 $ 4,285 $
— $ — $ (14,320) $ 29,756 $
4,285 $
—
_______________________________________
1.
Unrealized gains (losses) are reported in “Foreign currency translation adjustments,” in the Company’s consolidated statements of
comprehensive income (loss).
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
Unrealized
(gains) losses
included in
Other
comprehensiv
e income
(loss)2
Opening
Balance as of
January 1,
2020
Purchases/
Issuances
Sales/
Settlement
s
Closing
Balance at
December
31, 2020
Unrealized (gains) Losses for the
period included in:
Net income
(loss) on Level
3 Assets /
Liabilities
Outstanding
at December
31,
2020
Other
comprehensiv
e income
(loss) on
Level 3
Assets /
Liabilities
Outstanding
at December
Liabilities
Accounts payable, accrued
and other liabilities:
Contingent consideration
_______________________________________
1.
$
42,159 $ 4,661 $
55 $ 2,959 $ (10,043) $ 39,791 $
4,649 $
—
2.
Realized and unrealized gains (losses) are reported in “Other expenses” and "Other income (loss)," as applicable, in the Company’s
consolidated statements of operations.
Unrealized gains (losses) are reported in “Foreign currency translation adjustments,” in the Company’s consolidated statements of
comprehensive income (loss).
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,
2021
Assets
Liabilities
Valuation
Technique
Unobservable Inputs
Discount rate1
Range
6.8%-10.3%
Weighted
Average
9.8%
$
— $
29,756
Present value
of expected
payments
Probability of meeting
earnout and
contingencies
11%-100%
71.8%2
Contingent consideration
_______________________________________
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.
182
Fair Value as of December 31,
2020
Assets
Liabilities
Contingent consideration
$
— $
39,791
Valuation
Technique
Unobservable Inputs
Discount rate1
Range
6.8%-10.3%
Weighted
Average
9.5%
Present value
of expected
payments
Probability of meeting
earnout and
contingencies
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.
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, 2021 and 2020, the present
value of expected payments related to the Company’s contingent consideration was $29.8 million and $39.8 million, respectively.
The undiscounted value of the payments, assuming that all contingencies are met, would be $40.6 million and $53.4 million as
of December 31, 2021 and 2020, 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 $82.0 million and $83.0 million, which were included in “Other assets” in the Company’s consolidated
statements of financial condition as of December 31, 2021 and 2020, 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.
14.
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) 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, 2021, 2020 and 2019, Cantor’s share of the net profit (loss) in Tower Bridge was $2.5
million, $0.8 million and $3.1 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
183
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, 2021, 2020 and 2019, the Company recognized related party revenues of $14.9
million, $25.8 million and $29.4 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, 2021, 2020 and 2019, the Company was charged $81.9 million,
$62.6 million and $59.1 million, respectively, for the services provided by Cantor and its affiliates, of which $57.9 million, $39.4
million and $39.8 million, respectively, were to cover compensation to leased employees for the years ended December 31, 2021,
2020 and 2019. 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.
Purchase of Futures Exchange Group
On July 30, 2021, the Company completed the purchase of the Futures Exchange Group for a purchase price of
$4.9 million at closing, plus the cash held at closing by the Futures Exchange Group, and an earn-out, only payable out of the
Company's portion of the profits of the Futures Exchange Group, capped at the amount Cantor contributed to the Futures
Exchange Group prior to closing. The transaction has been accounted for as a transaction between entities under common control.
As part of the purchase of the Futures Exchange Group, Cantor has agreed to indemnify the Company for certain
expenses arising at the Futures Exchange Group up to a maximum of $1.0 million. As of December 31, 2021, the Company has
recorded assets of $0.4 million in the Company’s consolidated statements of financial condition for this indemnity.
In addition, the Futures Exchange Group received capital contributions from Cantor of $5.3 million, $4.6 million and
$3.9 million, for the years ended December 31, 2021, 2020 and 2019, respectively. These capital contributions were made prior
to BGC's acquisition of the Futures Exchange Group.
Newmark Spin-Off
The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their
respective subsidiaries.
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.”
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.
184
On November 30, 2018, BGC Partners 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 0.9444 shares of Newmark common stock
per Newmark Holdings interest (subject to adjustment).
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
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, 2021 and 2020, the Company had not facilitated any
Repurchase Agreements with 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, 2021, 2020 and 2019, the Company recognized its
share of FX gains of $0.5 million, $1.5 million and $0.3 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, 2021, 2020 and 2019,
the Company recorded revenues from Cantor entities of $0.1 million, $0.1 million and $0.2 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, 2021 and December 31, 2020, the Company did not have any investments in the program.
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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, 2021, 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, 2022, 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, 2021 and 2020, there were no borrowings by BGC or Cantor outstanding under this Agreement. The Company did
not record any interest expense related to the agreement for the year ended December 31, 2021. The Company recorded interest
expense related to the Agreement of $0.4 million for the year ended December 31, 2020. The Company did not record any interest
expense related to the agreement for the year ended December 31, 2019.
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, 2021 and 2020, 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-
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dealers, clearing organizations, customers and related broker-dealers” in the Company’s consolidated statements of financial
condition. As of December 31, 2021 and 2020, the Company had receivables from Freedom of $1.4 million. As of December 31,
2021 and 2020, the Company had $2.5 million and $0.6 million, respectively, in receivables from Cantor related to open derivative
contracts. As of December 31, 2021 and 2020, the Company had $1.5 million and $0.1 million, respectively, in payables to Cantor
related to open derivative contracts. As of December 31, 2021, the Company did not have any receivables from and payables to
Cantor related to fails and pending trades. As of December 31, 2020, the Company had $26.0 million 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, 2021 and 2020, the aggregate balance of employee loans, net, was $287.0 million and $408.1
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, 2021, 2020 and 2019 was $217.7 million, $67.0 million and $35.7 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, 2021, 2020 and 2019 was
$10.0 million, $8.8 million and $4.8 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 7—“Stock Transactions and Unit Redemptions,” the Company entered into the March 2018 Sales
Agreement with CF&Co, as the Company’s sales agent under the CEO Program. During the year ended December 31, 2021, the
Company did not sell any shares of Class A common stock under the March 2018 Sales Agreement. The March 2018 Sales
Agreement expired in September 2021. 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. For the
year ended December 31, 2021, the Company was not charged for services provided by CF&Co related to the CEO program with
CF&Co. For the years ended December 31, 2020 and 2019, the Company was charged approximately $9 thousand and $0.1
million, respectively, for services provided by CF&Co related to the Company's Sales Agreements 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, 2021 and 2020, the Company did not have any Securities loaned transactions with CF&Co. Securities loaned
transactions are included in “Securities loaned” in the Company’s consolidated statements of financial condition.
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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. 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 tendered $15.0 million of such senior notes in the tender offer completed on August
14, 2020, and did not hold such notes as of December 31, 2021.
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. 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. 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 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, 2021, the Company had $50.0 million remaining from its debt repurchase authorization.
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. 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, 2021.
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.
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, 2021, 2020 and 2019, 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 Cantor units had the Company
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redeemed the FPUs. If Cantor acquires any Cantor units as a result of the purchase or redemption by BGC Holdings of any FPUs,
Cantor will be entitled to the benefits (including distributions) of such units it acquires from the date of termination or bankruptcy
of the applicable Founding/Working Partner. In addition, 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).
On March 31, 2021, Cantor purchased from BGC Holdings an aggregate of 1,149,684 Cantor units for aggregate
consideration of $2,104,433 as a result of the redemption of 1,149,684 FPUs, and 1,618,376 Cantor units for aggregate
consideration of $3,040,411 as a result of the exchange of 1,618,376 FPUs. Each Cantor unit in BGC Holdings held by Cantor is
exchangeable by Cantor at any time on a one-for-one basis (subject to adjustment) for shares of BGC Class A common stock.
On October 28, 2021, Cantor purchased from BGC Holdings an aggregate of 460,929 Cantor units for an aggregate
consideration of $715,605 as a result of the redemption of 460,929 FPUs, and 1,179,942 Cantor units for aggregate consideration
of $2,033,838 as a result of the exchange of 1,179,942 FPUs. Each Cantor unit in BGC Holdings held by Cantor is exchangeable
by Cantor at any time on a one-for-one basis (subject to adjustment) for shares of BGC Class A common stock.
As of December 31, 2021, there were no FPUs in BGC Holdings remaining, which BGC Holdings had the right to
redeem or exchange and with respect to which Cantor will have the right to purchase an equivalent number of Cantor units
following such redemption or exchange.
Cantor Aurel Revenue Sharing Agreement
On June 24, 2021, the Board and Audit Committee authorized our French subsidiary, Aurel BGC SAS, to enter into a
revenue sharing agreement pursuant to which Cantor shall provide services to Aurel to support Aurel’s investment banking
activities with respect to special purpose acquisition companies. The services provided by Cantor to Aurel in support of such
SPAC Investment Banking Activities shall include referral of clients, structuring advice, financial advisory services, referral of
investors, deal execution services, and other advisory services in support of Aurel’s SPAC Investment Banking Activities pursuant
to its French investment services license. As compensation, Cantor shall receive a revenue share of 80% of Aurel’s net revenue
attributable to SPAC Investment Banking Activities. The term of the revenue sharing agreement is for an initial period of 12
months, which automatically renews each year unless either party provides notice of termination at least three months prior to
the anniversary. Aurel is also authorized to serve as bookrunner, underwriter or advisor in connection with French SPACs which
are sponsored by Cantor at market rates for such services. For the year ended December 31, 2021, Aurel had $2.5 million of
revenue and $1.7 million of fees payable to Cantor attributable to SPAC Investment Banking Activities, which were included as
part of “Other revenues” and “Fees to related parties”, respectively, in the Company's consolidated statements of operations.
Transactions with Executive Officers and Directors
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 April 8, 2021, the Compensation Committee approved the repurchase by the Company on April 23, 2021 of 123,713
exchangeable BGC Holdings LPU-NEWs held by Mr. Windeatt at the price of $5.65, which was the closing price of the
Company's Class A common stock on April 23, 2021, and the redemption of 28,477 exchangeable BGC Holdings PLPU-NEWs
held by Mr. Windeatt for $178,266, less applicable taxes and withholdings.
On April 8, 2021, the Compensation Committee approved the repurchase by the Company of the remaining 62,211
exchangeable BGC Holdings LPUs held by Mr. Windeatt that were granted exchangeability on March 2, 2020 at the price of
$5.38, the closing price of Class A common stock on April 8, 2020.
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On April 28, 2021, the Compensation Committee approved an additional monetization opportunity for Mr. Merkel.
Effective April 29, 2021, 108,350 of Mr. Merkel’s 273,612 non-exchangeable BGC Holdings PSUs were redeemed for zero,
101,358 of Mr. Merkel’s 250,659 non- exchangeable BGC Holdings PPSUs were redeemed for a cash payment of $575,687, and
108,350 shares of BGC Class A common stock were issued to Mr. Merkel. On April 29, 2021, the 108,350 shares of BGC Class
A common stock were repurchased from Mr. Merkel at the closing price of the Company's Class A common stock on that date,
under the Company's stock buyback program.
On June 28, 2021, (i) the Company exchanged 520,380 exchangeable LPUs held by Mr. Lutnick at the price of $5.86,
which was the closing price of the Company's Class A common stock on June 28, 2021, for 520,380 shares of BGC Class A
common stock, less applicable taxes and withholdings, resulting in the delivery of 365,229 net shares of BGC Class A common
stock to Mr. Lutnick, and in connection with the exchange of these 520,380 exchangeable LPUs, 425,765 exchangeable PLPUs
were redeemed for a cash payment of $1,525,705 towards taxes; (ii) 88,636 non-exchangeable LPUs were redeemed for zero,
and in connection therewith the Company issued Mr. Lutnick 88,636 shares of BGC Class A common stock, less applicable taxes
and withholdings, resulting in the delivery of 41,464 net shares of BGC Class A common stock to Mr. Lutnick; and (iii) 1,131,774
H Units held by Mr. Lutnick were redeemed for 1,131,774 HDUs with a capital account of $7,017,000, and in connection with
the redemption of these 1,131,774 H Units, 1,018,390 Preferred H Units were redeemed for $7,983,000 for taxes.
On December 21, 2021, the Compensation Committee approved a monetization opportunity for Mr. Lutnick. Effective
December 21, 2021, 1,939,896 of Mr. Lutnick's non-exchangeable BGC Holdings PPSUs were redeemed for a payment of
$10,851,803. Mr. Lutnick also elected to redeem all of his 425,766 exchangeable BGC Holdings PPSUs for a payment of
$1,525,706. In connection with the foregoing, Mr. Lutnick's 2,011,731 non-exchangeable BGC Holdings PSUs were redeemed
for zero and 2,011,731 shares of BGC Class A common stock were issued to Mr. Lutnick, In addition, 376,651 H Units held by
Mr. Lutnick were redeemed for 376,651 HDUs with a capital account of $2,339,003, and in connection with the redemption of
these 376,651 H Units, 463,969 Preferred H Units were redeemed for $2,661,000 for taxes.
On December 21, 2021, the Compensation Committee approved a monetization opportunity for Mr. Merkel. Effective
December 21, 2021, 90,366 non-exchangeable BGC Holdings PSUs were redeemed for zero, 149,301 of Mr. Merkel's non-
exchangeable BGC Holdings PPSUs were redeemed for a cash payment of $555,990, and 90,366 shares of BGC Class A common
stock were issued to Mr. Merkel.
On March 2, 2020, the Company granted Stephen M. Merkel 360,065 exchange rights with respect to 360,065 non-
exchangeable PSUs that were previously granted to Mr. Merkel. The resulting 360,065 exchangeable PSUs 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 PSUs 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 PSU, 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 PPSUs held by Mr. Merkel, for a payment of $1,507,285 for taxes when the PSU
units are exchanged. In connection with the redemption of the 185,300 PSUs, 122,579 PPSUs were redeemed for $661,303 for
taxes. On July 30, 2020, the Company redeemed the remaining 174,765 exchangeable PSUs 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 PSUs on July 30, 2020, 142,989 PPSUs 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.
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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.
In connection with the Company’s 2019 executive compensation process, the Company’s executive officers received
certain monetization of prior awards as set forth below.
On December 31, 2019, 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, 2019, 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
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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, 2019, 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, 2019, 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.
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, 2021 and 2020, the remaining
liability associated with this commitment was $1.7 million and $1.6 million, respectively, which is included in “Accounts payable,
accrued and other liabilities” in the Company’s consolidated statements of financial condition. Further, as of December 31, 2021
and 2020 the Company had a liability to the Cantor Fitzgerald Relief Fund for $8.3 million and $1.1 million, respectively,
associated with $7.2 million and $1.1 million of additional expense taken in September of 2021 and 2020, respectively.
Other Transactions
As of December 31, 2021 and 2020, BGC recognized $8.3 million payable to Newmark, which is included as part of
“Payables to related parties” and “Accounts payable, accrued and other liabilities”, respectively, in the Company's consolidated
statements of financial condition. The payable was a result of taxes paid by Newmark on its share of taxable income which were
included as part of the Company's consolidated tax return in the periods prior to the Spin-Off.
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, 2021 and 2020, the Company made $1.1
million and $1.5 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 thousand. The scheduled maturity date on the subordinated loan is September 1, 2023, and the current rate
of interest on the loan is 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.
On October 25, 2016, the Board and Audit Committee authorized the purchase of 9,000 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,
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the Company completed this transaction. As a result of this transaction, the Company owns 100% 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.
The aggregate purchase price paid by the Company to Cantor consisted of approximately $24.2 million in cash plus a
$4.8 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 20% 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, 2021, 2020 and 2019, respectively, Lucera recognized $0.2 million, $0.7 million and $0.4 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 was 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 paid a fixed rent
amount of $1.1 million in addition to all operating and tax expenses attributable to the lease. In May 2021, the sublease was
amended to provide for a rate of $15 thousand per month based on the size of utilized space, with terms extending on a month-
to-month basis. In connection with the sublease, BGC U.S. OpCo paid $0.5 million and $0.8 million for the years ended
December 31, 2021 and 2020, respectively.
15.
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
Percent
Ownership1
25% / 43% $
33 %
45 %
$
December 31,
2021
December 31,
2020
5,110 $
16,784
9,794
1,159
32,847 $
192
8,867
15,119
9,800
3,873
37,659
349
Total equity method and investments carried under measurement
alternative
$
33,039 $
38,008
_______________________________________
1
Represents the Company’s voting interest in the equity method investment as of December 31, 2021 and 2020.
The carrying value of the Company’s equity method investments was $32.8 million and $37.7 million as of December 31,
2021 and 2020, respectively, and is included in “Investments” in the Company’s consolidated statements of financial condition.
The Company recognized gains of $6.7 million, $5.0 million and $4.1 million related to its equity method investments
for the years ended December 31, 2021, 2020 and 2019, 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.
193
For the year ended December 31, 2021, the Company did not recognize any impairment charges relating to existing
equity method investments. 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 year ended December 31, 2019, the Company did not recognize any impairment
charges relating to existing equity method investments. The Company sold part of an equity method investment with a fair value
of $3.8 million during the year ended December 31, 2021. During the years ended December 31, 2020 and 2019, the Company
did not sell any 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,
2020
2019
2021
$
$
108,458 $
82,581
25,877 $
94,744 $
71,241
23,503 $
77,211
61,680
15,531
December 31,
2021
2020
$
$
$
104,855 $
2,603
42,640
150,098 $
2,000
92,114
55,984
150,098 $
89,627
2,806
29,065
121,498
2,000
70,020
49,478
121,498
See Note 14—“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 $0.2 million and
$0.4 million as of December 31, 2021 and 2020, respectively, 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 years ended December 31, 2021, 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, 2021 and 2020. These equity investments are accounted for using the
measurement alternative in accordance with the guidance on recognition and measurement. The Company recognized $0.1 million
of unrealized losses, $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, 2021, 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
194
agreements. The Company’s maximum exposure to loss with respect to the VIEs is its investment in such entities as well as a
credit facility and a subordinated loan.
The following table sets forth the Company’s investment in its unconsolidated VIEs and the maximum exposure to loss
with respect to such entities (in thousands).
December 31, 2021
December 31, 2020
Variable interest entities1
__________________
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, 2021 and 2020, 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.
Investment
Maximum
Exposure to Loss
Investment
$
1,159 $
2,139 $
1,258 $
Maximum
Exposure to Loss
2,238
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 $6.8 million and $7.2 million
as of December 31, 2021 and 2020, 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 $1.3 million and $1.0 million as of December 31,
2021 and 2020, respectively. The Company’s exposure to economic loss on this VIE was $4.5 million and $4.8 million as of
December 31, 2021 and 2020, respectively.
16.
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,
2021
December 31,
2020
$
$
96,472 $
280,540
105,362
482,374
(292,262)
190,112 $
92,577
265,082
121,024
478,683
(262,659)
216,024
Depreciation expense was $23.7 million, $24.1 million and $21.5 million for the years ended December 31, 2021, 2020
and 2019, respectively. Depreciation is included as part of “Occupancy and equipment” in the Company’s consolidated statements
of operations.
The Company has approximately $6.2 million and $5.9 million of asset retirement obligations related to certain of its
leasehold improvements as of December 31, 2021 and 2020, 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 year ended December 31, 2021, 2020 and 2019 software development costs totaling $43.2 million, $54.3 million,
$50.8 million, respectively, were capitalized. Amortization of software development costs totaled $34.9 million, $33.1 million
and $31.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. Amortization of software development
costs is included as part of “Occupancy and equipment” in the Company’s consolidated statements of operations.
Impairment charges of $11.1 million, $9.0 million and $4.5 million were recorded for the years ended December 31,
2021, 2020 and 2019, respectively, related to the evaluation of capitalized software projects for future benefit and for fixed assets
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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.
17.
Goodwill and Other Intangible Assets, Net
The changes in the carrying amount of goodwill for the year ended December 31, 2021 and 2020 were as follows (in
thousands):
Balance at December 31, 2019
Acquisitions
Measurement period adjustments
Cumulative translation adjustment
Balance at December 31, 2020
Sale of Insurance Business
Cumulative translation adjustment
Balance at December 31, 2021
Goodwill
553,745
3,065
(301)
(298)
556,211
(68,978)
(314)
486,919
$
$
$
For additional information on Goodwill, see Note 4—“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 2021 and 2020,
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, 2021
Gross Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-
Average
Remaining Life
(Years)
$
$
173,786 $
23,997
19,820
10,861
17,269
245,733
79,570
2,336
81,906
327,639 $
61,571 $
23,427
18,891
10,265
5,738
119,892
—
—
—
119,892 $
112,215
570
929
596
11,531
125,841
79,570
2,336
81,906
207,747
10.1
0.2
4.9
2.6
9.0
9.9
N/A
N/A
N/A
9.9
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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
$
$
252,241 $
24,025
30,715
10,616
29,566
347,163
79,570
2,408
81,978
429,141 $
77,106 $
20,031
29,596
10,223
5,028
141,984
—
—
—
141,984 $
175,135
3,994
1,119
393
24,538
205,179
79,570
2,408
81,978
287,157
Weighted-
Average
Remaining Life
(Years)
10.4
1.2
5.9
1.6
8.3
9.9
N/A
N/A
N/A
9.9
Intangible amortization expense was $23.3 million, $28.3 million and $29.4 million for the years ended December 31,
2021, 2020 and 2019, 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 2021. There were no
impairment charges for the Company’s definite and indefinite life intangibles for the years ended December 31, 2021, 2020 and
2019. 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, 2021 is as follows (in
millions):
2022
2023
2024
2025
2026
2027 and thereafter
Total
$
$
15.3
14.5
14.5
14.5
14.1
52.9
125.8
18.
Notes Payable, Other and Short-term Borrowings
Notes payable, other and short-term borrowings consisted of the following (in thousands):
Unsecured senior revolving credit agreement
5.125% Senior Notes due May 27, 2021
5.375% Senior Notes due July 24, 2023
3.750% Senior Notes due October 1, 2024
4.375% Senior Notes due December 15, 2025
Collateralized borrowings
Total Notes payable and other borrowings
Short-term borrowings
Total Notes payable, other and short-term borrowings
197
December 31,
2021
December 31,
2020
$
$
— $
—
447,911
297,731
297,547
9,642
1,052,831
3,584
1,056,415 $
—
255,570
446,577
296,903
297,031
19,854
1,315,935
3,849
1,319,784
Unsecured Senior Revolving Credit Agreement
On November 28, 2018, the Company 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 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 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 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 November 1, 2021, the
Company repaid in full the $300.0 million borrowings outstanding under the Revolving Credit Agreement which had been
borrowed during the year. As of both December 31, 2021 and 2020, there were no borrowings outstanding under the Revolving
Credit Agreement. The average interest rate on the outstanding borrowings was 2.09% and 2.88% for the years ended
December 31, 2021 and 2020, respectively. The Company recorded interest expense related to the Revolving Credit Agreement
of $3.6 million, $5.3 million and $10.0 million for the years ended December 31, 2021, 2020 and 2019, 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):
5.125% Senior Notes due May 27, 2021
5.375% Senior Notes due July 24, 2023
3.750% Senior Notes due October 1, 2024
4.375% Senior Notes due December 15, 2025
Total
December 31, 2021
December 31, 2020
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$
$
— $
447,911
297,731
297,547
1,043,189 $
— $
475,857
312,105
320,490
1,108,452 $
255,570 $
446,577
296,903
297,031
1,296,081 $
258,067
486,747
314,031
317,466
1,376,311
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.
5.125% Senior Notes
On May 27, 2016, the Company issued an aggregate of $300.0 million principal amount of 5.125% Senior Notes, which
matured on May 27, 2021. The 5.125% Senior Notes were general senior unsecured obligations of the Company. The 5.125%
Senior Notes bore 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 and ending the maturity date. Prior to maturity, 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. On May 27, 2021, BGC repaid the remaining $256.0 million principal plus accrued interest on its 5.125%
Senior Notes. The Company recorded interest expense related to the 5.125% Senior Notes of $5.8 million, $16.3 million, and
$16.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.
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 Notes). If
198
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, 2021 was $447.9 million. The Company recorded interest expense related to the 5.375% Senior
Notes of $25.5 million, $25.5 million and $25.6 million for the years ended December 31, 2021, 2020 and 2019, 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 are 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 $297.7 million as
of December 31, 2021. The Company recorded interest expense related to the 3.750% Senior Notes of $12.1 million for each of
the years ended December 31, 2021 and 2020. The Company recorded interest expense related to the 3.750% Senior Notes of
$3.2 million for the year ended December 31, 2019.
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 are 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 $297.5 million as of December 31, 2021. The Company recorded
interest expense related to the 4.375% Senior Notes of $13.8 million and $6.5 million for years ended December 31, 2021 and
2020, respectively. The Company did not record interest expense related to the 4.375% Senior Notes for year ended December 31,
2019.
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, 2021 and 2020. The Company did not record any
interest expense related to this secured loan arrangement for the years ended December 31, 2021 and 2020. The Company
recorded interest expense related to this secured loan arrangement of $30 thousand for the year ended December 31, 2019.
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 matured on May 31,
2021; therefore, there were no borrowings outstanding as of December 31, 2021. As of December 31, 2020, the Company had
$4.0 million outstanding related to this secured loan arrangement. The book value of the fixed assets pledged as of December 31,
199
2020 was $0.8 million. The Company recorded interest expense related to this secured loan arrangement of $40 thousand, $0.3
million and $0.5 million for the years ended December 31, 2021, 2020 and 2019, 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, 2021 and December 31, 2020, the Company had $5.9 million and $9.6 million, respectively, outstanding related to
this secured loan arrangement. The book value of the fixed assets pledged as of December 31, 2021 was $0.1 million. The book
value of the fixed assets pledged as of December 31, 2020 was $1.2 million. The Company recorded interest expense related to
this secured loan arrangement of $0.3 million, $0.4 million and $0.4 million for the years ended December 31, 2021,2020 and
2019, respectively.
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, 2021 and December 31, 2020, the Company had $3.8 million and $6.3 million, respectively, outstanding related to
this secured loan arrangement. The book value of the fixed assets pledged as of December 31, 2021 was $1.0 million. The book
value of the fixed assets pledged as of December 31, 2020 was $2.7 million. The Company recorded interest expense related to
this secured loan arrangement of $0.2 million, $0.3 million and $0.3 million for the years ended December 31, 2021, 2020 and
2019, respectively.
Short-term Borrowings
On August 22, 2017, the Company entered into a committed unsecured loan agreement with Itau Unibanco S.A. The
agreement provided for short-term loans of up to $3.6 million (BRL 20.0 million). The agreement was automatically renewed
every 180 days until August 13, 2021, when it was paid in full. Borrowings under this agreement bore interest at the Brazilian
Interbank offering rate plus 4.75%. As of December 31, 2021 there were no borrowings outstanding under this agreement. As of
December 31, 2020, there were $3.8 million (BRL 20.0 million), respectively, of borrowings outstanding under the agreement.
The Company recorded interest expense related to the agreement of $0.2 million, $0.3 million and $0.5 million for the years
ended December 31, 2021, 2020 and 2019, respectively.
On August 23, 2017, the Company entered into a committed unsecured credit agreement with Itau Unibanco S.A. The
agreement provided for an intra-day overdraft credit line up to $9.0 million (BRL 50.0 million). On August 20, 2021, the
agreement was amended, increasing the credit line up to $10.8 million (BRL 60.0 million). The maturity date of the agreement is
March 9, 2022. This agreement bears a fee of 1.75% per year. As of December 31, 2021 and December 31, 2020, there were no
borrowings outstanding under this agreement. The Company recorded bank fees related to the agreement of $0.1 million for each
of the years ended December 31, 2021, 2020 and 2019.
On January 25, 2021, the Company entered into a committed unsecured loan agreement with Banco Daycoval S.A.,
which provided for short-term loans of up to $1.8 million (BRL 10.0 million) and was renegotiated on June 1, 2021. The amended
agreement provides for short-term loans of up to $3.6 million (BRL 20.0 million). The maturity date of the agreement is January
17, 2023. Borrowings under this agreement bear interest at the Brazilian Interbank offering rate plus 3.66%. As of December 31,
2021, there were $3.6 million (BRL 20.0 million) of borrowings outstanding under the agreement. As of December 31, 2021, the
interest rate was 12.90%. The Company recorded interest expense related to the agreement of $0.2 million for the year ended
December 31, 2021. The Company did not record any interest expense related to the agreement for the years ended December 31,
2020 and 2019.
19.
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 November 22, 2021, at the annual meeting of stockholders, the stockholders approved the Equity Plan to increase
from 400 million to 500 million the aggregate number of shares of BGC Class A common stock that may be delivered or cash-
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settled pursuant to awards granted during the life of the Equity Plan. As of December 31, 2021, the limit on the aggregate number
of shares authorized to be delivered allowed for the grant of future awards relating to 164.5 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
$
Year Ended December 31,
2020
2021
128,107 $
34,335
78,596
15,126
84,966 $
14,006
74,282
10,291
2019
100,948
20,491
41,721
7,465
Equity-based compensation and allocations of net income to limited
partnership units and FPUs
$
256,164 $
183,545 $
170,625
_______________________________________
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, 2018
Granted
Redeemed/exchanged units
Forfeited units
Balance at December 31, 2019
Granted
Redeemed/exchanged units
Forfeited units
Balance at December 31, 2020
Granted
Redeemed/exchanged units
Forfeited units
Balance at December 31, 2021
BGC
LPUs
Newmark
LPUs
79,729
47,916
(21,110)
(4,128)
102,407
50,269
(14,642)
(382)
137,652
34,093
(58,832)
(798)
112,115
22,113
662
(1,024)
(7,144)
14,607
—
(1,300)
(105)
13,202
—
(1,881)
(270)
11,051
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.
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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, 2021
BGC
LPUs
Newmark
LPUs
77,610
34,505
112,115
8,316
2,735
11,051
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
$
Year Ended December 31,
2020
84,966 $
2021
128,107 $
2019
100,948
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, 2021, the Exchange Ratio was 0.9444.
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
Year Ended December 31,
2020
2019
2021
23,001
1,078
24,079
16,618
1,164
17,782
17,209
500
17,709
As of December 31, 2021 and 2020, 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 1.3 million and 3.5 million, respectively. As of
December 31, 2021 and 2020, 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 0.4 million and 0.5 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
Year Ended December 31,
2020
2019
2021
$
$
78,535 $
61
78,596 $
73,034 $
1,248
74,282 $
42,060
(339)
41,721
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.
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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 of BGC and Newmark Holdings LPUs
December 31,
2021
December 31,
2020
42,754
235
178,873 $
44,529
353
201,239
$
As of December 31, 2021, there was approximately $100.9 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 2.10 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, 2021, there were 1.3 million outstanding BGC LPUs with a post-termination
payout, with a notional value of approximately $12.4 million and an aggregate estimated fair value of $7.4 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 $0.4 million. 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.
Restricted Stock Units
Compensation expense related to RSUs held by BGC employees is as follows (in thousands):
RSU amortization
Year Ended December 31,
2020
2019
2021
$
15,126 $
10,291 $
7,465
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, 2018
Granted
Delivered
Forfeited
Balance at December 31, 2019
Granted
Delivered
Forfeited
Balance at December 31, 2020
Granted
Delivered
Forfeited
Balance at December 31, 2021
RSUs
Weighted-
Average Grant
Date Fair Value
Fair Value
Amount
929 $
4,283
(464)
(270)
4,478 $
6,618
(1,579)
(557)
8,960 $
6,319
(3,135)
(1,110)
11,034 $
10.83 $
4.61
10.11
5.99
5.25 $
3.25
5.79
4.11
3.75 $
4.23
4.08
4.28
3.87 $
10,058
19,764
(4,692)
(1,614)
23,516
21,506
(9,148)
(2,292)
33,582
26,716
(12,792)
(4,750)
42,756
Weighted-
Average
Remaining
Contractual
Term (Years)
1.75
2.50
2.46
2.27
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
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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, 2021 and 2020, the Company withheld shares of Class
A common stock valued at $4.4 million and $1.9 million to pay taxes due at the time of vesting. As of December 31, 2021, there
was approximately $35.6 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 2.27 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, 2021 and 2020, the aggregate estimated fair value of these acquisition-related LPUs
and RSUs was $8.9 million and $9.4 million, respectively. As of December 31, 2021 and 2020, the aggregate estimated fair value
of the deferred compensation awards was $21.7 million and $23.6 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, 2021, approximately 140 thousand BGC or Newmark restricted shares held by
BGC employees were forfeited in connection with this provision. During the year ended December 31, 2020, there were no BGC
or Newmark restricted shares held by BGC employees were forfeited in connection with this provision. During the years ended
December 31, 2021 and 2020, the Company released the restrictions with respect to 1.1 million and 0.7 million, respectively, of
BGC shares held by BGC employees. As of December 31, 2021 and 2020, there were 2.6 million and 3.7 million of restricted
BGC shares held by BGC employees outstanding, respectively. Additionally, during the years ended December 31, 2021 and
2020, Newmark released the restrictions with respect to 0.5 million and 0.3 million, respectively, of restricted Newmark shares
held by BGC employees. As of December 31, 2021 and 2020, there were 1.2 million and 1.7 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, 2021, 2020 and 2019 was $0.3 million, $0.8 million and $5.9 million respectively. As of December 31, 2021 and
2020, the total liability for the deferred cash compensation awards was $0.8 million and $1.5 million, respectively, which is
included in “Accrued compensation” on the Company’s consolidated statements of financial condition. As of December 31, 2021,
total unrecognized compensation cost related to deferred cash compensation, prior to the consideration of forfeitures, was
approximately $0.1 million and is expected to be recognized over a weighted-average period of 2.28 years.
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20.
Commitments, Contingencies and Guarantees
Contractual Obligations and Commitments
The following table summarizes certain of the Company’s contractual obligations at December 31, 2021 (in thousands):
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
Total
Less Than 1
Year
1-3 Years
3-5 Years
More Than 5
Years
$ 1,059,642 $
221,937
6,391 $ 753,251 $ 300,000 $
34,684
51,751
32,288
—
103,214
122,034
3,584
505
20,231
21,776
—
—
—
—
—
$ 1,449,709 $ 105,400 $ 883,878 $ 357,217 $ 103,214
59,732
—
21
7,385
11,738
12,396
—
—
10,137
—
49,906
3,584
484
2,709
10,038
_______________________________________
1
Long-term debt and collateralized borrowings reflects long-term borrowings of $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, 2021 was
$447.9 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, 2021 was approximately $297.7 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, 2021 was approximately $297.5 million), $5.9 million of collateralized borrowings due April 8, 2023, and $3.8 million
of collateralized borrowings due April 19, 2023. See Note 18—“Notes Payable, Other and Short-term Borrowings” for more
information regarding these obligations, including timing of payments and compliance with debt covenants.
2
3
4
5
6
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, 2021, the undrawn portion of the committed unsecured Revolving Credit Agreement was $350.0 million.
Short-term borrowings reflects approximately $3.6 million (BRL 20.0 million) of borrowing under the Company’s committed
unsecured loan agreement. See Note 18—“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 $28.6 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, 2021 is $20.2 million.
Other contractual obligations reflect commitments of $10.0 million 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. In addition, as part of the Insurance Business Disposition,
unvested equity and other awards previously granted by BGC to employees of its Insurance brokerage business were converted into
the right to receive a cash payment from BGC; a significant portion of these awards was 50% vested and paid in cash at closing, with
the remaining 50% vesting and to be paid in cash two years after closing. The remaining portion of these awards will have been 100%
vested and paid in cash by two years after the closing. The payments after closing are only made if the applicable employee remains
an employee of the Insurance brokerage business. The remaining portion of these awards is reflected as other contractual obligations,
and is recorded as part of “Accounts payable, accrued and other liabilities” in the Company’s consolidated statements of financial
condition.
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.
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As of December 31, 2021, minimum lease payments under these arrangements are as follows (in thousands):
2022
2023
2024
2025
2026
2027 and thereafter
Total
Net Lease
Commitment
$
$
32,288
28,318
23,433
19,014
15,670
103,214
221,937
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 14—“Related Party Transactions”
for more information).
Rent expense for the years ended December 31, 2021, 2020 and 2019 was $49.4 million, $51.1 million and $56.0 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, 2021, 2020 and 2019.
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.
The Company did not issue any contingent shares of BGC Class A common stock, LPUs, RSUs or cash for acquisitions
during the year ended December 31, 2021.
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.
During the year ended December 31, 2021, the contingent cash consideration increased by approximately $3.7 million
to $11.8 million in cash that may be paid due to an increase in probability of payout. 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.
As of December 31, 2021, the Company has issued 0.5 million shares of its Class A common stock, 0.2 million of RSUs
and paid $30.4 million in cash related to contingent payments for acquisitions completed since 2016.
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As of December 31, 2021, 1.8 million shares of the Company’s Class A common stock and 0.1 million RSUs remain to
be issued, and $20.9 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 13—“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.
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, 2021 and 2020, the Company was contingently liable for $1.8 million and $1.0 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
207
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 $0.4 million and $1.2 million in health care
claims as of December 31, 2021 and 2020, 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, 2021, 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.
21.
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.
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,
2020
2019
2021
$
$
(7,267) $
4,940
36,699
588
34,960
(1,000)
(1,515)
(12,098)
2,666
(11,947)
23,013 $
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
The Company had pre-tax income (loss) of $176.5 million, $72.2 million and $116.6 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
208
The Company had pre-tax income (loss) from domestic operations of $(642.4) million, $(212.0) million and $(206.7)
million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company had pre-tax income (loss) from
foreign operations of $818.9 million, $284.2 million and $323.3 million for the years ended December 31, 2021, 2020 and 2019,
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
Nontaxable gain on insurance disposition
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,
2020
2019
2021
$
$
37,065 $
2,440
5,009
11,797
2,737
2,929
(7,007)
(65,231)
(6,936)
31,299
(714)
11,532
(1,907)
23,013 $
15,166 $
73
(476)
6,531
(321)
(3,256)
(12,783)
—
1,475
2,643
1,076
11,966
(791)
21,303 $
24,492
3,466
7,935
4,538
(2,650)
(392)
10,509
—
(1,025)
3,166
(3,937)
4,015
(306)
49,811
As of December 31, 2021, 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.
The Company has finalized its accounting policy with respect to taxes on Global Intangible Low-Taxed Income (GILTI)
and has elected 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, 2021. Accordingly, the Company recorded a tax expense
of $33.7 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.
209
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
_______________________________________
1
Before netting within tax jurisdictions.
Year Ended December 31,
2020
2021
$
$
15,906 $
70,635
31,319
12,157
60,160
190,177
(48,623)
141,554
24,331
24,331
117,223 $
15,644
74,030
26,238
8,835
84,822
209,569
(81,191)
128,378
27,406
27,406
100,972
The Company has deferred tax assets associated with net operating losses in U.S. federal, state and local, and non-U.S.
jurisdictions of $1.4 million, $5.9 million and $45.8 million, respectively. These losses will begin to expire in 2027, 2025 and
2022, respectively. The Company has deferred tax assets associated with tax credits in the U.S. of $7.2 million, which will begin
to expire in 2027. The Company’s decrease in net operating losses as well as associated valuation allowance is primarily due to
disposition of the Insurance brokerage business 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, 2021, 2020 is as follows (in thousands):
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
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, 2021
$
$
$
10,481
1,706
—
—
—
—
12,187
884
(999)
—
—
(7,678)
4,394
As of December 31, 2021, the Company’s unrecognized tax benefits, excluding related interest and penalties, were $4.4
million, of which $4.4 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 2017,
210
2009 and 2016, respectively. The Company is currently under examination by tax authorities in the U.S. federal and certain state,
local and foreign 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, 2021, the Company had accrued $2.5 million
for income tax-related interest and penalties of which $(0.7) million was accrued during 2021.
22.
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, 2021, 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 their national regulator, which include the FCA
and L'Autorité des Marchés Financiers and must maintain financial resources (as defined by their national regulator) in excess of
the total financial requirement (as defined by their national regulator). As of December 31, 2021, 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 Company also operates a designated contract market (DCM) and derivatives clearing organization (DCO) through
the Futures Exchange Group, which 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, 2021, the Company’s regulated subsidiaries held $667.2 million of net assets. These subsidiaries
had aggregate regulatory net capital, as defined, in excess of the aggregate regulatory requirements, as defined, of $326.9 million.
23.
Segment, Geographic and Product Information
Segment Information
The Company currently operates in one reportable segment, brokerage services. We provide or have provided 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. On
November 1, 2021, we sold our Insurance brokerage business to The Ardonagh Group (see Note 5— "Divestitures"). 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):
211
Revenues:
U.K.
U.S.
Asia
Other Europe/MEA
France
Other Americas
Total revenues
Year Ended December 31,
2020
2019
2021
$
$
835,371 $
517,269
301,489
200,409
99,933
60,893
2,015,364 $
867,066 $
518,811
311,190
192,852
107,679
59,163
2,056,761 $
864,955
564,412
331,328
202,144
83,664
58,103
2,104,606
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
2021
Long-lived assets:
U.S.
U.K.
Asia
Other Europe/MEA
France
Other Americas
Total long-lived assets
Product Information
$
771,696 $
412,767
73,779
47,888
16,996
16,032
768,324
655,906
119,619
66,487
28,518
18,236
$ 1,339,158 $ 1,657,090
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. On November 1, 2021, we sold our
Insurance brokerage business to The Ardonagh Group (see Note 5—"Divestitures"). 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):
Revenues:
Rates
FX
Energy and commodities
Credit
Equity derivatives and cash equities
Insurance
Total brokerage revenues
All other revenues
Total revenues
Year Ended December 31,
2020
2019
2021
$
$
$
558,507 $
301,328
296,458
287,608
247,673
178,087
1,869,661 $
145,703
2,015,364 $
544,094 $
315,253
292,641
329,904
254,702
182,707
1,919,301 $
137,460
2,056,761 $
594,884
370,318
288,697
306,713
251,339
155,790
1,967,741
136,865
2,104,606
212
24.
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
2021
Year Ended December 31,
2020
2019
$
$
1,541,900 $
89,963
14,856
16,818
1,663,537
327,761
21,977
2,089
2,015,364 $
1,567,668 $
81,920
25,754
14,948
1,690,290
351,633
12,332
2,506
2,056,761 $
1,645,818
73,166
29,442
12,806
1,761,232
321,923
18,319
3,132
2,104,606
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 23—“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 $296.4 million and $629.4 million
at December 31, 2021 and December 31, 2020, respectively. The Company had no impairments related to these receivables during
the years ended December 31, 2021 and 2020.
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, 2021 and 2020 was $9.2 million and $15.0
million, respectively. During the years ended December 31, 2021 and 2020, the Company recognized revenue of $9.0 million and
$8.3 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, 2021, there were no capitalized costs recognized to
fulfill a contract. At December 31, 2020, there were $1.7 million of capitalized costs recognized to fulfill a contract.
213
25.
Leases
The Company, acting as a lessee, has operating leases and finance leases primarily relating to office space, data centers
and office equipment. The leases have remaining lease terms of 0.2 years to 17.6 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.
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, 2021, 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
Finance lease ROU assets
Liabilities
Operating lease liabilities
Finance lease liabilities
Classification in Consolidated Statements
of Financial Condition
December 31, 2021 December 31, 2020
Other assets
Fixed assets, net
$
$
136,252 $
2,893 $
Accounts payable, accrued and other liabilities $
Accounts payable, accrued and other liabilities $
166,220 $
2,985 $
165,969
—
190,207
—
214
Weighted-average remaining lease term
Operating leases (years)
Finance leases (years)
Weighted-average discount rate
Operating leases
Finance leases
The components of lease expense are as follows (in thousands):
Operating lease cost1
Finance lease cost
Classification in Consolidated Statements
of Operations
Occupancy and equipment
Amortization on ROU assets Occupancy and equipment
Interest on lease liabilities
Interest expense
____________________________________
1
December 31,
2021
December 31,
2020
10.8
4.7
4.9 %
3.1 %
10.5
0
4.9 %
— %
Year Ended December 31,
2021
2020
41,442 $
43,726
146 $
21 $
—
—
$
$
$
The Company recorded operating lease costs related to the Insurance brokerage business of $3.5 million for the year ended December
31, 2021.
Short-term lease expense is not material.
The following table shows the Company’s maturity analysis of its operating lease liabilities as of December 31, 2021
(in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
Interest
Total
December 31, 2021
Operating leases Finance leases
657
$
657
657
657
499
—
3,127
(142)
2,985
32,288 $
28,318
23,433
19,014
15,670
103,214
221,937 $
(55,717)
166,220 $
$
$
The following table shows cash flow information related to lease liabilities (in thousands):
Cash paid for obligations included in the measurement of lease liabilities1
Cash paid for obligations included in the measurement of finance lease liabilities
_______________________________________
1
The Company made payments for operating lease liabilities related to the Insurance brokerage business of $3.6 million
for the year ended December 31, 2021.
Year Ended December 31,
2020
2021
$
$
37,085 $
157 $
37,552
—
26.
Current Expected Credit Losses (CECL)
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 approximately $1.9 million, of which, $1.1 million was in
215
“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 years ended December 31, 2021 and 2020, the
Company recorded a decrease of $0.2 million and an increase of $0.7 million, respectively, in the CECL reserve against the
receivables portfolio, bringing the Company’s total CECL reserve to $2.4 million and $2.6 million as of December 31, 2021 and
2020, respectively.
This total CECL reserve is comprised of $1.7 million and $1.6 million for “Loans, forgivable loans and other receivables
from employees and partners, net” as of December 31, 2021 and 2020, respectively. The total CECL reserve is further comprised
of $0.7 million and $1.0 million for “Accrued commissions and other receivables, net,” as of December 31, 2021 and 2020,
respectively. For the year ended December 31, 2021, there was an increase of $0.1 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
$1.7 million as of December 31, 2021. 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."
For the year ended December 31, 2021, there was a decrease of $0.3 million in the CECL reserve against “Accrued
commissions and other receivables, net,” due to the updated macroeconomic assumptions resulting from an increase in the GDP
growth rate, 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 $0.7 million as of December 31, 2021. 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."
27.
Supplemental Balance Sheet Information
The components of certain balance sheet accounts are as follows (in thousands):
Other assets:
Operating lease ROU assets1
Deferred tax asset
Equity securities carried under measurement alternative
Other taxes
Prepaid expenses
Rent and other deposits
Other
Total other assets
Accounts payable, accrued and other liabilities:
Taxes payable
Accrued expenses and other liabilities2
Lease liabilities1
Deferred tax liability
Charitable contribution liability
Total accounts payable, accrued and other liabilities
Year Ended December 31,
2020
2021
136,252 $
135,365
82,093
37,011
16,715
15,849
21,948
445,233 $
165,969
125,292
81,758
27,450
35,215
16,355
28,388
480,427
Year Ended December 31,
2020
2021
277,932 $
203,937
169,205
18,142
10,038
679,254 $
255,944
890,890
190,207
24,320
2,758
1,364,119
$
$
$
$
_______________________________
1
As of December 31, 2021, $136.3 million and $169.2 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, 2020, $166.0 million and $190.2 million,
216
2
relating to lease ROU assets and lease liabilities, respectively, is attributable to the adoption of ASU No. 2016-02, Leases (Topic 842).
See Note 25—“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. See “Cash Segregated Under Regulatory
Requirements” and “Accrued Commissions and Other Receivables, Net” in Note 3—“Summary of Significant Accounting Policies”
for additional information.
28.
Subsequent Events
Fourth Quarter 2021 Dividend
On February 15, 2022, the Company’s Board declared a quarterly cash dividend of $0.01 per share for the fourth quarter
of 2021, payable on March 22, 2022 to BGC Class A and Class B common stockholders of record as of March 8, 2022.
217
ITEM 9.
FINANCIAL DISCLOSURE
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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 of the Board 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 of the Board 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, 2021. Based on that evaluation, the Chairman
of the Board and Chief Executive Officer and the Chief Financial Officer concluded that BGC Partners’ disclosure controls and
procedures were effective as of December 31, 2021.
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, 2021 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. The effectiveness of our internal control over financial reporting as
of December 31, 2021 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.
Material Weakness Identified
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.
As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2020,
management identified the following control deficiencies that in combination constituted 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 U.K. 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 U.K. 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 U.K. partnerships
in relation to partner related payments.
Remediation of Material Weakness
Our management, with the oversight of the Audit Committee of our Board of Directors, took immediate action to initiate
a plan to remediate the material weakness previously identified and disclosed in Part II, Item 9A of our Annual Report on Form
10-K for the year ended December 31, 2020. The below remediation measures were designed to remediate the control deficiencies
and enhance our overall internal control environment:
218
• Wire payments are not permitted to be made to vendor bank accounts other than from the master listing.
• Changes to bank details within the vendor master listing can only be made once an independent validation has been
performed.
•
Prior to the release of wire payments, the payee bank details are required to be validated to the vendor master listing by
an independent department.
• A reconciliation of disbursements and payments to taxing authorities has been implemented with respect to certain U.K.
partnerships.
Based upon management’s assessment of our implemented controls to address the material weakness noted above, we
believe the material weakness identified has been remediated as of December 31, 2021.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2021, there were no changes in our internal control over financial reporting, other
than the remediation measures implemented as described above, that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
Not Applicable
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable
219
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 2022 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 2022 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, 2021” in the 2022 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 2022 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 2022 Proxy Statement is hereby incorporated by reference in response to this Item 14.
220
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
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
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. 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)
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)
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)
221
Exhibit
Number
2.9
2.10
2.11
2.12
2.13
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Exhibit Title
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)
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 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)
Agreement for the Sale and Purchase of the Share Capital of Ed Broking Group Limited and Besso Insurance
Group Limited, Dated May 26, 2021, by and Among Tower Bridge (One) Limited, Ardonagh Specialty Holdings
2 Limited, The Ardonagh Group Limited and BGC Partners, Inc. (incorporated by reference to Exhibit 2.1 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2021)
Deed of Variation in Respect of the Agreement for the Sale and Purchase of the Share Capital of Ed Broking
Group Limited and Besso Insurance Group Limited, dated August 25, 2021, by and among Tower Bridge (One)
Limited, Ardonagh Specialty Holdings 2 Limited, The Ardonagh Group Limited and BGC Partners, Inc.
(incorporated by reference to Exhibit 2.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC
on November 8, 2021)
Deed of Variation in Respect of the Agreement for the Sale and Purchase of the Share Capital of Ed Broking
Group Limited and Besso Insurance Group Limited, dated October 31, 2021, by and among Tower Bridge (One)
Limited, Ardonagh Specialty Holdings 2 Limited, The Ardonagh Group Limited and BGC Partners, Inc.
(incorporated by reference to Exhibit 2.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC
on November 8, 2021)
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)
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)
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)
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)
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)
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)
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)
4.10
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)
222
Exhibit
Number
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
Exhibit Title
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)
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)
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)
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 filed with the SEC on April 7, 2008)
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)*
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)
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)
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)
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)
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)
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)
223
Exhibit
Number
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Exhibit Title
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)
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)
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)
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)
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)*
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)*
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)*
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)*
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)
Eighth Amended and Restated Long Term Incentive Plan, dated as of November 22, 2021 (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 23,
2021)*
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)*
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)
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)
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).
224
Exhibit
Number
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
21.1
23.1
31.1
31.2
32.1
Exhibit Title
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)
Second Amended and Restated Agreement of Limited Partnership of BGC Global Holdings, L.P., dated as of
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)
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)
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)
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)
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)
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. (incorporated by reference to Exhibit 10.47 to the Registrant’s Annual Report on Form
10-K filed with the SEC on March 1, 2021)
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.
225
Exhibit
Number
101
104
Exhibit Title
The following materials from BGC Partners’ Annual Report on Form 10-K for the period ended December 31,
2021 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 the iXBRL document.
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
226
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, 2021 to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 28th day of February, 2022.
BGC Partners, Inc.
By:
Name:
Title: Chairman of the Board and Chief Executive Officer
/S/ HOWARD W. LUTNICK
Howard W. Lutnick
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 indicated.
Date
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
Signature
/S/ HOWARD W. LUTNICK
Howard W. Lutnick
Capacity in Which Signed
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/S/ STEVEN BISGAY
Steven Bisgay
Chief Financial Officer
(Principal Financial and Accounting Officer)
/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
/S/ ARTHUR U. MBANEFO
Arthur U. Mbanefo
Director
Director
Director
Director
Director
227
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 2)
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31, 2021 December 31, 2020
$
$
$
$
31 $
568,961
10,038
1,043,189
70,261
1,692,480 $
29,539 $
1,043,189
1,072,728
24
737,955
2,758
1,296,082
64,498
2,101,317
50,999
1,296,082
1,347,081
619,752
1,692,480 $
754,236
2,101,317
See accompanying Notes to Financial Statements.
228
BGC PARTNERS, INC.
(Parent Company Only)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
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
Provision (benefit) for income taxes
Net income available to common stockholders
Per share data:
Basic earnings (loss) per share
Net income 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
Year Ended December 31,
2020
2019
2021
552 $
60,772
61,324
60,772
60,772
552
114,971
(8,484)
124,007 $
124,007 $
0.33 $
379,215
173,995 $
0.32 $
540,020
450 $
65,762
66,212
65,762
65,762
450
38,030
(6,582)
45,062 $
45,062 $
0.12 $
361,736
64,787 $
0.12 $
546,848
—
55,044
55,044
55,044
55,044
—
46,752
2,851
43,901
43,901
0.13
344,332
58,871
0.12
472,187
$
$
$
$
$
$
See accompanying Notes to Financial Statements.
229
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
$
$
Year Ended December 31,
2020
2019
45,062 $
43,901
2021
124,007 $
(11,853)
235
(11,618)
112,389 $
5,382
(1,210)
4,172
49,234 $
96
(8,733)
(8,637)
35,264
See accompanying Notes to Financial Statements.
230
BGC PARTNERS, INC.
(Parent Company Only)
STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to common stockholders
Adjustments to reconcile net income to net cash used in operating
activities:
Amortization of deferred financing costs
Equity (income) loss of subsidiaries
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 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:
Year Ended December 31,
2020
2019
2021
$
124,007 $
45,062 $
43,901
3,592
(114,971)
(6,404)
335,295
(7,280)
251,312
1,769
4,188
(38,030)
(13,585)
(11,480)
1,241
(187,069)
887
3,206
(46,752)
(20,042)
12,400
16,029
(366,496)
861
(21,459)
565,861
14,295
(184,491)
(4,125)
(361,018)
—
—
—
(15,098)
(365,398)
—
(256,032)
300,000
(300,000)
70,602
72
(565,854)
7
24
31 $
(60,440)
(5)
294,396
(43,968)
230,000
(300,000)
61,972
2,516
184,471
(20)
44
24 $
(192,442)
(970)
294,845
—
390,000
(320,000)
184,545
4,929
360,907
(111)
155
44
(157) $
59,018
(5,919) $
60,594
5,422
47,329
$
$
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
$
157,547 $
11,388 $
26,146
1,160
1,578
3,040
See accompanying Notes to Financial Statements.
231
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, 2021, the Company declared and paid cash dividends of $0.04 per share to BGC Class
A and Class B common stockholders. For the year ended December 31, 2020 and 2019, the comparable cash dividend amounts
were $0.17 per share and $0.56 per share, respectively.
Revisions of Previously Issued Financial Statements
On July 30, 2021, the Company completed the purchase of the Futures Exchange Group for a purchase price of $4.9
million at closing, plus the cash held at closing by the Futures Exchange Group, and an earn-out, only payable out of the
Company's portion of the profits of the Futures Exchange Group, capped at the amount Cantor contributed to the Futures
Exchange Group prior to closing.
The Futures Exchange Group acquisition has been determined to be a combination of entities under common control
that resulted in a change in the reporting entity. Accordingly, the financial results of the Company have been recast to include the
financial results of the Futures Exchange Group in the current and prior periods as if the Futures Exchange Group had always
been consolidated. The assets and liabilities of the Futures Exchange Group have been recorded in the Company's consolidated
statements of financial condition at the seller's historical carrying value. The purchase of the Futures Exchange Group was
accounted for as an equity transaction for the period ended September 30, 2021 (the period in which the transaction occurred).
For more information about the revisions to our previously issued financial statements, see Note 1—“Organization and
Basis of Presentation” in the Company’s consolidated financial statements included in Part II, Item 8 of this Annual Report on
Form 10-K.
2.
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,
2021 and 2020.
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 incurs interest at a fixed rate of 3.44% per year and matured on May 31,
2021; therefore, there were no borrowings outstanding as of December 31, 2021. As of December 31, 2020, the Company had
$4.0 million outstanding related to this secured loan arrangement. The book value of the fixed assets pledged as of December 31,
2020 was $0.8 million.
232
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, 2021 and 2020, the Company had $5.9 million and $9.6 million outstanding
related to this secured loan arrangement, respectively. The book value of the fixed assets pledged as of December 31, 2021 was
$0.1 million. The book value of the fixed assets pledged as of December 31, 2020 was $1.2 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, 2021 and December 31, 2020, the Company had $3.8 million and $6.3 million, respectively, outstanding related to
this secured loan arrangement. The book value of the fixed assets pledged as of December 31, 2021 was $1.0 million. The book
value of the fixed assets pledged as of December 31, 2020 was $2.7 million.
3.
Long-Term Debt
Unsecured Senior Revolving Credit
On November 28, 2018, the Company 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 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 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 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 November 1, 2021, the
Company repaid in full the $300.0 million borrowings outstanding under the Revolving Credit Agreement. As of both
December 31, 2021 and 2020, there were no borrowings outstanding under the Revolving Credit Agreement. The average interest
rate on the outstanding borrowings was 2.09% and 2.88% for the years ended December 31, 2021 and 2020, respectively. The
Company recorded interest expense related to the Revolving Credit Agreement of $3.6 million, $5.3 million and $10.0 million
for the years ended December 31, 2021, 2020 and 2019, 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, which
matured on May 27, 2021. The 5.125% Senior Notes were general senior unsecured obligations of the Company. The 5.125%
Senior Notes bore 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 and ending the maturity date. Prior to maturity, 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. On May 27, 2021, BGC repaid the remaining $256.0 million principal plus accrued interest on its 5.125%
Senior Notes. The Company recorded interest expense related to the 5.125% Senior Notes of $5.8 million, $16.3 million, and
$16.2 million for the years ended December 31, 2021, 2020 and 2019.
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 Notes). 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,
233
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, 2021 was $447.9 million. The Company recorded interest expense related to the 5.375% Senior
Notes of $25.5 million, $25.5 million and $25.6 million for the years ended December 31, 2021, 2020 and 2019, 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 $297.7 million
as of December 31, 2021. The Company recorded interest expense related to the 3.750% Senior Notes of $12.1 million $12.1
million and $3.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.
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 $297.5 million as of December 31, 2021. The Company recorded
interest expense related to the 4.375% Senior Notes of $13.8 million and $6.5 million for years ended December 31, 2021 and
2020, respectively. The Company did not record interest expense related to the 4.375% Senior Notes for year ended December 31,
2019.
234
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 2021 10-K
FILING.
235
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.
236
• 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 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.
237
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
• 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
238
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
239
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.
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;
240
• 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 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;
241
• 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; and
• 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
Unless otherwise stated, all results provided in this document compare the fourth quarter of 2021 with the
year-earlier period. Certain reclassifications/recasts may have been made to previously reported amounts
to conform to the current presentation and to show results on a consistent basis across periods. Certain
numbers and percentage changes listed throughout this document may not sum due to rounding.
242
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)
FY 2021
$
176,501 $
FY 2020
72,221
GAAP income (loss) from operations before income taxes
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
Impairment charges
Other (4)
Total Non-Compensation adjustments
Other income (losses), net adjustments:
Losses (gains) on divestitures
Fair value adjustment of investments (5)
Other net (gains) losses (6)
Total other income (losses), net adjustments
Total pre-tax adjustments
Adjusted Earnings before noncontrolling interest in subsidiaries and
taxes
GAAP net income (loss) available to common stockholders
$
Allocation of net income (loss) to noncontrolling interest in subsidiaries (7)
Total pre-tax adjustments (from above)
Income tax adjustment to reflect adjusted earnings taxes (8)
$
Post-tax adjusted earnings
Per Share Data
GAAP fully diluted earnings (loss) per share
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
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
$
$
$
$
$
Please see footnotes to this table on the next page.
243
256,164
208,751
464,915
23,282
1,649
11,247
29,804
65,982
(312,941)
73
(17,577)
(330,445)
200,452
183,545
37,209
220,754
28,251
2,880
11,432
18,150
60,713
(394)
431
(3,909)
(3,872)
277,595
376,953 $
349,816
124,007 $
27,099
200,452
(1,150)
350,408 $
0.32 $
(0.04)
0.37
—
0.65 $
540,020
0.04 $
0.04 $
45,062
6,621
277,595
(16,437)
312,841
0.12
(0.03)
0.51
(0.03)
0.57
546,848
0.17
0.17
(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 2021
FY 2020
$
$
128,107 $
34,335
78,596
15,126
256,164 $
84,966
14,006
74,282
10,291
183,545
(2) GAAP Expenses in the fourth quarter of 2021 included $116.6 million related to one-time employee loan forgiveness,
compensation expenses associated with the sale of the Insurance business of $25.7 million with respect to management
incentive and termination payments, and $26.3 million of employee loan forgiveness related to the sale of the Insurance
business. There were no such expenses in 2020. The fourth quarter of 2021 also included certain acquisition-related
compensation expenses of $1.0 million, certain one-off costs associated with the cost reduction program of $11.2 million, and
$14.3 million of employee loan impairments related to the cost reduction program. For the full year 2021, these amounts were
$4.5 million, $16.6 million, and $15.6 million, respectively. GAAP expenses for the fourth quarter of 2020 included certain
acquisition-related compensation expenses of $1.9 million, certain one-off costs associated with the cost reduction program of
$0.9 million, and certain loan impairments related to the cost reduction program of $0.7 million. For the full year 2020, these
amounts were $3.1 million, $22.8 million and $10.6 million, respectively.
(3) Includes non-cash GAAP charges related to the amortization of intangibles with respect to acquisitions.
(4) GAAP expenses in the fourth quarter of 2021 and 2020 included various other GAAP items. GAAP expenses for the full
years 2021 and 2020 included Charity Day Contributions of $7.2 million and $1.1 million, respectively, as well as various other
GAAP items. Pre-tax Adjusted Earnings in each presented period of 2020 exclude 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.
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.
(5) Includes non-cash loss of ($0.1) million and a non-cash gain of $0.6 million related to fair value adjustments of investments
held by BGC in the fourth quarter of 2021 and 2020, respectively. For the full years 2021 and 2020, these amounts were non-
cash losses of ($0.1) million and ($0.4) million, respectively.
(6) For the fourth quarter of 2021 and 2020, includes non-cash gains of $2.1 million and $1.4 million, respectively, related to
BGC's investments accounted for under the equity method. For the full years 2021 and 2020, these amounts were $6.7 million
and $5.0 million, respectively. The fourth quarter of 2021 also included a net gain of $5.9 million related to various other
GAAP items, while the fourth quarter of 2020 included a net loss of ($2.8) million related to an investment impairment of
($1.2) million as well as various other GAAP items. For the full year 2021, this amount was a net gain of $10.9 million, while
the full year 2020 included a net loss of ($1.1) million related to an investment impairment of ($3.9) million, partially offset by
various other GAAP items.
(7) Primarily represents Cantor's pro-rata portion of net income.
(8) BGC's GAAP provision for income taxes is calculated based on an annualized methodology. The Company's GAAP
provision (benefit) for income taxes was $16.0 million and ($6.7) million for the fourth quarters of 2021 and 2020, respectively.
For the full years 2021 and 2020, these amounts were $23.0 million and $21.3 million, 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 by $17.9 million and ($13.4) million for the fourth quarters of 2021 and 2020, respectively. For the full years
2021 and 2020, these adjustment amounts were ($1.2) million and ($16.4) million, respectively. As a result, the provision
(benefit) for income taxes with respect to Adjusted Earnings was ($2.0) million and $6.6 million for the fourth quarters of 2021
and 2020, respectively. For the full years 2021 and 2020, these amounts were $24.2 million and $37.7 million, respectively.
244
Note: Certain numbers may not add due to rounding.
BGC PARTNERS, INC.
FULLY DILUTED WEIGHTED-AVERAGE SHARE COUNT
UNDER GAAP AND FOR ADJUSTED EARNINGS
(in thousands)
(unaudited)
Common stock outstanding
Limited partnership units
Cantor units
Founding partner units
RSUs
Other
FY 2021
FY 2020
379,215
90,490
54,748
10,118
4,074
1,375
361,736
118,459
52,363
12,308
737
1,245
Fully diluted weighted-average share count under GAAP and Adjusted Earnings
540,020
546,848
Note: BGC’s fully diluted weighted-average share count under GAAP may differ from the fully diluted weighted-average share
count for Adjusted Earnings in order to avoid anti-dilution in certain periods.
BGC PARTNERS, INC.
LIQUIDITY ANALYSIS
(in thousands)
(unaudited)
Cash and cash equivalents
Securities owned
Marketable securities
Total Liquidity
December 31, 2021
December 31, 2020
$
$
553,598 $
40,838
406
594,842 $
596,291
58,572
349
655,212
245
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
FY 2021
FY 2020
$
124,007 $
45,062
Add back:
Provision (benefit) for income taxes
23,013
21,303
Net income (loss) attributable to noncontrolling interest in subsidiaries (1)
29,481
5,856
Interest expense
69,329
76,607
Fixed asset depreciation and intangible asset amortization
81,874
85,422
Impairment of long-lived assets
11,246
11,431
Equity-based compensation and allocations of net income to limited
partnership units and FPUs (2)
256,164
183,545
(Gains) losses on equity method investments (3)
(6,772)
(1,091)
Adjusted EBITDA
$
588,342 $
428,135
(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 fourth quarters of both 2021 and 2020, includes non-cash gains of $2.1 million and $1.4 million, respectively,
related to BGC's investments accounted for under the equity method. For the full years 2021 and 2020, these amounts were
$6.7 million and $5.0 million, respectively. The fourth quarter of 2020 also includes a net loss of ($1.2) million related to an
investment impairment. The full year 2020 also included a net loss of ($3.9) million related to investment impairment.
246
CORPORATE INFORMATION
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
Arthur U. Mbanefo
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
Jason W. Hauf
Chief Financial Officer
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
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
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, and Futures. BGC,
through its various affiliates, 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 FMX™,
Fenics®, Fenics Market Data™, Fenics GO™,
BGC®, BGC Trader™, Capitalab®, and
Lucera®, BGC offers financial technology
solutions, market data, and analytics
related to numerous financial instruments
and markets. BGC, BGC Trader, GFI,
Fenics, FMX, Fenics Market Data, kACE2,
Fenics GO, Capitalab, and Lucera 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.
© 2022 BGC Partners, Inc. All rights reserved.