Gain Capital Holdings Inc Annual Report 2015

Plain-text annual report

ANNUAL REPORT 2015 LETTER FROM THE CEO Glenn Stevens, CEO, GAIN Capital I am pleased to report it was another successful year for GAIN Capital as we continued to execute on our strategic plan of scaling our core businesses, even in the wake of unprecedented market events such as the de-pegging of the Swiss franc by the Swiss National bank, which derailed a number of our industry peers. We also generated strong financial results for FY 2015, reporting $81 million of adjusted EBITDA on record revenues of $435 million, which were up 18% on the previous year. As a reflection of our continued rapid growth, we were ranked 44th on Fortune’s 100 Fastest Growing Companies of 2015. On April 1, 2015, we successfully closed on the largest acquisition in GAIN Capital’s history – the $148 million purchase of London-based CFD provider, City Index. With this addition to GAIN Capital’s portfolio of trading brands, we are now one of the top three FX and CFD providers globally with over 147,000 active traders. It has been a very busy 12 months and we are pleased with the progress we are making to integrate the operations of GAIN Capital and City Index. In addition to combining our regulated entities and operations, we have already completed the migration of thousands of retail and partner clients to Advantage Trader, our go-forward trading platform. This year we are focused on decommissioning our remaining legacy trading platforms in order to consolidate our trading technology onto a single platform for future growth. Growing our core businesses While we progress on integration, we are also investing in several new organic growth initiatives centered on enhancing our clients’ experience. This year we will roll out significant enhancements to our desktop and mobile trading platforms, build out our service for high net worth clients and commence a global rollout of our advisory offering. We are also developing new unique decision support tools designed to help our clients identify trading opportunities. And, of course, our market leading FOREX.com and City Index brands put us in a strong position to continue to grow market share globally. On the partnership side, we have been adding new capabilities to support our growing global network of Introducing Brokers as well as building out our API liquidity solutions. We now have a very robust and capital-efficient multi-asset liquidity solution supporting the wide range of CFD products that we offer, including FX as well as index, commodity and individual equity CFDs. We are also continuing to invest in the growth of our other two businesses: our institutional offering, GTX, and our futures business. GTX is a $35 million revenue, 30% EBITDA margin business with strong momentum for continued growth and the capture of additional market share. Our futures business grew 27% last year, delivering shareholder value. Capturing synergies On the cost side, we are on schedule to capture the expected $45 million of synergies from the City Index acquisition and have also been making significant progress reducing other costs. Cost reduction remains a major priority for us and we are focused on achieving 30% EBITDA margins in 2016. While we continue to prioritize cash for working capital and future acquisitions, we also increased our capital return to shareholders in 2015, returning nearly $15 million through a combination of share buybacks and dividends. Looking ahead We recently announced our entry into the international money transfer business under the brand ForeignExchange.com. In addition to the payments business, we are reviewing opportunities to develop or acquire complementary products that will further cement our position as a global leader in online trading. All in all, we are pleased with our 2015 accomplishments and financial results and are looking forward to an even better year in 2016. We would like to thank you, our shareholders, for expressing your confidence in the GAIN Capital team. Glenn Stevens 2015 FINANCIAL AND OPERATING HIGHLIGHTS Net revenue Adjusted EBITDA: $435 million $81 million +18% year-over-year growth 18% margin Customer assets: $921 million +21% year-over-year growth Net revenue in millions ($) Adjusted EBITDA in millions ($) Client assets in millions ($) 435 369 268 182 151 37 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 1 1 0 2 11 2 1 0 2 81 75 61 921 739 760 446 310 3 1 0 2 4 1 0 2 5 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 Via organic growth and strategic acquisitions, we’ve more than doubled adjusted EBITDA over the past 5 years. GAIN CAPITAL IN NUMBERS GAIN Capital was founded in 1999 with a clear mission: to provide traders with low-cost access to foreign exchange markets. Since then, we have expanded our product offering and global reach, and now provide 145,000+ retail and institutional investors with access to OTC and exchange-traded markets. Global markets 12,500+ OTC and exchange- traded markets Retail trading volume Institutional trading volume $15.4 billion average daily volume (ADV) $10.3 billion average daily volume (ADV) Active traders 145,000+ Regulation 8 Employees 800+ retail customers worldwide jurisdictions worldwide across 3 continents Global presence 12 offices worldwide Americas Bedminster (HQ) Chicago Jersey City Powell EMEA Dubai London Truro APAC Beijing Hong Kong Shanghai Singapore Sydney OUR BUSINESS TODAY Through our portfolio of global trading brands, we deliver to our retail and institutional customers market-leading liquidity and execution services, innovative trading technology and exceptional client service. Our business is split into three distinct segments: retail, institutional and futures. Through these segments, we offer multiple access points to OTC markets and global exchanges across a wide range of asset classes, including foreign exchange, commodities, global indices and equities. Retail Institutional Futures GAIN Capital is the parent company of some of the best-known brands in online trading, providing liquidity, technology, and trading support to over 145,000 retail and institutional clients worldwide. Retail Through our two global retail trading brands, FOREX.com and City Index, we provide over 145,000 active traders from over 180 countries access to a diverse range of 12,500 global financial markets, including spot forex, precious metals trading and contracts for difference (CFDs) on global indices, commodities and individual equities. We also offer research and advisory services to retail clients through our CFD advisory business, Galvan. Average daily volume +38% Year-over-year growth Customer assets +20% Year-over-year growth Average daily volume in billions ($) Customer assets in millions ($) 15.4 11.1 7.5 310 324 675 590 559 6.0 5.0 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 Expanding into new asset classes and diversifying our revenue With the acquisition of City Index, we’ve expanded the number of markets we offer to our customers and increased our revenue from non-FX asset classes to 65% of our retail revenue in the second half of 2015, up from 52% for the same period in 2014. 24% 2H 35% 2015 10% 30% 5% 2H 2014 48% 31% 17% FX Indices Commodities & other Equities Institutional Our institutional business, GTX, provides liquidity and execution services in spot FX, forward foreign exchange and precious metals to buy-side and sell-side firms, including banks, brokers, hedge funds, Commodity Trading Advisors and asset managers. On top of our market leading ECN technology, GTX also operates a swap dealer and SEF to meet the regulatory obligations facing buy-and-sell side FX market participants today. GTX ECN volume +24% Year-over-year growth GTX revenue +56% 4 year annualized growth ECN ADV in billions ($) GTX revenue in millions ($) 7.2 5.8 4.3 15.7 6.0 35.5 35.1 28.3 1.5 1.6 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 Futures We provide our clients with electronic access to the world’s largest futures markets through our CFTC-regulated Futures Commissions Merchant (FCM). Our futures offering is marketed through Daniels Trading, an online futures brokerage targeting retail and professional traders. Futuresonline.com, our low-touch, discount online brokerage, and Top Third Ag Marketing, LLC , which uses options-based hedging strategies to help clients manage the risks of agricultural production. Client engagement increased across the board in 2015, with average daily contracts and customer assets up 22% and 24% respectively. In 2016, we will focus on increasing our market share in the U.S. and pursuing international expansion opportunities via our house brands as well as through intermediaries. Contracts traded +22% Year-over-year growth Customer assets +24% Year-over-year growth Average daily contracts in thousands Customer assets in millions ($) 34.4 28.1 246 201 21.4 18.3 146 118 0 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 0 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K/A Amendment No. 1ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2015OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the Transition Period from to .Commission File Number 001-35008 GAIN CAPITAL HOLDINGS, INC.(Exact name of registrant as specified in its charter) Delaware 20-4568600(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) Bedminster One135 Route 202/206Bedminster, New Jersey 07921(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (908) 731-0700Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of exchange on which registeredCommon stock, $0.00001 New York Stock Exchange Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x NoIndicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x NoIndicate 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 1934during 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 filingrequirements for the past 90 days. ý Yes ¨ NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). ý Yes ¨ NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the bestof the registrant’s knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to thisForm 10-K. oTable of ContentsIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨Accelerated filerýNon-accelerated filer ¨ (Do not check if a smaller reporting company)Smaller reporting company¨Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý NoThe aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2015, was approximately $211 million.As of April 29, 2016, the registrant had 48,483,199 shares of common stock, $0.00001 par value per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCECertain information contained in the registrant’s Definitive Proxy Statement filed pursuant to Regulation 14A with the SEC on April 29, 2016 is incorporatedby reference into Part III of this Form 10-K/A.Table of ContentsEXPLANATORY NOTEAs used in this Amendment No. 1 to Form 10-K for the year ended December 31, 2015 (the “Form 10-K/A”), the terms “Company,” “our,” “us”, or “we” referto GAIN Capital Holdings, Inc., a Delaware corporation and its consolidated subsidiaries.As disclosed by the Company in its Current Report on Form 8-K, as filed with the Securities and Exchange Commission (the “SEC”) on May 2, 2016, theAudit Committee of the Board of Directors of the Company concluded that the Company's previously issued consolidated financial statements as of and forthe year ended December 31, 2015 should no longer be relied upon because the Company determined that there were errors in the quarterly financial data forthe second, third and fourth quarters of 2015 and each quarter of 2014 that were included in unaudited Note 23 to those consolidated financial statements.These errors relate to the manner in which the Company presented, in such quarterly financial data, the allocation of the effects of the Company's previouslyannounced restatement of its consolidated financial statements as of and for the years ended December 31, 2014 and 2013 relating to certain non-operatingmatters, principally technical accounting requirements for intercompany transactions between U.S. and non-U.S. affiliates. Accordingly, this Form 10-K/Aamends our Annual Report on Form 10-K for the year ended December 31, 2015, as originally filed with the SEC on March 17, 2016 (the “Original Filing”),to restate Note 23 to the consolidated financial statements for the year ended December 31, 2015. The errors in the quarterly financial data in Note 23 had noimpact on, and no changes are required to, our full year financial results or any other information reported in the Original Filing.Except as provided above and as provided under the caption "Documents Incorporated by Reference" and the related references in Part III, Items 10 through15, this Form 10-K/A has not been updated to reflect events occurring after March 17, 2016, the date of the Original Filing. Therefore, this Form 10-K/Ashould be read in conjunction with filings we have made with the SEC subsequent to March 17, 2016.Table of ContentsGAIN Capital Holdings, Inc.FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 PART I Item 1.Business5Item 1A.Risk Factors19Item 1B.Unresolved Staff Comments34Item 2.Properties34Item 3.Legal Proceedings34Item 4.Mine Safety Disclosures35 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities36Item 6.Selected Financial Data38Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations39Item 7A.Quantitative and Qualitative Disclosures about Market Risk71Item 8.Financial Statements and Supplementary Data73Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure73Item 9A.Controls and Procedures74Item 9B.Other Information79 PART III Item 10.Directors, Executive Officers and Corporate Governance80Item 11.Executive Compensation80Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters80Item 13.Certain Relationships and Related Transactions, and Director Independence80Item 14.Principal Accountant Fees and Services80 PART IV Item 15.Exhibits and Financial Statement Schedules81 EXHIBIT INDEX82 SIGNATURES88Table of ContentsPART IFORWARD-LOOKING INFORMATIONIn this Annual Report on Form 10-K, the words “GAIN,” the “Company,” “our,” “we” and “us” refer to GAIN Capital Holdings, Inc. and, except asotherwise specified herein, to GAIN’s subsidiaries. GAIN’s fiscal year ended on December 31, 2015.This Annual Report on Form 10-K contains a number of forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of1934 as amended. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets inwhich GAIN operates and management’s current beliefs and assumptions. Any statements contained herein (including without limitation statements to theeffect that management or GAIN “believes,” “expects,” “anticipates,” “plans” and similar expressions) that are not statements of historical fact should beconsidered forward-looking statements and should be read in conjunction with the consolidated financial statements and notes to consolidated financialstatements included in this report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Thesestatements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. There are a number ofimportant factors that could cause actual results to differ materially from those indicated by such forward-looking statements. These factors include, withoutlimitation, those set forth in the section entitled “Item 1A – Risk Factors” below and discussed elsewhere herein. The risks and uncertainties described beloware not the only ones we face. We expressly disclaim any obligation to update any forward-looking statements, except as may be required by law.ITEM 1.BUSINESSOVERVIEWWe are a global provider of trading services and solutions, specializing in over-the-counter, or OTC, and exchange-traded markets. Our retail, institutionaland futures segments service customers in more than 180 countries worldwide, and we conduct business from our offices in Bedminster, New Jersey; JerseyCity, New Jersey; London, England; Cornwall, England; Chicago, Illinois; Powell, Ohio; Grand Rapids, Michigan; Tokyo, Japan; Sydney, Australia; Beijing,China; Shanghai, China; Pembroke, Bermuda; Hong Kong, and Singapore.We offer our customers access to a diverse range of over 12,500 financial products, including spot foreign exchange, or forex, and precious metals trading, aswell as “contracts for difference”, or CFDs, which are investment products with returns linked to the performance of underlying asset. We offer CFDs oncurrencies, commodities, indices, individual equities, bonds and interest rate products. We also support trading of exchange-traded futures and options onfutures on more than 30 global exchanges. In the United Kingdom, we offer spread bets, which are investment products similar to CFDs, but that offer morefavorable tax treatment for residents of that country.We have invested considerable resources since our inception to develop our proprietary trading platforms to provide our customers with advanced pricediscovery, trade execution and order management functions, while improving our ability to acquire and service our customers efficiently, as well as managemarket and credit risk associated with our customer’s trading activity. Today our customers can trade through web-based, downloadable and mobile tradingplatforms and have access to innovative trading tools to assist them with research and analysis, automated trading and account management.We operate our business in three segments. Through our retail segment, we provide our retail customers around the world with access to a diverse range ofglobal financial markets, including spot forex, precious metals, spread bets and CFDs on commodities, indices, individual equities and interest rate products,as well OTC options on forex. Our institutional segment provides agency execution services and offers access to markets and self-directed trading in foreignexchange, commodities, equities, options and futures via our GTX platform. Our futures segment offers execution and risk management services forexchange-traded futures and futures options on major U.S. and European futures and options exchanges. Each of our operating segments is discussed in moredetail below. For financial information regarding our segments, please see Note 22 to our audited consolidated financial statements included in this AnnualReport.As a global provider of online trading services, our results of operations are impacted by a number of external market factors, including market volatility andtransaction volumes, competition, the regulatory environment in the various jurisdictions and markets in which we operate and the financial condition of theretail and institutional customers to whom we provide our services. These factors are not the only factors that impacted our results of operations for the mostrecent fiscal period, and5Table of Contentsadditional or other factors may impact, or have different degrees of impact, on our results of operations in future periods. For financial information bygeographic area, please see Note 22 to our audited consolidated financial statements included in this Annual Report.As discussed in Note 2 to our audited consolidated financial statements under the heading "Restatement," we have restated our financial statements as ofDecember 31, 2014 and for the years ending December 31, 2014 and 2013. The following table sets forth the restated key financial data and operating metricsfor our business:Key Financial Data(in millions)Year Ended December 31,2015 2014 (As Restated) 2013(As Restated) 2012 2011Net Revenue$435.3 $369.2 $267.7 $151.8 $182Net income applicable to Gain Capital Holdings, Inc.$10.3 $24.9 $28.1 $2.6 $15.7Adjusted net income(1)$34.3 $30.9 $29.8 $4.3 $15.7Key Operating Metrics(Unaudited)Year Ended December 31,2015 2014 2013 2012 2011Retail OTC Trading Volume (billions)$3,985.8 $2,430.5 $1,796.7 $1,303.4 $1,574.0OTC Average Daily Volume (billions)$15.4 $9.4 $6.9 $5.0 $6.0 Active OTC Accounts(2)146,977 94,895 98,696 60,219 63,435Client Assets (millions)$920.6 $759.6 $739.3 $446.3 $310.4 Institutional Volume (billions)$2,671.9 $3,183.7 $2,599.6 $1,493.8 $445.7Average Daily Volume (billions)$10.3 $12.7 $10.0 $5.7 $1.7 Futures Futures Contracts(3)8,623,392 7,027,008 5,386,383 1,507,425 —Futures Average Daily Contracts34,356 28,108 21,460 18,383 —(1)Adjusted net income is a non-GAAP financial measure and represents our net income excluding restructuring, acquisition and integration-relatedexpenses, impairment on investment and gain on extinguishment of debt. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations - Key Income Statement Line Items and Key Operating Metrics” and “Reconciliation of Non-GAAP Financial Measures,” fordiscussion and reconciliation of non-GAAP financial measures.(2)Represents accounts which executed a transaction over the last 12 months.(3)Futures contracts represent the total number of contracts transacted by customers of our futures business.Growth Strategies6Table of ContentsWe intend to grow our business and increase our profitability principally by employing the following growth strategies: •Continue to enhance our proprietary trading platforms and innovative trading tools in our retail, institutional and futures segments in order to attractcustomers and increase our market share; •Strategically expand our operations and customer base through business acquisitions, investments and partnerships, such as our purchase of theentire issued and outstanding share capital of City Index (Holdings) Limited ("City Index"), a global online trading firm specializing in CFDs, forexand spread betting, which we completed on April 1, 2015;•Expand our product offerings in order to facilitate clients' trading of our wide range of financial products and to generate more revenue per customer;and•Identify and enter high-growth markets in order to expand our presence globally in markets where we believe there are large revenueopportunities. Our Retail SegmentOur retail segment represented 79.8% of our net revenue for the year ended December 31, 2015. We conduct our retail business primarily through ourFOREX.com and City Index brands. As of December 31, 2015, we had 173,738 funded retail accounts.We provide our retail customers around the world with access to a diverse range of 12,500 global financial markets, including spot forex and precious metalstrading, as well as “contracts for difference”, or CFDs, which are investment products with returns linked to the performance of underlying asset. We offerCFDs on currencies, commodities, indices, individual equities, bonds and interest rate products. In the United Kingdom, we offer spread bets, which areinvestment products similar to CFDs, but that offer more favorable tax treatment to residents of that country. We offer these products under the diverseregulatory environments in which we operate. For example, because of U.S. regulations, neither we, nor our subsidiaries, offer CFDs or spread bets in theUnited States or to U.S. residents.We seek to attract and support our customers through direct and indirect channels. Our primary direct channels for our retail segment are our Internetwebsites, FOREX.com and Cityindex.com, which are available in multiple languages, including English, Chinese, Japanese, German and Arabic. Our indirectchannel includes our relationships with introducing brokers, who solicit customers on our behalf, and white label partners, who offer our trading services totheir customers under their own brand. Total retail trading volume sourced through direct and indirect channels was 51% and 49%, respectively, for the yearended December 31, 2015.Our retail segment also includes Galvan Research and Trading, Ltd., or Galvan, which we acquired in 2014. Galvan, along with its subsidiaries, Galvan LLPand Faraday Research LLP, provides individual investors with professional advice and trading recommendations across a wide range of markets, includingforex, individual equities, equity indices and other market sectors.We generate revenue in our retail segment in two ways: (1) trading revenue from our market making activities for OTC products, earned principally from thebid/offer spread we offer our customers and any net gains and losses generated through changes in the market value of the currencies and other products heldin our net exposure and (2) fees, including financing charges for positions held overnight, commissions on equity CFD trades and advisory services, andother account related fees.In 2015, we generated approximately 86.3% of our retail segment trading volume from customers outside the United States. For a discussion of the risksassociated with our retail segment operations outside the United States, please see "Item 1A. Risk Factors."The following are the key components of our retail business:Innovative trading toolsWe have made significant investment in the development and support of our award-winning proprietary trading technology in order to provide our customerswith an enhanced customer experience and multiple ways to trade and manage their accounts, tailored to their level of experience and preferred mode ofaccess. In addition, we also selectively offer third party trading tools that we believe complement our proprietary offerings. We believe that our proprietarytrading technology has and will continue7Table of Contentsto provide us with a significant competitive advantage because we have the ability to adapt quickly to our customers’ changing needs, rapidly incorporatenew products and features and offer our customers multiple ways to engage with us.Competitive pricing and fast, accurate trade executionFor our OTC business, we have leveraged our extensive experience in the global OTC markets to develop highly automated processes, which allow us todeliver tight bid/offer spreads generally reflective of currently available pricing in the markets we offer and to execute our customers’ trades quickly andefficiently.In this regard, we have longstanding relationships with a large number of institutional liquidity providers, as well as access to multiple liquidity venues,which we believe allow us to offer our customers superior liquidity and more competitive pricing with tighter bid/offer spreads than many of our competitors.In addition, we have developed a proprietary pricing engine that electronically aggregates quotes from our liquidity sources based on the midpoint pricebetween the available “best bid” and “best offer.” This proprietary technology enables us to update our prices, on average three times a second for eachmarket we offer, helping to ensure that our prices accurately reflect current market price levels. Our proprietary technology also enables us to provide ourcustomers with high-speed trade execution. In 2015, we handled over 14 million trade requests through FOREX.com's proprietary platform and executed99.9% of trades in less than one second, with an average execution speed of .05 seconds. We have established a set of standards we use to measure executionquality for FOREX.com, and we publish execution statistics on a monthly basis. The FOREX.com execution scorecard, which is available on our website,demonstrates our ability to provide fast, accurate trade executions, as well as our commitment to transparency in our business. We believe we are the onlyfirm in our industry to voluntarily publish a monthly execution scorecard with the level of detail that we provide.Automated customer onboarding and account managementWe have developed proprietary technology to automate or otherwise facilitate operational functions that are core to our business and that we believe areimportant to our ability to deliver a superior customer experience. This includes a highly automated account opening and customer verification process, fastonline account funding and withdrawals with a wide variety of automated payment methods, and on-demand delivery of customer information, such asaccount statements and other account-related reporting. We also offer account opening and funding functions on our mobile trading applications in order toprovide a superior experience to the large number of customers who trade primarily through their mobile devices. Given the highly regulated and globalnature of our business, these processes are customized to each regulatory jurisdiction in which we operate, and are further tailored to customer needs andpreferences in specific countries in order to make it easier for clients in these countries to open accounts with us and then to fund and trade in those accounts.As a result, we have experienced a strong success at acquiring clients from countries in the world where we do not have a local office, particularly in theMiddle East and Asia Pacific regions.Sophisticated risk managementBecause we are exposed to market and credit risk in connection with our retail trading activities, developing and maintaining robust risk managementcapabilities is a high priority.We allow our customers to trade notional amounts greater than the funds they have on deposit with us through the use of leverage, making management ofcredit risk a key focus for us. The maximum leverage available to retail traders is generally set by the regulator in each jurisdiction. We manage customercredit risk through a combination of providing trading tools that allow our customers to avoid taking on excessive risk and automated processes that closecustomer positions in accordance with our policies, in the event that the funds in customers' accounts are not sufficient to hold their positions. For example,our customer trading platforms provide a real-time margin monitoring tool to enable customers to know when they are approaching their margin limits. If acustomer’s equity falls below the amount required to support one or more positions, we will automatically liquidate positions to bring the customer’s accountinto margin compliance.In addition, we actively monitor and assesses various market factors, including volatility and liquidity, and takes steps to address identified risks, such asproactively adjusting required customer margin (both initial and maintenance). For example, on January 15, 2015, the Swiss National Bank, or SNB,unexpectedly announced that it would move interest rates to -0.75% and abandon the 1.20 floor for EUR/CHF that it had previously maintained. Theannouncement led to unprecedented volatility in the Swiss franc, which negatively impacted many market participants. However, as part of our ordinarycourse risk management process, we had identified significant risk relating to EUR/CHF products and had increased client margin requirements to 5% inorder to help mitigate the risk of negative client equity in the event the price floor was abandoned. 8Table of ContentsWhen a retail customer executes a trade with us, the trade may be naturally hedged against an offsetting trade from another customer, hedged through anoffsetting trade with one of our liquidity providers or may become part of our net exposure portfolio. For naturally hedged trades, we receive the entirebid/offer spread we offer our customers on the two offsetting transactions. For trades hedged with our liquidity providers, we earn the difference between theretail bid/offer spread we offer our customers and the wholesale bid/offer spread we receive from our liquidity providers. Customer trades in our net exposureportfolio are managed pursuant to our risk-management policies and procedures, including risk limits established by the Risk Committee of our Board ofDirectors, and we receive the net gains or losses generated through the management of our net exposure.Our risk management policies and procedures have been developed to enable us to effectively manage our exposure to market risk, particularly in connectionwith the management of our net exposure. Our net exposure is evaluated each second and is continuously rebalanced throughout the trading day, therebyminimizing the risk we will be adversely affected by changes in the market prices of the products we hold. This real-time rebalancing of our portfolio enablesus to curtail risk and to be profitable in both up and down market scenarios.Our risk management policies and procedures are established and reviewed regularly by the Risk Committee of our Board of Directors. Our risk-managementteam monitors risk exposure continuously and updates senior management both informally over the course of the trading day and formally through real-time,intraday and end-of-day reporting. We do not actively initiate proprietary market positions in anticipation of future movements in the relative prices of theproducts we offer.CustomersOur retail customers consist primarily of self-directed traders, who execute trades on their own behalf. A small percentage of our customers have engaged anintermediary to make trading decisions on their behalf.Our typical self-directed customer is generally comfortable making trading decisions and is specifically interested in trading leveraged products, whichgenerally have a higher risk/reward profile. For the year ended December 31, 2015, self-directed customers represented approximately 98.9% of our retailtrading volume.The intermediaries engaged by our managed account customers, which we refer to as authorized traders, include professional money managers, which trade asignificant amount of aggregated customer funds, and individuals that trade for a small number of customer accounts. For the year ended December 31, 2015,managed account customers collectively represented approximately 1.1% of our retail trading volume.Sales and MarketingIn connection with our retail business, we look to acquire new customers as cost-efficiently as possible, primarily through online marketing efforts such asadvertising on third-party websites, search engine marketing and email marketing. Our experienced in-house marketing team creates highly targeted onlinecampaigns tailored to experienced traders, as well as marketing programs and materials designed to support and educate novice traders. We use sophisticatedtracking and measurement techniques to monitor the results of individual campaigns and continually work to optimize our overall marketing results.Our principal lead-generation tool is to offer prospective customers access to free registered practice trading accounts for a 30-day trial period. From aprospective customer’s point of view, we believe the registered practice trading account serves two important functions. First, it allows the prospectivecustomer to evaluate our trading platform, tools and services. Second, for less experienced traders, it serves as an educational tool, providing the prospectivecustomers with the opportunity to try trading in a risk-free environment, without committing any capital. During this trial period, our customer service team isavailable to assist and educate the prospective customers. We also actively forge partnerships with introducing brokers in order to expand our customer base. We work with a variety of different types of introducingbrokers, ranging from small, specialized firms that specifically identify and solicit customers interested in forex and CFD trading, to larger, more establishedfinancial services firms. Introducing brokers direct customers to us in return for either a commission on each referred customer’s trading volume or a share ofnet revenue generated by each referred customer’s trading activity.CompetitionThe market for our retail services is rapidly evolving and highly competitive. Our competitors vary by region in terms of regulatory status, breadth of productoffering, size and geographic scope of operations. Our main competitors can be categorized as follows:9Table of Contents•Regulated Forex Firms, such as Forex Capital Markets LLC and OANDA Corporation. Like us, these firms have also expanded globally over the pastseveral years, and we consider them to be competitors in the United States, as well as in several of our key international markets. •Global Multi-Asset Trading Firms, including firms such as Interactive Brokers, IG Group Holdings plc and CMC Group. These firms generally offer abroad set of asset classes and earn a significant percentage of their revenue from CFDs, equities and other exchange-traded products.Our Institutional SegmentThrough our institutional segment, we provide agency execution services and offer access to markets and self-directed trading in foreign exchange,commodities, equities, options and futures via an electronic communications network, or ECN, through our GTX platform. We also offer high touch servicesthrough a team of institutional sales and trading employees. For the year ended December 31, 2015, our institutional segment represented 7.8% of our netrevenue.In contrast to our retail segment, in our institutional segment, we primarily act as agent between the principals to the transactions that are executed, do notassume any market or credit risk, and earn commissions or commission equivalents (markup/markdown). Our institutional segment also facilitates clientorders through riskless principal trades.Electronic Execution ServicesThrough our GTX platform, we provide deep liquidity in spot and forward foreign exchange and precious metals to buy-side and sell-side firms, includingbanks, brokers, hedge funds, Commodity Trading Advisors and asset managers. GTX’s unique centrally-cleared prime brokerage model supports true peer-to-peer trading capabilities, meaning every GTX client has an opportunity to add market liquidity to the venue by posting real-time bids and offers, as well astrade on the bid and offers of other participants. For the year ended December 31, 2015, net revenue from our ECN business represented 64% of the netrevenue of our institutional segment.Our GTX Direct offering, a component of our ECN business, allows professional traders who meet certain qualifications, but do not have a credit line with aprime broker, access to the liquidity of the GTX platform. Through GTX Direct, our clients deposit collateral with us and we make trades through the GTXtrading platform on our clients’ behalf, earning a commission for each trade.GTX is powered by software and intellectual property that we first licensed on a exclusive basis in 2010. After undertaking significant development andenhancement efforts, we acquired full ownership of the software and intellectual property in July 2014.Institutional Sales and TradingOur institutional sales and trading business serves a broad range of participants across several asset classes, allowing clients to interact with the market basedon their specific needs and preferences. As a result, we are able to attract a base of clients with diverse investment styles and strategies. Our institutional salesand trading business includes our agency voice brokers who assist clients with complex liquidity sourcing and trade executions, as well as our swapexecution facility, or SEF, which provides an electronic venue for trading FX non-deliverable forwards.Nearly all of our revenue from institutional sales and trading consists of commissions derived from transaction execution services for institutional clients,conducted on an agency basis, as well as commission-equivalents generated on riskless principal transactions. Over the past several years we have built upthis business primarily through a focus on client service and an expansion of our sales and trading team. For the year ended December 31, 2015, net revenuefrom our institutional sales and trading business represented 37% of the net revenue of our institutional business.Sales and MarketingWe have a direct sales team that is dedicated to building relationships with potential institutional customers and expanding our institutional business. Sinceits inception in 2010, our institutional business has quickly expanded to include customers throughout the United States, Europe and Asia.Competition10Table of ContentsIn general, competition for business with institutional clients is based on a variety of factors, including technology, execution quality, client relationships,client service, cost and reputation.GTX competes with other firms offering electronic trading platforms, such as ICAP, through its EBS offering; Reuters; Currenex, owned by State Street Bank;BATS Global Markets, Inc., through its Hotspot offering; Integral Development Corp.; and others.Our Futures SegmentOur futures segment offers execution and related services for exchange-traded futures and futures options on major U.S. and European exchanges. We offerfutures services through our regulated FCM, GAIN Capital Group, LLC. In 2014, we expanded our futures business by acquiring a majority interest in GlobalAsset Advisors, LLC ("GAA"), a Chicago-based futures brokerage firm that markets to and services clients through Daniels Trading, an online futuresbrokerage targeting retail and professional traders. At the same time, we also acquired a majority interest in Top Third Ag Marketing, LLC ("TT"), which usesoptions-based hedging strategies to help clients manage the risks of agricultural production.Revenue in our futures segment is primarily generated through commissions earned on futures and futures options trades. Our futures segment represented10.4% of our net revenue for the year ended December 31, 2015.Advanced Trading PlatformAs with our retail segment, our futures segment seeks to provide customers with an enhanced customer experience through our proprietary trading platform.We have invested in high-speed connectivity to over 30 global electronic exchanges to deliver streaming quotes and high-speed executions. Our OEC Traderplatform is an easy-to-use electronic trading platform that offers users access to a full suite of trading tools. These include charting tools, custom alerts andindicators that allow customers to trade and monitor activity through a single charting window, as well as automated trading and risk management tools. Ourfutures segment also provides Trade Desk Manager, a broker version of our OEC Trader platform that is designed to allow brokers with information and toolsto manage their accounts. We also license a white label version of our OEC Trader platform to select third parties.Risk ManagementIn our futures segment, we are exposed to debit/deficit risk with our clients for exchange-traded futures and options on futures. If an adverse market moverelated to a client’s position occurs and we are unable to collect a margin call in a timely manner, the client account may incur a loss, resulting in a debitbalance. If a client account were to incur a loss resulting in a debit balance and we were unable to collect the debit balance from our client, we would incur abad debt expense, which could have a material adverse effect on our results of operations. In recognition of this risk, we monitor all client accounts in nearreal time and have employed multiple risk mitigation measures to help ensure that our client accounts are properly margined at all times.Sales and MarketingAs with our other segments, we seek to acquire customers as cost-efficiently as possible. Sales leads are generated through seminars, online advertising andother media.Our futures segment customers are sourced directly through dedicated sales staffs at GAIN Capital Group LLC, GAA, and TT. These sales teams focus on avariety of sectors and provide differentiated services to our customers.Additionally, our futures segment is introduced to customers indirectly through a network of introducing brokers, whose customers deposit funds with GainCapital Group LLC.CompetitionWith respect to exchange-traded products, our futures segment competes for both wholesale introducing business and direct client business. At the wholesalelevel, we attract partners who are interested in white labeling our proprietary software. In this regard, our primary competitors are the limited number of FCMsthat own and operate proprietary technology, including RJO Brien, Rosenthal Collins Group, Interactive Brokers and ADM Investor Services.11Table of ContentsWith the acquisition of GAA and Top Third, we also have a sizable and growing direct client business in our futures segment. This business is primarilyfocused on individual retail speculators and agricultural clients seeking to hedge commodity price exposure. The majority of our competitors in thecommodity hedging space are small, privately held firms like Allendale, Advance Trading, and Roach Ag Marketing, although we compete with larger firms,such as Interactive Brokers, with respect to individual retail speculators.Intellectual PropertyWe rely on a combination of trademark, copyright, trade secret and unfair competition laws in the United States and other jurisdictions to protect ourproprietary technology, intellectual property rights and our brands (e.g., FOREX.com, GAIN Capital, City Index and GTX). We also enter into confidentialityand invention assignment agreements with our employees and consultants, and confidentiality agreements with other third parties. We rigorously controlaccess to our proprietary technology. Currently, we do not have any pending or issued patents.We use a variety of service marks that have been registered with the U.S. Patent and Trademark Office, including: GAIN Capital (registered service mark),FOREX.com GAIN Capital Group (registered service mark), Trade Real-Time (registered service mark), ForexPro (registered service mark), ForexPremier(registered service mark), Forex Insider (registered service mark), ForexTrader (registered service mark), FOREX.com (registered service mark), ForexPlus(registered service mark), It’s Your World. Trade It. (registered service mark), GFT (registered service mark), “GFT and Lion Head” (registered service mark),“Lion Head” (registered service mark), G3BO (registered service mark), GFT Markets (registered service mark), Dealbook (registered service mark), CFD 360(registered service mark), FX 360° (registered service mark), OEC (registered service mark), OEC One Link (registered service mark) and Open E Cry(registered service mark). We also use a variety of trademarks that have been registered with the U.S. Patent and Trademark Office, including: GFT (registeredtrademark), “GFT and Lion Head” (registered trademark), “Lion Head” (registered trademark), Dealbook360 (registered trademark), Dealbook (registeredtrademark), Foresight-A.I. (registered trademark) and Open E Cry (registered trademark).RegulationOverviewOur business and industry are highly regulated. Our operating subsidiaries are regulated in a number of jurisdictions, including the United States, the UnitedKingdom (through which we have accessed regulatory passport rights to operate in a number of European Economic Area jurisdictions), Japan, Australia,Hong Kong, Canada, Singapore and the Cayman Islands. Government regulators and self-regulatory organizations oversee the conduct of our business inmany ways, and several perform regular examinations to monitor our compliance with applicable statutes, regulations and rules. These statutes, regulationsand rules cover all aspects of our business, including:•sales and marketing activities, including our interaction with, and solicitation of, customers;•trading practices, including the types of products and services we may offer;•treatment of customer assets, including custody, control, safekeeping and, in certain countries, segregation of our customer funds and securities;•maintaining specified minimum amounts of capital and limiting withdrawals of funds from our regulated operating subsidiaries;•continuing education requirements for our employees;•anti-money laundering practices;•recordkeeping and reporting; and•supervision regarding the conduct of directors, officers and employees.In some jurisdictions in which we offer our products and services, we are not subject to regulation as a result of the nature of the market or the manner inwhich we conduct our business. We consult with legal counsel in jurisdictions in which we operate on a regular basis as to whether we have the requiredauthorizations, licenses or approvals or whether we may conduct our business cross-border with residents in that jurisdiction without obtaining localregulatory authorization, approval or consent. In addition, on an on-going basis we proactively evaluate our activities in jurisdictions in which we are notcurrently licensed or registered. To the extent that we wish to serve customers in a jurisdiction in which we determine licensing or registration is required, wemay also elect to direct such customers to a licensed white label or other partner, rather than pursuing licensing or registration ourselves.Though we conduct our business in a manner which we believe complies with applicable local law, regulators may assert authority over activities that theydeem to take place within the jurisdiction they regulate, and new laws, rules or regulations12Table of Contentsmay be enacted that change the regulatory landscape and result in new, or clarify preexisting, registration or licensing requirements.The primary responsibility for ensuring that we maintain compliance with all applicable regulatory requirements is vested in our legal and compliancedepartments. In addition, our legal and compliance departments are responsible for our ongoing training and education programs, supervision of ourpersonnel required to be licensed by one or more of our regulators, review of sales, marketing and other communications and other related functions. Inaddition, all of our sales employees are licensed pursuant to applicable regulation.U.S. RegulationIn the United States, the CFTC and the NFA regulate our forex and futures trading activities. Historically, the principal legislation covering our U.S. forexbusiness was the Commodity Exchange Act, which provides for federal regulation of all commodities and futures trading activities and requires all futuresand commodity options to be traded on organized exchanges. In recent years, as in the case of other companies in the financial services industry, our forexbusiness has been subject to increasing regulatory oversight. Specifically, in 2008, Congress passed the CFTC Reauthorization Act, which amended theCommodity Exchange Act to grant the CFTC express authority to regulate the retail forex industry. On October 18, 2010, the CFTC adopted a series of ruleswhich regulate various aspects of our business, including:•creating “retail foreign exchange dealers,” or RFEDs, a new regulated category of forex brokers focused on retail investors that are permitted to act ascounterparty to retail forex transactions;•imposing an initial minimum security deposit amount of 2.0% of the notional value for retail forex transactions in “major currency” pairs and 5.0%of the notional value for all other retail forex transactions;•providing that introducing brokers, money managers and fund managers must either (i) register with the CFTC and become members of the NFA orapply for an exemption from registration and (ii) meet the minimum net capital requirements applicable to futures and commodity optionsintroducing brokers or enter into a guarantee agreement with a CFTC-regulated forex dealer member and permitting only one such guaranteeagreement per introducing broker;•requiring that a risk disclosure statement be provided to every retail forex customer, including disclosure of the number of profitable andunprofitable non-discretionary accounts maintained by the forex broker during the four most recent calendar quarters;•prohibiting RFEDs, FCMs and introducing brokers from including statements in sales and marketing materials that would appear to convey topotential retail forex customers that there is a guaranty against loss, and requiring that FCMs, RFEDs and introducing brokers provide retail forexcustomers with enhanced written disclosure statements that, among other things, inform customers of the risk of loss; and•requiring RFEDs to maintain net capital of at least $20.0 million, plus 5.0% of the RFED’s retail customer obligations in excess of $10.0 million. Inaddition, in the event an RFED’s net capital position falls below 110.0% of the minimum net capital requirement, the RFED would be subject toadditional reporting requirements.Our exchange-traded futures business, which is carried on by our subsidiary Gain Capital Group, LLC, is subject to the CFTC Net Capital Rule (Regulation1.17). Our OTC foreign exchange business carried on by our subsidiary Gain Capital Group, LLC under the Forex.com brand, is also subject to the CFTC NetCapital Rule (Regulation 5.7). Under applicable provisions of these regulations, Gain Capital Group, LLC is required to maintain adjusted net capital of thegreater of $1.0 million or 8% of Customer and Non-Customer Maintenance Margin or $20.0 million plus 5% of all liabilities owed to retail customersexceeding $10.0 million. At December 31, 2015, Gain Capital Group, LLC maintained $10.2 million more than the required minimum regulatory capital for atotal of 1.4 times the required capital and at all times maintained compliance with all applicable regulations.In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act. A number of significant provisionscontained in the law affect, or will affect once implementing regulations are adopted by the appropriate federal agencies, our business. Specifically, theDodd-Frank Act includes:•rules that, beginning in October 2010, require us to ensure that our customers residing in the United States have accounts open only with our NFA-member operating entity, GAIN Capital Group, LLC;•amendments to the Commodity Exchange Act that, beginning on July 15, 2011, required essentially all retail transactions in any commodity otherthan foreign currency to be executed on an exchange, rather than OTC;•a requirement that federal banking regulators adopt new rules regarding the conduct and operation of retail forex businesses by banks; and13Table of Contents•a requirement that the SEC adopt rules regarding the conduct and operation of retail forex businesses by broker-dealers.The Dodd-Frank Act also provides for additional regulation of swaps and security-based swaps, including some types of foreign exchange and metalsderivatives in which we engage. The Dodd-Frank Act requires the registration of swap dealers with the CFTC and imposes significant regulatory requirementson swap dealers and swap execution facilities. Effective February 27, 2013, GAIN GTX, LLC, became registered with the CFTC and NFA as a swap dealer.Effective April 17, 2014, GTX SEF, LLC became temporarily registered with the CFTC as a swap execution facility. Certain of our other subsidiaries may berequired to register, or may register voluntarily, as swap dealers and/or swap execution facilities.Swap dealers and swap execution facilities are subject to a comprehensive regulatory regime with new obligations for the swaps activities for which they areregistered, including adherence to risk management policies, supervisory procedures, trade record and real time reporting requirements as well as proposedrules for new minimum capital requirements. The specific parameters of these swap dealer and swap execution facility requirements are being developed bythe CFTC and other regulators. The full impact of the regulation on GAIN GTX, LLC, GTX SEF, LLC and any other of our subsidiaries that register as a swapdealer and/or swap execution facility remains unclear. It is likely, however, that these entities will face increased costs due to the registration and regulatoryrequirements listed above. Complying with the proposed regulation of swap dealers and swap execution facilities could require us to restructure ourbusinesses, require extensive systems changes, require personnel changes or raise additional potential liabilities and regulatory oversight. Compliance withswap-related regulatory capital requirements may require us to devote more capital to our GTX business. The increased costs associated with compliance, andthe changes that will be required in our OTC and clearing businesses, may adversely impact our results of operations, cash flows, or financial condition.U.S. Patriot Act and Anti-Money LaunderingLike other companies in the financial services industry, we are subject to a variety of statutory and regulatory requirements concerning our relationships withcustomers and the review and monitoring of their transactions. Specifically, we are subject to the Uniting and Strengthening America by ProvidingAppropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the Patriot Act, which requires that we maintain a comprehensive anti-moneylaundering, or AML, program, a customer identification program, or CIP, designate an AML compliance officer, provide specified employee training andconduct an annual independent audit of our AML program. Consistent with the Patriot Act, our CIP includes both documentary and non-documentary reviewand analysis of potential customers. Under our CIP, we review each prospective customer’s identity internally and also contract with third-party firms thatperform extensive background checks on each prospective customer, including through review of the U.S. Treasury Department’s Office of Foreign Assetsand Control, Specially Designated Nationals and Blocked Persons lists. These procedures and tools, coupled with our periodic training, assist us incomplying with the Patriot Act, as well as the CFTC’s and NFA’s applicable AML and CIP requirements.United Kingdom RegulationGAIN Capital Forex.com U.K. Ltd., or GCUK1, GAIN Capital U.K. Ltd., or GCUK2, and Galvan Research and Trading, Ltd., or Galvan, all three together theU.K. Entities, are all registered in the U.K. and are regulated by the Financial Conduct Authority in respect of their trading activity. The U.K. Entities arerequired to comply with relevant U.K. and E.U. legislation. In addition they must comply with the rules and guidance contained in the FCA Handbook ofrules and guidance, or FCA Handbook.GCUK1, is regulated by the FCA, as a full scope €730k IFPRU Investment Firm. GCUK1 is required to maintain the greater of $1.0 million (€730,000) or theFinancial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration, market and forex risk. AtDecember 31, 2015, GCUK1 maintained $33.8 million more than the minimum required regulatory capital for a total of 2.2 times the required capital and atall times maintained compliance with all applicable regulations.GCUK2, is regulated by the FCA as a full scope €730k IFPRU Investment Firm. GCUK2 is required to maintain the greater of $1.0 million (€730,000) or theFinancial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration, market and forex risk. AtDecember 31, 2015, GCUK2 maintained $73.4 million more than the minimum required regulatory capital for a total of 2.3 times the required capital and atall times maintained compliance with all applicable regulations.14Table of ContentsEffective beginning January 1, 2016, the FCA introduced the addition of a capital conservation buffer and a countercyclical capital buffer in line with therequirements set out in Capital Requirements Directive, or CRD IV, Article 160 Transitional Provisions for Capital Buffers. This requires all firms to maintainan additional buffer on top of the minimum capital requirements. The amount of buffer, which is a percentage of the firm’s common equity tier 1 capitalagainst the total risk exposure amount, will be based on a transitional period from January 1, 2016 to December 31, 2018. During that period, the minimumcommon equity tier 1 capital ratio requirement will increase from 5.125% to 8%.Galvan is regulated by the FCA as a BIPRU Limited License Firm. Galvan is required to maintain a base financial resources requirement of $0.1 million(€0.05 million) and a capital requirement of the higher of either credit risk plus market risk or fixed overhead requirement. At December 31, 2014, Galvanmaintained $3.6 million more than the minimum required regulatory capital for a total of 6.1 times the required capital and at all times maintainedcompliance with all applicable regulations.Client Money RulesGCUK1 and GCUK2 are subject to the FCA’s client money rules by virtue of being authorized by the FCA to hold client money. Recently, these rules wererevised extensively by the FCA and the changes came into effect over a period of 18 months, starting on July 1, 2014. These revisions focused on improvinga firm’s systems and controls around segregation, record keeping and reconciliation and set out how a firm must address client risks within its business. Underthese rules, we are required to:•maintain adequate segregation of client funds;•maintain adequate records in order to be able to meet future obligations when we hold client assets as collateral and be able to identify details ofthose assets to clients;•comply with custody rules when holding financial instruments (as defined by MiFID I) or other investments belonging to a client in the courseof our business, including the safeguarding of those investments and holding all dividends and fees (e.g., stock lending fees) in accordance withthe client money rules;•have adequate organizational arrangements in place to minimize the risk that client money may be paid for the account of a client whose moneyhas not yet been received by us;•undertake daily internal client money reconciliation; and•appoint an individual who is responsible for CASS oversight.Anti-Money Laundering and SanctionsAs in the U.S., we are subject to statutory and regulatory requirements concerning our relationships with customers and the review and monitoring of theirtransactions. Specifically, the U.K. Entities are subject to ongoing customer due diligence, or CDD, obligations under the Money Laundering Regulations2007, or MLR and the FCA Handbook.The prescribed CDD measures require the U.K. Entities to (i) verify customer identity and understand the nature and purpose of the proposed relationship onthe basis of documents, data or information obtained from a reliable and independent source and (ii) review and monitor their customer’s transactions andactivities. The U.K. Entities are required to determine the extent of CDD measures required for each customer on a risk sensitive basis depending on the typeof customer, business relationship, product or transaction and we must be able to demonstrate that such measures are appropriate in view of the risks of moneylaundering and terrorist financing. Our procedures are based on the Joint Money Laundering Group’s Guidance for the UK Financial Sector, the JMLSGGuidance, which provides guidance to firms for the determination of appropriate CDD measures.The FCA requires the U.K. Entities to have systems and controls in place to enable them to identify, assess, monitor and manage money laundering risk.Accordingly, we have the requisite systems and controls in place which are comprehensive and proportionate to the nature, scale and complexity of ouractivities. We provide appropriate training to our employees in relation to money laundering and retain documentation of our risk management policies andrisk profile in relation to money laundering. As required, we provide regular reports to our Money Laundering Reporting Officer, or MLRO, on the operationand effectiveness of these systems and controls, including details of our regular assessments of the adequacy of these systems and controls to ensure theircompliance with FCA requirements.Our systems and controls also include CDD and other measures to identify where customers and others with whom we transact may be subject to financialsanctions, including those initiated or adopted by the UK Treasury or the EU.EMIR15Table of ContentsThe E.U. European Market Infrastructure Regulation (Regulation (EU) 648/2012), or EMIR, imposes requirements on entities that enter into any form ofderivative contract, including foreign exchange derivatives, and applies directly to firms in the E.U. and indirectly to non-E.U. firms that trade with E.U.firms. Accordingly, the U.K. Entities need to:•report all derivative contracts and their lifecycle events (concluded, modified and terminated) to which we are a party to a trade repository eitherby ourselves or through a third party;•keep all records relating to concluding of derivative contracts and any subsequent modification for 5 years;•comply with the risk management requirements for OTC bilateral derivatives, including portfolio reconciliation, portfolio compression, recordkeeping, dispute resolution and margining (some of these requirements will be phased in from September 2016); and•clear through central counterparties all OTC derivatives which will be subject to the mandatory clearing obligation.The clearing and reporting obligations only apply to companies and other “undertakings”: they do not apply to individuals who are not carrying out aneconomic activity. This means that OTC derivatives between undertakings and such individuals do not need to be cleared, however, the undertaking will stillbe required to report the trade.Appropriateness assessmentsWhere firms offer “execution only” services for certain financial instruments which are deemed “complex”, E.U. Markets in Financial Instruments Directive(Directive 2004/39/EC), or MiFID I, requires firms to assess the appropriateness of those investments for retail clients. For this assessment, we are required tocollect information about our existing and potential clients’ knowledge and experience with regard to specific products and services, including:•the types of services, transactions and financial instruments with which the retail client is familiar;•the nature, volume, and frequency of the retail client’s transactions in financial instruments and the period over which they have been carriedout; and•the level of education, and profession or relevant former profession of the retail client or potential retail client.We are required to offer to a retail client or transact for them only those products that are deemed appropriate for their experience. If the retail client demandsa product that has been assessed as inappropriate for the retail client’s circumstances by us, we may offer that product to the client but we are required to givethe retail client a warning that the product is inappropriate to its circumstances. We are not required to undertake this analysis for professional clients as weare entitled to assume that a professional client has the necessary knowledge and experience in order to understand the risks involved in relation to theparticular products or services for which he has been classified as a professional client.MiFID IIMiFID I applied in the UK from November 2007 but has been recast in light of the financial crisis into a new directive, the Markets in Financial InstrumentsDirective II (Directive 2014/65/EU), or MiFID II, and a new regulation, the Markets in Financial Instruments Regulation (Regulation 600/2014), or MiFIR.The changes implemented by MiFID II and MiFIR were set to take effect from January 3, 2017, however, it is expected they will be delayed until January 3,2018.MiFID II will:•expand the number of financial instruments for which firms are required to carry out an appropriateness assessment before providing anexecution only service to retail clients;•extend the pre- and post-trade transparency regime to derivatives traded on regulated markets, multi-lateral trading facilities, or MTFs, andorganized trading facilities, or OTFs;•expand transaction reporting to those financial instruments traded on MTFs, OTFs, and those financial instruments where the underlyinginstrument is traded on a Trading Venue; and•give E.U. Member State regulators the new power to ban or restrict the marketing, distribution or sale of a financial instrument or types offinancial practice where there is a threat to investor protection, the orderly functioning and integrity of markets or to financial stability. TheEuropean Banking Authority and the European Securities and Markets Authority have similar powers to impose a ban on an EU-wide basis or inrelation to a particular E.U. Member State.Packaged Retail and Insurance-based Investment Products (PRIIPs)16Table of ContentsRegulation 1286/486 on key information documents for packaged retail and insurance-based investment products, or the PRIIPs Regulation, will apply inthe UK from December 31, 2016. From this date, the U.K. Entities will need to comply with the new regime set out in the PRIIPs Regulation in relation toPRIIPS that they manufacture, advise on or sell to retail clients. The FCA regards derivatives (including options, futures, and contracts for differences) asfalling within the definition of a PRIIP. The new regime will require us to provide retail clients with a standardized key information document, or KID, ingood time before any transaction in derivatives is concluded or for transactions concluded by distance communications, after the transaction has taken place,but only if it is not possible to provide the KID in advance and the client consents.Other International RegulationWe have provided below a brief description of the key aspects of the regulations governing our operations in the jurisdictions outside of the U.S. and theUnited Kingdom in which we have registered with, or obtained a license from, the local regulator, as well as material regulatory developments affecting ourbusiness in other jurisdictions important to our business, including developments that have presented risks or uncertainties for our operations.JapanForex.com Japan Co., Ltd., or GC Japan, is a registered Type I financial instruments business firm regulated by the Japan Financial Services Agency, or FSA,in accordance with Financial Instruments and Exchange Law (Law No. 25 of 1948, as amended). GC Japan is a member of the Financial Futures Associationof Japan. GC Japan is subject to a minimum capital adequacy ratio of 120%, which is derived by dividing Net Capital (as defined in Law No. 25) by the sumof GC Japan’s market, counterparty credit risk and operational risk. At December 31, 2015, GC Japan maintained $8.7 million more than the minimumrequired regulatory capital for a total of 10.7 times the required capital and at all times maintained compliance with all applicable regulations.GC Japan is also regulated by the Japan Ministry of Economy, Trade and Industry, or the METI, and the Japan Ministry of Agriculture, Forestry and Fisheries,or the MAFF. As required under applicable law, on January 1, 2011, we obtained a license from the METI and MAFF.AustraliaGAIN Capital Forex.com Australia, Pty. Ltd., or GCAU1, is regulated under the laws of Australia, including the CorporationsAct 2001 (Commonwealth of Australia). The Australian Securities and Investments Commission, or ASIC, is the corporate, markets and financial servicesregulator in Australia responsible for administering aspects of the Corporations Act 2001. GCAU1 holds an Australian Financial Services License that hasbeen issued by ASIC. GCAU1 is required to maintain a minimum capital requirement of $0.7 million (1.0 million AUD). The regulatory capital held isrequired to be in excess of 110% of its requirements at all times. At December 31, 2015, GCAU1 maintained $1.7 million more than the minimum requiredregulatory capital for a total of 3.4 times the required capital and at all times maintained compliance with all applicable regulations. Gain Capital Australia Pty Ltd, or GCAU2 is regulated under the laws of Australia, including the Corporations Act 2001 (Commonwealth of Australia). TheASIC is the corporate , markets and financial services regulator in Australia responsible for administering aspects of the Corporations Act 2001. GCAU2holds an Australian Financial Services License that has been issued by ASIC. GCAU2 is required to maintain a minimum capital requirement of $0.7 million(1.0 million AUD). The regulatory capital held is required to be in excess of 110% of its requirements at all times. At December 31, 2015, GCAU2 maintained$2.1 million more than the minimum required regulatory capital for a total of 4.0 times the required capital and at all times maintained compliance with allapplicable regulations.Effective January 31, 2014, ASIC increased the Net Tangible Assets (NTA) requirement, as part of RG166: Licensing: Financial Requirements, for OTCderivative issuers. ASIC requires retail OTC derivative issuers to have at all times the greater of $0.7 million or 10% of average revenue on hand at all times. RG166 outlines that, at the minimum, 50% of the NTA requirement is required to be held in cash or cash equivalents and 50% in liquid assets. OTCderivative issuers must report to ASIC if their NTA falls below 110% of the requirement within 3 business days after becoming aware of the event. ASIC has also recently implemented additional reporting regulations. As part of phase 2 of RG251 under ASIC, GCAU1 and GCAU2 began transactionreporting on October 1, 2014 and began position reporting on April 1, 2015. Australian Financial Service Licensees (AFSL) are required to reportcommodity, credit, equity, interest, and foreign exchange derivatives transactions and positions. AFSL holders will need to report to ASIC approved traderepositories under the Corporations Act 2001 as per the reporting requirement. 17Table of ContentsHong KongGAIN Capital - Forex.com Hong Kong, Ltd., or GCHK, is licensed by the Securities and Futures Commission, or SFC, to carry out Type 3 Regulated Activity,Leveraged Foreign Exchange Trading. GCHK is subject to the requirements of section 145 of the Securities and Futures Ordinance (Cap.571). Under this rule,GCHK is required to maintain a minimum liquid capital requirement of the higher of $1.9 million or the sum of 1.5% of its aggregate gross foreign currencyposition and 5% of its adjusted liabilities and clients’ margin calculated in accordance with applicable rules. At December 31, 2015, GCHK maintained $2.0million more than the minimum required regulatory capital for a total of 2.1 times the required capital and at all times maintained compliance with allapplicable regulations.Cayman IslandsGAIN Global Markets, Inc., or GGMI, our Cayman Island subsidiary, is a registered securities arranger with the Cayman Islands Monetary Authority, orCIMA. GGMI is required to maintain a capital level that is the greater of one quarter of relevant annual expenditure, or $100,000. At December 31, 2015,GGMI maintained $0.1 million more than the minimum required regulatory capital for a total of 1.5 times the required capital and at all times maintainedcompliance with all applicable regulations.CanadaGAIN Capital - Forex.com Canada, Ltd., or GCCA, is a Dealer Member of the Investment Industry Regulatory Organization of Canada, or IIROC, andregulated under the laws of Canada, including the Canadian Investor Protection Fund. In Canada, the securities industry is governed by provincial orterritorial legislation, and there is no national regulator. Local legislation differs from province to province and territory to territory, but generally requiresthat forex dealing representatives register with applicable regulators and self-regulatory organizations in order to offer forex and/or CFD products to retailclients. GCCA’s principal provincial regulator is the Ontario Securities Commission, or OSC. GCCA is required to maintain risk-adjusted capital in excess ofthe minimum capital requirement. At December 31, 2015, GCCA maintained $1.2 million more than the minimum required regulatory capital for a total of7.0 times the required capital and at all times maintained compliance with all applicable regulations.SingaporeGain Capital Singapore Pte Ltd (“GCS”) is registered by the Monetary Authority of Singapore (“MAS”) and operates as an approved holder of Capital MarketServices License. GCS is subject to the requirements of MAS and pursuant to the Securities and Futures Act (Cap 289). Under these rules GCS is required tomaintain a minimum base capital of $0.6 million (1.0 million SGD) and Financial Resources in excess of 120% of the total risk requirements, which iscalculated as the sum of operational, counterparty, large exposure and forex risk at all times. At December 31, 2015, GCS maintained $6.8 million more thanthe required minimum regulatory capital for a total of 12.3 times the required capital and at all times maintained compliance with all applicable regulations.Global Anti-Money LaunderingOur anti-money laundering and customer identification programs are designed to comply with applicable rules and regulations on a global basis. In addition,we have developed proprietary methods for risk-management and continue to add specialized processes, queries and automated reports designed to identifypotential money laundering, fraud and other suspicious activities. EmployeesAs of December 31, 2015, we had 772 employees. None of our employees are covered by collective bargaining agreements.Corporate InformationWe were incorporated in Delaware in October 1999 as GAIN Capital, Inc. Our principal executive offices are located at Bedminster One, 135 Route 202/206,Bedminster, New Jersey 07921. We operate our trading risk management and most administrative services out of our New York, New York; Bedminster,New Jersey; Jersey City, New Jersey; Chicago, Illinois; Powell, Ohio; Grand Rapids, Michigan; London, England; Cornwall, England; Tokyo, Japan; Sydney,Australia; Beijing, China; Hong Kong and Singapore offices. A complete list of our subsidiaries can be found in Exhibit 21.1 to this Annual Report.Available Information18Table of ContentsGAIN maintains a corporate website with the address www.gaincapital.com. Its intended use is as a regular means of disclosing material public informationand for complying with disclosure obligations under Regulation FD promulgated by the SEC. Such disclosures are included on the website under theheading “Investor Relations.” Accordingly, investors should monitor such portions of the website, in addition to following our press releases, SEC filings andpublic conference calls and webcasts.We are not incorporating information contained in the website by reference into this Annual Report on Form 10-K. We will make available, free of chargethrough the website under the heading “Investor Relations,” our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports onForm 8-K, and any amendments to these reports as soon as reasonably practicable after electronically filing such material with, or furnishing such material to,the SEC. In addition, we make available on our website (i) our Proxy Statements and reports filed by officers and directors under Section 16(a) of theExchange Act, (ii) the charters for the committees of our Board of Directors, including the Audit Committee, Compensation Committee, Nominating andCorporate Governance Committee and Risk Committee and (iii) our Code of Business Conduct and Ethics governing our directors, officers and employees.We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosedpursuant to the rules of the SEC and the New York Stock Exchange.Materials filed with the SEC can also be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call theSEC at 1-800-SEC-0330 for further information about the Public Reference Room. The SEC also maintains a website, www.sec.gov, containing the reports,proxy statements and other information that we file with the SEC.ITEM 1A. RISK FACTORSRisks Related to Our BusinessOur revenue and profitability are influenced by trading volume and currency volatility, which are directly impacted by domestic and international marketand economic conditions that are beyond our control.During recent years, there has been significant disruption and volatility in the global financial markets. Our revenue is influenced by the general level oftrading activity in the global financial markets. Our revenue and operating results may vary significantly from period to period due primarily to movementsand trends in the world’s financial markets and to fluctuations in trading levels. We have generally experienced greater trading volume in periods of volatilemarkets. In the event we experience lower levels of market volatility, our revenue and profitability will likely be negatively affected. In addition, ourcustomer base is primarily comprised of individual retail customers who view trading in the markets we offer as an alternative investment class. If globaleconomic conditions limit the disposable income of our customers, our business could be materially adversely affected as our customers may choose tocurtail their trading, which could result in reduced customer trading volume and trading revenue.Like other financial services firms, our business and profitability are directly affected by elements that are beyond our control, such as economic and politicalconditions, broad trends in business and finance, changes in the volume of market transactions, changes in supply and demand for currencies, movements incurrency exchange rates, changes in the financial strength of market participants, legislative and regulatory changes, changes in the markets in which suchtransactions occur, changes in how such transactions are processed and disruptions due to terrorism, war or extreme weather events. Any one or more of thesefactors, or other factors, may adversely affect our business and results of operations and cash flows. A weakness in equity markets, could result in reducedtrading activity by our customers and, therefore, could have a material adverse effect on our business, financial condition and results of operations and cashflows. As a result, period-to-period comparisons of our operating results may not be meaningful and our future operating results may be subject to significantfluctuations or declines.Our risk-management policies and procedures may not be effective and may leave us exposed to unidentified or unexpected risks.We are dependent on our risk-management policies and the adherence to such policies by our trading staff. Our policies, procedures and practices used toidentify, monitor and control a variety of risks, including risks related to human error, customer defaults, market movements, fraud and money-laundering, areestablished and reviewed by the Risk Committee of our Board of Directors. Some of our methods for managing risk are discretionary by nature and are basedon internally developed controls and observed historical market behavior, and also involve reliance on standard industry practices. These methods may notadequately prevent losses, particularly as they relate to extreme market movements, which may be significantly greater than historical fluctuations in themarket. Our risk-management methods also may not adequately prevent losses due to technical errors if our testing and quality control practices are noteffective in preventing software or hardware19Table of Contentsfailures. In addition, we may elect to adjust our risk-management policies to allow for an increase in risk tolerance, which could expose us to the risk ofgreater losses. Our risk-management methods rely on a combination of technical and human controls and supervision that are subject to error and failure.These methods may not protect us against all risks or may protect us less than anticipated, in which case our business, financial condition and results ofoperations and cash flows may be materially adversely affected.Our trading activities involve significant risks and unforeseen events could have a material adverse effect on our business, financial condition, results ofoperations and cash flows.We offer our clients access to a wide array of products, including forex, CFDs, spread bets, futures, futures options, OTC currency derivatives and gold andsilver spot trading products. Our trading activities in these various products involve significant risks.Through our retail and institutional forex trading activities, our principal sources of revenues and profits arise from the difference between the prices at whichwe buy and sell, or sell and buy, foreign currencies. We may incur trading losses for a variety of reasons, including:•price changes in foreign currencies;•lack of liquidity in foreign currencies in which we have positions; and•inaccuracies in our proprietary pricing mechanism, or rate engine, which evaluates, monitors and assimilates market data and reevaluates ouroutstanding currency quotes, and is designed to publish prices reflective of prevailing market conditions throughout the trading day.These risks may affect the prices at which we are able to sell or buy foreign currencies or may limit or restrict our ability to either resell foreign currencies thatwe have purchased or repurchase foreign currencies that we have sold.In addition, competitive forces often require us to match the breadth of quotes our competitors display and to hold varying amounts and types of foreigncurrencies at any given time. By having to maintain positions in certain currencies, we are subjected to a high degree of risk. We may not be able to managesuch risk successfully and may experience significant losses from such activities, which could have a material adverse effect on our business, financialcondition, results of operations and cash flows.All of the risks that pertain to our trading activities in the forex market also apply to our CFDs, spread bets, futures, futures options, OTC currency derivativesand gold and silver spot trading products and any other products we may offer in the future. These risks include market risk, counterparty risk, liquidity risk,technology risk, third-party risk and risk of human error. In addition, unexpected events can occur that can result in great financial loss to us, including ourinability to effectively integrate new products into our existing trading platforms or our failure to properly manage the market risks associated with makingmarkets for new products. The profit margins for these products may not be similar to the profit margins we have realized with respect to forex trading.In our futures segment, we are exposed to debit/deficit risk with our clients for exchange-traded futures and options on futures. If an adverse market moverelated to a client’s position occurs and we are unable to collect a margin call in a timely manner, the client account may incur a loss, resulting in a debitbalance. If a client account were to incur a loss resulting in a debit balance and we were unable to collect the debit balance from our client, we would incur abad debt expense, which could have a material adverse effect on our results of operations.Our acquisition strategy may result in significant transaction expenses, integration and consolidation risks and risks associated with entering newmarkets, and we may be unable to profitably operate our consolidated company.We have engaged in, and intend to continue to pursue, acquisitions of other businesses as part of our strategy to increase the range of products that we offer,especially into non-forex products, and to expand our businesses into new markets and geographies. Such acquisitions involve significant transactionexpenses, including, but not limited to, fees paid to legal, financial, tax and accounting advisors, filing fees and printing costs. Acquisitions also present risksassociated with offering new products or entering new markets and integrating the acquired companies. Other areas where we may face risks include:•diversion of management time and focus from operating our business to address challenges that may arise in integrating the acquired business;•transition of operations, users and customers onto our existing platforms or onto platforms of the acquired company;•failure to successfully further develop the acquired business;•failure to realize anticipated operational or financial synergies;20Table of Contents•implementation or remediation of controls, procedures, and policies at the acquired company;•in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic,currency, political, and regulatory risks associated with specific countries;•liability for activities of the acquired company before the acquisition, such as violations of laws, commercial disputes, tax liabilities, and otherknown and unknown liabilities; and•integration of the acquired business’ accounting, human resource and other administrative systems, and coordination of trading and sales andmarketing functions. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, amortization expenses, impairment of goodwill andpurchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results. Additionally, any new businesses that wemay acquire, once integrated with our existing operations, may not produce expected or intended results. Our failure to address these risks or other problemsencountered in connection with our future acquisitions could cause us to fail to realize the anticipated benefits of such acquisitions or incur unanticipatedliabilities, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.The accounting method for convertible debt securities that may be settled in cash, such as our 4.125% Convertible Senior Notes due 2018 and our 4.125%Convertible Senior Notes due 2020, could have a material effect on our reported financial results.In May 2008, the Financial Accounting Standards Board, or "FASB", issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt InstrumentsThat May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting StandardsCodification 470-20, Debt with Conversion and Other Options, or ASC 470-20. ASC 470-20 requires an entity to separately account for the liability andequity components of convertible debt instruments whose conversion may be settled entirely or partially in cash (such as our 4.125% Convertible SeniorNotes due 2018 and our 4.125% Convertible Senior Notes due 2020) in a manner that reflects the issuer’s economic interest cost for non-convertible debt.The liability component of the notes is initially valued at the fair value of a similar debt instrument that does not have an associated equity component and isreflected as a liability in our Consolidated Balance Sheets in an amount equal to the fair value. The equity component of the notes is included in theadditional paid-in capital section of our stockholders’ equity on our Consolidated Balance Sheets, and the value of the equity component is treated asoriginal issue discount for purposes of accounting for the debt component. This original issue discount is amortized to non-cash interest expense over theterm of the notes, and, as a result, we record a greater amount of interest expense in current periods. Accordingly, we will report lower net income in ourfinancial results than would have been recorded had we reflected only cash interest expense in our consolidated income statement because ASC 470-20 willrequire the interest expense associated with the notes to include both the current period’s amortization of the original issue discount and the notes’ cashcoupon interest, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the notes.In addition, under certain circumstances, convertible debt instruments whose conversion may be settled entirely or partly in cash (such as our 4.125%Convertible Senior Notes due 2018 and our 4.125% Convertible Senior Notes due 2020) are currently accounted for using the treasury stock method. Underthis method, the shares issuable upon conversion of the notes are not included in the calculation of diluted earnings per share unless the conversion value ofthe notes exceeds their principal amount at the end of the relevant reporting period. If the conversion value exceeds their principal amount, then, for dilutedearnings per share purposes, the notes are accounted for as if the number of shares of common stock that would be necessary to settle the excess, if we electedto settle the excess in shares, were issued. The accounting standards in the future may not continue to permit the use of the treasury stock method. If we areunable to use the treasury stock method in accounting for the shares, if any, issuable upon conversion of the notes, then our diluted earnings per share couldbe adversely affected.Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our businessto pay our substantial debt.Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness,including our 4.125% Convertible Senior Notes due 2018, which were issued in November 2013, and our 4.125% Convertible Senior Notes due 2020, whichwere issued in connection with our acquisition of City Index, depends on our future performance, which is subject to economic, financial, competitive andother factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt because offactors beyond our control. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets,restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness willdepend on the capital markets and our financial condition at such time. We may not be able to21Table of Contentsengage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.Any disruption or corruption of our proprietary technology could have a material adverse effect on our business, financial condition and results ofoperations and cash flows.We rely on our proprietary technology to receive and properly process internal and external data. Any disruption in the proper functioning or any corruptionof our software or erroneous or corrupted data may cause us to make erroneous trades, accept customers from jurisdictions where we do not possess the properlicenses, authorizations or permits or require us to suspend our services, any of which could have a material adverse effect on our business, financialcondition and results of operations and cash flows.Systems failures could cause interruptions in our services or decreases in the responsiveness of our services, which could harm our business.If our systems fail to perform, we could experience disruptions in operations, slower response times or decreased customer satisfaction. Our ability to facilitatetransactions successfully and provide high quality customer service depends on the efficient and uninterrupted operation of our computer andcommunications hardware and software systems. These systems have in the past experienced periodic interruptions and disruptions in operations, which webelieve will continue to occur from time to time. Our systems also are vulnerable to damage or interruption from human error, natural disasters, power loss,telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. We do not have fully redundantcapabilities. While we currently maintain a disaster recovery plan, or DRP, which is intended to minimize service interruptions and secure data integrity, ourDRP may not work effectively during an emergency. Any systems failure that causes an interruption in our services or decreases the responsiveness of ourservices could impair our reputation, damage our brand name and materially adversely affect our business, financial condition and results of operations andcash flows.We may not be able to develop and adopt new technologies in a timely fashion, which could adversely impact our ability to compete in the markets inwhich we operate.Our success in the past has largely been attributable to our proprietary technology that has taken many years to develop. If our competitors develop moreadvanced technologies, we may be required to devote substantial resources to the development of more advanced technology to remain competitive. Ourindustry is characterized by rapidly changing technology, evolving industry standards and changing trading systems, practices and techniques. We may notbe able to keep up with these rapid changes in the future, develop new technology, realize a return on amounts invested in developing new technologies orremain competitive in the future.We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business.We rely on a combination of trademark, copyright, trade secret and unfair competition laws in the United States and other jurisdictions to protect ourproprietary technology, intellectual property rights and our brands. We do not have any patents. While we rigorously control access to our proprietarytechnology and enter into confidentiality and invention assignment agreements with our employees, consultants and other third parties, it is possible thatthird parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights. Such unauthorizeduse and infringement would undermine the competitive benefits offered by our proprietary technology and could adversely impact our business and results ofoperations.We also license or are permitted to use intellectual property or technologies owned by others. In the event such intellectual property or technology becomesmaterial to our business, the loss of our license or our inability to otherwise continue use of such technologies would have a material adverse effect on ourbusiness. We may also face claims of infringement that could interfere with our ability to use technology that is material to our business operations.Attrition of customer accounts and failure to attract new accounts in a cost-effective manner could have a material adverse effect on our business,financial condition and results of operations and cash flows.Our customer base is primarily comprised of individual retail customers who generally trade with us for short periods. Although we offer products and tailoredservices designed to educate, support and retain our customers, our efforts to attract new customers or reduce the attrition rate of our existing customers maynot be successful. If we are unable to maintain or increase our customer retention rates or generate a substantial number of new customers in a cost-effectivemanner, our22Table of Contentsbusiness, financial condition and results of operations and cash flows would likely be adversely affected. Although we have spent significant financialresources on sales and marketing expenses and related expenses and plan to continue to do so, these efforts may not be cost-effective at attracting newcustomers. In particular, we believe that rates for desirable advertising and marketing placements, including online, search engine, print and televisionadvertising, are likely to increase in the foreseeable future, and we may be disadvantaged relative to our larger competitors in our ability to expand ormaintain our advertising and marketing commitments. Additionally, our sales and marketing methods are subject to regulation by the Commodity FuturesTrading Commission, or CFTC, and National Futures Association, or NFA, in the United States, the Financial Conduct Authority, or FCA, in the UnitedKingdom and by other regulators in other non-US jurisdictions. The rules and regulations of these organizations impose specific limitations on our salesmethods, advertising and marketing. If we do not achieve our advertising objectives, our profitability and growth may be materially adversely affected. We are subject to litigation risk which could adversely affect our reputation, business, financial condition and results of operations and cash flows.Many aspects of our business involve risks that expose us to potential liability under U.S. federal and state laws, as well as the rules and enforcement effortsof our regulators and self-regulatory organizations worldwide. These risks include, among others, disputes over trade terms with customers and other marketparticipants, customer losses resulting from system delay or failure and customer claims that we or our employees executed unauthorized transactions, madematerially false or misleading statements or lost or diverted customer assets in our custody. We may also be subject to regulatory investigation andenforcement actions seeking to impose significant fines or other sanctions, which in turn could trigger civil litigation for our previous operations that may bedeemed to have violated applicable rules and regulations in one or more jurisdictions.The volume of claims and the amount of damages and fines claimed in litigation and regulatory proceedings against financial services firms has beenincreasing and may continue to increase. The amounts involved in the trades we execute, together with rapid price movements in our currency pairs, canresult in potentially large damage claims in any litigation resulting from such trades. Dissatisfied customers, regulators or self-regulatory organizations maymake claims against us regarding the quality of trade execution, improperly settled trades, mismanagement or even fraud, and these claims may increase asour business expands.Litigation may also arise from disputes over the exercise of our rights with respect to customer accounts and collateral. Although our customer agreementsgenerally provide that we may exercise such rights with respect to customer accounts and collateral as we deem reasonably necessary for our protection, ourexercise of these rights may lead to claims by customers that we did so improperly.We may also have to rely on litigation to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietaryrights of others or defend against claims of infringement or invalidity. Even if we prevail in any litigation or enforcement proceedings against us, we couldincur significant legal expenses defending against the claims, even those without merit. Moreover, because even claims without merit can damage ourreputation or raise concerns among our customers, we may feel compelled to settle claims at significant cost. The initiation of any claim, proceeding orinvestigation against us, or an adverse resolution of any such matter, could have a material adverse effect on our reputation, business, financial condition andresults of operations and cash flows.We may be subject to customer litigation, financial losses, regulatory sanctions and harm to our reputation as a result of employee misconduct or errorsthat are difficult to detect and deter.There have been a number of highly publicized cases involving fraud or other misconduct by employees of financial services firms in recent years. Ouremployees could execute unauthorized transactions for our customers, use customer assets improperly or without authorization, carry out improper activitieson behalf of customers or use confidential customer or company information for personal or other improper purposes, as well as improperly record orotherwise try to hide improper activities from us.In addition, employee errors, including mistakes in executing, recording or reporting transactions for customers, may cause us to enter into transactions thatcustomers disavow and refuse to settle. Employee errors expose us to the risk of material losses until the errors are detected and the transactions are unwoundor reversed. The risk of employee error or miscommunication may be greater for products that are new or have non-standardized terms. Further, such errorsmay be more likely to occur in the aftermath of any acquisitions during the integration of or migration from technological systems. Misconduct by ouremployees or former employees could subject us to financial losses or regulatory sanctions and seriously harm our reputation. It may not be possible to detector deter employee misconduct, and the precautions we take to prevent and detect this activity23Table of Contentsmay not be effective in all cases. Our employees may also commit good faith errors that could subject us to financial claims for negligence or otherwise, aswell as regulatory actions.Misconduct by employees of our customers can also expose us to claims for financial losses or regulatory proceedings when it is alleged we or our employeesknew or should have known that an employee of our customer was not authorized to undertake certain transactions. Dissatisfied customers can make claimsagainst us, including claims for negligence, fraud, unauthorized trading, failure to supervise, breach of fiduciary duty, employee errors, intentionalmisconduct, unauthorized transactions by persons associated with us or failures in the processing of transactions.Our customer accounts may be vulnerable to identity theft and credit card fraud.Credit card issuers have adopted credit card security guidelines as part of their ongoing efforts to prevent identity theft and credit card fraud. We continue towork with credit card issuers to ensure that our services, including customer account maintenance, comply with these rules. When there is unauthorizedaccess to credit card data that results in financial loss, there is the potential that we could experience reputational damage and parties could seek damagesfrom us.If our reputation is harmed, or the reputation of the online financial services industry as a whole is harmed, our business, financial condition and results ofoperations and cash flows may be materially adversely affected.Our ability to attract and retain customers and employees may be adversely affected if our reputation is damaged. If we fail, or appear to fail, to deal withissues that may give rise to reputation risk, our business prospects could be materially adversely affected. These issues include, but are not limited to,appropriately dealing with potential conflicts of interest, legal and regulatory requirements, ethical issues, money-laundering, privacy, client data protection,record keeping, sales and trading practices, and the proper identification of the legal, credit, liquidity, and market risks inherent in our business. Failure toappropriately address these issues could also give rise to additional legal risk to us, which could, in turn, increase the size and number of claims and damagesasserted against us or subject us to regulatory enforcement actions, fines and penalties. Any such sanctions could materially adversely affect our reputation,thereby reducing our ability to attract and retain customers and employees.In addition, our ability to attract and retain customers may be adversely affected if the reputation of the online financial services industry as a whole or theforex industry is damaged. In recent years, a number of financial services firms have suffered significant damage to their reputations from highly publicizedincidents that in turn resulted in significant and in some cases irreparable harm to their business. A perception of instability within the online financialservices industry also could materially adversely affect our ability to attract and retain customers.The loss of our key employees could materially adversely affect our business, including our ability to grow our business.Our key employees, including Glenn Stevens, our chief executive officer, have significant experience in the forex industry and have made significantcontributions to our business. In addition, other senior employees have made significant contributions to our business. Our continued success is dependentupon the retention of these and other key executive officers and employees, as well as the services provided by our trading staff, technology andprogramming specialists and a number of other key managerial, marketing, planning, financial, technical and operations personnel. The loss of such keypersonnel could have a material adverse effect on our business. In addition, our ability to grow our business is dependent, to a large degree, on our ability toretain such employees. The industries in which we operate are highly competitive and we may be adversely affected if we are unable to compete effectively.The OTC derivatives market served by our retail segment is rapidly evolving and characterized by intense competition and evolving domestic and globalregulatory oversight and rules. Tighter spreads and increased competition could make our business less profitable. Our prospects may be materially adverselyaffected by our ability to adapt to these changes and effectively manage the risks, expenses and difficulties frequently encountered in the operation of abusiness in a rapidly evolving industry. We face similar competitive pressure in our institutional and futures segments.In addition, our competitors include sophisticated institutions which have larger customer bases, more established name recognition and substantially greaterfinancial, marketing, technological and personnel resources than we do. These advantages may enable them, among other things, to:24Table of Contents•develop products and services that are similar to ours, or that are more attractive to customers than ours in one or more of our markets;•provide products and services we do not offer;•provide execution and clearing services that are more rapid, reliable, efficient or less expensive than ours;•offer products and services at prices below ours to gain market share and to promote other businesses, such as forex options, futures, listed securities,CFDs, precious metals and OTC derivatives;•adapt at a faster rate to market conditions, new technologies and customer demands;•offer better, faster and more reliable technology;•outbid us for desirable acquisition targets;•more efficiently engage in and expand existing relationships with strategic alliances;•market, promote and sell their products and services more effectively; and•develop stronger relationships with customers.These competitors, including commercial and investment banking firms, may have access to capital in greater amounts and at lower costs than we do, and,therefore, may be better able to respond to changes in the industries in which we operate, to compete for skilled professionals, to finance acquisitions, to fundinternal growth and to compete for market share generally. Access to capital is critical to our business to satisfy regulatory obligations and liquidityrequirements. Among other things, access to capital determines our creditworthiness, which if perceived negatively in the market could materially impair ourability to attract customer assets. Access to capital also determines the degree to which we can expand our operations. Therefore, if we are unable to maintainor increase our capital on competitive terms, we could be at a significant competitive disadvantage, and our ability to maintain or increase our revenue andearnings could be materially impaired. Also, new or existing competitors in our markets could make it difficult for us to maintain our current market share orincrease it in desirable markets. Increased competition could also result in narrowing bid/offer spreads, which could materially adversely affect our business,financial condition and results of operations and cash flows. Any reduction in revenues without a commensurate reduction in expenses would decrease ourprofitability. We may not be able to compete effectively against these firms, particularly those with greater financial resources, and our failure to do so couldmaterially and adversely affect our business, financial condition and results of operations and cash flows.We may be unable to effectively manage our growth.As we continue to seek to grow our business, both organically and by selectively pursuing acquisitions, we may need to expand and upgrade the reliabilityand scalability of our transaction processing systems, network infrastructure and other aspects of our proprietary technology. We may not be able to expandand upgrade our technology systems and infrastructure to accommodate increases in our business activity in a timely manner, which could lead tooperational breakdowns and delays, loss of customers, a reduction in the growth of our customer base, increased operating expenses, financial losses,increased litigation or customer claims, regulatory sanctions or increased regulatory scrutiny. In addition, we will need to continue to attract, hire and retainhighly skilled and motivated executives and employees. We may not be able to attract or retain the executives and employees necessary to manage ourgrowth effectively.We may be unable to respond to customers’ demands for new services and products and our business, financial condition and results of operations andcash flows may be materially adversely affected.The market for Internet-based and mobile trading is characterized by:•changing customer demands;•the need to enhance existing services and products or introduce new services and products;•evolving industry practices; and•rapidly evolving technology solutions.New services and products provided by our competitors may render our existing services and products less competitive. Our future success will depend, inpart, on our ability to respond to customers’ demands for new services and products on a timely and cost-effective basis and to adapt to address theincreasingly sophisticated requirements and varied needs of our customers and prospective customers. We may not be successful in developing, introducingor marketing new services and products. In addition, our new service and product enhancements may not achieve market acceptance. Any failure on our partto anticipate or respond adequately to customer requirements or changing industry practices, or any significant delays in the development, introduction oravailability of new services, products or service or product enhancements could have a material adverse effect on our business, financial condition and resultsof operations and cash flows.25Table of ContentsOur international operations present special challenges and our failure to adequately address such challenges or compete in these markets, either directlyor through joint ventures with local firms, could have a material adverse effect on our business, financial condition and results of operations and cashflows.In 2015, we generated approximately 86.3% of our retail segment trading volume from customers outside the United States. Expanding our business in newmarkets is an important part of our growth strategy. Due to certain cultural, regulatory and other challenges relevant to those markets, however, we may be ata competitive disadvantage in those regions relative to local firms or to international firms that have a well-established local presence. These challengesinclude:•less developed or mature local technological infrastructure and higher costs, which could make our products and services less attractive or accessiblein emerging markets;•difficulty in complying with the diverse regulatory requirements of multiple jurisdictions, which may be more burdensome, not clearly defined andsubject to unexpected changes, potentially exposing us to significant compliance costs and regulatory penalties;•less developed and established local financial and banking infrastructure, which could make our products and services less accessible;•reduced protection of intellectual property rights;•inability to enforce contracts;•difficulties and costs associated with staffing and managing foreign operations, including reliance on newly hired local personnel;•tariffs and other trade barriers;•currency and tax laws that may prevent or restrict the transfer of capital and profits among our various operations around the world; and•time zone, language and cultural differences among personnel in different areas of the world.In addition, in order to be competitive in these local markets, or in some cases because of restrictions on the ability of foreign firms to do business locally, wemay seek to operate through joint ventures with local firms. Doing business through joint ventures may limit our ability to control the conduct of thebusiness and could expose us to reputational and greater operational risks. We may also face intense competition from other international firms overrelatively scarce opportunities for market entry. Given the intense competition from other international brokers that are also seeking to enter these newmarkets, we may have difficulty finding suitable local firms willing to enter into the kinds of relationships with us that we may need to gain access to thesemarkets. This competition could make it difficult for us to expand our business internationally as planned.If our operating subsidiaries are unable to pay us dividends when needed, we may be unable to satisfy our obligations when they arise.As a holding company, nearly all of our funds generated from operations are generated by our operating subsidiaries. Historically, we have accessed thesefunds through receipt of dividends from these subsidiaries. Some of our subsidiaries are subject to regulation and requirements of various regulatory bodies,including the CFTC and NFA in the United States, the FCA in the United Kingdom, the FSA, METI and MAFF in Japan, the SFC in Hong Kong, IIROC andthe Ontario Securities Commission, or OSC, in Canada and the CIMA in the Cayman Islands, relating to liquidity and capital standards, which may have theeffect of limiting funds available for the payment of dividends to the holding company. Accordingly, if our operating subsidiaries are unable to pay usdividends and make other payments to us when needed, due to regulatory restrictions or otherwise, we may be unable to satisfy our obligations when theyarise.Risks Related to RegulationFailure to comply with the rapidly evolving laws and regulations governing our businesses may result in regulatory agencies taking action against us,which could significantly harm our business.Substantially all of our operations are conducted through subsidiaries that are regulated by governmental bodies or self-regulatory organizations. Many ofthe regulations we are governed by are intended to protect the public, our customers and the integrity of the markets, and not necessarily our shareholders.Among other things, we are subject to regulation with regard to:•sales and marketing activities, including our interaction with, and solicitation of, customers;•trading practices, including the types of investment products we may offer;26Table of Contents•the methods by which customers can fund accounts with us, including the recently implemented NFA ban on the use of credit cards to fund accountsin the United States;•treatment of customer assets, including custody, control, safekeeping and, in certain countries, segregation of our customer funds and securities;•maintaining specified minimum amounts of capital and limiting withdrawals of funds from our regulated operating subsidiaries;•continuing education requirements for our employees;•anti-money laundering practices;•record keeping and reporting; and•supervision regarding the conduct of directors, officers and employees.Compliance with these regulations is complicated, time consuming and expensive. Our ability to comply with all applicable laws and regulations isdependent in large part on our internal legal and compliance functions, as well as our ability to attract and retain qualified personnel, which we may not beable to do. Regulators and self-regulatory organizations broadly oversee the conduct of our business and several perform regular examinations of ouroperations to monitor our compliance with applicable laws and regulations. If a regulator finds that we have failed to comply with applicable rules andregulations, we may be subject to censure, fines, cease-and-desist orders, suspension of our business, removal of personnel, civil litigation or other sanctions,including, in some cases, increased reporting requirements or other undertakings, revocation of our operating licenses or criminal conviction. In addition, wecould incur significant legal expenses in defending ourselves against and resolving actions or investigations by such regulatory agencies. An adverseresolution of any future actions or investigations by such regulatory agencies against us could result in a negative perception of our company and cause themarket price of our common stock to decline or otherwise have a material adverse effect on our business, financial condition, results of operations and cashflows.As a result of recent regulatory changes in certain jurisdictions, our operations and profitability may be disrupted and we may be subject to regulatoryaction taken against us if a regulatory authority determines that our operations are out of compliance, or requires us to comply with additional regulatoryrequirements.Recently, the legislative and regulatory environment in which we operate has undergone significant changes, and U.S. and foreign regulators have expressedtheir intention to review existing regulation in a number of areas as a result of the highly publicized market disruption that occurred in January 2015 whenthe SNB announced that it would move interest rates to -0.75% and abandon the 1.20 floor for EUR/CHF that it had previously maintained. Our ability toexpand our presence in various jurisdictions throughout the world will depend on the nature of future changes to the regulatory environment and our abilityto continue to comply with evolving requirements. To the extent one or more regulators determines that our current activities do not comply with applicablelaw or regulations in a given jurisdiction, our services may be disrupted, we may elect to shift our services to a white label partner or we may be required towithdraw or modify our service offering.In August 2010, the CFTC released new rules, effective as of October 18, 2010, relating to the retail forex industry regarding, among other things, increasedinitial minimum security deposits, registration of introducing brokers, money managers and fund managers, increased risk disclosures, including disclosuresrelating to customer profits and losses, record keeping, financial reporting, minimum capital and other operational standards. In addition, the rulesestablished 50-to-1 as the maximum leverage permitted to be provided to U.S. customers in major currency pairs, and 20-to-1 in all other currency pairs. Morerecently, following the SNB market event, the NFA has also increased the minimum security deposit requirements on certain major currency pairs to 3.0% or5.0% of notional value, and to 6.0%, 9.0% or 20% of notional value for certain other currency pairs. Regulators in other jurisdictions may make similaradjustments to maximum leverage limits. We can provide no assurance that maximum leverage limits in the United States, or elsewhere, will not be decreasedfurther, which could materially adversely affect our business, results of operations and financial condition.The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, enacted in July 2010, has had and is expected to continue to havea significant effect on our U.S. retail business. For example, the Dodd-Frank Act further amended the Commodity Exchange Act to prohibit essentially allOTC retail transactions in any commodity other than foreign currency after July 15, 2011. As a result, after such date, we are not permitted to offer our U.S.retail customers leveraged spot metals trading or any product other than forex. The Dodd-Frank Act also provides for additional regulation of swaps andsecurity-based swaps, including some types of foreign exchange and metals derivatives in which we engage. Swap dealers are required to register with theCFTC and are subject to a comprehensive regulatory regime with new obligations for the swaps activities for which they are registered, including, amongother things, new capital requirements, a new margin regime for uncleared swaps and a new segregation regime for collateral of counterparties to unclearedswaps. Swap execution facilities, as defined by the Commodity Exchange Act, are also required to register with the CFTC with respect to transactionsinvolving swaps that are subject to mandatory clearing requirements and are subject to a comprehensive regulatory regime with new obligations for27Table of Contentscleared swap activities for which they are registered, including, among other things, a variety of core principles and other requirements, such as maintaining arule book defining the rules of the swap execution facility and its members. Areas required to be covered in the rule book include, but are not limited to:governance, participants, participant obligations, trading practices, reporting, clearing, business conduct, disciplinary rules, arbitration and other matters.While the specific parameters of these swap dealer and swap execution facility requirements are still being developed by the relevant regulators, it is likelythat any of our subsidiaries that are required to register as swap dealers (such as GAIN GTX, LLC and GTX SEF, LLC, which have registered with the CFTCand NFA as a swap dealer and a swap execution facility, respectively) will face increased costs due to the registration and regulatory requirements listedabove. Any of these new regulatory developments, alone or in combination, could have a material adverse effect on our business and profitability.In the United Kingdom, effective beginning January 1, 2016, the FCA introduced the addition of a capital conservation buffer and a countercyclical capitalbuffer in line with the requirements set out in Capital Requirements Directive, or CRD IV, Article 160 Transitional Provisions for Capital Buffers. Thisrequires all firms to maintain an additional buffer on top of the minimum capital requirements. The amount of buffer, which is a percentage of the firm’scommon equity tier 1 capital against the total risk exposure amount, will be based on a transitional period from January 1, 2016 to December 31, 2018.During that period, the minimum common equity tier 1 capital ratio requirement will increase from 5.125% to 8%.In the European Union, government officials have announced the intention to propose new laws to regulate OTC derivatives. The new laws would, amongother things, require mandatory central clearing of some derivatives, higher collateral requirements and higher capital charges for certain OTC derivatives. InFebruary 2014, the European Market Infrastructure Regulation, or EMIR, enacted reporting requirements requiring all open trade positions under theapplicable asset classes, including all over-the-counter and exchange traded derivatives, to be reported, on a back-dated basis from August 2012 to thepresent, to an approved trade repository. Many of these initiatives are still at the consultation stage and details for many aspects of the legislative proposalshave not yet been published. If the products that we offer are subjected to mandatory central clearing, exchange trading, higher collateral requirements orhigher capital charges, our business, financial condition and results of operations could be materially adversely affected.In Japan, regulations, which became effective in August 2011, prohibit our ability to offer Japanese residents leverage for forex products in excess of 25-to-1.For spot gold that we offer in Japan, beginning July 1, 2011, the maximum allowable leverage became 20-to-1. Japanese authorities may adopt additionalregulatory changes in the future, or other regulators could follow in the Japanese regulators’ example, and such changes to permitted margin or other aspectsof our business could materially adversely affect our financial condition, results of operations and cash flows.In Australia, ASIC has proposed its intention to issue new guidance on advertising materials, to introduce disclosure benchmarks for OTC CFD providers andto require OTC CFD providers to adopt written customer suitability policies.In addition, the changing regulatory environment may create uncertainty with respect to certain practices or types of transactions that, in the past, may havebeen considered permissible and appropriate among financial services firms. Certain established practices may be called into question or become subject toadditional regulatory requirements. These legal or regulatory uncertainties and additional regulatory requirements could result in a loss of, or increase in thecost of, business and could materially adversely affect our revenue, profitability and results of operations. Finally, because of changes in regulation,regulatory interpretations, enforcement practices or for other reasons, we may be found to have violated local regulation and, as a result, we may be subject toenforcement actions and penalties or customer claims in those local jurisdictions.28Table of ContentsAs we operate in many jurisdictions without local registration, licensing or authorization, we may be subject to possible enforcement action and sanctionfor our operations in such jurisdictions if our operations are determined to have violated regulations in those jurisdictions. Further, our growth may belimited by various restrictions and we remain at risk that we may be required to cease operations if we become subject to regulation by local governmentbodies.For the year ended December 31, 2015, although a majority of our retail trading volume was attributable to customers resident in a jurisdiction where we orour white label partners are licensed, regulated or deal with customers cross-border in a manner that we believe does not require us to be regulated in thatjurisdiction, a portion of our retail trading volume was attributable to customers in jurisdictions in which we or our white label partners are not currentlylicensed or authorized by the local government or applicable self-regulatory organization. We determine the nature and extent of services we can offer andthe manner in which we conduct our business in the various jurisdictions in which we serve customers based on a variety of factors, including legal advicereceived from local counsel, our review of applicable U.S. and local laws and regulations and, in some cases, our discussions with local regulators. In cases inwhich we operate in jurisdictions based on local legal advice, we are exposed to the risk that our legal and regulatory analysis is subsequently determined bya local regulatory agency or other authority to be incorrect and that we have not been in compliance with local laws or regulations, including local licensingor authorization requirements, and to the risk that the regulatory environment in a jurisdiction may change, including in a circumstance where laws orregulations or licensing or authorization requirements that previously were not enforced become subject to enforcement.In jurisdictions in which we are not licensed or authorized, we may be subject to a variety of restrictions regarding the manner in which we conduct ourbusiness or serve customers, including restrictions on:•our sales and marketing activities;•the use of a website specifically targeted to potential customers in a particular country;•the minimum income level or financial sophistication of potential customers we may contact;•our ability to have a physical presence in a particular country; or•the types of services we may offer customers physically present in each country.These restrictions may limit our ability to grow our business in any such jurisdiction or may result in increased overhead costs or degradation in our servicesin that jurisdiction. Consequently, we cannot assure you that our international expansion plans will be achieved.We may be subject to possible enforcement action and penalties if we are determined to have previously offered, or currently offer, our services in violationof applicable laws and regulations in any of the markets in which we serve customers. In any such case, we may be required to cease the conduct of ourbusiness with customers in one or more jurisdictions. We may also determine that compliance with the laws or licensing, authorization or other regulatoryrequirements for continuing the business in one or more jurisdictions are too onerous to justify making the necessary changes. In addition, any such eventcould negatively impact our relationship with the regulators or self-regulatory organizations in the jurisdictions where we are subject to regulation.We are required to maintain high levels of capital, which could constrain our growth and subject us to regulatory sanctions.Our regulators have stringent rules requiring that we maintain specific minimum levels of regulatory capital in our operating subsidiaries. In the UnitedStates, as a Futures Commission Merchant, or FCM, and a Retail Forex Exchange Dealer, or RFED, we are required to maintain adjusted net capital of$20.0 million plus 5.0% of the amount of retail customer liabilities over $10.0 million. On a worldwide basis, as of December 31, 2015, we were required tomaintain approximately $114.5 million in minimum capital in the aggregate across all jurisdictions. Regulators continue to evaluate and modify regulatorycapital requirements from time to time in response to market events and to improve the stability of the international financial system. Additional revisions tothis framework or new capital adequacy rules applicable to us may be proposed and ultimately adopted, which could further increase our minimum capitalrequirements in the future.Even if regulators do not change existing regulations or adopt new ones, our minimum capital requirements will generally increase in proportion to the sizeof the business conducted by our regulated subsidiaries. As a result, we will need to increase our regulatory capital in order to expand our operations andincrease our revenue, and our inability to increase our capital on a cost-efficient basis could constrain our growth. In addition, in many cases, we are notpermitted to withdraw regulatory capital maintained by our subsidiaries without prior regulatory approval or notice, which could constrain our ability toallocate our capital resources most efficiently throughout our global operations. In particular, these restrictions could adversely affect our ability to withdrawfunds needed to satisfy our ongoing operating expenses, debt service and other cash needs and could affect any future decision by our Board of Directorsregarding the payment of our quarterly dividends. Regulators monitor our levels29Table of Contentsof capital closely and we are required to report the amount of regulatory capital we maintain to our regulators on a regular basis, and must report anydeficiencies or material declines promptly. While we expect that our current amount of regulatory capital will be sufficient to meet anticipated short-termincreases in requirements, any failure to maintain the required levels of regulatory capital, or to report any capital deficiencies or material declines in capitalcould result in severe sanctions, including fines, censure, restrictions on our ability to conduct business and revocation of our registrations. The imposition ofone or more of these sanctions could ultimately lead to our liquidation, or the liquidation of one or more of our operating subsidiaries.Interpretation of corporate tax laws and regulations and changes in such laws and regulations, as well as adverse determinations regarding theapplication of such laws and regulations, could adversely affect our earnings.We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have significant businessoperations. These tax laws are complex and may be subject to different interpretations. We must make judgments and interpretations about the application ofthese inherently complex tax laws when determining the provision for income taxes and must also make estimates about when in the future certain itemsaffect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be settled with the taxing authority upon examinationor audit. In addition, changes to the Internal Revenue Code, administrative rulings or court decisions could increase our provision for income taxes andreduce our earnings.Servicing customers via the Internet may require us to comply with the laws and regulations of each country in which we are deemed to conduct business.Failure to comply with such laws may negatively impact our financial results.Since our services are available over the Internet in foreign countries and we have customers residing in foreign countries, foreign jurisdictions may requireus to qualify to do business in their country. We believe that the number of our customers residing outside of the United States will continue to increase overtime. We are required to comply with the laws and regulations of each country in which we conduct business, including laws and regulations currently inplace or which may be enacted related to Internet services available to the residents of each country from service providers located elsewhere. Any failure todevelop effective compliance and reporting systems could result in regulatory penalties in the applicable jurisdiction, which could have a material adverseeffect on our business, financial condition and results of operations and cash flows.Procedures and requirements of the Patriot Act and other anti-money laundering and know your customer regulations may expose us to significant costsor penalties.As participants in the financial services industry, we are, and our subsidiaries are, subject to numerous laws and regulations, including the United StatesPatriot Act, that require that we know our customers and monitor transactions for suspicious financial activities. The cost of complying with the Patriot Actand similar laws and regulations is significant. We face the risk that our policies, procedures, technology and personnel directed toward complying with theselaws and regulations are insufficient and that we could be subject to significant criminal and civil penalties due to noncompliance. Such penalties could havea material adverse effect on our business, financial condition and results of operations and cash flows.Risks Related to Third PartiesIf we lose access to our prime brokers and other liquidity providers, we may be unable to provide competitive trading services, which will materiallyadversely affect our business, financial condition and results of operations and cash flows.We rely on third-party financial institutions to provide us with market liquidity. We maintain relationships with a large network of liquidity providers,including established global prime brokers such as J.P. Morgan, Citibank and UBS. We depend on these relationships, particularly those with our primebrokers, for our access to a pool of liquidity to ensure that we are able to execute our customers’ trades in the products we offer at the notional amounts ourcustomers request. These liquidity providers, although under contract with us, may terminate our arrangements at any time. If we were to experience adisruption in the services provided by a liquidity provider, particularly one of our prime brokers, due to a financial, technical or other adverse development,our business could be materially adversely affected to the extent that we are unable to transfer positions and margin balances to another liquidity providerthat allows us to offer competitive trading services in a timely fashion. In the event of the insolvency of one of our prime broker or other liquidity providers,we might not be able to recover any or all of the funds we have on deposit with such entity since we will be among the entity’s unsecured creditors. In theevent that we no longer have access to the levels of liquidity that we currently have, we may be unable to provide competitive trading services, which wouldmaterially adversely affect our business, financial condition and results of operations and cash flows.A systemic market event that impacts the various market participants with whom we interact could have a material adverse effect on our business,financial condition and results of operations and cash flows.30Table of ContentsWe interact with various third parties through our relationships with our liquidity providers, white label partners and introducing brokers. Some of thesemarket participants could be overleveraged. In the event of sudden, large market price movements, such market participants may not be able to meet theirobligations to brokers who, in turn, may not be able to meet their obligations to their counterparties. As a result, a system collapse in the financial systemcould occur, which would have a material adverse effect on our business, financial condition and results of operations and cash flows.We are subject to risk of default by financial institutions that hold our funds and our customers’ funds.We have significant deposits of our own funds and our customers' funds with banks and other financial institutions, including liquidity providers. In theevent of the insolvency of one of these financial institutions, we might not be able to fully recover the assets we have deposited since we will be among theinstitution’s unsecured creditors. As a result, our business could be materially adversely affected by the loss of these funds.Customer funds deposited with us in the United States are not permitted to be segregated from our own funds for purposes of applicable bankruptcy orinsolvency laws, meaning such funds may be at risk of default if we were to become insolvent.Pursuant to CFTC and NFA regulations for our U.S.-regulated subsidiaries, forex customer funds deposited with us are not permitted to be segregated from ourown funds for purposes of applicable bankruptcy and insolvency laws. Because our customers’ funds are aggregated with our own for these purposes, in theevent we were to become insolvent, our customers may be unable to fully recover the funds they have deposited with us, as they will be among our unsecuredcreditors, and the extent to which these funds will be entitled to insurance by the Federal Deposit Insurance Corporation is uncertain.We are subject to credit risk in that a customer’s losses may exceed the amount of cash in their account.Our trading operations require a commitment of our capital and involve risk of loss because of the potential that a customer’s losses may exceed the amountof cash in their account. Our margin policy allows customers to leverage their account balances by trading notional amounts that may be significantly largerthan their cash balances. We mark our customers’ accounts to market each time a currency price in their portfolio changes. While this allows us to closelymonitor each customer’s exposure, it does not guarantee our ability to eliminate negative customer account balances prior to an adverse currency pricechange or other market events, such as the extreme volatility in the Swiss franc following the SNB market event in January 2015. Although we have theability to alter our margin requirements without prior notice to our customers, this may not eliminate the risk that our access to liquidity becomes limited ormarket conditions, including currency price volatility and liquidity constraints, change faster than our ability to modify our margin requirements. Changes inmarket conditions or unforeseen extreme market events could result in our customers experiencing losses in excess of the funds they have deposited with us. In such an event, we may not be able to recover the negative client equity from our customers, which may result in our incurring a bad debt expense. Inaddition, if we cannot recover funds from our customers, we may nonetheless be required to fund positions we hold with our liquidity providers or other thirdparties. Any of the foregoing events could have a material adverse effect on our business, financial condition, results of operations and cash flows.Failure of third-party systems or third-party service and software providers upon which we rely could adversely affect our business.We rely on certain third-party computer systems or third-party service and software providers, including trading platforms, back-office systems, Internetservice providers, software development partners and communications facilities. For example, for the year ended December 31, 2015, 32.7% of our retailtrading volume was derived from trades utilizing the MetaTrader platform, a third-party trading platform we license that is particularly popular in theinternational retail trading community. Any interruption in these third-party services, or deterioration in their performance or quality, could adversely affectour business. If our arrangement with any third party is terminated, we may not be able to find an alternative systems or services provider on a timely basis oron commercially reasonable terms. This could have a material adverse effect on our business, financial condition and results of operations and cash flows.Security breaches in our computer infrastructure may jeopardize confidential information transmitted over the Internet, cause interruptions in ouroperations or give rise to liabilities to third parties.Our computer infrastructure is potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive problems and securitybreaches. Any such problems or security breaches could give rise to liabilities to one or more third parties, including our customers, and disrupt ouroperations. A party able to circumvent our security measures could misappropriate proprietary information or customer information, jeopardize theconfidential nature of information we transmit31Table of Contentsover the Internet or cause interruptions in our operations. Concerns over the security of Internet transactions and the safeguarding of confidential personalinformation could also inhibit our customers’ use of our systems over the Internet. To the extent that our activities involve the storage and transmission ofproprietary information and personal financial information, security breaches could expose us to a risk of financial loss, litigation and other liabilities. Ourcurrent insurance policies may not protect us against all of such losses and liabilities. Any of these events, particularly if they result in a loss of confidence inour services, could have a material adverse effect on our business, financial condition and results of operations and cash flows.Failure to maintain relationships with introducing brokers who direct new customers to us could have a material adverse effect on our business, financialcondition and results of operations and cash flows.We have relationships with introducing brokers who direct new customers to us and provide marketing and other services for these customers. In certainjurisdictions, we are only able to provide our services through introducing brokers. For the year ended December 31, 2015, approximately 31.4% of our retailtrading volume was derived from introducing brokers. Many of our relationships with introducing brokers are nonexclusive or may be terminated by thebrokers on short notice. In addition, under our agreements with introducing brokers, they have no obligation to provide us with new customers or minimumlevels of transaction volume. Our failure to maintain our relationships with these introducing brokers, the failure of the introducing brokers to provide us withcustomers or our failure to create new relationships with introducing brokers would result in a loss of revenue, which could have a material adverse effect onour business, financial condition and results of operations and cash flows. To the extent any of our competitors offers more attractive compensation terms toone or more of our introducing brokers, we could lose the brokers’ services or be required to increase the compensation we pay to retain the brokers. Inaddition, we may agree to set the compensation for one or more introducing brokers at a level where, based on the transaction volume generated by customersdirected to us by such brokers, it would have been more economically attractive to seek to acquire the customers directly rather than through the introducingbroker.Our business or reputation could be harmed by introducing broker misconduct or errors that are difficult to detect and deter.It may be perceived that we are responsible for any improper conduct by our introducing brokers, even though we do not control their activities. Many of ourintroducing brokers operate websites, which they use to advertise our services or direct customers to us. It is difficult for us to closely monitor the contents oftheir websites to ensure that the statements they make in relation to our services are accurate and comply with applicable rules and regulations. Anydisciplinary action taken against any of our introducing brokers in the United States and abroad could have a material adverse effect on our reputation,damage our brand name and materially adversely affect our business, financial condition and results of operations and cash flows.Risks Related to our Common StockWe have identified a material weakness in our internal control over financial reporting, that, if not properly remediated, could adversely affect ourbusiness and results of operations.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Asdescribed in "Item 9A. Controls and Procedures," we have concluded that our internal control over financial reporting was ineffective as of December 31,2015 due to a material weakness at the Company. The identified material weakness as of December 31, 2015 relates primarily to the manner in which certainintercompany payables and receivables among domestic and overseas subsidiaries of the Company were treated for accounting and tax purposes for the yearsended December 31, 2013 and 2014 and certain quarters of 2015.In response to these errors, the Company's management has begun implementing formal preventive and detective controls requiring the enhanced review ofthe accounting for and tax treatment of intercompany payables and receivables, particularly those between domestic and overseas subsidiaries. As furtherdescribed in "Item 9A. Controls and Procedures," the Company is also reviewing resource requirements and capabilities in its finance and tax teams todetermine whether roles and responsibilities need to be realigned and/or new personnel added, and management is continuing to review these matters toensure that similar failures of internal control over financial reporting do not recur. However, we cannot assure you that the remediation efforts will beeffective or that additional or similar material weaknesses will not develop or be identified.Implementing changes to our internal controls may distract our officers and employees and entail material costs to implement new processes and/or modifyour existing processes. Moreover, these changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and anyfailure to maintain that adequacy, or consequent inability to produce32Table of Contentsaccurate financial statements on a timely basis, could harm our business. In addition, investors' perceptions that our internal controls are inadequate or thatwe are unable to produce accurate financial statements on a timely basis may harm our business.The market price of our common stock may be volatile.Our results of operations and cash flows have fluctuated significantly from period to period in the past based on a variety of factors, including some that arebeyond our control, such as currency volatility and fluctuations in trading volume. These variations, along with any failure to achieve operating results thatmeet or exceed the expectations of our investors and the market as a whole, could result in significant price and volume fluctuations in our common stock.Other factors that could affect the market price of our common stock include:•future announcements concerning us or our competitors, including the announcement of acquisitions;•changes in government regulations or in the status of our regulatory approvals or licensure;•public perceptions of risks associated with our services or operations;•developments in our industry; and•general economic, market and political conditions and other factors that may be unrelated to our operating performance or the operatingperformance of our competitors.If securities analysts stop publishing research or reports about us or our business or if they downgrade our common stock, the market price of our commonstock could decline.The market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do notcontrol these analysts. If any analyst who covers us downgrades our stock or lowers its future stock price targets or estimates of our operating results, ourstock price could decline rapidly. Furthermore, if any analyst ceases to cover us, we could lose visibility in the market, which in turn could cause the marketprice of our common stock to decline.Our stockholder rights plan may prevent efforts by our stockholders to effect a change of control of our company or a change in our management.We have adopted a stockholder rights plan, commonly referred to as a poison pill. The rights plan is intended to deter an attempt to acquire us in a manner oron terms not approved by our Board of Directors. The rights plan will not prevent an acquisition that is approved by our Board of Directors. Our rights plancould substantially impede the ability of public stockholders to benefit from a change in control and, as a result, may reduce the market price of our commonstock and the ability of holders of our common stock to realize any potential change of control premium.We may be unable to obtain capital when we need it, on acceptable terms, or at all.Our business depends on the availability of adequate funding and regulatory capital under applicable regulatory requirements. Historically, we have satisfiedthese needs from internally generated funds and from our offering of convertible debt securities. While we currently anticipate that our available cashresources will be sufficient to meet our presently anticipated working capital and capital expenditure requirements for at least the next 12 months, we mayneed to raise additional funds to:•support more rapid expansion;•develop new or enhanced services and products;•respond to competitive pressures;•acquire new businesses, products or technologies; or•respond to unanticipated requirements.Additional financing may not be available when needed on terms favorable to us or at all.33Table of ContentsThe limited liquidity for our common stock could affect your ability to sell your shares at a satisfactory price.Our common stock is relatively illiquid. As of March 11, 2016, we had 48,561,528 shares of common stock outstanding (excluding shares held by us astreasury stock). The average daily trading volume in our common stock during the 60 calendar days ended March 1, 2016 was approximately 158,405 shares.A more active public market for our common stock may not develop, which could continue to adversely affect the liquidity of our common stock andadversely affect the trading price of our common stock. Moreover, without a large public float, our common stock is less liquid than the stock of companieswith broader public ownership and, as a result, the trading prices of our common stock may be more volatile than that of other companies or the market as awhole. In addition, in the absence of an active public trading market, you may be unable to liquidate your investment in us at a satisfactory price.Stockholders may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions, conversion of our4.125% Convertible Senior Notes due 2018 or our 4.125% Convertible Senior Notes due 2020, or otherwise.As of December 31, 2015, we had approximately 68 million shares of common stock authorized but unissued. As of December 31, 2015, we have reserved anaggregate of 8.7 million shares for issuance under our equity incentive compensation plans (5.8 million to be issued pursuant to future awards and grantsunder the 2015 Plan, 2.7 million shares that are subject to outstanding grants under the 2010 Plan, and 0.2 million shares to be issued pursuant to the 2011Employee Stock Purchase Plan). In addition, our 4.125% Convertible Senior Notes due 2018, which were issued in November 2013, are convertible intoshares of our common stock, although we may, at our election and subject to certain limitations, choose to settle any conversion by the payment or deliveryof cash, shares of our common stock, or a combination thereof. Prior to June 1, 2018, these notes may be converted only upon the occurrence of specifiedevents set forth in the indenture pursuant to which they were issued, while on or after June 1, 2018, holders may convert their notes at any time. Our 4.125%Convertible Senior Notes due 2020, which were issued in April 2015 in connection with our acquisition of City Index, are convertible into shares of ourcommon stock, although we may, at our election and subject to certain limitations, choose to settle any conversion by the payment or delivery of cash, sharesof our common stock, or a combination thereof. Prior to October 1, 2019, these notes may be converted only upon the occurrence of specified events set forthin the indenture pursuant to which they were issued, while on or after October 1, 2019, holders may convert their notes at any time. Any common stock thatwe issue, including under our 2015 Plan, 2011 Employee Stock Purchase Plan or other equity incentive plans that we may adopt in the future, or uponconversion of any of our convertible senior notes will dilute the percentage ownership held by investors who own our common stock.ITEM 1B. UNRESOLVED STAFF COMMENTSThere are no unresolved staff comments.ITEM 2. PROPERTIESWe are a global provider of trading services and solutions, specializing in over-the-counter, or OTC, and exchange-traded markets. Our retail, institutionaland futures segments service customers in more than 180 countries worldwide, and we conduct business from our offices in Bedminster, New Jersey; JerseyCity, New Jersey; London, England; Cornwall, England; Chicago, Illinois; Powell, Ohio; Grand Rapids, Michigan; Tokyo, Japan; Sydney, Australia; Beijing,China; Shanghai, China; Pembroke, Bermuda; Hong Kong and Singapore. Our retail segment conducts business in each of these locations, except ourlocations in Illinois and Ohio, which are focused primarily on our futures segment. Our institutional segment conducts business primarily from our locationsin New Jersey and Bermuda, while our corporate segment is primarily located in our corporate headquarters in Bedminster, New Jersey. All of our office spacewas leased as of December 31, 2015While we believe that these facilities are adequate to meet our current needs, it may become necessary to secure additional space in the future toaccommodate any future growth. We believe that such additional space will be available as needed in the future on commercially reasonable terms.ITEM 3. LEGAL PROCEEDINGSOn February 16, 2012, we received a Letter of Claim on behalf of certain individuals who had lost money in an investment scheme operated by a third-partymoney management firm, incorporated in the United Kingdom, which has since been closed down by the United Kingdom’s Financial Services Authority.The investment firm, Cameron Farley Ltd, had opened a corporate account with us and invested the individuals’ money, representing such funds as its own,while operating a fraudulent scheme. Though a complaint has been filed and served on us, the claimants requested, and we agreed, to follow the United34Table of ContentsKingdom’s Pre-Action Protocol, a pre-litigation process intended to resolve matters without the need to engage in formal litigation. We submitted a Responseto the Letter before Claim on July 4, 2012. On July 5, 2012, we received a substantially similar Letter of Claim on behalf of further individuals. Subsequently,the parties agreed to consolidate claims by those other similarly situated individuals with the pending Pre-Action Protocol process. The parties agreed itwould be more appropriate for the proceedings to be dealt with in the Commercial Court and the matters were transferred pursuant to Consent Orders datedMarch 14, 2013. We subsequently filed an application for strike out and/or summary judgment in respect of all claims on March 15, 2013. The claimantsfiled an answer to our motion on June 2, 2013 and subsequently we filed a response to this answer on July 15, 2013. A hearing was held on our applicationfor strike out and/or summary judgment on September 18 and 19, 2013. After the hearing, the judge asked the claimants to respond in writing to hisadditional questions from the hearing. The claimants had until October 11, 2013 to provide answers and we were given until November 1, 2013 to respond. On February 26, 2014, the judge denied our motion for strike out/summary judgment. Case management conferences were held by the Court on October 17,2014 and June 18, 2015. On August 3, 2015, the claimants filed an Amended Master Particulars of Claim, and on October 6, 2015, we filed an AmendedDefense. The parties have completed discovery and provided disclosure on October 30, 2015. The current Court timetable provides for a trial date in the firstquarter of 2017. We can provide no assurances that this matter will be successfully resolved. As of the date of this report, a potential loss or a potential rangeof loss cannot be reasonably estimated.In addition to the matter discussed above, we are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of ourmanagement, the outcome of such other claims and legal actions, if decided adversely, is not expected to have a material adverse effect on our quarterly orannual operating results, cash flows or consolidated financial position.ITEM 4. MINE SAFETY DISCLOSURESNot Applicable.35Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESOur common stock began trading on the New York Stock Exchange under the symbol “GCAP” on December 15, 2010. Prior to that date, there was noestablished trading market for our common stock. As of March 11, 2016, we estimate that we had approximately 85 stockholders of record. Because many ofour shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of underlyingbeneficial stockholders represented by these record holders.The following table details the high and low closing prices for the common stock as reported by the New York Stock Exchange for the periods indicated.2015 2014QuarterHigh Low High LowFirst Quarter$10.24 $7.98 $11.81 $7.82Second Quarter$10.38 $9.29 $11.14 $7.58Third Quarter$9.69 $6.98 $7.71 $6.01Fourth Quarter$8.41 $7.14 $9.11 $6.18DIVIDEND POLICYIn October 2011, our Board of Directors approved a policy of paying quarterly dividends, subject to available cash flow from operations, other considerationsand the determination by our Board of Directors of the amount. Each quarter since, we have paid a $0.05 per share dividend to holders of our common stock.The latest dividend of $0.05 per share was declared in March 2016 and is payable on March 29, 2016 to stockholders of record on March 25, 2016.Although we intend to continue our policy of paying quarterly dividends, any declaration and payment of dividends will be at the discretion of our Board ofDirectors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictionswith respect to the payment of dividends, and other considerations that our Board of Directors deems relevant. The Board’s ability to declare a dividend isalso subject to limits imposed by Delaware corporate law. In addition, our subsidiaries are permitted to pay dividends to us subject to (i) certain regulatoryrestrictions related to the maintenance of minimum net capital in those of our subsidiaries that are subject to net capital requirements imposed by applicablelaw or regulation and (ii) general restrictions imposed on dividend payments under the laws of the jurisdiction of incorporation or organization of eachsubsidiary.RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIESNone.REPURCHASES OF COMMON STOCKDuring the year ended December 31, 2015, we repurchased approximately 0.7 million shares of our common stock pursuant to the terms of our approvedstock repurchase plan.36Table of Contents Total Maximum Number Number of Shares (or Approximate Purchased as Dollar Value) of Part of Publicly Shares that MayTotal Number Announced Yet Be Purchasedof Shares Average Price Plans or Under the Plans orPeriodPurchased(1) Paid per Share(1) Programs(1) Programs(1)(2)January 2015— — — $8,528,167February 2015— — — $8,528,167March 2015— — — $8,528,167April 2015— — — $8,528,167May 201521,132 $9.46 21,132 $8,327,753June 201520,801 9.61 20,801 $8,127,346July 201524,334 8.94 24,334 $7,909,320August 201549,977 7.42 49,977 $7,537,261September 2015150,023 7.67 150,023 $6,384,123October 2015100,000 7.33 100,000 $5,648,902November 2015— — — $5,648,902December 2015288,095 7.65 288,095 $3,439,347(1)In May 2013, the Company announced that its Board of Directors approved a share repurchase plan, which authorizes the expenditure of up to $15.0million for the purchase of the Company’s common stock.(2) Transaction fees related to the share purchases are deducted from the total remaining allowable expenditure amount.STOCK PERFORMANCE GRAPHThe following performance chart assumes an investment of $100 on December 15, 2010 (the date our shares began trading on the NYSE) and compares thechange at December 31, 2010 through December 31, 2015 in the market price for our common stock with the Russell 2000 Index, the NASDAQ CompositeIndex, and a peer group identified by us (the “Selected Peer Group Index”). The Selected Peer Group Index was selected to include publicly-traded companiesengaging in one or more of our lines of business.The Selected Peer Group Index is weighted according to the respective issuer’s stock market capitalization and is comprised of the following companies:Advent Software, Inc., BGC Partners, Inc., DST Systems, E*Trade Financial Corporation, FactSet Research Systems, Inc., FXCM, Inc., GFIG Group, Inc., INTLFCStone Inc., Investment Technology Group, Inc., Knight Capital Group, Inc., Market Axcess Holdings, Inc., MSCI, Inc., and SWS Group, Inc.The comparisons in the graphs below are based on historical data and are not intended to forecast the possible future performance of our common stock.37Table of ContentsEQUITY COMPENSATION PLAN INFORMATIONThe following table provides information with respect to our compensation plans under which equity compensation was authorized as of December 31, 2015. Number of securities remainingNumber of Weighted-average available for futuresecurities to be exercise price issuance underissued upon exercise of equity compensationof outstanding outstanding plans (excludingoptions, warrants options, warrants securities reflectedand rights and rights in column (a)Plan category(a) (b) (c)Equity compensation plans approved by security holders2,540,052 $5.76 5,821,424ITEM 6. SELECTED FINANCIAL DATAThe financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and our audited consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, December 31,2014 and December 31, 2013, included in this annual report on Form 10-K.As discussed in Note 2 to our audited consolidated financial statements under the heading "Restatement," we have restated our financial statements as ofDecember 31,2014 for the years ending December 31, 2014 and 2013. The information presented below reflects the restated results of our operations.Our historical results of operations are not necessarily indicative of future results.38Table of ContentsSelected Consolidated Statement of Income and Comprehensive Income (in thousands, except share and per share data)Year Ended December 31,2015(1) 2014(As Restated) 2013(1)(As Restated) 2012 2011Consolidated Statement of Income andComprehensive Income Data: Net Revenue$435,347 $369,189 $267,691 $151,804 $182,009Total operating expense$417,698 $317,592 $222,968 $150,218 $158,221Income before income tax expense$8,427 $45,450 $45,490 $1,142 $23,244Net Income applicable to GAIN Capital Holdings, Inc.$10,279 $24,877 $28,107 $2,621 $15,698Earnings per common share: Basic$0.22 $0.56 $0.76 $0.08 $0.46Diluted$0.22 $0.53 $0.71 $0.07 $0.40Weighted average common shares outstanding used incomputing earnings per common share Basic47,601,979 40,561,644 36,551,246 34,940,800 34,286,840Diluted48,379,051 43,214,895 39,632,878 37,880,208 38,981,792Cash dividends per share$0.20 $0.20 $0.20 $0.20 $0.05Selected Consolidated Balance Sheet (in thousands unless otherwise stated)Year Ended December 31,2015(1) 2014(As Restated) 2013(1) 2012 2011Consolidated Balance Sheet Data: Cash and cash equivalents$171,888 $139,351 $39,871 $36,820 $60,221Cash and securities held for customers$920,621 $759,559 $739,318 $446,311 $310,447Receivables from brokers$121,153 $134,908 $227,630 $89,916 $85,401Total assets$1,424,815 $1,183,301 $1,112,560 $629,262 $504,930Payables to customers$920,621 $759,559 $739,318 $446,311 $310,447Notes payable$— $— $— $— $7,875Convertible senior notes$121,996 $68,367 $65,360 $— $—Total shareholders' equity$306,084 $249,920 $226,723 $162,568 $163,974(1)There were material business combinations that occurred in 2013 and 2015, respectively. See Note 11 for further discussion.ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION39Table of ContentsThe following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes theretoprovided under “Item 8. Financial Statements and Supplementary Data” contained elsewhere within this Annual Report on Form 10-K.OverviewWe are a global provider of trading services and solutions, specializing in over-the-counter, or OTC, and exchange-traded markets. Our retail, institutionaland futures segments service customers in more than 180 countries worldwide, and we conduct business from our offices in Bedminster, New Jersey; JerseyCity, New Jersey; London, England; Cornwall, England; Chicago, Illinois; Powell, Ohio; Grand Rapids, Michigan; Tokyo, Japan; Sydney, Australia; Beijing,China; Shanghai, China; Pembroke, Bermuda; Hong Kong and Singapore.We offer our customers access to a diverse range of over 12,500 financial products, including spot foreign exchange, or forex, and precious metals trading, aswell as “contracts for difference”, or CFDs, which are investment products with returns linked to the performance of underlying asset. We offer CFDs oncurrencies, commodities, indices, individual equities, bonds and interest rate products. We also support trading of exchange-traded futures and options onfutures on more than 30 global exchanges. In the United Kingdom, we offer spread bets, which are investment products similar to CFDs, but that offer morefavorable tax treatment for residents of that country.We have invested considerable resources over the past 16 years to develop our proprietary trading platforms to provide our customers with advanced pricediscovery, trade execution and order management functions, while improving our ability to acquire and service our customers efficiently, as well as managemarket and credit risk associated with our customer’s trading activity. Today our customers can trade through web-based, downloadable and mobile tradingplatforms and have access to innovative trading tools to assist them with research and analysis, automated trading and account management.We operate our business in three segments. Through our retail segment, we provide our retail customers around the world with access to a diverse range ofglobal financial markets, including spot forex, precious metals, spread bets and CFDs on commodities, indices, individual equities and interest rate products,as well OTC options on forex. Our institutional segment provides agency execution services and offers access to markets and self-directed trading in foreignexchange, commodities, equities, options and futures via our GTX platform. Our futures segment offers execution and risk management services forexchange-traded futures and futures options on major U.S. and European futures and options exchanges. Each of our operating segments is discussed in moredetail below.As a global provider of online trading services, our results of operations are impacted by a number of external market factors, including market volatility andtransaction volumes, competition, the regulatory environment in the various jurisdictions and markets in which we operate and the financial condition of theretail and institutional customers to whom we provide our services. These factors are not the only factors that impacted our results of operations for the mostrecent fiscal period, and additional or other factors may impact, or have different degrees of impact, on our results of operations in future periods. Please see"Item 1A. Risk Factors" for a discussion of other factors that may impact our business.Market Environment and Trading VolatilityOur revenue and operating results may vary significantly from period to period due primarily to movements and trends in the world’s financial markets and tofluctuations in market volatility. As a general rule, our businesses typically benefit from volatility in the markets that we serve, as periods of increasedvolatility often coincide with higher levels of trading by our clients and a higher volume of transactions. However, periods of extreme volatility may result insignificant market dislocations that can also lead clients to reduce their trading activity. In addition, volatility that results in trading within a relativelynarrow band of prices may lead to less profitable trading activity. Also, low or extremely high market volatility can adversely affect our ability to profitablymanage our net exposure, which represents the unhedged portion of the trading positions we enter into with customers in our retail segment.Market volatility is driven by a range of external factors, some of which are market specific and some of which are correlated to general macroeconomicconditions. Weakness in equity markets, which occurred in much of 2011 and several of the previous years, can result in reduced overall trading activity. TheEuropean sovereign debt crisis, which arose in the second quarter of 2010 and continued throughout 2011 and 2012, created economic uncertainty,adversely affecting the equities and other financial markets for much of this period, leading investors to, at times, reduce their trading activity, and alsoresulted in anomalous and challenging market conditions over several significant periods during 2011 and 2012. Market conditions again becamechallenging in late 2013 and early 2014, with volatility in several of the major currencies reaching 5-year lows. Overall market conditions in the second halfof 2014 and into 2015 broadly improved, although our overall revenue capture in the first half of 2015 was tempered by an early concentration of one-waytrading in the Euro/U.S. dollar pair, which required us40Table of Contentsto hedge more volume with our liquidity providers, as well as unusually adverse trading conditions in indices. Market conditions improved in the secondhalf of 2015, with higher volatility in indices and commodities.CompetitionThe products we offer have generally been accessible to retail investors for a significantly shorter period than many other securities products, such as equities,and our industry is rapidly evolving and characterized by intense competition. Entering new markets often requires us to lower our pricing in order to attractcustomers and compete with other companies which have already established customer bases in such markets. In addition, in existing markets, on occasionwe make short-term decisions to be more aggressive regarding the pricing we offer our customers, or we may decide to offer additional services at reducedrates, or free of charge, in order to attract customers and take market share from our competitors.Regulatory EnvironmentIn recent years, the financial markets have experienced a major global regulatory overhaul, as regulators and legislators in the United States and abroad haveproposed and, in some instances, adopted, a wide range of regulatory changes that have had a significant effect on the manner in which we operate ourbusinesses. For example, as a result of the Dodd-Frank Act’s requirement that essentially all transactions in commodities be executed on an exchange, afterJuly 15, 2011, we were no longer permitted to offer leveraged spot metal transactions in the United States.U.S. and foreign regulators have expressed their intention to review existing regulation in a number of areas as a result of the highly publicized marketdisruption that occurred in January 2015 when the SNB announced that it would move interest rates to -0.75% and abandon the 1.20 floor for EUR/CHF thatit had previously maintained. For example, following the SNB market event, the NFA increased margin requirements on certain currency pairs, includingthose involving the Swiss franc, Swedish krona and Norwegian krone, and regulators in other jurisdictions may follow suit.Part of our growth strategy is to enter new markets, and as we do so we will become subject to regulation in those markets. Complying with differentregulatory regimes in multiple markets is expensive, and in many markets the regulatory environment is unclear and evolving. Changes in regulatoryrequirements and changes in the interpretation of existing regulatory requirements may force us to alter our business practices.City Index AcquisitionOn April 1, 2015, we completed the acquisition of the entire issued and outstanding share capital of City Index (Holdings) Limited, or City Index, a globalonline trading firm specializing in CFDs, forex and spread betting from City Index Group Limited. The preliminary purchase price consisted ofapproximately (i) $6.1 million in cash, inclusive of working capital adjustments and $1.0 million in cash to be held in escrow; (ii) 5,319,149 shares of ourcommon stock, including 4,787,234 shares to be held in escrow; and (iii) 4.125% unsecured Convertible Senior Notes with an aggregate principal amount of$60.0 million, including convertible senior notes with an aggregate principal amount of $54.0 million to be held in escrow. In addition, we paid City Indexapproximately $22.4 million, which was used to settle certain inter-company liabilities between City Index and City Index Group Limited.Global Asset Advisors, LLC and Top Third Ag Marketing LLC AcquisitionsOn March 7, 2014, we entered into a Membership Interest Purchase Agreement, which we refer to as the GAA Agreement, with Global Asset Advisors, LLC, orGAA, Lucky Good Dog, L.L.C., or LGD, Glenn A. Swanson and Andrew W. Daniels (as sellers' representative). On March 21, 2014, upon the terms and subjectto the conditions set forth in the GAA Agreement, we purchased 55% of the outstanding membership interests in GAA from LGD and Mr. Swanson, whom wecollectively refer to as the GAA Sellers, for an aggregate purchase price consisting of (i) $4,420,240 in cash, subject to certain adjustments, and (ii) 116,801shares of the Company's common stock. Under the terms of the GAA Agreement, LGD and Mr. Swanson are also entitled to receive, for a period of seven yearsafter the closing of the acquisition, annual payments of a portion of the net interest earned on the assets of clients of GAA at the time of the closing. Under theterms of the Amended and Restated Operating Agreement of GAA, which was executed at the closing of the acquisition, we have, for a period of six yearsafter the closing, a call right to purchase the remaining membership interests in GAA for a price based on a multiple of GAA's trailing twelve month EBITDA.From the third anniversary through the sixth anniversary of the closing date, the GAA Sellers may put their remaining interests in GAA to us on the sameterms.Also on March 7, 2014, we entered into a Membership Interest Purchase Agreement, which we refer to as the Top Third Agreement, with Top Third AgMarketing LLC, or Top Third, LGD, Mark Gold and Glenn A. Swanson. On March 21, 2014,41Table of Contentsupon the terms and subject to the conditions set forth in the Top Third Agreement, we purchased 55% of the outstanding membership interests in Top Thirdfrom LGD and Messrs. Gold and Swanson, whom we collectively refer to as the Top Third Sellers, for an aggregate purchase price consisting of $4,749,289,subject to certain adjustments, a portion of which will be payable to Mr. Gold contingent upon satisfying certain requirements over the three year periodfollowing the closing date of the acquisition. Under the terms of the Amended and Restated Operating Agreement of Top Third, which was executed on theclosing of the acquisition, we have, for a period of six years after the closing, a call right to purchase the remaining membership interests in Top Third for aprice based on a multiple of Top Third's trailing twelve month EBITDA. From the third anniversary through the sixth anniversary of the closing date, the TopThird Sellers may put their remaining interests in Top Third to us on the same terms.Galvan AcquisitionIn July 2014, we closed on our acquisition of Galvan Research and Trading, Ltd., or Galvan. Galvan, along with its subsidiaries, Galvan LLP and FaradayResearch LLP, provides individual investors with professional advice and trading recommendations across a wide range of markets, including FX, individualequities, equity indices and other market sectors. The consideration for the acquisition consisted of a cash payment at closing of $9.7 million, as well as anearn-out arrangement under which the sellers may be entitled to additional contingent consideration based upon the acquired businesses achieving certainperformance targets in 2014, 2015 and 2016. At the time the acquisition closed, we estimated the acquisition date fair value of the contingent considerationto be $10.5 million. In December 2015, we entered into an agreement with the former owners of Galvan to satisfy all remaining obligations under thecontingent earn-out arrangement for a one-time payment of $1.5 million, which was paid in early 2016.Acquisition of Intellectual Property AssetsOn July 10, 2014, we entered into asset purchase agreements with Valaquenta Intellectual Property Limited, or Valaquenta, and Forexster Limited, orForexster, pursuant to which one of our subsidiaries, GAIN GTX Bermuda, Ltd., or GTX Bermuda, agreed to purchase, from Valaquenta and Forexster, thesoftware and other intellectual property assets utilized to operate the electronic trading platform offered to customers in our GTX business. Prior to theclosing of the acquisition, which took place on July 10, 2014, we had agreements with Valaquenta and Forexster granting us the exclusive right to use theintellectual property in the field of forex trading and non-exclusive rights to use the intellectual property for the trading of financial products in the fields ofprecious metals and hydrocarbons. Following the closing of the acquisition, GTX Bermuda has full rights and title over the intellectual property for thetrading of currencies, commodities and all other financial instruments of any kind whatsoever.The purchase was made with a combination of $12.4 million in cash and $5.3 million of our unregistered common stock. In addition, GTX Bermuda agreed topay Valaquenta contingent consideration in the event that GTX Bermuda or any of its affiliates in the future provide customers the ability to trade new typesof financial instruments using the purchased intellectual property and the trading of such new products generates "Net Revenue" (as defined in the agreementwith Valaquenta) in excess of thresholds set out in the agreement.Key Income Statement Line Items and Key Operating MetricsThe following section briefly describes the key components of our revenues and expenses, our use of non-GAAP financial measures, and key operatingmetrics we use to evaluate the performance of our business.RevenueRevenue from our business consists of retail segment revenue, institutional segment revenue, futures segment revenue, other revenue and interest revenue.Retail Segment RevenueRetail segment revenue is our largest source of revenue. Retail segment revenue is comprised of trading revenue from our retail segment, commission revenuefrom our sales trader and advisory businesses, as well as inactivity fees and interest revenue.Prior to our acquisitions of Global Futures and Forex, Ltd., or GFT, and City Index, trading revenue in our retail segment had been generated primarily byforex products. As a result of the GFT and City Index acquisitions, trading revenue generated by non-forex products, particularly CFDs relating to equityindices, single stock equities and commodities, has increased both in magnitude and as a percentage of total revenue in our retail segment.42Table of ContentsWe generate revenue in our retail segment in two ways: (1) trading revenue from our market making activities for OTC products, earned principally from thebid/offer spread we offer our customers and any net gains and losses generated through changes in the market value of the currencies and other products heldin our net exposure and (2) fees, including financing charges for positions held overnight, commissions on equity CFD trades and advisory services, andother account related fees.For the year ended December 31, 2015, approximately 98% of our average daily retail segment trading volume was either naturally hedged or hedged by uswith one of our liquidity providers, which is slightly higher than our average daily retail segment trading volume hedged of approximately 96% in both 2014and 2013. The remaining 2% of our average daily retail segment trading volume for 2015 and 4% in both 2014 and 2013 consisted of our net exposure.We manage our net exposure by applying position and exposure limits established under our risk-management policies and by continuous, active monitoringby our trading and risk teams. Based on our risk management policies and procedures, over time a portion of our net exposure may be hedged with ourliquidity providers. Although we do not actively initiate proprietary market positions in anticipation of future movements in the relative prices of theproducts we offer, through our net exposure we are likely to have open positions in various currencies at any given time. In the event of unfavorable marketmovements, we may experience losses on such positions. See “Our Retail Segment - Sophisticated Risk Management” in Item 1. Business, in this Form 10-Kfor further details regarding our risk management policies for the retail segment.Our retail sales trader business has historically provided high-touch trading services and execution to high net worth customers. We primarily earncommissions on this trade flow, which we typically hedge fully. In the latter part of 2015, our sales trader business was fully integrated into the rest of theretail segment.Institutional Segment RevenueInstitutional segment revenue consists primarily of revenue from our GTX business, which provides a proprietary trading platform and sales and tradingservices to institutions as well as interest revenue and expense. Revenue for our GTX business is generated primarily through commissions on trades executedon the GTX platform. We act as an agent for the trades executed on the GTX platform and, therefore, do not assume any market or credit risk in connectionwith those transactions. Our institutional segment revenue includes revenue generated by intercompany transactions with other segments/affiliates that areeliminated when calculating our consolidated net revenue. This intercompany revenue totaled approximately $1.6 million for the year ended December 31,2015.Futures Segment RevenueFutures revenue is comprised primarily of commissions earned on futures and futures options trades, as well as interest revenue. We are not exposed to marketrisk in connection with customer trades in our futures segment.Corporate and Other RevenueCorporate and other revenue primarily comprises foreign currency transaction gains and losses. During the twelve months ended December 31, 2015,corporate and other revenue also included a $6.7 million adjustment to the contingent consideration related to our Galvan acquisition. In December 2015, weentered into an agreement with the former owners of Galvan to satisfy all remaining obligations under the contingent earn-out arrangement for a one-timepayment of $1.5 million, which was paid in early 2016.Net Interest RevenueNet interest revenue/expense consists primarily of the revenue generated by our cash and customer cash held by us at banks and on deposit as collateral withour liquidity providers, less interest paid to our customers.Our cash and customer cash is generally invested in money market funds, which primarily invest in short-term United States government securities or treasurybills. Such deposits and investments earned interest at an average effective rate of approximately 0.1% for the year ended December 31, 2015 and 2014.Interest paid to customers varies primarily due to the net value of a customer account. A customer’s net account value equals cash on deposit plus the mark-to-market of open positions as of the measurement date. Interest income and interest expense are recorded when earned and incurred, respectively. Net interestrevenue was $0.2 million for the year ended December 31, 2015, compared to net interest revenue of $0.8 million for the year ended December 31, 2014.43Table of ContentsExpensesOur expenses are principally comprised of employee compensation and benefits, selling and marketing, referral fees, trading expenses, interest on long termborrowings, communications and technology expenses, as well as general and administrative expenses.Employee Compensation and BenefitsEmployee compensation and benefits includes salaries, bonuses, commissions, stock-based compensation, contributions to benefit programs and otherrelated employee costs.Selling and MarketingOur marketing strategy employs a combination of direct online marketing and focused branding programs, with the goal of raising awareness and cost-effectively acquiring customers for our products and services.Referral FeesReferral fees consist of compensation paid to our white label partners and introducing brokers. We generally provide white label partners with the platform,systems, and back-office services necessary for them to offer trading services to their customers. Introducing brokers identify and direct customers to us.Referral fees are largely variable and change principally based on the level of customer trading volume directed to us from our white label partners andintroducing brokers, the specific terms of our agreements with the white label partners and introducing brokers, which vary on a partner-by-partner andregional basis, and the relative percentage of trading volume generated from particular relationships in any given period. The majority of our white label andintroducing broker partners are paid based on the trading volume generated by the customers they introduce, directly or indirectly, to us, rather than on arevenue sharing basis. As such, during periods in which their customers’ trading activity is not profitable for us, if the associated trading volume remainshigh, we may be required to make larger payments to these partners despite the fact that we are generating lower revenue from their customers. Our indirectbusiness accounted for 48.4%, 48.7% and 38.6% of retail trading volume in the years ended December 31, 2015, 2014 and 2013, respectively. The increasein indirect business in 2014 was largely due to the acquisition of GFT.Trading ExpensesTrading expenses consists of exchange fees paid to stock exchanges and other third-parties for exchange market data that we provide to our customers or useto create our own derived data products, as well as fees for news services and fees paid to prime brokers in connection with our institutional and futuressegments.General and AdministrativeGeneral and administrative expenses consist of bank fees, professional fees, occupancy and equipment and other miscellaneous expenses.Depreciation and amortizationDepreciation and amortization consists of the recognition of expense for physical assets and software purchased for use over a period of several years and ofthe amortization of internally developed software.Purchased Intangible AmortizationPurchased intangible amortization consists of amortization related to intangible assets we acquired in 2015, 2014 and 2013 in connection with ouracquisitions. The principal intangible assets acquired were technology, customer assets and a non-compete agreement. These intangible assets have usefullives ranging from one year to ten years.Communications and Technology44Table of ContentsCommunications and technology consists of communications fees, data fees, product development, software and maintenance expenses.Bad debt provisionBad debt provision represents the amounts estimated for the uncollectibility of certain outstanding balances during the period.Restructuring ExpensesIn 2015, 2014 and 2013, we incurred restructuring expenses, which reflected costs arising from headcount reductions and other exit costs, measured anddisclosed in accordance with ASC 420 Exit or Disposal Cost Obligations and ASC 712 Compensation - Nonretirement Postemployment Benefits.Acquisition ExpensesIn 2015, 2014 and 2013, we incurred acquisition-related expenses, which included professional services costs, such as legal, accounting, valuation and othercosts specified in ASC 805. These costs are expensed as incurred.Integration ExpensesIn 2015, 2014 and 2013, we incurred integration expenses, which are acquisition-related costs that are incurred while integrating the acquired company intothe consolidated group. These costs include retention bonuses paid to employees and the cost of retiring redundant assets.Impairment of InvestmentIn 2013, our investment in Kapitall, Inc. became impaired. In 2014, the remaining value of the investment was written off.Interest Expense on Long-term borrowingsInterest expense on long-term borrowings consists of interest expense on our 4.125% Convertible Senior Notes due 2018, issued in November 2013 andinterest expense on our 4.125% Convertible Senior Notes due 2020, issued in April 2015 as part of the consideration for the City Index acquisition.Non-GAAP Financial MeasuresWe use adjusted net income and adjusted earnings per common share, each of which is a non-GAAP financial measure, to evaluate our business. We believeour reporting of adjusted net income and adjusted earnings per share assists investors in evaluating our operating performance. Adjusted net income andadjusted earnings per common share are not measures of financial performance calculated in accordance with GAAP. They should be considered in additionto, but not as a substitute for, other measures of our financial performance reported in accordance with GAAP, such as net income and earnings per commonshare. Below is a discussion and reconciliation of these non-GAAP financial measures.Adjusted Net Income and Adjusted Earnings Per ShareAdjusted net income is a non-GAAP financial measure and represents our net income excluding restructuring, acquisition and integration expenses, whichinclude deal-related acquisition costs, such as legal, accounting and valuation expenses, accelerated amortization of trading platforms, gain onextinguishment of debt and other expenses incurred in connection with, or as a result of, merger and acquisition transactions. In addition, adjusted netincome excludes the adjustment to the fair value of consideration from the Galvan acquisition and the bad debt expense related to the Swiss National Bankevent in January 2015. We exclude these items from our adjusted net income and adjusted earnings per share, because we view these as transactions notcomponents of our core operations, which we believe to be the most meaningful indicators of the Company's performance.Adjusted earnings per share is a non-GAAP financial measure and represents our adjusted net income per share. We believe these financial measures assistinvestors in evaluating our operating performance. These non-GAAP financial measures have certain limitations, including that they do not havestandardized meanings. Therefore, our definitions may be different from similar non-GAAP financial measures used by other companies or analysts, and itmay be difficult to compare our financial performance to that of other companies.Reconciliation of Non-GAAP Financial Measures45Table of ContentsAs discussed in Note 2 to our audited consolidated financial statements under the heading "Restatement," we have restated our financial statements for theyears ending December 31, 2014 and 2013. The following table provides a reconciliation of GAAP net income to adjusted net income and adjusted earningsper common share for the restated amounts (amounts in thousands except per share amounts): Year Ended December 31, 2015 2014(As Restated) 2013(As Restated)Net income applicable to GAIN Capital Holdings, Inc.$10,279 $24,877 $28,107Add Back, net of tax: Acquisition expense2,199 2,539 1,171Restructuring2,716 1,680 289Integration21,510 1,792 1,252Other items(1)— 36 (995)Adjustment to fair value of contingent consideration(4,369) — —Bad Debt related to SNB event in January 20151,950 — —Adjusted net income$34,285 $30,924 $29,824Adjusted earnings per common share Basic$0.72 $0.76 $0.82 Diluted$0.71 $0.72 $0.75(1) Other items, net of tax include impairment of investment and gain on extinguishment of debt.Operating MetricsIn addition to the financial measures discussed above, we review various key operating metrics, which are described below, to evaluate the performance ofour businesses. Key Operating Metrics (Unaudited) Year Ended December 31, 2015 2014 2013 2012 2011Retail OTC Trading Volume (billions)$3,985.8 $2,430.5 $1,796.7 $1,303.4 $1,574.0OTC Average Daily Volume (billions)$15.4 $9.4 $6.9 $5.0 $6.0 Active OTC Accounts146,977 94,895 98,696 60,219 63,435Client Assets (millions)$920.6 $759.6 $739.3 $446.3 $310.4 Institutional Volume (billions)$2,671.9 $3,183.7 $2,599.6 $1,493.8 $445.7Average Daily Volume (billions)$10.3 $12.7 $10 $5.7 $1.7 Futures Futures Contracts8,623,392 7,027,008 5,386,383 1,507,425 —Futures Average Daily Contracts34,356 28,108 21,460 18,383 —OTC Trading Volume46Table of ContentsOTC trading volume is the U.S. dollar equivalent of the aggregate notional value of OTC trades executed by customers in our retail segment. Approximately59.9% of our overall customer trading volume for the year ended December 31, 2015 was generated in our retail segment, compared to 43.3% for the yearended December 31, 2014.OTC Average Daily VolumeAverage daily volume is the U.S. dollar equivalent of the aggregate notional value of trades executed by our customers in a given period divided by thenumber of trading days in the given period.Active OTC AccountsActive OTC accounts represents retail segment customers who executed at least one trade during the relevant period. We believe active OTC accounts is animportant operating metric because it correlates to trading volume and revenue in our retail segment.Client AssetsClient assets represent amounts due to clients in our retail and futures segments, including customer deposits and unrealized gains or losses arising from openpositions.GTX VolumeGTX volume is the U.S. dollar equivalent of the aggregate notional value of OTC trades executed by customers in our institutional segment. Approximately40.1% and 56.7% of our overall customer trading volume for the years ended December 31, 2015 and 2014, respectively, was generated in our institutionalsegment.Futures ContractsFutures contracts represent the total number of contracts transacted by customers in our futures segment.We believe that our customer trading volumes are driven by eight main factors. Four of these factors are broad external factors outside of our control thatgenerally impact customer trading volumes, and include:•overall economic conditions and outlook;•volatility of financial markets;•legislative changes; and•regulatory changes.The volatility of financial markets has generally been positively correlated with customer trading volume. Our customer trading volume is also affected bythe following additional factors:•the effectiveness of our sales activities;•the competitiveness of our products and services;•the effectiveness of our customer service team; and•the effectiveness of our marketing activities.In order to increase customer trading volume, we focus our marketing and our customer service and education activities on attracting new customers andextending the duration and scope of the relationship our customers have with us.For the years ended December 31, 2015 and December 31, 2014, no single retail or institutional customer accounted for more than 4% of our total netrevenue.Results of OperationsAs discussed in Note 2 to our audited consolidated financial statements under the heading "Restatement," we have restated our financial statements as ofDecember 31, 2014 and for the years ending December 31, 2014 and 2013 to reflect certain tax and other adjustments. The information presented belowreflects the restated results of our operations.During the fourth quarter of 2015, we changed our segment reporting structure to include three operating segments, retail, institutional and futures, ratherthan a single operating segment as had been previously reported. These operating segments are47Table of Contentsdiscussed in more detail below. We also report information relating to general corporate services in a fourth component, corporate and other. See Notes 1 and22 to our audited consolidated financial statements for additional information.48Table of ContentsYear Ended December 31, 2015 Compared to Year Ended December 31, 2014Revenue (amounts in thousands)Year Ended December 31,2015 2014REVENUE: Retail revenue$347,489 $292,778Institutional revenue33,773 34,518Futures revenue45,427 36,160Other revenue8,487 4,904Total non-interest revenue435,176 368,360Interest revenue1,220 1,428Interest expense1,049 599Total net interest revenue171 829Net Revenue$435,347 $369,189Our total net revenue increased $66.2 million, or 17.9%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.Retail revenue increase $54.7 million, or 18.7%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. The increase wasprimarily the result of the City Index acquisition in April 2015.Institutional revenue decreased $0.7 million, or 2.2%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.The decreaseprimarily resulted from a reduction in commission revenue from our institutional sales and trading services, partially offset by a growth in commissionsrevenue from trading on our GTX platform.Futures revenue increased $9.3 million, or 25.6%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. The increase wasprimarily due to inclusion of full year results of GAA and Top Third, in which we acquired controlling interests in March 2014.Other revenue increased $3.6 million, or 73.1%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. The increase wasprimarily due to an adjustment to the recorded amount of contingent consideration relating to our Galvan acquisition, partially offset by foreign currencyrevaluation.Our net interest revenue decreased from $0.8 million for the year ended December 31, 2014 to $0.2 million for the year ended December 31, 2015.Operating Expenses (amounts in thousands)Year Ended December 31,2015 2014Total operating expenses (amounts in thousands)$417,698 $317,592As a percentage of net revenue95.9% 86.0%Our total operating expenses increased $100.1 million, or 31.5%, for the year ended December 31, 2015, compared to the year ending December 31, 2014,primarily due to the effects of the City Index acquisition.The increase in operating expenses consisted primarily of increases of $7.3 million in employee compensation and benefits, $7.0 million in selling andmarketing, $12.6 million in referral fees, $5.7 million in trading expenses, $16.4 million in general and administrative expenses, $4.5 million in depreciationand amortization, $8.5 million in purchased intangible amortization, $3.4 million in communication and technology, $3.8 million in bad debt provision,$1.1 million in restructuring expenses, and $30.6 million in integration expenses offset by a decrease of $0.7 million in acquisition expenses.49Table of ContentsThe changes in expenses are discussed in more detail below.Employee Compensation and BenefitsYear Ended December 31,2015 2014Employee compensation and benefits (amounts in thousands)$106,581 $99,233As a percentage of net revenue24.5% 26.9%Employee compensation and benefits expenses increased $7.3 million, or 7.4%, for the year ended December 31, 2015, compared to the year endedDecember 31, 2014. The increase was primarily due to compensation and benefits for the additional employees acquired in the acquisition of City Index,partially offset by the headcount reductions effected in the third and fourth quarters of 2015.Selling and Marketing ExpensesYear Ended December 31,2015 2014Selling and marketing (amounts in thousands)$27,168 $20,213As a percentage of net revenue6.2% 5.5%Selling and marketing expenses increased $7.0 million, or 34.4%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.These increases were primarily due to costs incurred to support additional brands following the acquisition of City Index.Referral FeesYear Ended December 31,2015 2014Referral fees (amounts in thousands)$103,523 $90,972As a percentage of net revenue23.8% 24.6%Referral fees increased $12.6 million, or 13.8%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. The increase wasprimarily due to increased trading volume introduced to us by introducing brokers in 2015, primarily due to our acquisition of City Index, partially offset bylower average referral fees per million paid to such partners in respect of introduced trading volumes.Trading ExpensesYear Ended December 31,2015 2014Trading expenses (amounts in thousands)$31,914 $26,168As a percentage of net revenue7.3% 7.1%Trading expenses increased $5.7 million, or 22.0%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. The increase wasprimarily due to increased trading expenses resulting from the expansion of our business following the acquisition of City Index.General and AdministrativeYear Ended December 31,2015 2014General and administrative (amounts in thousands)$55,067 $38,651As a percentage of net revenue12.6% 10.5%50Table of ContentsGeneral and administrative expense increased $16.4 million, or 42.5%, for the year ended December 31, 2015, compared to the year ended December 31,2014. The increase was primarily due to an increase in occupancy and equipment, primarily due to the additional locations acquired in the City Indextransaction, as well as increased bank fees attributable to an increase in customer activity and accounts acquired in the City Index transaction.Depreciation and AmortizationYear Ended December 31,2015 2014Depreciation and amortization (amounts in thousands)$11,111 $6,610As a percentage of net revenue2.6% 1.8%Depreciation and amortization increased by $4.5 million, or 68.1%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.The increase was primarily due to the depreciation of property and equipment acquired in the City Index transaction.Purchased Intangible AmortizationYear Ended December 31,2015 2014Purchased intangible amortization (amounts in thousands)$16,550 $8,080As a percentage of net revenue3.8% 2.2%Purchased intangible amortization increased $8.5 million, or 104.8%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.The increase was primarily due to an increase in amortization relating to the acquisitions of City Index in 2015 and the full year inclusion of amortizationfrom our acquisitions in 2014 of GAA, Top Third, Galvan and the intellectual property rights relating to our GTX platform.Communications and TechnologyYear Ended December 31,2015 2014Communications and technology (amounts in thousands)$18,929 $15,567As a percentage of net revenue4.3% 4.2%Communications and technology expenses increased $3.4 million, or 21.6%, for the year ended December 31, 2015, compared to the year endedDecember 31, 2014. These increases were primarily due to the acquisition of City Index.Bad debt provision Year Ended December 31, 2015 2014Bad debt (amounts in thousands)$7,462 $3,699As a percentage of net revenue1.7% 1.0%Bad debt provision increased $3.8 million, or 101.7%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. This increasewas primarily due to an increase in bad debt as a result of negative balances experienced by some of our customers following actions taken by the SwissNational Bank in January 2015, as well as the acquisition of City Index. 51Table of ContentsRestructuring expensesYear Ended December 31,2015 2014Restructuring (amounts in thousands)$3,482 $2,334As a percentage of net revenue0.8% 0.6%Restructuring expenses were $3.5 million and $2.3 million for the years ended December 31, 2015 and December 31, 2014, respectively. Restructuringexpenses include severance payments and related expenses that arose in connection with headcount reduction initiatives, such as those that took place in thethird and fourth quarters of 2015 following our acquisition of City Index. Integration expensesYear Ended December 31,2015 2014Integration (amounts in thousands)$33,092 $2,489As a percentage of net revenue7.6% 0.7%Integration expenses were $33.1 million and $2.5 million for the years ended December 31, 2015 and December 31, 2014 respectively. In the year endedDecember 31, 2015 these expenses consisted primarily of the accelerated amortization of intangible and other assets made redundant by the City Indexacquisition. In the year ended December 31, 2014, these expenses included accelerated amortization of platform assets related to our GFT acquisitionintegration efforts.Acquisition expensesYear Ended December 31,2015 2014Acquisition expense (amounts in thousands)$2,819 $3,526As a percentage of net revenue0.6% 1.0%Acquisition expenses were $2.8 million and $3.5 million for the years ended December 31, 2015 and December 31, 2014 respectively. Acquisition expensesare costs directly attributable to acquisitions, including legal, accounting and other professional advisory fees.Interest on long term borrowings Year Ended December 31, 2015 2014Interest on long term borrowings (amounts in thousands)$9,222 $6,147As a percentage of net revenue2.1% 1.7%Interest on long term borrowings were $9.2 million and $6.1 million for the years ended December 31, 2015 and December 31, 2014, respectively. Interest onlong-term borrowings consists of interest expense on our 4.125% Convertible Senior Notes due 2018, issued in November 2013, and our 4.125% ConvertibleSenior Notes due 2020, issued in April 2015 in connection with the City Index acquisition.52Table of ContentsIncome TaxesYear Ended December 31,2015 2014Income tax expense (amounts in thousands)$(3,512) $19,140Effective tax rate(41.7)% 42.1%Income tax expense decreased $22.7 million, resulting in a tax benefit of $3.5 million for the year ended December 31, 2015, compared to income taxexpense of $19.1 million for the year ended December 31, 2014. Our effective tax rate in the year ended December 31, 2015 was (41.7)%. The decrease ineffective tax compared to the year ended December 31, 2014 was due to significant discrete items in the year ended December 31, 2015. See Note 19 to ouraudited consolidated financial statements for more detail.Segment Results - Year Ended December 31, 2015 Compared to Year Ended December 31, 2014Retail Segment Year Ended December 31, 2015 2014Net revenue$351,472 $296,941 Employee compensation and benefits67,515 61,989Selling and marketing26,129 19,574Referral fees87,175 78,553Other operating expenses76,301 51,561Segment profit$94,352 $85,264Retail segment net revenue increased $54.5 million, or 18.4%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. Theincrease was primarily the result of the City Index acquisition in April 2015.Employee compensation and benefits expenses for the retail segment increased $5.5 million, or 8.9%, for the year ended December 31, 2015, compared to theyear ended December 31, 2014. The increase was primarily due to the compensation and benefits for the additional employees employed following theacquisition of City Index, partially offset by the headcount reductions effected in the third and fourth quarters of 2015.Selling and marketing expense for the retail segment increased $6.6 million, or 33.5%, for the year ended December 31, 2015, compared to the year endedDecember 31, 2014. The increase was primarily due to costs incurred to support additional brands following the acquisition of City Index.Referral fees for the retail segment increased $8.6 million, or 11.0%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.The increase in referral fees was primarily due to increased trading volume introduced to us by introducing brokers, primarily due to our acquisition of CityIndex, partially offset by lower average referral fees per million paid to partners in respect of introduced trading volumes.Other operating expenses for the retail segment increased $24.7 million, or 48.0%, for the year ended December 31, 2015, compared to the year endedDecember 31, 2014. The increase was primarily due to the acquisition of City Index. Other operating expenses for the retail segment include general andadministrative expenses, communication and technology expenses and trading expenses.53Table of ContentsInstitutional Segment Year Ended December 31, 2015 2014Net revenue35,072 35,413 Employee compensation and benefits15,305 13,963Selling and marketing138 120Other operating expenses9,573 10,939Segment profit$10,056 $10,391Institutional segment net revenue was largely unchanged for the year ended December 31, 2015, compared to the year ended December 31, 2014.Institutional segment revenue for the year ended December 31, 2015 reflected a decrease in commission revenue of $3.6 million from our institutional salesand trading services, partially offset by growth in commissions revenue of $3.1 million from trading on our GTX platform, in each case as compared to theyear ended December 31, 2014.Employee compensation and benefits expenses for the institutional segment increased $1.3 million, or 9.6%, for the year ended December 31, 2015,compared to the year ended December 31, 2014. The increase was primarily due to additional employees hired during late 2014 to support our institutionalsegment operations.Selling and marketing expenses for the institutional segment remained largely unchanged for the year ended December 31, 2015, compared to the year endedDecember 31, 2014.Other operating expenses for the institutional segment decreased $1.4 million, or 12.5%, for the year ended December 31, 2015, compared to the year endedDecember 31, 2014. The decrease was primarily due to reduced platform operating costs following the purchase of the software and other intellectualproperty assets utilized to operate the electronic trading platform offered to customers in our GTX business. Other operating expenses from the institutionalsegment include general and administrative expenses, communication and technology expenses and trading expenses.Futures Segment Year Ended December 31, 2015 2014Net revenue$45,797 $36,016 Employee compensation and benefits10,634 8,918Selling and marketing901 519Referral fees16,348 12,419Other operating expenses13,960 11,585Segment profit$3,954 $2,575Futures segment net revenue increased $9.8 million, or 27.2%, for the year ended December 31, 2015, compared to the year ended December 31, 2014. Theincrease was primarily due to inclusion of full year results of GAA and Top Third, which were acquired in March 2014.Employee compensation and benefits expenses for the futures segment increased $1.7 million, or 19.2%, for the year ended December 31, 2015, compared tothe year ended December 31, 2014. The increase was primarily due to the inclusion of a full year of compensation and benefits for the additional employeesemployed following the acquisitions of GAA and Top Third in March 2014.Selling and marketing expenses for the futures segment increased $0.4 million, or 73.6%, for the year ended December 31, 2015, compared to the year endedDecember 31, 2014. The increase was primarily due to the inclusion of a full year of selling and marketing expenses related to GAA and Top Third, in whichwe acquired controlling interests in March 2014.54Table of ContentsReferral fees for the futures segment increased $3.9 million, or 31.6%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.The increase was primarily due to the inclusion of a full year of referral fees for GAA and Top Third.Other operating expenses for the futures segment increased $2.4, or 20.5%, for the year ended December 31, 2015, compared to the year ended December 31,2014. The increase was primarily due to the inclusion of a full year of other operating expenses related to GAA and Top Third. Other operating expenses fromthe futures segment include general and administrative expenses, communication and technology expenses and trading expenses.Corporate and Other Year Ended December 31, 2015 2014Other revenue$(3,716) $819 Employee compensation and benefits13,127 14,362Other operating expenses11,038 10,001Loss$(27,881) $(23,544)Corporate and other revenue decreased $4.5 million, for the year ended December 31, 2015, compared to the year ended December 31, 2014. The increasewas primarily due to an adjustment to the recorded amount of contingent consideration relating to our Galvan acquisition, partially offset by foreign currencyrevaluations.Employee compensation and benefits expenses for employees not attributed to any of our operating segments, such as our executive officers, decreased $1.2million, or 8.6%, for the year ended December 31, 2015, compared to the year ended December 31, 2014.Other operating expenses not attributed to any of our operating segments increased $1.0 million, or 10.4%, for the year ended December 31, 2015, comparedto the year ended December 31, 2014. The increase was primarily due to an increase in indirect taxes primarily due to our acquisition of City Index.Year Ended December 31, 2014 Compared to Year Ended December 31, 2013Revenue (amounts in thousands)Year Ended December 31,2014 2013REVENUE: Retail revenue$292,778 $215,734Institutional revenue34,518 28,005Futures revenue36,160 22,188Other revenue4,904 1,099Total non-interest revenue368,360 267,026Interest revenue1,428 821Interest expense599 156Total net interest revenue829 665Net Revenue$369,189 $267,691Our total net revenue increased $101.5 million, or 37.9%, for the year ended December 31, 2014, compared to the year ended December 31, 2013.55Table of ContentsRetail revenue increased $77.0 million, or 35.7%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increase wasprimarily the result of the GFT acquisition in September 2013.Institutional revenue increased $6.5 million, or 23.3%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increasewas primarily due to growth in commission revenue from both our institutional sales and trading services and our GTX platform.Futures revenue increased $14.0 million, or 63.0%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increase wasprimarily due to the acquisition of 55% interests in GAA and Top Third in March 2014.Other revenue increased $3.8 million, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increase was primarily dueto foreign currency revaluations.Our net interest revenue increased from $0.7 million for the year ended December 31, 2013 to $0.8 million for the year ended December 31, 2014.Operating ExpensesYear Ended December 31,2014 2013Total operating expenses (amounts in thousands)$317,592 $222,968As a percentage of net revenue86.0% 83.3%Our total operating expenses increased $94.6 million, or 42.4%, for the year ended December 31, 2014, compared to the year ending December 31, 2013. Theincrease in operating expenses was primarily due to an increase of $24.6 million in employee compensation and benefits, an increase of $38.3 million inreferral fees, an increase of $8.0 million in trading expenses, an increase of $12.1 million in general and administrative expenses, an increase of $5.2 millionin purchased intangible amortization and an increase of $4.3 million in communication and technology, partially offset by decreases of $2.1 million inselling and marketing expenses and $1.7 million in depreciation and amortization expenses.Employee Compensation and BenefitsYear Ended December 31,2014 2013Employee compensation and benefits (amounts in thousands)$99,233 $74,607As a percentage of net revenue26.9% 27.9%Employee compensation and benefits expenses increased $24.6 million, or 33.0%, for the year ended December 31, 2014, compared to the year endedDecember 31, 2013. Salaries and benefits (excluding commissions and bonus) increased $5.5 million primarily due to the additional employees employedfollowing the acquisitions of GFT, GAA, Top Third and Galvan. Commissions increased $23.1 million, primarily due to our sales trader employees, whojoined us following the closing of the GFT acquisition in September 2013, as well as the commissions paid to employees who joined us in the acquisitions ofGAA, Top Third and Galvan during 2014. Bonus expenses decreased $2.3 million.Selling and Marketing ExpensesYear Ended December 31,2014 2013Selling and marketing (amounts in thousands)$20,213 $22,337As a percentage of net revenue5.5% 8.3%Selling and marketing expenses decreased $2.1 million, or 9.5%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. Thedecrease was primarily due to the continued optimization of our direct marketing efforts.56Table of ContentsReferral feesYear Ended December 31,2014 2013Referral fees (amounts in thousands)$90,972 $52,623As a percentage of net revenue24.6% 19.7%Referral fees increased $38.3 million, or 72.9%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increase wasprimarily due to greater customer trading volume directed to us by our white label partners and introducing brokers, in part as a result of partner relationshipsacquired as part of the GFT acquisition.Trading ExpensesYear Ended December 31,2014 2013Trading expenses (amounts in thousands)$26,168 $18,164As a percentage of net revenue7.1% 6.8%Trading expenses increased $8.0 million, or 44.1%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. Of the increase,$5.3 million was primarily due to increased exchange data fees resulting from greater trading volume. There was a $2.8 million increase in clearing andexchange fees associated with our institutional and futures segments, primarily due to increases in trading volumes in such segments.General and AdministrativeYear Ended December 31,2014 2013General and administrative (amounts in thousands)$38,651 $26,558As a percentage of net revenue10.5% 9.9%General and administrative expenses increased $12.1 million, or 45.5%, for the year ended December 31, 2014, compared to the year ended December 31,2013. The increase was primarily due to increased bank fees attributable to an increase in customer activity and accounts acquired in the GFT transaction,and an increase in occupancy and equipment, primarily due to the additional locations acquired in the GFT transaction.Depreciation and AmortizationYear Ended December 31,2014 2013Depreciation and amortization (amounts in thousands)$6,610 $8,283As a percentage of net revenue1.8% 3.1%Depreciation and amortization decreased by $1.7 million, or 20.2%, for the year ended December 31, 2014, compared to the year ended December 31, 2013.The decrease was primarily due to our no longer amortizing prepaid exclusive intellectual property rights licensed from Valaquenta and Forexster followingour acquisition of such rights in July 2014. These rights are now being amortized as a component of purchased intangible amortization.Purchased Intangible AmortizationYear Ended December 31,2014 2013Purchased intangible amortization (amounts in thousands)$8,080 $2,906As a percentage of net revenue2.2% 1.1%57Table of ContentsPurchased intangible amortization increased $5.2 million, or 178.0%, for the year ended December 31, 2014, compared to the year ended December 31, 2013.The increase was primarily due to an increase in amortization relating to the acquisitions of GFT, GAA, Top Third and Galvan, as well as the intellectualproperty rights acquired from Valaquenta and Forexster.Communications and TechnologyYear Ended December 31,2014 2013Communication and technology (amounts in thousands)$15,567 $11,315As a percentage of net revenue4.2% 4.2%Communications and technology expenses increased $4.3 million, or 37.6%, for the year ended December 31, 2014, compared to the year ended December31, 2013. The increase was primarily due to our acquisitions of GFT, GAA, Top Third and Galvan.Bad Debt Provision Year Ended December 31, 2014 2013Bad debt provision (amounts in thousands)$3,699 $1,501As a percentage of net revenue1.0% 0.6%Bad debt provision increased $2.2 million, or 146.4%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increasewas primarily due to an increase in the volume of credit card chargebacks during the period, as well as an increase in customer accounts with negativebalances that were deemed uncollectible.Restructuring expensesYear Ended December 31,2014 2013Restructuring (amounts in thousands)$2,334 $450As a percentage of net revenue0.6% 0.2%Restructuring expenses reflect severance payments and related expenses that arose in connection with headcount reduction initiatives in 2014 following ouracquisition of GFT.Acquisition expensesYear Ended December 31,2014 2013Acquisition expense (amounts in thousands)$3,526 $1,824As a percentage of net revenue1.0% 0.7%Acquisition expenses are costs directly attributable to the acquisitions closed in 2014 and 2013, as well as our acquisition of City Index which was signed inOctober 2014. These costs consist primarily of legal, accounting and other professional advisory fees.Integration expenseYear Ended December 31,2014 2013Integration (amounts in thousands)$2,489 $1,950As a percentage of net revenue0.7% 0.7%58Table of ContentsIntegration expenses are acquisition-related costs that are incurred while integrating the acquired company into the consolidated group. These costs includeincentive payments to employees to remain through the acquisition and costs of retiring redundant assets, as well as accelerated amortization of assets retiredas a result of acquisitions.Interest on long term borrowings Year Ended December 31, 2014 2013Interest on long term borrowings (amounts in thousands)$6,147 $1,233As a percentage of net revenue1.7% 0.5%Interest on long term borrowings were $6.1 million and $1.2 million for the years ended December 31, 2014 and December 31, 2013, respectively. Interest onlong-term borrowings consisted of interest expense on our 4.125% Convertible Senior Notes due 2018, issued in November 2013.Income TaxesYear Ended December 31,2014 2013Income tax expense/(benefit) (amounts in thousands)$19,140 $17,383Effective tax rate42.1% 38.2%Income tax expense increased $1.8 million, resulting in a tax expense of $19.1 million for the year ended December 31, 2014, compared to income taxexpense of $17.4 million for the year ended December 31, 2013. Our effective tax rate in the year ended December 31, 2014 was 42.1%. This is higher thanthe 35% U.S. statutory rate, primarily due to the foreign rate differential from our international operations, where tax rates for those operations are generallylower than the U.S. statutory rate. As such, the proportion of our consolidated taxable earnings originating in foreign jurisdictions impacts our consolidatedtax rate. Please see Note 19 to our audited consolidated financial statements for more information on our effective tax rate.Segment Results - Year Ended December 31, 2014 Compared to Year Ended December 31, 2013Retail Segment Year Ended December 31, 2014 2013Net revenue$296,941 $218,848 Employee compensation and benefits61,989 44,924Selling and marketing19,574 21,761Referral fees78,553 41,459Other operating expenses51,561 33,148Segment profit$85,264 $77,556Retail segment net revenue increased $78.1 million, or 35.7%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. Theincrease was primarily the result of the GFT acquisition in September 2013.Employee compensation and benefits expenses for the retail segment increased $17.1 million, or 38.0%, for the year ended December 31, 2014, compared tothe year ended December 31, 2013. Salaries and benefits (excluding commissions and bonus) increased primarily due to the additional employees employedfollowing in the acquisitions of GFT and Galvan. Commissions increased primarily due to our sales trader employees, who joined us following the closing ofthe GFT acquisition in September59Table of Contents2013, as well as the commissions paid to employees who joined us following the acquisition of Galvan during 2014. These increases were partially offset bya reduction in bonus expenses due to our performance compared to the prior year relative to internal budgets.Selling and marketing expenses for the retail segment decreased $2.2 million, or 10.1%, for the year ended December 31, 2014, compared to the year endedDecember 31, 2013. The decrease was primarily due to the continued optimization of our direct marketing efforts.Referral fees for the retail segment increased $37.1 million, or 89.5%, for the year ended December 31, 2014, compared to the year ended December 31, 2013.The increase was primarily due to greater customer trading volume directed to us by our white label partners and introducing brokers, in part as a result ofpartner relationships acquired as part of the GFT acquisition.Other operating expenses for the retail segment increased $18.4 million, or 55.5%, for the year ended December 31, 2014, compared to the year endedDecember 31, 2013. The increase was primarily due to increased exchange data fees resulting from greater trading volume, as well as increased bank feesattributable to an increase in customer activity and accounts acquired in the GFT transaction, and an increase in occupancy and equipment, primarily due tothe additional locations acquired in the GFT transaction. Other operating expenses from the retail segment include general and administrative expenses,communication and technology expenses and trading expenses.Institutional Segment Year Ended December 31, 2014 2013Net revenue35,413 29,213 Employee compensation and benefits13,963 13,006Selling and marketing120 244Other operating expenses10,939 8,170Segment profit$10,391 $7,793Institutional segment net revenue increased $6.2 million, or 21.2%, for the year ended December 31, 2014, compared to the year ended December 31, 2013.The increase primarily resulted from growth in commission revenue of $5.9 million from our institutional sales and trading services and $1.4 million fromtrading on our GTX platform, in each case as compared to the year ended December 31, 2013.Employee compensation and benefits expenses for the institutional segment increased $1.0 million, or 7.4%, for the year ended December 31, 2014,compared to the year ended December 31, 2013. The increase was primarily due to additional headcount to drive growth of the business.Other operating expenses for the institutional segment increased $2.8 million, or 33.9%, for the year ended December 31, 2014, compared to the year endedDecember 31, 2013. The increase was primarily due to increased clearing fees as a result of increases in trading volumes.60Table of ContentsFutures Segment Year Ended December 31, 2014 2013Net revenue$36,016 $23,360 Employee compensation and benefits8,918 3,399Selling and marketing519 332Referral fees12,419 11,164Other operating expenses11,585 8,948Segment profit$2,575 $(483)Futures segment net revenue increased $12.7 million, or 54.2%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. Theincrease was primarily due to the acquisition of 55% interests in GAA and Top Third in March 2014.Employee compensation and benefits expenses for the futures segment increased $5.5 million, or 162.4%, for the year ended December 31, 2014, comparedto the year ended December 31, 2013. The increase was primarily due to the acquisition of GAA and Top Third in March 2014.Selling and marketing expenses for the futures segment increased $0.2 million, or 56.3%, for the year ended December 31, 2014, compared to the year endedDecember 31, 2013. The increase was primarily due to the acquisition of GAA and Top Third in March 2014.Referral fees for the futures segment increased $1.3 million, or 11.2%, for the year ended December 31, 2014, compared to the year ended December 31, 2013.The increase was primarily due to the acquisition of GAA and Top Third in March 2014.Other operating expenses for the futures segment increased $2.6 million, or 29.5%, for the year ended December 31, 2014, compared to the year endedDecember 31, 2013. The increase was primarily due to the acquisition of GAA and Top Third in March 2014.Corporate and Other Year Ended December 31, 2014 2013Other revenue$819 $(3,729) Employee compensation and benefits14,362 13,279Other operating expenses10,001 7,272Loss$(23,544) $(24,280)Corporate and other revenue increased $4.5 million for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increase wasprimarily due to foreign currency revaluations. Additionally, net interest revenue increased from $0.7 million for the year ended December 31, 2013 to $0.8million for the year ended December 31, 2014.Employee compensation and benefits expenses for employees not attributed to any of our operating segments, such as our executive officers, increased $1.1million, or 8.2%, for the year ended December 31, 2014, compared to the year ended December 31, 2013. The increase was primarily due to additionalCorporate headcount arising from the GFT acquisition.Other operating expenses not attributed to any of our operating segments increased $2.7 million, or 37.5%, for the year ended December 31, 2014, comparedto the year ended December 31, 2013. The increase was primarily due in an increase in general administrative costs, such as insurance and travel arising fromthe GFT acquisition.61Table of ContentsLiquidity and Capital ResourcesWe have historically financed our liquidity and capital needs primarily through the use of funds generated from operations by our subsidiaries, the issuanceof debt and equity securities, including the 4.125% Convertible Senior Notes due 2018 that we issued in the fourth quarter of 2013 and the 4.125%Convertible Senior Notes due 2020 that were issued in 2015 in connection with our acquisition of City Index, and access to secured lines of credit. We planto finance our future operating liquidity and regulatory capital needs in a manner consistent with our past practice. We expect that our capital expendituresfor the next 12 months will be consistent with our annual spend during 2015, as we continue to build out the technology platforms that were acquired as partof the City Index transaction.We primarily hold and invest our cash at various financial institutions and in various investments, including cash held at banks, deposits at our liquidityproviders and money market funds which invest in short-term U.S. government securities. In general, we believe all of our investments and deposits are ofhigh credit quality and we have more than adequate liquidity to conduct our businesses.The following table shows the amount of cash (including customer cash) held by our subsidiaries located outside the United States and the amount ofaccumulated earnings at December 31, 2015 (amounts in millions):Entity NameCash AccumulatedEarningsGAIN Capital-Forex.com U.K., Ltd.$230.6 $67.2GAIN Capital UK Limited307.9 17.3GAIN Capital Japan Co., Ltd.48.8 —GAIN Capital Forex.com Australia, Pty. Ltd.9.0 —GAIN Capital-Forex.com Hong Kong, Ltd.4.4 —GAIN Capital-Forex.com Canada Ltd.6.5 —GAIN Capital Singapore Pte. Ltd.28.4 0.9GAIN Capital Australia Pty Ltd.20.0 1.3Galvan Research and Trading Ltd.0.7 4.7GAIN Global Markets, Inc.0.3 —Faraday Research LLP0.3 0.6GTX Bermuda Ltd.6.5 8.0Gain Global Markets Bermuda, Ltd.2.8 —Total$666.2 $100.0At December 31, 2015, we had approximately $100.0 million held in accumulated earnings of our foreign subsidiaries. We have made provisions for U.S.taxes that would arise on distribution if $48.3 million of these earnings were repatriated to the United States. The remaining earnings are indefinitely investedoutside the United States and are expected to be reinvested in the working capital and other business needs of the foreign subsidiaries. If the remainingearnings had been repatriated into the United States as of December 31, 2015, in the form of dividends or otherwise, we would have been subject toadditional income taxes of approximately $9.8 million.Some of our operating subsidiaries are subject to requirements of various regulatory bodies, including the CFTC and NFA in the United States, the FCA in theUnited Kingdom, the FSA, METI and MAFF in Japan, the SFC in Hong Kong, IIROC and the OSC in Canada and the CIMA in the Cayman Islands, relatingto liquidity and capital standards, which limit funds available for the payment of dividends to GAIN Capital Holdings, Inc. As a result, we may be unable toaccess funds which are generated by our operating subsidiaries when we need them.The following table illustrates the minimum regulatory capital our subsidiaries were required to maintain as of December 31, 2015 and the actual amounts ofcapital that were maintained on that date (amounts in millions):62Table of ContentsEntity NameMinimumRegulatoryCapitalRequirements CapitalLevelsMaintained ExcessNetCapitalGAIN Capital Group, LLC$26.1 $36.3 $10.2GAIN Capital Securities, Inc.0.1 0.4 0.3GAIN Global Markets, Inc.0.2 0.3 0.1GAIN Capital Forex.com Australia, Pty. Ltd.0.7 2.4 1.7GAIN Capital Forex.com U.K., Ltd.27.8 61.6 33.8GAIN Capital-Forex.com Hong Kong, Ltd.1.9 3.9 2.0GAIN Capital-Forex.com Canada Ltd.0.2 1.4 1.2Forex.com Japan., Ltd.0.9 9.6 8.7GAIN Capital UK, Ltd.54.5 127.9 73.4GAIN Capital Singapore Pte, Ltd.0.6 7.4 6.8GAIN Capital Australia Pty Ltd.0.7 2.8 2.1Galvan Research and Trading, Ltd.0.7 4.3 3.6Global Assets Advisors, LLC0.1 1.2 1.1Total$114.5 $259.5 $145.0Our futures commission merchant and forex dealer subsidiary, GAIN Capital Group, LLC, is subject to the Commodity Futures Trading Commission NetCapital Rule (Rule 1.17) and NFA Financial Requirements, Sections 11 and 12. Under applicable provisions of these regulations, Gain Capital Group, LLC isrequired to maintain adjusted net capital of the greater of $1.0 million or 8% of Customer and Non-Customer Maintenance Margin, or $20 million plus 5% ofall liabilities owed to retail customers exceeding $10 million. Net capital represents current assets less total liabilities as defined by CFTC Rule 1.17. Ourcurrent assets primarily consist of cash and cash equivalents reported on our balance sheet as cash, receivables from brokers and trading securities, which aregenerally short-term U.S. government securities. Our total liabilities include payables to customers, accrued expenses, accounts payable, sales and marketingexpense payable, introducing broker fees payable and other liabilities. From net capital we take certain percentage deductions against assets held based onfactors required by the Commodity Exchange Act to calculate adjusted net capital. Our net capital and adjusted net capital changes from day to day. As ofDecember 31, 2015, GAIN Capital Group, LLC had net capital of approximately $36.3 million and net capital requirements of $26.1 million. As ofDecember 31, 2015, GAIN Capital Group’s excess net capital was $10.2 million. We believe that we currently have sufficient capital to satisfy these on-goingminimum net capital requirements. In accordance with CFTC regulation 1.12 and NFA Financial Requirements Section 1, a 20.0% decrease in GAIN CapitalGroup, LLC’s net capital and a 30.0% decrease in excess net capital due to a planned equity withdrawal requires regulatory notification and/or approval.GAIN Capital Forex.com U.K. Ltd., or GCUK1, GAIN Capital UK Limited, or GCUK2, and Galvan Research and Trading, Ltd., or Galvan, all three togetherthe U.K. Entities, are all registered in the U.K. and are regulated by the Financial Conduct Authority in respect of their trading activity. The U.K. Entities arerequired to comply with relevant U.K. and E.U. legislation. In addition they must comply with the rules and guidance contained in the FCA Handbook ofrules and guidance, or FCA Handbook.GCUK1, is regulated by the FCA, as a full scope €730k IFPRU Investment Firm. GCUK1 is required to maintain the greater of $1.0 million (€730,000) or theFinancial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration, market and forex risk. AtDecember 31, 2015, GCUK1 maintained $33.8 million more than the minimum required regulatory capital for a total of 2.2 times the required capital and atall times maintained compliance with all applicable regulations.GCUK2, is regulated by the FCA as a full scope €730k IFPRU Investment Firm. GCUK2 is required to maintain the greater of $1.0 million (€730,000) or theFinancial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration, market and forex risk. AtDecember 31, 2015, GCUK2 maintained $73.4 million more than the minimum required regulatory capital for a total of 2.3 times the required capital and atall times maintained compliance with all applicable regulations.Effective from January 1, 2016, the FCA has introduced the addition of a capital conservation buffer and a countercyclical capital buffer in line with therequirements set out in Capital Requirements Directive, or CRD IV, Article 160 Transitional63Table of ContentsProvisions for Capital Buffers. This will require all firms to maintain an additional buffer on top of the minimum capital requirements. The amount of buffer,which is a percentage of the firm’s common equity tier 1 capital against the total risk exposure amount, will be based on a transitional period from January 1,2016 to December 31, 2018. During that period, the minimum common equity tier 1 capital ratio requirement will increase from 5.125% to 8%.Galvan, is regulated by the FCA as a BIPRU Limited License Firm. Galvan is required to maintain a base financial resources requirement of $0.1 million(€0.05 million) and a capital requirement of the higher of either credit risk plus market risk or fixed overhead requirement. At December 31, 2015, Galvanmaintained $3.6 million more than the minimum required regulatory capital for a total of 6.1 times the required capital and at all times maintainedcompliance with all applicable regulations.In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act. A number of significant provisionscontained in the law affect, or will affect once implementing regulations are adopted by the appropriate federal agencies, our business. Among other things,the Dodd-Frank Act provides for additional regulation of swaps and security-based swaps, including some types of foreign exchange and metals derivativesin which we engage. The Dodd-Frank Act requires the registration of swap dealers and swap execution facilities with the CFTC and imposes significantregulatory requirements on swap dealers and swap execution facilities. Effective February 27, 2013, GAIN GTX, LLC, became registered with the CFTC andNFA as a swap dealer. Effective April 17, 2014, GTX SEF, LLC became temporarily registered with the CFTC as a swap execution facility. Certain of ourother subsidiaries may be required to register, or may register voluntarily, as swap dealers and/or swap execution facilities. Swap dealers and swap executionfacilities are subject to a comprehensive regulatory regime with new obligations for the swaps activities for which they are registered, including adherence torisk management policies, supervisory procedures, trade record and real time reporting requirements as well as proposed rules for new minimum capitalrequirements. The specific parameters of these swap dealer and swap execution facility requirements are being developed by the CFTC and other regulators.The full impact of the regulation on GAIN GTX, LLC, GTX SEF, LLC and any other of our subsidiaries that register as a swap dealer and/or swap executionfacility remains unclear. It is likely, however, that these entities will face increased costs due to the registration and regulatory requirements listed above.Complying with the proposed regulation of swap dealers and swap execution facilities could require us to restructure our businesses, require extensivesystems changes, require personnel changes or raise additional potential liabilities and regulatory oversight. Compliance with swap-related regulatory capitalrequirements may require us to devote more capital to our GTX business. The increased costs associated with compliance, and the changes that will berequired in our OTC and clearing businesses, may adversely impact our results of operations, cash flows, or financial condition.We are required to maintain cash on deposit with our liquidity providers in order to conduct our hedging activities. As of December 31, 2015, we posted$121.2 million in cash with liquidity providers. As of December 31, 2015, our total client assets were $920.6 million. Total client assets represent amountsdue to clients, including deposits and unrealized gains or losses arising from open positions.The table set forth below provides information regarding our total available liquidity as of December 31, 2015 and 2014, respectively. We use this non-GAAP measure to evaluate our business operations and our ability to continue to grow through acquisitions (amounts in millions):As of As ofDecember 31, December 31,2015 2014Cash and cash equivalents$171.9 $139.4Receivables from brokers121.2 134.9 Net operating cash293.1 274.3Less: Minimum regulatory requirements(114.5) (76.3) Free Cash Available(1)$38.6 $118.0(1)Our Convertible Senior Notes due 2018 and 2020 are excluded given their long-dated maturity64Table of ContentsConvertible Senior NotesOn November 27, 2013, we issued $80 million aggregate principal amount of our 4.125% Convertible Senior Notes due 2018 in a private offering toqualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the note offering wereapproximately $77.2 million, after deducting discounts to the initial purchasers and estimated offering expenses payable by the company.The notes bear interest at a fixed rate of 4.125% per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2014.The interest payment on the notes was approximately $3.3 million for the year ended December 31, 2014. The notes are convertible into cash, shares of ourcommon stock, or a combination thereof, at our election. The notes will mature on December 1, 2018, unless earlier converted, redeemed or repurchased. Wemay not redeem the notes prior to December 1, 2016.On April 1, 2015, as part of the consideration for our acquisition of City Index, we issued $60 million aggregate principal amount of our 4.125% ConvertibleSenior Notes due 2020 to City Index Group Limited. These notes bear interest at a fixed rate of 4.125% per year, payable semiannually in arrears on April 1and October 1 of each year, beginning on October 1, 2015. The notes are convertible into cash, shares of our common stock, or a combination thereof, at ourelection, subject to certain limitations. The notes will mature on April 1, 2020, unless earlier converted, redeemed or repurchased. We may not redeem thenotes until the two year period prior to the maturity date of the notes.In May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash uponConversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversionand Other Options, or ASC 470-20. ASC 470-20 requires an entity to separately account for the liability and equity components of convertible debtinstruments whose conversion may be settled entirely or partially in cash (such as our 4.125% Convertible Senior Notes and the convertible notes to beissued in connection with our acquisition of City Index) in a manner that reflects the issuer’s economic interest cost for non-convertible debt. The liabilitycomponent of the notes is initially valued at the fair value of a similar debt instrument that does not have an associated equity component and, for our4.125% Convertible Senior Notes, is reflected as a liability in our consolidated balance sheet in an amount equal to the fair value, which, as of December 31,2015 and 2014, was $122.0 million and $68.4 million, respectively. The equity component of the notes is included in the additional paid-in capital sectionof our stockholders’ equity on our Consolidated Balance Sheets, and the value of the equity component is treated as original issue discount for purposes ofaccounting for the debt component. The equity component, as of December 31, 2014 and 2013, for our 4.125% Convertible Senior Notes was $12.1 million.This original issue discount is amortized to non-cash interest expense over the term of the notes, and, as a result, we record a greater amount of interestexpense in current periods. Accordingly, we will report lower net income in our financial results than would have been recorded had we reflected only cashinterest expense in our consolidated income statement because ASC 470-20 will require the interest expense associated with the notes to include both thecurrent period’s amortization of the original issue discount and the notes’ cash coupon interest, which could adversely affect our reported or future financialresults, the trading price of our common stock and the trading price of the notes.In addition, under certain circumstances, convertible debt instruments whose conversion may be settled entirely or partly in cash (such as our 4.125%Convertible Senior Notes due 2018 and our 4.125% Convertible Senior Notes due 2020) are currently accounted for using the treasury stock method. Underthis method, the shares issuable upon conversion of the notes are not included in the calculation of diluted earnings per share unless the conversion value ofthe notes exceeds their principal amount at the end of the relevant reporting period. If the conversion value exceeds their principal amount, then, for dilutedearnings per share purposes, the notes are accounted for as if the number of shares of common stock that would be necessary to settle the excess, if we electedto settle the excess in shares, were issued.Credit FacilityAs part of our acquisition of GFT in September 2013, all outstanding obligations under a revolving line of credit we maintained at that time were satisfiedand the line of credit was terminated.Cash FlowThe following table sets forth a summary of our cash flow for each of the three years ended December 31, 2015 (amounts in thousands):65Table of ContentsYear ended December 31,2015 2014 2013Cash provided by / (used for) operating activities$77,213 $136,788 $(18,887)Cash used for investing activities(16,081) (35,463) (9,807)Cash (used for) / provided by financing activities(25,840) (5,938) 33,633Effect of exchange rate changes on cash and cash equivalents(2,755) 4,093 (1,888)INCREASE IN CASH AND CASH EQUIVALENTS$32,537 $99,480 $3,051The primary drivers of our cash flow provided by/(used for) operating activities are net income, adjusted for non-cash charges, such as depreciation andamortization, and amounts posted as collateral with liquidity providers.For the year ended December 31, 2013, amounts posted as collateral with liquidity providers were included on our balance sheet as receivables from brokersand represented collateral required to be deposited with our liquidity providers in order for us to hold securities positions, as well as amounts we posted, atour discretion, with liquidity providers in excess of applicable collateral requirements. Due to a change made in 2014, starting with the year ended December31, 2014, amounts required to be posted as collateral with our liquidity providers are included on our balance sheet as receivables from brokers, whilediscretionary amounts posted in excess of applicable collateral requirements are viewed as available cash to the extent not required to be classified as cashand securities held for customers. We receive interest on amounts we have posted as collateral with our liquidity providers. The amount of collateral requiredby our liquidity providers in the future will be commensurate with the amount of securities positions that they hold on our behalf. The amount of cash postedwith liquidity providers in excess of applicable collateral requirements is discretionary and may increase or decrease in future periods as we determine themost efficient uses of our cash.Our largest operating expenses are employee compensation and benefits and referral fees. Employee compensation and benefits include salaries, bonuses andother employee related costs as well as commissions paid to certain sales personnel.Referral fees consist primarily of compensation paid to our white label partners and introducing brokers.Unrealized gains and losses on cash positions revalued at prevailing foreign currency exchange rates are included in trading revenue but have no directimpact on cash flow from operations. Gains and losses become realized and impact cash flow from operations when customer transactions are liquidated. Tosome extent, the amount of net deposits made by our customers in any given period is influenced by unrealized gains and losses because our customers’trading positions are impacted by unrealized gains and losses and our customers may be required to post additional funds to maintain open positions or maychoose to withdraw excess funds on open positions.Year Ended December 31, 2015 Compared to Year Ended December 31, 2014Cash provided by operating activities was $77.2 million for the year ended December 31, 2015, compared to $136.8 million provided by operating activitiesfor the year ended December 31, 2014. Our cash provided by operating activities for the year ended December 31, 2014 was primarily due to the change inthe manner in which we viewed amounts posted with our liquidity providers in excess of applicable collateral requirements, as discussed above.Cash used for investing activities was $16.1 million for the year ended December 31, 2015, compared to $35.5 million used for investing activities in theyear ended December 31, 2014. Cash used for acquisitions and for the purchase of intangible assets decreased approximately $11.7 million and $12.4million, respectively. Cash used for the purchase of property and equipment increased $10.9 million.Cash used for financing activities was $25.8 million for the year ended December 31, 2015, compared to $5.9 million used for financing activities for the yearended December 31, 2014. Cash used for contractual payments of acquisition increased $13.9 million, cash used for tax benefit from employee stock optionexercises increased $0.1 million, cash used for the purchase of treasury stock increased $3.8 million, and cash used for the dividend payments increased $1.4million.Year Ended December 31, 2014 Compared to Year Ended December 31, 2013Cash provided by operating activities was $141.7 million for the year ended December 31, 2014, compared to $18.3 million used for the year endedDecember 31, 2013. The increase in cash provided by operating activities was primarily due to the66Table of Contentsmovement in receivables from brokers of $173.0 million as a result of the change in the way we record available cash discussed above.Cash used for investing activities was $35.5 million for the year ended December 31, 2014, compared to $9.8 million used for investing activities in the yearended December 31, 2013. Cash used for acquisitions increased approximately $10.7 million and an additional $12.4 million was used for the purchase ofintangible assets. Cash used for the purchase of property and equipment increased $2.6 million.Cash used for financing activities was $5.9 million for the year ended December 31, 2014, compared to $33.6 million provided by financing activities for theyear ended December 31, 2013. Cash provided by the issuance of convertible senior notes decreased $77.9 million, cash used for principal payment on notespayable decreased $31.2 million and cash used for the purchase of treasury stock decreased $5.9 million.Capital ExpendituresCapital expenditures were $19.7 million for the year ended December 31, 2015, compared to $8.8 million for the year ended December 31, 2014 and $6.2million for the year ended December 31, 2013. Capital expenditures for the years ended December 31, 2015, 2014, and 2013 were primarily related to thedevelopment of various trading platforms and websites, including the build out of the technology platforms acquired as part of the City Index transaction.Off-Balance-Sheet ArrangementsAt December 31, 2015 and 2014 we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to asstructured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or othercontractually narrow or limited purposes.Contractual ObligationsThe following table sets forth our contractual obligations as of December 31, 2015. (Amounts in thousands): Less than 1-3 3-5 More thanTotal 1 Year Years Years 5 YearsPurchase Obligations$14,039 $12,781 $1,258 $— $—Operating Leases39,538 8,587 10,575 8,158 12,218Total$53,577 $21,368 $11,833 $8,158 $12,218The amounts reported above for "Purchase Obligations" are calculated based upon mandatory pre-cancellation notice periods, if any. Excluded from theamounts set forth above are obligations relating to the $80 million in principal amount of our 4.125% Convertible Senior Notes due 2018 that we issued inthe fourth quarter of 2013 and the $60 million in principal amount of our 4.125% Convertible Senior Notes due 2020 that were issued in 2015 in connectionwith our acquisition of City Index, as our obligations under these Convertible Senior Notes are not sure to be settled in cash. By their terms, theseConvertible Senior Notes may be settled in cash, shares of our common stock or in a combination of shares and cash at our discretion.Critical Accounting PoliciesOur consolidated financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. The preparationof these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure ofcontingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Weevaluate these estimates and assumptions on an ongoing basis. We base our estimates on the information currently available to us and on various otherassumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions orconditions.An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain atthe time the estimate is made; if different estimates reasonably could have been used; or if67Table of Contentschanges in the estimate that are reasonably likely to occur periodically could materially impact the financial statements. While our significant accountingpolicies are described in more detail in the notes to our consolidated financial statements included in this annual report, we believe the following accountingpolicies are critical to the estimates and assumptions used in the preparation of our consolidated financial statements.Revenue RecognitionRetail revenue comprises trading and commission revenue from our retail segment. OTC trading includes forex trading, or forex, metals trading, contracts-for-difference, or CFDs, and spread-betting (in markets which do not prohibit such transactions), as well as other financial products.Gains or losses are realized when customer transactions are liquidated. Unrealized gains or losses on trading positions are revalued at prevailing foreigncurrency exchange rates (the difference between contract price and market price) at the date of the balance sheet and are included in Receivables brokers aswell as Payables to customers on the Consolidated Balance Sheets. Changes in net unrealized gains or losses are recorded in Retail revenue on theConsolidated Statements of Income and Comprehensive Income. Retail revenue is recorded on a trade date basis.Institutional revenue consists of revenue from our institutional segment, which provides a proprietary trading platform and sales and trading services toinstitutions. Revenue from the institutional segment is generated primarily through commissions or spreads on trades executed on the GTX platform or byvoice-brokers. We act as an agent for the trades executed on the GTX platform and therefore do not assume any market or credit risk in connection with thosetransactions. Revenues are booked on a trade date basis.Futures revenue consists of revenue from our futures segment, which offers exchange-based trading execution services, focusing on the indices, agriculturalhedging, and commodities sectors. Revenues in this business are generated through commissions, which are earned for executing our customers' trades. Theserevenues are booked on a trade date basis. We act in an agency capacity with respect to the clearing of trades, but as a principal with respect to fees paid tointroducing brokers in the futures business. Therefore, we take no market risk in this business.Income TaxesWe have restated our consolidated financial statements as of December 31, 2014 and for the years ended December 31, 2013 and 2014 to reflect adjustmentsto the tax treatment of certain intercompany payables and receivables among our domestic and overseas subsidiaries. See Note 2 to our audited consolidatedfinancial statements for additional information.Current income tax is calculated on the basis of the tax laws enacted or substantially enacted at the year end in the countries where we operate and generatetaxable income.Deferred income tax expenses are provided using the asset and liability method, under which deferred tax assets and liabilities are determined based upon thetemporary differences between the consolidated financial statements and the income tax basis, using currently enacted tax rates. The effect on deferred taxassets and liabilities of a change in tax rates is recognized in our Consolidated Statements of Income and Comprehensive Income in the period of enactment.We routinely evaluate all deferred tax assets to determine the likelihood of their realization.We use estimates in determining income tax positions under ASC 740-10-25, Income Taxes. Although we believe that our tax estimates are reasonable, theultimate tax determination involves significant judgment and is subject to audit by tax authorities in the ordinary course of business.To the extent we are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materiallyaffected. An unfavorable tax settlement could require use of our cash and result in an increase in our effective income tax rate in the period of resolution.In accordance with ASC 740, we evaluate a tax position to determine whether it is more likely than not that the taxposition will be sustained upon examination, based on the technical merits of the position. If the position does not meet a morelikely than not threshold, a tax reserve is established and no income tax benefit is recognized. We are audited by U.S. federaland state, as well as foreign, tax authorities. In some cases, many years may elapse before a tax return containing tax positionsfor which an ASC 740 reserve has been established is examined and an audit is completed. As audit settlements are reached, weadjust the corresponding reserves, if required, in the period in which the final determination is made. While it is difficult topredict the final outcome or timing of a particular tax matter, we believe that our reserves for uncertain tax positions are68Table of Contentsrecorded pursuant to the provisions of ASC 740.We operate a permanent reinvestment strategy, under which earnings derived from foreign business remain invested in the Company’s foreign subsidiaries.We have no plans to repatriate these earnings.Convertible Senior NotesIn November 2013, we issued $80 million aggregate principal amount of our 4.125% Convertible Senior Notes due 2018. In April 2015, we issued $60million aggregate principal amount of our 4.125% Unsecured Convertible Senior Notes due 2020. These notes are hybrid instruments, having both a debtand an equity component, and we accounted for them in accordance with relevant guidance for such instruments. The debt component includes an initialdiscount determined by the notes' coupon rate and prevailing market interest rates. The equity component equals the initial discount and is included inAdditional Paid in Capital. The discount will amortize over the life of the notes, as we record interest expense. The notes will mature on December 1, 2018and April 1, 2020, respectively, unless earlier converted, redeemed or repurchased. We may not redeem the notes prior to December 1, 2016 and April 1,2018, respectively.Business CombinationsIn April 2015, we completed our acquisition of City Index. In July 2014, we completed our acquisition of Galvan. In March 2014, we acquired thecontrolling interests in GAA and Top Third. In September 2013, we completed our acquisition of GFT. We accounted for these transaction in accordance withaccounting guidance for business combinations, which required identifying the acquirer, determining the acquisition date, determining the purchase priceand determining fair values for assets and liabilities assumed, as well as calculating goodwill. We disclosed acquisition, restructuring, and integrationexpenses separately.See Note 11 to our audited consolidated financial statements for more information.Goodwill and Intangible AssetsRelevant accounting guidance requires purchased intangible assets other than goodwill to be amortized over their useful lives unless the useful lives aredetermined to be indefinite. If the assets are determined to have a finite life in the future, we will amortize the carrying value over the remaining useful life atthat time. Our URLs (foreignexchange.com and forex.com) are indefinite life intangible assets and are, therefore, not amortized. We compare the recordedvalue of the indefinite life intangible assets to their fair value on an annual basis and whenever circumstances arise that indicate that an impairment may haveoccurred. In accordance with relevant accounting guidance, we test goodwill for impairment on an annual basis during the fourth quarter and on an interimbasis when conditions indicate impairment may have occurred. Goodwill impairment is determined by comparing the estimated fair value of the reportingunit with its respective book value. We performed our annual test for goodwill impairment in the fourth quarter of 2015 and noted there was no impairment.Accrued CompensationWe make estimates in determining our quarterly and annual accrued non-share-based compensation. A significant portion of our employee incentivecompensation programs are discretionary. Each quarter and year-end we determine the amount of discretionary cash bonus pools. We also reviewcompensation throughout the year to determine how overall performance compares to management’s expectations. We take these and other factors, includinghistorical performance and our performance relative to budget, into account in reviewing accrued discretionary cash compensation estimates quarterly andadjusting accrual rates as appropriate. Changes to these factors could cause a material increase or decrease in the amount of compensation expense that wereport in a particular period.DerivativesForex, metals and CFDs allow for the exchange of the difference in value of a particular asset such as a stock index, energy product, or gold contracts,between the time at which a contract is opened and the time at which it is closed. Our open positions and those of our retail customers are consideredderivatives under FASB ASC 815. Therefore, they are accounted for at fair value and are included in Receivables from brokers and Payables to customers inthe consolidated balance sheets.Share Based PaymentsASC 718-10, Compensation – Stock Compensation, requires measurement of share based payment arrangements at fair value and recognition ofcompensation cost over the service period, net of estimated forfeitures. The fair value of restricted stock69Table of Contentsunits is determined based on the number of units granted and the grant date fair value of GAIN Capital Holding, Inc.’s common stock.We measure the fair value of stock options on the date of grant using the Black-Scholes option pricing model which requires the use of several estimates,including:•The volatility of our stock price;•The expected life of the option;•Risk free interest rates; and•Expected dividend yield.The use of different assumptions in the Black-Scholes pricing model would result in different amounts of stock-based compensation expense. Furthermore, ifdifferent assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.The average risk free rate is based upon the five year bond rate converted to a continuously compounded interest rate.Contingent ConsiderationUnder the agreements governing certain of our business combinations, we are obligated to make contingent payments that are Level 3 financial liabilities. These contingent payments are recorded under Accrued expenses and other liabilities on our Consolidated Balance Sheet. The fair value of these paymentsare determined using prevailing interest rates as of the balance sheet date and forecasts of the acquired company's performance, estimation of which does nothave any basis in quoted or observable markets. Interest expense associated with our contingent consideration is included in earnings. At the time the Galvanacquisition closed, we estimated the acquisition date fair value of the contingent consideration to be $10.5 million. In December 2015, we entered into anagreement with the former owners of Galvan to satisfy all remaining obligations under the contingent earn-out arrangement we entered into in connectionwith the Galvan acquisition for a one-time payment of $1.5 million, which was paid in early 2016.Recent Accounting PronouncementsIn February 2016, the FASB issued new guidance regarding the accounting for leases. The FASB issued this update to increase transparency andcomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasingarrangements. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal year. We arecurrently assessing the impact on our consolidated financial statements of adopting this guidance.In September 2015, FASB issued new guidance regarding the accounting for provisional adjustments of business combinations. The guidance states that ifchanges are required to be made to provisional amounts included in previously issued financial statements, such changes should be included in the period inwhich they are identified. These changes include adjustments to goodwill, as well as the cumulative impact of adjustments for depreciation, amortization orother income. The guidance is effective for annual periods beginning after December 15, 2015, including interim periods within that reporting period. Thisguidance will impact how we deal with provisional adjustments for business combinations following adoption. In April 2015, the FASB issued new guidance regarding the accounting for debt issuance costs. The guidance requires presenting any deferred financing costsfrom debt issuances as a reduction in the amount of debt included on the balance sheet, which is a change from currently applicable rules requiring such coststo be classified as assets. In August 2015, the FASB issued updated guidance, which incorporated an SEC staff announcement highlighting that costsincurred for line-of-credit arrangements could be recorded as assets and amortized ratably over the term of the line-of-credit arrangement (regardless ofwhether there are any outstanding borrowings). The guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoptionis permitted for financial statements that have not been previously issued. We do not expect this guidance to have a material impact on our consolidatedfinancial statements.In May 2014, the FASB issued new revenue recognition guidance that superseded the previously existing revenue recognition guidance and most industry-specific guidance applicable to revenue recognition. The guidance requires recognizing revenue when transferring promised goods or services to customers.Recognition should reflect the consideration which the company expects to receive in exchange for those goods or services. The guidance requires enhanceddisclosures to help financial statement users better understand the nature, amount, timing and uncertainty of the revenues that are recognized. The guidance70Table of Contentsis effective for interim reporting periods within annual reporting periods beginning after December 15, 2017, which is a one year deferral from the originalguidance, approved by the FASB in July 2015. Early application is permitted for annual periods beginning after December 15, 2016, including interimperiods within that reporting period. We are currently assessing the impact on our consolidated financial statements of adopting this guidance.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate RiskInterest rate risk arises from the possibility that changes in interest rates will impact our consolidated financial statements. Our net interest revenue is directlyaffected by the short-term interest rates we earn from re-investing our cash and our customer’s cash. As a result, a portion of our interest income will decline ifinterest rates fall. Short-term interest rates are highly sensitive to factors that are beyond our control, including general economic conditions and the policiesof various governmental and regulatory authorities. Our cash and cash equivalents and customer cash and cash equivalents are held in cash and cashequivalents including cash at banks, deposits at liquidity providers, in money market funds that invest in short-term U.S. government securities and in UnitedStates and Canadian Imperial Bank of Commerce treasury bills. The interest rates earned on these deposits and investments affects our interest revenue. Weestimate that as of December 31, 2015, an immediate 100 basis point increase in short-term interest rates would result in approximately $10.6 million more inannual pretax income.Foreign Currency RiskCurrency risk arises from the possibility that fluctuations in foreign exchange rates will impact the value of our earnings and assets. Entities that have assetsand liabilities denominated in currencies other than the primary economic environment in which the entity operates are subject to re-translation.We monitor our exchange rate exposure and may make settlements to reduce our exposure. We do not take proprietary directional market positions.Historically we have experienced relatively small impacts due to the composition of our balance sheets and the lack of volatility between exchanges rates inthe jurisdictions in which we operate. Our exposure to foreign currency exchange rates may increase in the future and we may consider entering into hedgingtransactions to mitigate our exposure to foreign currency exchange rates. These hedging transactions may not be successful.Credit RiskOur trading operations require a commitment of our capital and involve risk of loss because of the potential that a customer’s losses may exceed the amountof cash in their account. While we are able to closely monitor each customer’s exposure, it does not guarantee our ability to eliminate negative customeraccount balances prior to an adverse currency price change or other market events, such as the extreme volatility in the Swiss franc following the SNB marketevent in January 2015. Changes in market conditions or unforeseen extreme market events could result in our customers experiencing losses in excess of thefunds they have deposited with us. In such an event, we may not be able to recover the negative client equity from our customers, which could materiallyadversely affect our results of operations. In addition, if we cannot recover funds from our customers, we may nonetheless be required to fund positions wehold with our liquidity providers or other third parties and, in such an event, our available funds may not be sufficient to meet our obligations to these thirdparties, which could materially adversely affect our business, financial condition, results of operations and cash flows. In order to help mitigate this risk, we require that each trade must be collateralized in accordance with our margin policies described below. Each customer isrequired to have minimum funds in their account for opening positions, which we refer to as the initial margin, and for maintaining positions, which we referto as maintenance margin, depending on the product being traded. Margin requirements are expressed as a percentage of the customer’s total position in thatproduct, and the customer’s total margin requirement is based on the aggregate margin requirement across all of the positions that a customer holds at anyone moment in time. Each net position in a particular product is margined separately. Accordingly, we do not net across different positions, thereby followinga more conservative margin policy. Our systems automatically monitor each customer’s margin requirements in real time, and we confirm that each of ourcustomers has sufficient cash collateral in his or her account before we execute their trades. We may also adjust required customer margins (both initial andmaintenance) from time to time based on our monitoring of various factors, including volatility and liquidity. If at any point in time a customer's trading71Table of Contentsposition does not comply with the applicable margin requirement, the position may be automatically liquidated, partially or entirely, in accordance with ourmargin policies and procedures. This policy protects both us and the customer. Our margin and liquidation policies are set forth in our customer agreements.We are also exposed to potential credit risk relating to the counterparties with which we hedge our trades and the financial institutions with which we depositcash. We mitigate these risks by transacting with several of the largest financial institutions in the world. In the event that our access to one or more financialinstitutions becomes limited, our ability to hedge may be impaired.Market RiskWe are exposed to market risk in connection with our retail trading activities. Because we act as counterparty to our retail customers’ transactions, we areexposed to risk on each trade that the market price of our position will decline. Accordingly, accurate and efficient management of our net exposure is a highpriority, and as such we have developed both automated and manual policies and procedures to manage our exposure. These risk-management policies andprocedures are established and reviewed regularly by the Risk Committee of our Board of Directors. Our risk-management policies require quantitativeanalyses by currency pair, as well as assessment of a range of market inputs, including trade size, dealing rate, customer margin and market liquidity. Our risk-management procedures require our team of senior traders to monitor risk exposure on a continuous basis and update senior management both informallyover the course of the trading day and formally through intraday and end of day reporting. A key component of our approach to managing market risk is thatwe do not initiate market positions for our own account in anticipation of future movements in the relative prices of products we offer. To facilitate our risk-management activities, we maintain levels of capital in excess of those currently required under applicable regulations. As of December 31, 2015, wemaintained capital levels of $259.5 million, which represented approximately 2.3 times the capital we were required to hold under applicable regulations.Cash Liquidity RiskIn normal conditions, our market making business and related services is self financing as we generate sufficient cash flows to pay our expenses as theybecome due. As a result, we generally do not face the risk that we will be unable to raise cash quickly enough to meet our payment obligations as they arise.Our cash flows, however, are influenced by customer trading volume, currency volatility and liquidity in foreign currencies pairs in which we have positions.These factors are directly impacted by domestic and international market and economic conditions that are beyond our control. In an effort to manage thisrisk, we have secured a substantial liquidity pool by establishing trading relationships with nine financial institutions. These relationships provide us withsufficient access to liquidity to allow us to consistently execute significant trades in varying market conditions at the notional amounts our customers desireby providing us with as much as 50:1 leverage on the notional amounts of our available collateral we have on deposit with such financial institutions. Wegenerally maintain collateral on deposit, which includes our funds and our customers’ funds. Collateral on deposit ranged from $134.9 million to$230.0 million in the aggregate, during the year ended December 31, 2015.In addition, our trading operations involve the risk of losses due to the potential failure of our customers to perform their obligations under the transactionswe enter into with them, which increases our exposure to cash liquidity risk. To reduce this risk, our margin policy requires that we mark our customers’accounts to market each time the market price of a position in their portfolio changes and provides for automatic liquidation of positions, as described above.Operational RiskOur operations are subject to broad and various risks resulting from technological interruptions, failures or capacity constraints in addition to risks involvinghuman error or misconduct. Regarding technological risks, we are heavily dependent on the capacity and reliability of the computer and communicationssystems supporting our operations. We have established a program to monitor our computer systems, platforms and related technologies and to promptlyaddress issues that arise. We have also established disaster recovery facilities in strategic locations to ensure that we can continue to operate with limitedinterruptions in the event that our primary systems are damaged. As with our technological systems, we have established policies and procedures designed tomonitor and prevent both human errors, such as clerical mistakes or incorrectly placed trades, as well as human misconduct, such as unauthorized trading,fraud or negligence. In addition, we seek to mitigate the impact of any operational issues by maintaining insurance coverage for various contingencies.Regulatory Capital Risk72Table of ContentsVarious domestic and foreign government bodies and self-regulatory organizations responsible for overseeing our business activities require that we maintainspecified minimum levels of regulatory capital in our operating subsidiaries. If not properly monitored or adjusted, our regulatory capital levels could fallbelow the required minimum amounts set by our regulators, which could expose us to various sanctions ranging from fines and censure to imposing partial orcomplete restrictions on our ability to conduct business. To mitigate this risk, we continuously evaluate the levels of regulatory capital at each of ouroperating subsidiaries and adjust the amounts of regulatory capital in each operating subsidiary as necessary to ensure compliance with all regulatory capitalrequirements. These requirements may increase or decrease from time to time as required by regulatory authorities. We also maintain excess regulatory capitalto provide liquidity during periods of unusual or unforeseen market volatility, and we intend to continue to follow this policy. In addition, we monitorregulatory developments regarding capital requirements so that we may be prepared for increases in the required minimum levels of regulatory capital thatmay occur from time to time in the future.Regulatory RiskWe operate in a highly regulated industry and are subject to the risk of sanctions from U.S., federal and state, and international authorities if we fail to complyadequately with regulatory requirements. Failure to comply with applicable regulations could result in financial, operational and other penalties. Ourauthority to conduct business could be suspended or revoked. In addition, efforts to comply with applicable regulations may increase our costs or limit ourability to pursue certain business opportunities. Federal and state regulations significantly limit the types of activities in which we may engage.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur consolidated financial statements are included in pages F-1 to F-58 of this Annual Report on Form 10-K.73Table of ContentsITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURES(a) Evaluation of Disclosure Controls and ProceduresThe Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reportsunder the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer(“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure.Management of the Company, with the participation of its CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures.Based on their evaluation and in light of the material weakness identified below, as of the end of the period covered by this Form 10-K, the Company’s CEOand CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities ExchangeAct of 1934, as amended) were not effective.(b) Management’s Report On Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting isdefined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executiveand principal financial officers and is affected by the Company’s Board of Directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles (“GAAP”) and includes those policies and procedures that:•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP,and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on the financial statements.Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detectmisstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system containsself-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-IntegratedFramework (2013). Based on this assessment, the Company has determined that there were material errors in the manner in which the Company accounted forincome taxes for the years ended December 31, 2013 and 2014 and for certain quarters of 2015 under ASC 740, “Income Taxes”. These errors relatedprimarily to the manner in which certain intercompany payables and receivables between domestic and overseas subsidiaries of the Company were treated foraccounting and tax purposes during the impacted periods. Accordingly, management, including the Company’s CEO and CFO, concluded that a materialweakness in internal control over financial reporting existed as of December 31, 2015.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management of the Companyhas identified the material weakness that existed as of December 31, 2015 as resulting from insufficient formal preventive or detective controls designed toensure that the Company's accounting for intercompany payables and receivables was consistent with general accepted accounting principles andmanagement's expectations as to the tax treatment of those payables and receivables.74Table of ContentsRemediation PlanSince identifying the material weakness in our internal control over financial reporting discussed above, the Company’s management has begunimplementing formal preventive and detective controls requiring the enhanced review of the accounting for and tax treatment of intercompany payables andreceivables, particularly those between domestic and overseas subsidiaries. The Company is also reviewing resource requirements and capabilities in itsfinance and tax teams to determine whether roles and responsibilities need to be realigned and/or new personnel added. The management of the Company iscontinuing to review these matters to ensure that similar failures of internal control over financial reporting do not recur.Our independent registered public accounting firm has audited and issued a report on the effectiveness of our internal control over financial reporting as ofDecember 31, 2015, which appears below.(c) Changes in Internal Control Over Financial ReportingAs noted above, since identifying the material weakness in our internal control over financial reporting discussed above, the Company’s management hasbegun implementing formal preventive and detective controls requiring the enhanced review of the accounting for and tax treatment of intercompanypayables and receivables, particularly those between domestic and overseas subsidiaries.75Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders ofGAIN Capital Holdings, Inc.Bedminster, New JerseyWe have audited the internal control over financial reporting of GAIN Capital Holdings, Inc. and subsidiaries (the “Company”) as of December 31, 2015,based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying “Management’s Report On Internal Control Over FinancialReporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We did not examinethe effectiveness of internal control over financial reporting of GAIN Capital UK Limited, a wholly owned subsidiary, whose consolidated financialstatements reflect total assets and revenues constituting 32% and 24%, respectively, of the related consolidated financial statement amounts as of and for theyear ended December 31, 2015. The effectiveness of GAIN Capital UK Limited’s internal control over financial reporting was audited by other auditorswhose report has been furnished to us, and our opinion, insofar as they relate to the effectiveness of GAIN Capital UK Limited’s internal control overfinancial reporting, are based solely on the report of the other auditors.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principalfinancial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition ofthe company’s assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override ofcontrols, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibilitythat a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The followingmaterial weakness has been identified and included in management's assessment: Management of the Company has identified the material weakness thatexisted as of December 31, 2015 as resulting from insufficient formal preventive or detective controls designed to ensure that the Company's accounting forintercompany payables and receivables was consistent with generally accepted accounting principles and management's expectations as to the tax treatmentof those payables and receivables. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit ofthe consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015, of the Company and this report doesnot affect our report on such consolidated financial statements and financial statement schedule.In our opinion, because of the effect of the material weakness identified above on the achievement of the objectives of the control criteria, the Company hasnot maintained effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.76Table of ContentsWe have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financialstatements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated March 17, 2016 expressedan unqualified opinion on those financial statements and financial statement schedule based on our audit and the report of the other auditors, and includedan explanatory paragraph regarding the restatement of the consolidated balance sheet as of December 31, 2014, and the consolidated statements of incomeand comprehensive income, changes in shareholders’ equity and cash flows for the years ended December 31, 2014 and 2013 to correct a misstatement./s/ Deloitte & Touche LLPNew York, New YorkMarch 17, 201677Table of ContentsReport of Independent Registered Public Accounting FirmBoard of Directors and ShareholderGAIN Capital UK LimitedLondon, United KingdomWe have audited GAIN Capital UK Limited’s internal control over financial reporting as of December 31, 2015, based on criteria established in InternalControl - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). GAINCapital UK Limited’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectivenessof internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting (not presentedseparately herein). Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, GAIN Capital UK Limited maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of GAINCapital UK Limited as of December 31, 2015 and March 31, 2015, and the related profit and loss account, statement of changes in equity and cash flows forthe nine-month period ended December 31, 2015 and the year ended March 31, 2015, and the related notes to the financial statements and our report datedMarch 15, 2016 expressed an unqualified opinion thereon./s/ BDO LLPLondon, United KingdomMarch 15, 201678Table of ContentsITEM 9B. OTHER INFORMATIONNone.79Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEInformation required to be included in this item is incorporated by reference to our definitive proxy statement, which was filed with the SEC on April 29,2016.Our Code of Business Conduct and Ethics (the “Code”) applies to all of our employees, directors and officers, including our principal executive officer,principal financial officer and principal accounting officer, or persons performing similar functions. We make the Code available free of charge through ourinvestor relations website, which is located at ir.gaincapital.com. We intend to disclose any amendments to, or waivers from, the Code that are required to bepublicly disclosed pursuant to rules of the SEC and the New York Stock Exchange in filings with the SEC and by posting such information on our website.ITEM 11. EXECUTIVE COMPENSATIONInformation required to be included in this item is incorporated by reference to our definitive proxy statement, which was filed with the SEC on April 29,2016.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSInformation required to be included in this item is incorporated by reference to our proxy statement, which was filed with the SEC on April 29, 2016.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEInformation required to be included in this item is incorporated by reference to our proxy statement, which was filed with the SEC on April 29, 2016.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation to be included in this item is incorporated by reference to our proxy statement, which was filed with the SEC on April 29, 2016.80Table of ContentsPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESFinancial Statements and Schedules:1. Financial StatementsThe following financial statements and reports of independent registered public accounting firm are included herein:Reports of Independent Registered Public Accounting FirmsF-2Consolidated Balance Sheets as of December 31, 2015 and 2014 (As Restated)F-4Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2015,2014 and 2013 (As Restated)F-5Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2015,2014 and 2013 (As Restated)F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013 (AsRestated)F-8Notes to Consolidated Financial StatementsF-102. Financial Statement SchedulesThe following supplemental schedule is filed herewith:Schedule I - Condensed Financial Information of GAIN Capital Holdings, Inc, (Parent Company Only) as ofDecember 31, 2015 and 2014 and for each of the three years in the period ended December 31, 2015 (AsRestated)F-58Schedules other than those listed above have been omitted because they are not applicable or the requiredinformation is included in the financial statements or notes thereto.81Table of Contents3. Exhibit indexExhibitNo. Description 2.1† Asset Purchase Agreement dated as of April 20, 2011 by and among GAIN Capital Group, LLC and DeutscheBank AG, acting through is London Branch (Incorporated by reference to Exhibit 2.1 of the Registrant’sForm 10-Q for the quarter ended March 31, 2011, filed on May 16, 2011, No. 001-35008). 2.2 Stock Purchase Agreement, dated as of April 24, 2013, by and among GAIN Capital Holdings, Inc., Gary J.Tilkin and Global Futures & Forex, Ltd. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Form10-Q for the quarter ended March 31, 2013, filed on May 10, 2013, No. 001-35008). 2.3 Amended and Restated Stock Purchase Agreement, dated as of September 24, 2013, by and among GAINCapital Holdings, Inc., Gary J. Tilkin and Global Futures & Forex, Ltd. (Incorporated by reference to Exhibit2.1 to the Registrant's Current Report on Form 8-K, filed on September 25, 2013, No. 001-35008). 2.4 Share Purchase Agreement, dated as of October 31, 2014, by and among GAIN Capital Holdings, Inc., CityIndex Group Limited, INCAP Gaming B.V. and IPGL Limited (Incorporated by reference to Exhibit 2.1 ofthe Registrant's Current Report on Form 8-K/A, filed on January 12, 2015, No. 001-35008). 3.1 Third Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.3 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632). 3.2 Certificate of Designation of Series A Participating Cumulative Preferred Stock of GAIN Capital Holdings,Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on April10, 2013, No. 001-35008). 3.3 Amended and Restated By-laws (Incorporated by reference to Exhibit 3.2 of the Registrant’s RegistrationStatement on Form S-1, as amended, No. 333-161632). 4.1 Specimen Certificate evidencing shares of common stock (Incorporated by reference to Exhibit 4.1 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632). 4.2 Investor Rights Agreement, dated January 11, 2008, by and among the Company, the Investors and theFounding Stockholders, as defined therein (Incorporated by reference to Exhibit 4.2 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). 4.3 Amendment to Investor Rights Agreement, dated as of November 18, 2013, by and among the Company, theInvestors named therein and the Founding Stockholder, as defined therein (Incorporated by reference toExhibit 4.3 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013, as filedon March 17, 2014, No. 001-35008). 4.4 Rights Agreement, dated as of April 9, 2013, between GAIN Capital Holdings, Inc. and BroadridgeCorporate Issuer Solutions, Inc., as Rights Agent (Incorporated by reference to Exhibit 4.1 to the Registrant'sCurrent Report on Form 8-K, filed on April 10, 2013, No. 001-35008). 4.5 Indenture, dated as of November 27, 2013, between GAIN Capital Holdings, Inc. and The Bank of New YorkMellon (Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed onNovember 27, 2013, No. 001-35008). 82Table of Contents 4.6 Indenture, dated as of April 1, 2015, between GAIN Capital Holdings, Inc. and The Bank of New YorkMellon (Incorporated by reference to Exhibit 4.11 of the Registrant's Registration Statement on Form S-3, asamended, No. 333-208175). 10.1 2015 Omnibus Incentive Compensation Plan (Incorporated by reference to Annex A of the Registrant’sDefinitive Proxy Statement on Schedule 14A, filed on October 15, 2015, No. 001-35008).** 10.2 2010 Omnibus Incentive Compensation Plan (Incorporated by reference to Exhibit 10.2 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632).** 10.3 2011 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.3 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632).** 10.4 Nonqualified Deferred Compensation Plan (Incorporated by reference to Exhibit 10.3 of the Registrant’sForm 10-K for the year ended December 31, 2010, filed on March 30, 2011, No. 001-35008).** 10.5 Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.4 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). ** 10.6 Form of Nonqualified Stock Option Agreement (Incorporated by reference to Exhibit 10.5 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). ** 10.7 Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.6 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). ** 10.8 Form of Restricted Stock Unit Agreement (Time Vesting) (Incorporated by reference to Exhibit 10.7 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 10.9 Form of Restricted Stock Unit Agreement (Performance Vesting) (Incorporated by reference to Exhibit 10.8of the Registrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 10.10 Form of Indemnification Agreement with the Company’s Non-Employee Directors (Incorporated byreference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 10.11 Amended and Restated 2006 Equity Compensation Plan, effective December 31, 2006 (Incorporated byreference to Exhibit 10.60 of the Registrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 10.12 Amendment No. 2007-1 to the GAIN Capital Holdings, Inc. 2006 Equity Compensation Plan (Incorporatedby reference to Exhibit 10.61 of the Registrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 10.13 Amendment No. 2008-1 to the GAIN Capital Holdings, Inc. 2006 Equity Compensation Plan (Incorporatedby reference to Exhibit 10.62 of the Registrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 83Table of Contents10.14 Amendment No. 2010-1 to the GAIN Capital Holdings, Inc. 2006 Equity Compensation Plan (Incorporatedby reference to Exhibit 10.63 of the Registrant’s Registration Statement on Form S-1, as amended, No. 333-161632).** 10.15† FX Prime Brokerage Master Agreement, dated as of December 6, 2006, by and between GAIN Capital Group,LLC and The Royal Bank of Scotland, plc. (Incorporated by reference to Exhibit 10.24 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). 10.16† FX Prime Brokerage Agreement, dated as of July 8, 2005, by and between UBS AG and GAIN Capital, Inc.(Incorporated by reference to Exhibit 10.25 of the Registrant’s Registration Statement on Form S-1, asamended, No. 333-161632). 10.17† Foreign Exchange Prime Brokerage Agency Agreement, dated as of July 12, 2006, by and between GAINCapital Group, LLC and The Royal Bank of Scotland, plc. (Incorporated by reference to Exhibit 10.26 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632). 10.18† Foreign Exchange Prime Brokerage Agreement, dated October 18, 2005, by and between Deutsche Bank AG,London Branch and GCAM, LLC (Incorporated by reference to Exhibit 10.27 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). 10.19 Amendment to Foreign Exchange Prime Brokerage Agreement, dated January 26, 2006, by and betweenDeutsche Bank AG, London Branch and GCAM, LLC (Incorporated by reference to Exhibit 10.28 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632). 10.20 Form of ISDA Master Agreement, 1992 edition (Incorporated by reference to Exhibit 10.29 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632). 10.21 Form of Introducing Broker Agreement (Incorporated by reference to Exhibit 10.30 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). 10.22 Form of Agreement for White Label Services (Incorporated by reference to Exhibit 10.31 of the Registrant’sRegistration Statement on Form S-1, as amended, No. 333-161632). 10.23 Lease and Lease Agreement, dated August 18, 2009, by and between S/K Bed One Associates LLC andGAIN Capital Holdings, Inc. (Incorporated by reference to Exhibit 10.37 of the Registrant’s RegistrationStatement on Form S-1, as amended, No. 333-161632). 10.24† License Agreement, dated August 9, 2007, by and between GAIN Capital Group, LLC and MetaQuotesSoftware Corp. (Incorporated by reference to Exhibit 10.43 of the Registrant’s Registration Statement onForm S-1, as amended, No. 333-161632). 10.25† Agreement, dated November 22, 2004, by and between esignal, a division of Interactive Data Corporation,and GAIN Capital, Inc. (Incorporated by reference to Exhibit 10.44 of the Registrant’s RegistrationStatement on Form S-1, as amended, No. 333-161632). 10.26 Form of ISDA Master Agreement, 2002 edition (Incorporated by reference to Exhibit 10.49 of theRegistrant’s Registration Statement on Form S-1, as amended, No. 333-161632). 84Table of Contents10.27 Executive Employment Agreement, dated May 5, 2015, by and between GAIN Capital Holdings, Inc. andGlenn Stevens (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2015, filed on August 10, 2015, No. 001-35008).** 10.28 Executive Employment Agreement, dated May 5, 2015, by and between GAIN Capital Holdings, Inc. andSamantha Roady (Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015, No. 001-35008).** 10.29 Executive Employment Agreement, dated May 5, 2015, by and between GAIN Capital Holdings, Inc. andDiego Rotsztain (Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015, No. 001-35008).** 10.30 Executive Employment Agreement, dated May 5, 2015, by and between GAIN Capital Holdings, Inc. andJeffrey Scott (Incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2015, filed on August 10, 2015, No. 001-35008).** 10.31 Service Agreement, dated as of March 9, 2011, by and between City Index Limited and Nigel Rose(Incorporated by reference to Exhibit 10.31 of the Registrant’s Annual Report on Form 10-K for the yearended December 31, 2015, filed on March 17, 2016, No. 001-35008).** 10.32 Asset Purchase Agreement, dated as of October 5, 2010, by and among GAIN Capital Group, LLC, GAINCapital-Forex.com U.K., and GAIN Capital Forex.com Japan, Co. Ltd., and Capital Market Services, LLC,Capital Market Services UK Ltd., Capital Market Services International - BM, Ltd., and CMS Japan K.K.(Incorporated by reference to Exhibit 10.64 of the Registrant’s Registration Statement on Form S-1, asamended, No. 333-161632). 10.33 Amendment No. 1 to Asset Purchase Agreement, dated as of November 23, 2010, by and among GAINCapital Group, LLC, GAIN Capital-Forex.com U.K., and GAIN Capital Forex.com Japan, Co. Ltd., andCapital Market Services, LLC, Capital Market Services UK Ltd., Capital Market Services International - BM,Ltd., and CMS Japan K.K. (Incorporated by reference to Exhibit 10.65 of the Registrant’s RegistrationStatement on Form S-1, as amended, No. 333-161632). 10.34 Stock Purchase Agreement between optionsXpress Holdings, Inc. and GAIN Capital Group, LLC dated as ofJune 27, 2012 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2012, filed August 9, 2012, No. 001-35008). 10.35 Stockholders’ Agreement, dated as of April 24, 2013, by and among GAIN Capital Holdings, Inc. and Gary J.Tilkin (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarter ended March31, 2013, filed on May 10, 2013, No. 001-35008). 10.36 Amended and Restated Stockholders’ Agreement, dated as of September 24, 2013, by and between GAINCapital Holdings, Inc. and Gary J. Tilkin (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form10-Q for the quarter ended September 30, 2013, filed on November 12, 2013, No. 001-35008). 10.37 Loan and Security Agreement, dated as of September 24, 2013, by and between GAIN Capital Holdings, Inc.and Gary J. Tilkin (Incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q for the quarterended September 30, 2013, filed on November 12, 2013, No. 001-35008). 85Table of Contents10.38 Membership Interest Purchase Agreement, dated as of March 7, 2014, by and among GAIN Capital Holdings,Inc., Global Asset Advisors, LLC, Lucky Good Dog, L.L.C., Glenn A. Swanson and Andrew W. Daniels(Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2014, filed on May 12, 2014, No. 001-35008). 10.39 Membership Interest Purchase Agreement, dated as of March 7, 2014, by and among GAIN Capital Holdings,Inc., Top Third Ag Marketing LLC, Global Asset Advisors, LLC, Lucky Good Dog, L.L.C., Glenn A.Swanson and Mark Gold (Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report onForm 10-Q for the quarter ended March 31, 2014, filed on May 12, 2014, No. 001-35008). 10.40 Asset Purchase Agreement, dated as of July 10, 2014, between GAIN GTX Bermuda, Ltd., GAIN CapitalHoldings, Inc. and Valaquenta Intellectual Properties Limited (Incorporated by reference to Exhibit 10.1 ofthe Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed onNovember 11, 2014, No. 001-35008). 10.41 Asset Purchase Agreement, dated as of July 10, 2014, between GAIN GTX Bermuda, Ltd., GAIN CapitalHoldings, Inc. and Forexster Limited (Incorporated by reference to Exhibit 10.2 of the Registrant's QuarterlyReport on Form 10-Q for the quarter ended September 30, 2014, filed on November 11, 2014, No. 001-35008). 10.42 Stockholders' Agreement, effective as of October 31, 2104, among GAIN Capital Holdings, Inc., City IndexGroup Limited and the other parties identified as "Stockholders" therein (Incorporated by reference toExhibit 10.1 of the Registrant's Current Report on Form 8-K/A, filed on January 12, 2015, No. 001-35008). 10.43 Form of Registration Rights Agreement among GAIN Capital Holdings, Inc., City Index Group Limited,INCAP Gaming B.V. and the other parties identified as "Investors" therein (Incorporated by reference toExhibit 10.2 of the Registrant's Current Report on Form 8-K/A, filed on January 12, 2015, No. 001-35008). 10.44 Letter Agreement, dated as of December 10, 2014, by and among GAIN Capital Holdings, Inc., VantagePointVenture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P., VantagePoint Venture Partners IVPrincipals Fund, L.P. and VP New York Venture Partners, L.P. 10.45 Separation and Release Agreement, dated as of October 1, 2015, by and between GAIN Capital Holdings,Inc. and Jason Emerson (Incorporated by reference to Exhibit 10.45 of the Registrant’s Annual Report onForm 10-K for the year ended December 31, 2015, filed on March 17, 2016, No. 001-35008).** 21.1 Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21.1 of the Registrant’s Annual Reporton Form 10-K for the year ended December 31, 2015, filed on March 17, 2016, No. 001-35008). 23.1* Consent of Deloitte & Touche LLP 23.2* Consent of BDO LLP 31.1* Certification of Chief Executive Officer pursuant to rule 13a-14(a) under the Securities Exchange Act of1934, as amended. 31.2* Certification of Chief Financial Officer pursuant to rule 13a-14(a) under the Securities Exchange Act of1934, as amended. 86Table of Contents 32.1* Certification of Chief Executive Officer as required by section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Chief Financial Officer as required by section 906 of the Sarbanes-Oxley Act of 2002. 101.INS+ XBRL Instance 101.SCH+ XBRL Taxonomy Extension Schema 101.CAL+ XBRL Taxonomy Extension Calculation 101.DEF+ XBRL Taxonomy Extension Definition 101.LAB+ XBRL Taxonomy Extension Labels 101.PRE+ XBRL Taxonomy Extension Presentation *Filed herewith.**Compensation related contract. †Confidential treatment requested. Confidential materials omitted and filed separately with the Securities and ExchangeCommission. +XBRL (Extensible Business Reporting Language) information is furnished and not filed, and is not a part of a registrationstatement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed forpurposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability underthese sections.87Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized on the 2nd day of May, 2016.GAIN CAPITAL HOLDINGS, INC.By:/s/ Glenn H. Stevens Glenn H. Stevens President and Chief Executive Officer(Principal Executive Officer)88Table of ContentsINDEX TOCONSOLIDATED FINANCIAL STATEMENTS ANDFINANCIAL STATEMENT SCHEDULEConsolidated Financial Statements: Reports of Independent Registered Public Accounting FirmsF-2Consolidated Balance Sheets as of December 31, 2015 and 2014 (As Restated)F-4Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013 (As Restated)F-5Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2015, 2014 and 2013 (As Restated)F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013 (As Restated)F-8Notes to Consolidated Financial StatementsF-10 Financial Statement Schedule: Schedule I - Condensed Financial Information of GAIN Capital Holdings, Inc. (Parent Company Only) as of December 31, 2015 and 2014 and foreach of the three years in the period ended December 31, 2015 (As Restated)F-58F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders ofGAIN Capital Holdings, Inc.Bedminster, New JerseyWe have audited the accompanying consolidated balance sheets of GAIN Capital Holdings, Inc. and subsidiaries (the “Company”) as of December 31, 2015and 2014, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the threeyears in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidatedfinancial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese consolidated financial statements and financial statement schedule based on our audits. We did not audit the consolidated financial statements of GAINCapital UK Limited, a wholly owned subsidiary, which statements reflect total assets and revenues constituting 32% and 24%, respectively of the relatedconsolidated financial statement amounts as of and for the year ended December 31, 2015. Those statements were audited by other auditors whose report hasbeen furnished to us, and our opinion, insofar as it relates to the amounts included for GAIN Capital UK Limited, is based solely on the report of the otherauditors.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, thefinancial position of GAIN Capital Holdings, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flowsfor each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States ofAmerica. Also, in our opinion, based on our audits and the report of the other auditors, such financial statement schedule, when considered in relation to thebasic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.As discussed in Note 2, the accompanying consolidated balance sheet as of December 31, 2014, and the consolidated statements of income andcomprehensive income, changes in shareholders’ equity and cash flows for the years ended December 31, 2014 and 2013 have been restated to correct amisstatement.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal controlover financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our report dated March 17, 2016 expressed an adverse opinion on the Company’sinternal control over financial reporting based on our audit and the report of the other auditors, because of a material weakness./s/ Deloitte & Touche LLPNew York, New YorkMarch 17, 2016F-2Table of ContentsReport of Independent Registered Public Accounting FirmBoard of Directors and ShareholderGAIN Capital UK LimitedLondon, United KingdomWe have audited the accompanying balance sheets of GAIN Capital UK Limited as of December 31, 2015 and March 31, 2015 and the related profit and lossaccount, statement of changes in equity and cash flows for the nine-month period ended December 31, 2015 and the year ended March 31, 2015, and therelated notes to the financial statements. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GAIN Capital UK Limited atDecember 31, 2015 and March 31, 2015 and the results of its operations and its cash flows for the nine-month period ended December 31, 2015 and the yearended March 31, 2015, in accordance with United Kingdom Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK andRepublic of Ireland’.United Kingdom Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ varies in certainsignificant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of suchdifferences is presented in Note 29 to the financial statements.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), GAIN Capital UK Limited’sinternal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 15, 2016 expressed an unqualified opinionthereon./s/ BDO LLPLondon, United KingdomMarch 15, 2016F-3Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Balance Sheets(in thousands, except share data) As of December 31, 2015 As of December 31, 2014(As Restated)ASSETS: Cash and cash equivalents$171,888 $139,351Cash and securities held for customers920,621 759,559Receivables from brokers, of which ($12,568) and $717, respectively, are open contracts at fairvalue121,153 134,908Prepaid assets7,835 2,537Property and equipment, net of accumulated depreciation of ($44,750) and ($31,544), respectively30,367 18,796Intangible assets, net of accumulated amortization of ($47,906) and ($12,670), respectively91,512 60,806Goodwill34,017 33,579Other assets, net of allowance for doubtful accounts of ($6,832) and ($4,555), respectively47,422 33,765Total assets$1,424,815 $1,183,301LIABILITIES AND SHAREHOLDERS’ EQUITY: Liabilities Payables to customers, of which ($143,918) and ($102,722), respectively, are open contracts at fairvalue$920,621 $759,559Accrued compensation and benefits12,362 16,912Accrued expenses and other liabilities51,638 76,195Income tax payable1,068 1,010Convertible senior notes121,996 68,367Total liabilities$1,107,685 $922,043Commitments and contingent liabilities (See Note 18) Redeemable non-controlling interests$11,046 $11,338Shareholders’ equity Common stock ($0.00001 par value; 120 million shares authorized, 52,072,884 shares issued and48,771,015 shares outstanding as of December 31, 2015; 60 million shares authorized, 45,582,066shares issued and 42,934,559 shares outstanding as of December 31, 2014)$— $—Accumulated other comprehensive loss(5,865) (1,513)Additional paid-in capital212,981 148,378Treasury stock, at cost (3,301,869 shares at December 31, 2015 and 2,647,507 at December 31,2014, respectively)(21,808) (16,720)Retained earnings120,776 119,775Total shareholders’ equity306,084 249,920Total liabilities and shareholders’ equity$1,424,815 $1,183,301The accompanying notes are an integral part of these consolidated financial statements.F-4Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Statements of Income and Comprehensive Income(in thousands, except share and per share data) For the Fiscal Year Ended December 31, 2015 2014 2013 (As Restated) (As Restated)REVENUE: Retail revenue$347,489 $292,778 $215,734Institutional revenue33,773 34,518 28,005Futures revenue45,427 36,160 22,188Other revenue8,487 4,904 1,099Total non-interest revenue435,176 368,360 267,026Interest revenue1,220 1,428 821Interest expense1,049 599 156Total net interest revenue171 829 665Net revenue$435,347 $369,189 $267,691EXPENSES: Employee compensation and benefits$106,581 $99,233 $74,607Selling and marketing27,168 20,213 22,337Referral fees103,523 90,972 52,623Trading expenses31,914 26,168 18,164General and administrative55,067 38,651 26,558Depreciation and amortization11,111 6,610 8,283Purchased intangible amortization16,550 8,080 2,906Communications and technology18,929 15,567 11,315Bad debt provision7,462 3,699 1,501Acquisition expenses2,819 3,526 1,824Restructuring expenses3,482 2,334 450Integration expenses33,092 2,489 1,950Impairment of investment— 50 450Total operating expense417,698 317,592 222,968OPERATING PROFIT17,649 51,597 44,723Interest expense on long term borrowings9,222 6,147 1,233Gain on extinguishment of debt— — 2,000INCOME BEFORE INCOME TAX EXPENSE8,427 45,450 45,490Income tax (benefit)/expense(3,512) 19,140 17,383NET INCOME11,939 26,310 28,107Net income attributable to non-controlling interest1,660 1,433 —NET INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.10,279 24,877 28,107Other comprehensive (loss)/income: Foreign currency translation adjustment(4,352) (4,089) 1,327NET COMPREHENSIVE INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.$5,927 $20,788 $29,434Earnings per common share: Basic$0.22 $0.56 $0.76Diluted$0.22 $0.53 $0.71Weighted average common shares outstanding used in computing earnings per common share: Basic47,601,979 40,561,644 36,551,246Diluted48,379,051 43,214,895 39,632,878The accompanying notes are an integral part of these consolidated financial statements.F-5Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Statements of Changes in Shareholders’ Equity(in thousands, except share data) Common Stock TreasuryStock AdditionalPaid inCapital RetainedEarnings AccumulatedOtherComprehensiveIncome/(Loss) Total Shares (1) Amount BALANCE—January 1, 2013 (AsRestated)34,924,095 $— $(8,280) $85,009 $84,590 $1,249 $162,568Exercise of options1,394,975 — — 2,539 — — 2,539Issuance of common stock3,625,721 — — 34,771 — — 34,771Conversion of restricted stockinto common stock339,686 — — — — — —Employee stock purchase plan75,191 — — 302 — — 302Repurchase of shares(934,234) — (7,189) — — — (7,189)Stock compensation expense— — — 2,975 — — 2,975Tax benefit of stock optionsexercises— — — 1,026 — — 1,026Other— — — (62) (154) — (216)Convertible senior noteissuance— — — 12,147 — — 12,147Tax effect of convertible seniornote— — — (4,308) — — (4,308)Dividends declared ($0.20dividend per share)— — — — (7,326) — (7,326)Foreign currency translationadjustment— — — — — 1,327 1,327Net income applicable to GainCapital Holdings, Inc.— — — — 28,107 — 28,107BALANCE—January 1, 2014 (AsRestated)39,425,434 $— $(15,469) $134,399 $105,217 $2,576 $226,723Exercise of options719,719 — — 2,087 — — 2,087Issuance of common stock978,736 — — 6,493 — — 6,493Conversion of restricted stockinto common stock1,863,396 — — — — — —Employee stock purchase plan98,606 — — 740 — — 740Repurchase of shares(151,332) — (1,251) — — — (1,251)Stock compensation expense— — — 3,452 — — 3,452Tax benefit of stock optionsexercises— — — 1,221 — — 1,221Other— — — (14) (73) — (87)Adjustment to the redemptionvalue of non-controlling interests— — — — (2,107) — (2,107)Dividends declared ($0.20dividend per share)— — — — (8,139) — (8,139)Foreign currency translationadjustment— — — — — (4,089) (4,089)Net income applicable to GainCapital Holdings, Inc.— — — — 24,877 — 24,877BALANCE—January 1, 2015 (AsRestated)42,934,559 $— $(16,720) $148,378 $119,775 $(1,513) $249,920F-6Table of ContentsExercise of options638,241 — — 2,386 — — 2,386Issuance of common stock5,319,149 — — 45,100 — — 45,100Conversion of restricted stockinto common stock440,651 — — — — — —Employee stock purchase plan92,777 — — 789 — — 789Repurchase of shares(654,362) — (5,088) — — — (5,088)Stock compensation expense— — — 3,680 — — 3,680Tax benefit of stock optionsexercises— — — 1,140 — — 1,140Convertible senior note issuance— — — 15,348 — — 15,348Tax effect of convertible seniornote— — — (3,840) — — (3,840)Other— — — (56) — (56)Adjustment to the redemptionvalue of put options related tonon-controlling interests— — — — 308 — 308Dividends declared ($0.20dividend per share)— — — — (9,530) — (9,530)Foreign currency translationadjustment— — — — — (4,352) (4,352)Net income applicable to GainCapital Holdings, Inc.— — — — 10,279 — 10,279BALANCE—December 31, 201548,771,015 $— $(21,808) $212,981 $120,776 $(5,865) $306,084(1) - The Company has 15,000,000 shares of authorized preferred stock, of which none are issued or outstanding.The accompanying notes are an integral part of these consolidated financial statements.F-7Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Statements of Cash Flows(in thousands) For the Fiscal Years Ended December 31, 2015 2014(As Restated) 2013(As Restated)CASH FLOWS FROM OPERATING ACTIVITIES: Net income$11,939 $26,310 $28,107Adjustments to reconcile net income to cash provided by / (used for) operating activities Loss / (gain) on foreign currency exchange rates2,432 (1,618) 3,641Depreciation and amortization27,661 14,690 11,189Non-cash integration costs26,827 1,162 1,163Deferred tax (benefit)/expense(12,355) 5,108 (5,431)Amortization of deferred financing costs354 354 —Bad debt provision7,462 3,699 1,501Impairment of cost method investment— 50 450Convertible senior note discount amortization3,624 2,150 175Gain on extinguishment of debt— — (2,000)Stock compensation expense3,680 3,452 2,975Adjustment to fair value of contingent consideration(6,722) — —Changes in operating assets and liabilities: Cash and securities held for customers101,325 (9,260) (74,769)Receivables from brokers45,576 94,933 (78,556)Prepaid assets(1,445) 2,730 318Other assets(6,229) (8,495) (1,075)Payables to customers(101,325) 9,260 74,769Accrued compensation and benefits(7,454) 4,497 6,375Accrued expenses and other liabilities(18,748) (2,422) 7,867Income tax payable611 (9,812) 4,414Cash provided by / (used for) operating activities77,213 136,788 (18,887)CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment(19,676) (8,759) (6,187)Sale of treasury bills— 614 599Intangible asset purchases— (12,400) —Funding of acquisitions, net of cash acquired(3,258) (14,918) (4,219)Cash received relating to acquisitions7,612 — —Purchase of investment(759) — —Cash used for investing activities(16,081) (35,463) (9,807)CASH FLOWS FROM FINANCING ACTIVITIES: Contractual payments for acquisitions(13,893) — (2,419)Proceeds from issuance of convertible senior note, net— — 77,900Principal payment on notes payable— — (31,200)Proceeds from exercise of stock options2,386 2,087 2,539Proceeds from employee stock purchase plan789 740 302Purchase of treasury stock(5,088) (1,251) (7,189)Tax benefit from employee stock option exercises1,140 1,221 1,026Dividend payments(9,530) (8,139) (7,326)Distributions to non-controlling interest holders(1,644) (596) —F-8Table of ContentsCash (used for) / provided by financing activities$(25,840) $(5,938) $33,633Effect of exchange rate changes on cash and cash equivalents(2,755) 4,093 (1,888)INCREASE IN CASH AND CASH EQUIVALENTS32,537 99,480 3,051CASH AND CASH EQUIVALENTS—Beginning of year$139,351 $39,871 $36,820CASH AND CASH EQUIVALENTS—End of year$171,888 $139,351 $39,871SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Cash (paid) / received during the year for: Interest(5,065) (3,373) (655)Taxes$(9,861) $(13,151) $(8,376)Non-cash investing activities: Purchase of fixed assets included in accrued expense and other liabilities$— $701 $—Non-cash financing activities: Convertible senior notes issued as consideration for business acquisitions$65,000 $— $—Deferred taxes related to convertible senior notes$(3,840) $— $(4,308)Senior loan issued by seller$— $— $33,200Common stock issued as consideration for asset and business acquisitions$45,100 $6,493 $34,771Adjustment to redemption value of non-controlling interests$308 $(2,107) $—The accompanying notes are an integral part of these consolidated financial statements.F-9Table of ContentsGAIN CAPITAL HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATIONDescription of BusinessGAIN Capital Holdings, Inc. (together with its subsidiaries, the “Company”), is a Delaware corporation formed and incorporated on March 24, 2006. GAINHoldings, LLC is a wholly-owned subsidiary of GAIN Capital Holdings, Inc., and it owns all outstanding membership units of GAIN Capital Group, LLC(“Group, LLC”), the Company's primary regulated entity in the United States. City Index (Holdings) Ltd ("City Index") is the Company's primary regulatedentity outside of the United States.Group, LLC is a retail foreign exchange dealer (“RFED”) and a Futures Commission Merchant (“FCM”) registered with the Commodity Futures TradingCommission (the “CFTC”). As such, it is subject to the regulations of the CFTC, an agency of the U.S. government, and the rules of the National FuturesAssociation (“NFA”), an industry self-regulatory organization.GAIN Capital-Forex.com U.K. Ltd. (“GCUK1”) and GAIN Capital UK Limited ("GCUK2") are each registered in the United Kingdom ("U.K.") and regulatedby the Financial Conduct Authority (“FCA”) as full scope €730k IFPRU Investment Firms.The following list includes each of the Company’s significant U.S. and international regulated subsidiaries as of December 31, 2015:GAIN Capital Group, LLCGAIN Capital Forex.com U.K., Ltd.GAIN Capital Japan Co., Ltd.GAIN Capital Forex.com Australia Pty. Ltd.GAIN GTX, LLCGlobal Assets Advisors, LLCTop Third Ag Marketing LLCGalvan Research and Trading, Ltd.GAIN Capital UK LimitedGAIN Capital Australia Pty. Ltd.GAIN Capital Singapore Pte. Ltd.In April 2015, the Company acquired all of the outstanding share capital of City Index from City Index Group Limited. GCUK2, GAIN Capital Australia Pty.Ltd. (“GCAU2”) , and GAIN Capital Singapore Pte. Ltd. ("GCS") are each subsidiaries that were acquired as part of the City Index acquisition. Each of theseentities is regulated locally by the relevant regulators, including the FCA.In July 2014, the Company acquired all of the outstanding share capital of Galvan Research and Trading, Ltd. ("Galvan"), a U.K. based corporation, and itssubsidiaries, Faraday Research LLP and Galvan LLP. Galvan is regulated by the FCA.In March 2014, the Company acquired controlling interests in Global Asset Advisors, LLC ("GAA") and Top Third Ag Marketing LLC ("Top Third").In September 2013, the Company purchased all of the outstanding share capital of Global Futures & Forex, Ltd., a Michigan corporation ("GFT").See Note 11 for further details related to the Company's acquisitions.Basis of Presentation and Principles of ConsolidationThe consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP")and have been prepared in accordance with the regulations of the Securities and Exchange Commission ("SEC").During the fourth quarter of 2015, the Company changed its segment reporting structure from a single operating segment to three operating segments, Retail,Institutional and Futures. The Company also provides general corporate services to its segments through a corporate function, which only earns revenues thatare incidental to the public entity and is therefore not an operating segment. Such costs are reported as "Corporate and Other." The segment reportingstructure is consistent with howF-10Table of Contentsthe Chief Operating Decision Maker reviews the businesses, makes investing and resource decisions and assesses operating performance. Previouslydisclosed segment information has been retrospectively adjusted to conform with changes made to the current segment presentation. In connection with the change in segments, management determined that it would be more useful to the users of the consolidated financial statements to haverevenue presentation on the Consolidated Statements of Income and Comprehensive Income to have operating revenue presented in a manner consistent withsegment revenue, and accordingly, reclassified amounts from Trading revenue and Commission revenue to Retail revenue, Institutional revenue and Futuresrevenue for the years ended December 31 2014 and 2013. This change in presentation had no impact on Total non-interest revenue.ConsolidationThe consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and other subsidiaries in which the Companyholds a controlling financial interest. All intercompany transactions and balances are eliminated in consolidation. The Company applies relevant accountingstandards governing consolidation in determining its principles of consolidation. The Company's consolidated financial statements include non-controllinginterests related to certain less than wholly owned subsidiaries. See Note 12 for details regarding non-controlling interests related to certain less than whollyowned subsidiaries.Use of EstimatesThe preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and thereported amounts of revenue and expenses during the reporting period. In presenting the consolidated financial statements, management makes estimatesregarding:•Valuation of assets and liabilities requiring fair value estimates;•Certain accruals;•The allowance for doubtful accounts;•The realization of deferred taxes;•The carrying amount of goodwill and other intangible assets;•The useful lives of intangible assets and other long-lived assets with finite lives;•Incentive based compensation accruals and valuation of share-based payment arrangements; •Transfer pricing;•The recognition and measurement of uncertain tax positions; and•Other matters that affect the reported amounts and disclosure of contingencies in the consolidated financial statements.Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have amaterial impact on the consolidated financial statements, and it is possible that such changes could occur in the near term.Revenue RecognitionRevenue is recognized in accordance with revenue recognition guidance. The Company primarily generates revenue through market making and byproviding trading execution services for its clients. The Company categorizes revenue as Retail revenue, Institutional revenue, Futures revenue, Otherrevenue and Net interest revenue.Retail revenue is the Company's largest source of revenue. Retail revenue comprises trading revenue from the retail OTC business, sales trader, and advisorybusinesses. OTC trading includes forex trading ("forex"), metals trading, contracts-for-difference (“CFDs”) and spread-betting (in markets which do notprohibit such transactions), as well as other financial products.Gains or losses are realized when customer transactions are liquidated. Unrealized gains or losses on trading positions are revalued at prevailing foreigncurrency exchange rates (the difference between contract price and market price) at the date of the balance sheet and are included in Receivables from brokersas well as Payables to customers on the Consolidated BalanceF-11Table of ContentsSheets. Changes in net unrealized gains or losses are recorded in Retail revenue on the Consolidated Statements of Income and Comprehensive Income.Retail revenue is recorded on a trade date basis.Institutional revenue consists of revenue from the Company's GTX business, which provides a proprietary trading platform and sales and trading services toinstitutions. Revenue for the GTX business is generated primarily through commissions or spreads on trades executed on the GTX platform or by voice-brokers. The Company acts as an agent for the trades executed on the GTX platform. The Company, therefore, does not assume any market or credit risk inconnection with those transactions. Revenues are booked on a trade date basis.Futures revenue consists of revenue from the Company's futures business, which offers exchange-based trading execution services, focusing on the indices,agricultural hedging, and commodities sectors. Revenues in this business are generated through commissions, which are earned for executing the Company'scustomers' trades. These revenues are booked on a trade date basis. The Company acts in an agency capacity with respect to the clearing of trades, but is aprincipal with respect to fees paid to introducing brokers in its futures business. The Company does not assume any market risk with respect to customertrades in this business.Other revenue primarily comprises account management and transaction fees, inactivity, training fees charged to customer accounts, and adjustments tocontingent consideration, as well as foreign currency transaction gains and losses.Net interest revenue consists primarily of the revenue generated by our cash and customer cash held by us at banks, as well as funds on deposit as collateralwith our liquidity providers, less interest paid to our customers.Interest revenue and interest expense are recorded when earned and incurred, respectively. Selling and marketingSelling and marketing costs are relate to producing and communicating advertising, as well as other marketing activities, and are expensed as incurred.Restructuring expensesIn 2015, 2014 and 2013, the Company incurred restructuring expenses, which reflected costs arising from headcount reductions and other exit costs,measured and disclosed in accordance with relevant accounting guidance.Acquisition expensesIn 2015, 2014 and 2013, the Company incurred acquisition related expenses, which included costs such as legal, accounting, valuation and other costsspecified in accounting guidance. These costs are expensed as incurred.Integration expensesIn 2015, 2014 and 2013, the Company incurred integration expenses, which are acquisition related costs that are subsequently incurred while integrating theacquired company into the consolidated group.InvestmentsFor equity investments in which the Company exerts significant influence over operating and financial policies but does not have a controlling financialinterest, the equity method of accounting is used. The were no distributed or undistributed earnings from equity method investees during 2015, 2014 or2013.Impairment of investmentIn 2013, the Company’s investment in Kapitall, Inc. became impaired. During 2013 and 2014, the remaining carrying value was written off and recognized asan impairment loss.Gain on extinguishment of debtIn 2013, the Company settled its GFT acquisition financing for less than the principal amount, in exchange for early payment. The difference between theprincipal and payment constituted Gain on extinguishment of debt.F-12Table of ContentsCash and cash equivalentsThe Company considers all highly liquid investments with an original maturity of 90 days or less at the time of acquisition to be cash equivalents. AtDecember 31, 2015 and 2014, the Company’s cash equivalents consisted of money market accounts with an initial maturity of 90 days or less. Cashequivalents are recorded at fair value.Cash and securities held for customersCash and securities held for customers represents cash and other highly liquid assets held to fund customer liabilities in connection with trading positions.Included in this balance are funds deposited by customers and funds accruing to customers as a result of trades or contracts. The Company records acorresponding liability in connection with this amount in Payables to customers. In addition, the Company holds certain customer funds in segregated orsecured broker accounts. Legally segregated balances are not available for general use, in accordance with certain jurisdictional regulatory requirements.Fair ValueCertain financial assets and liabilities are recorded at fair value in accordance with applicable accounting guidance, as discussed in Note 4 Fair ValueInformation.Other financial assets and liabilities are not measured at fair value on a recurring basis but nevertheless approximate fair value due to their short termmaturities. Such financial assets and liabilities include: Receivables from brokers; certain other assets; Payables to customers; and Accrued expenses andother liabilities.The above referenced receivables and payables include open trading positions which are held at fair value, hedging and customer positions, both of whichchange in value as the price of the underlying product changes. The prices approximate the amounts at which the Company can settle the positions at thebalance sheet date.Concentrations of Credit RiskThe Company owns financial instruments that subject the Company to credit risk. These financial instruments are held primarily in Cash and cashequivalents as well as Cash and securities held for customers. The Company’s credit risk is managed by investing cash and cash equivalents primarily inhigh-quality money market and from time to time U.S. and Canadian Government instruments. The majority of the Company’s cash and cash equivalents areheld at ten financial institutions.The Company also has credit risk related to receivables from brokers included in Receivables from brokers. As of December 31, 2015 and 2014, 28% and29%, respectively, of the Company’s Receivables from brokers balance, included in the Consolidated Balance Sheets, was from one large, global financialinstitution.Receivables from BrokersReceivables from brokers include funds that the Company has posted with brokers as collateral required by agreements for holding hedging positions. Also,Receivables from brokers contains funds required to collateralize customer futures trading, as well as the related excess and the Company's own collateral.These amounts are reflected as Receivables from brokers on the Consolidated Balance Sheets and include gains or losses realized on settled contracts, as wellas unrealized gains or losses on open positions.Property and Equipment and Other Long-Lived AssetsProperty and equipment are recorded at cost, net of accumulated depreciation. Identifiable significant improvements are capitalized and expenditures formaintenance and repairs are charged to expense as incurred.Property and equipment are depreciated on a straight-line basis over a three year useful life, except for leasehold improvements, which are depreciated on astraight-line basis over the shorter of the lease term or estimated useful life.The Company accounts for costs incurred to develop its trading platforms and related software in accordance with Accounting Standards Codification("ASC") 350-40, Internal-Use Software. ASC 350-40 requires that such technology be capitalized in the application and infrastructure development stages.Costs related to training, administration and non-value-added maintenance are charged to expense as incurred. Capitalized software development costs arebeing amortized over the useful life of the software, which the Company has estimated at three years.F-13Table of ContentsIn accordance with ASC 360-10, Property, Plant and Equipment, the Company periodically evaluates the carrying value of long-lived assets when eventsand circumstances warrant such review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows fromsuch an asset are separately identifiable and are less than the carrying value. In that event, a loss is recognized in the amount by which the carrying valueexceeds the fair market value of the long-lived asset. This guidance applies to assets held for use and not to assets held for sale. The Company has no assetsheld for sale. The Company has identified no such impairment indicators as of December 31, 2015 or December 31, 2014.Foreign CurrenciesItems included in the financial statements of each of the Company's subsidiaries are measured using the currency of the primary environment in which thesubsidiaries operate ("the functional currency"). The Company has determined that its functional currency is U.S. dollars (“USD”). The Company’sAccumulated other comprehensive income/(loss), consists of foreign currency translation adjustments from subsidiaries not using the USD as their functionalcurrency.Foreign currency transactions are remeasured into functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from the remeasurement at period end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognized in Other revenue on the Consolidated Statements of Income and Comprehensive Income. The Companyrecorded foreign exchange losses of $2.4 million, gains of $1.6 million and losses of $3.6 million for the years ended December 31, 2015, 2014 and 2013,respectively.Intangible AssetsAccounting guidance addressing intangible assets requires purchased intangible assets other than goodwill to be amortized over their estimated useful livesunless their lives are determined to be indefinite. If indefinite-lived assets are determined to have a finite life in the future, the Company will amortize thecarrying value over the remaining estimated useful life at that time.The Company analyzes its business, legal, and regulatory environment at least annually and on an interim basis when conditions indicate impairment mayhave occurred to determine whether its indefinite-lived intangible assets are likely to be impaired. This qualitative assessment indicated that it is more likelythan not that the Company's indefinite lived intangible assets are not impaired. See Note 8 for additional information.GoodwillIn accordance with relevant accounting guidance, the Company tests goodwill for impairment on an annual basis during the fourth quarter and on an interimbasis when conditions indicate impairment may have occurred (see Note 8). In performing these assessments, management relies on and considers a number offactors, including operating results, business plans, economic projections, anticipated future cash flows, comparable market transactions (to the extentavailable), other market data and the Company's overall market capitalization. There are inherent uncertainties related to these factors which requirejudgment in applying them to the analysis of goodwill and indefinite-lived intangible assets for impairment.Goodwill impairment is determined by comparing the estimated fair value of the reporting units with their respective carrying value. At the date of the latesttest as of December 31, 2015, using both the income approach and market approach, the fair value of each of the Company's reporting units was significantlyin excess of its book value, as such no impairment was identified.Other AssetsThe Company records short term investments, receivables from vendors, security deposits, current and deferred tax assets, an indemnification asset, customerdebit positions, net of related allowance, and miscellaneous receivables in Other assets on the Consolidated Balance Sheets. The Company considers allinvestments with an original maturity of greater than 90 days, but less than one year to be short term investments. Short term investments consist of short-termcertificates of deposit. All income from the certificates of deposit is recorded as interest income when earned. See Note 9 for additional information.DerivativesForex, metals, and CFDs allow for exchanging the difference in value of a particular asset such as stock index, energy product, or gold contracts, between thetime at which a contract is opened and the time at which it is closed. The Company's retail customer open positions and positions with liquidity providers areconsidered derivatives under derivatives accounting guidance. Therefore, they are accounted for at fair value, and included in Receivables from brokers andPayables to customers in the Consolidated Balance Sheets. The Company did not designate any of its derivatives as hedging instruments.F-14Table of ContentsNet gains and losses with respect to derivative instruments are reflected in Retail Revenue in the accompanying Consolidated Statements of Income andComprehensive Income.Allowance for Doubtful AccountsThe Company records an increase in the allowance for doubtful accounts when the prospect of collecting a specific customer account balance becomesdoubtful. Management specifically analyzes accounts receivable and historical bad debt experience when evaluating the adequacy of the allowance fordoubtful accounts. Should any of these factors change, the estimates made by management will also change, which could affect the level of the Company’sfuture provision for doubtful accounts. The customer receivables, net of allowance for doubtful accounts, is included in Other assets on the ConsolidatedBalance Sheets. Receivables from customers are reserved for and the related reserves are recorded in Bad debt provision on the Consolidated Statements ofIncome and Comprehensive Income. The allowance for doubtful accounts consisted of the following (amounts in thousands):Balance as of January 1, 2013$(148)Addition to provision(1,501)Amounts written off491Balance as of December 31, 2013(1,158)Addition to provision(3,699)Amounts written off302Balance as of December 31, 2014(4,555)Addition to provision(7,462)Amounts written off5,185Balance as of December 31, 2015$(6,832)Payables to CustomersPayables to customers, included on the Consolidated Balance Sheets, include amounts due on cash and margin transactions. These transactions includedeposits, commissions and gains or losses arising from settled trades. The payables balance also reflects unrealized gains or losses arising from open positionsin customer accounts. The Company engages in white label, or omnibus relationships, with other regulated financial institutions. The payables balanceincludes amounts deposited by these financial institutions in order for the Company to act as clearing broker.Referral fees Introducing brokers direct customers to the Company in return for a commission on each referred customer’s trading volume or a share of net revenuegenerated by each referred customer’s trading activity. Such fees are referred to as introducing broker fees and are recorded on a trade date basis, in ReferralFees, in the Consolidated Statements of Income and Comprehensive Income.Trading ExpensesTrading expenses consist of exchange fees paid to stock exchanges and other third-parties for exchange market data that the Company provides to itscustomers or uses to create its own derived data products, as well as fees for news services and fees paid to prime brokers in connection with its institutionalGTX business and futures business.Income TaxesIncome tax expense is provided for using the asset and liability method, under which deferred tax assets and liabilities are determined based upon thetemporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. The Company operatesunder a permanent reinvestment strategy, under which earnings derived from foreign businesses remain invested in the Company’s foreign subsidiaries. Inaccordance with accounting guidance, the Company does not recognize domestic tax expense related to the permanently reinvested earnings. The Companyhas no plans to repatriate accumulated unremitted earnings as of December 31, 2015.F-15Table of ContentsEmployee compensation and benefitsIn accordance with stock compensation guidance, the Company recognizes expense for all share-based payments to employees, including grants of employeestock options as well as restricted stock units on the basis of grant date fair values. The Company estimates fair value using the Black Scholes model for stockoptions and fair value on grant date for restricted stock units. Shares typically vest incrementally and equally on an annual basis over a four year period,without performance triggers or other requirements beyond continued service. For each type of award, the Company reduces expense by an estimatedforfeiture rate. See Note 15 for additional share based payment disclosure.The Company make estimates in determining its quarterly and annual accrued non-share-based compensation. A significant portion of the Company'semployee incentive compensation programs is discretionary. Each quarter and year-end the Company determines the amount of its expected discretionarycash bonus pools.Treasury SharesIn accordance with ASC 505-30, Equity - Treasury Stock, the Company treats the cost of acquired shares purchased as a deduction from shareholders’ equityand as a reduction of the total shares outstanding when calculating earnings per share.Earnings Per Common ShareBasic earnings per common share is calculated using the weighted average common shares outstanding during the year. Common equivalent shares fromstock options and restricted stock awards, using the treasury stock method, are also included in the diluted per share calculations unless their effect ofinclusion would be anti-dilutive. See Note 16 for discussion of the impact of the Company's convertible note and non-controlling interests on EPS.Risk ManagementThe Company offers its customers access to a diverse range of over 12,500 financial products, including spot foreign exchange, or forex, and precious metalstrading, as well as “contracts for difference”, or CFDs, which are investment products with returns linked to the performance of underlying asset. We offerCFDs on currencies, commodities, indices, individual equities, bonds and interest rate products. We also support trading of exchange-traded futures andoptions on futures on more than 30 global exchanges. In the United Kingdom, we offer spread bets, which are investment products similar to CFDs, but thatoffer more favorable tax treatment for residents of that country. The Company actively trades currencies in the spot market, earning a dealer spread. TheCompany seeks to manage its market risk by generally entering into offsetting contracts in the interbank market, also on a margin basis. The Companydeposits margin collateral with large money center banks and other major financial institutions. The Company is subject to credit risk or loss fromcounterparty nonperformance. The Company seeks to control the risks associated with its customers’ activities by requiring its customers to maintain margincollateral. The Company's trading platforms do not allow customers to enter into trades if sufficient margin collateral is not on deposit with the Company.The Company developed risk-management systems and procedures that allow it to manage the market and credit risk associated with managed flow activitiesin real-time. The Company does not actively initiate directional market positions in anticipation of future movements in the relative prices of currencies andevaluates market risk exposure on a continuous basis. As a result of the Company’s hedging activities, the Company is likely to have open positions invarious currencies at any given time. An additional component of the risk-management approach is that levels of capital are maintained in excess of thoserequired under applicable regulations. The Company also maintains liquidity relationships with three established, global prime brokers and at least six otherliquidity providers, providing the Company with access to a liquidity pool.2. RESTATEMENTThe Company has determined that there were errors in the manner in which the Company accounted for income taxes as of and for the years ended December31, 2014 and 2013 and for certain quarters of 2015 under ASC 740 (ASC 740), Income Taxes. These errors related primarily to the manner in which certainintercompany payables and receivables among domestic and overseas subsidiaries of the Company were treated for accounting and tax purposes during theimpacted periods. The consolidated financial statements of the Company as of and for the years ended December 31, 2014 and 2013 included in this reporthave been restated to reflect the correction of these errors. In addition, certain other adjustments, previously determined to be immaterial individually and inthe aggregate, have also been corrected in the restated financial statements.F-16Table of ContentsOther immaterial adjustments mentioned above include an error related to the calculation of the redemption value of the non-controlling interests previouslyrecorded as an out of period adjustment in the six month period ended June 30, 2015. This previous out of period adjustment of $1.3 million reduced retainedearnings and increased non-controlling interests. This has now been reflected in the appropriate periods.All relevant footnotes to the consolidated financial statements, including the quarterly financial data presented in Note 23 have also been restated to reflectthe items discussed above.The following tables reflect the financial statement line items impacted by the restatement. The column headed "Tax Adjustment" reflects the impact of thetax matters discussed above, while the "All Other Adjustments" column reflects the impact of the other previously identified immaterial adjustments in theConsolidated Balance Sheet and Statements of Income and Comprehensive Income. The column headed "Adjustments" reflects the impact of the tax mattersdiscussed above as well as the impact of the other previously identified immaterial adjustments in the Consolidated Statement of Cash Flows. For theavoidance of doubt, the following tables include only those line items impacted by the restatement.Consolidated Balance Sheet As of December 31, 2014 As Reported TaxAdjustment OtherAdjustments As RestatedASSETS: Cash and cash equivalents$139,403 $— $(52) $139,351Goodwill34,567 (988) — 33,579Other assets, net of allowance for doubtfulaccounts(1)35,311 917 (2,463) 33,765Total assets$1,185,887 $(71) $(2,515) $1,183,301LIABILITIES AND SHAREHOLDERS’EQUITY: Liabilities Accrued expenses and other liabilities64,476 12,170 (451) 76,195Income tax payable1,470 1,603 (2,063) 1,010Total liabilities$910,784 $13,773 $(2,514) $922,043Redeemable non-controlling interests10,209 — 1,129 11,338Shareholders’ equity Accumulated other comprehensive loss(2,054) 541 — (1,513)Additional paid-in capital152,684 (4,306) — 148,378Retained earnings130,984 (10,079) (1,130) 119,775Total shareholders’ equity264,894 (13,844) (1,130) 249,920Total liabilities and shareholders’ equity$1,185,887 $(71) $(2,515) $1,183,301(1) The Company previously reported $174,000 as Short term investments, at fair value; this amount has been reclassified to Other assets, net of allowance for doubtfulaccounts to conform to current year presentationF-17Table of ContentsConsolidated Statements of Income and Comprehensive Income For the Fiscal Year Ended December 31, 2014 As Reported TaxAdjustment OtherAdjustments RestatedREVENUE: Retail revenue(1)$293,122 $— $(344) $292,778Institutional revenue(1)34,518 — — 34,518Futures revenue(1)36,160 — — 36,160Total non-interest revenue368,704 — (344) 368,360Net revenue$369,533 $— $(344) $369,189EXPENSES: Employee compensation and benefits$99,485 $— $(252) $99,233Referral fees91,092 — (120) 90,972Trading expenses26,285 — (117) 26,168General and administrative38,509 — 142 38,651Depreciation and amortization7,125 — (515) 6,610Restructuring expenses1,214 — 1,120 2,334Total operating expense317,334 — 258 317,592OPERATING PROFIT52,199 — (602) 51,597INCOME BEFORE INCOME TAXEXPENSE46,052 — (602) 45,450Income tax (benefit)/expense12,993 6,200 (53) 19,140NET INCOME33,059 (6,200) (549) 26,310NET INCOME APPLICABLE TO GAINCAPITAL HOLDINGS, INC.31,626 (6,200) (549) 24,877Other comprehensive (loss)/income: Foreign currency translationadjustment(4,630) 541 (4,089)NET COMPREHENSIVE INCOMEAPPLICABLE TO GAIN CAPITALHOLDINGS, INC.$26,996 $(5,659) $(549) $20,788Earnings per common share: Basic$0.76 $(0.16) $(0.04) $0.56Diluted$0.71 $(0.14) $(0.04) $0.53(1) - The Company has changed its revenue presentation, see Note 1 for detailF-18Table of Contents For the Fiscal Year Ended December 31, 2013 As Reported TaxAdjustment OtherAdjustments As RestatedREVENUE: Retail revenue(1)$215,667 $— $67 $215,734Institutional revenue(1)28,005 — — 28,005Futures revenue(1)22,188 — — 22,188Total non-interest revenue266,959 — 67 267,026Net revenue$267,624 $— $67 $267,691EXPENSES: Employee compensation and benefits$74,185 $— $422 $74,607Referral fees52,503 — 120 52,623General and administrative26,813 — (255) 26,558Depreciation and amortization7,768 — 515 8,283Restructuring expenses1,570 — (1,120) 450Total operating expense223,286 — (318) 222,968OPERATING PROFIT44,338 — 385 44,723INCOME BEFORE INCOME TAX EXPENSE45,105 — 385 45,490Income tax (benefit)/expense13,794 3,589 — 17,383NET INCOME31,311 (3,589) 385 28,107NET INCOME APPLICABLE TO GAIN CAPITALHOLDINGS, INC.31,311 (3,589) 385 28,107NET COMPREHENSIVE INCOME APPLICABLETO GAIN CAPITAL HOLDINGS, INC.$32,638 $(3,589) $385 $29,434Earnings per common share: Basic$0.85 $(0.10) $0.01 $0.76Diluted$0.79 $(0.09) $0.01 $0.71(1) - The Company has changed its revenue presentation, see Note 1 for detailConsolidated Statement of Changes in Shareholders' Equity Additional Paid inCapital Retained Earnings Accumulated OtherComprehensiveIncome/(Loss) Total AsReported AsRestated AsReported AsRestated As Reported As Restated AsReported AsRestatedBALANCE—January 1, 2013$85,089 $85,009 $84,772 $84,590 $1,249 $1,249 $162,830 $162,568BALANCE—January 1, 2014$138,691 $134,399 $108,603 $105,217 $2,576 $2,576 $234,401 $226,723BALANCE—December 31, 2014$152,684 $148,378 $130,984 $119,775 $(2,054) $(1,513) $264,894 $249,920Consolidated Statement of Cash FlowsF-19Table of Contents For the Fiscal Year Ended December 31, 2014 As Reported Adjustments As RestatedCASH FLOWS FROM OPERATING ACTIVITIES: Net income$33,059 $(6,749) $26,310Adjustments to reconcile net income to cash provided by / (used for)operating activities Depreciation and amortization16,367 (1,677) 14,690Non-cash integration costs— 1,162 1,162Deferred tax (benefit)/expense2,536 2,572 5,108Changes in operating assets and liabilities: Cash and securities held for customers(9,679) 419 (9,260)Receivables from brokers94,657 276 94,933Prepaid assets2,729 1 2,730Other assets(11,536) 3,041 (8,495)Payables to customers9,679 (419) 9,260Accrued compensation and benefits3,671 826 4,497Accrued expenses and other liabilities(8,565) 6,143 (2,422)Income tax payable(2,832) (6,980) (9,812)Cash provided by / (used for) operating activities138,173 (1,385) 136,788Effect of exchange rate changes on cash and cash equivalents2,760 1,333 4,093INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS99,532 (52) 99,480CASH AND CASH EQUIVALENTS—End of year$139,403 $(52) $139,351SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Adjustment to redemption value of non-controlling interests$(978) $(1,129) $(2,107)F-20Table of Contents For the Fiscal Year Ended December 31, 2013 As Reported Adjustments RestatedCASH FLOWS FROM OPERATING ACTIVITIES: Net income$31,311 $(3,204) $28,107Adjustments to reconcile net income to cash provided by / (used for)operating activities Depreciation and amortization11,837 (648) 11,189Non-cash integration costs— 1,163 1,163Deferred tax (benefit)/expense39 (5,470) (5,431)Stock compensation expense2,896 79 2,975Changes in operating assets and liabilities: Cash and securities held for customers(74,608) (161) (74,769)Receivables from brokers(78,336) (220) (78,556)Prepaid assets318 — 318Other assets(383) (692) (1,075)Payables to customers74,608 161 74,769Accrued compensation and benefits7,118 (743) 6,375Accrued expenses and other liabilities973 6,894 7,867Income tax payable2,131 2,283 4,414Effect of exchange rate changes on cash and cash equivalents(2,446) 558 (1,888)SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Deferred taxes related to convertible senior notes$— $(4,308) $(4,308)3. RECENT ACCOUNTING PRONOUNCEMENTSIn February 2016, the FASB issued new guidance regarding the accounting for leases. The FASB issued this update to increase transparency andcomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasingarrangements. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company iscurrently assessing the impact on its consolidated financial statements of adopting this guidance.In September 2015, the FASB issued new guidance regarding the accounting for provisional adjustments of business combinations. The guidance states thatif changes are required to be made to provisional amounts included in previously issued financial statements, such changes should be included in the periodin which they are identified. These changes include adjustments to goodwill, as well as the cumulative impact of adjustments for depreciation, amortizationor other income. The guidance is effective for annual periods beginning after December 15, 2015, including interim periods within that reporting period. Thisguidance will impact how the Company deals with provisional adjustments for business combinations following adoption. In April 2015, the FASB issued new guidance regarding the accounting for debt issuance costs. The guidance requires presenting any deferred financing costsfrom debt issuances as a reduction in the amount of debt included on the balance sheet, which is a change from currently applicable rules requiring such coststo be classified as assets. In August 2015, the FASB issued updated guidance, which incorporated an SEC staff announcement highlighting that costsincurred for line-of-credit arrangements could be recorded as assets and amortized ratably over the term of the line-of-credit arrangement (regardless ofwhether there are any outstanding borrowings). The guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoptionis permitted for financial statements that have not been previously issued. The Company does not expect this guidance to have a material impact on itsconsolidated financial statements.F-21Table of ContentsIn May 2014, the FASB issued new revenue recognition guidance that superseded the previously existing revenue recognition guidance and most industry-specific guidance applicable to revenue recognition. The guidance requires recognizing revenue when transferring promised goods or services to customers.Recognition should reflect the consideration which the company expects to receive in exchange for those goods or services. The guidance requires enhanceddisclosures to help financial statement users better understand the nature, amount, timing and uncertainty of the revenues that are recognized. The guidanceis effective for interim reporting periods within annual reporting periods beginning after December 15, 2017, which is a one year deferral from the originalguidance, approved by the FASB in July 2015. Early application is permitted for annual periods beginning after December 15, 2016, including interimperiods within that reporting period. The Company is currently assessing the impact on its consolidated financial statements of adopting this guidance.4. FAIR VALUE INFORMATIONAccounting guidance defines fair value as the price that would be received in exchange for an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. The guidance establishes a three level hierarchy that ranks the quality and reliability of informationused in developing fair value estimates for financial instruments. The hierarchy gives the highest priority to quoted prices in active markets and the lowestpriority to unobservable data. In cases where two or more levels of inputs are used to determine fair value, a financial instrument's level is determined basedon the lowest level input that is considered significant to the fair value measurement in its entirety. The three levels of fair value hierarchy are summarizedbelow:Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;Level 2 - Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directlyor indirectly; andLevel 3 - Valuations that require inputs that are both unobservable to a market participant and significant to the fair value measurement.For assets and liabilities that are transferred between levels during the period, fair values are ascribed as if the assets or liabilities had been transferred as of thebeginning of the period.The following table presents the Company’s assets and liabilities that were measured at fair value on a recurring basis during the reporting period and therelated hierarchy levels (amounts in thousands): Fair Value Measurements on a Recurring Basisas of December 31, 2015 Level 1 Level 2 Level 3 TotalFinancial Assets (Liabilities): Customer derivative positions$— $143,918 $— $143,918Broker derivative contracts— (12,568) — (12,568)Money market accounts25,167 — — 25,167Certificates of deposit174 — — 174Investment in gold107 — — 107Total$25,448 $131,350 $— $156,798 F-22Table of Contents Fair Value Measurements on a Recurring Basisas of December 31, 2014 Level 1 Level 2 Level 3 TotalFinancial Assets (Liabilities): Customer derivative contracts$— $102,722 $— $102,722Broker derivative contracts— 717 — 717Money market accounts20,537 — — 20,537Certificates of deposit174 — — 174Investment in gold118 — — 118Contingent consideration— — (9,974) (9,974)Total$20,829 $103,439 $(9,974) $114,294The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the years ended December31, 2015 and December 31, 2014, nor has there been any movement between levels during these respective periods.Level 1 Financial AssetsThe Company has money market accounts, certificates of deposit and an investment in gold that are Level 1 financial instruments that are recorded basedupon listed or quoted market rates. The money market accounts are recorded in Cash and cash equivalents and Cash and securities held for customers; thecertificates of deposit are recorded in Other Assets and the investment in gold is recorded in Other Assets.Level 2 Financial Assets and LiabilitiesThe Company has customer derivative contracts that are Level 2 financial instruments recorded in Payables to customers.The Company has broker derivative contracts that are Level 2 financial instruments recorded in Receivables from brokers.The fair values of these Level 2 financial instruments are based upon directly observable values for underlying instruments.F-23Table of ContentsLevel 3 Financial LiabilitiesUnder the agreements governing the Company's acquisition of Galvan, the Company was obligated to make contingent payments that are Level 3 financialliabilities. These contingent payments were recorded under Accrued expenses and other liabilities on the Company's Consolidated Balance Sheets. The fairvalue of these payments was determined using current Company-specific and risk free interest rates as of the balance sheet date and probability-weightedforecasts of the acquired company's performance and client accounts, the estimation of which does not have any basis in quoted or observable markets.Significant increases (decreases) in any of the forecast inputs in isolation would result in a significantly higher (lower) fair value measurement, whilesignificant increases (decreases) in interest rates would result in a significantly lower (higher) fair value measurement. In December 2015, the Companyentered into an agreement with the former owners of Galvan to satisfy all remaining obligations under the contingent earn-out arrangement for a one-timepayment of $1.5 million, which was paid in early 2016.The following is a rollforward of the Level 3 liabilities from January 1, 2014 to December 31, 2015 (amounts in thousands):Liabilities Contingent ConsiderationBalance at January 1, 2014 $—Issuance of contingent payment obligation 10,540Gains included in earnings - currency revaluation (984)Losses included in earnings - discount amortization 418Balance at January 1, 2015 9,974Gains included in earnings - adjustment to fair value of contingent consideration (6,722)Contingent consideration payments (2,063)Gains included in earnings - currency revaluation (212)Losses included in earnings - discount amortization 570Settlement of contingent payment obligation (1,547)Balance at December 31, 2015 $—Gains included in earnings - adjustment to fair value of contingent consideration and Gains included in earnings - currency revaluation for Level 3 liabilitiesare reported in Other revenue, while losses included in earnings attributable to discount amortization are reported in Interest expense.Financial Instruments Not Measured at Fair ValueThe table below presents the carrying value, fair value, and fair value hierarchy category of certain financial instruments that are not measured at fair value inthe consolidated balance sheets (amounts in thousands).Receivables from brokers comprise open trades, which are measured at fair value (disclosed above), and the Company's deposits, which are not measured atfair value but approximate fair value. These deposits approximate fair value because they are cash balances that the Company may withdraw at its discretion.Such settlement would occur within a relatively short period of time once a withdrawal is initiated.Payables to customers comprise open trades, which are measured at fair value (disclosed above), and customer deposits that the Company holds for its role asclearing broker. These deposits are not measured at fair value, but approximate fair value, because they are cash balances that the Company or its customerscan settle at either party's discretion. Such settlement would occur within a relatively short period of time once a withdrawal is initiated.The carrying value of Convertible senior notes represents the notes’ principal amounts net of unamortized discount (see Note 14). The Company assessed thenotes' fair value as determined by current Company-specific and risk free interest rates as of the balance sheet date.The carrying value of Accrued expenses and other liabilities included $20.0 million as of December 31, 2014, referred to as the Holdback Amount, which isan amount relating to the Company's acquisition of GFT. These liabilities were settled, and accordingly, there are no liabilities for the Holdback Amount asof December 31, 2015. The carrying values of Accrued expense and other liabilities as of December 31, 2014 not measured at fair value approximate fairvalue because of the relatively short period of time between their origination and expected settlement date.F-24Table of Contents As of December 31, 2015 Fair Value Measurements using: Carrying Value Fair Value Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) SignificantObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Financial Assets: Receivables from brokers$133,721 $133,721 $— $133,721 $—Financial Liabilities: Payables to customers$1,064,539 $1,064,539 $— $1,064,539 $—Convertible senior notes$121,996 $122,264 $— $122,264 $— As of December 31, 2014 Fair Value Measurements using: Carrying Value Fair Value Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) SignificantObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Financial Assets: Receivables from brokers$134,191 $134,191 $— $134,191 $—Financial Liabilities: Payables to customers$862,281 $862,281 $— $862,281 $—Convertible senior notes$68,367 $66,440 $— $66,440 $—Accrued expenses and other liabilities$20,000 $20,000 $— $20,000 $— F-25Table of Contents5. DERIVATIVESThe Company's contracts with its customers and its liquidity providers are deemed to be derivative instruments. The table below represents the fair values ofthe Company’s derivative instruments reported within Receivables from brokers and Payables to customers on the accompanying Consolidated BalanceSheet (amounts in thousands): December 31, 2015 Gross amounts ofassets forderivative openpositions at fairvalue Gross amount of(liabilities) forderivative openpositions at fairvalue Net amounts ofassets/(liabilities)for derivativeopen positions atfair valueDerivative Instruments: Foreign currency exchange contracts$138,140 $(59,468) $78,672CFD contracts111,844 (70,429) 41,415Metals contracts18,866 (7,603) 11,263Total$268,850 $(137,500) $131,350 December 31, 2015 Cash Collateral Net amounts ofassets/(liabilities)for derivativeopen positions atfair value Net amounts ofassets/(liabilities)presented in thebalance sheetDerivative Assets/(Liabilities:) Receivables from brokers$133,721 $(12,568) $121,153Payables to customers$(1,064,539) $143,918 $(920,621) December 31, 2014 Gross amounts ofassets forderivative openpositions at fairvalue Gross amount of(liabilities) forderivative openpositions at fairvalue Net amounts ofassets/(liabilities)for derivativeopen positions atfair valueDerivative Instruments: Foreign currency exchange contracts$168,034 $(93,057) $74,977CFD contracts44,329 (24,420) 19,909Metals contracts16,146 (7,593) 8,553Total$228,509 $(125,070) $103,439 December 31, 2014 Cash Collateral Net amounts ofassets/(liabilities)for derivativeopen positions atfair value Net amounts ofassets/(liabilities)presented in thebalance sheetDerivative Assets/(Liabilities): Receivables from brokers$134,191 $717 $134,908Payables to customers$(862,281) $102,722 $(759,559)The Company’s derivatives include different underlyings, which vary in price. Foreign exchange contracts typically have prices less than two dollars, whilecertain metals contracts and CFDs can be considerably higher priced. The table below presents the number of contracts reported within Receivables frombrokers and Payables to customers on the consolidated balance sheets (amounts in thousands):F-26Table of Contents December 31, 2015 Total contracts in longpositions Total contracts in shortpositionsDerivative Instruments: Foreign currency exchange contracts3,106,885 2,931,109CFD contracts139,465 285,640Metals contracts1,278 308Total3,247,628 3,217,057 December 31, 2014 Total contracts inlong positions Total contracts inshort positionsDerivative Instruments: Foreign currency exchange contracts3,147,518 2,679,041CFD contracts873,070 10,753Metals contracts835 335Total4,021,423 2,690,129The Company did not designate any of its derivatives as hedging instruments. Net gains with respect to derivative instruments reflected in Retail Revenue inthe accompanying Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2015 and 2014 were as follows(amounts in thousands): For the Years Ended December 31, 2015 2014Derivative Instruments: Foreign currency exchange contracts$163,315 $136,546CFD contracts151,553 105,174Metals contracts28,918 48,608Total$343,786 $290,3286. RECEIVABLES FROM BROKERSAmounts receivable from brokers consisted of the following as of (amounts in thousands): December 31, 2015 December 31, 2014Required Collateral$129,042 $95,599Excess from futures broker - Restricted4,679 38,592Open foreign exchange positions(12,568) 717Total$121,153 $134,908The Company has posted funds with brokers as collateral required by agreements for holding trading positions. These amounts are reflected as Receivablesfrom brokers on the Consolidated Balance Sheets.F-27Table of Contents7. PROPERTY AND EQUIPMENTProperty and equipment, including leasehold improvements and capitalized software development costs, consisted of the following as of (amounts inthousands): December 31, 2015 December 31, 2014Software$44,194 $30,351Computer equipment14,300 8,516Leasehold improvements11,200 6,719Telephone equipment881 719Office equipment2,113 2,345Furniture and fixtures1,761 1,044Web site development costs668 646Gross property and equipment75,117 50,340Less: Accumulated depreciation and amortization(44,750) (31,544)Property and equipment, net$30,367 $18,796As mentioned in Note 1 above, the Company purchased all of the outstanding share capital of City Index in April 2015, Galvan in July 2014 and controllinginterests in GAA and Top Third in March 2014. The final purchase price allocation for City Index, Galvan, GAA and Top Third to property and equipmentare detailed below in Note 11.Depreciation and amortization expense for property and equipment was $11.1 million, $6.6 million and $8.3 million for the years ended December 31, 2015,2014 and 2013, respectively.The Company adjusted the depreciation and amortization period of certain property and equipment that experienced changes in estimated useful lives as aresult of the City Index and GFT acquisitions. This change in useful lives resulted in an additional charges of $5.4 million and $1.2 million for the yearsended December 31, 2015 and 2014. The additional charge was recorded in Integration expenses.In addition, the Company wrote off certain property and equipment that became obsolete as a result of the City Index acquisition. This resulted in anadditional charge of $1.9 million for the year ended December 31, 2015. The additional charge was recorded in Integration expenses.F-28Table of Contents8. INTANGIBLE ASSETS AND GOODWILLIntangible AssetsThe Company's various finite-lived intangible assets consisted of the following as of (amounts in thousands): December 31, 2015 December 31, 2014IntangiblesGross AccumulatedAmortization Net Gross AccumulatedAmortization NetCustomer list$56,388 $(14,111) $42,277 $22,944 $(7,152) $15,792Technology74,378 (32,117) 42,261 48,376 (4,671) 43,705Trademark8,289 (1,678) 6,611 1,793 (847) 946Total finite lived intangibles$139,055 $(47,906) $91,149 $73,113 $(12,670) $60,443Trademarks not subject toamortization(1)363 — 363 363 — 363Total intangibles assets(2)$139,418 $(47,906) $91,512 $73,476 $(12,670) $60,806(1) These indefinite-life trademarks relate to the Forex.com and foreignexchange.com domain names where management determined there was no legal, regulatory ortechnological limitation on their useful lives. These trademarks are also supported annually in the Company's impairment test for intangible assets.(2) The increase in total intangibles for the year ended December 31, 2015 was primarily due to the customer lists, technology and trademarks acquired as part of the CityIndex acquisition. See Note 11 for details of the intangibles acquired in the Company's City Index, GAA, Top Third and Galvan acquisitions. The technology acquiredpursuant to the asset purchase agreements with Valaquenta Intellectual Property Limited ("Valaquenta") and Forexster Limited ("Forexster"), is described in further detailbelow.The Company has the following identifiable intangible assets as of December 31, 2015:Intangible AssetAmount (in thousands) Weighted averageamortization periodCustomer list$56,388 7.6 yearsTechnology74,378 8.9 yearsTrademark(1)8,652 6.7 yearsTotal intangible assets$139,418 (1) Trademarks with indefinite lives, as described above, comprise $0.4 million of the gross $8.7 million of trademarks.The final purchase price allocations to intangible assets for the acquisitions of City Index, Galvan, GAA, and Top Third acquisitions are detailed below inNote 11.On July 10, 2014, the Company entered into asset purchase agreements with Forexster, pursuant to which one of the Company's subsidiaries, GAIN GTXBermuda, Ltd. ("GTX Bermuda"), agreed to purchase from Valaquenta and Forexster the software and other intellectual property assets utilized to operate theelectronic trading platform offered to customers in the Company's Gain GTX, LLC ("GTX") business. The purchase was made with a combination of $12.4million in cash and $5.3 million in shares of the Company's unregistered common stock. GTX Bermuda agreed to pay Valaquenta contingent considerationin the event that GTX Bermuda or any of its affiliates in the future provide customers the ability to trade new types of financial instruments using thepurchased intellectual property and the trading of such new products generates "Net Revenue" (as defined in the agreement with Valaquenta) in excess ofthresholds set out in the agreement. Prior to the closing of the acquisitions, the Company had agreements with Valaquenta and Forexster granting it theexclusive right to use the intellectual property in the field of forex trading and non-exclusive rights to use the intellectual property for the trading of financialproducts in the fields of precious metals and hydrocarbons. Following the closing of the acquisition, GTX Bermuda has full rights and title over theintellectual property for trading of currencies, commodities and all other financial instruments of any kind whatsoever. This purchase added $21.4 million tothe Company's intangible assets, $3.7 million of which were previously held as a prepayment made to Forexster under an exclusive rights agreement. TheCompany has assigned a 10 year useful life to this asset.Amortization expense for the purchased intangibles was $16.6 million, $8.1 million and $2.9 million for the years ended December 31, 2015, 2014 and 2013,respectively.The Company adjusted the amortization periods of certain intangible assets that experienced a change of estimated useful lives as a result of the City Indexacquisition. This change resulted in an additional charge of $19.7 million during the year ended December 31, 2015. The additional charge is recorded inIntegration expenses.During 2013, the Company accelerated $1.2 million of a software platform which was recorded in Integration expenses.F-29Table of ContentsFuture annual estimated amortization expense is as follows (amounts in thousands):Years Ended December 31: 2016$15,988201715,132201813,648201911,97420209,992Thereafter24,415Total$91,149GoodwillGoodwill is calculated as the difference between the cost of acquisition and the fair value of the net identifiable assets of an acquired business. As ofDecember 31, 2015 and December 31, 2014, the Company had recorded goodwill of approximately $34.0 million and $33.6 million, respectively. Theincrease of $0.4 million was primarily related to the City Index acquisition.There were no goodwill impairments as a result of performing the Company's 2015 and 2014 annual impairment tests. As previously noted, the Companychanged its segment reporting structure effective December 31, 2015, from a single operating segment to three operating segments, Retail, Institutional andFutures. Goodwill has been allocated based on the relative fair value of each newly identified reporting units within such segments. The allocation wasperformed effective as of the same date as the goodwill impairment test.The following represents the carrying amount of goodwill by segment (amounts in thousands):RetailInstitutionalFuturesTotalCarrying amount of goodwill as of December 31,2015$26,722$4,788$2,507$34,0179. OTHER ASSETSOther assets consisted of the following as of (amounts in thousands): December 31, 2015 December 31, 2014Vendor and security deposits$11,486 $3,373Income tax receivable9,482 5,163Deferred tax assets, net17,827 6,308Indemnification asset— 8,792GTX Trade Receivables4,881 4,190Customer Debit Positions7,340 6,594Allowance on customer debit positions(6,832) (4,555)Miscellaneous receivables2,416 3,900Equity method investment822 —$47,422 $33,765Under the terms of the GFT acquisition, an initial amount of $20.0 million, referred to as the Holdback Amount, was deferred, to be paid following thesettlement of certain liabilities of GFT after the closing date of the acquisition. The selling stockholder of GFT agreed to indemnify the Company for theseliabilities.F-30Table of ContentsAt December 31, 2014, based on the Company's best estimate of the amounts necessary to settle such liabilities, the Company recorded an indemnificationasset of $8.8 million at December 31, 2014. This was included within Other assets in the purchase price allocation of GFT. During the twelve months endedDecember 31, 2015, the previous liabilities of GFT were settled and, therefore, the Company made payments to the selling shareholder of GFT, as required bythe stock purchase agreement providing for the acquisition of GFT, which settled the liability associated with the Holdback Amount.10. RELATED PARTY TRANSACTIONSCertain officers and directors of the Company have personal funds on deposit in separate customer accounts with the Company. These accounts are recordedin Payables to customers on the consolidated balance sheets. The aggregate amount of these funds was $0.3 million and $3.6 million at December 31, 2015and December 31, 2014, respectively.IPGL Limited, the majority selling shareholder in the acquisition of City Index, has a trading account with the Company, which is recorded in Payables tocustomers on the consolidated balance sheet. The aggregate amount of these funds was $21.7 million at December 31, 2015.11. ACQUISITIONSCity Index (Holdings) LimitedOn April 1, 2015, the Company acquired the entire issued and outstanding share capital of City Index. City Index is a global online trading firm specializingin offering CFDs, forex and spread betting for retail customers. This acquisition was made to strengthen and diversify the Company's existing global footprintin the retail business.The purchase price consisted of approximately $6.1 million in cash, inclusive of working capital adjustments and $1.0 million in cash to be held in escrow,5,319,149 shares of the Company's common stock, inclusive of 4,787,234 shares to be held in escrow, and 4.125% unsecured Convertible Senior Notes withan aggregate principal amount of $60.0 million and fair value of $65.0 million, inclusive of an aggregate principal amount of $54.0 million to be held inescrow. In addition, the Company paid City Index approximately $22.4 million, which was used to settle certain inter-company liabilities between CityIndex and City Index Group Limited (its former parent company).The difference in the purchase price from June 30, 2015 to December 31, 2015 was due to the finalization of working capital adjustments.The purchase price was derived as follows (amounts in thousands):Cash$6,103Convertible senior notes65,000Common stock issued45,100Total purchase price$116,203The purchase price of City Index was allocated to the fair value of various assets and liabilities as follows (amounts in thousands): F-31Table of ContentsCash$10,546Cash and securities held for customers281,576Receivable from brokers35,974Property and equipment10,466Prepaid assets4,038Other assets5,119Total tangible assets347,719Total liabilities assumed299,000Net assets acquired48,719Identifiable intangible assets: Customer list34,277Trade name6,645Technology26,157Intangible assets, net67,079Goodwill$405Acquisition expenses were $2.8 million or the year ended December 31, 2015. They were recorded in Acquisition Expense.For the period from acquisition to December 31, 2015, revenues generated by City Index were $136.0 million, of which $30.8 million have been eliminatedin consolidation, and expenses were $95.0 million of which $2.3 million have been eliminated in consolidation. City Index generated income before taxes of$41.0 million, of which $28.5 million have been eliminated in consolidation.The weighted average lives of City Index's intangible assets are 7.9 years for customer lists, 7.0 years for trade names, and 6.9 years for technology.Galvan Research and Trading, Ltd.In July 2014, the Company acquired all the share capital of Galvan and its wholly owned subsidiaries, Faraday Research LLP and Galvan LLP. The purchaseprice was $20.3 million. This acquisition was made to add an advisory capability to complement the Company's retail business.The purchase price was $9.7 million in cash and a contingent payment of $10.5 million payable over a three year period. Over the three year period, thecontingent payment is subject to a fair value assessment related to achieving specific financial and customer account targets. The actual contingent paymentfor 2014 was $2.1 million, which was paid on September 30, 2015. For the twelve months ended December 31, 2015, the Company adjusted the contingentpayment's value based on forecasts of performance related to 2015 and 2016 payments, and in December 2015 settled the outstanding contingent paymentfor $1.5 million payable in early 2016 (See Note 4). The purchase price was derived as follows (amounts in thousands):Cash$9,732Contingent payment10,540Total purchase price$20,272The purchase price of Galvan was allocated to the fair value of various assets and liabilities as follows (amounts in thousands): F-32Table of ContentsCash and cash equivalents$2,193Receivable from brokers745Property and equipment12Prepaid assets94Other assets64Total tangible assets3,108Total liabilities assumed1,931Net assets acquired1,177Identifiable intangible assets: Customer list4,203Trade name784Intangible assets, net4,987Goodwill$14,108Acquisition expenses were $0.4 million for the year ended December 31, 2014. They were recorded in Acquisition Expense.For the period from acquisition to December 31, 2014, revenues generated by Galvan were $5.2 million, of which $2.4 million have been eliminated inconsolidation, and expenses were $3.0 million, generating income before taxes of $2.2 million.Global Asset Advisors, LLCIn March 2014, the Company acquired a 55% interest in GAA. The purchase price was $5.6 million. This acquisition was made to strengthen the Company'sfutures business.The purchase price was derived as follows (amounts in thousands):Cash$4,365Common Stock issued1,241Total purchase price$5,606The purchase price of GAA was allocated to the fair value of various assets and liabilities as follows (amounts in thousands): Non-controlling interest$4,509 Cash and cash equivalents$360Receivable from brokers438Property and equipment148Prepaid assets153Other assets3Total tangible assets1,102Total liabilities assumed515Net assets acquired587Identifiable intangible assets: Customer list3,100Trade name270Intangible assets, net3,370Goodwill$6,158Acquisition expenses were $0.1 million for the year ended December 31, 2014 and were recorded in Acquisition Expense.For the period from acquisition to December 31, 2014, revenues generated by GAA were $5.5 million, of which $4.3 million was eliminated in consolidation,and expenses were $4.8 million, generating income before taxes of $0.7 million, of which $0.3 million was recorded to non-controlling interests.F-33Table of ContentsTop Third Ag Marketing LLCIn March 2014, the Company acquired a 55% interest in Top Third. The purchase price was a $3.5 million cash payment. This acquisition was made as part ofthe Company's strategy to diversify its revenue base.The purchase price of Top Third was allocated to the fair value of various assets and liabilities as follows (amounts in thousands): Non-controlling interest$3,885 Cash and cash equivalents$73Receivable from brokers663Total tangible assets736Total liabilities assumed1,103Net liabilities assumed(367)Identifiable intangible assets: Customer list3,900Trade name90Intangible assets, net3,990Goodwill$3,806Acquisition expenses were $0.1 million for the year ended December 31, 2014 and were recorded in Acquisition Expense.For the period from acquisition to December 31, 2014, revenues generated by Top Third were $5.1 million and expenses were $2.6 million, generatingincome before taxes of $2.5 million, of which $1.1 million was recorded to non-controlling interests.Global Futures & Forex, LtdOn September 24, 2013, the Company entered into an Amended and Restated Stock Purchase Agreement with Gary L. Tilkin, a natural person (the “Seller”),and GFT, pursuant to which the Company purchased all of the issued and outstanding share capital of GFT from the Seller. The acquisition was made as partof the Company's strategy to increase its offering of products and to expand its retail and institutional businesses into new markets and geographies.The purchase price allocation was derived as follows (amounts in thousands): Cash$40,000Payment for excess cash adjustment2,160Loan payable33,200Common Stock issued34,771Total purchase price$110,131The purchase price of GFT was allocated to the fair value of various assets and liabilities as follows (amounts in thousands): F-34Table of Contents Cash and cash equivalents$15,781Cash and cash equivalents held for customers228,419Receivable from brokers61,028Property and equipment7,515Other assets18,942Total tangible assets331,685Total liabilities assumed251,691Net assets acquired79,994Identifiable intangible assets: Software25,300 Customer relationships3,150Intangible assets, net28,450Goodwill$1,687Acquisition expenses were $1.8 million for the year ended December 31, 2013 and were recorded in Acquisition Expense.For the period from acquisition to December 31, 2013, revenues generated by GFT were $26.9 million and expenses were $32.0 million, generating a lossbefore taxes of $5.1 million.Pro Forma Information (unaudited):The following unaudited pro forma operating data is presented as if the acquisition of City Index had occurred on January 1, 2014, and includes actual resultsfor GFT for periods after their acquisition in September 2013, GAA and Top Third for periods after their acquisition in March 2014, as well as Galvan resultsafter its acquisition in July 2014. This data does not include any proforma adjustments for the GFT, GAA, Top Third or Galvan acquisitions, as the Companybelieves it is more useful to present the pro forma effects of the City Index acquisition on their own in light of the transaction's significance. The unauditedpro forma data does not include the impact of forecasted operating expense synergies.The unaudited pro forma data is provided for informational purposes only and may not necessarily be indicative of future results of operations or what theresults of operations would have been had the Company and City Index operated as a combined entity for the periods presented.Unaudited pro forma income statement line items for the twelve months ended December 31, 2015 and December 31, 2014 were as follows (amounts inthousands):F-35Table of Contents For the Fiscal Year Ended December 31, 2015 2014REVENUE: Total non-interest revenue$471,959 $506,228Interest revenue1,303 2,288Interest expense1,049 599Total net interest revenue254 1,689Net revenue472,213 507,917EXPENSES: Depreciation and amortization11,753 16,500Purchased intangible amortization18,619 17,962Other expense items424,229 430,263Total operating expense454,601 464,725OPERATING PROFIT17,612 43,192Interest on long term borrowings10,267 9,283Gain on extinguishment of debt— —Impairment of investment— —INCOME BEFORE INCOME TAX EXPENSE7,345 33,909Income tax expense126 16,399NET INCOME7,219 17,510Net income attributable to non-controlling interests1,660 1,433Net income applicable to Gain Capital Holdings, Inc.$5,559 $16,077The following unaudited pro forma operating data is presented as if the acquisition of GAA, Top Third and Galvan had occurred on January 1, 2013. Theunaudited pro forma data does not include the impact of forecasted operating expense synergies.The unaudited pro forma data is provided for informational purposes only and may not necessarily be indicative of future results of operations or what theresults of operations would have been had the Company and the acquired companies operated as a combined entity for the periods presented.Unaudited pro forma income statement line items for the twelve months ended December 31, 2014 and December 31, 2013 were as follows (amounts inthousands):F-36Table of Contents For the Fiscal Year Ended December 31, 2014 2013REVENUE: Total non-interest revenue$376,362 $289,810Interest revenue1,435 856Interest expense599 156Total net interest revenue836 700Net revenue377,198 290,510EXPENSES: Depreciation and amortization6,626 8,407Purchased intangible amortization9,044 4,834Other expense items308,607 227,273Total operating expense324,277 240,514OPERATING PROFIT52,921 49,996Interest on long term borrowings(6,147) (1,232)Gain on extinguishment of debt— 2,000INCOME BEFORE INCOME TAX EXPENSE46,774 50,764Income tax expense19,316 18,750NET INCOME27,458 32,014Net income attributable to non-controlling interests1,308 691Net income applicable to Gain Capital Holdings, Inc.$26,150 $31,323The following unaudited pro forma operating data are presented as if the acquisition of GFT had occurred on January 1, 2012. The unaudited pro forma datadoes not include the impact of forecasted operating expense synergies.The unaudited pro forma data is provided for informational purposes only and may not necessarily be indicative of future results of operations or what theresults of operations would have been had the Company and GFT operated as a combined entity for the periods presented.Unaudited pro forma income statement line items for the twelve months ended December 31, 2013 and December 31, 2012, were as follows (amounts inthousands):F-37Table of Contents For the Fiscal Year Ended December 31, 2013 2012REVENUE: Total non-interest revenue$353,556 $248,592Interest revenue927 1,096Interest expense634 537Total net interest revenue293 559Net revenue353,849 249,151EXPENSES: Other expense items(1)299,945 261,679Depreciation and amortization11,527 7,958Purchased intangible amortization5,157 7,250Acquisition expense1,824 85Restructuring451 634Integration1,950 —Total expense320,854 277,606OPERATING PROFIT/(LOSSES)32,995 (28,455)Interest expense on long term borrowings1,232 444Gain on extinguishment of debt2,000 —INCOME BEFORE INCOME TAX EXPENSE/(BENEFIT)33,763 (28,899)Income tax expense16,106 (10,837)NET INCOME/(LOSS)$17,657 $(18,062)(1) Other expenses items for the year ended December 31, 2013, included a one-time, non-recurring expense of $5.1million relating to a GFT accrual for certain liabilities to third parties.RestructuringIn 2013, the Company incurred Restructuring expenses, which reflected the cost of reducing global headcount following the GFT acquisition. Additionalheadcount reductions in the third quarter of 2014 were designed to meet challenging market conditions in the first half of 2014 and to achieve greater costefficiency in general. The Company incurred $3.5 million of restructuring expenses for the twelve months ended December 31, 2015, which reflected the costof reducing global headcount following the City Index acquisition. These expenses are recorded under Restructuring expense in the Consolidated Statementsof Income and Comprehensive Income and the restructuring liability is recorded in Accrued compensation and benefits in the Consolidated Balance Sheets. (in thousands)Restructuring liability as of January 1, 2014$5842014 restructuring expenses2,334Payments made in 2014(2,543)Liability as of December 31, 20143752015 restructuring expenses3,482Payments made in 2015(3,358)Liability as of December 31, 2015$49912. NON-CONTROLLING INTERESTSNon-controlling interestsIn March 2014, the Company acquired controlling interests in GAA and Top Third. The Company purchased 55% of each entity, and the respective sellersmaintained a 45% interest in each entity. The 45% interests are redeemable at pricesF-38Table of Contentsdetermined by applying a contractually agreed upon formula to the respective acquired company's financial results. The Company owns immediatelyexercisable call options to purchase the remaining interests in each company. The minority owners hold put options, which become exercisable in 2017 orupon the occurrence of certain events, to compel the Company to purchase the remaining interests.The non-controlling interests are not classified as liabilities, because redemption is not mandatory or at fixed prices. They are not classified as equity becausetheir redemption is not exclusively in the Company's control. Therefore, the non-controlling interests are held in temporary equity in the ConsolidatedBalance Sheets.The non-controlling interests' carrying value is determined by the Company's purchase prices and the non-controlling interests' share of the Company'ssubsequent net income. This value is benchmarked against the redemption value of the sellers' put options. The carrying value is adjusted to the latter,provided that it does not fall below the initial carrying values, as determined by the Company's purchase price allocation. The Company has made a policyelection to reflect any changes caused by such an adjustment in retained earnings, rather than in current earnings.The table below reflects the non-controlling interests effects on the Company's financial statements: Redeemable non-controlling interestsDecember 31, 2013$—Non-controlling interests related to 2014 acquisitions8,394Adjustment to the redemption value of non-controlling interests2,107Net income attributable to non-controlling interests1,433Distributions to non-controlling interest holders(596)December 31, 2014$11,338Adjustment to the redemption value of non-controlling interests(308)Net income attributable to non-controlling interests1,660Distributions to non-controlling interest holders(1,644)December 31, 2015$11,04613. SHAREHOLDERS' EQUITYCommon Stock — At December 31, 2015 and 2014, the Company had authorized 120,000,000 and 60,000,000 shares of Common Stock, respectively, ofwhich 52,072,884 and 48,771,015 shares were issued and outstanding, respectively as of December 31, 2015, and 45,582,066 and 42,934,559 shares wereissued and outstanding, respectively as of December 31, 2014.Treasury Stock — As of December 31, 2015 and 2014, the Company had repurchased 3.3 million shares and 2.6 million shares, respectively, of outstandingCommon Stock for an aggregate cost of $21.8 million and $16.7 million, respectively, reducing the number of shares outstanding.Dividends — In February, May, July and November of 2015, 2014 and 2013, the Company announced the payment of a $0.05 quarterly dividend per share ofCommon Stock. The dividend payments announced in February, May, July and November were paid in March, June, September and December of each year,for an aggregate amount of $9.5 million, $8.1 million and $7.3 million respectively, which was applied against Retained Earnings. F-39Table of Contents14. CONVERTIBLE SENIOR NOTESConvertible Senior Notes due 2020On April 1, 2015, as part of the City Index acquisition consideration, the Company issued to the sellers $60.0 million aggregate principal amount of 4.125%Convertible Senior Notes maturing on April 1, 2020. These Convertible Senior Notes pay interest semi-annually on April 1 and October 1 at a rate of 4.125%per year, which commenced on October 1, 2015.Prior to the date that is six months immediately preceding the maturity date, the Convertible Notes will be convertible only upon the occurrence of specifiedevents set forth in the Note Indenture. Thereafter, until the close of business on the business day immediately preceding the maturity date, holders mayconvert their Convertible Notes at any time. The Company will settle conversions of the Convertible Notes by paying or delivering, as the case may be, cash,shares of Common Stock or a combination thereof, at its election. The conversion rate for the Convertible Notes will be equal to $1,000, divided by theinitial conversion price, rounded to the nearest 1/10,000th share of Common Stock. The initial conversion price will be equal to 125% of the arithmeticaverage of the daily volume-weighted average price for the Common Stock over the 20 consecutive trading day period ending on, and including, the tradingday immediately preceding the closing date; provided that the initial conversion price shall not exceed the greater of (i) $9.25 and (ii) the last reported saleprice of the Common Stock on the Closing Date; and shall not be less than $7.20. The conversion rate and the corresponding conversion price will be subjectto customary anti-dilution adjustments, as described in the Note Indenture, including, but not limited to, Common Stock splits, Common Stockcombinations, issuances of Common Stock as a dividend on the Common Stock, issuances of options rights, warrants or other securities of the Company as adividend on the Common Stock, payment by the Company of any cash dividend in excess of $0.05 per quarter per share of Common Stock, and above-market tender offers or exchange offers by the Company or its subsidiaries for the Common Stock. In addition, in certain circumstances, the Company may berequired to increase the conversion rate for any Convertible Notes converted in connection with a make-whole fundamental change as defined in the NoteIndenture.If the Company undergoes a fundamental change, holders may require the Company to repurchase for cash all or part of their Convertible Notes at a purchaseprice equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the date ofrepurchase.Prior to the date that is two years immediately preceding the maturity date, the Company will not have the right to redeem the Convertible Notes. During thetwo year period immediately preceding the maturity date, the Company may redeem for cash all, but not less than all, of the Convertible Notes if the lastreported sale price of the Common Stock equals or exceeds 130% of the conversion price for the Convertible Notes for at least 20 trading days, whether or notconsecutive, during the 30 consecutive trading day period ending on the trading day immediately preceding the date the Company delivers notice ofredemption. If the Company elects to redeem the Convertible Notes, holders may convert their Convertible Notes at any time prior to the close of business onthe business day immediately preceding the redemption date.The Indenture will contain events of default customary for convertible debt securities (with customary grace periods, as applicable) and will provide that,upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding ConvertibleNotes will become due and payable immediately without further action or notice. If any other type of event of default occurs and is continuing, then theholders of at least 25% in aggregate principal amount of the then outstanding Convertible Notes or the trustee may declare all of the outstanding ConvertibleNotes to be due and payable immediately.Convertible Senior Notes due 2018On November 27, 2013, the Company issued $80.0 million principal amount of 4.125% Convertible Senior Notes maturing on December 1, 2018. TheCompany received net proceeds of $77.9 million, after deducting the initial purchasers' discount. These Convertible Senior Notes pay interest semi-annuallyon June 1 and December 1 at a rate of 4.125% per year, which commenced on June 1, 2014.The Convertible Senior Notes will be convertible at an initial conversion rate of 83.33 shares of the Company's common stock per $1,000 principal amount,which is equivalent to an initial conversion price of approximately $12.00. In addition, following certain corporate transactions occurring prior to thematurity date, the Company will, in certain circumstances, increase the conversion rate for a holder electing to convert notes in connection with suchcorporate transaction. Upon conversion, theF-40Table of ContentsCompany will deliver cash up to the principal amount. With respect to any conversion value in excess of the principal amount, the Company will delivershares of its common stock, unless it elects to deliver cash in lieu of all or a portion of such shares.Holders may convert notes in integral multiples of $1,000 principal amount, at any time prior to the close of business on the business day immediatelypreceding June 1, 2018, but only in the following circumstances:•During any calendar quarter commencing after the calendar quarter ending on March 31, 2014 (and only during such quarter), the last reported saleprice of the Company’s common stock for each of at least 20 of the preceding 30 trading days, ending on and including the last trading day of thequarter exceeds 130% of the conversion price. These days need not be consecutive;•During the five consecutive business day period immediately after any five consecutive trading day period (such five consecutive trading dayperiod being referred to as the “measurement period”), in which the trading price (as defined in the offering memorandum) per $1,000 principalamount of the notes, as determined following a request by a holder of the notes in the manner described in the offering memorandum, for eachtrading day of the measurement period, was less than 98% of the product of the last reported sale price of the Company's common stock and theconversion rate on such trading day;•Upon the occurrence of specified corporate events (as described in the offering memorandum); or•If the Company has called the notes for redemption (as described in the offering memorandum).In addition, regardless of the foregoing circumstances, holders may convert their notes at any time on or after June 1, 2018 until the close of business on thebusiness day immediately preceding the maturity date.In addition, if the Company undergoes a fundamental change (as defined in the Note indenture), holders may, subject to certain conditions, require theCompany to repurchase their notes for cash at a price equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid interest.Under accounting guidance, an entity must separately account for the liability and equity components of a convertible debt instrument that may be settledentirely or partially in cash upon conversion. The separate accounting must reflect the issuer's economic interest cost. The fair value of the equity component,net of pro-rata initial purchasers’ discounts, is included in the additional paid-in capital section of stockholders' equity in the Company's ConsolidatedBalance Sheets. The principal amount of the Convertible Senior Notes is reduced by unamortized original issue discount, which reflects the ConvertibleSenior Notes fair value. At issuance, the equity component of the Convertible Senior Notes was valued at $27.9 million before pro-rata initial purchasers'commissions of $0.3 million and related additional costs of $0.1 million. The Convertible Senior Notes were valued at $117.1 million consisting of $140.0million of principal, net of $27.9 million allocated to equity, not including pro-rata initial purchasers' commissions of $1.8 million and additional relatedcosts of $0.4 million. The original issue discount will be amortized over the life of the Convertible Senior Notes due 2020 and 2018 using the effectiveinterest rate of 8.6% and 8.1%, respectively.Relevant accounting guidance requires entities to disclose the dilutive effects of convertible instruments. As of December 31, 2015 and 2014, the Company’scommon stock had not met the convertibility criteria noted in the offering memorandum. Therefore, the Convertible Senior Notes were not dilutive as ofDecember 31, 2015 and 2014.The balances of the liability and equity components as of December 31, 2015 and 2014, were as follows, with amounts in thousands:December 31, December 31,2015 2014Liability component - principal$140,000 $80,000Deferred bond discount18,004 11,633Liability component - net carrying value$121,996 $68,367 Additional paid in capital$27,920 $12,572Discount attributable to equity(412) (425)Equity component$27,508 $12,147F-41Table of ContentsInterest expense related to the Convertible Senior Notes, included in Interest expense on long-term borrowings in the Consolidated Statements of Income andComprehensive Income, was as follows, with amounts in thousands: For the Fiscal Year Ended December 31,2015 2014Interest expense - stated coupon rate$5,156 $3,300Interest expense - amortization of deferred bond discount and costs3,712 2,593Total interest expense - convertible note$8,868 $5,89315. SHARE BASED COMPENSATIONShare Based PaymentTotal share-based compensation cost recognized during 2015, 2014 and 2013 consisted of the following ($ in thousands:) For the Years Ended December 31, 2015 2014 2013Employee compensation and benefits3,680 3,452 2,975On September 30, 2015, the Company's board of directors adopted the GAIN Capital Holdings, Inc. 2015 Omnibus Incentive Compensation Plan, (the "2015Plan"), which became effective November 30, 2015.The 2015 Plan replaces the GAIN Capital Holdings, Inc. 2010 Omnibus Incentive Compensation Plan, (the “2010 Plan”). The 2015 Plan has available 8.7million shares (5.8 million to be issued pursuant to future awards and grants under the 2015 Plan, 2.7 million shares that are subject to outstanding grantsunder the 2010 Plan, and 0.2 million shares to be issued pursuant to the 2011 Employee Stock Purchase Plan) for awards to employees, nonemployeedirectors, consultants, and advisors in the form of incentive stock options ("ISO"), nonqualified stock options ("NQSO"), restricted stock awards ("RSA"),restricted stock units ("RSU"), stock appreciation rights and other stock-based awards. The "evergreen" provision that allowed the Company to authorizeadditional shares to be issued under the 2010 plan was removed from the 2015 Plan. Accordingly, the maximum number of shares that can be issued will befixed and cannot be increased in the future without shareholder approval.Under the 2015 Plan, the Compensation Committee of the Board of Directors (the "Compensation Committee") will determine the exercise price of theoptions granted and may grant options to purchase shares of the Company’s common stock in amounts as determined by the Compensation Committee. TheCompensation Committee may grant options that are intended to qualify as ISOs under Section 422 of the Internal Revenue Code, or NQSOs which are notintended to so qualify. ISOs may only be granted to employees. Anyone eligible to participate in the 2015 Plan may receive a grant of NQSQs. The exerciseprice of a stock option granted under the 2015 Plan cannot be less than the fair market value of a share of the Company’s common stock on the date theoption is granted. All options granted under the 2015 Plan expire ten years from the date of grant.Stock OptionsThe following table summarizes the stock option activity under all plans from January 1, 2015 through December 31, 2015 (in thousands, except per shareamounts): F-42Table of Contents Options Outstanding Weighted Weighted Average Number of Average Remaining Aggregate Options Exercise Price Life (Years) Intrinsic ValueOutstanding January 1, 2015 1,908 $4.83 3.30 Granted 137 9.51 6.40 Exercised (638) 3.74 1.86 Forfeited/Expired (49) 6.62 5.00 Outstanding December 31, 2015 1,358 $5.76 4.16 $3,544Vested and expected to vest options 1,340 $5.71 4.13 $3,525Exercisable, December 31, 2015 938 $5.17 3.83 $2,792 Fair market value of common stock at exercise date $5,869 Cost to exercise 2,388 Net value of stock options exercised $3,481 The following table summarizes information concerning outstanding and exercisable stock options as of December 31, 2015: Options Outstanding Options Exercisable Weighted Average Weighted Remaining Number of Weighted Number Average Contractual Options AverageExercise Price Outstanding Exercise Price Life (Years) Exercisable Exercise Price$3.83 481 $3.83 1.64 481 $3.83$4.40 238 4.40 4.22 90 $4.40$5.30 208 5.30 3.31 136 $5.30$8.02 210 8.02 2.29 210 $8.02$9.51 137 9.51 9.51 — $9.51$9.95 84 9.95 5.18 21 $9.95 1,358 $5.76 4.16 938 $5.17The weighted-average remaining contractual life for the 1.4 million outstanding options as of December 31, 2015, is approximately 4.16 years. There were0.9 million stock options exercisable as of December 31, 2015. The total intrinsic value of stock options exercised during 2015, 2014, and 2013 respectivelywere $3.5 million, $4.2 million and $4.7 million. During 2015, the Company had 0.3 million stock options vest. The Company received $2.4 million, $2.1million, and $2.5 million from stock option exercises in 2015, 2014, and 2013, respectively.In 2015, the Company granted 0.1 million options to employees. In 2014, the Company granted 0.1 million options to employees. In 2013, the Companygranted 0.5 million options to employees. The weighted average grant-date fair value of stock options granted in the years ended December 31, 2015, 2014,and 2013 was $3.43, $3.79, and $1.22, respectively.The Compensation Committee approved stock option grants with a fair market value estimated under a Black-Scholes option pricing valuation model usingthe following assumptions:F-43Table of Contents For the Fiscal Year Ended December 31, 2015 2014 2013Valuation Assumptions Risk-free rate1.47% 1.40% 0.80%Expected volatility49.08% 51.80% 48.80%Expected term (years)4.75 4.80 4.80Dividend yield2.1% 2.0% 4.9%The expected volatility was calculated on the basis of the volatility of the Company's common stock. The average risk free rate is based upon the risk free rateof the U.S. Treasury bond rate with a maturity commensurate with the expected term. The options granted during 2015 were granted on May 26, 2015.Restricted Stock Units and Restricted Stock AwardsThe 2015 Plan provides for the issuance of RSUs that are convertible on a 1:1 basis into shares of the Company’s common stock. The Company maintains arestricted stock unit account for each grantee. RSU grants typically vest over four years, with 25% vesting on each anniversary date of the grant. After theRSUs vest, the grantee shall receive payment in the form of cash, shares of the Company’s common stock, or a combination of the two, as determined by theCompany. Payment of cash and/issuance of shares shall be made upon the vesting date, upon a predetermined delivery date, upon a change in control of theCompany, or upon the employee leaving the Company. The Company has historically settled these awards through the issuance of common stock torecipients and intends to continue to do so. The Company may also issue performance grants, which vest immediately, but under which delivery of thecommon stock is deferred until a later date. RSUs are assigned the value of the Company’s common stock at date of grant issuance, and the grant date fairvalue is amortized over a four year period. During 2015, 2014 and 2013, 0.6 million, 0.5 million and 0.8 million RSUs, respectively, were granted toemployees and members of the Board of Directors.The 2015 Plan also provides for the issuance of restricted stock awards, or RSAs, which represent shares of the Company’s common stock subject to transferand other restrictions. The Company maintains a restricted stock award account for each grantee. Restrictions typically lapse over four years, with 25%vesting on each anniversary date of the grant. After the restrictions lapse, or upon a change in control of the Company, the grantee shall receive payment inthe form of cash, shares of the Company’s common stock, or a combination of the two, as determined by the Company. The Company has historically settledthese awards through the issuance of common stock to recipients and intends to continue to do so. The Company may also issue performance grants whichhave immediate vesting. There were no RSAs granted during 2015, 2014 or 2013.A summary of the status of the Company’s nonvested shares of RSUs and RSAs as of December 31, 2015 and changes during the year ended December 31,2015, is presented below (in thousands, except per share amounts): Weighted Average Weighted Average Number Grant Date Number Grant DateNon-Vested Sharesof RSUs Fair Value of RSAs Fair ValueNon-vested at January 1, 20151,073 $6.69 54 $7.31Granted601 9.42 — —Vested(387) 6.46 (53) 7.32Forfeited(104) 8.08 (1) 6.48Non-vested at December 31, 20151,183 $8.03 — $—As of December 31, 2015, there was $7.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangementsgranted under the 2010 Plan. The cost is expected to be recognized over a weighted-average period of approximately three years . The fair market value onthe grant date for RSUs and RSAs vested during the years ended December 31, 2015, 2014 and 2013 was $2.9 million, $4.3 million and $1.7 million,respectively. The total intrinsic value of the RSUs and RSAs that became unrestricted during the year ended December 31, 2015 was $4.2 million at the datethey became unrestricted. RSUs and RSAs that were vested during the year ended December 31, 2015, had a value at grant date ofF-44Table of Contents$2.9 million. The Company granted RSUs during the year ended December 31, 2015 which had a value of $5.7 million at grant date. The fair market value ofRSUs and RSAs at the date of grant during the year ended December 31, 2014 was $4.5 million. Employee Stock Purchase PlanThe 2011 Employee Stock Purchase Plan ("ESPP") was adopted by the Company’s Board of Directors on November 22, 2010. The ESPP became effective onJanuary 1, 2011. The ESPP permits eligible employees to purchase shares of the Company’s common stock at a 15% discount from the lesser of the fairmarket value per share of the Company’s common stock on the first day of the offering period or the fair market value of the Company’s common stock on theinterim purchase date through after-tax payroll deductions. The total number of shares reserved for issuance under the ESPP was initially 500,000. It isintended that the ESPP meet the requirements for an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. For the year endedDecember 31, 2015, 92,777 shares were issued under the plan. For the year ended December 31, 2014, 98,606 shares were issued under the ESPP. Thediscount on the ESPP of $0.1 million is recorded to Employee compensation and benefits on the Consolidated Statement of Income and ComprehensiveIncome.16. EARNINGS PER COMMON SHAREBasic and diluted earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding duringthe period. Diluted earnings per share includes the determinants of basic net income per share and, in addition, gives effect to the potential dilution thatwould occur if securities or other contracts to issue common stock were exercised, vested or converted into common stock, unless they are anti-dilutive.Diluted weighted average common shares include vested and unvested stock options, vested restricted stock units and vested restricted stock awards whichare to be delivered as soon as administratively practicable on or after December 31, 2015, unvested restricted stock units and unvested restricted stockawards. Approximately 0.4 million and 0.1 million stock options were excluded from the calculation of diluted earnings per share for the years endedDecember 31, 2015 and 2014, respectively, as they were anti-dilutive.Diluted earnings per share excludes any shares of Company common stock potentially issuable under the Company's convertible notes, which are discussedin Note 14. Based upon an assumed trading price of $13 for each share of the Company's common stock, and if the relevant conditions under the indenturesgoverning both 2018 and 2020 convertible senior notes were satisfied, there would be an additional 0.5 million and 1.5 million dilutive shares for the 2018and 2020 notes, respectively.The following table sets forth the computation of earnings per share (amounts in thousands except share and per share data): For the years ended December 31,2015 2014 2013Net income applicable to GAIN Capital Holdings, Inc.$10,279 $24,877 $28,107Adjustment(1)(2)308 (2,107) (154)Net income available to GAIN common shareholders$10,587 $22,770 $27,953Weighted average common shares outstanding: Basic weighted average common shares outstanding47,601,979 40,561,644 36,551,246Effect of dilutive securities: Stock options424,087 763,068 1,214,370 RSUs/RSAs352,985 1,890,183 1,867,262Diluted weighted average common shares outstanding48,379,051 43,214,895 39,632,878Earnings per common share Basic$0.22 $0.56 $0.76Diluted$0.22 $0.53 $0.71 (1)During the years ending December 31, 2015 and 2014, the Company concluded that the carrying value of the Company's redeemable non-controllinginterests was less than its redemption value. The adjustment to increase carrying value reduces earnings available to the Company's shareholders.(2)During the year ending December 31, 2013, an adjustment to retained earnings was made, reflecting the amounts deemed uncollectible associatedwith previously issued preferred stock, which was converted to common stock immediately prior to the Company's IPO in 2010.F-45Table of Contents17. LEGALFrom time to time the Company becomes involved in legal proceedings and in each case the Company assesses the likely liability and/or the amount ofdamages as appropriate. Where available information indicates that it is probable a liability had been incurred at the date of the consolidated financialstatements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income. In manyproceedings, however, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the amount of any loss. Inaddition, even where loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized losscontingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss.For certain legal proceedings, the Company can estimate possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amountsaccrued. For certain other legal proceedings, the Company cannot reasonably estimate such losses, if any, since the Company cannot predict if, how or whensuch proceedings will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings that are in theirearly stages of development or where plaintiffs seek substantial or indeterminate damages. Numerous issues must be developed, including the need todiscover and determine important factual matters and the need to address novel or unsettled legal questions relevant to the proceedings in question, before aloss or additional loss or range of loss or additional loss can be reasonably estimated for any proceeding.LitigationOn February 16, 2012, the Company received a Letter of Claim on behalf of certain individuals who had lost money in an investment scheme operated by athird-party money management firm, incorporated in the United Kingdom, which has since been closed down by the United Kingdom’s Financial ServicesAuthority. The investment firm, Cameron Farley Ltd, had opened a corporate account with the Company and invested the individuals’ money, representingsuch funds as its own, while operating a fraudulent scheme. Though a complaint has been filed and served on the Company, the claimants requested, and theCompany agreed, to follow the United Kingdom’s Pre-Action Protocol, a pre-litigation process intended to resolve matters without the need to engage informal litigation. The Company submitted a Response to the Letter before Claim on July 4, 2012. On July 5, 2012 the Company received a substantiallysimilar Letter of Claim on behalf of further individuals. Subsequently, the parties agreed to consolidate claims by those other similarly situated individualswith the pending Pre-Action Protocol process. The parties agreed it would be more appropriate for the proceedings to be dealt with in the Commercial Courtand the matters were transferred pursuant to Consent Orders dated March 14, 2013. The Company subsequently filed an application for strike out and/orsummary judgment in respect of all claims on March 15, 2013. The claimants filed an answer to the Company's motion on June 2, 2013 and subsequently theCompany filed a response to this answer on July 15, 2013. A hearing was held on the Company's application for strike out and/or summary judgment onSeptember 18 and 19, 2013. After the hearing, the judge asked the claimants to respond in writing to his additional questions from the hearing. Theclaimants had until October 11, 2013 to provide answers and the Company was given until November 1, 2013 to respond. On February 26, 2014, the judgedenied the Company's motion for strike out and/or summary judgment. Case management conferences were held by the Court on October 17, 2014 and June18, 2015. On August 3, 2015, the claimants filed an Amended Master Particulars of Claim, and on October 6, 2015, the Company filed an Amended Defense.The parties have completed discovery and provided disclosure on October 30, 2015. The current Court timetable provides for a trial date in the first quarter of2017. The Company can provide no assurances that this matter will be successfully resolved. As of the date of this report, a potential loss or a potential rangeof loss cannot be reasonably estimated.Through the Company's acquisition of Open E Cry ("OEC"), the Company became the subject of a patent infringement lawsuit originally filed against OECon February 9, 2010 in the U.S. District Court for the Northern District of Illinois by Trading Technologies International, Inc. ("Trading Technologies")seeking injunctive relief and unspecified damages. As reflected in a Second Amended Complaint filed on June 15, 2011, plaintiff alleged infringement of 12patents relating to real-time display of price quotes and market depth on OEC's electronic trading interfaces. The case was consolidated with 11 related casesin February 2011, and the parties have exchanged infringement, non-infringement and invalidity contentions for several of the disputed patents. On May 6,2015, the Company entered into a settlement and license agreement with Trading Technologies pursuant to which the Company made a one-time royaltypayment to Trading Technologies in exchange for a volume-based license for the disputed patents. The Company was fully indemnified for the amount of theroyalty payment by the former owner of OEC and therefore the Company incurred no net expense. The lawsuit was dismissed on May 6, 2015.18. COMMITMENTS AND CONTINGENCIESLeases & Purchase Obligations — The Company leases office space under non-cancelable operating lease agreements that expire on various dates through2025. Such leases do not require any contingent rental payments or impose any financialF-46Table of Contentsrestrictions. Certain of the Company's leases include renewal options and escalation clauses. In addition, the Company has certain non-cancelable purchaseobligations for its operational needs. Future annual minimum lease payments for the Company's non-cancellable operating leases and purchase obligationsare as follows (amounts in thousands):Years Ended December 31:2016$21,36920176,71620185,07720194,4782020 and beyond15,937Total$53,577Rent expense, which is recorded on a straight-line basis, was $3.7 million, $5.1 million, and $3.7 million for the years ended December 31, 2015, 2014 and2013, respectively.19. INCOME TAXESThe following table presents the U.S. and non-U.S. components of income before income tax (benefit) / expense for the years ended December 31, 2015,2014, and 2013 (amounts in thousands): For the Fiscal Year Ended December 31, 2015 2014 2013U.S.$(39,761) $17,439 $18,546Non-U.S.48,188 28,011 26,944Total income before tax (benefit) / expense$8,427 $45,450 $45,490Income tax (benefit) / expense consisted of (amounts in thousands): For the Fiscal Year Ended December 31, 2015 2014 2013Current Federal$1,136 $8,658 $15,201State172 (199) 321UK7,239 5,322 7,275Japan127 173 14Other non-U.S.169 78 3Total current income tax expense8,843 14,032 22,814Deferred Federal(9,889) 4,966 (5,883)State(1,375) (99) 205UK(337) (122) —Japan(148) 159 121Other non-U.S.(545) 20 (316)Change in valuation allowance(61) 184 442Total deferred tax (benefit) / expense(12,355) 5,108 (5,431)Total income tax (benefit) / expense$(3,512) $19,140 $17,383Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities and aremeasured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. The Company’s net deferred tax assets areincluded in Other assets on the Consolidated Balance Sheets. The netF-47Table of Contentschange in valuation allowance for the year ended December 31, 2015 was $0.2 million. Significant components of the Company’s deferred tax assets andliabilities were as follows (amounts in thousands): December 31, 2015 2014Deferred tax assets Foreign net operating losses$13,286 $1,909Unrealized trading losses— 1,293Stock-based compensation expense1,437 1,474Intangible assets3,012 6,698Basis difference in property and equipment4,950 —Other2,962 2,126Total deferred tax assets25,647 13,500Valuation allowance(853) (913)Total deferred tax assets after valuation allowance$24,794 $12,587 Deferred tax liabilities Basis difference in property and equipment$— $(1,717)Discount on convertible note(6,186) (3,778)Other(781) (784)Total deferred liabilities(6,967) (6,279)Net deferred tax assets$17,827 $6,308The Company has $62.4 million in foreign net operating loss (“NOL”) carry forwards as of December 31, 2015. These NOLs begin to expire in 2019. TheCompany has a deferred tax asset of $13.3 million relating to these NOLs for which it has established a valuation allowance of $0.9 million.The following table reconciles the effective tax rate to the U.S. federal statutory income tax rate: 2015 2014 2013Federal income tax at statutory rate35.00 % 35.00 % 35.00 %Increase/(decrease) in effective tax rate resulting from: State income tax(9.25)% (0.57)% 0.76 %Foreign rate differential(96.96)% (9.71)% (5.22)%Deemed dividends55.30 % — % — %Non deductible transaction costs11.71 % 1.42 % — %Impact of non-controlling interests(6.89)% (1.10)% — %Contingent liability(27.92)% — % — %Foreign losses(19.20)% — % — %162 (m)3.44 % — % — %GFT Carryback(6.58)% — % — %Uncertain tax positions19.67 % 14.04 % 5.88 %Other permanent differences— % 3.03 % 1.79 %Effective Tax Rate(41.68)% 42.11 % 38.21 %In 2015 the Company had a number of discrete tax items that impacted its effective tax rate:•The Company had outstanding intercompany balances between U.S. and non-U.S. entities, which resulted in a taxable deemed dividend of $37.2million. This is represented by the deemed dividend adjustment in the table above.F-48Table of Contents•The Company adjusted the fair value of contingent consideration relating to the Galvan acquisition. This resulted in non-taxable earnings of $6.7million. This is represented by the contingent liability adjustment in the table above.•The Company received a favorable tax ruling on the utilization of historic foreign operating losses and was able to record a deferred tax asset of $1.6million. This is represented by the foreign losses adjustment in the table above.At December 31, 2015, the Company had approximately $100.0 million held in earnings of its foreign subsidiaries. The Company has made provision forU.S. taxes that would arise on distribution if $48.3 million of these earnings were repatriated to the United States. The remaining earnings are indefinitelyinvested outside the United States and are expected to be reinvested in the working capital and other business needs of the foreign subsidiaries. If theremaining earnings had been repatriated into the United States as of December 31, 2015, in the form of dividends or otherwise, the Company would havebeen subject to additional income taxes of approximately $9.8 million.The Company has recorded a liability of $11.8 million related to uncertain tax positions at December 31, 2015 in accordance with ASC 740-10, IncomeTaxes. This liability is recorded in Accrued expenses and other liabilities on the Consolidated Balance Sheet.The following table summarizes the activity to the gross unrecognized tax benefits from uncertain tax positions (amounts in thousands):As of December 31,2015 2014 2013Beginning balance as of January 1$10,517 $8,345 $78Increases based on tax positions related to the current period885 2,197 8,287Increases based on tax positions related to prior periods429 — —Decreases related to a lapse of applicable statute of limitations(30) (25) (20)Ending balance as of December 31$11,801 $10,517 $8,345Included in the balance of unrecognised tax benefits as of December 31, 2015, December 31, 2014 and December 31, 2013 are $11.8 million, $10.5 millionand $8.3 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. The Company’s open tax years range from 2013 through2015 for its U.S. federal returns, from 2012 through 2015 for the U.K., from March 2015 through March 2016 for Japan and from 2011 through 2015 for itsmajor state jurisdictions. It is reasonably possible that the amount of liability for unrecognized tax benefits could change during the next 12 months. Anestimate of the range of the possible change cannot be made until issues are further developed or examinations closed.In addition to the total unrecognized tax benefits noted above, the Company recorded $1.8 million and $2.3 million of penalties and interest for the yearsended December 31, 2015 and December 31, 2014, respectively. These amounts are recorded in Income tax (benefit) / expense in the Consolidated Statementsof Income and are part of the uncertain tax positions impact when reconciling the federal income tax rate to the Company's effective tax rate.20. RETIREMENT PLANSThe Company sponsors a “Safe Harbor” 401(k) retirement plan which was put into effect as of January 1, 2011. The plan provides for a 100% match by theCompany on the first 3% of the employee’s salary contributed to the plan and 50% on the next 2% with immediate vesting on all employer contributions,subject to IRS limitations. Substantially all of the Company’s employees are eligible to participate in the plan.The expense recorded to employee compensation and benefits on the Consolidated Statements of Income and Comprehensive Income by the Company for itsemployees’ participation in the respective plans during the years ended December 31, 2015, 2014 and 2013 was $0.9 million, $1.3 million, and $0.9 million,respectively.21. REGULATORY REQUIREMENTSF-49Table of ContentsGroup, LLC, the Company’s FCM and RFED subsidiary, is subject to the CFTC Net Capital Rule (Rule 1.17) and NFA Financial Requirements Sections 11and 12. Under applicable provisions of these regulations, Gain Capital Group, LLC is required to maintain adjusted net capital of the greater of $2.5 millionor 8% of Customer and Non-Customer Maintenance Margin or $20.0 million plus 5.0% of all liabilities owed to retail customers exceeding $10.0 million. AtDecember 31, 2015, Group LLC maintained $10.2 million more than the required minimum regulatory capital for a total of 1.4 times the required capital andat all times maintained compliance with all applicable regulations.GAIN Capital Securities, Inc. ("GCSI") is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934, as amended. GCSI is a memberof the Financial Industry Regulatory Authority (“FINRA”), Municipal Securities Rulemaking Board (“MSRB”), and Securities Investor ProtectionCorporation (“SIPC”). Pursuant to the SEC’s Uniform Net Capital Rule 15c3-1, GCSI is required to maintain a minimum net capital balance (as defined) of$0.05 million. GCSI must also maintain a ratio of aggregate indebtedness (as defined) to net capital of not more than 15 to 1. At December 31, 2015, GCSImaintained $0.3 million more than the minimum required regulatory capital for a total of 4.0 times the required capital and at all times maintainedcompliance with all applicable regulations.GCUK1 is registered in the U.K. and regulated by the FCA as a full scope €730k IFPRU Investment Firm. GCUK1 is required to maintain the greater of $1.0million (€730,000) or the Financial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration,market and forex risk. At December 31, 2015, GCUK1 maintained $33.8 million more than the minimum required regulatory capital for a total of 2.2 timesthe required capital and at all times maintained compliance with all applicable regulations.GCUK2 is registered in the U.K. and regulated by the FCA as a full scope €730k IFPRU Investment Firm. GCUK2 is required to maintain the greater of $1.0million (€730,000) or the Financial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration,market and forex risk. At December 31, 2015, GCUK2 maintained $73.4 million more than the minimum required regulatory capital for a total of 2.3 timesthe required capital and at all times maintained compliance with all applicable regulations.Forex.com Japan Co., Ltd. (“GC Japan”) is a registered Type I financial instruments business firm regulated by the Japan Financial Services Agency ("FSA")in accordance with Financial Instruments and Exchange Law (Law No. 25 of 1948, as amended). GC Japan is a member of the Financial Futures Associationof Japan. GC Japan is subject to a minimum capital adequacy ratio of 120%, which is derived by dividing Net Capital (as defined in Law No. 25) by the sumof GC Japan’s market, counterparty credit risk and operational risk. At December 31, 2015, GC Japan maintained $8.7 million more than the minimumrequired regulatory capital for a total of 10.7 times the required capital and at all times maintained compliance with all applicable regulations.GCAU1 is regulated under the laws of Australia, including the Corporations Act 2001 (Commonwealth of Australia). The Australian Securities andInvestments Commission ("ASIC) is the corporate, markets and financial services regulator in Australia responsible for administering aspects of theCorporations Act 2001. GCAU1 holds an Australian Financial Services License that has been issued by ASIC. GCAU1 is required to maintain a minimumcapital requirement of $0.7 million (1.0 million AUD). The regulatory capital held is required to be in excess of 110% of its requirements at all times. AtDecember 31, 2015, GCAU1 maintained $1.7 million more than the minimum required regulatory capital for a total of 3.4 times the required capital and at alltimes maintained compliance with all applicable regulations.Effective January 31, 2014, ASIC increased the Net Tangible Assets (NTA) requirement, as part of RG166: Licensing: Financial Requirements, for OTCderivative issuers. ASIC requires retail OTC derivative issuers to have at all times the greater of $0.8 million or 10% of average revenue on hand at all times. RG166 outlines that, at the minimum, 50% of the NTA requirement is required to be held in cash or cash equivalents and 50% in liquid assets. OTCderivative issuers must report to ASIC if their NTA falls below 110% of the requirement within 3 business days after becoming aware of the event. GCAU2 is regulated under the laws of Australia, including the Corporations Act 2001 (Commonwealth of Australia). GCAU2 holds an Australian FinancialServices License that has been issued by ASIC. GCAU2 is required to maintain a minimum capital requirement of $0.7 million (1.0 million AUD). Theregulatory capital held is required to be in excess of 110% of its requirements at all times. At December 31, 2015, GCAU2 maintained $2.1 million more thanthe minimum required regulatory capital for a total of 4.0 times the required capital and at all times maintained compliance with all applicable regulations.GCHK is licensed by the Securities and Futures Commission (“SFC”) to carry out Type 3 Regulated Activity, Leveraged Foreign Exchange Trading. GCHK issubject to the requirements of section 145 of the Securities and Futures Ordinance (Cap.571). Under this rule, GCHK is required to maintain a minimumliquid capital requirement of the higher of $1.9 millionF-50Table of Contentsor the sum of 1.5% of its aggregate gross foreign currency position and 5% of its adjusted liabilities and clients’ margin calculated in accordance withapplicable rules. At December 31, 2015, GCHK maintained $2.0 million more than the minimum required regulatory capital for a total of 2.1 times therequired capital and at all times maintained compliance with all applicable regulations.GAIN Global Markets, Inc. (“GGMI”), the Company’s Cayman Island subsidiary, is a registered securities arranger with the Cayman Islands MonetaryAuthority (“CIMA”). GGMI is required to maintain a capital level that is the greater of one quarter of relevant annual expenditure, or the financial resourcesrequirement which is the sum of the Base Requirement, counterparty and position risk requirement, or $0.1 million. At December 31, 2015, GGMI maintained$0.1 million more than the minimum required regulatory capital for a total of 1.5 times the required capital and at all times maintained compliance with allapplicable regulations. GAIN Capital - Forex.com Canada, Ltd. ("GCCA") is a Dealer Member of the Investment Industry Regulatory Organization of Canada ("IIROC) and regulatedunder the laws of Canada, including the Canadian Investor Protection Fund. In Canada, the securities industry is governed by provincial or territoriallegislation, and there is no national regulator. Local legislation differs from province to province and territory to territory, but generally requires that forexdealing representatives register with applicable regulators and self-regulatory organizations in order to offer forex and/or CFD products to retail clients.GCCA’s principal provincial regulator is the Ontario Securities Commission, or OSC. GCCA is required to maintain risk-adjusted capital in excess of theminimum capital requirement. At December 31, 2015, GCCA maintained $1.2 million more than the minimum required regulatory capital for a total of 7.0times the required capital and at all times maintained compliance with all applicable regulations.GCS is registered by the Monetary Authority of Singapore (“MAS”) and operates as an approved holder of Capital Market Services License. GCS is subject tothe requirements of MAS and pursuant to the Securities and Futures Act (Cap 289). Under these rules GCS is required to maintain a minimum base capital of$0.6 million (1.0 million SGD) and Financial Resources in excess of 120% of the total risk requirements, which is calculated as the sum of operational,counterparty, large exposure and forex risk at all times. At December 31, 2015, GCS maintained $6.8 million more than the required minimum regulatorycapital for a total of 12.3 times the required capital and at all times maintained compliance with all applicable regulations.Galvan is registered in the U.K. and regulated by the FCA as a BIPRU Limited Licence Firm. Galvan is required to maintain a base financial resourcesrequirement of $0.1 million (€0.05 million) and a capital requirement of the higher of either credit risk plus market risk or fixed overhead requirement. AtDecember 31, 2015, Galvan maintained $3.6 million more than the minimum required regulatory capital for a total of 6.1 times the required capital and at alltimes maintained compliance with all applicable regulations.GAA is a registered Introducing Broker and is subject to the CFTC Net Capital Rule (Rule 1.17). Under applicable provisions of these rules, GAA is requiredto maintain adjusted net capital of $0.1 million. At December 31, 2015, GAA maintained $1.1 million more than the minimum required regulatory capital fora total of 12.0 times the required capital and at all times maintained compliance with all applicable regulations.The following table illustrates the minimum regulatory capital our subsidiaries were required to maintain as of December 31, 2015 and the actual amounts ofcapital that were maintained (amounts in millions): F-51Table of ContentsEntity NameMinimumRegulatoryCapitalRequirements CapitalLevelsMaintained ExcessNetCapital Percent ofRequirementMaintainedGAIN Capital Group, LLC$26.1 $36.3 $10.2 139%GAIN Capital Forex.com U.K., Ltd.27.8 61.6 33.8 222%Forex.com Japan., Ltd.0.9 9.6 8.7 1,067%GAIN Capital-Forex.com Hong Kong, Ltd.1.9 3.9 2.0 205%GAIN Capital Forex.com Australia, Pty. Ltd.0.7 2.4 1.7 343%Galvan Research and Trading, Ltd.0.7 4.3 3.6 614%GAIN Capital-Forex.com Canada Ltd.0.2 1.4 1.2 700%GAIN Capital Securities, Inc.0.1 0.4 0.3 400%GAIN Global Markets, Inc.0.2 0.3 0.1 150%GAIN Capital UK, Ltd.54.5 127.9 73.4 235%GAIN Capital Singapore Pte, Ltd.0.6 7.4 6.8 1,233%GAIN Capital Australia Pty Ltd.0.7 2.8 2.1 400%Global Assets Advisors, LLC0.1 1.2 1.1 1,200%Total$114.5 $259.5 $145.0 227%22. SEGMENT INFORMATIONASC 280, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments.Operating segments are defined as components of an enterprise which engage in business activities from which they may earn revenues and incur expensesand about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision making group, indeciding how to allocate resources and in assessing performance. Reportable segments are defined as an operating segment that either (a) exceeds 10% ofrevenue, or (b) reported profit or loss in absolute amount exceeds 10% of profit of all operating segments that did not report a loss or (c) exceeds 10% of thecombined assets of all operating segments. The Company’s operations relate to global trading services and solutions.During the fourth quarter of 2015, the Company changed its internal reporting structure and the information provided to its chief operating decision maker.As a result the Company has changed its segment reporting structure to include three operating segments, retail, institutional and futures, rather than a singleoperating segment as had been previously reported. These operating segments are discussed in more detail below. The Company also reports informationrelating to general corporate services in a fourth component, corporate and other. Information in these consolidated financial statements reflects theinformation presented to the chief operating decision maker, and prior periods have been retrospectively adjusted to reflect the current segment structure. Thechief operating decision maker does not review total assets by operating segment.Retail SegmentBusiness in the retail segment is conducted primarily through the Company's FOREX.com and City Index brands. The Company provides its retail customersaround the world with access to a diverse range of 12,500 global financial markets, including spot forex, precious metals and CFDs on commodities, indices,individual equities and interest rate products, as well as OTC options on forex. In the United Kingdom, the Company also offer spread bets, which areinvestment products similar to CFDs, but that offer more favorable tax treatment to residents of that country.Institutional SegmentThe institutional segment provides agency execution services and offers access to markets and self-directed trading in foreign exchange, commodities,equities, options and futures via an electronic communications network, or ECN, through the Company's GTX platform. The Company also offers high touchsales and trading aided by a team of sales employees.Futures SegmentF-52Table of ContentsThe futures segment offers execution and related services for exchange-traded futures and futures options on major U.S. and European exchanges. TheCompany offers futures services through its subsidiary, GAIN Capital Group, LLC, under the GAIN Capital Futures brand. In addition, in 2014, the Companyexpanded its futures business by acquiring majority interests in GAA and TT.Corporate and otherCorporate and other provides general corporate services to the Company's segments and also includes eliminations between operating segments which were$(1.3) million, $(0.9) million and $(0.9) million for the twelve months ended December 31, 2015, 2014 and 2013. Corporate and other revenue primarilycomprises foreign currency transaction gains and losses. During the twelve months ended December 31, 2015, corporate and other revenue also included a$6.7 million adjustment to the contingent consideration related to the Galvan acquisition.Selected financial information by segment is presented in the following tables (amounts in thousands):F-53Table of ContentsRetail Year Ended December 31,2015 2014 2013Net revenue$351,472 $296,941 $218,848 Employee compensation and benefits67,515 61,989 44,924Selling and marketing26,129 19,574 21,761Referral fees87,175 78,553 41,459Other operating expenses76,301 51,561 33,148Segment profit$94,352 $85,264 $77,556 Institutional Year Ended December 31,2015 2014 2013Net revenue$35,072 $35,413 $29,213 Employee compensation and benefits15,305 13,963 13,006Selling and marketing138 120 244Referral fees— — —Other operating expenses9,573 10,939 8,170Segment profit$10,056 $10,391 $7,793 Futures Year Ended December 31, 2015 2014 2013Net revenue$45,797 36,016 23,360 Employee compensation and benefits10,634 8,918 3,399Selling and marketing901 519 332Referral fees16,348 12,419 11,164Other operating expenses13,960 11,585 8,948Segment profit$3,954 $2,575 $(483) Corporate and Other Year Ended December 31, 2015 2014 2013Other revenue$(3,716) $819 $(3,729) Employee compensation and benefits13,127 14,362 13,279Selling and marketing— — —Referral fees— — —Other operating expenses11,038 10,001 7,272Loss$(27,881) $(23,544) $(24,280)F-54Table of ContentsReconciliation of operating segment profit / (loss) to Income before income tax (benefit) / expense For the Fiscal Year Ended December 31, 2015 2014 2013Retail segment$94,352 $85,264 $77,556Institutional segment10,056 10,391 7,793Futures segment3,954 2,575 (483)Corporate and other(27,881) (23,544) (24,280)SEGMENT PROFIT80,481 74,686 60,586Depreciation and amortization11,111 6,610 8,283Purchased intangible amortization16,550 8,080 2,906Acquisition expenses2,819 3,526 1,824Restructuring expenses3,482 2,334 450Integration expenses33,092 2,489 1,950Impairment of investment— 50 450Change in fair value to contingent consideration(6,722) — —SNB bad debt provision2,500 — —OPERATING PROFIT17,649 51,597 44,723Interest expense on long term borrowings9,222 6,147 1,233Gain on extinguishment of debt— — 2,000INCOME BEFORE INCOME TAX EXPENSE$8,427 $45,450 $45,490Net revenue (loss) by geographic area for the years ended December 31, 2015, 2014 and 2013 is as follows ($ in thousands): 2015 2014 2013Net Revenue(1): North America(2)$107,534 $133,103 $153,449Europe(3)307,087 237,391 33,347Other20,726 (1,305) 80,895Total Net Revenue$435,347 $369,189 $267,691(1) - Net revenue is attributed to individual countries based on the jurisdiction of the formation of the reporting entity that records the transaction(2) - Includes U.S. net revenue of $107.5 million, $133.1 million, and $153.5 million for 2015, 2014, and 2013 respectively.(3) - Includes UK net revenue of $307.3 million and $237.7 million, and $33.3 million for 2015, 2014, and 2013 respectively.Long-lived assets by geographic area as of December 31, 2015, 2014 and 2013 are as follows (in thousands): 2015 2014Long-lived assets(1): North America(2)6,370 16,729Europe(3)23,147 1,820Other850 247Total long-lived assets30,367 18,796(1) - Long-lived assets are comprised of property, plant and equipment, net. They exclude goodwill, other intangible assets and other assets, which are not attributable to any onegeographic location.(2) - Includes U.S. long-lived assets of $6.4 million, $16.7 million for 2015 and 2014, respectively.(3) - Includes UK long-lived assets of $23.1 million, $1.7 million for 2015 and 2014, respectively.F-55Table of Contents23. QUARTERLY FINANCIAL DATA (UNAUDITED)As discussed above, the information for the second, third and fourth quarters of 2015 and each quarter of 2014 has been restated to correct certain errorsrelating to the manner in which the Company originally presented the allocation of the effects of the Company's previously announced restatement of itsconsolidated financial statements as of and for the years ended December 31, 2014 and 2013. The errors in the quarterly financial data previously presentedin this Note 23 had no impact on our full year financial results. The following table sets forth selected restated quarterly financial data for 2015 and 2014 (inthousands, except per share data): First Second Third Fourth Quarter Quarter Quarter QuarterFor the Year Ended December 31, 2015 (As Restated) Total non-interest revenue$92,967 $111,452 $128,045 $102,712Net revenue$92,986 $111,457 $128,111 $102,793Income/(loss) before income tax expense$11,554 $(12,741) $9,418 $196Income tax (benefit)/expense$5,745 $(6,039) $7,862 $(11,080)Net income/(loss)$5,809 $(6,702) $1,556 $11,276Net income attributable to non-controlling interest$344 $416 $583 $317Net income/(loss) applicable to GAIN Capital Holdings, Inc.$5,465 $(7,118) $973 $10,959Basic net income/(loss) per share$0.11 $(0.16) $0.05 $0.23Diluted net income/(loss) per share$0.11 $(0.16) $0.05 $0.23 For the Year Ended December 31, 2014 (As Restated) Total non-interest revenue$80,412 $70,005 $102,786 $115,157Net revenue$80,722 $70,264 $102,956 $115,247Income/(loss) before income tax expense$3,833$(6,421)$20,887$27,151Income tax (benefit)/expense$2,787 $(1,926) $9,206 $9,073Net income/(loss)$1,046$(4,495)$11,681$18,078Net income attributable to non-controlling interest$38 $164 $785 $446Net income/(loss) applicable to GAIN Capital Holdings, Inc.$1,008 $(4,659) $10,896 $17,632Basic net income/(loss) per share$0.02 $(0.12) $0.22 $0.42Diluted net income/(loss) per share$0.02 $(0.12) $0.21 $0.40As discussed in Note 2 to our audited consolidated financial statements under the heading "Restatement," the Company has restated its consolidatedfinancial statements as of December 31, 2014, and for the years ending December 31, 2014 and 2013. The following table sets forth the impact of therestatement on the quarterly financial data for the interim periods in 2015 and 2014: As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended September 30, 2015 Total non-interest revenue$127,865 $— $180 $128,045Net revenue$127,931 $— $180 $128,111Income/(loss) before income tax expense$9,215 $— $203 $9,418Income tax (benefit)/expense$328 $7,534 $— $7,862Net income/(loss)$8,887 $(7,534) $203 $1,556Net income/(loss) applicable to GAIN Capital Holdings, Inc.$8,304 $(7,534) $203 $973Basic net income/(loss)per share$0.20 $0.05Diluted net income/(loss) per share$0.20 $0.05F-56Table of Contents As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended June 30, 2015 Total non-interest revenue$111,559 $— $(107) $111,452Net revenue$111,564 $— $(107) $111,457Income/(loss) before income tax expense$(12,538) $— $(203) $(12,741)Income tax (benefit)/expense$(4,124) $(1,915) $— $(6,039)Net income/(loss)$(8,414) $1,915 $(203) $(6,702)Net income/(loss) applicable to GAIN Capital Holdings, Inc.$(8,830) $1,915 $(203) $(7,118)Basic net income/(loss)per share$(0.23) $(0.16)Diluted net income/(loss) per share$(0.23) $(0.16) As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended March 31, 2015 Total non-interest revenue$92,933 $— $34 $92,967Net revenue$92,952 $— $34 $92,986Income/(loss) before income tax expense$11,498 $— $56 $11,554Income tax (benefit)/expense$2,818 $2,927 $— $5,745Net income/(loss)$8,680 $(2,927) $56 $5,809Net income/(loss) applicable to GAIN Capital Holdings, Inc.$8,336 $(2,927) $56 $5,465Basic net income/(loss)per share$0.19 $0.11Diluted net income/(loss) per share$0.18 $0.11 As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended December 31, 2014 Total non-interest revenue$114,725 $— $432 $115,157Net revenue$114,723 $— $524 $115,247Income/(loss) before income tax expense$26,456 $— $695 $27,151Income tax (benefit)/expense$8,398 $728 $(53) $9,073Net income/(loss)$18,058 $(728) $748 $18,078Net income/(loss) applicable to GAIN Capital Holdings, Inc.$17,612 $(728) $748 $17,632Basic net income/(loss)per share$0.44 $0.42Diluted net income/(loss) per share$0.42 $0.40F-57Table of Contents As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended September 30, 2014 Total non-interest revenue$103,388 $— $(602) $102,786Net revenue$103,650 $— $(694) $102,956Income/(loss) before income tax expense$21,470 $— $(583) $20,887Income tax (benefit)/expense$5,340 $3,866 $— $9,206Net income/(loss)$16,130 $(3,866) $(583) $11,681Net income/(loss) applicable to GAIN Capital Holdings, Inc.$15,345 $(3,866) $(583) $10,896Basic net income/(loss)per share$0.35 $0.22Diluted net income/(loss) per share$0.33 $0.21 As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended June 30, 2014 Total non-interest revenue$69,504 $— $501 $70,005Net revenue$69,763 $— $501 $70,264Income/(loss) before income tax expense$(7,013) $— $592 $(6,421)Income tax (benefit)/expense$(2,021) $95 $— $(1,926)Net income/(loss)$(4,992) $(95) $592 $(4,495)Net income/(loss) applicable to GAIN Capital Holdings, Inc.$(5,156) $(95) $592 $(4,659)Basic net income/(loss)per share$(0.13) $(0.12)Diluted net income/(loss) per share$(0.13) $(0.12) As Reported Tax Adjustments Other Adjustments As RestatedFor the three months ended March 31, 2014 Total non-interest revenue$81,087 $— $(675) $80,412Net revenue$81,397 $— $(675) $80,722Income/(loss) before income tax expense$5,139 $— $(1,306) $3,833Income tax (benefit)/expense$1,276 $1,511 $— $2,787Net income/(loss)$3,863 $(1,511) $(1,306) $1,046Net income/(loss) applicable to GAIN Capital Holdings, Inc.$3,825 $(1,511) $(1,306) $1,008Basic net income/(loss)per share$0.10 $0.02Diluted net income/(loss) per share$0.09 $0.0224. SUBSEQUENT EVENTSIn March 2016, the Company announced the payment of a $0.05 dividend per share of Common Stock payable on March 29, 2016 to stockholders of recordon March 25, 2016.F-58Table of ContentsGAIN CAPITAL HOLDINGS, INC.(Parent Company Only)Condensed Balance Sheets(in thousands, except share data)As of December 31,2015 2014(As Restated)ASSETS:Cash and cash equivalents$451 $1,184Equity investments in subsidiaries447,732 380,110Receivables from affiliates2,442 17,545Prepaid assets4 2Income tax receivable9,482 4,994Deferred tax assets, net13,563 5,911Other assets495 7,736 Total assets$474,169 $417,482LIABILITIES AND SHAREHOLDERS EQUITY:Liabilities Accrued compensation and benefits$211 $51Accrued expenses and other liabilities20,438 37,154Payable to affiliates25,44061,990Convertible senior notes121,996 68,367 Total liabilities168,085 167,562Commitments and contingent liabilities (see Note 3) Shareholders' Equity Common stock ($0.00001 par value; 120 million shares authorized, 52,072,884 shares issued and48,771,015 shares outstanding as of December 31, 2015; 60 million shares authorized, 45,582,066 sharesissued and 42,934,559 shares outstanding as of December 31, 2014)— —Accumulated other comprehensive income(5,865) (1,513)Additional paid-in capital212,981 148,378Treasury stock, at cost (3,301,869 shares at December 31, 2015 and 2,647,507 at December 31, 2014,respectively)(21,808) (16,720)Retained earnings120,776 119,775 Total shareholders' equity306,084 249,920 Total liabilities and shareholders' equity$474,169 $417,482F-59Table of ContentsGAIN CAPITAL HOLDINGS, INC.(Parent Company Only)Condensed Statements of Income and Comprehensive Income(in thousands)For the Fiscal Year EndedDecember 31,2015 2014(As Restated) 2013(As Restated)REVENUE: Dividends from subsidiaries$38,642 $— $37,099Interest and other178 90 181Total revenue$38,820 $90 $37,280OPERATING EXPENSES: Interest expense63 64 63Employee compensation and benefits10,096 11,578 187General and administrative6,775 8,208 6,075Total operating expenses16,934 19,850 6,325Interest expense on long term borrowings9,222 6,147 1,233Gain on extinguishment of debt— — 2,000INCOME/(LOSS) BEFORE INCOME TAX EXPENSE12,664 (25,907) 31,722Income tax (benefit) / expense(10,875) (2,584) 10,325NET INCOME/(LOSS) BEFORE UNDISTRIBUTED EARNINGS OF SUBSIDIARIES23,539 (23,323) 21,397Undistributed earnings of subsidiaries(13,260) 48,200 6,710NET INCOME10,279 24,877 $28,107Other comprehensive (loss) / income Foreign currency translation adjustment(4,352) (4,089) $1,327NET COMPREHENSIVE INCOME$5,927 $20,788 $29,434F-60Table of ContentsGAIN CAPITAL HOLDINGS, INC.(Parent Company Only)Condensed Statements of Cash Flows(in thousands) For the Fiscal Year Ended December 31, 2015 2014(As Restated) 2013(As Restated)CASH FLOWS FROM OPERATING ACTIVITIES: Net income$10,279 $24,877 $28,107Adjustments to reconcile net income to cash provided by operating activities Undistributed earnings of subsidiaries13,260 (48,200) (6,710)Gain on extinguishment of debt— — (2,000)Gain on foreign currency exchange rates(66) — (274)Deferred tax (benefit)/expense(11,264) 4,867 1,448Amortization of deferred finance costs354 354 —Stock compensation expense3,680 3,452 2,975Convertible note discount amortization3,624 2,150 175Changes in operating assets and liabilities: Receivables from affiliates37,548 (33,827) 19,278Prepaid assets(3) 127 (127)Other assets7,240 (10,123) 291Income tax receivable(9,069) (771) (9,742)Accrued compensation and benefits160 51 —Accrued expenses and other liabilities(4,876) 10,426 1,478Payable to affiliates(36,549) 61,990 —Cash provided by operating activities14,318 15,373 34,899CASH FLOWS FROM INVESTING ACTIVITIES: Investment and funding of subsidiaries7,081 (51,107) (28,648)Purchase of short term investments— (92) —Cash provided by / (used for) investing activities7,081 (51,199) (28,648)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of convertible senior note issuance, net— — 77,900Principal payment on notes payable— — (31,200)Contractual payments for acquisitions(11,829) — —Proceeds from exercise of stock options2,386 2,087 2,539Proceeds from employee stock purchase plan789 740 302Purchase of treasury stock(5,088) (1,251) (7,189)Tax benefit from employee stock option exercises1,140 1,221 1,026Dividend payments(9,530) (8,139) (7,326)Cash (used for)/provided by financing activities(22,132) (5,342) 36,052(DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS(733) (41,168) 42,303CASH AND CASH EQUIVALENTS — Beginning of year1,184 42,352 49CASH AND CASH EQUIVALENTS — End of year$451 $1,184 $42,352SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: F-61Table of ContentsInterest paid$(4,538) $(3,373) $(556)Taxes refunds received/taxes (paid)$733 $(3,711) $(5,562)Non-cash financing activities related to acquisitions: Seller provided financing— — $33,200Common stock issued as consideration for asset and business acquisitions$45,100 $6,493 $34,771 F-62Table of ContentsSCHEDULE I —GAIN CAPITAL HOLDINGS, INC.(PARENT COMPANY ONLY)NOTES TO CONDENSED FINANCIAL STATEMENTS1. Basis of PresentationBasis of Financial Information — The accompanying condensed financial statements of GAIN Capital Holdings, Inc. (“Parent Company”), including thenotes thereto, should be read in conjunction with the consolidated financial statements of GAIN Capital Holdings, Inc. and Subsidiaries (the “Company”) andthe related notes.The condensed financial statements are prepared in accordance with accounting principles generally accepted in the U.S. which require the Company orParent Company to make estimates and assumptions regarding valuations of certain financial instruments and other matters that affect the Parent CompanyFinancial Statements and related disclosures. Actual results could differ from these estimates.The Parent Company on a stand-alone basis, has accounted for majority-owned subsidiaries using the equity method of accounting.RestatementThe Company has determined that there were errors in the Company's accounting for income taxes as of December 31, 2014 and for the years endedDecember 31, 2014 and 2013 and for certain quarters of 2015 under ASC 740 (ASC 740), Income Taxes. These errors relate primarily to the manner in whichcertain intercompany payables and receivables among domestic and overseas subsidiaries of the Company were treated for accounting and tax purposesduring the impacted periods. The condensed financial statements of the Parent Company as of December 31, 2014 and for the years ended December 31, 2014and 2013 included in this report have been restated to reflect the correction of these errors. In addition, certain other adjustments, previously determined to beimmaterial individually and in the aggregate, have also been corrected in the restated condensed financial statements.The following tables reflect the condensed financial statement line items impacted by the restatement. The column headed "Tax Adjustments" reflects theimpact of the tax matters discussed above, while the "Other Adjustments" column reflects the impact of the other previously identified immaterialadjustments in the Condensed Balance Sheet and Condensed Statements of Income and Comprehensive Income. The column headed "Adjustments" reflectsthe impact of the tax matters discussed above as well as the impact of the other previously identified immaterial adjustments in the Condensed Statement ofCash Flows. For the avoidance of doubt, the following tables include only those line items impacted by the restatement.F-63Table of ContentsCondensed Balance Sheet As of December 31, 2014 As Reported TaxAdjustment OtherAdjustments AsRestatedASSETS: Cash and cash equivalents$1,235 $— $(51) $1,184Equity investments in subsidiaries381,240 — (1,130) 380,110Receivables from affiliates18,533 (988) — 17,545Current tax receivable5,084 (90) — 4,994Deferred tax assets, net— 5,911 — 5,911Other assets15,703 (5,504) (2,463) 7,736Total assets$421,797 $(671) $(3,644) $417,482LIABILITIES AND SHAREHOLDERS’ EQUITY: Liabilities Accrued expenses and other liabilities25,435 12,170 (451) 37,154Income tax payable1,060 1,003 (2,063) —Total liabilities156,903 13,173 (2,514) 167,562Commitments and contingent liabilities Shareholders’ equity Accumulated other comprehensive income(2,054) 541 — (1,513)Additional paid-in capital152,684 (4,306) — 148,378Retained earnings130,984 (10,079) (1,130) 119,775Total shareholders' equity264,894 (13,844) (1,130) 249,920Total liabilities and shareholders’ equity$421,797 $(671) $(3,644) $417,482F-64Table of ContentsCondensed Statements of Income and Comprehensive Income For the Fiscal Year Ended December 31, 2014 As Reported TaxAdjustment OtherAdjustments As RestatedInterest expense on long term borrowings$5,893 $— $254 $6,147INCOME/(LOSS) BEFORE INCOMETAX EXPENSE(25,653) — (254) (25,907)Income tax (benefit) / expense(8,784) 6,200 — (2,584)NET INCOME/(LOSS) BEFOREUNDISTRIBUTED EARNINGS OFSUBSIDIARIES(16,869) (6,200) (254) (23,323)Undistributed earnings of subsidiaries48,495 (295) 48,200NET INCOME$31,626 $(6,200) $(549) $24,877Other comprehensive (loss) / income, net oftax Foreign currency translation adjustment(4,630) 541 — (4,089)NET COMPREHENSIVE INCOME$26,996 $(5,659) $(549) $20,788 For the Fiscal Year Ended December 31, 2013 As Reported TaxAdjustment OtherAdjustments As RestatedOPERATING EXPENSES: Interest expense1,199 — (1,136) 63 Total operating expense7,461 — (1,136) 6,325Interest expense on long term borrowings— — 1,233 1,233INCOME/(LOSS) BEFORE INCOMETAX EXPENSE31,819 — (97) 31,722Income tax (benefit) / expense6,736 3,589 — 10,325NET INCOME/(LOSS) BEFOREUNDISTRIBUTED EARNINGS OFSUBSIDIARIES25,083 (3,589) (97) 21,397Undistributed earnings of subsidiaries6,228 482 6,710NET INCOME31,311 (3,589) 385 28,107Other comprehensive (loss) / income, netof tax NET COMPREHENSIVE INCOME$32,638 $(3,589) $385 $29,434F-65Table of ContentsCondensed Statement of Cash Flows For the Fiscal Year Ended December 31, 2014 As Reported Adjustments As RestatedCASH FLOWS FROM OPERATING ACTIVITIES: Net income$31,626 $(6,749) $24,877Adjustments to reconcile net income to cash provided byoperating activities Undistributed earnings of subsidiaries(48,495) 295 (48,200)Deferred taxes2,508 2,359 4,867Changes in operating assets and liabilities: Receivables from affiliates(18,533) (15,294) (33,827)Other assets(5,188) (4,935) (10,123)Current tax receivable(1,591) 820 (771)Accrued compensation and benefits(21) 72 51Accrued expenses and other liabilities1,762 8,664 10,426Payable to affiliates47,522 14,468 61,990Cash provided by operating activities15,673 (300) 15,373CASH FLOWS FROM INVESTING ACTIVITIES: Investment and funding of subsidiaries(46,726) (4,381) (51,107)Cash used for investing activities(46,818) (4,381) (51,199)Effect of exchange rate changes on cash and cashequivalents(4,630) 4,630 —(DECREASE) / INCREASE IN CASH AND CASHEQUIVALENTS(41,117) (51) (41,168)CASH AND CASH EQUIVALENTS — Beginning ofyear42,352 — 42,352CASH AND CASH EQUIVALENTS — End of year$1,235 $(51) $1,184F-66Table of Contents For the Fiscal Year Ended December 31, 2013 As Reported Adjustments As RestatedCASH FLOWS FROM OPERATING ACTIVITIES: Net income$31,311 $(3,204) $28,107Adjustments to reconcile net income to cash providedby operating activities Undistributed earnings of subsidiaries6,228 (12,938) (6,710)Deferred taxes(1,448) 2,896 1,448Amortization of deferred finance costs30 (30) —Stock compensation expense2,896 79 2,975Changes in operating assets and liabilities: Receivables from affiliates17,681 1,597 19,278Prepaid assets(127) — (127)Other assets(5,354) 5,645 291Current tax receivable2,055 (11,797) (9,742)Accrued expenses and other liabilities(3,486) 4,964 1,478Cash provided by operating activities47,687 (12,788) 34,899CASH FLOWS FROM INVESTING ACTIVITIES: Investment and funding of subsidiaries(42,764) 14,116 (28,648)Cash used for investing activities(42,764) 14,116 (28,648)Effect of exchange rate changes on cash and cashequivalents1,328 (1,328) —3. Transactions with SubsidiariesThe Parent Company has transactions with its subsidiaries determined on an agreed upon basis. Cash dividends from subsidiaries were $38.6 million, $0.0million, and $37.1 million for the years ended December 31, 2015, 2014, and 2013, respectively.4. Commitments and ContingenciesFor a discussion of commitments and contingencies, see Note 18 to the Company’s consolidated financial statements. F-67EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-208175 and 333-171841 on Form S-3 and Form S-8, respectively, of ourreports dated March 17, 2016, relating to the consolidated financial statements and financial statement schedule of GAIN Capital Holdings, Inc. andsubsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement of theCompany’s 2014 consolidated balance sheet, and 2014 and 2013 consolidated statements of operations and comprehensive income, changes in shareholders’equity and cash flows to correct a misstatement), and the effectiveness of the Company’s internal control over financial reporting (which report expresses anadverse opinion because of a material weakness), appearing in this Annual Report on Form 10-K/A of the Company for the year ended December 31, 2015./s/ Deloitte & Touche LLPNew York, NYMay 2, 2016EXHIBIT 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe DirectorsGain Capital Holdings, Inc.Bedminster, NJ 07921We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-208175) and Form S-8 (No.333-171841) of Gain Capital Holdings, Inc. of our report dated March 15, 2016, relating to the consolidated financial statements, andthe effectiveness of internal control over financial reporting of Gain Capital UK Limited, which appears in this Annual Report on Form10-K/A of Gain Capital Holdings, Inc./s/ BDO LLPBDO LLPLondon, United KingdomMay 2, 2016Exhibit 31.1CERTIFICATION PURSUANT TORULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDI, Glenn H. Stevens, certify that: 1.I have reviewed this annual report on Form 10-K/A of GAIN Capital Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: May 2, 2016 /s/ Glenn H. Stevens Glenn H. Stevens President and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2CERTIFICATION PURSUANT TORULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDI, Nigel Rose, certify that: 1.I have reviewed this annual report on Form 10-K/A of GAIN Capital Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: May 2, 2016 /s/ Nigel Rose Nigel Rose Chief Financial Officer(Principal Financial and Accounting Officer) Exhibit 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER,AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Glenn H. Stevens, the undersigned Chief Executive Officer and President of GAIN Capital Holdings, Inc., a Delaware corporation (the “Company”), herebycertify pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge: 1.The accompanying annual report on Form 10-K/A for the fiscal year ended December 31, 2015 (the “Report”) fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: May 2, 2016 /s/ Glenn H. StevensGlenn H. StevensChief Executive Officer and President(Principal Executive Officer)A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signaturethat appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will beretained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 32.2CERTIFICATION OF CHIEF FINANCIAL OFFICER,AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Nigel Rose, the undersigned Chief Financial Officer of GAIN Capital Holdings, Inc., a Delaware corporation (the “Company”), hereby certify pursuant to 18U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge: 1.The accompanying annual report on Form 10-K/A for the fiscal year ended December 31, 2015 (the “Report”) fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: May 2, 2016/s/ Nigel RoseNigel RoseChief Financial Officer(Principal Financial and Accounting Officer)A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signaturethat appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will beretained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.BOARD OF DIRECTORS PETER QUICK CHAIRMAN OF THE BOARD GLENN H. STEVENS CHIEF EXECUTIVE OFFICER JOSEPH A. SCHENK CHRISTOPHER W. CALHOUN TOM BEVILACQUA CHRISTOPHER SUGDEN GLOBAL OFFICES US BEDMINSTER (Global Headquarters) CHICAGO JERSEY CITY EMEA DUBAI LONDON APAC HONG KONG SHANGHAI SINGAPORE SYDNEY TOKYO NON-GAAP FINANCIAL MEASURES Adjusted EBITDA is a non-GAAP financial measure that represents our historical earnings before interest, taxes, depreciation, amortization and non-recurring expenses. Adjusted Net Income is a non-GAAP financial measures that represents our net income excluding the impact of one-time items. These non-GAAP financial measures have certain limitations, including that they do not have a standardized meaning and, therefore, our definitions may be different from similar non-GAAP financial measures used by other companies and/or analysts. Thus, it may be more difficult to compare our financial performance to that of other companies. We believe our use of Adjusted EBITDA and Adjusted Net Income assists investors in evaluating our historical and expected operating performance. However, because Adjusted EBITDA and Adjusted Net Income are not measures of financial performance calculated in accordance with GAAP, such measures should be considered in addition to, but not as a substitute for, other. CORPORATE DISCLAIMERS The forward-looking statements contained herein include, without limitation, statements relating to GAIN Capital’s and/or City Index (Holdings) Limited (“City Index”) expectations regarding the opportunities and strengths of the combined company created by GAIN Capital’s acquisition of City Index and its product offerings, growth opportunities, value creation and financial strength. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that GAIN Capital or City Index will realize these expectations or that these beliefs will prove correct. In addition, a variety of important factors could cause results to differ materially from such statements. These factors are noted throughout GAIN Capital’s annual report on Form 10-K, as filed with the Securities and Exchange Commission on March 17, 2016, and include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, errors or malfunctions in GAIN Capital’s systems or technology, rapid changes in technology, effects of inflation, customer trading patterns, the success of our product and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate assets and companies we have acquired, our ability to effectively compete in the futures industry, changes in tax policy or accounting rules, fluctuations in foreign exchange rates and commodity prices, adverse changes or volatility in interest rates, as well as general economic, business, credit and financial market conditions, internationally or nationally, and our ability to continue paying a quarterly dividend in light of our future financial performance and financing needs. The forward-looking statements included herein represent GAIN Capital’s views as of the date hereof. GAIN Capital undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law. GAIN Capital 135 US Highway 202/206, Suite 11 Bedminster, NJ 07921, United States. Head office: +1 877 424 6227 Investor Relations: +1 908 731 0737 IR@gaincapital.com

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