Gain Capital Holdings Inc
Annual Report 2017

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2017OR¨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. ýIndicate 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.Table of ContentsLarge 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, 2017 was approximately $193 million.As of March 1, 2018, the registrant had 44,864,805 shares of common stock, $0.00001 par value per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCECertain information contained in the registrant’s Definitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscalyear is incorporated by reference into Part III of this Form 10-K.Table of ContentsGAIN Capital Holdings, Inc.FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 PART I Item 1.Business4Item 1A.Risk Factors17Item 1B.Unresolved Staff Comments31Item 2.Properties31Item 3.Legal Proceedings31Item 4.Mine Safety Disclosures31 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities32Item 6.Selected Financial Data35Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations36Item 7A.Quantitative and Qualitative Disclosures about Market Risk62Item 8.Financial Statements and Supplementary Data64Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure64Item 9A.Controls and Procedures64Item 9B.Other Information67 PART III Item 10.Directors, Executive Officers and Corporate Governance68Item 11.Executive Compensation68Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters68Item 13.Certain Relationships and Related Transactions, and Director Independence68Item 14.Principal Accountant Fees and Services68 PART IV Item 15.Exhibits and Financial Statement Schedules69 EXHIBIT INDEXF-45 SIGNATURESF-513Table 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, 2017.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 (the “Exchange Act”). These forward-looking statements are based on current expectations, estimates, forecasts and projections about theindustry and markets in which GAIN operates and management’s current beliefs and assumptions. Any statements contained herein (including, withoutlimitation, statements to the effect that management or GAIN “believes,” “expects,” “anticipates,” “plans” and similar expressions) that are not statements ofhistorical fact should be considered forward-looking statements and should be read in conjunction with the consolidated financial statements and notes toconsolidated financial statements included in this report and the section entitled “Management’s Discussion and Analysis of Financial Condition andResults of Operations.” These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult topredict. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements.These factors include, without limitation, those set forth in the section entitled “Item 1A. Risk Factors” below and discussed elsewhere herein. The risks anduncertainties described below are not the only ones we face. We expressly disclaim any obligation to update any forward-looking statements, except as maybe 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; Chicago, Illinois; Powell, Ohio; London, England; Cornwall, England; Tokyo, Japan; Sydney, Australia; Shanghai, China; Pembroke,Bermuda; Hong Kong; Dubai, U.A.E.; Zurich, Switzerland; and Singapore.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 customers around the world access to a diverse range of global financialmarkets. We offer our customers access to over 12,500 financial products, including spot foreign exchange (forex), precious metals trading, as well ascontracts for difference (CFDs), which are investment products with returns linked to the performance of underlying assets. We offer CFDs on currencies,commodities, indices, individual equities, bonds, options and interest rate products. In the United Kingdom, we offer spread bets, which are investmentproducts similar to CFDs, but that offer more favorable tax treatment for residents of that country. In addition to these OTC products, our futures segmentoffers exchange-traded futures and options on futures on more than 30 global exchanges. Our institutional segment offers access to markets in spot andforward foreign exchange and precious metals via our GTX platform, as well as agency execution services. We provide deep liquidity in spot and forwardforeign exchange and precious metals to buy-side and sell-side firms, including banks, brokers, hedge funds, Commodity Trading Advisors and assetmanagers. Each of our operating segments is discussed in more detail below. For financial information regarding our segments, please refer to Note 21 to ouraudited consolidated financial statements included in this Annual Report.As a global provider of online trading services, our results of operations are impacted by a number of external factors, including market volatility,competition, the regulatory environment in the various jurisdictions and markets in which we operate and the financial condition of the retail andinstitutional customers to whom we provide our services. These factors are not the only factors that impacted our results of operations for the most recentfiscal period, and additional factors may impact our results of operations in future periods. In addition, please refer to “Item 1A. Risk Factors” for a discussionof other factors that may impact our business.4Table of ContentsThe following table sets forth the key financial data and operating metrics for our business: Key Financial Data (in millions) Year Ended December 31, 2017 2016 2015 2014 2013Net Revenue$308.6 $411.8 $435.3 $369.2 $267.7Net (loss)/income applicable to GAIN Capital Holdings, Inc.$(11.2) $35.3 $10.3 $24.9 $28.1Adjusted net (loss)/income(1)$(9.4) $45.1 $34.3 $30.9 $29.8 Key Operating Metrics (Unaudited) Year Ended December 31, 2017 2016 2015 2014 2013Retail OTC Trading Volume (billions)$2,473.6 $2,822.0 $3,985.8 $2,430.5 $1,796.7OTC Average Daily Volume (billions)$9.6 $10.9 $15.4 $9.4 $6.9Active OTC Accounts (2) (3)132,262 126,528 142,836 91,328 93,143Client Assets (millions)$749.6 $599.5 $675.6 $563.2 $592.9 Institutional ECN Volume (billions)$2,979.6 $2,180.7 $1,865.1 $1,498.6 $1,127.9ECN Average Daily Volume (billions)$11.5 $8.4 $7.2 $5.8 $4.3Swap Dealer Volume (billions)$720.5 $779.4 $806.8 $1,685.1 $1,471.7Swap Dealer Average Daily Volume (billions)$2.8 $3.0 $3.1 $6.5 $5.7 Futures Number of Futures Contracts (4)6,857,870 8,304,376 8,623,392 7,027,008 5,386,383Futures Average Daily Contracts27,322 32,954 34,356 28,108 21,460Active Futures Accounts (2)7,838 8,368 8,668 8,184 7,064Client Assets (millions)$229.2 $346.0 $245.0 $196.4 $146.4(1)Adjusted net income is a non-GAAP financial measure and represents our net income excluding restructuring, acquisition and integration-relatedexpenses, impairment on investment, loss on extinguishment of debt, and other corporate expenses. Please refer to “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” under heading “Key Income Statement Line Items and Key OperatingMetrics” and under heading “Reconciliation of Non-GAAP Financial Measures” for discussion and reconciliation of non-GAAP financial measures.(2)Represents accounts which executed a transaction over the last 12 months.(3)We have updated our historical active account disclosures to reflect a change in definition for certain accounts.(4)Futures contracts represent the total number of contracts transacted by customers of our futures business.For financial information by geographic area, please refer to Note 21 to our audited consolidated financial statements included in this Annual Report.Growth StrategiesWe intend to grow our business and increase our profitability principally by employing the following strategies: •Pursuing organic growth by:5Table of Contents•Leveraging our global footprint and powerful brand assets to increase our overall share in the markets we operate.•Focusing on the development of our direct business versus our lower margin indirect business;•Providing an attractive proposition to address the needs of our two distinct customer segments: experienced active traders and retail investors;and•Introducing new, innovative products and services; including upgraded and enhanced trading platforms and tools as well as digital advisoryproducts.•Increasing operational excellence by:•Increasing automation, thereby reducing service costs;•Simplifying our technology “stack”;•Rationalizing our brands across our three business segments; and•Seeking to achieve an optimal balance between insourcing versus outsourcing.•Reducing revenue volatility through:•Reducing the variability between customer transaction revenue (CTR) and reported results;•Implementing artificial intelligence driven hedging programs;•Decreasing the cost of hedging; and•Further optimizing trade flow.•We will also continue to selectively review mergers and acquisitions and other inorganic opportunities which complement our organic growthstrategy.Our Retail SegmentOur retail segment represented 74.9% of our net revenue for the year ended December 31, 2017. We conduct our retail business primarily through ourFOREX.com and City Index brands. As of December 31, 2017, we had 185,729 funded retail accounts.Through our retail segment, we provide customers around the world access to a diverse range of global financial markets. We offer our customers access toover 12,500 financial products, including spot foreign exchange (forex), precious metals trading, as well as contracts for difference (CFDs), which areinvestment products with returns linked to the performance of underlying assets. We offer CFDs on currencies, commodities, indices, individual equities,bonds, options and interest rate products. 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 offer these products under the diverse regulatory environments in which we operate. Because ofU.S. regulations, neither we, nor our subsidiaries, offer CFDs or spread bets in the United 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 and Arabic. Our indirect channelincludes our relationships with introducing brokers, who solicit customers on our behalf, and white label partners, who offer our trading services to theircustomers under their own brand. Total retail trading volume sourced through direct and indirect channels was 67% and 33%, respectively, for the year endedDecember 31, 2017.We generate revenue in our retail segment principally from transaction fees we charge our customers, including the bid/offer spread, financing charges forpositions held overnight, commissions on equity CFD trades and advisory services, and other account related fees.In 2017, we generated approximately 72.7% 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 refer to “Item 1A. Risk Factors.”The following sections provide additional information regarding our retail business:6Table of ContentsInnovative 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 selectively offer third party trading tools that we believe complement our proprietary offerings. We believe that our proprietary tradingtechnology has and will continue to provide us with a significant competitive advantage because we have the ability to adapt quickly to our customers’changing needs, rapidly incorporate new products and features and offer our customers multiple ways to engage with us.Competitive pricing and fast, accurate trade executionWe have longstanding relationships with a large number of institutional liquidity providers, as well as access to multiple liquidity venues. This allows us tooffer our customers superior liquidity and more competitive pricing with tighter bid/offer spreads than many of our competitors. In addition, we havedeveloped a proprietary pricing engine that electronically aggregates quotes from our liquidity sources. This ensures that our prices accurately reflect currentmarket price levels and allows us to provide our customers high-speed trade execution. In 2017, we handled over 14 million trade requests and executed99.9% of trades in less than one second, with an average execution speed of 0.03 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.Efficient customer onboarding and account managementWe have developed proprietary technology to handle numerous aspects of account onboarding and customer service including account opening andcustomer verification process, fast online account funding and withdrawals with a wide variety of automated payment methods, and on-demand delivery ofcustomer information, such as account statements and other account-related reporting. We also offer account opening and funding functions on our mobiletrading applications in order to provide a superior experience to the large number of customers who trade primarily through their mobile devices. Given thehighly regulated and global nature of our business, these processes are customized to each regulatory jurisdiction in which we operate, and are furthertailored to customer needs and preferences in specific countries in order to make it easier for clients in these countries to open accounts with us and then tofund and trade in those accounts.Sophisticated risk managementBecause we are exposed to market, credit and other risks in connection with our retail business, 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. We manage customer credit risk through a combination of providing trading tools that allow our customers' to avoid taking onexcessive risk and automated processes that close customer positions in accordance with our policies, in the event the funds in customers' accounts are notsufficient to hold their positions. One such tool available on our trading platforms is a real-time margin monitoring tool that enables customers to know whenthey are approaching their margin limits. If a customer’s equity falls below the amount required to support one or more positions, we will automaticallyliquidate positions to bring the customer’s account into margin compliance.In addition, we actively monitor and assess various market factors, including volatility and liquidity, and take 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 extraordinary 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% well inadvance of the SNB's move, which mitigated the risk of negative client equity in the event the price floor was abandoned.With respect to market risk, when a retail customer executes a trade with us, the trade may be naturally hedged against an offsetting trade from anothercustomer, hedged through an offsetting trade with one of our liquidity providers or may become part of our net exposure portfolio. For naturally hedgedtrades, we receive the entire bid/offer spread we offer our customers on the two offsetting transactions. For trades hedged with our liquidity providers, we earnthe difference between the retail bid/offer spread we offer our customers and the wholesale bid/offer spread we receive from our liquidity providers. Customer7Table of Contentstrades in our net exposure portfolio are managed pursuant to our risk-management policies and procedures, including risk limits established by the RiskCommittee of our Board of Directors, 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 continuously 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 number 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, 2017, self-directed customers represented approximately 99.3% of our retailtrading volume.The intermediaries engaged by our managed account customers, which we refer to as authorized traders, include professional money managers, which tradeaggregated customer funds, and individuals that trade for a small number of customer accounts. For the year ended December 31, 2017, managed accountcustomers collectively represented approximately 0.7% 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 newer traders. We use sophisticatedtracking and measurement techniques to monitor the results of individual campaigns and continually work to optimize our overall marketing results.One of our principal lead-generation tools 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 work with introducing brokers in order to expand our customer base. We work with a variety of different types of introducing brokers, ranging fromsmall, specialized firms that specifically identify and solicit customers interested in forex and CFD trading, to larger, more established financial servicesfirms. Introducing brokers direct customers to us in return for either a commission on each referred customer’s trading volume or a share of net revenuegenerated by each referred customer’s trading activity. In 2017 we began to roll out a global affiliate program pursuant to which third parties refer customer tous in exchange for a one-time payment. The affiliate program commenced in the United Kingdom and we intend to extend it to our other major markets.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 during 2017 can be categorized as follows:8Table of Contents•Regulated Forex Firm such as OANDA Corporation and FXCM. Like us, these firms have also expanded globally over the past several years, and weconsider them to be competitors in several of our key markets. In February 2017, FXCM was required to cease offering its services in the UnitedStates by the Commodities Futures Trading Commission and we acquired substantially all of the company's U.S.-domiciled customers. For moreinformation, please refer to Note 7 to our audited consolidated financial statements included in this Annual Report. •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, forex and exchange-traded products.Our Institutional SegmentThrough our institutional segment, we provide a variety of services to institutional investors including electronic access to foreign exchange and preciousmetals via an ECN, agency execution services from our voice sales team through our registered swap dealer; trading on a registered swap execution facilityand prime-of-prime services in collaboration with the retail segment. For the year ended December 31, 2017, our institutional segment represented 9.8% ofour net revenue.In contrast to our retail segment, in our institutional segment, we act as agent between the principals to the transactions that are executed. We do not assumeany market or credit risk, as we earn commissions or commission equivalents (markup/markdown) for our services. Our institutional segment also facilitatesclient orders through riskless principal trades.Service OfferingsThrough the ECN platform, which is branded under “GTX,” we provide deep liquidity in spot and forward foreign exchange and precious metals to buy-sideand sell-side firms, including banks, brokers, hedge funds, Commodity Trading Advisors and asset managers. GTX’s centrally-cleared prime brokerage modelsupports true peer-to-peer trading capabilities and allows every GTX client to add market liquidity to the venue by posting real-time bids and offers, whilealso trading on other participants' bids and offers. For the year ended December 31, 2017, net revenue from our ECN business was 74% of the net revenue ofour institutional segment.Our prime-of-prime business, which we refer to as our GTX Direct offering, allows experienced traders who meet certain qualifications, but do not have acredit line with a prime broker, access to trading on the GTX ECN. Through GTX Direct, our clients deposit collateral with us and we make trades through theGTX trading platform on our clients’ behalf, earning a commission for each trade.The agency execution desk serves a broad range of participants across several asset classes, allowing clients to interact with the market based on their specificneeds and preferences. Our agency execution business is currently positioned on as a compliment to our ECN offering, providing bespoke hands-on servicefor clients wishing to execute more complex or structured transactions.Our swap execution facility, or SEF, offers electronic trading of non-deliverable forwards. We are in the process of on-boarding prime banks to serve as centralclearing hubs to facilitate this business.For the year ended December 31, 2017, net revenue from our agency execution business constituted 25% of the net revenue of our institutional segment.GTX is powered by software and intellectual property that we first licensed on an exclusive basis in 2010. After undertaking significant development andenhancement efforts, we acquired full ownership of the software and intellectual property in July 2014.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 expanded to include customers throughout the United States, Europe, and Asia.9Table of ContentsCompetitionIn 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 Nex Group, formerly ICAP, through its EBS offering; Thomson Reuters;Currenex, owned by State Street Bank; Hotspot, a subsidiary of CBOE Holdings, Inc.; Integral Development Corp.; FastMatch Inc.; 360T Trading Networks;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 clearour customers’ trades through our regulated FCM, GAIN Capital Group, LLC (“GCGL”). In 2014, we expanded our futures business by acquiring a majorityinterest in Global Asset Advisors, LLC (“GAA”), a Chicago-based futures brokerage firm which principally markets to and services clients under the DanielsTrading (“DTR”) brand. GAA is an introducing broker targeting retail and professional traders, primarily in equities and agricultural products. At the sametime, we also acquired a majority interest in Top Third Ag Marketing, LLC (“TT”), an introducing broker, which uses options-based hedging strategies tohelp 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 represented12.3% of our net revenue for the year ended December 31, 2017.Advanced Trading PlatformOur futures segment provides customers an enhanced experience through our GAIN Trader proprietary trading platform. We have invested in high-speedconnectivity to provide access to over 30 global electronic exchanges, which allows us to deliver streaming quotes and high-speed executions. The GAINTrader platform has a robust suite of trading tools, including charting tools, custom alerts and indicators, as well as automated trading and risk managementtools. Our futures segment also provides Trade Desk Manager, a version of our GAIN Trader platform offered to other introducing brokers, which allows themto manage their customers’ accounts. In addition, we facilitate connection to our trading services through APIs from other front-end applications, and welicense a white label version of our GAIN Trader platform to select third parties.Risk ManagementIn our futures segment, we are exposed to credit risk as it relates to customer positions. If an adverse market move occurs and triggers an additional marginrequirement, we may be unable to collect the additional margin in a timely manner, or at all. In such a case, we would incur bad debt expense, which couldhave a material adverse effect on our results of operations. To mitigate this risk, we monitor all client accounts in near real time using multiple tool andprocesses designed to ensure that our client accounts are trading within their means.Sales and MarketingAs with our other segments, we seek to acquire futures customers as cost-efficiently as possible. Our principal source of new customers comes from a largenetwork of introducing brokers, In addition, sales leads are generated through seminars, online advertising and other media. In addition to our marketingefforts, we attract our futures segment customers through dedicated sales staff at GCGL, GAA and TT. These sales teams focus on a variety of sectors andprovide differentiated services to our customers.CompetitionOur futures segment competes for both introducing-broker generated business and direct client business. For introducing brokers, our primary competitors arethe limited number of FCMs that own and operate proprietary technology, including FC Stone, R.J. O’Brien, Rosenthal Collins Group, Interactive Brokers,and ADM Investor Services.The majority of our competitors for direct business are small, privately held firms like Allendale, Advance Trading, and Roach Ag Marketing; as well aslarger firms such as Interactive Brokers, TD Ameritrade and E*Trade Financial Corporation.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 and10Table of Contentsconsultants, and confidentiality agreements with other third parties. We rigorously control access to our proprietary technology. Currently, we do not haveany 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), Forex Insider (registered service mark), ForexTrader (registered service mark), FOREX.com(registered service mark), It’s Your World. Trade It. (registered service mark), GAIN Capital Futures (registered service mark), GAIN Futures, OEC (registeredservice mark). We also have registered trademarks covering our City Index brand name and logo in a variety of jurisdictions, including Australia, the UnitedKingdom, European Union, Singapore and China.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;•the methods by which customers can fund accounts with us;•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. To the extent that we wish to serve customers in a jurisdiction in which we determine licensing or registrationis required, we may 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 regulations may be enacted that change the regulatory landscape and result innew, 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, our sales employees are licensed pursuant to applicable regulation.11Table of ContentsU.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. The CFTC Reauthorization Act, which grants the CFTC express authority to regulate the retailforex industry includes a series of rules which 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 between 2.0% and 5.0%, depending on the pair, of the notional value for retail forextransactions in “major currency” pairs and between 5.0% and 20%, depending on the pair, of the notional value for retail forex transactions in "non-major currency";•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; and•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; andIn 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, the Dodd-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, GCGL;•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; and•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, ("GTX SEF") became provisionally registered with the CFTCand NFA as a swap dealer. Effective June 2016, GTX SEF, LLC became permanently registered with the CFTC as a swap execution facility, replacing thetemporary registration previously granted in April 2014. The CFTC and NFA have adopted, and may adopt, new rules including those more recently adoptedrequiring Retail Foreign Exchange Dealers to provide greater transparency about the cost associated with their forex transactions; required notification toNFA for FCMs that decide to offer customers the ability to trade any virtual currency futures product and monthly risk data reporting requirements for SwapDealers. Our operations in the U.S. are also subject to regulatory capital requirements that require various of our subsidiaries to maintain a minimum level ofnet capital relative to customer obligations. For more information, please see “Item 7. Management’s Discussion and Analysis of Financial Condition andResults of Operations - Liquidity and Capital Resources - Regulatory Capital Requirements.”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, a12Table of Contentscustomer identification program, or CIP, designate an AML compliance officer, provide specified employee training and conduct an annual independentaudit of our AML program. Consistent with the Patriot Act, our CIP includes both documentary and non-documentary review and analysis of potentialcustomers. Under our CIP, we review each prospective customer’s identity internally and also contract with third-party firms that perform extensivebackground checks on each prospective customer, including through review of the U.S. Treasury Department’s Office of Foreign Assets and Control,Specially Designated Nationals and Blocked Persons lists. These procedures and tools, coupled with our periodic training, assist us in complying with thePatriot Act, as well as the CFTC’s and NFA’s applicable AML and CIP requirements.United Kingdom RegulationGAIN Capital U.K., Ltd. (“GCUK2”), Trade Facts, Ltd. (“Trade Facts”) and GAIN Capital Payments Ltd. are registered in the U.K. and are regulated by theFinancial Conduct Authority in respect of their trading activity. These U.K. Entities are required to comply with relevant U.K. and E.U. legislation andregulation. GAIN Capital-Forex.com U.K. Ltd. (“GCUK1”) was regulated until October 6, 2017 when its business operations were integrated into GCUK2 andits license was deregistered with the FCA. Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources - Regulatory Capital Requirements” for a discussion of minimum regulatory capital requirements applicable to our U.K.businesses.Client Money RulesGCUK2 is subject to the FCA’s client money rules by virtue of being authorized by the FCA to hold client money. Under these 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 and external client money reconciliations; and•appoint an individual who is responsible for Client Asset Sourcebook, or 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 U.K. Financial Sector, which providesguidance 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 U.K. Treasury or the EU.13Table of ContentsEMIRThe 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 (these requirements began to be phased in starting in September 2016); and•clear through central counterparties all OTC derivatives which will be subject to the mandatory clearing obligation.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 knowledge, experience and othercircumstances. If the retail client demands a product that has been assessed as inappropriate for the retail client’s circumstances by us, we may either refuse tooffer the product to the client, or allow them access to the product but we are required to give the retail client a warning that the product may be inappropriateto its circumstances. We are not required to undertake this analysis for professional clients as we are entitled to assume that a professional client has thenecessary knowledge and experience in order to understand the risks involved in relation to the particular products or services for which he has beenclassified as a professional client.MiFID IIMiFID I applied in the U.K. from November 2007 but has been recast into a new directive, the Markets in Financial Instruments Directive II (Directive2014/65/EU), or MiFID II, and a new regulation, the Markets in Financial Instruments Regulation (Regulation 600/2014), or MiFIR. The changesimplemented by MiFID II and MiFIR took effect on January 3, 2018.MiFID II:•expands the number of financial instruments for which firms are required to carry out an appropriateness assessment before providing anexecution only service to retail clients;•extends the pre- and post-trade transparency regime to derivatives traded on regulated markets, multi-lateral trading facilities, or MTFs, andorganized trading facilities, or OTFs;•expands transaction reporting to those financial instruments traded on MTFs, OTFs, and those financial instruments where the underlyinginstrument is traded on a Trading Venue; and•gives 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)Regulation 1286/486 on key information documents for packaged retail and insurance-based investment products, or the PRIIPs Regulation, took effect inthe U.K. from January 1, 2018, reflecting a delay from the original implementation date of December 31, 2016. U.K. Entities now need to comply with thenew regime set out in the PRIIPs Regulation in relation to14Table of ContentsPRIIPS 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 requires us to provide retail clients with a standardized key information document, or KID, in goodtime before any transaction in derivatives is concluded or for transactions concluded by distance communications, after the transaction has taken place, butonly if it is not possible to provide the KID in advance and the client consents.ESMA’s Consultation Paper: ESMA35-43-904In January 2018, the European Securities and Markets Association, or ESMA, issued a consultation paper, referred to as ESMA35-43-904. In this paper,ESMA states that it is considering the possible use of its product intervention powers under Article 40 of MiFIR to address investor protection concerning themarketing, distribution and sale of CFDs and binary options to retail investors. These proposals include the use of enhanced risk disclosures, restrictionsupon the offering of promotional incentives to clients, mandatory margin close-out levels for retail clients and varying limitations on the opening leveragethat may be offered to clients; including an overall cap of 30 to 1 leverage for major currency pairs and lower leverage levels for other asset classes. Thecomment period for ESMA’s consultation expired in February 2018 and we cannot currently predict which, if any, of the proposed changes will beimplemented. The FCA have indicated that any U.K. policy measures covering similar topics would take in to account such ESMA measures once finalized.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.JapanGAIN Capital Japan Co., Ltd., or GC Japan, is a registered Type I financial instruments business firm regulated by the Japan Financial Services Agency, orFSA, in accordance with Financial Instruments and Exchange Law (Law No. 25 of 1948, as amended). GC Japan is a member of the Financial FuturesAssociation of Japan. GC Japan is subject to a minimum capital adequacy ratio of 140%, which is derived by dividing Net Capital (as defined in Law No. 25)by the sum of GC Japan’s market, counterparty credit risk and operational risk. The FSA has also proposed new rules that would reduce the maximumleverage that brokers can offer to 10-to-1 from the current limit of 25-to-1. At December 31, 2017, GC Japan maintained $7.5 million more than the minimumrequired regulatory capital for a total of 6.0 times the required capital.AustraliaGAIN Capital Australia, Pty. Ltd., or GCAU, 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. GCAU holdsan Australian Financial Services License that has been issued by ASIC. GCAU is required to maintain a minimum capital requirement of approximately $0.8million (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, 2017, GCAUmaintained $3.9 million more than the minimum required regulatory capital for a total of 5.9 times the required capital.Hong 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 $1.9 million. At December 31, 2017, GCHK maintained $2.8 million more than theminimum required regulatory capital for a total of 2.5 times the required capital.Cayman IslandsGAIN Global Markets, Inc., or GGMI, our Cayman Island subsidiary, is a registered securities arranger and market maker with the Cayman Islands MonetaryAuthority, or CIMA. GGMI is required to maintain a capital level that is the greater of one quarter of relevant annual expenditure, or approximately $1.6million. At December 31, 2017, GGMI maintained $0.8 million more than the minimum required regulatory capital for a total of 1.5 times the requiredcapital.15Table of ContentsCanadaGAIN Capital-Forex.com Canada, Ltd., or GCCA, is a Dealer Member of the Investment Industry Regulatory Organization of Canada, or 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, 2017, GCCA maintained $1.5 million more than the minimum required regulatory capital for a total of 8.5times the required capital.SingaporeGAIN Capital Singapore Pte., Ltd., or GCS, is registered by the Monetary Authority of Singapore (“MAS”) and operates as an approved holder of CapitalMarket Services License. GCS is subject to the requirements of MAS and pursuant to the Securities and Futures Act (Cap 289). Under these rules GCS isrequired to maintain a minimum base capital of approximately $0.6 million (1.0 million SGD) and Financial Resources in excess of 120% of the total riskrequirements, which is calculated as the sum of operational, counterparty, large exposure and market risk at all times. At December 31, 2017, GCS maintained$5.4 million more than the required minimum regulatory capital for a total of 10.0 times the required capital.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, 2017, we had 708 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. Other offices include Bedminster, New Jersey; Jersey City, New Jersey; Chicago, Illinois; Powell, Ohio; London, England;Cornwall, England; Tokyo, Japan; Sydney, Australia; Shanghai, China; Pembroke, Bermuda; Hong Kong; Dubai, U.A.E.; Zurich, Switzerland; and Singapore.A complete list of our subsidiaries can be found in Exhibit 21.1 to this Annual Report.Available InformationGAIN 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.16Table of ContentsITEM 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 staff. Our policies, procedures and practices used to identify,monitor and control a variety of risks, including risks related to human error, customer defaults, market movements, technology, fraud and money-laundering,are established and reviewed by the Risk Committee of our Board of Directors. Some of our methods for managing risk are discretionary by nature and arebased on internally developed controls and observed historical market behavior, and also involve reliance on standard industry practices. These methodsmay not adequately prevent losses, particularly as they relate to extreme market movements, which may be significantly greater than historical fluctuations inthe market. 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 hardware failures. In addition, we may elect to adjust our risk-management policies to allow for an increase in risktolerance, which could expose us to the risk of greater losses. Our risk-management methods rely on a combination of technical and human controls andsupervision 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 ourbusiness, financial condition and results of operations 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; and17Table of Contents•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, OTC currency derivatives and gold and silver spottrading 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 our inability to effectivelyintegrate new products into our existing trading platforms or our failure to properly manage the market risks associated with making markets for newproducts. 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 also exposed to debit/deficit risk with our clients for exchange-traded futures and options on futures. An adverse market moverelated to a client’s position may result in a debit balance, which, if we are unable to collect, would result in a bad debt expense. Such an expense could havea material adverse effect on our results of operations.The accounting method for convertible debt securities that may be settled in cash, such as our 4.125% Convertible Senior Notes due 2018, our 4.125%Convertible Senior Notes due 2020, and our 5.00% Convertible Senior Notes due 2022, could have a material effect on our reported financial results.Accounting Standards Codification 470-20, Debt with Conversion and Other Options, or ASC 470-20. ASC 470-20 requires an entity to separately accountfor the liability and equity components of convertible debt instruments whose conversion may be settled entirely or partially in cash (such as our 4.125%Convertible Senior Notes due 2018, our 4.125% Convertible Senior Notes due 2020, and our 5.00% Convertible Senior Notes due 2022) in a manner thatreflects 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 debtinstrument that does not have an associated equity component and is reflected as a liability in our Consolidated Balance Sheets in an amount equal to the fairvalue. The equity component of the notes is included in the additional paid-in capital section of our shareholders’ equity on our Consolidated BalanceSheets, and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component. This original issuediscount is amortized to non-cash interest expense over the term of the notes, and, as a result, we record a greater amount of interest expense in currentperiods. Accordingly, we will report lower net income in our financial results than would have been recorded had we reflected only cash interest expense inour consolidated income statement because ASC 470-20 will require the interest expense associated with the notes to include both the current period’samortization of the original issue discount and the notes’ cash coupon interest, which could adversely affect our reported or future financial results, thetrading 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, our 4.125% Convertible Senior Notes due 2020, and our 5.00% Convertible Senior Notes due 2022) are currentlyaccounted for using the treasury stock method. Under this method, the shares issuable upon conversion of the notes are not included in the calculation ofdiluted earnings per share unless the conversion value of the notes exceeds their principal amount at the end of the relevant reporting period. If theconversion value exceeds their principal amount, then, for diluted earnings per share purposes, the notes are accounted for as if the number of shares ofcommon stock that would be necessary to settle the excess, if we elected to settle the excess in shares, were issued. The accounting standards in the futuremay not continue to permit the use of the treasury stock method. If we are unable 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 could be adversely affected.18Table of ContentsServicing 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 SeniorNotes due 2018, which were issued in November 2013, our 4.125% Convertible Senior Notes due 2020, which were issued in connection with our acquisitionof City Index, and our 5.00% Convertible Senior Notes due 2022, which were issued in August 2017, depends on our future performance, which is subject toeconomic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the futuresufficient to service our debt because of factors beyond our control. If we are unable to generate such cash flow, we may be required to adopt one or morealternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability torefinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of theseactivities 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.Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation tosuffer.In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of ourcustomers, and personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing,maintenance and transmission of this information is critical to our operations. Despite our security measures, we have from time to time experienced third-party cyberattacks as well as unintentional errors that can damage our systems or expose sensitive information, and our information technology andinfrastructure may be vulnerable to future attacks by hackers or compromised due to employee error, malfeasance or other disruptions, such as “distributeddenial of service” or similar cyberattacks. Any such event could compromise our networks and the information stored there could be accessed, publiclydisclosed, lost or stolen.19Table of ContentsWhile our liability for known past events has not been material to our business, financial condition, results of operations or cash flows, any such access,disclosure or other loss of information could result in future legal claims or proceedings, liability under laws that protect the privacy of personal information,regulatory penalties, disruption of our operations and the services we provide to customers, damage to our reputation or a loss of confidence in our productsand services, any of which could adversely affect our business, financial condition, results of operations and cash flows. Although we maintain cyber riskinsurance, this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.Products linked to cryptocurrencies could expose us to technology, regulatory and financial risks.We have recently begun offering derivative products linked to Bitcoin and other cryptocurrencies in certain jurisdictions, and intend to expand the types ofproducts offered, the associated types of cryptocurrencies and the jurisdictions in which the products are offered. The distributed ledger technologyunderlying cryptocurrencies and other similar financial assets is evolving at a rapid pace and may be vulnerable to cyberattacks or have other inherentweaknesses that are not yet apparent. We may be, or may become, exposed to risks related to cryptocurrencies or other financial products that rely ondistributed ledger technology through our facilitation of clients’ activities involving such financial products linked to distributed ledger technology.There is currently no broadly accepted regulatory framework for Bitcoin or other cryptocurrencies, and the regulation of cryptocurrencies is developing andchanging rapidly in the United States and other countries around the world. For example, in the United States, it is unclear whether many cryptocurrencies are“securities” under federal securities laws, and the implications for us if any of our products are linked to cryptocurrencies that are determined to be securitiescould be significant and adverse. In addition, some market observers have asserted that recent price increases in many cryptocurrency markets, such as that forBitcoin, indicate the existence of a “bubble,” and if markets for any cryptocurrencies linked to our products suffer severe declines, our customers couldexperience significant losses and we could lose their business.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 in which we operate toprotect our proprietary technology, intellectual property rights and our brands. We do not have any patents. While we rigorously control access to ourproprietary technology and enter into confidentiality and invention assignment agreements with our employees, consultants and other third parties, it ispossible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights. Suchunauthorized use and infringement would undermine the competitive benefits offered by our proprietary technology and could adversely impact our businessand results of operations.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, our business, financial condition and results of operations and cash flows would likely be adversely affected. Although we have spent significantfinancial resources on sales and marketing expenses and related expenses and plan to continue to do so, these efforts may not be cost-effective at attractingnew customers. 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 jurisdictions. The rules and regulations of these organizations impose specific limitations on our sales methods,advertising and marketing. If we do not achieve our advertising objectives, our profitability and growth may be materially adversely affected. 20Table of ContentsWe 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 federal, state and local laws, both in the U.S. and in the otherjurisdictions in which we operate, as well as the rules and enforcement efforts of our regulators and self-regulatory organizations worldwide. These risksinclude, among others, disputes over trade terms with customers and other market participants, customer losses resulting from system delay or failure andcustomer claims that we or our employees executed unauthorized transactions, made materially false or misleading statements or lost or diverted customerassets in our custody. We may also be subject to regulatory investigation and enforcement actions seeking to impose significant fines or other sanctions,which in turn could trigger civil litigation for our previous operations that may be deemed to have violated applicable rules and regulations in one or morejurisdictions.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 following any acquisitions during the integration of or migration from technological systems. Misconduct by our employees orformer employees could subject us to financial losses or regulatory sanctions and seriously harm our reputation. It may not be possible to detect or deteremployee misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Our employees may also commit goodfaith errors that could subject us to financial claims for negligence or otherwise, as well 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.21Table of ContentsOur 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:•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;22Table of Contents•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 successfully execute our growth strategy.As we continue to seek to grow our business, we intend to execute a growth strategy that involves a number of different initiatives designed to organicallygrow our product offering and customer base, increase operational efficiency, reduce revenue volatility and rationalize and leverage our global brands, whilestill selectively pursuing acquisition opportunities. We also intend to continue to expand and upgrade the reliability and scalability of our transactionprocessing systems, network infrastructure and other aspects of our proprietary technology. We may not be able to successfully execute all or any of theseinitiatives, and the results may vary from our expectations. Further, even if these initiatives are successful, we may not be able to expand and upgrade ourtechnology systems and infrastructure to accommodate increases in our business activity in a timely manner, which could lead to operational breakdownsand delays, loss of customers, a reduction in the growth of our customer base, increased operating expenses, financial losses, increased litigation or customerclaims, regulatory sanctions or increased regulatory scrutiny. In addition, we will need to continue to attract, hire and retain highly skilled and motivatedexecutives and employees to both execute our growth strategy and to manage the resulting growth 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.Our 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 2017, we generated approximately 72.7% 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:23Table of Contents•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, MAS in Singapore, ASIC in Australia, and the CIMA in the Cayman Islands, relating to liquidity andcapital standards, which may have the effect of limiting funds available for the payment of dividends to the holding company. Accordingly, if our operatingsubsidiaries are unable to pay us dividends and make other payments to us when needed, due to regulatory restrictions or otherwise, we may be unable tosatisfy our obligations when they arise.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;•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. 24Table of ContentsFuture 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.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;•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.Regulatory changes in the jurisdictions in which we operate may disrupt our operations or require us to comply with additional regulatory requirements.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. For example, In January 2018, the European Securities and Markets Association, or ESMA,issued a consultation paper, referred to as ESMA35-43-904. In this paper, ESMA states that it is considering the possible use of its product interventionpowers under Article 40 of MiFIR to address investor protection concerning the marketing, distribution and sale of CFDs and binary options to retailinvestors. These proposals include the use of enhanced risk disclosures, restrictions upon the offering of promotional incentives to clients, mandatory marginclose-out levels for retail clients and applying an overall cap of 30-to-1 leverage for major currency pairs and lower leverage levels for other asset classes. TheFCA have indicated that any U.K. policy measures covering similar topics would take in to account such ESMA measures once finalized. In addition, theregulators in a number of European countries, such as France and Belgium, have already adopted rules and regulations that prohibit or limit offering,advertising and promoting leveraged derivative products such as CFDs, and other regulators may follow suit. In Japan, the FSA has proposed25Table of Contentsnew rules that would reduce the maximum leverage that brokers can offer to 10-to-1 from the current limit of 25-to-1. In China, recent activity suggests thatthe Chinese government may be looking to adopt specific regulations governing trading of foreign exchange and CFD products. Our ability to expand ourpresence in various jurisdictions throughout the world will depend on the nature of future changes to the regulatory environment and our ability to continueto comply with evolving requirements. Any of these new regulatory developments, alone or in combination, could have a material adverse effect on ourbusiness and profitability.As 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, 2017, 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 $20.0million plus 5.0% of the amount of retail customer liabilities over $10.0 million, plus 10% of all liabilities owed to eligible contract participantcounterparties acting as a dealer that are not an affiliate. On a worldwide basis, as of December 31, 2017, we were required to maintain approximately $112.9million in minimum capital in the aggregate across all jurisdictions. Regulators continue to evaluate and modify regulatory capital requirements from time totime in response to market events and to improve the stability of the international financial system. Additional revisions to this framework or new capitaladequacy rules applicable to us may be proposed and ultimately adopted, which could further increase our minimum capital requirements in the future.26Table of ContentsEven 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 levels of capital closely and we are required to report the amount of regulatorycapital we maintain to our regulators on a regular basis, and must report any deficiencies or material declines promptly. While we expect that our currentamount of regulatory capital will be sufficient to meet anticipated short-term increases in requirements, any failure to maintain the required levels ofregulatory capital, or to report any capital deficiencies or material declines in capital could result in severe sanctions, including fines, censure, restrictions onour ability to conduct business and revocation of our registrations. The imposition of one 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.On December 22, 2017, President Trump signed into law P.L. no 115-97 “Tax Cuts and Jobs Act” which includes a broad range of tax law changes affectingbusinesses, including corporate tax rates, business deductions, and international tax provisions. As the law is new and administrative tax regulations havenot yet been made available with respect to many of the provisions in this new law, it is uncertain as to how these new provisions will be interpreted andapplied by the Internal Revenue Service and what impact this law will have on our business. 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. For example,the Cyprus Securities and Exchange Commission recently announced that it will require any registered investment firm in Cyprus that wishes to offerproducts to customers offered in another country to provide evidence of its authorization to offer products in that other country. If one of our regulators wereto adopt a similar requirement, we could be subject to increased regulatory compliance costs or may be required to modify our business and operations. Anyfailure to develop effective compliance and reporting systems could result in regulatory penalties in the applicable jurisdiction, which could have a materialadverse effect 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.27Table of ContentsRisks 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.We 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.Retail Forex customer funds deposited with us in the United States are not permitted to be segregated from our own funds for purposes of applicableCFTC, NFA, bankruptcy or insolvency laws and regulations, 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, retail forex customer funds deposited with us are not permitted to be segregatedfrom our own funds for purposes of applicable CFTC, NFA, bankruptcy and insolvency laws and regulations. Although we are required to designate andreport specific depository accounts as accounts holding assets to cover our obligations to retail forex customers; our customers’ funds may be aggregatedwith our own for these purposes. In the event we were to become insolvent, our customers may be unable to fully recover the funds they have deposited withus, as they will be among our unsecured creditors, and the extent to which these funds will be entitled to insurance by the Federal Deposit InsuranceCorporation 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 price in their portfolio changes. While this allows us to closely monitor eachcustomer’s exposure, it does not guarantee our ability to eliminate negative customer account balances prior to an adverse price change or other marketevents. Although we have the ability to alter our margin requirements without prior notice to our customers, this may not eliminate the risk that our access toliquidity becomes limited or market conditions, including price volatility and liquidity constraints, change faster than our ability to modify our marginrequirements. Changes in market conditions or unforeseen extreme market events could result in our customers experiencing losses in excess of the fundsthey 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 incurringa bad debt expense. In addition, if we cannot recover funds from our customers, we may nonetheless be required to fund28Table of Contentspositions we hold with our liquidity providers or other third parties. 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, 2017, 37.2% 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 alternative systems or service providers on a timely basis or oncommercially reasonable terms. This 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, 2017, approximately 15.7% 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 StockThe 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.29Table of ContentsIf 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.The 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 1, 2018, we had 44,864,805 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, 2018 was approximately 1,833,780shares. 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 our 5.00% Convertible Senior Notes due 2022, orotherwise.As of December 31, 2017, we had approximately 66.4 million shares of common stock authorized but unissued. As of December 31, 2017, we have reservedan aggregate of 4.0 million shares for issuance under our equity incentive compensation plans.In addition, our 4.125% Convertible Senior Notes due 2018, which were issued in November 2013, are convertible into shares of our common stock,although we may, at our election and subject to certain limitations, choose to settle any conversion by the payment or delivery of cash, shares of our commonstock, or a combination thereof. Prior to June 1, 2018, these notes may be converted only upon the occurrence of specified events set forth in the indenturepursuant to which they were issued, while on or after June 1, 2018, holders may convert their notes at any time. During 2016 and 2017 the Companyrepurchased a significant portion of these Convertible Senior Notes and, as of December 31, 2017, the outstanding principal amount of the notes outstandingwas $6.4 million.30Table of ContentsOur 4.125% Convertible Senior Notes due 2020, which were issued in April 2015 in connection with our acquisition of City Index, 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 October 1, 2019, 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 October 1, 2019, holders may convert their notes at any time.Our 5.00% Convertible Senior Notes due 2022, which were issued in August 2017, are convertible into shares of our common stock, although we may, at ourelection and subject to certain limitations, choose to settle any conversion by the payment or delivery of cash, shares of our common stock, or a combinationthereof. Prior to April 15, 2022, these notes may be converted only upon the occurrence of specified events set forth in indenture pursuant to which they wereissued, while on or after April 15, 2022, holders may convert their notes at any time.Any common stock that we issue, including under our 2015 Plan, 2011 Employee Stock Purchase Plan or other equity incentive plans that we may adopt inthe future, or upon conversion 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; Chicago, Illinois; Powell, Ohio; London, England; Cornwall, England; Tokyo, Japan; Sydney, Australia; Shanghai, China; Pembroke,Bermuda; Hong Kong; Dubai, U.A.E.; Zurich, Switzerland; 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, with sales functions in Europe and Asia as well. Our corporate segment is primarily located in our corporate headquarters inBedminster, New Jersey. All of our office space was leased as of December 31, 2017.While 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 PROCEEDINGSWe are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of our management, the outcome of such otherclaims and legal actions, if decided adversely, is not expected to have a material adverse effect on our quarterly or annual operating results, cash flows orconsolidated financial position.ITEM 4. MINE SAFETY DISCLOSURESNot Applicable.31Table 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 1, 2018, we estimate that we had approximately 72 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.2017 2016QuarterHigh Low High LowFirst Quarter$8.40 $6.62 $7.61 $6.21Second Quarter$8.68 $5.63 $7.03 $6.11Third Quarter$7.21 $6.16 $6.97 $6.15Fourth Quarter$10.00 $6.14 $7.01 $4.57DIVIDEND 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.In November 2016, our Board of Directors approved a change in the dividend policy which increased the dividend to $0.06 per share to holders of ourcommon stock. The latest dividend of $0.06 per share was declared on March 6, 2018 and is payable on March 30, 2018 to stockholders of record onMarch 27, 2018.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, 2017, we repurchased approximately 3.8 million shares of our common stock pursuant to the terms of our approvedstock repurchase plan.32Table of Contents Total Maximum Number Number of Shares (or Approximate Purchased as Dollar Value) of Part of Publicly Shares that May Total Number Announced Yet Be Purchased of Shares Average Price Plans or Under the Plans orPeriodPurchased(1) Paid per Share(1) Programs(1) Programs(1)(2)(3)January 2017283,436 $7.06 283,436 $22,539,824February 2017188,013 $7.98 188,013 $21,036,448March 2017140,974 $8.15 140,974 $19,884,029April 2017125,186 $7.58 125,186 $18,932,263May 2017263,238 $6.08 263,238 $17,327,119June 2017372,838 $5.90 372,838 $15,119,768July 2017190,823 $6.47 190,823 $13,880,398August 20172,211,775 $6.83 88,789 $13,267,186September 2017— $— — $13,267,186October 2017— $— — $13,267,186November 2017— $— — $13,267,186December 2017— $— — $13,267,186(1) On May 16, 2011, the Company announced that its Board of Directors approved a share repurchase plan, which authorized the expenditure of up to $10.0million for the purchase of the Company’s common stock. On May 6, 2013, the Company announced that the Board of Directors approved to increase thetotal amount available for the purchase of the Company’s common stock by $15.0 million. On May 3, 2016, the Company’s Board of Directors approved toincrease the total amount available for the purchase of the Company’s common stock by an additional $15.0 million, including amounts allocable to certainprior purchases made in March, April and May 2016. On November 3, 2016, the Company announced that its Board of Directors had increased the totalamount available for the repurchase of the Company’s common stock under the Company’s share repurchase plan to $30.0 million.(2) Transaction fees related to the share purchases are deducted from the total remaining allowable expenditure amount.(3) On August 14, 2017, in connection and concurrent with the offering of the Company's 5.00% Convertible Senior Notes due in 2022, the Board ofDirectors approved the expenditure of up to $15.0 million for the purchase of the Company's common stock, of which $14.5 million was repurchased.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 15, 2010 through December 31, 2017 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:BGC Partners, Inc., CMC Markets plc, DST Systems, Inc., E*Trade Financial Corporation, FactSet Research Systems, Inc., IG Group Holdings plc, INTLFCStone, Inc., Investment Technology Group, Inc., MarketAxess Holdings, Inc., MSCI, Inc., Plus500 Ltd., and Virtu Financial, Inc. We have updated theSelected Peer Group to remove FXCM, Inc. and Knight Capital Group, Inc., each of which was included in the Selected Peer Group in our Annual Report onForm 10-K for the year ended December 31, 2016, as FXCM is no longer a competitor in the U.S. market since the Company purchased their U.S. customers in2017, and Knight Capital Group, Inc. was acquired and is no longer publicly traded. Additionally, we have added CMC Markets plc, IG Group Holdings plc,Plus500 Ltd., and Virtu Financial, Inc. to our Selected Peer Group Index, as they engage in one or more of our lines of business.33Table of ContentsThe comparisons in the graphs below are based on historical data and are not intended to forecast the possible future performance of our common stock.EQUITY COMPENSATION PLAN INFORMATIONThe following table provides information with respect to our compensation plans under which equity compensation was authorized as of December 31, 2017. Number of securities remaining Number of Weighted-average available for future securities to be exercise price issuance under issued upon exercise of equity compensation of outstanding outstanding plans (excluding options, warrants options, warrants securities reflected and rights and rights in column (a))Plan category(a) (b) (c)Equity compensation plans approved by security holders1,294,625 $6.25 3,980,83634Table of ContentsITEM 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, 2017 and 2016 and for the years ended December 31, 2017, December 31,2016 and December 31, 2015, included in this annual report on Form 10-K.Our historical results of operations are not necessarily indicative of future results. Selected Consolidated Statement of Operations and Comprehensive Income (in thousands, except share and per share data) Year Ended December 31, 2017 2016 2015(1) 2014 2013(1)Consolidated Statement of Operations andComprehensive Income Data: Net revenue$308,624 $411,825 $435,347 $369,189 $267,691Total operating expense$308,946 $354,162 $417,698 $317,592 $222,968(Loss)/income before income tax (benefit)/expense$(17,087) $47,242 $8,427 $45,450 $45,490Net (loss)/income applicable to GAIN CapitalHoldings, Inc.$(11,195) $35,272 $10,279 $24,877 $28,107(Loss)/earnings per common share: Basic$(0.20) $0.67 $0.22 $0.56 $0.76Diluted$(0.20) $0.67 $0.22 $0.53 $0.71Weighted average common shares outstanding used incomputing (loss)/earnings per common share Basic46,740,097 48,588,917 47,601,979 40,561,644 36,551,246Diluted46,740,097 48,785,674 48,379,051 43,214,895 39,632,878Cash dividends per share$0.24 $0.21 $0.20 $0.20 $0.20 Selected Consolidated Balance Sheet (in thousands unless otherwise stated) Year Ended December 31, 2017 2016 2015(1) 2014 2013(1)Consolidated Balance Sheet Data: Cash and cash equivalents$209,688 $234,760 $171,888 $139,351 $39,871Cash and securities held for customers$978,828 $945,468 $920,621 $759,559 $739,318Receivables from brokers$78,503 $61,096 $121,153 $134,908 $227,630Total assets$1,448,647 $1,430,084 $1,424,559 $1,183,301 $1,112,560Payables to customers$978,828 $945,468 $920,621 $759,559 $739,318Convertible senior notes$132,221 $124,769 $121,740 $68,367 $65,360Total shareholders' equity$285,748 $294,182 $306,084 $249,920 $226,723(1)There were material business combinations that occurred in 2013 and 2015, respectively, which impacted the comparability of the amounts shownabove. Please refer to Note 10 to our audited consolidated financial statements for further discussion.35Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe 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. We offer our customersaccess to a diverse range of over 12,500 financial products, including spot foreign exchange, or forex, and precious metals trading, as well as “contracts fordifference”, or CFDs, which are investment products with returns linked to the performance of underlying assets.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 primarily due to movements and trends in the world’s financial markets and tofluctuations in market volatility. Market volatility is driven by a range of external factors, some of which are market specific and some of which are correlatedto general macroeconomic conditions. As a general rule, our businesses typically benefit from volatility in the prices of the products that we offer, as periodsof increased volatility often coincide with higher levels of trading by our clients and a higher volume of transactions. However, periods of extreme volatilitymay result in significant market dislocations that can also lead clients to reduce their trading activity. In addition, volatility that results in market pricesmoving within a relatively narrow band of prices may lead to less profitable trading activity. Also, low or extremely high market volatility can adverselyaffect our ability to profitably manage our net exposure, which represents the unhedged portion of the trading positions we enter into with customers in ourretail segment.Our financial performance throughout 2017 reflects the effects of the lowest market volatility levels experienced over the past decade; with the trend one ofgenerally decreasing volatility throughout the year and the lowest levels occurring in the fourth quarter of 2017. Despite the macro pressure on our business,we saw pockets of growth, particularly in direct client assets and our ECN platform, which has been taking market share and increasing trading volume.CompetitionThe products we offer have generally been accessible to retail investors for a significantly shorter period than many other securities products, such as cashequities, and our industry is rapidly evolving and characterized by intense competition. Entering new markets often requires us to lower our pricing in orderto attract customers and compete with other companies which have already established customer bases in such markets. In addition, in existing markets, onoccasion we make short-term decisions to be more aggressive regarding the pricing we offer our customers, or we may decide to offer additional services atreduced rates, or free of charge, in order to attract customers and take market share from our competitors.Regulatory EnvironmentThe major global regulatory overhaul of financial markets which occurred following the financial crisis in 2008 has generally continued in the variousjurisdictions in which we operate. Early examples of such overhaul in the United States included passage of he Dodd-Frank Act and various relatedamendments to the Commodity Exchange Act. In December 2016, the FCA issued a consultation paper, referred to as CP16/40, that included a number ofproposed changes to the regulatory requirements36Table of Contentsrelating to companies, such as GCUK2, that offer CFDs and spread bets. These proposed requirements included enhanced risk disclosures, a ban on offeringaccount bonuses or similar promotional incentives to clients, mandatory margin close-out levels for retail clients and limitations on the leverage that may beoffered to clients, with the limitations varying based on whether the clients are classified as experienced or inexperienced using criteria identified by theFCA. In June 2017, the FCA stated that any further action would be delayed pending action by the European Securities and Markets Authority, which hasbeen reviewing the regulation of CFDs by various European regulators for several years.In January 2018, ESMA issued a consultation paper, referred to as ESMA35-43-904. In this paper, ESMA has stated that it is considering the possible use ofits new product intervention powers under Article 40 of MiFIR to address investor protection concerning the marketing, distribution and sale of CFDs andbinary options to retail investors. These proposals are similar to those issued by the FCA and include the use of enhanced risk disclosures, restrictions uponthe offering of promotional incentives to clients, mandatory margin close-out levels for retail clients and varying limitations on the opening leverage thatmay be offered to clients; including an overall cap of 30 to 1 leverage for major foreign currency pairs and lower leverage levels for other asset classes. TheFCA has indicated that any U.K. policy measures would take in to account such ESMA measures once finalized. The comment period for ESMA’sconsultation expired in February 2018 and we cannot currently predict which, if any, of the proposed changes will be implemented. If ESMA's proposals areenacted as proposed, or similar measures are adopted, they will apply across Europe, including to our U.K. operations. The restrictions on leverage areexpected to have a material effect on our clients' trading patterns and could have a material adverse effect on or results of operations and financial condition.Similarly, the Japanese Financial Services Authority has proposed lowering permitted leverage for foreign currency and CFD's offered to retail investors inJapan to a maximum of 10 to 1. If adopted, our Japanese clients trading pattern may change significantly and the results of operations from our Japanesebusiness may be materially adversely affected. As a result of regulatory change, we may be required to change our business strategy, including the nature ofthe products that we offer, the target market for our products or our overall strategy toward one or more geographic markets.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.FXCM Asset AcquisitionOn February 7, 2017, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Forex Capital Markets L.L.C. (“FXCM"). Pursuant to theterms of the Purchase Agreement, FXCM transferred substantially all of its U.S.-domiciled customer accounts to us effective as of February 24, 2017. Inconsideration of the transfer of these accounts, we agreed to pay FXCM, without duplication:•$500 per account for each transferred account that first executes a new trade with GAIN during the 76-day period immediately following the closingof the account transfer (the “Initial Period”); and•$250 per account for each transferred account that (i) did not execute a new trade with GAIN during the Initial Period and (ii) executes a new tradewith GAIN during the 77-day period immediately following the last day of the Initial Period.We paid $7.2 million to FXCM as consideration for the purchased accounts for the twelve months ended December 31, 2017, which was capitalized andincluded as an intangible asset to be amortized on a straight line basis over its two year useful life.Credit FacilityOn August 3, 2017, we entered into a Credit Agreement (the “Credit Agreement”), with Barclays Bank PLC (“Barclays”), as Administrative Agent, CollateralAgent, Arranger and Documentation Agent, Sterling National Bank as Joint Bookrunner (“Sterling”), and the other lenders from time to time party thereto(together with Barclays and Sterling, the “Lenders”).The Credit Agreement provides for a U.S. $50.0 million senior secured first lien revolving credit facility (the “Facility”), to be made available upon certainterms and conditions described below. Upon our request, the Facility may be increased by up to $25.0 million, with a minimum increase of $5.0 million. EachLender has the absolute discretion to provide all or any part of the requested increase, or to decline to participate in the increase. Amounts available under theFacility may be borrowed, repaid and reborrowed on and after the closing date until the third anniversary of the closing date (the “Maturity Date”). Allamounts outstanding under the Facility will initially bear interest, at our option, at a rate per annum equal to (i) the “Cost of37Table of ContentsFunds Rate” or, if applicable, “Base Rate” plus 1.75% per annum, or (ii) “LIBOR Rate” plus 2.75% per annum, in each case as such terms are defined in theCredit Agreement. Beginning on the date on which we deliver to the Lenders financial statements for the first full fiscal quarter after the closing date, theapplicable margin for the Facility will be determined on a sliding scale based on our Consolidated Gross Leverage Ratio (as defined in the Facility). As ofDecember 31, 2017 the interest rate is 6.25%.All obligations under the Facility are guaranteed by each of our direct or indirect wholly-owned domestic subsidiaries (excluding our regulated subsidiaries)(collectively, the “Guarantors”). The obligations under the Facility are secured by a first priority security interest in all of the capital stock of each subsidiaryowned by us or a Guarantor (collectively, the “Collateral”), which pledge, in the case of any foreign subsidiary, is limited to 65.0% of the voting stock ofsuch foreign subsidiary and is limited to foreign subsidiaries directly owned by us or a Guarantor.The Facility contains customary financial covenants, tested quarterly, including with respect to our Consolidated Gross Leverage Ratio, ConsolidatedInterest Coverage Ratio and Minimum Net Capital, in each case as such terms are defined in the Credit Agreement. The Facility contains such representationsand warranties by us and the Guarantors as are customary for transactions and facilities of this type, subject to baskets for permitted acquisitions, dispositions,incurrence of additional indebtedness and similar transactions.In addition to other events of default that are customary for transactions and facilities of this type (subject to applicable grace periods and materialitystandards).Convertible NotesOn August 22, 2017, we issued $92.0 million aggregate principal amount of our 5.00% Convertible Senior Notes due 2022, which amount includes theexercise in full of the over-allotment option granted to the initial purchasers of the notes, in a private offering to qualified institutional buyers pursuant toRule 144A under the Securities Act of 1933, as amended. The notes bear interest at a fixed rate of 5.00% per year, payable semi-annually in arrears onFebruary 15 and August 15 of each year, beginning on February 15, 2018. The notes are convertible into cash, shares of our common stock, or a combinationthereof, at our election. The notes will mature on August 15, 2022, unless earlier converted, redeemed or repurchased. We may not redeem the notes prior toAugust 15, 2020. The net proceeds from the offering of these notes were approximately $88.4 million, after deducting discounts to the initial purchasers andoffering expenses payable by the Company.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.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 revenue, institutional revenue, futures revenue, other revenue and interest revenue.Retail RevenueRetail revenue is our largest source of revenue. Retail revenue is principally comprised of trading revenue from our retail segment.Trading revenue in our retail segment is generated by forex products and non-forex products, including spot forex, precious metals, spread bets and CFDs oncommodities, indices, individual equities and interest rate products, as well as OTC options on forex.38Table 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 fees, including financing charges for positions held overnight, commissions on equity CFD trades, and otheraccount related fees and (2) any net gains and losses generated through changes in the market value of the currencies and other products held in our netexposure.Retail revenue represented 74.9% and 80.3% of our total net revenue for the year ended December 31, 2017 and 2016, respectively.For the year ended December 31, 2017, approximately 97% of our average daily retail trading volume was either naturally hedged or hedged by us with oneof our liquidity providers, which is substantially similar to our average daily retail trading volume hedged of approximately 98% and 98% in 2016 and 2015,respectively. The remaining 3%, 2%, and 2% of our average daily retail trading volume in 2017, 2016 and 2015, respectively, 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 products at any given time. In the event of unfavorable marketmovements, we may experience losses on such positions. Please refer to “Item 1. Business” under heading Sophisticated risk management for further detailsregarding our risk management policies for the retail segment.In 2015 and earlier periods, we had a retail sales trader business which provided high-touch trading services and execution to high net worth customers. Weprimarily earned commissions on this trade flow, which we typically hedged fully. In the latter part of 2015, our sales trader business was restructured andintegrated into the rest of the retail segment.Institutional RevenueInstitutional revenue consists of revenue from our GTX business, which provides a proprietary ECN trading platform and sales and trading services,principally to institutional customers. Revenue from our GTX business is generated primarily through commissions or commission-equivalents for tradesexecuted on 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 inconnection with those transactions. Our institutional revenue includes revenue generated by intercompany transactions with other segments/affiliates that areeliminated when calculating our consolidated net revenue. This intercompany revenue totaled approximately $0.8 million and $1.2 million for the yearended December 31, 2017 and 2016, respectively.Futures RevenueFutures revenue comprises primarily commissions earned on futures and futures options trades. We act as an agent for the trades executed in our futuressegment and are not exposed to market risk in connection with that activity.Other RevenueOther revenue primarily comprises foreign currency translation gains and losses, as well as inactivity fees. 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 Trade Facts acquisition. InDecember 2015, we entered into an agreement with the former owners of Trade Facts to satisfy all remaining obligations under the contingent earn-outarrangement for a one-time payment 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, treasurybills, and other money market instruments. Interest paid to customers varies primarily due to the net value of a customer account. A customer’s net accountvalue equals cash on deposit plus the mark-to-market of open positions as of the measurement date. Interest income and interest expense are recorded whenearned and incurred, respectively. Net interest revenue was $4.9 million for the year ended December 31, 2017, compared to net interest revenue of $1.1million for the year ended December 31, 2016.39Table of ContentsExpensesOur expenses are principally comprised of the following: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, as well as client engagement and retention.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 expense also includes payments made to affiliates for referring customer 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 the customers that they haveintroduced. Our indirect business accounted for 33.3%, 43.5%, 48.4% of retail trading volume in the years ended December 31, 2017, 2016 and 2015,respectively. The decline in indirect volume was due to our focus on expanding our direct business, efforts to optimize our indirect channel, as well as anincrease in direct volume as a result of our acquisition of FXCM’s U.S.-domiciled customer accounts.Trading ExpensesTrading expenses consist of exchange fees paid to exchanges and other third-parties for exchange market data that we provide to our customers or use tocreate 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 connection with our acquisitions. The principalintangible assets acquired were technology, customer relationships and a non-compete agreement. These intangible assets have useful lives ranging from oneyear to ten years.Communications and TechnologyCommunications 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.40Table of ContentsRestructuring ExpensesIn 2016 and 2015 we incurred restructuring expenses, which reflected costs arising from headcount reductions and other exit costs, measured and disclosed inaccordance with FASB ASC 420 Exit or Disposal Cost Obligations and ASC 712 Compensation - Nonretirement Postemployment Benefits.Acquisition ExpensesIn 2015 we incurred acquisition-related expenses, which included professional services costs, such as legal, accounting, valuation and other costs specifiedin FASB ASC 805. These costs are expensed as incurred.Integration ExpensesIn 2016 and 2015 we incurred integration expenses, which are acquisition-related costs that are incurred while integrating an acquired company into theconsolidated group. These costs include retention bonuses paid to employees and the cost of retiring redundant assets.Legal SettlementOn April 28, 2016, we entered into a settlement agreement with the claimants in the Cameron Farley Ltd. matter. Please refer to Note 16 to our auditedconsolidated financial statements for more detail. Pursuant to the terms of the settlement agreement, we agreed to make a one-time settlement payment inexchange for a full and final settlement of all claims. The settlement amount, net of insurance recoveries, totaled approximately $9.2 million.Impairment of InvestmentIn 2017 we recognized an impairment expense due to an impairment of a small equity method investment.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, interestexpense on our 4.125% Convertible Senior Notes due 2020, issued in April 2015 as part of the consideration for the City Index acquisition, and interestexpense on our 5.00% Convertible Senior Notes due 2022, issued in August 2017.Non-GAAP Financial MeasuresWe use free cash available, adjusted net income and adjusted earnings per common share, each of which is a non-GAAP financial measure, to evaluate ourbusiness. We believe our reporting of free cash available, adjusted net income and adjusted earnings per share assists investors in evaluating our operatingperformance. Free cash available, adjusted net income and adjusted earnings per common share are not measures of financial performance calculated inaccordance with GAAP. They should be considered in addition to, but not as a substitute for, other measures of our financial performance reported inaccordance with GAAP, such as net income and earnings per common share. Below is a discussion and reconciliation of these non-GAAP financial measures.Free Cash AvailableFree cash available is a non-GAAP financial measure and consists of our Cash and cash equivalents, plus our Receivables from banks and brokers, plusrevolving credit facility, less the minimum regulatory capital requirements applicable to our business. We use this non-GAAP measure to evaluate our abilityto fund growth in our business.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, loss onextinguishment of debt, loss on impairment of investments and other expenses incurred in connection with, or as a result of, merger and acquisitiontransactions. In addition, adjusted net income excludes the adjustment to the fair value of consideration from the Trade Facts acquisition and the bad debtexpense related to the Swiss National Bank event in January 2015 and costs incurred in 2017 related fees paid for the Company’s operational strategy review.We exclude these items from our adjusted net income and adjusted earnings per share, because we view these as transactions that are not part of our coreoperations, which we believe to be the most meaningful indicators of the Company’s performance.41Table of ContentsAdjusted 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 MeasuresFor a reconciliation of free cash available to Cash and cash equivalents, please refer to the “Liquidity and Capital Resources” section below. The followingtable provides a reconciliation of GAAP net income to adjusted net income and adjusted earnings per common share (amounts in thousands except per shareamounts): Year Ended December 31, 2017 2016 2015Net (loss)/income applicable to GAIN Capital Holdings, Inc.$(11,195) $35,272 $10,279 Income tax (benefit)/expense(6,855) 9,768 (3,512) Equity in net loss of affiliate343 62 — Non-controlling interest620 2,140 1,660Pre-tax (loss)/income(17,087) 47,242 8,427Adjustments: Acquisition expense— — 2,819 Restructuring— 1,041 3,482 Integration— 2,788 33,092 Other items(1)6,391 — — Adjustment to fair value of contingent consideration— — (6,722) Legal settlement— 9,205 — Bad debt related to SNB event in January 2015— — 2,500Total adjustments6,391 13,034 35,171Adjusted pre-tax (loss)/income(10,696) 60,276 43,598Normalized income tax2,246 (12,998) (7,653)Equity in net loss of affiliate(343) (62) —Non-controlling interest(620) (2,140) (1,660)Adjusted net (loss)/income (non-GAAP)$(9,413) $45,076 $34,285 Adjusted (loss)/earnings per common share (non-GAAP): Basic$(0.20) $0.93 $0.72 Diluted$(0.20) $0.92 $0.71(1) Other items include impairment of investment ($620), loss on extinguishment of debt ($4,944), and other corporate expenses ($827).42Table of ContentsOperating 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, 2017 2016 2015 2014 2013Retail OTC Trading Volume (billions)$2,473.6 $2,822.0 $3,985.8 $2,430.5 $1,796.7OTC Average Daily Volume (billions)$9.6 $10.9 $15.4 $9.4 $6.9Active OTC Accounts (1) (2)132,262 126,528 142,836 91,328 93,143Client Assets (millions)$749.6 $599.5 $675.6 $563.2 $592.9 Institutional ECN Volume (billions)$2,979.6 $2,180.7 $1,865.1 $1,498.6 $1,127.9ECN Average Daily Volume (billions)$11.5 $8.4 $7.2 $5.8 $4.3Swap Dealer Volume (billions)$720.5 $779.4 $806.8 $1,685.1 1,471.7Swap Dealer Average Daily Volume (billions)$2.8 $3.0 $3.1 $6.5 5.7 Futures Number of Futures Contracts (3)6,857,870 8,304,376 8,623,392 7,027,008 5,386,383Futures Average Daily Contracts27,322 32,954 34,356 28,108 21,460Active Futures Accounts (1)7,838 8,368 8,668 8,184 7,064Client Assets (millions)$229.2 $346.0 $245.0 $196.4 $146.4(1)Represents accounts which executed a transaction over the last 12 months.(2)We have updated our historical active account disclosures to reflect a change in definition for certain accounts.(3)Futures contracts represent the total number of contracts transacted by customers of our futures business.OTC Trading VolumeOTC trading volume is the U.S. dollar equivalent of the aggregate notional value of OTC trades executed by customers in our retail segment. Approximately40.1% of our overall customer trading volume in retail and institutional for the year ended December 31, 2017 was generated in our retail segment, comparedto 48.8% for the year ended December 31, 2016.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.Institutional VolumeApproximately 59.9% and 51.2% of our overall customer trading volume in retail and institutional for the years ended December 31, 2017 and 2016,respectively, was generated in our institutional segment.43Table of ContentsECN VolumeECN volume is the U.S. dollar equivalent of the aggregate notional value of trades executed on our GTX platform.ECN Average Daily VolumeECN average daily volume is the U.S. dollar equivalent of the aggregate notional value of trades executed on our GTX platform in a given period divided bythe number of trading days in the given period.Swap Dealer VolumeSwap dealer volume is the U.S. dollar equivalent of the aggregate notional value of trades executed through our non-platform institutional trading services.Swap Dealer Average Daily VolumeSwap dealer average daily volume is the U.S. dollar equivalent of the aggregate notional value of trades executed through our non-platform institutionaltrading services in a given period divided by the number of trading days in the given period.Number of Futures ContractsNumber of futures contracts represent the total number of contracts transacted by customers in our futures segment.Futures Average Daily ContractsAverage daily futures contracts is the number of futures contracts transacted by our futures customers in a given period divided by the number of trading daysin the given period.Active Futures AccountsActive futures accounts represent customers who executed at least one futures trade during the relevant period.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 four 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.Results of OperationsOur segment reporting structure includes three operating segments (retail, institutional, and futures). These operating segments are discussed in more detailbelow. We also report information relating to general corporate services in a fourth component, corporate and other. Please refer to Notes 1 and 21 to ouraudited consolidated financial statements for additional information.44Table of ContentsYear Ended December 31, 2017 Compared to Year Ended December 31, 2016Revenue (amounts in thousands) Year Ended December 31, 2017 2016 $ Change % ChangeREVENUE: Retail revenue$231,100 $330,744 $(99,644) (30.1)%Institutional revenue30,136 29,030 1,106 3.8 %Futures revenue37,964 47,430 (9,466) (20.0)%Other revenue4,478 3,504 974 27.8 %Total non-interest revenue303,678 410,708 (107,030) (26.1)%Interest revenue5,829 1,669 4,160 249.3 %Interest expense883 552 331 60.0 %Total net interest revenue4,946 1,117 3,829 342.8 %Net revenue$308,624 $411,825 $(103,201) (25.1)%The decrease in retail revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to a decrease involume related to indirect customers and overall revenue capture compared to the prior year, primarily due to historically low levels of market volatility.The increase in institutional revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to an increasein volume from the GTX platform, driven by high frequency traders.The decrease in futures revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to a decrease involume across all futures customer types.The increase in other revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to changes in foreigncurrency revaluations, partially offset by a decrease in data fees relating to dormant customer accounts.45Table of ContentsExpenses (amounts in thousands) Year Ended December 31, 2017 2016 $ Change % ChangeEmployee compensation and benefits$95,218 $101,904 $(6,686) (6.6)%Selling and marketing31,200 28,742 2,458 8.6 %Referral fees53,671 70,752 (17,081) (24.1)%Trading expenses29,041 31,159 (2,118) (6.8)%General and administrative45,727 55,036 (9,309) (16.9)%Depreciation and amortization17,907 13,905 4,002 28.8 %Purchased intangible amortization16,110 15,016 1,094 7.3 %Communications and technology19,699 20,460 (761) (3.7)%Bad debt provision(247) 4,154 (4,401) (105.9)%Restructuring expenses— 1,041 (1,041) (100.0)%Integration expenses— 2,788 (2,788) (100.0)%Legal settlement— 9,205 (9,205) (100.0)%Impairment of investment620 — 620 100.0 %Total operating expense308,946 354,162 (45,216) (12.8)%OPERATING (LOSS)/PROFIT(322) 57,663 (57,985) (100.6)%Interest expense on long term borrowings11,821 10,421 1,400 13.4 %Loss on extinguishment of debt4,944 — 4,944 100.0 %(LOSS)/INCOME BEFORE INCOME TAX(BENEFIT)/EXPENSE(17,087) 47,242 (64,329) (136.2)%Income tax (benefit)/expense$(6,855) $9,768 $(16,623) (170.2)%The decrease in employee compensation and benefits for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarilydue to a reduction in commission-based payments as a result of the decrease in volume and changes in methodology for calculating certain employeecommissions for the period ended December 31, 2017.The increase in selling and marketing expense for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due toincreases in marketing expenditures for our retail segment to support our organic growth strategy during the year ended December 31, 2017.The decrease in referral fees for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to the decrease inindirect volume during the year ended December 31, 2017 as part of ongoing partner optimization.The decrease in trading expenses for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to a decrease inclearing fees and market data payments in line with the decrease in volume.The decrease in general and administrative expenses for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily dueto a reduction in vendor payments, specifically in audit fees and regulatory assessments, and a reduction in rent due to renegotiation or extension of leasedfacilities, as well as a reduction in banking fees.The decrease in communications and technology expense for the year ended December 31, 2017 compared to the year ended December 31, 2016 wasprimarily due to a decrease in spending on third-party services during the year ended December 31, 2017 as part of our ongoing cost saving plan.The decrease in bad debt provision for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to largerecoveries from 2015 and 2016 debtors offset by minimal bad debt incurred within the year.On April 28, 2016, we entered into a settlement agreement with the claimants in the Cameron Farley Ltd. matter. Pursuant to the terms of the settlementagreement, we agreed to make a one-time settlement payment in exchange for a full and final settlement of all claims. The settlement amount, net of insurancerecoveries, totaled approximately $9.2 million.46Table of ContentsThe increase in impairment of investment for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to animpairment of a small equity method investment.During the third quarter of 2017, we repurchased $71.8 million in principal amount of our 4.125% Convertible Senior Notes due 2018 using a portion of thenet proceeds of the offering of our 5.00% Convertible Senior Notes due 2022. As a result, we recognized a debt extinguishment loss of $4.9 million for theyear ended December 31, 2017.Income tax expense for the year ended December 31, 2017 decreased $16.6 million, with a tax benefit of $6.9 million compared to a tax expense of $9.8million in the year ended December 31, 2016. Our effective tax rate for the year ended December 31, 2017 was 40.1%, compared to an effective tax rate of20.7% for the year ended December 31, 2016. The increase in effective tax rate was primarily due to a change in the mix of earnings from different foreignjurisdictions, the impact of the release of income tax contingency reserves, as well as changes due to the Tax Cuts and Jobs Act. Please refer to Note 18 to ouraudited consolidated financial statements for more detail.Segment Results - Year Ended December 31, 2017 Compared to Year Ended December 31, 2016Retail Segment (amounts in thousands) Year Ended December 31, 2017 2016 $ Change % ChangeNet revenue$237,418 $336,353 $(98,935) (29.4)% Employee compensation and benefits60,887 62,423 (1,536) (2.5)%Selling and marketing29,929 27,666 2,263 8.2 %Referral fees39,711 55,080 (15,369) (27.9)%Other operating expenses61,735 75,488 (13,753) (18.2)%Segment profit$45,156 $115,696 $(70,540) (61.0)%The decrease in retail segment net revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to adecrease in volume related to indirect customers with revenue capture trailing the prior year, primarily due to historically low levels of volatility.The decrease in employee compensation and benefits expenses for the retail segment for the year ended December 31, 2017 compared to the year endedDecember 31, 2016 was primarily due to a reduction in our annual employee incentive compensation costs based on the decrease in our results for the yearended December 31, 2017.The increase in selling and marketing expense for the retail segment for the year ended December 31, 2017 compared to the year ended December 31, 2016was primarily due to an increase in marketing expenditures to support our organic growth strategy during the year ended December 31, 2017.The decrease in referral fees for the retail segment for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due tothe decrease in indirect volume for the year ended December 31, 2017 as part of ongoing partner optimization.The decrease in other operating expenses for the retail segment for the year ended December 31, 2017 compared to the year ended December 31, 2016 wasprimarily due to a reduction in bank charges and UK trading expenses, as well as a reduction in bad debt related to large recoveries from 2015 and 2016debtors, offset by minimal bad debt incurred in 2017.Other operating expenses for the retail segment include general and administrative expenses, communication and technology expenses, trading expenses,and bad debt.47Table of ContentsInstitutional Segment (amounts in thousands) Year Ended December 31, 2017 2016 $ Change % ChangeNet revenue$31,155 $30,219 $936 3.1 % Employee compensation and benefits13,887 14,424 (537) (3.7)%Selling and marketing86 103 (17) (16.5)%Other operating expenses12,274 10,342 1,932 18.7 %Segment profit$4,908 $5,350 $(442) (8.3)%The increase in institutional segment net revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due toan increase in volume from the ECN platform, driven by high frequency traders.The decrease in employee compensation and benefits expenses for the institutional segment for the year ended December 31, 2017 compared to the yearended December 31, 2016 was primarily due to a decrease in commissions and sales bonuses paid to employees as a result of changes to some commissionschemes.Selling and marketing expenses for the institutional segment remained relatively flat for the year ended December 31, 2017 compared to the year endedDecember 31, 2016.The increase in other operating expenses for the institutional segment for the year ended December 31, 2017 compared to the year ended December 31, 2016was primarily due to increased fees charged by our clearing firms as a result of the increase in trading volume.Other operating expenses from the institutional segment include general and administrative expenses, communication and technology expenses, tradingexpenses, and bad debt.Futures Segment (amounts in thousands) Year Ended December 31, 2017 2016 $ Change % ChangeNet revenue$40,291 $48,084 $(7,793) (16.2)% Employee compensation and benefits9,387 11,967 (2,580) (21.6)%Selling and marketing786 972 (186) (19.1)%Referral fees13,960 15,672 (1,712) (10.9)%Other operating expenses12,931 14,769 (1,838) (12.4)%Segment profit$3,227 $4,704 $(1,477) (31.4)%The decrease in futures segment net revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to adecrease in volume across all customer types.The decrease in employee compensation and benefits expenses for the futures segment for the year ended December 31, 2017 compared to the year endedDecember 31, 2016 was primarily due to lower commissions paid to employees as a result of the decrease in trading volume and related revenue.Selling and marketing expenses for the futures segment remained relatively flat for the year ended December 31, 2017 compared to the year ended December31, 2016.The decrease in referral fees for the futures segment for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily dueto the decrease in trading volume.48Table of ContentsThe decrease in other operating expenses for the futures segment for the year ended December 31, 2017 compared to the year ended December 31, 2016 wasprimarily due to a decrease in charges from our clearing brokers due to the decrease in trading volume.Other operating expenses from the futures segment include general and administrative expenses, communication and technology expenses, and tradingexpenses, and bad debt.Corporate and Other (amounts in thousands) Year Ended December 31, 2017 2016 $ Change % ChangeOther revenue$(240) $(2,831) $2,591 (91.5)% Employee compensation and benefits11,057 13,090 (2,033) (15.5)%Selling and marketing399 1 398 NMOther operating expenses6,453 10,210 (3,757) (36.8)%Loss$(18,149) $(26,132) $7,983 (30.5)%The increase in corporate and other revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due tochanges in foreign currency revaluations.The decrease in employee compensation and benefits expenses for employees not attributed to any of our operating segments, such as our executive officers,for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to a reduction in our annual employee incentivecompensation costs based on the decrease in results for the year ended December 31, 2017.The increase in selling and marketing expenses not attributed to any of our operating segments for the year ended December 31, 2017 compared to the yearended December 31, 2016 was primarily related to marketing for the Company’s payments service offering.The decrease in other operating expenses not attributed to any of our operating segments for the year ended December 31, 2017 compared to the year endedDecember 31, 2016 was primarily due to a reduction in corporate related insurance costs, temporary staffing costs, vendor payments and a reduction in rentpayments due to renegotiation or extension of leased facilities as part of our ongoing cost saving plan.Year Ended December 31, 2016 Compared to Year Ended December 31, 2015Revenue (amounts in thousands) Year Ended December 31, 2016 2015 $ Change % ChangeREVENUE: Retail revenue$330,744 $347,489 $(16,745) (4.8)%Institutional revenue29,030 33,773 (4,743) (14.0)%Futures revenue47,430 45,427 2,003 4.4 %Other revenue3,504 8,487 (4,983) (58.7)%Total non-interest revenue410,708 435,176 (24,468) (5.6)%Interest revenue1,669 1,220 449 36.8 %Interest expense552 1,049 (497) (47.4)%Total net interest revenue1,117 171 946 553.2 %Net revenue$411,825 $435,347 $(23,522) (5.4)%The decrease in retail net revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to a decrease intrading volume.49Table of ContentsThe decrease in institutional revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to a decreasein volume in our non-platform institutional trading services and a shift in the mix of trading volume on our GTX platform reflecting an increased percentageof lower revenue-per-contract transactions, partially offset by an increase in ECN trading volume.The increase in futures revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to an increase inrevenue per traded contract during the year.The decrease in other revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to an adjustment tothe recorded amount of contingent consideration relating to our Trade Facts acquisition in 2015, partially offset by an increase in foreign currencyrevaluation.Expenses (amounts in thousands) Year Ended December 31, 2016 2015 $ Change % ChangeEmployee compensation and benefits$101,904 $106,581 $(4,677) (4.4)%Selling and marketing28,742 27,168 1,574 5.8 %Referral fees70,752 103,523 (32,771) (31.7)%Trading expenses31,159 31,914 (755) (2.4)%General and administrative55,036 55,067 (31) (0.1)%Depreciation and amortization13,905 11,111 2,794 25.1 %Purchased intangible amortization15,016 16,550 (1,534) (9.3)%Communications and technology20,460 18,929 1,531 8.1 %Bad debt provision4,154 7,462 (3,308) (44.3)%Acquisition expenses— 2,819 (2,819) (100.0)%Restructuring expenses1,041 3,482 (2,441) (70.1)%Integration expenses2,788 33,092 (30,304) (91.6)%Legal settlement9,205 — 9,205 100.0 %Total operating expense354,162 417,698 (63,536) (15.2)%OPERATING PROFIT57,663 17,649 40,014 226.7 %Interest expense on long term borrowings10,421 9,222 1,199 13.0 %INCOME BEFORE INCOME TAX EXPENSE/(BENEFIT)47,242 8,427 38,815 460.6 %Income tax expense/(benefit)$9,768 $(3,512) $13,280 (378.1)%The decrease in employee compensation and benefits expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 wasprimarily due to the effects of restructuring actions taken in 2015 to reduce headcount following the City Index acquisition.The increase in selling and marketing expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due toincreased costs to support our retail brands during the fourth quarter of 2016, partially offset by a reduction in marketing spend in the first three quarters of2016 while we focused on integration activities.The decrease in referral fees for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to our focus onterminating unprofitable partner relationships and, to a lesser extent, renegotiating ongoing partner agreements to more favorable terms.The decrease in trading expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to the full-yeareffect of the wind down of our sales trader business, which was integrated into our retail segment during the course of 2015.50Table of ContentsGeneral and administrative expenses remained relatively flat for the year ended December 31, 2016 compared to the year ended December 31, 2015.The increase in depreciation and amortization for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to thedepreciation of property and equipment acquired in the City Index acquisition in the second quarter of 2015.The decrease in purchased intangible amortization for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily dueto the full amortization of the GFT acquisition in the fourth quarter of 2015, partially offset by the amortization of intangible assets acquired as part of theCity Index transaction.The increase in communications and technology expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 wasprimarily due to the inclusion of a full year of communication and technology expenses acquired as part of the City Index transaction in 2015.The decrease in bad debt provision for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to the $2.5million in bad debt which arose in connection with the Swiss National Bank in January 2015.The decrease in acquisition expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 was due to a lack of acquisitionexpenses for the year ended December 31, 2016 compared to the $2.8 million of acquisition expenses for the year ended December 31, 2015, which aroseprimarily in connection with the City Index transaction. Acquisition expenses are costs directly attributable to acquisitions, including legal, accounting andother professional advisory fees.The decrease in restructuring expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to the winddown of our restructuring activities from the integration of City Index. Restructuring expenses include severance payments and related expenses that arose inconnection with headcount reduction relating to our ongoing integration of City Index.The decrease in integration expenses for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to the winddown of our restructuring activities from the integration of City Index. In the year ended December 31, 2016, these expenses consisted of acquisition-relatedactivity, primarily the accelerated amortization of intangible and other assets made redundant as a result of the City Index acquisition, employee relocationcosts and retention payments to employees. In the year ended December 31, 2015, these expenses included the accelerated amortization of the tradingplatform acquired in the GFT transaction which was retired following our acquisition of City Index.On April 28, 2016, we entered into a settlement agreement with the claimants in the Cameron Farley Ltd. matter, discussed above in “Part 1 - FinancialInformation - Item 3. Legal Proceedings”. Pursuant to the terms of the settlement agreement, we agreed to make a one-time settlement payment in exchangefor a full and final settlement of all claims. The settlement amount, net of insurance recoveries, totaled approximately $9.2 million.Interest on long term borrowings was $10.4 million and $9.2 million for the years ended December 31, 2016 and December 31, 2015, 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. The year ended December 31, 2016 was the first full year ofinterest expense for the 4.125% Convertible Senior Notes due 2020.Income tax expense increased $13.3 million, resulting in a tax expense of $9.8 million for the year ended December 31, 2016, compared to income taxbenefit of $3.5 million for the year ended December 31, 2015. Our effective tax rate in the year ended December 31, 2016 was 20.7% compared to an effectivetax rate of (41.7)% in the year ended December 31, 2015. The increase in effective tax rate for the year ended December 31, 2016 compared to the year endedDecember 31, 2015 was primarily due to a change in the mix of earnings from different foreign jurisdictions. Please refer to Note 18 to our auditedconsolidated financial statements for more detail.51Table of ContentsSegment Results - Year Ended December 31, 2016 Compared to Year Ended December 31, 2015Retail Segment (amounts in thousands) Year Ended December 31, 2016 2015 $ Change % ChangeNet revenue$336,353 $351,472 $(15,119) (4.3)% Employee compensation and benefits62,423 67,515 (5,092) (7.5)%Selling and marketing27,666 26,129 1,537 5.9 %Referral fees55,080 87,175 (32,095) (36.8)%Other operating expenses75,488 76,301 (813) (1.1)%Segment profit$115,696 $94,352 $21,344 22.6 %The decrease in retail segment net revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to adecrease in trading volume, partially offset by an increase in revenue per million.The decrease in employee compensation and benefits expenses for the retail segment for the year ended December 31, 2016 compared to the year endedDecember 31, 2015 was primarily due to a reduction in our annual employee incentive compensation costs, as well as the headcount reductions effected inthe third and fourth quarters of 2015.The increase in selling and marketing expenses for the retail segment for the retail segment for the year ended December 31, 2016 compared to the year endedDecember 31, 2015 was primarily due to increased costs to support the retail brands during the fourth quarter of 2016, partially offset by a reduction inmarketing spend in the first three quarters of 2016 while we focused on integration activities.The decrease in referral fees for the retail segment for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due toour focus on terminating unprofitable partner relationships and, to a lesser extent, renegotiating ongoing partner agreements to more favorable terms.The decrease in other operating expenses for the retail segment for the year ended December 31, 2016 compared to the year ended December 31, 2015 wasprimarily due to a decrease in U.K. regulatory fees, partially offset by an increase in audit fees for the year ended December 31, 2016.Other operating expenses for the retail segment include general and administrative expenses, communication and technology expenses, and tradingexpenses.Institutional Segment (amounts in thousands) Year Ended December 31, 2016 2015 $ Change % ChangeNet revenue$30,219 $35,072 $(4,853) (13.8)% Employee compensation and benefits14,424 15,305 (881) (5.8)%Selling and marketing103 138 (35) (25.4)%Other operating expenses10,342 9,573 769 8.0 %Segment profit$5,350 $10,056 $(4,706) (46.8)%The decrease in institutional segment net revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due toa decrease in volume in our non-platform institutional trading services and a shift in the mix of trading volume on our GTX platform reflecting an increasedpercentage of lower revenue-per-contract transactions, partially offset by an increase in ECN trading volume.52Table of ContentsThe decrease in employee compensation and benefits expenses for the institutional segment for the year ended December 31, 2016 compared to the yearended December 31, 2015 was primarily due to a decrease in commissions paid to employees as a result of the decrease in revenue.Selling and marketing expenses for the institutional segment remained relatively flat for the year ended December 31, 2016 compared to the year endedDecember 31, 2015.The increase in other operating expenses for the institutional segment for the year ended December 31, 2016 compared to the year ended December 31, 2015was primarily due to the mix of trading fees paid to third parties for the year ended December 31, 2016, compared to the prior year.Other operating expenses from the institutional segment include general and administrative expenses, communication and technology expenses, and tradingexpenses.Futures Segment (amounts in thousands) Year Ended December 31, 2016 2015 $ Change % ChangeNet revenue$48,084 $45,797 $2,287 5.0 % Employee compensation and benefits11,967 10,634 1,333 12.5 %Selling and marketing972 901 71 7.9 %Referral fees15,672 16,348 (676) (4.1)%Other operating expenses14,769 13,960 809 5.8 %Segment profit$4,704 $3,954 $750 19.0 %The increase in futures segment net revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to anincrease in revenue per traded contract in 2016.The increase in employee compensation and benefits expenses for the futures segment for the year ended December 31, 2016 compared to the year endedDecember 31, 2015 was primarily due to additional commissions paid to employees as a result of the increase in revenue.Selling and marketing expenses for the futures segment remained relatively flat for the year ended December 31, 2016 compared to the year ended December31, 2015.The decrease in referral fees for the futures segment for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily dueto a decrease in indirect futures volumes.The increase in other operating expenses for the futures segment for the year ended December 31, 2016 compared to the year ended December 31, 2015 wasprimarily due to an increase in trading expenses.Other operating expenses from the futures segment include general and administrative expenses, communication and technology expenses, and tradingexpenses.Corporate and Other (amounts in thousands) Year Ended December 31, 2016 2015 $ Change % ChangeOther revenue$(2,831) $(3,716) $885 (23.8)% Employee compensation and benefits13,090 13,127 (37) (0.3)%Selling and marketing1 — 1 100.0 %Other operating expenses10,210 11,038 (828) (7.5)%Loss$(26,132) $(27,881) $1,749 (6.3)%53Table of ContentsThe increase in corporate and other revenue for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due tochanges in foreign currency revaluations.Employee compensation and benefits expenses for employees not attributed to any of our operating segments, such as our executive officers, remainedrelatively flat for the year ended December 31, 2016 compared to the year ended December 31, 2015.Selling and marketing expenses for employees not attributed to any of our operating segments remained relatively flat for the year ended December 31, 2016compared to the year ended December 31, 2015.The decrease in other operating expenses not attributed to any of our operating segments for the year ended December 31, 2016 compared to the year endedDecember 31, 2015 was primarily due to a decrease in professional fees.Liquidity 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, the 4.125% ConvertibleSenior Notes due 2020 that were issued in 2015 in connection with our acquisition of City Index, the 5.00% Convertible Senior Notes due 2022 that wereissued in the third quarter of 2017, and access to secured lines of credit, such as the revolving credit facility entered into in August 2017. We plan to financeour future operating liquidity and regulatory capital needs in a manner consistent with our past practice. We expect that our capital expenditures for the next12 months will be lower than 2017, as we continue to identify areas for savings.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 primarily invest in short-term U.S. government securities, treasury bills, and other money market instruments. Ingeneral, we believe all of our investments and deposits are of high credit quality and we have more than adequate liquidity to conduct our businesses.Several of our operating subsidiaries are subject to requirements of 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, MAS in Singapore, ASIC in Australia, and theCIMA in the Cayman Islands, 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.Regulatory Capital RequirementsThe following table illustrates the minimum regulatory capital our subsidiaries were required to maintain as of December 31, 2017 and the actual amounts ofcapital that were maintained on that date (amounts in millions):54Table of ContentsEntity NameMinimumRegulatoryCapitalRequirements CapitalLevelsMaintained ExcessNetCapitalGAIN Capital Group, LLC$34.7 $48.0 $13.3GAIN Capital Securities, Inc.0.1 0.4 0.3GAIN Capital U.K., Ltd.69.7 208.1 138.4GAIN Capital Japan Co., Ltd.1.5 9.0 7.5GAIN Capital Australia, Pty. Ltd.0.8 4.7 3.9GAIN Capital-Forex.com Hong Kong, Ltd.1.9 4.7 2.8GAIN Global Markets, Inc.1.6 2.4 0.8GAIN Capital-Forex.com Canada, Ltd.0.2 1.7 1.5GAIN Capital Singapore Pte., Ltd.0.6 6.0 5.4Trade Facts, Ltd.0.6 3.2 2.6Global Asset Advisors, LLC— 1.8 1.8GAIN Capital Payments Ltd.0.2 0.4 0.2GTX SEF, LLC1.0 1.4 0.4Total$112.9 $291.8 $178.9Our futures commission merchant and forex dealer subsidiary, GCGL, is subject to the Commodity Futures Trading Commission Net Capital Rule (Rule 1.17)and NFA Financial Requirements, Sections 1 and 11. Under applicable provisions of these regulations, GCGL is required to maintain adjusted net capital ofthe greater of $1.0 million or 8% of Customer and Non-Customer Risk Maintenance Margin, or $20.0 million plus 5% of all liabilities owed to retailcustomers exceeding $10.0 million, plus 10% of all liabilities owed to eligible contract participant counterparties acting as a dealer that are not an affiliate.Net capital represents current assets less total liabilities as defined by CFTC Rule 1.17. GCGL’s current assets primarily consist of cash and cash equivalentsreported on its balance sheet as cash, receivables from brokers and trading securities, which are generally short-term U.S. government securities. GCGL’s totalliabilities include payables to customers, accrued expenses, accounts payable, sales and marketing expense payable, introducing broker fees payable andother liabilities. From net capital we take certain percentage deductions or haircuts against assets held based on factors required by the Commodity ExchangeAct to calculate adjusted net capital. GCGL’s net capital and adjusted net capital changes from day to day. As of December 31, 2017, GCGL had net capitalof approximately $48.0 million and net capital requirements and haircut charges of $34.7 million. As of December 31, 2017, GAIN Capital Group’s excessnet capital was $13.3 million. We believe that we currently have sufficient capital to satisfy these on-going minimum net capital requirements. In accordancewith CFTC regulation 1.12 and NFA Financial Requirements Section 1, a 20.0% decrease in GCGL’s net capital and a 30.0% decrease in excess net capitaldue to a planned equity withdrawal requires regulatory notification and/or approval.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$0.1 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, 2017, GCSImaintained $0.3 million more than the minimum required regulatory capital for a total of 4.0 times the required capital.GCUK2 is regulated by the FCA as a full scope €730k IFPRU Investment Firm. GCUK2 is required to maintain the greater of approximately $0.9 million(€730,000) or the Financial Resources Requirement, which is calculated as the sum of the firm’s operational, credit, counterparty, concentration and marketrisk. At December 31, 2017, GCUK2 maintained $138.4 million more than the minimum required regulatory capital for a total of 3.0 times the requiredcapital.GC Japan is a registered Type I financial instruments business firm regulated by the Japan Financial Services Agency (“FSA”) in accordance with FinancialInstruments and Exchange Law (Law No. 25 of 1948, as amended). GC Japan is a member of the Financial Futures Association of Japan. GC Japan is subjectto a minimum capital adequacy ratio of 140%, which is derived by dividing Net Capital (as defined in Law No. 25) by the sum of GC Japan’s market,counterparty credit risk and operational risk. At December 31, 2017, GC Japan maintained $7.5 million more than the minimum required regulatory capitalfor a total of 6.0 times the required capital.55Table of ContentsGCAU is regulated under the laws of Australia, including the Corporations Act 2001 (Commonwealth of Australia). GCAU holds an Australian FinancialServices License that has been issued by ASIC. GCAU is required to maintain a minimum capital requirement of $0.8 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, 2017, GCAU maintained $3.9 million more thanthe minimum required regulatory capital for a total of 5.9 times the required capital.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 $1.9 million. At December 31, 2017, GCHK maintained $2.8 million more than the minimum required regulatory capital for atotal of 2.5 times the required capital.GGMI, the Company’s Cayman Island subsidiary, is a registered securities arranger and market maker with the Cayman Islands Monetary Authority(“CIMA”). GGMI is required to maintain a capital level that is the greater of one quarter of relevant annual expenditure, or the financial resources requirementwhich is the sum of the Base Requirement, counterparty and position risk requirement, or $1.6 million. At December 31, 2017, GGMI maintained $0.8million more than the minimum required regulatory capital for a total of 1.5 times the required capital.GCCA is a Dealer Member of the Investment Industry Regulatory Organization of Canada (“IIROC”) and regulated under the laws of Canada, including theCanadian Investor Protection Fund. In Canada, the securities industry is governed by provincial or territorial legislation, and there is no national regulator.Local legislation differs from province to province and territory to territory, but generally requires that forex dealing representatives register with applicableregulators and self-regulatory organizations in order to offer forex and/or CFD products to retail clients. GCCA’s principal provincial regulator is the OntarioSecurities Commission, or OSC. GCCA is required to maintain risk-adjusted capital in excess of the minimum capital requirement. At December 31, 2017,GCCA maintained $1.5 million more than the minimum required regulatory capital for a total of 8.5 times the required capital.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 ofapproximately $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 ofoperational, counterparty, large exposure and market risk at all times. At December 31, 2017, GCS maintained $5.4 million more than the required minimumregulatory capital for a total of 10.0 times the required capital.Trade Facts is regulated by the FCA as a BIPRU Limited License Firm. Trade Facts is required to maintain a base financial resources requirement ofapproximately $0.6 million (€0.5 million) and a capital requirement of the higher of either credit risk plus market risk or a fixed overhead requirement. AtDecember 31, 2017, Trade Facts maintained $2.6 million more than the minimum required regulatory capital for a total of 5.3 times the required capital.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 less than $0.1 million. At December 31, 2017, GAA maintained $1.8 million more than the minimum required regulatorycapital.GAIN Capital Payments Ltd. is regulated in the U.K. by the FCA and is authorized to carry out payment services under the Payment Services Regulations2009. The regulatory capital must be the greater of either (i) $0.2 million (€0.1 million) or (ii) requirements determined by the fixed overhead requirement. AtDecember 31, 2017, GAIN Capital Payments Ltd. maintained $0.2 million more than the minimum required regulatory capital for a total of 2.0 times therequired capital.GTX SEF is a registered swap execution facility with the CFTC and is subject to the requirements under CFTC regulations 37.1300-1306. Under applicableprovisions of these regulations, GTX SEF is required to maintain financial resources of more than or equal to the total of its operating costs for a period of atleast one year financial resources requirements, calculated on a rolling basis. At December 31, 2017, GTX SEF maintained $0.4 million more than theminimum required regulatory capital for a total of 1.4 times the required capital.Effective from 2016, the FCA began transitioning in additional capital requirements in the form of a conservation buffer and a countercyclical capital bufferas set out in Capital Requirements Directive, or CRD IV, Article 160 Transitional Provisions for Capital Buffers. The transitional period began on January 1,2016 and the minimum common equity tier 1 capital ratio requirement, currently at 6.375% for the year of 2018, will increase to 7.0% as of January 1, 2019.Given the nature of our UK-regulated firms’ activities, the effect of the countercyclical buffer is expected to be negligible.56Table of ContentsIn 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 with the CFTC and imposes significant regulatory requirements on swapdealers and swap execution facilities. Effective February 27, 2013, GAIN GTX, LLC became provisionally registered with the CFTC and NFA as a swapdealer. Effective June 2016, GTX SEF, LLC became permanently registered with the CFTC as a swap execution facility, replacing the temporary registrationpreviously granted in April 2014. Certain of our other subsidiaries may be required to register, or may register voluntarily, as swap dealers and/or swapexecution 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. GAIN GTX, LLC and GTX SEF, LLC have faced, and may continue to face, increased costs due to theregistration and regulatory requirements listed above, as may any other of our subsidiaries that register as a swap dealer and/or swap execution facility. Inparticular, the CFTC has proposed rules that would require a swap dealer to maintain regulatory capital of at least $20 million. Compliance with this or otherswap-related regulatory capital requirements may require us to devote more capital to our GTX business or otherwise restructure our operations, such as bycombining our GTX business with other regulated subsidiaries that must also satisfy regulatory capital requirements. The increased costs associated withcompliance, and the changes that will be required in our OTC and clearing businesses, may adversely impact our results of operations, cash flows or financialcondition.Operating CashWe are required to maintain cash on deposit with our liquidity providers in order to conduct our hedging activities. As of December 31, 2017, we posted$78.5 million in cash with liquidity providers. As of December 31, 2017, our total client assets were $978.8 million compared to $945.5 million as ofDecember 31, 2016, an increase of $33.4 million. Total client assets represent amounts due to clients, including deposits and unrealized gains or lossesarising from open positions.The table set forth below provides a measure of our available liquidity as of December 31, 2017 and 2016, respectively. We believe our reporting of availableliquidity assists investors in evaluating our performance. We use this non-GAAP measure to evaluate our ability to continue to fund growth in our business(amounts in millions): December 31, 2017 December 31, 2016Cash and cash equivalents$209.7 $234.8Receivables from brokers78.5 61.1Revolving credit facility (undrawn)50.0 — Net operating cash338.2 295.9Less: Minimum regulatory requirements(112.9) (113.0)Less: Payables to brokers(2.8) —Less: Convertible senior notes due 2018(6.4) — Liquidity (1)$216.1 $182.9(1)Our Convertible Senior Notes due 2020 and 2022 are excluded given their long-dated maturityThe increase in our liquidity for the twelve months ended December 31, 2017 was primarily due to the availability of the $50.0 million revolving creditfacility we entered into in August 2017 and the $15.9 million net proceeds of the offering of our 5.00% Convertible Senior Notes due in 2022, partially offsetby the net loss of $11.2 million and the purchase of treasury stock of $26.2 million.57Table of ContentsConvertible Senior NotesOn November 27, 2013, we issued $80.0 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. We used a portionof the net proceeds of the offering of our 5.00% Convertible Senior Notes due 2022 to repurchase $71.8 million in principal amount of our 4.125%Convertible Senior Notes due 2018.The notes bear interest at a fixed rate of 4.125% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1,2014. The notes are convertible into cash, shares of our common stock, or a combination thereof, at our election. The notes will mature on December 1, 2018,unless earlier converted, redeemed or repurchased.On April 1, 2015, as part of the consideration for our acquisition of City Index, we issued $60.0 million aggregate principal amount of our 4.125%Convertible Senior Notes due 2020 to City Index Group Limited. These notes bear interest at a fixed rate of 4.125% per year, payable semi-annually in arrearson April 1 and October 1 of each year, beginning on October 1, 2015. The notes are convertible into cash, shares of our common stock, or a combinationthereof, at our election, subject to certain limitations. The notes will mature on April 1, 2020, unless earlier converted, redeemed or repurchased. We may notredeem the notes until the two year period prior to the maturity date of the notes.On August 22, 2017, we issued $92.0 million aggregate principal amount of our 5.00% Convertible Senior Notes due 2022, which includes the exercise infull of the over-allotment option granted to the initial purchasers of the notes, in a private offering to qualified institutional buyers pursuant to Rule 144Aunder the Securities Act of 1933, as amended. The notes bear interest at a fixed rate of 5.00% per year, payable semi-annually in arrears on February 15 andAugust 15 of each year, beginning on February 15, 2018. The notes are convertible into cash, shares of our common stock, or a combination thereof, at ourelection. The notes will mature on August 15, 2022, unless earlier converted, redeemed or repurchased. We may not redeem the notes prior to August 15,2020. The net proceeds from the offering of these notes were approximately $88.4 million, after deducting discounts to the initial purchasers and estimatedoffering expenses payable by the Company.Under applicable accounting guidance, an entity must separately account for the liability and equity components of convertible debt instruments whoseconversion may be settled entirely or partially in cash 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 is reflected asa liability in our consolidated balance sheet in an amount equal to the fair value, which, as of December 31, 2017 and 2016, was $132.2 million and $124.8million, respectively. The equity component of the notes is included in the additional paid-in capital section of our shareholders’ equity on our ConsolidatedBalance Sheets, and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component. The equitycomponent, as of December 31, 2017 and 2016, for our convertible senior notes was $38.6 million and $27.4 million, respectively. This original issuediscount is amortized to non-cash interest expense over the term of the notes, and, as a result, we record a greater amount of interest expense in currentperiods. Accordingly, we reported lower net income in our financial results than would have been recorded had we reflected only cash interest expense in ourconsolidated income statement because ASC 470-20 requires the interest expense associated with the notes to include both the current period’s amortizationof the original issue discount and the notes’ cash coupon interest, which could adversely affect our reported or future financial results, the trading price of ourcommon 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, 4.125% Convertible Senior Notes due 2020, and 5.00% Convertible Senior Notes due 2022) are currently accounted forusing the treasury stock method. Under this method, the shares issuable upon conversion of the notes are not included in the calculation of diluted earningsper share unless the conversion value of the notes exceeds their principal amount at the end of the relevant reporting period. If the conversion value exceedstheir principal amount, then, for diluted earnings per share purposes, the notes are accounted for as if the number of shares of common stock that would benecessary to settle the excess, if we elected to settle the excess in shares, were issued. The accounting standards in the future may not continue to permit theuse of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares, if any, issuable upon conversion of the notes,then our diluted earnings (loss) per share could be adversely affected.58Table of ContentsCredit FacilityOn August 3, 2017, the Company entered into a Credit Agreement, dated as of August 2, 2017, for a three year U.S. $50.0 million senior secured first lienrevolving credit facility that matures in August 2020. Upon request of the Company, the credit facility may be increased by up to $25.0 million, with aminimum increase of $5.0 million. The credit facility contains covenants that are customary for an issuer with senior debt. As of December 31, 2017, we werein compliance with the covenants for our credit facility. The Company will pay a quarterly commitment fee based on the undrawn portion of the facility andinterest on amounts drawn.As of December 31, 2017, there were no amounts outstanding under the revolving line of credit.Cash FlowThe following table sets forth a summary of our cash flow for each of the three years ended December 31, 2017 (amounts in thousands): Year ended December 31, 2017 2016 2015Net cash provided by operating activities$11,131 $124,839 $77,213Net cash used in investing activities(28,114) (31,327) (16,081)Net cash used in financing activities(21,530) (21,175) (25,840)Effect of exchange rate changes on cash and cash equivalents13,441 (9,465) (2,755)NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS$(25,072) $62,872 $32,537The 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.Our largest operating expenses are employee compensation and benefits, marketing and referral fees. Employee compensation and benefits include salaries,bonuses and other employee related costs, as well as commissions paid to certain sales personnel. Marketing expenses consist primarily of selling andpromotional costs to support our retail, institutional and futures brands. Referral fees consist primarily of payments made to our white label partners andintroducing 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 the impact of unrealized gains and losses on ourcustomer balances, such that customers may be required to post additional funds to maintain open positions or may choose to withdraw excess funds on openpositions.Year Ended December 31, 2017 Compared to Year Ended December 31, 2016Operating ActivitiesCash provided by operating activities was $11.1 million for the year ended December 31, 2017, compared to $124.8 million provided by operating activitiesfor the year ended December 31, 2016. Net income decreased approximately $48.0 million and receivable from brokers decreased 75.9 million. This wasoffset by an increase of approximately $5.0 million due to the loss on extinguishment of debt for the year ended December 31, 2017.Investing ActivitiesCash used for investing activities was $28.1 million for the year ended December 31, 2017, compared to $31.3 million used for investing activities in theyear ended December 31, 2016. Cash used for the purchase of intangible assets increased approximately $7.2 million related to the purchase of FXCMcustomer assets in the year ended December 31, 2017, which was offset by the purchase of an additional 24% ownership interest in each of GAA and TT foran aggregate purchase price of $7.4 million in the prior year and a net decrease of $3.0 million in the cash used for the purchase of property and equipment.Financing ActivitiesCash used for financing activities was $21.5 million for the year ended December 31, 2017, compared to $21.2 million used for financing activities for theyear ended December 31, 2016. Cash used for the purchase of treasury stock increased $17.2 million59Table of Contentsdue to our stock repurchase activities, in particular for purchases made as part of the convertible refinancing, offset by the net impact of the convertible noterefinancing of $17.7 million for the year ended December 31, 2017.Year Ended December 31, 2016 Compared to Year Ended December 31, 2015Operating ActivitiesCash provided by operating activities was $124.8 million for the year ended December 31, 2016, compared to $77.2 million provided by operating activitiesfor the year ended December 31, 2015. Non-cash integration costs decreased approximately $26.5 million due to the acceleration of the amortization of theGFT platform in the year ended December 31, 2015. This was offset by an increase in cash provided by deferred taxes of $8.9 million for the year endedDecember 31, 2016.Investing ActivitiesCash used for investing activities was $31.3 million for the year ended December 31, 2016, compared to $16.1 million used for investing activities in theyear ended December 31, 2015. Cash used for acquisitions and for the purchase of intangible assets increased approximately $3.3 million, which was offsetby the purchase of an additional 24% ownership interest in each of GAA and TT for an aggregate purchase price of $7.4 million and a decrease of $7.6million in cash received in the City acquisition in 2015. Cash used for the purchase of property and equipment increased $4.2 million.Financing ActivitiesCash used for financing activities was $21.2 million for the year ended December 31, 2016, compared to $25.8 million used for financing activities for theyear ended December 31, 2015. Cash used in acquisitions decreased $13.9 million as the City Index acquisition closed in 2015 and there were noacquisitions in 2016. In addition, cash used for tax benefit from employee stock option exercises increased $1.1 million, cash used for the purchase oftreasury stock increased $3.9 million due to our stock repurchase activities for the year ended December 31, 2016, and cash used for the repurchase of theconvertible notes increased $1.7 million due to the note buy backs for the year ended December 31, 2016.Capital ExpendituresCapital expenditures were $20.9 million for the year ended December 31, 2017, compared to $23.9 million for the year ended December 31, 2016 and $19.7million for the year ended December 31, 2015. Capital expenditures for the years ended December 31, 2017, 2016, and 2015 were primarily related to thedevelopment and additional features to various trading platforms and websites.Off-Balance-Sheet ArrangementsAt December 31, 2017 and 2016 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, 2017 (amounts in thousands): Less than 1-3 3-5 More thanTotal 1 Year Years Years 5 YearsPurchase Obligations$24,265 $16,997 $7,268 $— $—Operating Leases25,162 5,191 7,133 7,505 5,333Total$49,427 $22,188 $14,401 $7,505 $5,333The amounts reported above for “Purchase Obligations” are calculated to include mandatory pre-cancellation notice periods, if any. Excluded from theamounts set forth above are obligations relating to the $6.4 million in principal amount of our 4.125% Convertible Senior Notes due 2018 that we issued inthe fourth quarter of 2013, the $60.0 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, and the $92.0 million in principal amount of our 5.00% Convertible Senior Notes due 2022 that we issued in the thirdquarter of 2017, as our obligations under these Convertible Senior Notes are not certain to be settled in cash. By their terms, these Convertible Senior Notesmay be settled in cash, shares of our common stock or in a combination of shares and cash at our discretion.60Table of ContentsPurchase obligations due in less than one year primarily consist of agreements with service providers related to maintenance, data, system support andnetwork services.Critical Accounting Policies and EstimatesOur 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 management’s most difficult, subjective, or complex judgments, often as a result of the need tomake estimates about the effects of matters that are inherently uncertain. While our significant accounting policies are described in more detail in the notes toour consolidated financial statements, we believe the following accounting policies are critical to the estimates and assumptions used in the preparation ofour consolidated financial statements.Goodwill and Intangible AssetsWe obtained goodwill and intangible assets as a result of the acquisitions of certain of our subsidiaries. Goodwill represents the excess of the cost over thefair market value of net assets acquired. We are required to periodically assess whether any of our goodwill is impaired. In order to do this, we apply judgmentin determining our reporting units, which represent our business segments. In accordance with relevant accounting guidance, we test goodwill for impairmenton an annual basis during the fourth quarter and on an interim basis when conditions indicate impairment may have occurred. When testing for goodwillimpairment, the Company first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it ismore likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes it is more likely than not that the fairvalue of a reporting unit is less than its carrying amount, a quantitative fair value test is performed to determine any potential impairment loss. We performedour annual test for goodwill impairment in the fourth quarter of 2017 and noted there was no impairment. Intangible assets with definite useful lives are subject to amortization and are evaluated for recoverability when events or changes in circumstances indicatethat an intangible asset’s carrying amount may not be recoverable in accordance with ASC 360, Property, Plant, and Equipment. If such an event or changeoccurs, we estimate cash flows directly associated with the use of the intangible asset to test its recoverability and assess its remaining useful life. Theprojected cash flows require assumptions related to revenue growth, operating margins and other relevant market, economic and regulatory factors. If theexpected undiscounted future cash flows from the use and eventual disposition of a finite‑lived intangible asset or asset group are not sufficient to recover thecarrying value of the asset, we then compare the carrying amount to its current fair value. We estimate the fair value using market prices for similar assets, ifavailable, or by using a discounted cash flow model. We then recognize an impairment loss for the amount by which the carrying amount exceeds its fairvalue. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.Income TaxesASC 740, Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for incometaxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences ofevents that have been recognized in an entity’s financial statements or tax returns. A valuation allowance may be recorded against deferred tax assets if it ismore likely than not that those assets will not be realized. Judgment is required in assessing the future tax consequences of events that have been recognizedin our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact our financial positionor results of operations. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measuredbased on the largest benefit for each such position that has a greater than fifty percent likelihood of being realized upon ultimate resolution. We considermany factors when evaluating and estimating our tax positions and tax benefits. Such estimates involve interpretations of regulations, rulings, case law, etc.and are inherently complex. Our estimates may require periodic adjustments and may not accurately anticipate actual outcomes as61Table of Contentsresolution of income tax treatments in individual jurisdictions typically would not be known for several years after completion of any fiscal year. The impactof our reassessment of uncertain tax positions in accordance with ASC 740 did not have a material impact on the results of operations, financial condition orliquidity.Recent Accounting PronouncementsIn May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which is part of ASC Topic 606. It defines how companiesreport revenues from contracts with customers and also requires certain enhanced disclosures. The standard’s provisions and related amendments are effectivefor annual reporting periods beginning after December 15, 2017. On January 1, 2018, the Company adopted this guidance, which did not have a materialimpact on the Company’s financial statements. A substantial portion of revenue falls under ASC Topic 825, Financial Instruments, which is excluded fromthe scope of the new guidance. The Company adopted ASU No. 2014-09 using the modified retrospective approach, which includes presenting thecumulative effects of initial application, if any, along with supplemental disclosures.In November 2016, the FASB issued ASU No. 2016-18, “Restricted Cash”, requiring that amounts generally described as restricted cash and restricted cashequivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statementof cash flows. The new guidance became effective on January 1, 2018 and will be applied using a retrospective transition method to each period presented.The Company concluded that cash held for customers, including amounts required to be segregated under federal or other regulations is considered restrictedcash and will present such cash with total cash on the statement of cash flows.In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” whicheliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2) from the goodwill impairmenttest. Instead, an impairment charge will equal the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the amount ofgoodwill allocated to the reporting unit. The guidance will be effective prospectively for the Company for the quarter ending December 31, 2020, with earlyadoption permitted after January 1, 2017. Management will adopt this approach to the extent if Step 2 is required.In February 2016, the FASB issued ASU No. 2016-02, which amended the guidance on accounting for leases. The FASB issued this update to increasetransparency and comparability among organizations. This update requires recognizing lease assets and lease liabilities on the balance sheet and disclosingkey information about leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods withinthat fiscal year. The Company is currently assessing the impact on its Financial Statements of adopting this guidance.In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220),” to address certain income taxeffects in Accumulated Other Comprehensive Income (AOCI) resulting from the tax reform enacted in 2017. The amended guidance provides an option toreclassify tax effects within AOCI to retained earnings in the period in which the effect of the tax reform is recorded. The amendments are effective for fiscalyears beginning after December 15, 2018, including interim periods. Early adoption is permitted. The Company is currently assessing the impact on itsFinancial Statements of adopting this guidance.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKMarket risk refers to the potential for adverse changes in the value of a Company’s financial instruments as a result of changes in market conditions. We donot hold financial instruments for trading purposes on a long-term basis. We continually evaluate our exposure to market risk and oversee the establishmentof policies, procedures and controls to ensure that market risks are identified and analyzed on an ongoing basis.Interest 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, 2017, an immediate 100 basis point increase in short-term interest rates would result in approximately $10.3 million more inannual pretax income.62Table of ContentsForeign 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 monitorour exchange rate exposure and may make settlements to reduce our exposure. We do not take proprietary directional market positions.Virtually all sales and related operating costs are denominated in the currency of the local country and translated into USD for consolidated reportingpurposes. Although the majority of the assets and liabilities of these subsidiaries are denominated in the functional currency of the subsidiary, they may alsohold assets or liabilities denominated in other currencies. These items may give rise to foreign currency transaction gains and losses. As a result, our results ofoperations and financial position are exposed to changing currency exchange rates. We may consider entering into hedging transactions to mitigate ourexposure 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 tradingposition 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, with limits on our exposure to any single financialinstitution. In the event that our access to one or more financial institutions becomes limited, our ability to hedge may be impaired.63Table of ContentsMarket 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 instrument, 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, 2017, wemaintained capital levels of $291.8 million, which represented approximately 2.6 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 markets in which we have positions. These factorsare directly impacted by domestic and international market and economic conditions that are beyond our control. In an effort to manage this risk, we havesecured a substantial liquidity pool by establishing trading relationships with several financial institutions. These relationships provide us with sufficientaccess to liquidity to allow us to consistently execute significant trades in varying market conditions at the notional amounts our customers desire byproviding 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, with our liquidity providers. Collateral on deposit ranged from$81.4 million to $245.0 million in the aggregate during the year ended December 31, 2017.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. Our computer infrastructure is potentially vulnerable to physical or electronic computer break-ins, viruses and similardisruptive problems and security breaches. We have established a program to monitor our computer systems, platforms and related technologies and topromptly address issues that arise. We have also established disaster recovery facilities in strategic locations to ensure that we can continue to operate withlimited interruptions in the event that our primary systems are damaged. As with our technological systems, we have established policies and proceduresdesigned to monitor and prevent both human errors, such as clerical mistakes or incorrectly placed trades, as well as human misconduct, such as unauthorizedtrading, fraud or negligence. In addition, we seek to mitigate the impact of any operational issues by maintaining insurance coverage for variouscontingencies.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur consolidated financial statements are included in pages F-1 to F-53 of this Annual Report on Form 10-K.ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURES(a) Evaluation of Disclosure Controls and Procedures64Table of ContentsThe 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, as of the end of the period covered by this Form 10-K, the Company’s CEO and CFO have concluded that the Company’sdisclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were 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, 2017. 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, management, including the Company’s CEO and CFO, concluded that our internal control over financialreporting was effective as of December 31, 2017.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, 2017 as stated in their report on the following page.(c) Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during theyear ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.65Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and Board of DirectorsGAIN Capital Holdings, Inc.Opinion on Internal Control Over Financial ReportingWe have audited GAIN Capital Holdings, Inc. and subsidiaries (the Company) internal control over financial reporting as of December 31, 2017, based oncriteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, shareholders’equity, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes and financial statement schedule I(collectively, the consolidated financial statements), and our report dated March 14, 2018, expressed an unqualified opinion on those consolidated financialstatements.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA 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./s/ KPMG LLPNew York, New YorkMarch 14, 201866Table of ContentsITEM 9B. OTHER INFORMATIONNone.67Table 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 to be filed pursuant to Regulation 14A, whichwe intend to file within 120 days of the end of our fiscal year.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 to be filed pursuant to Regulation 14A, whichwe intend to file within 120 days of the end of our fiscal year.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 to be filed pursuant to Regulation 14A, which we intendto file within 120 days of the end of our fiscal year.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 to be filed pursuant to Regulation 14A, which we intendto file within 120 days of the end of our fiscal year.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation to be included in this item is incorporated by reference to our proxy statement to be filed pursuant to Regulation 14A, which we intend to filewithin 120 days of the end of our fiscal year.68Table 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, 2017 and 2016F-4Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31,2017, 2016 and 2015F-5Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2017,2016 and 2015F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015F-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) asof December 31, 2017 and 2016 and for the Years ended December 31, 2017, 2016, and 2015F-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.69Table of ContentsINDEX TOCONSOLIDATED FINANCIAL STATEMENTS ANDFINANCIAL STATEMENT SCHEDULEConsolidated Financial Statements: Reports of Independent Registered Public Accounting FirmsF-2Consolidated Balance Sheets as of December 31, 2017 and 2016F-5Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2017, 2016, and 2015F-6Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2017, 2016, and 2015F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015F-9Notes to Consolidated Financial StatementsF-11 Financial Statement Schedule: Schedule I - Condensed Financial Information of GAIN Capital Holdings, Inc. (Parent Company Only) as of December 31, 2017 and 2016 and for theYears ended December 31, 2017, 2016 and 2015F-42F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and Board of DirectorsGAIN Capital Holdings, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of GAIN Capital Holdings, Inc. and subsidiaries (the Company) as of December 31, 2017and 2016, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years inthe two‑year period ended December 31, 2017, and the related notes and financial statement schedule I (collectively, the consolidated financial statements).In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017and 2016, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 31, 2017, in conformity withU.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 14, 2018 expressed an unqualified opinion on theeffectiveness of the Company’s internal control over financial reporting.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures thatrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ KPMG LLPWe have served as the Company’s auditor since 2016.New York, New YorkMarch 14, 2018F-2Table 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 statements of income and comprehensive income, changes in shareholders’ equity, and cash flows of GAINCapital Holdings, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2015. Our audit also included the financial statement schedule forthe year ended December 31, 2015, listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statementschedule based on our audit. We did not audit the consolidated financial statements of GAIN Capital UK Limited, a wholly owned subsidiary, whichstatements reflect revenues constituting 24% of the related consolidated financial statement amounts for the year ended December 31, 2015. Thosestatements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for GAINCapital UK Limited, is 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 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 audit and the report of the other auditors provide a reasonable basis for our opinion.In our opinion, based on our audit and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, theresults of operations and cash flows of GAIN Capital Holdings, Inc. and subsidiaries for the year ended December 31, 2015, in conformity with accountingprinciples generally accepted in the United States of America. Also, in our opinion, based on our audit and the report of the other auditors, such financialstatement schedule for the year ended December 31, 2015, when considered in relation to the basic 2015 consolidated financial statements taken as a whole,presents fairly, in all material respects, the information set forth therein./s/ Deloitte & Touche LLPNew York, New YorkMarch 17, 2016F-3Table of ContentsReport of Independent Registered Public Accounting FirmBoard of Directors and ShareholderGain Capital UK LimitedLondon, United KingdomWe have audited the profit and loss account, statement of changes in equity and cash flows for the nine-month period ended December 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 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 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 audit provides a reasonablebasis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the results of Gain Capital UK Limited’s operations and cashflows for the nine-month period ended December 31, 2015 in accordance with United Kingdom Financial Reporting Standard 102 ‘The Financial ReportingStandard applicable in the UK and Republic 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./s/ BDO LLPBDO LLPLondon, United KingdomMarch 15, 2016F-4Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Balance Sheets(in thousands, except share data) December 31, 2017 December 31, 2016ASSETS: Cash and cash equivalents$209,688 $234,760Cash and securities held for customers978,828 945,468Receivables from brokers78,503 61,096Property and equipment, net40,742 36,462Intangible assets, net61,969 67,358Goodwill33,036 32,107Other assets45,881 52,833Total assets$1,448,647 $1,430,084LIABILITIES AND SHAREHOLDERS’ EQUITY: Liabilities Payables to customers$978,828 $945,468Payables to brokers2,789 —Accrued compensation and benefits10,104 13,559Accrued expenses and other liabilities33,947 41,547Income tax payable599 3,965Convertible senior notes132,221 124,769Total liabilities$1,158,488 $1,129,308Commitments and contingent liabilities Redeemable non-controlling interests$4,411 $6,594Shareholders’ equity Common stock ($0.00001 par value; 120 million shares authorized, 53,612,340 shares issued and45,152,299 shares outstanding as of December 31, 2017; 120 million shares authorized,52,848,811 shares issued and 48,220,243 shares outstanding as of December 31, 2016)$— $—Additional paid-in capital235,659 218,392Retained earnings122,686 143,399Accumulated other comprehensive loss(15,670) (36,842)Treasury stock, at cost (8,460,041 shares at December 31, 2017 and 4,628,568 at December 31,2016, respectively)(56,927) (30,767)Total shareholders’ equity285,748 294,182Total liabilities and shareholders’ equity$1,448,647 $1,430,084The accompanying notes are an integral part of these consolidated financial statements.F-5Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Statements of Operations and Comprehensive Income(in thousands, except share and per share data) Year Ended December 31, 2017 2016 2015REVENUES: Retail revenue$231,100 $330,744 $347,489Institutional revenue30,136 29,030 33,773Futures revenue37,964 47,430 45,427Other revenue4,478 3,504 8,487Total non-interest revenue303,678 410,708 435,176Interest revenue5,829 1,669 1,220Interest expense883 552 1,049Total net interest revenue4,946 1,117 171Net revenue$308,624 $411,825 $435,347EXPENSES: Employee compensation and benefits$95,218 $101,904 $106,581Selling and marketing31,200 28,742 27,168Referral fees53,671 70,752 103,523Trading expenses29,041 31,159 31,914General and administrative45,727 55,036 55,067Depreciation and amortization17,907 13,905 11,111Purchased intangible amortization16,110 15,016 16,550Communications and technology19,699 20,460 18,929Bad debt provision(247) 4,154 7,462Acquisition expenses— — 2,819Restructuring expenses— 1,041 3,482Integration expenses— 2,788 33,092Legal settlement— 9,205 —Impairment of investment620 — —Total operating expense308,946 354,162 417,698OPERATING (LOSS)/PROFIT(322) 57,663 17,649Interest expense on long term borrowings11,821 10,421 9,222Loss on extinguishment of debt4,944 — —(LOSS)/INCOME BEFORE INCOME TAX (BENEFIT)/EXPENSE(17,087) 47,242 8,427Income tax (benefit)/expense(6,855) 9,768 (3,512)Equity in net loss of affiliate(343) (62) —NET (LOSS)/INCOME(10,575) 37,412 11,939Net income attributable to non-controlling interest620 2,140 1,660NET (LOSS)/INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.(11,195) 35,272 10,279Other comprehensive income/(loss): Foreign currency translation adjustment21,172 (30,977) (4,352)COMPREHENSIVE INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.$9,977 $4,295 $5,927(Loss)/earnings per common share: Basic$(0.20) $0.67 $0.22Diluted$(0.20) $0.67 $0.22Weighted average common shares outstanding used in computing (loss)/earnings per common share: Basic46,740,097 48,588,917 47,601,979Diluted46,740,097 48,785,674 48,379,051The accompanying notes are an integral part of these consolidated financial statements.F-6Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Statement of Changes in Shareholders’ Equity(in thousands, except share data) Common Stock TreasuryStock AdditionalPaid inCapital RetainedEarnings AccumulatedOtherComprehensiveIncome Total Shares (1) Amount BALANCE—January 1, 201542,934,559 $— $(16,720) $148,378 $119,775 $(1,513) $249,920Net income applicable to GAIN CapitalHoldings, Inc.— — — — 10,279 — 10,279Exercise of options638,241 — — 2,386 — — 2,386Issuance of common stock5,319,149 — — 45,100 — — 45,100Conversion of restricted stock intocommon stock440,651 — — — — — —Issuance of common stock for theemployee stock purchase plan92,777 — — 789 — — 789Purchase of treasury stock(654,362) — (5,088) — — — (5,088)Shares withheld for net settlements ofshare-based awards— — — — — — —Share-based compensation— — — 3,680 — — 3,680Tax benefit of stock options exercises— — — 1,140 — — 1,140Convertible note issuance— — — 15,348 — — 15,348Tax effect of debt discount onconvertible notes— — — (3,840) — — (3,840)Other— — — — (56) — (56)Adjustment to the redemption value ofput options related to non-controllinginterests— — — — 308 — 308Dividends declared— — — — (9,530) — (9,530)Foreign currency translation adjustment— — — — — (4,352) (4,352)BALANCE—December 31, 201548,771,015 $— $(21,808) $212,981 $120,776 $(5,865) $306,084Net income applicable to GAINCapital Holdings, Inc.— — — — 35,272 — 35,272Exercise of options179,501 — — 706 — — 706Issuance of common stock— — — — — — —Conversion of restricted stock intocommon stock500,253 — — — — — —Issuance of common stock for theemployee stock purchase plan96,173 — — 611 — — 611Purchase of treasury stock(1,317,369) — (8,894) — — — (8,894)Shares withheld for net settlements ofshare-based awards(9,330) — (65) — — — (65)Share-based compensation— — — 4,151 — — 4,151Tax effect of debt discount onconvertible notes— — — 48 — — 48Repurchase of convertible seniornotes— — — (105) — — (105)Adjustment to the redemption valueof put options related to non-controlling interests— — — — (2,715) — (2,715)Adjustment to fair value ofredeemable non-controlling interests— — — — 258 — 258Dividends declared— — — — (10,192) — (10,192)Foreign currency translationadjustment— — — — — (30,977) (30,977)F-7Table of ContentsBALANCE—December 31, 201648,220,243 $— $(30,767) $218,392 $143,399 $(36,842) $294,182Net loss applicable to GAIN CapitalHoldings, Inc.— — — — (11,195) — (11,195)Exercise of options88,427 — — 356 — — 356Conversion of restricted stock intocommon stock572,060 — — — — — —Issuance of common stock for theemployee stock purchase plan103,042 — — 642 — — 642Purchase of treasury stock(3,776,283) — (25,778) — — — (25,778)Shares withheld for net settlements ofshare-based awards(55,190) — (382) — — — (382)Share-based compensation— — — 5,093 — — 5,093Recognition of debt discount onconvertible notes— — — 18,399 — — 18,399Tax effect of debt discount onconvertible notes— — — (7,037) — — (7,037)Repurchase of convertible senior notes— — — (186) — — (186)Adjustment to the redemption value ofput options related to non-controllinginterests— — — — 1,656 — 1,656Dividends declared— — — — (11,174) — (11,174)Foreign currency translation adjustment— — — — — 21,172 21,172BALANCE—December 31, 201745,152,299 $— $(56,927) $235,659 $122,686 $(15,670) $285,748The accompanying notes are an integral part of these consolidated financial statements.F-8Table of ContentsGAIN CAPITAL HOLDINGS, INC.Consolidated Statements of Cash Flows(in thousands) Year Ended December 31, 2017 2016 2015CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss)/income$(10,575) $37,412 $11,939Adjustments to reconcile net (loss)/income to cash provided by operating activities (Gain)/loss on foreign currency exchange rates(719) 1,692 2,432Depreciation and amortization34,017 28,921 27,661Non-cash integration costs— 366 26,827Deferred tax benefit(2,630) (3,481) (12,355)Amortization of deferred financing costs495 442 354Bad debt provision(247) 4,154 7,462Convertible senior notes discount amortization4,917 4,311 3,624Share-based compensation5,093 4,151 3,680Loss/(gain) on extinguishment of debt4,944 (89) —Equity in net loss of affiliate343 62 —Adjustment to fair value of contingent consideration— — (6,722)Impairment of cost basis investment620 — —Changes in operating assets and liabilities: Cash and securities held for customers5,352 (77,216) 101,325Receivables from brokers(17,549) 58,360 45,576Payables to brokers2,789 — —Other assets5,872 (13,079) (7,674)Payables to dealers, FCM’s, customers(5,352) 77,216 (101,325)Accrued compensation and benefits(3,942) 2,045 (7,454)Accrued expenses and other liabilities(10,059) (6,703) (18,748)Income tax payable(2,238) 6,275 611Net cash provided by operating activities11,131 124,839 77,213CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment(20,930) (23,883) (19,676)Purchase of partial interest in GAA/TT— (7,444) —Acquisition of FXCM assets(7,184) — —Funding of acquisitions, net of cash acquired— — (3,258)Cash received relating to acquisitions— — 7,612Purchase of investment— — (759)Net cash used in investing activities(28,114) (31,327) (16,081)CASH FLOWS FROM FINANCING ACTIVITIES: Contractual payments for acquisitions— — (13,893)Proceeds from exercise of stock options356 706 2,386Proceeds from employee stock purchase plan642 611 789Purchase of treasury stock(26,160) (8,959) (5,088)Excess tax benefit from employee stock option exercises— — 1,140Dividend payments(11,174) (10,192) (9,530)Distributions to non-controlling interest holders(1,147) (1,605) (1,644)Convertible note issuance, net of commissions89,010 — —Repurchase of convertible notes(73,057) (1,736) —Net cash used in financing activities$(21,530) $(21,175) $(25,840)F-9Table of ContentsEffect of exchange rate changes on cash and cash equivalents13,441 (9,465) (2,755)NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS(25,072) 62,872 32,537CASH AND CASH EQUIVALENTS—Beginning of year$234,760 $171,888 $139,351CASH AND CASH EQUIVALENTS—End of year$209,688 $234,760 $171,888SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest$5,660 $6,251 $5,065Income taxes$4,512 $8,438 $9,861Non-cash financing activities: Common stock issued as consideration for business acquisition$— $— $45,100Convertible senior notes issued as consideration for business acquisition$— $— $65,000Deferred taxes related to convertible senior notes issued$(7,037) $— $(3,840)Adjustment to the redemption value of put options related to non-controlling interests$1,656 $(2,715) $308The accompanying notes are an integral part of these consolidated financial statements.F-10Table of ContentsGAIN CAPITAL HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. ORGANIZATION AND BASIS OF PRESENTATIONGAIN 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 owns all outstanding membership units of GAIN Capital Group, LLC(“Group, LLC”), the Company’s primary regulated entity in the United States. GAIN Capital Holdings Ltd. is the holding company of the Company’s primaryregulated entity in the United Kingdom.The Company is a global provider of trading services and solutions, specializing in over-the-counter, or OTC, and exchange-traded markets. The Companyoperates its business in three segments. Through its retail segment, the Company provides its retail customers around the world with access to a diverse rangeof global financial markets, including spot forex, precious metals, spread bets and contracts for difference, or CFDs, on commodities, indices, individualequities, options and interest rate products, as well as OTC options on forex. The Company’s institutional segment provides agency execution services andelectronic access to spot and forward foreign exchange and precious metals markets via the electronic communications network, or ECN, GTX. TheCompany’s futures segment offers execution and risk management services for exchange-traded products on major U.S. and European exchanges. For moreinformation about the Company’s segments, please refer to Note 21.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 GCUK2 are each registered in the United Kingdom (“U.K.”) and regulated by the Financial ConductAuthority (“FCA”) as full scope €730k IFPRU Investment Firms. GCUK1 was regulated until October 6, 2017 when it was integrated into GCUK2 and itslicense was deregistered with the FCA.In April 2015, the Company acquired all of the outstanding share capital of City Index from City Index Group Limited. GCUK2, GCAU and GCS are eachsubsidiaries that were acquired as part of the City Index acquisition. Each of these entities is regulated locally by the relevant regulators, including the FCA.In December 2016, the Company acquired additional ownership interests in each of Global Asset Advisors, LLC (“GAA”) and Top Third Ag Marketing, LLC(“Top Third”), increasing its ownership percentage of each company to 79%.The 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”).2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESConsolidationThe 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.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 significantestimates regarding:•Valuation of assets and liabilities requiring fair value estimates;•The allowance for doubtful accounts;•The realization of deferred taxes;F-11Table of Contents•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; •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 and advisory businesses.OTC trading includes forex trading (“forex”), metals trading, CFDs and spread-betting (in markets which do not prohibit such transactions), as well as otherfinancial 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 frombrokers, Payables to customers, and Payables to brokers on the Consolidated Balance Sheets. Changes in net unrealized gains or losses are recordedin Retail revenue on the Consolidated Statements of Operations 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 does not assume any market or credit risk in connectionwith 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. Restructuring expensesIn 2016 and 2015, the Company incurred restructuring expenses, which reflected costs arising from headcount reductions and other exit costs, measured anddisclosed in accordance with relevant accounting guidance. These costs are expensed as incurred.Acquisition expensesIn 2015, the Company incurred acquisition related expenses, which included costs such as legal, accounting, valuation and other costs specified inaccounting guidance. These costs are expensed as incurred.F-12Table of ContentsIntegration expensesIn 2016 and 2015, the Company incurred integration expenses, which are acquisition related costs that are subsequently incurred while integrating theacquired company into the consolidated group. These costs are expensed as incurred.Cash 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. TheCompany’s cash equivalents consisted of U.S. treasury bills and money market accounts with an initial maturity of 90 days or less. Cash equivalents arerecorded 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. Asof December 31, 2017, $105.2 million of total cash and securities held for customers are invested in U.S. government and agency securities.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.Fair Value MeasurementsCertain financial assets and liabilities are measured at fair value in accordance with applicable accounting guidance, as discussed in Note 3 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; Convertible senior notes; certain other assets; Payables to customers;Payables to brokers; and Accrued expenses and other 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. Government instruments. The majority of the Company’s cash and cash equivalents are held at tenfinancial institutions.The Company also has credit risk related to receivables from brokers included in Receivables from brokers and Cash and cash equivalents. As ofDecember 31, 2017 and 2016, 41% and 54%, respectively, of the Company’s brokers receivables included in the Consolidated Balance Sheets were from onelarge, global financial institution.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.F-13Table of ContentsProperty 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. Costsrelated to training, administration and non-value-added maintenance are charged to expense as incurred. Capitalized software development costs are beingamortized over the useful life of the software, which the Company has estimated at three years.In 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 identifiable undiscounted cashflows from such an asset (or asset group) are less than the carrying value. In that event, a loss is recognized in the amount by which the carrying value exceedsthe 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 assets held forsale. The Company has identified no such impairment indicators as of December 31, 2017 or December 31, 2016.Foreign CurrenciesItems included in the financial statements of each of the Company’s subsidiaries are measured using the currency of the primary economic environment inwhich the subsidiaries operate (the functional currency). The Company has determined that it’s 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 of monetary assets and liabilities denominated in foreigncurrencies at period end exchange rates are recognized in Other revenue on the Consolidated Statements of Operations and Comprehensive Income. TheCompany recorded a foreign exchange gain of $0.7 million, and losses of $1.7 million and $2.4 million, for the years ended December 31, 2017, 2016, and2015, 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. Please refer to Note 7 for additional information.GoodwillThe Company obtained goodwill as a result of the acquisitions of certain subsidiaries. Goodwill represents the excess of the cost over the fair market value ofnet assets acquired. In accordance with relevant accounting guidance, the Company tests goodwill for impairment on an annual basis during the fourthquarter and on an interim basis when conditions indicate impairment may have occurred (please refer to Note 7). In performing these assessments,management relies on and considers a number of factors, including operating results, business plans, economic projections, anticipated future cash flows,comparable market transactions (to the extent available), other market data and the Company’s overall market capitalization. There are inherent uncertaintiesrelated to these factors which require judgment in applying them to the analysis of goodwill and intangible assets for impairment.When testing for goodwill impairment, the Company first assesses qualitative factors to determine whether the existence of events or circumstances leads to adetermination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes it is more likelythan not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed.Under the quantitative test, the fair value of each reporting unit is compared to its carrying value in order to identify potential impairment. If the fair value ofa reporting unit exceeds the carrying value of its net assets, goodwill is not considered impaired and no further testing is required. If the carrying value of thenet assets exceeds the fair value of a reporting unit, impairment is indicated at the reporting unit level and an impairment charge will be recorded. Animpairment charge will equal the amount byF-14Table of Contentswhich a reporting unit’s carrying amount exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. For the year ended December 31, 2017, the Company performed a qualitative analysis for each of its reporting units to determine whether it was more likelythan not that the fair value was less than the carrying value. As a result of this assessment, the Company determined that it was not necessary to perform aquantitative impairment test and concluded that goodwill assigned to each reporting unit was not impaired at December 31, 2017.DerivativesForex, metals, and CFDs allow for exchanging the difference in value of a particular asset such as a stock index, energy product, or gold contracts, betweenthe time at which a contract is opened and the time at which it is closed. The Company’s retail customer open positions and positions held with liquidityproviders are considered derivatives under the accounting guidance in ASC 815. Derivatives and Hedging. Therefore, they are accounted for at fair value,and included in Receivables from brokers, Payables to customers, and Payables to brokers in the Consolidated Balance Sheets. The Company did notdesignate any of its derivatives as hedging instruments. Net gains and losses with respect to derivative instruments are reflected in Retail Revenue in theaccompanying Consolidated Statements of Operations and Comprehensive 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. Changes in estimates are recognized in current year earnings. The customer receivables, net of allowance for doubtful accounts, areincluded in Other assets on the Consolidated Balance Sheets. Receivables from customers are reserved for and the related reserves are recorded in Bad debtprovision on the Consolidated Statements of Operations and Comprehensive Income.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 arrangements with other regulated financial institutions. The payables balance includes amountsdeposited by these financial institutions in order for the Company to act as a clearing broker.Payables to BrokersPayables to brokers comprise open trades, which are measured at fair value and the cash due to or from brokers, which is not measured at fair value butapproximates fair value. These balances result when the Company’s hedging trades produce a loss and necessitate a margin call to re-capitalize positions orsettle losses.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. White label partners offer our trading services to their customers under their own brand. Their fees arereferred to as introducing broker fees and are recorded on a trade date basis, in Referral Fees, in the Consolidated Statements of Operations andComprehensive 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 clearing fees paid to prime brokers in connection with itsinstitutional GTX business and futures business. These costs are expensed as incurred.Income TaxesIncome taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assetsand liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect onF-15Table of Contentsdeferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance isrecorded against deferred tax assets if it is more likely than not that such assets will not be realized. Contingent income tax liabilities are recorded when thecriteria for loss recognition have been met. An uncertain tax position is recognized based on the determination of whether or not a tax position is more likelythan not to be sustained upon examination based upon the technical merits of the position. If this recognition threshold is met, the tax benefit is thenmeasured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. At December 31, 2017, theCompany has changed its position regarding the earnings of its foreign subsidiaries. As a result of changes in U.S. tax law, the Company will no longer assertpermanent reinvestment for a majority of its foreign earnings. However, the Company does assert that the earnings of its Australian subsidiaries will bepermanently reinvested in the working capital and other business needs of the subsidiaries to the extent that repatriation of these earnings would triggeradditional taxes.Share Based CompensationShare-based compensation expense requires measurement of compensation cost for share-based awards at fair value and recognition of compensation costover the vesting period, net of estimated forfeitures. For awards with service conditions, the Company recognizes compensation cost on a straight-line basisover the requisite service period.The fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which considers, among other factors, the expected termof the award and the expected volatility of the Company’s stock price. Although the Black-Scholes model meets the requirements of ASC 718,Compensation-Stock Compensation, the fair values generated by the model may not be indicative of the actual fair values of the underlying awards, as it doesnot consider other factors important to those share-based compensation awards, such as continued employment, periodic vesting requirements and limitedtransferability.The risk-free interest rate used in the Black-Scholes option-pricing model is based on the U.S. Treasury yield curve in effect at the time of grant. The expectedoption life is based on historical experience of employee exercise behavior. Expected volatility is based on historical volatility, implied volatility, priceobservations taken at regular intervals and other factors deemed appropriate. Expected dividend is based upon the current dividend rate. There were no stockoptions granted in 2017.The fair value of restricted stock unit awards is based on the fair value of the Company’s common stock on the grant date.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. Please refer to Note 15 for discussion of the impact of the Company’s convertible notes and non-controlling interests onEPS.Recent Accounting Pronouncements Not Yet AdoptedIn May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which is part of ASC Topic 606. It defines how companiesreport revenues from contracts with customers and also requires certain enhanced disclosures. The standard’s provisions and related amendments are effectivefor annual reporting periods beginning after December 15, 2017. On January 1, 2018, the Company adopted this guidance, which did not have a materialimpact on the Company’s financial statements. A substantial portion of revenue falls under ASC Topic 825, Financial Instruments, which is excluded fromthe scope of the new guidance. The Company adopted ASU No. 2014-09 using the modified retrospective approach, which includes presenting thecumulative effects of initial application, if any, along with supplemental disclosures.In November 2016, the FASB issued ASU No. 2016-18, “Restricted Cash”, requiring that amounts generally described as restricted cash and restricted cashequivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statementof cash flows. The new guidance became effective on January 1, 2018 and will be applied using a retrospective transition method to each period presented.The Company concluded that cash held for customers, including amounts required to be segregated under federal or other regulations is considered restrictedcash and will present such cash with total cash on the statement of cash flows.In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” whicheliminates the requirement to calculate the implied fair value of goodwill to measure a goodwillF-16Table of Contentsimpairment charge (Step 2) from the goodwill impairment test. Instead, an impairment charge will equal the amount by which a reporting unit’s carryingamount exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. The guidance will be effective prospectively for theCompany for the quarter ending December 31, 2020, with early adoption permitted after January 1, 2017. Management will adopt this approach to the extentStep 2 is required.In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which amended the guidance on accounting for leases. The FASB issued thisupdate to increase transparency and comparability among organizations. This update requires recognizing lease assets and lease liabilities on the balancesheet and disclosing key information about leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018, includinginterim periods within that fiscal year. The Company is currently assessing the impact on its Financial Statements of adopting this guidance.In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220),” to address certain income taxeffects in Accumulated Other Comprehensive Income (AOCI) resulting from the tax reform enacted in 2017. The amended guidance provides an option toreclassify tax effects within AOCI to retained earnings in the period in which the effect of the tax reform is recorded. The amendments are effective for fiscalyears beginning after December 15, 2018, including interim periods. Early adoption is permitted. The Company is currently assessing the impact on itsFinancial Statements of adopting this guidance.3. 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):F-17Table of Contents Fair Value Measurements on a Recurring Basisas of December 31, 2017 Level 1 Level 2 Level 3 TotalFinancial Assets (Liabilities): Cash and cash equivalents: Money market accounts$219,286 $— $— $219,286Cash and securities held for customers: US treasury bills: U.S. government and agency securities105,190 — — 105,190Receivable from brokers: Broker derivative contracts— 4,966 — 4,966Other assets: Certificates of deposit175 — — 175Other130 — — 130Payables to customers: Customer derivative contracts— 129,966 $— 129,966Payables to brokers: Broker derivative contracts (3,170) (3,170)Total$324,781 $131,762 $— $456,543 Fair Value Measurements on a Recurring Basisas of December 31, 2016 Level 1 Level 2 Level 3 TotalFinancial Assets: Cash and cash equivalents: Money market accounts$120,927 $— $— $120,927Cash and securities held for customers: US treasury bills: U.S. government and agency securities135,974 — — 135,974Receivable from brokers: Broker derivative contracts— 5,228 — 5,228Other assets: Certificates of deposit175 — — 175Other115 — — 115Payables to customers: Customer derivative contracts— 115,677 — 115,677Total$257,191 $120,905 $— $378,096The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the years endedDecember 31, 2017 and December 31, 2016, nor has there been any movement between levels during these respective periods.Level 1 Financial AssetsThe Company has U.S. Treasury bills, money market accounts and certificates of deposit that are Level 1 financial instruments that are recorded based uponlisted or quoted market rates. The U.S. Treasury bills and money market accounts are recorded in Cash and cash equivalents and Cash and securities held forcustomers and the certificates of deposit are 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.F-18Table of ContentsThe Company has broker derivative contracts that are Level 2 financial instruments recorded in Receivables from brokers and Payables to brokers.The fair values of these Level 2 financial instruments are based upon directly observable values for underlying instruments.Level 3 Financial LiabilitiesThe Company did not have any Level 3 Financial Assets or Liabilities on December 31, 2017 or December 31, 2016.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 posted funds with brokers that arerequired as collateral for holding trading positions, which are not measured at fair value but approximate fair value. These deposits approximate fair valuebecause they are cash balances that the Company may withdraw at its discretion. Settlement would be expected to occur within a relatively short period oftime 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.Payables to brokers comprise open trades, which are measured at fair value (disclosed above) and the cash due to or from brokers. The cash within thisbalance is not measured at fair value but does approximate fair value, because it is immediately payable to the brokers. Settlement occurs as soon as a brokerinitiates a margin call.The carrying value of Convertible senior notes represents the notes’ principal amounts net of unamortized discount (please refer to Note 13). The Companyassessed the notes’ fair value as determined by current Company-specific and risk free interest rates as of the balance sheet date.The table below represents the financial assets and liabilities at their carrying value and fair value: (amounts in thousands)As of December 31, 2017 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$73,537 $73,537 $— $73,537 $—Payables to brokers$381 $381 $— $381 $—Financial Liabilities: Payables to customers$1,108,794 $1,108,794 $— $1,108,794 $—Convertible senior notes$132,221 $205,073 $— $205,073 $— As of December 31, 2016 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$55,868 $55,868 $— $55,868 $—Financial Liabilities: Payables to customers$1,061,146 $1,061,146 $— $1,061,146 $—Convertible senior notes$124,769 $122,264 $— $122,264 $—F-19Table of Contents4. 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, Payables to customers and Payables to brokers on the accompanyingConsolidated Balance Sheets (amounts in thousands): December 31, 2017 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$121,104 $(31,556) $89,548CFD contracts102,659 (62,322) 40,337Metals contracts4,084 (2,207) 1,877Total$227,847 $(96,085) $131,762 December 31, 2017 Cash Collateral Net amounts ofassets/(liabilities)for derivativeopen positions atfair value Net amounts ofassets/(liabilities)presented in thebalance sheetDerivative Assets/(Liabilities:) Receivables from brokers$73,537 $4,966 $78,503Payables to customers$(1,108,794) $129,966 $(978,828)Payables to brokers$381 $(3,170) $(2,789) December 31, 2016 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$130,301 $(59,631) $70,670CFD contracts74,443 (37,241) 37,202Metals contracts18,766 (5,733) 13,033Total$223,510 $(102,605) $120,905 December 31, 2016 Cash Collateral Net amounts ofassets/(liabilities)for derivativeopen positions atfair value Net amounts ofassets/(liabilities)presented in thebalance sheetDerivative Assets/(Liabilities): Receivables from brokers$55,868 $5,228 $61,096Payables to customers$(1,061,145) $115,677 $(945,468)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 have considerably higher prices. The amounts reported within Receivables from brokers, Payables to customers,Payables to brokers on the Consolidated Balance Sheets are derived from the number of contracts below (amounts in thousands):F-20Table of Contents December 31, 2017 Total contracts in longpositions Total contracts in shortpositionsDerivative Instruments: Foreign currency exchange contracts2,075,789 4,148,056CFD contracts126,519 174,835Metals contracts414 217Total2,202,722 4,323,108 December 31, 2016 Total contracts in longpositions Total contracts in shortpositionsDerivative Instruments: Foreign currency exchange contracts2,427,066 2,288,386CFD contracts112,685 156,308Metals contracts820 341Total2,540,571 2,445,035The 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 Operations and Comprehensive Income for the years ended December 31, 2017 and 2016 were as follows(amounts in thousands): For the Years Ended December 31, 2017 2016Derivative Instruments: Foreign currency exchange contracts$114,149 $163,096CFD contracts101,663 128,737Metals contracts15,151 38,089Total$230,963 $329,9225. RECEIVABLES FROM BROKERSThe 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.Amounts receivable from brokers consisted of the following as of (amounts in thousands): December 31, 2017 December 31, 2016Required collateral$73,537 $55,868Open foreign exchange positions4,966 5,228Total$78,503 $61,096F-21Table of Contents6. PROPERTY AND EQUIPMENTProperty and equipment, including leasehold improvements and capitalized software development costs, consisted of the following as of (amounts inthousands): December 31, 2017 December 31, 2016Software$57,047 $52,891Computer equipment18,390 19,797Leasehold improvements11,068 11,055Telephone equipment643 778Office equipment2,110 2,138Furniture and fixtures3,592 2,285Web site development costs386 644Gross property and equipment93,236 89,588Less: Accumulated depreciation and amortization(52,494) (53,126)Property and equipment, net$40,742 $36,462Depreciation and amortization expense for property and equipment was $17.9 million, $13.9 million and $11.1 million for the years ended December 31,2017, 2016, and 2015, respectively.The Company adjusted the amortization period of certain property and equipment that experienced changes in useful lives as a result of the City Indexacquisition. This change in useful lives resulted in no additional charge for the year ended December 31, 2017 and an additional charge of $0.4 million forthe year ended December 31, 2016. The additional charge was recorded in Integration expenses.The Company wrote off certain property and equipment that became obsolete as a result of the City Index acquisition. This resulted in an additional chargeof $1.9 million for the year ended December 31, 2015. The additional charge was recorded in Integration expenses. There was no additional charge incurredfor the year ended December 31, 2017 and December 31, 2016.The Company retired $21.0 million of fully depreciated property and equipment for the year ended December 31, 2017.7. INTANGIBLE ASSETSThe Company’s various intangible assets consisted of the following as of (amounts in thousands): December 31, 2017 December 31, 2016IntangiblesGross AccumulatedAmortization Net Gross AccumulatedAmortization NetCustomer list$60,420 $(31,698) $28,722 $50,253 $(20,928) $29,325Technology72,204 (43,270) 28,934 70,145 (37,074) 33,071Trademark7,680 (3,730) 3,950 7,104 (2,505) 4,599Total finite lived intangibles$140,304 $(78,698) $61,606 $127,502 $(60,507) $66,995Trademarks not subject toamortization(1)363 — 363 363 — 363Total intangibles assets$140,667 $(78,698) $61,969 $127,865 $(60,507) $67,358(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. The Company compares the recorded value of the indefinite-life intangible assets to their fair value on an annual basis andwhenever circumstances arise that indicate that impairment may have occurred.F-22Table of ContentsThe Company had the following identifiable intangible assets and weighted average amortization periods as of December 31, 2017:Intangible AssetAmount (in thousands) Weighted averageamortization periodCustomer list$60,420 6.9Technology72,204 9.0Trademark(1)8,043 6.7Total intangible assets$140,667 (1) Trademarks with an indefinite life, as described above, comprise $0.4 million of the $8.0 million of trademarks.Amortization expense for the purchased intangibles was $16.1 million, $15.0 million and $16.6 million for the years ended December 31, 2017, 2016, and2015, respectively.The Company adjusted the amortization period of certain intangible assets that experienced changes in useful lives as a result of the City Index acquisition.This change in useful lives resulted in $19.7 million of additional expense for the year ended December 31, 2015. The additional charges were recorded inIntegration expenses. There was no additional charge for the year ended December 31, 2017 and December 31, 2016.On February 7, 2017, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Forex Capital Markets L.L.C. (“FXCM”).Pursuant to the terms of the Purchase Agreement, FXCM transferred substantially all of its U.S.-domiciled customer accounts to the Company effective as ofFebruary 24, 2017. In consideration of the transfer of these accounts, the Company agreed to pay FXCM, without duplication:•$500 per account for each transferred account that first executes a new trade with GAIN during the 76-day period immediately following the closingof the account transfer (the “Initial Period”); and•$250 per account for each transferred account that (i) did not execute a new trade with GAIN during the Initial Period and (ii) executes a new tradewith GAIN during the 77-day period immediately following the last day of the Initial Period.The Company has paid $7.2 million to FXCM as consideration for the purchased accounts for the year ended December 31, 2017, which was capitalized andincluded as an intangible asset and amortized on a straight line basis over its two year useful life.Future annual estimated amortization expense is as follows (amounts in thousands):Years Ended December 31,: 2018$16,362201911,40020209,48620219,40720226,171Thereafter8,780Total$61,606GoodwillGoodwill is evaluated for impairment on an annual basis during the fourth quarter and in interim periods when events or changes indicate the carrying valuemay not be recoverable. The Company operates under three reporting units, retail, institutional and futures. There were no additions or impairments to thecarrying value of the Company’s goodwill during the year ended December 31, 2017.For the year ended December 31, 2017, the Company performed a qualitative analysis to determine whether it was more likely than not that the fair value ofits reporting units was less than their carrying value. As a result of this assessment, the CompanyF-23Table of Contentsdetermined that it was not necessary to perform a quantitative impairment test and concluded that goodwill assigned to each of its reporting units was notimpaired at December 31, 2017.As of December 31, 2017 and December 31, 2016, the Company had recorded goodwill of approximately $33.0 million and $32.1 million, respectively. Theincrease of $0.9 million was related to foreign currency translation adjustments.The following represents the changes in the carrying amount of goodwill by segment for 2017 and 2016 (amounts in thousands):Retail Institutional Futures TotalCarrying amount of goodwill as of December 31, 2016$25,222 $4,519 $2,366 $32,107Foreign currency translation adjustments730 131 68 929Carrying amount of goodwill as of December 31, 2017$25,952 $4,650 $2,434 $33,0368. OTHER ASSETSOther assets consisted of the following as of (amounts in thousands): December 31, 2017 December 31, 2016Vendor and security deposits$11,923 $9,670Income tax receivable2,132 1,017Deferred tax assets, net10,698 15,071GTX trade receivables5,758 7,515Customer debit positions2,384 9,781Allowance on customer debit positions(1,959) (9,237)Insurance receivable— 3,500Prepaid assets9,523 8,300Miscellaneous receivables4,872 6,615Equity method investment— 601Deferred commitment fees550 —Total other assets$45,881 $52,833The allowance for doubtful accounts consisted of the following (amounts in thousands):Balance as of January 1, 2015$(4,555)Addition to provision(7,462)Amounts collected/written off5,185Balance as of December 31, 2015(6,832)Addition to provision(4,154)Amounts collected/written off1,749Balance as of December 31, 2016(9,237)Addition to provision247Amounts collected/written off7,031Balance as of December 31, 2017$(1,959)9. 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 $0.2 million and $0.3 million at December 31, 2017and December 31, 2016, 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 $15.9 million and $3.8 million at December 31, 2017 andDecember 31, 2016, respectively.F-24Table of Contents10. 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 globalfootprint in 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 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): Cash$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 for 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 has 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.Pro Forma Information (unaudited):The following unaudited pro forma data is presented as if the acquisition of City Index had occurred on January 1, 2015. The unaudited pro forma data doesnot include the impact of forecasted operating expense synergies.F-25Table of ContentsThe 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 were as follows (amounts in thousands): For the Fiscal Year EndedDecember 31, 2015REVENUE: Total non-interest revenue$471,959Interest revenue1,303Interest expense1,049Total net interest revenue254Net revenue472,213EXPENSES: Depreciation and amortization11,753Purchased intangible amortization18,619Other expense items424,229Total operating expense454,601OPERATING PROFIT17,612Interest on long term borrowings10,267Gain on extinguishment of debt—Impairment of investment—INCOME BEFORE INCOME TAX EXPENSE7,345Income tax expense126NET INCOME7,219Net income attributable to non-controlling interests1,660Net income applicable to Gain Capital Holdings, Inc.$5,559RestructuringThe Company incurred $1.0 million and $3.5 million of restructuring expenses for the twelve months ended December 31, 2016 and December 31, 2015,respectively. These expenses reflected the cost of reducing global headcount following the City Index acquisition and are recorded in Restructuring expensesin the Consolidated Statements of Operations and Comprehensive Income. The restructuring liabilities have all been paid as of December 31, 2016. During2017, the Company incurred no additional restructuring expenses related to the global headcount reductions following the City Index acquisition.11. 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, subject to immediately exercisable call options for the Company to purchase the remaining interests, as well as putoptions for the sellers to sell their remaining interests in each entity to the Company that were to become exercisable in 2017. In December 2016, theCompany acquired an additional 24% of each entity and, accordingly, the respective sellers now maintain a 21% interest in each entity. In connection withthe purchase of these additional interests, the Company and the respective sellers agreed that neither would exercise the call options or put options withrespect to the remaining interests prior to December 31, 2017.In accordance with ASC 480-10-S99-3A, Classification and Measurement of Redeemable Securities, non-controlling interests are classified outside ofpermanent equity as their redemption is not (i) mandatory, (ii) at fixed prices, and (iii) exclusively within the Company’s control.F-26Table of ContentsThe 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 reflects any changescaused 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-controllinginterestsDecember 31, 2015$11,046Purchase of additional shares of non-controlling interests(7,444)Adjustment to fair value of non-controlling interests(258)Adjustment to the redemption value of non-controlling interests2,715Net income attributable to non-controlling interests2,140Distributions to non-controlling interest holders(1,605)December 31, 2016$6,594Adjustment to the redemption value of non-controlling interests(1,656)Net income attributable to non-controlling interests620Distributions to non-controlling interest holders(1,147)December 31, 2017$4,41112. REVOLVING CREDIT ARRANGEMENTOn August 3, 2017, the Company entered into a Credit Agreement, dated as of August 2, 2017, for a three year U.S. $50.0 million senior secured first lienrevolving credit facility that matures in August 2020. Upon request of the Company, the credit facility may be increased by up to $25.0 million, with aminimum increase of $5.0 million. The credit facility contains covenants that are customary for an issuer with senior debt. As of December 31, 2017, we werein compliance with the covenants for our credit facility. The commitment fees of $0.5 million paid at establishment of the credit facility will be amortizedover the life of the facility and was recorded to Other Assets.As of December 31, 2017, there were no amounts outstanding under the revolving line of credit.13. CONVERTIBLE SENIOR NOTESConvertible Senior Notes due 2022On August 22, 2017, the Company issued $92.0 million aggregate principal amount of its 5.00% Convertible Senior Notes due 2022, which amount includesthe exercise in full of the over-allotment option granted to the initial purchasers of the Notes, in a private offering to qualified institutional buyers pursuant toRule 144A under the Securities Act of 1933, as amended. The Notes bear interest at a fixed rate of 5.00% per year, payable semi-annually in arrears onFebruary 15 and August 15 of each year, beginning on February 15, 2018. The Notes are convertible into cash, shares of the Company’s common stock, or acombination thereof, at the Company’s election. The Company currently intends to settle the debt in cash. The Notes will mature on August 15, 2022, unlessearlier converted, redeemed or repurchased. The Company may not redeem the Notes prior to August 15, 2020. The net proceeds from the Note Offering wereapproximately $89.0 million, after deducting discounts to the initial purchasers but prior to taking into account any estimated offering expenses payable bythe Company.Prior to the close of business on the business day immediately preceding April 15, 2022, the Notes may be converted only upon the occurrence of specifiedevents set forth in the Indenture. On or after April 15, 2022, until the close of business on the business day immediately preceding the maturity date, holdersmay convert their Notes at any time. Subject to the foregoing, the Notes are convertible at the option of the holders and will be settled, at the Company’selection, by the payment or delivery of cash, shares of the Company’s common stock, or a combination thereof. The conversion rate is initially 122.0107shares ofF-27Table of Contentsthe Company’s common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $8.20 per share of commonstock). The conversion rate and the corresponding conversion price will be subject to adjustment in some circumstances described in the Indenture. If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or part of theirNotes at a purchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, thefundamental change repurchase date. In addition, in certain circumstances, the Company may be required to increase the conversion rate for any Notesconverted in connection with a make-whole fundamental change (as defined in the Indenture). The Company may not redeem the Notes prior to August 15, 2020. On and after August 15, 2020, and prior to the maturity date, the Company may redeem forcash all, but not less than all, of the Notes if the last reported sale price of its common stock equals or exceeds 130% of the applicable conversion price for atleast 20 trading days, whether or not consecutive, during the 30 consecutive trading day period ending on the trading day immediately preceding the datethe Company delivers notice of the redemption. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus any accruedand unpaid interest to, but excluding, the redemption date. In addition, if the Company calls the Notes for redemption, a make-whole fundamental changewill be deemed to occur. As a result, the Company will, in certain circumstances, increase the conversion rate for holders who convert their Notes after theCompany delivers a notice of redemption and before the close of business on the business day immediately preceding the relevant redemption date.Convertible 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. The Company currently intends to settle the debt in cash.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 orF-28Table of Contentsinsolvency with respect to the Company, all outstanding Convertible Notes will become due and payable immediately without further action or notice. If anyother type of event of default occurs and is continuing, then the holders of at least 25% in aggregate principal amount of the then outstanding ConvertibleNotes or the trustee may declare all of the outstanding Convertible Notes 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. During the first quarter of 2016, the Company repurchased $1.9million in principal amount of the convertible senior notes due in 2018, for an aggregate purchase price of $1.7 million. During the third quarter of 2017, theCompany repurchased $71.8 million in principal amount of the convertible senior notes due in 2018, for an aggregate purchase price of $73.7 million withthe proceeds from the issuance of Convertible Senior Notes due in 2022. As a result we recognized an extinguishment loss of $4.9 million. The Companycurrently intends to settle the remaining outstanding debt in cash upon maturity.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, the Company will deliver cash up to the principal amount. With respect to any conversion value in excess of theprincipal amount, the Company will deliver shares 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 5 consecutive trading day periodbeing referred to as the “measurement period”), in which the trading price (as defined in the offering memorandum) per $1,000 principal amount ofthe notes, as determined following a request by a holder of the notes in the manner described in the offering memorandum, for each trading day ofthe measurement period, was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate onsuch 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 equitycomponent, net of pro-rata initial purchasers’ discounts, is included in the additional paid-in capital section of shareholders' equity in the Company’sConsolidated Balance Sheets. The principal amount of the Convertible Senior Notes is reduced by unamortized original issue discount, which reflects theConvertible Senior Notes fair value. The original issue discount will be amortized over the life of the Convertible Senior Notes due 2022, 2020 and 2018using the effective interest rate of 10.4%, 8.6% and 8.1%, respectively.F-29Table of ContentsRelevant accounting guidance requires entities to disclose the dilutive effects of convertible instruments. As of December 31, 2017 and 2016, 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, 2017 and 2016.The balances of the liability and equity components as of December 31, 2017 and 2016 were as follows (amounts in thousands):December 31, December 31,2017 2016Liability component - principal$158,350 $138,150Deferred bond discount(25,624) (13,213)Deferred financing cost(505) (168)Liability component - net carrying value$132,221 $124,769 Additional paid in capital$39,405 $27,822Discount attributable to equity(826) (419)Equity component$38,579 $27,403Interest expense related to the Convertible Senior Notes, included in Interest expense on long term borrowings in the Consolidated Statements of Operationsand Comprehensive Income, was as follows (amounts in thousands): For the Fiscal Year Ended December 31,2017 2016Interest expense - stated coupon rate$6,535 $5,725Interest expense - amortization of deferred bond discount and costs5,286 4,696Total interest expense - convertible note$11,821 $10,42114. SHARE BASED PAYMENTSTotal share-based compensation expense recognized during 2017, 2016 and 2015 consisted of the following (amounts in thousands): For the Years Ended December 31, 2017 2016 2015Employee compensation and benefits$5,093 $4,151 $3,680On 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 replaced the GAIN Capital Holdings, Inc. 2010 Omnibus Incentive Compensation Plan, (the “2010 Plan”). The 2015 Plan has available 4.0million shares and no additional shares to be issued pursuant to the 2011 Employee Stock Purchase Plan for awards to employees, nonemployee directors,consultants, and advisors in the form of incentive stock options (“ISO”), nonqualified stock options (“NQSO"), restricted stock awards ("RSA”), restrictedstock units (“RSU”), stock appreciation rights and other stock-based awards. The "evergreen" provision that allowed the Company to authorize additionalshares to be issued under the 2010 plan was removed from the 2015 Plan. Accordingly, the maximum number of shares that can be issued will be fixed andcannot 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 NQSOs. 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 seven years from the date of grant.F-30Table of ContentsStock OptionsThe following table summarizes the stock option activity under all plans from January 1, 2017 through December 31, 2017 (in thousands, except per shareamounts): Options Outstanding Weighted Weighted Average Number of Average Remaining Aggregate Options Exercise Price Life (Years) Intrinsic ValueOutstanding January 1, 2017 1,393 $6.13 2.96 Granted — — 0.00 Exercised (88) 4.03 3.07 Forfeited/Expired (10) 9.80 4.39 Outstanding December 31, 2017 1,295 $6.25 2.65 $4,857Vested and expected to vest options 1,286 $6.24 2.63 $4,824Exercisable, December 31, 2017 1,033 $5.90 2.07 $4,235 Fair market value of common stock at exercise date $621 Cost to exercise 356 Net value of stock options exercised $265 The total intrinsic value of stock options exercised during 2017, 2016, and 2015, respectively, was $0.3 million, $0.5 million and $3.5 million. During 2017,the Company had 0.2 million stock options vest. The Company received $0.4 million, $0.7 million, and $2.4 million from stock option exercises in 2017,2016, and 2015, respectively.The Company granted 0.2 million and 0.1 million options to employees in 2016 and 2015, respectively. The weighted average grant-date fair value of stockoptions granted in the years ended December 31, 2016 and 2015 was $2.18 and $3.43, respectively. The Company made no option grants in 2017.The Compensation Committee approved stock option grants with a fair market value estimated under a Black-Scholes option pricing valuation model usingthe following assumptions: For the Fiscal Year Ended December 31, 2017 2016 2015Valuation Assumptions Risk-free rateNA 1.19% 1.47%Expected volatilityNA 47.63% 49.08%Expected term (years)NA 4.75 4.75Dividend yieldNA 3.0% 2.1%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.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 vestF-31Table of Contentsimmediately, but under which delivery of the common stock is deferred until a later date. RSUs are assigned the value of the Company’s common stock atdate of grant issuance, and the grant date fair value is amortized over a four year period. During 2017, 2016, and 2015, 1.0 million, 0.9 million and 0.6million RSUs, respectively, were granted to employees and members of the Board of Directors.A summary of the status of the Company’s non-vested shares of RSUs as of December 31, 2017 and changes during the year ended December 31, 2017 arepresented below (in thousands, except per share amounts): Weighted Average Number Grant DateNon-Vested Sharesof RSUs Fair ValueNon-vested at January 1, 20171,474 $7.49Granted963 8.20Vested(572) 7.25Forfeited(140) 7.86Non-vested at December 31, 20171,725 $7.93The total grant-date fair value of RSUs granted during the years ended December 31, 2017, December 31, 2016 and December 31, 2015 was $7.9 million,$6.2 million, and $5.7 million, respectively.As of December 31, 2017, there was $11.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangementsgranted under the 2015 Plan. The cost is expected to be recognized over a weighted-average period of approximately three years. 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, 2017 and December 31, 2016, 103,042 shares and 96,173 shares were issued under the ESPP, respectively. The discount on the ESPP of $0.1million is recorded in Employee compensation and benefits in the Consolidated Statement of Operations and Comprehensive Income.15. EARNINGS PER COMMON SHAREBasic and diluted (loss)/earnings per common share are computed by dividing net (loss)/income by the weighted average number of common sharesoutstanding during the period. Diluted (loss)/earnings per share includes the determinants of basic net income per share and, in addition, gives effect to thepotential dilution that would occur if securities or other contracts to issue common stock were exercised, vested or converted into common stock, unless theyare anti-dilutive. Diluted weighted average common shares include vested and unvested stock options, unvested restricted stock units and unvested restrictedstock awards. Approximately 0.5 million and 0.2 million stock options were excluded from the calculation of diluted (loss)/earnings per share for the yearsended December 31, 2017 and 2016, respectively, as they were anti-dilutive.Diluted (loss)/earnings per share excludes any shares of Company common stock potentially issuable under the Company’s convertible senior notes, whichare discussed in Note 13. Based upon an assumed trading price of $13 for each share of the Company’s common stock, and if the relevant conditions underthe indenture governing the 2018, 2020, and 2022 convertible senior notes were satisfied, there would be an additional 0.0 million, 1.5 million, and 4.2million dilutive shares as of December 31, 2017 for the 2018, 2020 and 2022 notes, respectively.F-32Table of ContentsThe following table sets forth the computation of (loss)/earnings per share (amounts in thousands except share and per share data): For the years ended December 31,2017 2016 2015Net (loss)/income applicable to GAIN Capital Holdings, Inc.$(11,195) $35,272 $10,279Adjustment(1)1,656 (2,715) 308Net (loss)/income available to GAIN common shareholders$(9,539) $32,557 $10,587Weighted average common shares outstanding: Basic weighted average common shares outstanding46,740,097 48,588,917 47,601,979Effect of dilutive securities: Stock options245,259 163,223 424,087 RSUs/RSAs35,746 33,534 352,985Diluted weighted average common shares outstanding46,740,097 48,785,674 48,379,051(Loss)/earnings per common share: Basic$(0.20) $0.67 $0.22Diluted$(0.20) $0.67 $0.22 (1)During the years ending December 31, 2017, 2016 and 2015, the Company concluded that the carrying value of the Company’s redeemable non-controlling interests was less than their redemption value, requiring that an adjustment to the carrying value be recorded for purposes of calculatingearnings per common share. The adjustment to increase or reduce the carrying value will, respectively, reduce or increase earnings per common shareby reducing or increasing net income available to common shareholders.16. 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 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 had 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. On April 28, 2016, the parties entered into a Settlement Agreement in which the Company agreed to make a one-time settlement payment inexchange for a full and final settlement of all claims. For the year ended December 31, 2016, the settlement amount, net of insurance recoveries, totaledapproximately $9.2 million.F-33Table of Contents17. 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 financial restrictions. Certain of the Company’s leases include renewaloptions and escalation clauses. In addition, the Company has certain non-cancelable purchase obligations for its operational needs. Future annual minimumlease payments for the Company’s non-cancellable operating leases and purchase obligations are as follows (amounts in thousands):Years Ended December 31,: 2018$22,18820198,99320205,40920213,98820223,5162023 and beyond5,333Total$49,427Rent expense, which is recorded on a straight-line basis, was $2.6 million, $2.9 million, and $3.7 million for the years ended December 31, 2017, 2016 and2015, respectively.18. INCOME TAXESThe following table presents the U.S. and non-U.S. components of (loss)/income before income tax (benefit)/expense for the years ended December 31, 2017,2016, and 2015 (amounts in thousands): For the Fiscal Year Ended December 31, 2017 2016 2015U.S.$(20,685) $2,701 $(39,761)Non-U.S.3,598 44,541 48,188Total (loss)/income before tax (benefit)/expense$(17,087) $47,242 $8,427F-34Table of ContentsIncome tax (benefit)/expense consisted of (amounts in thousands): For the Fiscal Year Ended December 31, 2017 2016 2015Current Federal$(5,765) $3,365 $1,136State48 336 172U.K.771 8,859 7,239Japan188 64 127Australia571 — —Other non-U.S.(39) 625 169Total current income tax (benefit)/expense(4,226) 13,249 8,843Deferred Federal(938) (276) (9,889)State(953) (822) (1,375)U.K.(1,558) 601 (337)Singapore412 (2,162) —Japan175 (528) (148)Other non-U.S.233 (620) (545)Change in valuation allowance— 326 (61)Total deferred tax benefit(2,629) (3,481) (12,355)Total income tax (benefit)/expense$(6,855) $9,768 $(3,512)Deferred 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.Significant components of the Company’s deferred tax assets and liabilities were as follows (amounts in thousands): December 31, 2017 2016Deferred tax assets Foreign net operating losses$10,474 $10,161Share-based compensation1,105 1,506Intangible assets1,554 5,423Basis difference in property and equipment3,938 5,138Other943 2,793Total deferred tax assets18,014 25,021Valuation allowance(1,156) (1,179)Total deferred tax assets after valuation allowance16,858 23,842 Deferred tax liabilities Unrealized trading losses(559) (4,234)Discount on convertible note(5,601) (4,727)Other— (181)Total deferred liabilities(6,160) (9,142)Net deferred tax assets$10,698 $14,700F-35Table of ContentsThe Company has $58.6 million in net operating loss (“NOL”) carry forwards as of December 31, 2017. These NOLs begin to expire in 2020. The Companyhas a deferred tax asset of $10.5 million relating to these NOLs for which it has established a valuation allowance of $1.0 million. The net change in thevaluation allowance is $0.02 million.The following table reconciles the effective tax rate to the U.S. federal statutory income tax rate: 2017 2016 2015Federal income tax at statutory rate35.00 % 35.00 % 35.00 %Increase/(decrease) in effective tax rate resulting from: State income tax3.44 % (0.67)% (9.25)%Foreign rate differential(52.55)% 8.20 % (96.96)%Deemed dividends— % 0.01 % 55.30 %Non-deductible transaction costs— % — % 11.71 %Impact of non-controlling interests1.27 % (1.59)% (6.89)%Contingent liability— % — % (27.92)%Foreign losses— % — % (19.20)%162 (m)(0.85)% 0.33 % 3.44 %GFT carryback— % — % (6.58)%Uncertain tax positions26.94 % 2.36 % 19.67 %Impairment of investment— % 8.36 % — %Non-taxable dividend62.44 % (32.16)% — %U.K. bank tax— % 2.92 % — %Rate changes(13.14)% (1.34)% — %Toll tax inclusion(25.96)% — % — %Foreign tax credit10.28 % — % — %True-ups and deferred tax adjustments(2.73)% (2.78)% — %Other permanent differences(4.03)% 2.04 % — %Effective Tax Rate40.11 % 20.68 % (41.68)%In 2017, the Company had a number of discrete tax items that impacted its effective tax rate:•The Company paid inter-company dividends due to internal restructuring of $41.5 million, which are non-taxable in the jurisdictions received.•The Company released $4.6 million of income tax contingencies.•As a result of the enactment of the “Tax Cuts and Jobs Act” in the U.S. on December 22, 2017 (the "Tax Reform"), the Company: (1) included aprovisional $12.6 million of additional income, related to the mandatory deemed repatriation of untaxed foreign earnings, offset by current yearlosses and a foreign tax credit of $1.7 million; and (2) incurred $2.2 million of tax expense with respect to a DTA revaluation as a result of thechange in corporate tax rate from 35% to 21%.•The current U.S. tax liability has been estimated using provisional amounts of untaxed foreign earnings. Additionally, the impact of foreign taxcredits and the impact on state taxes is provisional. These provisional amounts will be finalized within the measurement period.At December 31, 2017, as a result of the Tax Reform, the Company has changed its position regarding the repatriation of earnings of its foreign subsidiaries.The Company asserts that the earnings of its foreign subsidiaries will be permanently reinvested in the working capital and other business needs of thesubsidiaries to the extent that repatriation of these earnings would trigger additional capital gains and/or foreign withholding taxes. As such, amounts thatcan be brought back without triggering capital gains and/or foreign withholding taxes will not be considered permanently reinvested. Based on our analysis,we do not believe that the potential impact of the unrecognized deferred tax liability associated with the repatriation of such earnings would be material tothe financial statements.At December 31, 2017, the Company did not have any uncertain tax positions.F-36Table of ContentsThe following table summarizes the activity to the gross unrecognized tax benefits from uncertain tax positions (amounts in thousands):As of December 31,2017 2016 2015Beginning balance as of January 1$4,628 $11,801 $10,517Increases based on tax positions related to the current period— — 885Increases/(decreases) based on tax positions related to prior periods(4,331) (6,617) 429Decreases related to settlements(297) (554) —Decreases related to a lapse of applicable statute of limitations— (2) (30)Ending balance as of December 31$— $4,628 $11,801Included in the balance of unrecognized tax benefits as of December 31, 2017, December 31, 2016, and December 31, 2015 are $0.0 million, $4.6 million and$11.8 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. The Company’s open tax years range from 2013 through2017 for its U.S. federal returns, from 2015 through 2017 for the U.K., from 2012 through 2017 for Japan, and from 2012 through 2017 for its major statejurisdictions. It is reasonably possible that the amount of liability for unrecognized tax benefits could change during the next 12 months due to openexaminations. An estimate 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 $0.0 million, $0.9 million, and $1.8 million of penalties and interestfor the years ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively. These amounts are recorded in Income tax(benefit)/expense in the Consolidated Statements of Operations and Comprehensive Income and are part of the uncertain tax positions impact whenreconciling the federal income tax rate to the Company’s effective tax rate.19. 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 Operations and Comprehensive Income by the Companyfor its employees’ participation in the respective plans during the years ended December 31, 2017, 2016 and 2015 was $0.9 million, $0.9 million, and $0.9million, respectively.20. REGULATORY REQUIREMENTSThe following table illustrates the minimum regulatory capital our subsidiaries were required to maintain as of December 31, 2017 and the actual amounts ofcapital that were maintained (amounts in millions):F-37Table of ContentsEntity NameMinimumRegulatoryCapitalRequirements CapitalLevelsMaintained ExcessNetCapital Percent ofRequirementMaintainedGAIN Capital Group, LLC$34.7 $48.0 $13.3 138%GAIN Capital Securities, Inc.0.1 0.4 0.3 400%GAIN Capital U.K., Ltd.69.7 208.1 138.4 299%GAIN Capital Japan Co., Ltd.1.5 9.0 7.5 600%GAIN Capital Australia, Pty. Ltd.0.8 4.7 3.9 588%GAIN Capital-Forex.com Hong Kong, Ltd.1.9 4.7 2.8 247%GAIN Global Markets, Inc.1.6 2.4 0.8 150%GAIN Capital-Forex.com Canada, Ltd.0.2 1.7 1.5 850%GAIN Capital Singapore Pte., Ltd.0.6 6.0 5.4 1,000%Trade Facts, Ltd.0.6 3.2 2.6 533%Global Asset Advisors, LLC— 1.8 1.8 180%GAIN Capital Payments Ltd.0.2 0.4 0.2 200%GTX SEF, LLC1.0 1.4 0.4 140%Total$112.9 $291.8 $178.9 258%21. 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.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 over 12,500 global financial markets, including spot forex, precious metals and CFDs on commodities, indices, individualequities and interest rate products, as well as OTC options on forex. In the United Kingdom, the Company also offer spread bets, which are investmentproducts 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 SegmentThe 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$2.3 million, $1.2 million and $1.3 million for the twelve months ended December 31, 2017, 2016 and 2015, respectively. Corporate and other revenueprimarily comprises foreign currency transaction gains and losses. During the twelve months ended December 31, 2015, corporate and other revenue alsoincluded a $6.7 million adjustment to the contingent consideration related to the Trade Facts acquisition.F-38Table of ContentsSelected financial information by segment is presented in the following tables (amounts in thousands): Retail Year Ended December 31, 2017 2016 2015Net revenue$237,418 $336,353 $351,472 Employee compensation and benefits60,887 62,423 67,515Selling and marketing29,929 27,666 26,129Referral fees39,711 55,080 87,175Other operating expenses61,735 75,488 76,301Segment profit$45,156 $115,696 $94,352 Institutional Year Ended December 31, 2017 2016 2015Net revenue$31,155 $30,219 $35,072 Employee compensation and benefits13,887 14,424 15,305Selling and marketing86 103 138Other operating expenses12,274 10,342 9,573Segment profit$4,908 $5,350 $10,056 Futures Year Ended December 31, 2017 2016 2015Net revenue$40,291 48,084 45,797 Employee compensation and benefits9,387 11,967 10,634Selling and marketing786 972 901Referral fees13,960 15,672 16,348Other operating expenses12,931 14,769 13,960Segment profit$3,227 $4,704 $3,954 Corporate and Other Year Ended December 31, 2017 2016 2015Other revenue$(240) $(2,831) $(3,716) Employee compensation and benefits11,057 13,090 13,127Selling and marketing399 1 —Other operating expenses6,453 10,210 11,038Loss$(18,149) $(26,132) $(27,881)F-39Table of ContentsReconciliation of operating segment profit to (loss)/income before income tax (benefit)/expense For the Fiscal Year Ended December 31, 2017 2016 2015Retail segment$45,156 $115,696 $94,352Institutional segment4,908 5,350 10,056Futures segment3,227 4,704 3,954Corporate and other(18,149) (26,132) (27,881)SEGMENT PROFIT35,142 99,618 80,481Depreciation and amortization17,907 13,905 11,111Purchased intangible amortization16,110 15,016 16,550Acquisition expenses— — 2,819Restructuring expenses— 1,041 3,482Integration expenses— 2,788 33,092Impairment of investment620 — —Change in fair value to contingent consideration— — (6,722)Legal settlement— 9,205 —SNB bad debt provision— — 2,500Other corporate expenses827 — —OPERATING (LOSS)/PROFIT(322) 57,663 17,649Interest expense on long term borrowings11,821 10,421 9,222Loss on extinguishment of debt4,944 — —(LOSS)/INCOME BEFORE INCOME TAX (BENEFIT)/EXPENSE$(17,087) $47,242 $8,427Net revenue by geographic area for the years ended December 31, 2017, 2016 and 2015 is as follows (amounts in thousands): 2017 2016 2015Net Revenue(1): North America(2)$126,811 $126,600 $107,534Europe(3)154,027 264,879 307,087Other27,786 20,346 20,726Total Net Revenue$308,624 $411,825 $435,347(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 $117.4 million, $126.3 million, and $107.5 million for 2017, 2016, and 2015 respectively.(3) - Includes U.K. net revenue of $154.2 million and $264.7 million, and $307.3 million for 2017, 2016, and 2015 respectively.Long-lived assets by geographic area as of December 31, 2017 and 2016 are as follows (amounts in thousands): 2017 2016Long-lived assets(1): North America(2)$8,848 $6,875Europe(3)29,961 27,779Other1,933 1,808Total long-lived assets$40,742 $36,462(1) - Long-lived assets are comprised of property 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 $8.8 million and $6.9 million for 2017 and 2016, respectively.(3) - Includes U.K. long-lived assets of $30.0 million and $27.8 million for 2017 and 2016, respectively.F-40Table of Contents22. QUARTERLY FINANCIAL DATA (UNAUDITED)The following table sets forth selected quarterly financial data for 2017 and 2016 (in thousands, except per share data): First Second Third Fourth Quarter Quarter Quarter QuarterFor the Year Ended December 31, 2017 Total non-interest revenue$58,889 $96,901 $79,923 $67,965Net revenue$59,567 $98,054 $81,313 $69,690Income/(loss) before income tax expense$(23,659) $15,120 $(1,896) $(6,652)Net income/(loss)$(18,786) $14,092 $(2,355) $(3,526)Net income attributable to non-controlling interest$85 $153 $225 $157Net income/(loss) applicable to GAIN Capital Holdings, Inc.$(18,871) $13,939 $(2,580) $(3,683)Basic net income/(loss) per share$(0.39) $0.31 $(0.04) $(0.08)Diluted net income/(loss) per share$(0.39) $0.31 $(0.04) $(0.08) For the Year Ended December 31, 2016 Total non-interest revenue$115,340 $107,975 $71,966 $115,427Net revenue$115,554 $108,290 $72,223 $115,758Income/(loss) before income tax expense$11,064 $16,629 $(7,156) $26,705Net income/(loss)$8,701 $11,586 $(3,966) $21,091Net income attributable to non-controlling interest$349 $745 $748 $298Net income/(loss) applicable to GAIN Capital Holdings, Inc.$8,352 $10,841 $(4,714) $20,793Basic net income/(loss) per share$0.17 $0.19 $(0.11) $0.42Diluted net income/(loss) per share$0.17 $0.19 $(0.11) $0.4223. SUBSEQUENT EVENTSIn March 2018, the Company announced the payment of a $0.06 dividend per share of Common Stock payable on March 30, 2018 to stockholders of recordon March 27, 2018.F-41Table of ContentsSchedule IGAIN CAPITAL HOLDINGS, INC.(Parent Company Only)Condensed Balance Sheets(in thousands, except share data) December 31, 2017 December 31, 2016ASSETS: Cash and cash equivalents$138 $3,350Equity investments in subsidiaries523,353 501,553Income tax receivable1,864 903Deferred tax assets, net4,969 10,120Other assets3,153 6,100 Total assets$533,477 $522,026LIABILITIES AND SHAREHOLDERS’ EQUITY: Liabilities Accrued compensation and benefits$— $60Accrued expenses and other liabilities7,170 13,489Payable to affiliates108,338 89,526Convertible senior notes132,221 124,769 Total liabilities247,729 227,844Commitments and contingent liabilities (refer to Note 3) Shareholders’ Equity Common stock ($0.00001 par value; 120 million shares authorized, 53,612,340 shares issued and45,152,299 shares outstanding as of December 31, 2017; 120 million shares authorized,52,848,811 shares issued and 48,220,243 shares outstanding as of December 31, 2016)— —Additional paid-in capital235,659 218,392Retained earnings122,686 143,399Accumulated other comprehensive loss(15,670) (36,842)Treasury stock, at cost (8,460,041 shares at December 31, 2017 and 4,628,568 at December 31,2016, respectively)(56,927) (30,767) Total shareholders’ equity285,748 294,182 Total liabilities and shareholders’ equity$533,477 $522,026The accompanying notes are an integral part of these condensed financial statements.F-42Table of ContentsSchedule IGAIN CAPITAL HOLDINGS, INC.(Parent Company Only)Condensed Statements of Operations and Comprehensive Income(in thousands) Year Ended December 31, 2017 2016 2015REVENUE: Dividends from subsidiaries$6,900 $— $38,642Interest and other30 64 178Total revenue$6,930 $64 $38,820OPERATING EXPENSES: Interest expense204 39 63Employee compensation and benefits728 6,852 10,096Legal settlement2 9,205 —General and administrative4,905 6,412 6,775Total operating expense5,839 22,508 16,934Interest expense on long term borrowings11,821 10,421 9,222Loss on extinguishment of debt4,944 — —(LOSS)/INCOME BEFORE INCOME TAX EXPENSE(15,674) (32,865) 12,664Income tax (benefit)/expense(7,614) 2,603 (10,875)NET (LOSS)/INCOME BEFORE UNDISTRIBUTED EARNINGS OF SUBSIDIARIES(8,060) (35,468) 23,539Equity in (loss)/earnings of subsidiaries(3,135) 70,741 (13,260)NET (LOSS)/INCOME(11,195) 35,273 10,279Other comprehensive income/(loss): Foreign currency translation adjustment21,172 (30,977) (4,352)TOTAL COMPREHENSIVE INCOME$9,977 $4,296 $5,927The accompanying notes are an integral part of these condensed financial statements.F-43Table of ContentsSchedule IGAIN CAPITAL HOLDINGS, INC.(Parent Company Only)Condensed Statements of Cash Flows(in thousands) Year Ended December 31, 2017 2016 2015CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss)/income$(11,195) $35,273 $10,279Adjustments to reconcile net (loss)/income to cash provided by operating activities Equity in loss/(earnings) of subsidiaries3,135 (70,741) 13,260Loss/(gain) on extinguishment of debt4,944 (89) —(Gain)/loss on foreign currency exchange rates(16) 21 (66)Deferred tax benefit(1,891) (1,098) (11,264)Amortization of deferred financing costs495 442 354Dividends received— 28 —Share-based compensation5,093 4,151 3,680Convertible senior notes discount amortization4,917 4,310 3,624Changes in operating assets and liabilities: Receivables from affiliates— 2,442 37,548Other assets2,944 (5,861) 7,237Income tax payable(945) 13,121 (9,069)Accrued compensation and benefits(60) (151) 160Accrued expenses and other liabilities(6,972) (6,949) (4,876)Payable to affiliates18,828 64,064 (36,549)Cash provided by operating activities19,277 38,963 14,318CASH FLOWS FROM INVESTING ACTIVITIES: Investment in and funding of subsidiaries(2,106) (16,513) 7,081Cash (used in)/provided by investing activities(2,106) (16,513) 7,081CASH FLOWS FROM FINANCING ACTIVITIES: Contractual payments for acquisitions— — (11,829)Convertible note issuance, net of commissions89,010 — —Repurchase of convertible notes(73,057) (1,735) —Proceeds from exercise of stock options— 706 2,386Proceeds from employee stock purchase plan642 610 789Purchase of treasury stock(26,160) (8,959) (5,088)Excess tax benefit from employee stock option exercises356 49 1,140Dividend payments(11,174) (10,222) (9,530)Cash used in financing activities(20,383) (19,551) (22,132)(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS(3,212) 2,899 (733)CASH AND CASH EQUIVALENTS — Beginning of year3,350 451 1,184CASH AND CASH EQUIVALENTS — End of year$138 $3,350 $451SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest paid$5,012 $5,830 $4,538Tax refunds/(tax payments)$827 $(3,552) $733Non-cash financing activities related to acquisitions: Common stock issued as consideration for asset and business acquisitions$— $— $45,100The accompanying notes are an integral part of these condensed financial statements.F-44Table 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 Company has several subsidiaries that are subjected to minimum net capital requirements as noted in Note 20 - Regulatory Requirements, in theaccompanying consolidated financial statements. In accordance with SEC Rule § 210.12-04 Condensed financial information of registrant, the condensedfinancial information of the Parent Company is required to be presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of theconsolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidatedsubsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) whichas of the end of the most recent fiscal year may not be transferred to the Parent Company by subsidiaries in the form of loans, advances or cash dividendswithout the consent of a third party such as the primary regulators of the Company’s operating subsidiaries.The Parent Company on a stand-alone basis, has accounted for majority-owned subsidiaries using the equity method of accounting.2. Transactions with SubsidiariesThe Parent Company has transactions with its subsidiaries determined on an agreed upon basis. Cash dividends from subsidiaries were $6.9 million, $0.0million, and $38.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.3. Commitments and ContingenciesFor a discussion of commitments and contingencies, please refer to Note 17 to the Company’s consolidated financial statements.ITEM 16. FORM 10-K SUMMARYNone.3. 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). 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). 4.7 Indenture, dated as of August 22, 2017, between GAIN Capital Holdings, Inc. and The Bank of New YorkMellon (incorporated by reference to exhibit 4.1 of the Registrant’s Current Report on Form 8-K, filed onAugust 23, 2017, No. 001-35008). 4.8 Form of 5.00% Convertible Senior Notes due 2022 (included in Exhibit 4.7). 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).** F-45Table of Contents 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).** 10.14 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). F-46Table of Contents10.16† 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). 10.27 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).** F-47Table of Contents10.29 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 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 1-K for the yearended December 31, 2015, filed on March 17, 2016, No. 001-35008).** 10.31 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). 10.33 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). 10.34 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). 10.35 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). 10.36 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). 10.37 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). 10.38 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). F-48Table of Contents10.39 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). 10.40 Stockholders' Agreement, effective as of October 31, 2014, 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). 10.41 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). 10.42 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. 10.43 Asset Purchase Agreement, dated as of February 7, 2017, by and between GAIN Capital Group, LLC andForex Capital Markets L.L.C. (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Reporton Form 10-Q for the quarter ended March 31, 2017, filed on May 10, 2017, No. 001-35008) 10.44 Credit Facility, dated as of August 2, 2017, by and among GAIN Capital Holdings, Inc., Barclays Bank PLC,Sterling National Bank and the lenders set forth therein (incorporated by reference to Exhibit 10.1 of theRegistrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed on August 8, 2017,No. 001-35008). 10.45* Executive Employment Agreement, dated November 7, 2017, by and between GAIN Capital UK Ltd. andAlastair Hine ** 21.1* Subsidiaries of the Registrant. 23.1* Consent of Deloitte & Touche LLP 23.2* Consent of BDO LLP 23.3* Consent of KPMG 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. 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. F-49Table of Contents101.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.F-50Table 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 14th day of March, 2018.GAIN CAPITAL HOLDINGS, INC.By:/s/ Glenn H. Stevens Glenn H. Stevens President and Chief Executive Officer(Principal Executive Officer)Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized. Signature Title Date /s/ Glenn H. Stevens President, Chief Executive Officer and Director(Principal Executive Officer) March 14, 2018Glenn H. Stevens /s/ Nigel Rose Chief Financial Officer (Principal Financial Officerand Principal Accounting Officer) March 14, 2018Nigel Rose /s/ Joseph A. Schenk Chairman of the Board of Directors March 14, 2018Joseph A. Schenk /s/ Peter Quick Director March 14, 2018Peter Quick /s/ Christopher W. Calhoun Director March 14, 2018Christopher W. Calhoun /s/ Thomas Bevilacqua Director March 14, 2018Thomas Bevilacqua /s/ Christopher S. Sugden Director March 14, 2018Christopher S. Sugden /s/ Mark Richards Director March 14, 2018Mark Richards /s/ Alex Goor Director March 14, 2018Alex Goor F-51EXHIBIT 10.45EXECUTIVE EMPLOYMENT AGREEMENTTHIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made on 3 November 2017 between GAIN Capital UKLimited, a private limited company with a registered office address at Park House, 16 Finsbury Circus, London, EC2M 7EB (the“Company”) and Alastair Hine of 75b London Road, Tunbridge Wells, Kent, TN1 1DX (the “Executive”) to record the terms on whichthe Executive is employed by the Company.1 Definitions.In this Agreement (and in the Schedules to this Agreement (unless otherwise stated)), the following definitions apply:Board means the board of directors of the Parent Company;Confidential Information includes any confidential information (in whatever form and wherever located) relating to customersor potential customers, employees, officers or shareholders of the Company or any Group Company, its or their respective trackrecords, prices or pricing policies, customer lists, marketing information, market share, maturing business opportunities, tenders,intellectual property, business plans or dealings, technical data, financial information and plans, credit and payment policies,designs, formulae, algorithms, models, product lines, research activities, advisors’ reports, details of the experience, attributes,remuneration, skills, experience and personal information of persons employed or engaged by the Company or any GroupCompany, any document marked “Confidential” or “Secret”, or any information which the Executive has been told isconfidential or which he might reasonably expect the Company or any Group Company to regard as confidential, or anyinformation which has been given to the Company or any Group Company in confidence by customers, potential customers,suppliers or other persons and including information which the Executive creates, develops, receives or obtains in the course ofthe Employment;Employment means the Executive’s employment with the Company on the terms of this Agreement;Group Company means, in relation to the Company, any subsidiary or holding company, or any subsidiary of such a holdingcompany (“holding company” and “subsidiary” having the meanings set out in section 1159 of the Companies Act 2006) or anysubsidiary undertaking or parent undertaking or any subsidiary undertaking of such a parent undertaking (“parent undertaking”,“subsidiary undertaking” and “undertaking” having the meanings set out in sections 1161 and 1162 of the Companies Act2006) and any reference to the Group shall be construed accordingly and, in relation to the Parent Company, any subsidiary orholding company, or any subsidiary of such holding company (“holding company” and “subsidiary” having the meanings setout in section 1159 of the Companies Act 2006) or any subsidiary undertaking or parent undertaking or any subsidiaryundertaking of such parent undertaking (“parent undertaking”, “subsidiary undertaking” and “undertaking” having themeanings set out in sections 1161 and 1162 of the Companies Act 2006) and any reference to the Group shall be construedaccordingly;Parent Company means GAIN Capital Holdings, Inc., a corporation organised under the laws of Delaware and the ultimateholding company of the Company.Regulations means the Working Time Regulations 1998; Termination Date means the date on which the Employment ends.2Appointment.(a)The Company will employ and the Executive will serve as Chief Operating Officer on the terms of this Agreement.(b)The Executive will report to the Chief Executive Officer of the Parent Company and shall have general control andresponsibility for the management of the general business operations of the Company and the other Group Companies, ineach case as defined by the Chief Executive Officer of the Parent Company from time to time.(c)The Executive represents that he is entering into this Agreement voluntarily and that his Employment hereunder and hiscompliance with the terms and conditions of this Agreement will not conflict with or result in the breach of any agreement towhich he is a party or by which he may be bound, or any legal duty that he owes or may owe to another.3Employment Term.(a)The Employment will start on 3 November 2018 and will continue on and subject to the terms of this Agreement, inparticular clause 17 below, for an initial period expiring on 31 December 2018, after which the Employment willautomatically renew annually for a further period of one year unless either party gives the other at least 60 days’ writtennotice of non-renewal, in which case this Agreement will terminate on the date specified in such written notice.(b)The first six months of the Executive’s employment shall be a probationary period (the “Probationary Period”). TheCompany may, at its absolute discretion, extend this period for such further period as it may decide. During theProbationary Period your performance and suitability for continued employment will be monitored.(c)The Company may, in its absolute discretion, at any time terminate the Employment with immediate effect by notice inwriting to inform the Executive that the Employment will terminate with immediate effect and that the Company will pay theExecutive an amount in lieu of all or part of the period of notice set forth in clause 17(d) equal to the portion of his BaseSalary otherwise payable during such period, provided that:(i)Any payments due to the Executive under this clause 3 will be subject to such deductions as the Company is required tomake;(ii)The Executive will only be entitled to payment under this clause 3 if the Company notifies him in writing of its decisionto make the payment in lieu of notice and the Executive complies with his obligations under this Agreement includingand in particular under clause 23 (Restrictions after Employment); and(iii)The Company may pay any sums due to the Executive under this clause 3 in equal monthly instalments (on or about thenormal date of payment of Base Salary) until the date upon which the notice period (or the balance of the notice period)applicable under clause 17 would otherwise have expired.4Duties and Extent of Services.2(a)As an executive officer of the Company, the Executive shall be entitled to all of the benefits and protections to which allofficers of the Company are entitled pursuant to the Company’s organisational documents, which shall include, but not belimited to, the rights of indemnification set forth in such organisational documents, and coverage under the Company’sdirectors’ and officers’ liability insurance, as are in effect from time to time.(b)During the Employment, the Executive agrees to devote all his business time, attention, and skill to the Company’s businessand that of any Group Companies. The Executive covenants, warrants and represents that he shall devote his full and bestefforts to the fulfillment of his employment obligations, and he shall exercise the highest degree of loyalty and the higheststandards of conduct in the performance of his duties. He will do his best to promote the interests of the Company andGroup Companies.(c)During the Employment, the Executive will comply with the following:(i)the provisions of the Criminal Justice Act 1993 or any other legislation relating to insider trading or market abuse; and(ii)the rules of any other relevant recognised investment exchange; and(iii)all rules issued by the Company and any Group Company in relation to owning or trading securities.(d)The Executive acknowledges that he is in the position of a fiduciary having regard to the nature and seniority of his positionand owes a duty to disclose to the Company his own misdeeds and those of any other person employed or engaged by theCompany or any Group Company.(e)The Executive will notify the Chief Executive Officer of the Parent Company immediately if he becomes aware of anymatter which does or which might adversely affect the interests of the Company or any Group Company giving allnecessary particulars.5Hours of work(a)There are no normal hours of work for the Executive’s appointment. He will work whatever hours are necessary to carryout his duties properly. He shall not be entitled to additional remuneration for working outside normal office hours of theCompany and any Group Company.(b)The Executive agrees that the limit on working time in Regulation 4(1) of the Regulations will not apply to hisEmployment (the “Opt-Out”). The Executive may (subject to the provisions of the Regulations and without prejudice tothe other terms of this Agreement) give three months written notice to the Company that he wishes to withdraw hisagreement to the Opt-Out.6Place of work. The Executive will be based at the Company’s office in London. The Company reserves the right to change theExecutive’s place of work to another location in the United Kingdom. The Executive may be required to travel both throughoutand outside the United Kingdom.37Compensation(a)Base Salary. The Company shall pay the Executive an annualized base salary of £250,000 (the “Base Salary”) in equalmonthly instalments in arrears. Currently payment is made on or around the 21st of each calendar month. Salary will accruefrom day to day and will be calculated on the basis of 260 working days per annum. The Base Salary shall be reviewedperiodically by the Board’s Compensation Committee (the “Compensation Committee”) and, in the sole discretion of theCompensation Committee, the Base Salary may be adjusted effective as of any date determined by the CompensationCommittee. The Executive shall not receive any additional compensation from any Group Company. The Base Salaryincludes any fees to which the Executive may be entitled should be serve as a director of the Company or any GroupCompany.(b)Bonus. Subject always to any legal or regulatory obligations applicable to the Company for the time being and any stepswhich the Company considers to be appropriate to comply with such obligations, during the Employment, the Executiveshall be eligible to participate in each bonus or incentive compensation plan, program or policy maintained by the Companyfrom time to time, including those maintained by the Parent Company and adopted by the Company, in whole or in part, forthe executive officers of the Company (each, an “Incentive Compensation Plan” and payments thereunder, “IncentiveCompensation”). The Executive’s target and maximum compensation under, and his performance goals and other terms ofparticipation in, each Incentive Compensation Plan shall be determined by the Compensation Committee in its solediscretion. Save as otherwise set out in this Agreement, any such Incentive Compensation is not guaranteed and iscontingent upon the Executive and the Parent Company achieving established deliverables or other goals. Any suchIncentive Compensation shall not be considered “earned” by the Executive until the Company has allocated payment to bemade to the Executive for any performance period. Payment under any such Incentive Compensation Plan shall be made, ifat all, after the close of the relevant performance period in accordance with the Company’s normal bonus procedures then ineffect. Notwithstanding anything herein to the contrary, to the extent permitted or required by governing law, theCompensation Committee shall have discretion to adjust the Executive’s compensation for the following year to account for,or to require the Executive to repay to the Company, the amount of any Incentive Compensation to the extent theCompensation Committee or the Board determines that such Incentive Compensation was not actually earned by theExecutive due to (%3) the amount of such payment being based on the achievement of financial results that weresubsequently the subject of a material accounting restatement that occurs within three years of such payment (except in thecase of a restatement due to a change in accounting policy or simple error); (%3) the Executive having engaged in fraud,gross negligence or intentional misconduct; or (%3) the Executive having deliberately misled the market or the Company’sstockholders regarding the financial performance of the Company or any Group Company. Neither eligibility to participatenor payment of bonus in respect of any previous period gives rise to any right, expectation or entitlement for the Executiveto receive any future payment or as to the amount of any such payment. The Company and the Parent Company, asapplicable, reserve the right to amend the terms of such Incentive Compensation Plan at any time, including during anyperformance period. Any Incentive Compensation Plan paid will not be taken into account in calculating pensioncontributions under clause 9. The Executive acknowledges that it is possible that the Company may exercise its discretion toaward to him nil Incentive Compensation. Without limiting the foregoing, the Executive acknowledges that he is not eligibleto receive any discretionary cash bonus in respect of 2017.4(c)At any time, the Company may deduct all or part of any sums owed by the Executive to the Company or any GroupCompany including, but not limited to, any outstanding loans, advances, the cost of repairing any damage or loss to theCompany’s property caused by him or salary paid in respect of excess holiday taken at the Termination Date from any sumsdue from the Company to the Executive (whether during the Employment or after the Termination Date) and withoutprejudice to the Company’s other rights and remedies.(d)Equity. During the Employment, the Executive will be eligible to participate in all long-term equity incentive programs madeavailable to other executive officers and that are established by the Company for its employees, including the 2015Omnibus Incentive Compensation Plan (or a successor thereto) of the Parent Company, at levels determined by theCompensation Committee in its sole discretion commensurate with the Executive’s position. All equity grants made to theExecutive will vest in accordance with a vesting schedule that is consistent with other grants under the 2015 OmnibusIncentive Compensation Plan (or successor plan) of the Parent Company and will be subject in all respects to the terms ofthe 2015 Omnibus Incentive Compensation Plan (or successor plan) of the Parent Company and the agreement evidencingsuch grant.8Benefits. On completing the Probationary Period to the Company’s satisfaction, the Executive shall be entitled to participate inany and all benefit programs and arrangements generally made available by the Parent Company and Company to executiveofficers, including, but not limited to, pension plans, private medical cover, death in service benefit and life insurance plans forwhich the Executive may be eligible during the Term.9Pension and life assurance.(a)The Executive may become a member of the Company’s Group Personal Pension Plan, subject to satisfying the eligibilitycriteria and subject always to the rules of the plan from time to time. Full details of the plan can be obtained from HumanResources.(b)The Company will comply with the employer pension duties in respect of the Employment in accordance with Part 1 ofthe Pensions Act 2008 and such other statutory duties as may arise from time to time.(c)A contracting-out certificate pursuant to the provisions of the Pension Schemes Act 1993 is not in force for theEmployment.(d)The Company will provide the Executive with life assurance cover to assure a sum equal to four times his Base Salary,payable if he dies during the Employment subject to HM Customs & Revenue limits and to clause 12 (ConditionsApplicable to Insured Benefits).10Private Medical Insurance Scheme. Subject to clause 12 (Conditions Applicable to Insured Benefits), the Executive andeligible family members are eligible to join the Company’s private medical insurance scheme.11Permanent Health Insurance. Subject to clause 12 (Conditions Applicable to Insured Benefits), the Executive is eligible to jointhe Company’s permanent health insurance scheme, subject to the terms and conditions of the scheme, in force from time totime. The provision of permanent health insurance does not restrict the Company’s rights to terminate the Executive’sEmployment in accordance with the terms of this Agreement. All rights of the Executive to receive salary and5benefits under this Agreement shall cease in respect of any period during which the Executive is entitled to receive benefitsunder the permanent health insurance scheme.12Conditions Applicable to Insured Benefits.(a)The terms of this clause 12 apply to the benefits referred to in clauses 9 (Pension and Life Assurance), 10 (Private MedicalInsurance Scheme) and 11 (Permanent Health Insurance) (the Insured Benefits).(b)The Executive’s participation in the Insured Benefits is subject to the terms of the relevant scheme in force from time totime. The Executive acknowledges that the decision on whether, and if so, to what extent, benefits may be provided to himin respect of Insured Benefits will be taken by the scheme insurer. The Executive agrees that he will have no claim againstthe Company or any Group Company relating to the provision of Insured Benefits.(c)The Executive’s participation in the Insured Benefits (and any other insurance-related benefit scheme in which he mayparticipate from time to time) is subject to the normal underwriting requirements of the relevant scheme in force from time totime.(d)The Executive will not be eligible for any Insured Benefit in respect of which cover is not available from the Company’schosen insurer or is only available from such insurer subject to additional premiums or conditions.(e)Eligibility for some benefits is conditional on the Executive being an employee of the Company either at a specified time (ortimes), or for a period (or periods) in respect of which benefit is paid. For the avoidance of doubt, the Company may dismissthe Executive at any time, and for any reason in accordance with the terms of this Agreement, even if this results in theExecutive losing any current or prospective entitlement to any Insured Benefits.(f)The Insured Benefits are provided subject to the terms, including for the avoidance of doubt, eligibility criteria, of theinsurance policies taken out by the Company and in force from time to time. The Company will not provide any InsuredBenefit if the relevant insurer does not accept its liability to make the relevant payment under the terms of the relevantpolicy. Copies of the relevant policies are available on request.(g)Third party providers (e.g. insurers or pension providers) may from time to time provide additional information to theExecutive. The Company does not accept responsibility for the accuracy of any such third party information and suchinformation does not form part of the Executive’s contract of employment.(h)The Company may vary, replace or withdraw the provision of any of the Insured Benefits at its absolute discretion. TheCompany will be under no obligation to provide any compensation or any other benefit if it, at any time and for any reason,exercises such discretion.13Holiday.(a)The Company’s holiday year runs from 1 January to 31 December each year (Holiday Year). The Executive is entitled to aminimum 25 days paid annual holiday during each complete Holiday Year.6(b)In addition to his annual holiday entitlement, the Executive is entitled to paid holiday in respect of the usual 8 publicholidays in England and Wales. The Company reserves the right to require the Executive to work on a public holiday fromtime to time. The Executive will be given one day’s paid leave in lieu of such public holiday and for which he will be paidat the rate of his Base Salary.(c)All holidays must be approved in advance by the Chief Executive Officer of the Parent Company. The Executive mustcomply with the Company’s holiday request procedure in respect of any proposed holiday dates, as outlined in theEmployee Handbook from time to time.(d)For the purposes of calculating holiday entitlement during the year in which the Employment with the Company commencesor terminates, annual entitlement will be pro-rated and rounded up to the nearest half day, based on the number ofcompleted months’ service during that Holiday Year.(e)If, on the termination of the Employment with the Company for whatever reason, the Executive has taken more holiday thanhis accrued entitlement at such date, the Company shall be entitled to deduct from any payments due to him, an amount inrespect of holidays taken in excess of the Executive’s accrued entitlement. If the holiday the Executive has taken is less thanhis accrued pro-rated entitlement, he will be entitled to be paid in lieu in respect of such accrued but unused holidayentitlement subject to the terms of this Agreement. One day’s holiday pay is calculated as 1/260th of Base Salary.(f)The Company shall not pay in lieu of untaken holiday except on termination of employment. The Executive may only carryforward untaken holiday entitlement from one Holiday Year to the next to the extent permitted by Company policy as ineffect from time to time.(g)The Company may require the Executive to take any unused holiday during any notice period given to terminate thisAgreement.14Expenses. During the Employment, the Executive will be reimbursed for travel, entertainment and other out-of-pocket expensesreasonably incurred by the Executive on behalf of the Company in the performance of the Executive’s duties hereunder, so longas (a) such expenses are consistent with the type and amount of expenses that customarily would be incurred by similarlysituated corporate executives in the UK; and (b) the Executive complies with the Company’s policies with respect to travel andexpenditure, to include the timely provision of receipts for expenses.15Adherence to Company Policy. In addition to the terms of this Agreement, the Executive is bound by such other of theCompany’s employment, compliance and workplace policies and procedures, notified to him from time to time, to the extentthat these impose obligations on him, including, but not limited to, those set out in any Employee Handbook or ComplianceManual.16Sickness Absence and Reporting.(a)The Executive agrees to submit to a medical examination, at any time, if asked to do so by the Company. The Company willnominate a medical practitioner and meet all relevant charges. The Executive consents to the disclosure by such medicalpractitioner of the results of such examination to the Company, subject to the provisions of the Access to Medical ReportsAct 1988 (if applicable).7(b)If the Executive does not perform his duties for seven consecutive calendar days or more because of ill-health or injury, hewill provide the Company with a medical certificate.(c)The Company will pay the Executive statutory sick pay in accordance with the Social Security Contributions and BenefitsAct 1992. Any sick pay paid to the Executive in excess of statutory sick pay will be at the absolute discretion of theCompany and will be deemed to include statutory sick pay.(d)If the Executive receives compensation for loss of earnings from a third party or health insurance scheme relating to aperiod during which he received or is receiving any payments from the Company, the Company may reduce any futureamounts payable to him to reflect that compensation.17Termination.(a)Incapacity. The Company may terminate the Executive’s employment immediately if, as a result of ill-health or injuryabsence, the Executive is prevented from performing his duties for an aggregate period of more than 75% of the workingdays in any period of 6 consecutive months.(b)Death. The Executive’s employment with the Company will terminate upon the death of the Executive.(c)Termination with Cause. The Company may terminate the Executive’s employment at any time for Cause by providingwritten notice of such termination to the Executive. “Cause” means any of the following, as determined by the Board:(i)the Executive is guilty of dishonesty, or other gross misconduct, or gross incompetence or commits any serious orpersistent breach of the terms of this Agreement, including, but not limited to, any breach of clause 26 (RegulatoryObligations); or(ii)the Executive acts in any way (whether in the course of his Employment or not) which, in the reasonable opinion ofthe Board brings or may bring him or the Company or any Group Company into disrepute; or(iii)the Executive becomes bankrupt, applies for or has a receiving order under Section 286 Insolvency Act 1986 madeagainst him, or has any order made against him to reach a voluntary arrangement as defined by Section 253 of thatAct; or(iv)the Executive is of unsound mind; or(v)the Executive engages in conduct which, in the opinion of the Board is unacceptable, or performs his duties in amanner which in the opinion of the Board is unacceptable, or(vi)the Executive is convicted of a criminal offence (other than a road traffic offence not punishable by imprisonment); or(vii)the Executive commits an offence under the Bribery Act 2010; or(viii)the continued employment of the Executive contravenes section 8 of the Asylum and Immigration Act 1996.8For purposes of determining Cause, with respect to subsections (i), (ii) and (v) above, if the action or inaction in question issusceptible of a cure, then no finding of Cause shall occur prior to written notice to the Executive setting forth in reasonabledetail the action or inaction at issue, and the Executive’s failure to cure such condition following a cure period of no lessthan fifteen days; provided, however, that the foregoing notice requirement shall not apply with respect to a breach of clause26 (Regulatory Obligations).(d)Termination Without Cause. The Company, at the direction of the Board, may terminate the Employment without Cause atany time upon no less than 90 days’ prior written notice or payment in lieu of notice pursuant to clause 3(b) above;provided, that, notwithstanding the foregoing, the Executive’s employment may be terminated at any time during theProbationary Period on one week’s prior written notice.(e)Resignation for Good Reason. The Executive may resign from his Employment with the Company for Good Reason byproviding written notice to the Chief Executive Officer of the Parent Company that an event constituting Good Reason hasoccurred and the Executive desires to resign from his Employment as a result. Such notice must be provided to the ChiefExecutive Officer of the Parent Company by the Executive within 60 days following the initial occurrence of the eventconstituting Good Reason. After receipt of such written notice, the Chief Executive Officer of the Parent Company shallhave a period of 30 days to cure such event; provided, however, the Chief Executive Officer of the Parent Company, may,at his or her sole option, determine not to cure such event and accept the Executive’s resignation, effective 30 daysfollowing such Chief Executive Officer’s receipt of the Executive’s notice that an event constituting Good Reason hasoccurred. If, in the reasonable judgment of the Executive, the Chief Executive Officer of the Parent Company does not curethe event constituting Good Reason within the requisite 30-day period, the Executive’s employment with the Company shallterminate on account of Good Reason 30 days following the expiration of such Chief Executive Officer’s cure period,unless the Chief Executive Officer of the Parent Company determines to terminate the Employment prior to such date. Asused herein, “Good Reason” means that, without the Executive’s consent, any of the following has occurred:(i)a material diminution in the Executive’s authority, duties, responsibilities or job title;(ii)a relocation of the Company’s principal offices in London to a location that is not within the United Kingdom; or(iii)any action or inaction by the Company that constitutes a material breach by the Company of its obligations under thisAgreement.(f)Resignation without Good Reason. The Executive may resign from his Employment with the Company without GoodReason (as that term is defined in clause 17(e)) at any time upon no less than 90 days’ prior written notice to the ChiefExecutive Officer of the Parent Company. Upon such notice of resignation, the Company may, at its sole option, accept theExecutive’s resignation effective as of a date prior to the resignation date specified in the notice, and in such event, theearlier date will be the Termination Date.18Compensation Upon Termination.9(a)Termination after the Probationary Period without Cause or Due to Incapacity or Death; Resignation with Good Reason.Upon termination of Employment at any time after the end of the Probationary Period pursuant to clauses 17(a), 17(b), 17(d)or 17(e), the Executive (or his estate, as applicable) will receive any Base Salary accrued and unpaid as at the TerminationDate, any sums due pursuant to clause 13 (if any) and appropriate expense reimbursements as soon as practicable after theTermination Date. In addition, subject to the Executive’s (or his estate’s, as applicable) execution of a statutory settlementagreement on terms satisfactory to the Company and execution and non-revocation of the general release of claims on termssatisfactory to the Company, as well as the Executive’s compliance with clause 23 (Restrictions After Employment),Schedule 1, clause 19 (Confidentiality) and any other provisions which are expressed to apply on and following terminationof Employment in this Agreement, the Company will also pay to the Executive (or his estate) an amount equal to 12 monthsof the Executive’s monthly Base Salary, which shall be paid in accordance with the Company’s normal payroll practices inequal installments over the 12-month period following Executive’s last day of employment and which shall commence assoon as administratively practicable following the expiration of the revocation period for the general release, but not laterthan 60 days following the date of Executive’s last day of employment with the Company. The Company shall have nofurther obligations under this Agreement to the Executive (or his estate, as applicable).(b)Termination During Probationary Period or with Cause; Resignation without Good Reason. If (i) the Company terminatesthe Employment during the Probationary Period for any reason or, after the end of the Probationary Period, with Causepursuant to clause 17(c), (ii) the Executive resigns without Good Reason pursuant to clause 17(f), or (iii) the Executive isentitled to the severance benefits pursuant to clause 18(a) and either he or his estate, if applicable, does not execute astatutory settlement agreement on terms satisfactory to the Company or does not execute or revokes a general release ofclaims on terms satisfactory to the Company, or is in material breach of clause 23 (Restrictions After Employment), Schedule1, clause 19 (Confidentiality) and any other provisions which are expressed to apply on and following termination ofEmployment in this Agreement, then the Company will pay the Executive his Base Salary accrued and unpaid as of theTermination Date, any sums due under clause 13 (if any) and unpaid as of the Termination Date and appropriate expensereimbursements as soon as practicable and, following such payments, the Company shall have no further obligations underthis Agreement to the Executive.(c)Nonrenewal of this Agreement. If the Executive or the Company provides written notice of non-renewal of this Agreementin accordance with clause 3 above, termination of the Employment in connection with the non-renewal of this Agreementshall not be deemed a termination without Cause or a resignation for Good Reason and no payments or severance benefitsunder clause 18 of this Agreement will be payable to the Executive.19Confidentiality.(a)During his Employment, the Executive will not use or disclose, directly or indirectly, any trade secrets or ConfidentialInformation belonging to the Company or any Group Company, except to allow him to carry out his duties properly or asrequired by law.(b)The obligations contained in this clause 19 will continue to apply to the Executive after his Employment ends, for so long asthe information referred to in clause 19 remains confidential.10(c)During his Employment, the Executive will not make or store (in any form including on any website or web based databaseor networking site) any notes or memoranda relating to any aspect of the business of the Company or any Group Company(Memoranda) which are not for the benefit of the Company or Group Company. All Memoranda made by the Executivewill belong to the Company.(d)The Company and any Group Company may, from time to time be entrusted with confidential or proprietary information,trade secrets or intellectual property belonging to third parties (Third Party Confidential Information). The Executive willcomply with any contractual undertakings or obligations which the Company or any Group Company imposes onemployees in respect of Third Party Confidential Information. The Executive will enter into any confidentiality undertakingwith any third party that the Company or any Group Company may require.20Garden Leave(a)At any time after the Company or the Executive has given notice to terminate the Employment, the Company may exerciseall or any of the following rights:(i)change the Executive’s duties in whatever way it decides is appropriate;(ii)totally withdraw all the Executive’s powers and responsibilities;(iii)withdraw or limit the access of the Executive to any of the IT or other systems of the Company or any GroupCompany;(iv)require that the Executive does not contact or communicate with any current, past or prospective clients, employees orsuppliers of the Company or any Group Company about any aspect of the business of the Company or any GroupCompany;(v)prohibit the Executive from entering any premises of the Company or any Group Company;(vi)require the Executive to carry out his duties (including those specified in this clause) from home;(vii)appoint another person or persons to act jointly with the Executive in discharging his duties (whether as an employeeor officer of the Company or any Group Company) to replace the Executive in any office from which he has resigned;(viii)require the Executive to assist in a proper handover of his duties and responsibilities (including clients, prospects andbusiness) to another employee of the Company;(ix)require the Executive to keep the Company informed of his whereabouts so that he may be called upon to perform anyduties as required by the Company;(x)require that the Executive complies with any or all of his obligations under clause 22 (Return of Property),for a maximum period of six months (the Garden Leave Period).11(b)At any time during the Garden Leave Period, the Board may require the Executive to resign immediately from anydirectorship or other office that he may hold with the Company and any Group Company.(c)During any Garden Leave Period, unless the Chief Executive Officer of the Parent Company agrees otherwise, the Executivewill not:(i)do any work, whether paid or unpaid, for any third party;(ii)hold himself out as a director or other officer of the Company or any Group Company if he no longer holds office withsuch company;(iii)make any comment to any person about the change to his duties, except to confirm that he is on Garden Leave.(d)The Executive acknowledges that he will remain employed by the Company on the terms of this Agreement during anyGarden Leave Period and, in particular, he remains bound by the express obligations contained in this Agreement except asvaried by this clause 20 and by the implied obligations of honesty, loyalty and good faith and confidentiality owed by anemployee to his employer. The Executive will make himself available to the Company and any Group Company, in person,on the telephone or otherwise as the Company may direct, during normal working hours.(e)If the Executive fails to make himself available to work during any Garden Leave Period other than as agreed with the ChiefExecutive Officer of the Parent Company, the Company may deduct one day’s salary for each day of absence during suchnotice period and without prejudice to the rights of the Company in respect of breach by the Executive of the terms of thisAgreement.(f)The Company will continue to pay the Executive’s Base Salary and provide contractual benefits during any Garden LeavePeriod as long as he complies with his obligations under this Agreement.(g)During the Garden Leave Period, the Company reserves the right to terminate the employment of the Executive by givingnotice to make a payment to the Executive in lieu in accordance with clause 3(b) above in respect of any unexpired periodof notice given or deemed by the Company to be given.(h)The Company’s rights under this clause are distinct from the Company’s right to suspend the Executive to investigate anyallegations against him in accordance with subsection 20(i) below (Suspension).(i)Suspension. The Company may suspend the Executive for a reasonable period to investigate any allegations of theExecutive’s involvement in any allegation of Cause or any misconduct or alleged breach of the terms of this Agreement andpending any disciplinary decision. During any period of suspension, the Executive will continue to receive his Base Salaryand contractual benefits provided that he remains ready, willing and able to work. For the avoidance of doubt, if theExecutive is not available for work through sickness, ill-health or otherwise, then he shall have no right to receive his BaseSalary or contractual benefits save as set out in this Agreement. During the period of suspension, the Executive will notattend work but will provide whatever12co-operation and assistance the Company may require to allow it to complete its investigations. The Executive will not takeany holiday while he is suspended unless the Chief Executive Officer of the Parent Company expressly allows him to do so.21Inventions, Ideas, Processes and Designs.(a)The Executive acknowledges that in the course of the Employment and as part of his duties he may conceive or make,individually or with others, certain inventions, ideas, discoveries, developments, writings, designs, drawings, improvementsand innovations, whether or not patentable, or capable of registration (collectively Inventions); and he may develop orproduce, individually or with others, certain works in which copyright and/or unregistered design right will subsist invarious media, including but not limited to electronic materials (collectively, Creative Works), and agrees that he willpromptly disclose in writing to the Company all Inventions and Creative Works.(b)Intellectual Property means patents, trademarks and service marks, rights in designs, trade or business names, copyrights(including rights in computer software), database rights (whether or not any of these are registered and includingapplications for registration of any such thing) and all rights or forms of protection of a similar nature or having equivalentor similar effect to any of these which may subsist anywhere in the world.(c)The Executive acknowledges that any Inventions or Creative Works and any and all Intellectual Property subsisting orwhich may in the future subsist in such Inventions or Creative Works whether or not conceived or made during workinghours, including, without limitation, those which:(i)relate in any manner to the business of the Company or any Group Company or to its actual or demonstrably anticipatedactivities; or(ii)result from or are made in the course of the Executive’s employment by the Company; or(iii)involve the use of any equipment, supplies, facilities, Confidential Information, documents, Intellectual Property or timeof the Company or any other Group Company,will on creation vest in and be the exclusive property of the Company in the United Kingdom or any other part of theuniverse and where the same does not automatically vest as aforesaid and the Executive agrees to assign the same to theCompany (or as it may direct) or in the case of any future copyright in the same the Executive hereby assigns suchcopyright to the Company.(d)The Executive agrees that, without limitation to the foregoing:(i)any Invention disclosed by the Executive to a third person or described in a patent or registered design application filedby the Executive or on the Executive’s behalf; and(ii)any Creative Work disclosed to a third person, published or the subject of an application for copyright or otherregistration filed by the Executive or on the Executive’s behalf,during or within six months following termination of the Employment will be presumed to have been written, developed,produced, conceived or made by the Executive during the Employment,13unless proved by the Executive to have been written, developed, produced, conceived or made by the Executive followingthe termination of the Employment.(e)The Executive hereby irrevocably waives any rights which he may have in the Inventions or the Creative Works which areor have been conferred on him by chapter IV of Part I of the Copyright, Designs and Patents Act 1988 headed “MoralRights” and by any other laws of a similar or equivalent nature in any of the countries of the world.(f)The Executive will also, at the Company’s request and expense, execute specific assignments of any Inventions or CreativeWorks and execute, acknowledge and deliver such other documents and take such further action as the Company mayrequire, at any time during or subsequent to the period of the Employment, to vest or evidence title in Inventions or CreativeWorks in the Company (or as it may direct) and to obtain, maintain and defend the Intellectual Property in the Inventions orCreative Works in any and all countries or to otherwise give effect to the provisions of this Agreement.(g)The Executive hereby irrevocably appoints the Company to be his attorney in his name and on his behalf to execute and doany such instrument or thing and generally to use his name for the purpose of giving to the Company or its nominee the fullbenefit of the provisions of this clause 21 and acknowledges in favour of any third party that a certificate in writing signedby any Director or the Secretary of the Company that any instrument or act falls within the authority hereby conferred shallbe conclusive evidence that such is the case.22Return of Property.(a)At any time during the Employment, including during any Garden Leave Period, the Company may require the Executive to(and will in any event on the termination of the Employment) for whatever reason:(i)return promptly to the Company all Confidential Information and all original and copy books, documents, records,correspondence, papers, information, software, data, and any other information-storing medium belonging or relating tothe business of the Company or any Group Company; and any other property, equipment, keys, hardware belonging tothe Company or any Group Company or belonging to any third party which has provided such property to the Companyor any Group Company for the use of that company which is in his possession or under his control.(ii)permanently delete from any mobile telephone, personal or laptop computer, PDA, tablet or other mobile device, anyinternet or web-based account or facility (including any business or social networking site, including but not limited toLinkedIn, Facebook, Google + or Twitter) (“Relevant Media”) or other information storing medium all data, client orprospective client or customer contact details or profiles, documents and information belonging to or obtained from orprepared for the Company or any other Group Company or any of its or their respective customers, clients, investors oradvisers.(b)During or at any time after the Employment ends, the Executive will co-operate with any request from the Company todisclose, provide and facilitate access (including by providing passwords) to any Relevant Media or other website or webbased directory, any computer, mobile device, organiser or other equipment in his possession, or under his control, whichcontains Confidential14Information or other information or material belonging or relating to the Company or any Group Company or any of theirclients, employees or suppliers. This obligation applies to equipment owned by the Company, any Group Company, theExecutive or anyone else. The Executive will permit the Company to inspect, copy, amend or remove any material relatingto the business of the Company or any Group Company.(c)The Executive will confirm in writing that he has complied fully with his obligations under this clause, if required to do soby the Company.23Restrictions After Employment.(a)The Executive recognises that, whilst performing his duties for the Company and any Group Company, he will have accessto trade secrets and confidential information belonging to the Company and Group Companies and will obtain personalknowledge of and influence over its or their clients, partners, suppliers and employees. The Executive therefore agrees thatthe restrictions in Schedule 1 of this Agreement are reasonable and necessary to protect the legitimate business interests ofthe Company and Group Companies.(b)The Executive agrees that if he receives any offer of employment or other work, either during the Employment or during theRestricted Period (as defined in Schedule 1 of this Agreement), he will give the person offering the employment or otherwork a copy of this Agreement and will draw their attention to clauses 24 (Other Activities during Employment), 20 (GardenLeave) and 23 (Restrictions after Employment) and to Schedule 1 in particular.24Other Activities During Employment.(a)During his Employment the Executive will not, in any capacity, be involved in providing services, directly or indirectly, toany other person in respect of any other business, trade or occupation unless he has first obtained the prior written consentof the Chief Executive Officer of the Parent Company.(b)The restriction in clause 24(a) will not prevent the Executive from holding up to 3% of any securities in any company,whether or not the securities are quoted on any recognised investment exchange.(c)The Executive will not during the Employment without the prior written consent of the Chief Executive Officer of the ParentCompany whether alone or jointly with or on behalf of any person whether directly or indirectly and in any capacity beinvolved in the preparation, planning, creation or establishment of any business which competes or intends to compete withany business of the Company or any Group Company in which the Executive is or has been involved at any time in thecourse of the Employment.25Use of Business or Social Media.(a)The Executive may in the course of the Employment use or access internet or web-based accounts or facilities (includingany Relevant Media (as defined above)) provided that:(i)all accounts used or held by him in Relevant Media must be separate and distinct from any personal accounts used orheld by him in Relevant Media;15(ii)all data or information held or maintained by him in Relevant Media shall be the property of the Company;(iii)all data or information held or maintained by him in Relevant Media must be backed up or stored on and properlyaccessible through the internal database or systems of the Company;(iv)he must maintain and update a record of all Relevant Media and report and regularly update such records to be sent inwriting to the Company each Relevant Media account which the Executive opens; all user details, logins, passwords orsimilar held by you from time to time in respect of any Relevant Media; and each Relevant Media account which youclose.26Regulatory Obligations.(a)It is a condition of the Employment that, if and insofar as is applicable to the Executive, he is and remains, at all materialtimes, a fit and proper person for the purposes of the FCA Handbook of Rules and Guidance and any similar regulatoryrequirements (FCA Handbook) and that the Executive will observe and comply with all policies and compliance rules of theCompany or any Group Company applicable to employees generally as in effect from time to time.(b)Without prejudice to the other terms of this Agreement:(i)the Company will be entitled to summarily terminate the Employment without notice or payment in lieu of notice in theevent that the Executive should cease to be a fit and proper person for the purposes of the FCA Handbook;(ii)the Executive will comply with the principles governing the conduct of individual employees in controlled positions asset out from time to time in the FCA Handbook;(iii)the Executive will comply with and assist the Company and any Group Company in ensuring compliance with theregulatory obligations imposed upon it (or them) and their employees from time to time including under the FCAHandbook;(iv)if the Executive is found to have submitted any false or misleading information to the Company in connection with hisapplication for employment with the Company or its predecessor, then the Company may terminate the Employmentsummarily and without notice or payment in lieu of notice;(v)the Executive will attend such training courses, lectures and workshops as the Company may from time to timereasonably require for the purpose of maintaining his skills, knowledge and expertise, including those set out in the FCAHandbook applicable to him from time to time;(vi)the Executive will promptly bring to the attention of the Company any breach of FCA or other regulatory guidelines,rules or principles whether such breach has been committed by him or another person.27Data Protection.16(a)The Executive confirms he has read and understood the Company's Communications Systems Policy and other IT policiesrelating to data protection, copies of which are set forth on the MyGAIN Internet portal maintained by the Parent Company.The Company may change these policies at any time and will post updated policies as appropriate.(b)The Executive consents to the Company and any Group Company holding and processing (both electronically andmanually) personal data, including sensitive personal data (“Data”), relating to him for the purposes of business, personneland pensions administration and management and for compliance with any laws and regulations applicable to the Companyor any Group Company.(c)For the purposes of the Data Protection Act 1998 (“DPA”), the Company is a Data Controller and may process personaldata during the course of the Executive’s Employment to enable it to carry out its function properly. The Executiveauthorises the Company in accordance with the provisions of the DPA and any regulations made under it to process Datarelating to him and, where appropriate, to transfer process and store such Data outside the European Economic Area (asdefined from time to time).(d)The Company will from time to time engage third parties (“Data Processors”) to store, manage and process Data bothwithin and outside the European Economic Area. The Executive authorises the Company as Data Controller in accordancewith the provisions of the DPA and any regulations made under it to utilise Data Processors as and when required.28Severability. The provisions of this Agreement and the attached Schedules are severable. If any provision (or any identifiablepart of any provision) is held to be invalid or unenforceable by any court of competent jurisdiction, then such invalidity orunenforceability will not affect the validity or enforceability of the remaining provisions.29Statutory Particulars. The statutory particulars of employment to which the Executive is entitled under the Employment RightsAct 1996 are contained in this Agreement and the attached schedule 2.30Third Parties. Only the parties to this Agreement and any Group Company may enforce and take the benefit of this Agreementin accordance with the Contracts (Rights of Third Parties) Act 1999, subject to the terms of this Agreement. Pursuant to theContracts (Rights of Third Parties) Act 1999, no other person may enforce the terms of this Agreement against the Company.31Unfair Contract Terms Act 1977. The Executive acknowledges that he has had the opportunity to receive independent legaladvice on the terms of this Agreement prior to entering into this Agreement and, in the light of that advice the Executiveacknowledges that the terms of the Agreement are reasonable in the circumstances.32Complete Agreement. This Agreement embodies the entire agreement of the parties with respect to the Executive’semployment, compensation, benefits and related items and supersedes any other prior oral or written agreements, arrangementsor understandings between the Executive and the Company. The Executive confirms that he has not been persuaded to enterinto this Agreement by any representation which is not set out in the Agreement. The Executive waives all his rights arisingfrom any representation given in connection with this Agreement, other than his rights to claim a17breach of the terms of this Agreement. This waiver of rights does not apply to any fraudulent representation.33Waiver. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or beconstrued as a waiver of any subsequent breach by such party.34Governing Law. This Agreement will be governed by and construed in accordance with the laws of England and each of theparties submits to the exclusive jurisdiction of the English courts.35Notices. Any notice to be given under this Agreement must be given in writing. Notice given to the Company must be deliveredby hand or by first class post addressed to the General Counsel of the Parent Company at Bedminster One, Suite 11, 135 USHwy 202/206, Bedminster New Jersey, United States of America, 07921. Notice given to the Executive must be given to himpersonally or sent by first class post to his last known residential address. The Executive must inform the Company in writing ofhis residential address for the time being. Notices served by post will be deemed to be served on the second business day afterthe date of posting.36Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, andall of which taken together shall constitute one and the same instrument.18IN WITNESS WHEREOF, the parties hereto have duly executed this Employment Agreement as of the date first written above.GAIN CAPITAL UK LIMITEDBy: /s/ Nigel Rose Name: Nigel RoseTitle: Director By: /s/ Alastair Hine 19Schedule 1Restrictions1The Executive agrees that, during the period of twelve months following the Termination Date (reduced by a period equal to thelength of any Garden Leave Period imposed in accordance with clause 20 (Garden Leave)), he will not be involved, directly orindirectly, whether on his own or in conjunction with any Restricted Person, in any capacity in any business activity whichcompetes or which intends to compete with any Restricted Business.2The Executive agrees that, during the Restricted Period, he will not act in competition with any Restricted Business directly orindirectly, in any capacity by:2.1soliciting or enticing away or endeavouring to solicit or entice away from the Company or any Group Company any Client,Prospective Client, Partner or Prospective Partner;2.2doing business with, or otherwise dealing with, any Client, Prospective Client, Partner or Prospective Partner;2.3soliciting or enticing away from or endeavouring to solicit or entice away from the Company or any Group Company any KeyEmployee;2.4employing or engaging or otherwise facilitating the employment or engagement of any Key Employee;2.5interfering with the arrangements between the Company or any Group Company and any Supplier.3The Executive agrees that he will not at any time following the Termination Date:3.1Represent himself as being connected with the Company or any Group Company in any capacity;3.2make or cause to be made to any person in any circumstances any comments which are (or which might reasonably beconsidered to be) disparaging or derogatory of the Company or any Group Company or any of its or their respective officers,employees, consultants, shareholders or agents.4If at any time prior to the expiration of the Restricted Period the Executive receives any offer from or on behalf of any thirdparty to be involved (or if he is engaged in any discussions with any third party with a view to being involved) in any capacityin any business or concern which competes (or which intends to compete) with the Company or any Group Company, theExecutive shall forthwith provide to such third party a copy of this Schedule and shall inform the Company in writing of theidentity of such third party as soon as reasonably practicable following acceptance of any offer of or agreement to any suchinvolvement.5The Company accepts, as trustee for each Group Company, the benefit of all undertakings given by the Executive in thisSchedule to any Group Company.206The provisions of this Schedule shall apply only in respect of any business of the Company or any Group Company in respectof which the Executive was either materially involved or in respect of which the Executive had access to ConfidentialInformation or for which the Executive was responsible at any time during the Relevant Period.7None of the restrictions in this Schedule shall prevent the Executive from holding an investment by way of shares or othersecurities of not more than 3% of the total issued share capital of any company, whether or not listed or dealt in on a recognisedstock exchange.8The provisions of this Schedule are severable and if any provision or identifiable part is held to be unenforceable by any courtof competent jurisdiction, then such unenforceability shall not affect the enforceability of the remaining provisions oridentifiable parts of this Schedule. Whilst the restrictions and defined expressions in this Schedule are regarded by the parties asfair and reasonable, if any such provision is held to be unreasonably wide but would be valid if part of the wording weredeleted, that restriction or definition will apply with so much of the wording deleted as may be necessary to render it valid.9For the purposes of this Schedule, the following words have the meanings set out below:Confidential Information means Confidential Information as described in clause 1 (Definitions) of the Agreement;Client means any person with whom the Company or any Group Company(a)has, at the Termination Date, arrangements in place pursuant to which the Company or any Group Company suppliesgoods or services; or(b)with whom the Company or any Group Company has been in the habit of dealing at any time during the RelevantPeriod; and(c)in relation to whom the Executive had access to Confidential Information at any time during the Relevant Period; or(d)with whom the Executive has had personal contact or dealings in the course of his Employment at any time duringthe Relevant Period;Key Employee means any person who is employed or engaged to provide services personally at the Termination Date by theCompany or any Group Company, and who, during the Relevant Period, had material contact with the Executive; and(a)who reported to the Executive; or(b)who had material contact with clients or suppliers of the Company or any Group Company in the course of his or heremployment; or(c)who was a member of the Board or reported directly to a member of the Board; or who was a member of the seniormanagement team of the Company or any Group Company; or(d)whose job duties involved research and development to a material extent; and(e)who, by reason of his or her seniority and expertise, knowledge of trade secrets and Confidential Information, orknowledge of and influence over Clients or Prospective21Clients of the Company and any Group Company is likely to be able to materially influence, assist or benefit anybusiness which is or intends to be a competitor of the Company and any Group Company.Partner means those having business dealings with the Company and any Group Company, including dealers, traders,distributors, sales representatives and wholesalers.Prospective Client means any person to whom, during the Relevant Period, the Company or any Group Company has offeredto supply goods or services, or to whom the Company or any Group Company has provided details of the terms on which itwould or might be willing to supply goods or services, or with whom the Company or any Group Company has had anynegotiations or discussions regarding the possible supply of goods or services; and in each case:(a)with whom the Executive has had personal contact or dealings in the course of his Employment at any time duringthe Relevant Period; or(b)in relation to whom the Executive had access to Confidential Information at any time during the Relevant Period.Prospective Partner means any person to whom, during the Relevant Period, the Company or any Group Company has offeredto conduct business, or to whom the Company or any Group Company has provided details of the terms on which it would ormight be willing to conduct business, or with whom the Company or any Group Company has had any negotiations ordiscussions regarding the possible conducting of business; and in each case:(a)with whom the Executive has had personal contact or dealings in the course of his Employment at any time duringthe Relevant Period; or(b)in relation to whom the Executive had access to Confidential Information at any time during the Relevant Period.Restricted Business means any business or prospective business of the Company or any Group Company at the TerminationDate in which the Executive was materially involved or in respect of which the Executive had access to ConfidentialInformation or for which the Executive was responsible at any time during the Relevant Period;Relevant Period means, where the Executive’s duties, powers and responsibilities are totally withdrawn in accordance withclause 20 (Garden Leave), the period of two years immediately before the start of the Garden Leave Period (as defined in theAgreement); and otherwise, the period of two years ending on the Termination Date, and in either case, the period of theExecutive’s Employment if he has been employed by the Company for less than two years.Restricted Period means the period of 12 months immediately following the Termination Date, reduced by a period equal tothe length of any Garden Leave Period imposed in accordance with clause 20 (Garden Leave).Restricted Person means any person employed or engaged as a director or as a manager or member of the seniormanagement team of the Company or any Group Company at any time during the Employment or during the Relevant Periodand any other person whom the Company may inform the Executive in writing is a “Restricted Person” for the purposes of thisAgreement;22Supplier means any person with whom the Company or any Group Company has, at the Termination Date, arrangements inplace for the supply of goods or services to the Company or any Group Company.Termination Date means the date on which the Employment ends for whatever reason.23Schedule 2Statutory Particulars1.Continuity of Employment(a)The Executive’s statutory period of continuous employment with the Company began on 3 November 2017.(b)No other period of employment with any previous employer will be treated as continuous with the Executive’sEmployment by the Company.2.Grievance and Dismissal(a)If the Executive has a grievance relating to his Employment, he should raise it in the first instance with the ChiefExecutive Officer of the Parent Company. If the matter is not satisfactorily resolved, he may raise it with the Chairman ofthe Board, whose decision will be final.(b)There is no formal disciplinary procedure applicable to the Executive’s Employment. If he is dissatisfied with anydisciplinary decision taken against him he should appeal to the Chairman of the Board. The Chairman’s decision will befinal.(c)For the avoidance of doubt, the grievance, dismissal and disciplinary procedures of the Company from time to time inforce do not form part of the contract of employment of the Executive or otherwise have contractual force and effectunless otherwise stated.3.Collective AgreementsThere are no collective agreements which directly affect the terms and conditions of the Employment.24Exhibit 21.1List of SubsidiariesEntity NameJurisdiction of IncorporationGAIN Capital Holdings Ltd.England and WalesGAIN Capital UK LimitedEngland and WalesGAIN Capital Australia Pty. Ltd.AustraliaGAIN Capital Singapore Pte. Ltd.SingaporeGCAM, LLCDelawareGAIN Holdings, LLCDelawareGAIN Capital Group, LLCDelawareS.L. Bruce Financial CorporationOhioGAIN Capital Securities, Inc.DelawareGAIN Capital Holdings International, LLCDelawareGAIN Global Markets, Inc.Cayman IslandsIsland Traders (Cayman), LimitedCayman IslandsGAIN Capital-Forex.com Hong Kong, Ltd.Hong KongGAIN Capital Japan Co., Ltd.JapanGAIN Capital-Forex.com U.K., Ltd.England and WalesGAIN Capital-Forex.com Canada, Ltd.CanadaGAIN GTX, LLCDelawareGAIN GTX, Singapore Pte. Ltd.SingaporeGAIN Capital Holdings International, B.V.The NetherlandsGAIN Capital International Finance Company, B.V.The NetherlandsGAIN Capital GTX International, B.V.The NetherlandsGAIN Capital – Forex.com International, B.V.The NetherlandsGAIN Global Markets International, B.V.The NetherlandsGAIN Capital – Forex.com Cyprus Ltd.CyprusGTX SEF, LLCDelawareGlobal Futures & Forex, Ltd.MichiganGlobal Asset Advisors, LLCIllinoisTop Third AG Marketing, LLCDelawareGAIN Global Markets Bermuda, Ltd.BermudaTrade Facts Ltd.EnglandGTX Bermuda, Ltd.BermudaGain Capital Technology Consulting Hong Kong LimitedHong KongGain Capital Payments Ltd.England and WalesCity Index Academy Ltd.England and WalesCity Index Inc.DelawareFX Solutions LLCNew JerseyJia Rao Network Technology Co. Ltd.ChinaGTX (Switzerland) GmbHSwitzerlandEXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-208175 and 333-211097 on Form S-3 and Form S-8, respectively, of ourreport dated March 17, 2016, relating to the 2015 consolidated financial statements and financial statement schedule of GAIN Capital Holdings, Inc. andsubsidiaries (the “Company”), appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2017./s/ Deloitte & Touche LLPNew York, NYMarch 14, 2018EXHIBIT 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe DirectorsGain Capital Holdings, Inc.Bedminster, NJ 07921United States of AmericaWe hereby consent to the incorporation by reference in the Registration Statements on Form S3 (No. 333-208175) and Form S-8 (No. 333-211097) of GainCapital Holdings, Inc. of our report dated March 15, 2016, relating to the consolidated financial statements of Gain Capital UK Limited, which appears in thisAnnual Report on Form 10-K of Gain Capital Holdings, Inc./s/ BDO LLPBDO LLPLondon, United KingdomMarch 14, 2018EXHIBIT 23.3Consent of Independent Registered Public Accounting FirmThe Board of DirectorsGAIN Capital Holdings, Inc.:We consent to the incorporation by reference in the registration statements (No. 333‑208175) on Form S-3 and (No. 333-211097) on Form S-8, respectively,of GAIN Capital Holdings, Inc. of our reports dated March 14, 2018, with respect to the consolidated balance sheets of GAIN Capital Holdings, Inc. as ofDecember 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cashflows for each of the years in the two-year period ended December 31, 2017, and the related notes and financial statement schedule I (collectively, the“consolidated financial statements”), and the effectiveness of internal control over financial reporting as of December 31, 2017, which report appears in theDecember 31, 2017 annual report on Form 10‑K of GAIN Capital Holdings, Inc./s/ KPMG LLPNew York, New YorkMarch 14, 2018Exhibit 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 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: March 14, 2018 /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 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: March 14, 2018 /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 for the fiscal year ended December 31, 2017 (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: March 14, 2018 /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 for the fiscal year ended December 31, 2017 (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: March 14, 2018 /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. 

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